THIRD AMENDED AND RESTATED
                          WAREHOUSING CREDIT AGREEMENT

                                      AMONG

                           PLM EQUIPMENT GROWTH FUND V
                          PLM EQUIPMENT GROWTH FUND VI
                     PLM EQUIPMENT GROWTH & INCOME FUND VII
               PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.
                          PLM FINANCIAL SERVICES, INC.

                                       AND

                  FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
                                BANK OF MONTREAL
                      AND SUCH OTHER FINANCIAL INSTITUTIONS
                        AS SHALL BECOME LENDERS HEREUNDER

                                       AND

                  FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
                                    AS AGENT








                                December 2, 1997





<PAGE>


                           THIRD AMENDED AND RESTATED
                          WAREHOUSING CREDIT AGREEMENT



         THIS THIRD AMENDED AND RESTATED WAREHOUSING CREDIT AGREEMENT is entered
into as of  December  2,  1997,  by and among  PLM  EQUIPMENT  GROWTH  FUND V, a
California  limited  partnership  ("EGF V"),  PLM  EQUIPMENT  GROWTH  FUND VI, a
California  limited  partnership  ("EGF VI"), PLM EQUIPMENT GROWTH & INCOME FUND
VII, a California  limited  partnership  ("EGF  VII"),  and  PROFESSIONAL  LEASE
MANAGEMENT  INCOME FUND I, L.L.C., a Delaware limited liability company ("Income
Fund I") (EGF V, EGF VI, EGF VII and  Income  Fund I each  individually  being a
"Borrower" and,  collectively,  the  "Borrowers"),  and PLM FINANCIAL  SERVICES,
INC., a Delaware corporation and the sole general partner, in the case of EGF V,
EGF VI and EGF VII, and the sole manager,  in the case of Income Fund I ("FSI"),
and FIRST  UNION  NATIONAL  BANK OF NORTH  CAROLINA  ("FUNB"),  BANK OF MONTREAL
("BMO") and each other  financial  institution  which may hereafter  execute and
deliver an instrument of assignment  with respect to this Agreement  pursuant to
Section  11.10  (each  individually  being a  "Lender,"  and  collectively,  the
"Lenders"),  and FIRST UNION NATIONAL BANK OF NORTH CAROLINA, as agent on behalf
and for the benefit of the Lenders (not in its individual  capacity,  but solely
as agent,  the "Agent").  This  Agreement  amends,  restates and  supersedes the
Growth Fund Agreement (as defined below).

                                    RECITALS

         A. Borrowers,  FSI, PLM Equipment Growth Fund III, a California limited
partnership  ("EGF III"),  PLM  Equipment  Growth Fund IV, a California  limited
partnership  ("EGF IV"),  FUNB and Fleet Bank,  N.A.  (the "Prior  Lenders") and
Agent,  as agent for the Prior  Lenders,  entered  into that Second  Amended and
Restated  Warehousing  Credit  Agreement dated as of May 31, 1996, as amended by
that Amendment No. 1 to Second Amended and Restated Warehousing Credit Agreement
dated as of  November  5,  1996,  that  Amendment  No. 2 to Second  Amended  and
Restated  Warehousing  Credit  Agreement  dated as of  October  3, 1997 and that
Amendment  No. 3 to Second  Amended and Restated  Warehousing  Credit  Agreement
dated as of November 3, 1997 (as so amended  to, the "Growth  Fund  Agreement"),
pursuant to which the Prior Lenders have agreed to extend and make  available to
Borrowers certain advances of credit.

         B.  Borrowers  and FUNB,  as the sole  remaining  Prior Lender having a
Commitment under the Growth Fund Agreement,  and FSI desire to amend and restate
the Growth Fund  Agreement  and to, among other  things,  increase the aggregate
Commitments set forth on Schedule A of the Growth Fund Agreement, remove EGF III
and  EGF IV as  borrowers  under  the  revolving  credit  facility,  extend  the
commitment  Termination Date and reduce the Applicable Margin, as more fully set
forth herein.

         C. On the terms and conditions set forth below, BMO desires,  as of and
from the Closing Date, to become a Lender under this Agreement.

         D. Lenders have agreed to make such credit available to Borrowers,  but
only upon the terms and subject to the conditions  hereinafter  set forth and in
reliance on the representations and warranties set forth herein.

                                    AGREEMENT

         NOW,  THEREFORE,  in  consideration  of the foregoing  recitals and the
mutual  covenants  hereinafter set forth, and intending to be legally bound, the
parties hereto agree as follows:

SECTION 1.                       DEFINITIONS.

         1.1  Defined  Terms.  As used  herein,  the  following  terms  have the
following meanings:

         "Acquisition" means, with respect to any Borrower, any transaction,  or
any series of related transactions,  by which such Borrower, FSI or any of FSI's
Subsidiaries,   including,   without  limitation,  TEC  AcquiSub,   directly  or
indirectly (a) acquires any ongoing business or all or substantially  all of the
assets of any Person or division thereof,  whether through a purchase of assets,
merger or otherwise,  or (b) acquires (in one  transaction or as the most recent
transaction in a series of  transactions)  control of at least a majority of the
stock  of a  corporation  having  ordinary  voting  power  for the  election  of
directors,  or (c)  acquires  control  of at least a majority  of the  ownership
interests in any partnership or joint venture.

         "Adjusted  LIBOR" means,  for each Interest  Period in respect of LIBOR
Loans,  an interest rate per annum (rounded  upward to the nearest 1/16th of one
percent (0.0625%)) determined pursuant to the following formula:

[GRAPHIC  OMITTED]The  Adjusted LIBOR shall be adjusted  automatically as of the
effective date of any change in the Eurodollar Reserve Percentage.

         "Advance"  means any  Advance  made or to be made by any  Lender to any
Borrower as set forth in Section 2.1.1.

         "Affiliate"  means,  with respect to any Person,  (a) each Person that,
directly or indirectly,  through one or more  intermediaries,  owns or controls,
whether beneficially or as a trustee,  guardian or other fiduciary, five percent
(5.0%) or more of the stock  having  ordinary  voting  power in the  election of
directors of such Person or of the  ownership  interests in any  partnership  or
joint  venture,  (b) each Person that  controls,  is  controlled  by or is under
common control with such Person or any Affiliate of such Person,  or (c) each of
such Person's  officers,  directors,  joint  venturers  and partners;  provided,
however,  that in no case shall any Lender or Agent be deemed to be an Affiliate
of any Borrower or FSI for purposes of this  Agreement.  For the purpose of this
definition,  "control"  of a Person  shall  mean  the  possession,  directly  or
indirectly,  of the power to direct or cause the direction of its  management or
policies,  whether  through the ownership of voting  securities,  by contract or
otherwise.

         "AFG" means American Finance Group, Inc., a Delaware corporation.

         "AFG  Agreement"  means the Amended  and  Restated  Warehousing  Credit
Agreement dated as of November 3, 1997, by and among AFG,  Lenders and Agent, as
the same  from time to time may be  amended,  modified,  supplemented,  renewed,
extended or restated.

         "Agent"  means FUNB  solely  when  acting in its  capacity as the Agent
under this  Agreement  or any of the other  Loan  Documents,  and any  successor
Agent.

         "Agent's Side Letter" means the side letter agreement dated November 3,
1997, by and between Borrowers, TEC AcquiSub, AFG and Agent.

         "Agreement"  means this Third Amended and Restated  Warehousing  Credit
Agreement dated as of November 3, 1997, including all amendments,  modifications
and supplements  hereto,  renewals,  extensions or restatements  hereof, and all
appendices,  exhibits and schedules to any of the foregoing,  and shall refer to
the Agreement as the same may be in effect from time to time.

         "Aircraft"  means any corporate,  commuter,  or commercial  aircraft or
helicopters,  with  modifications (as applicable) and replacement or spare parts
used in connection therewith,  including, without limitation,  engines, rotables
or propellers,  and any engines,  rotables and  propellers  used on a stand-lone
basis.

         "Applicable Margin" means:

         (a) with respect to Prime Rate Loans, zero percent (0.00%); and

         (b) with respect to LIBOR Loans, one and five-eighths percent
(1.625%).

         "Assignment  and  Acceptance"  has the  meaning  set  forth in  Section
11.10.2.

         "Bank  Affiliate"  means a Person engaged  primarily in the business of
commercial  banking and that is an Affiliate of a Lender or of a Person of which
a Lender is an Affiliate.

         "Bankruptcy  Code" means the  Bankruptcy  Code of 1978, as amended,  as
codified  under Title 11 of the United  States Code,  and the  Bankruptcy  Rules
promulgated thereunder, as the same may be in effect from time to time.

         "Borrowing  Base" means,  as  calculated  separately  for each Borrower
individually  as at any date of  determination,  an amount not to exceed the sum
of:

         (a) fifty percent  (50.0%) of the  unrestricted  cash available for the
purchase of Eligible Inventory by such Borrower,

                  plus

                  (b) an  amount  equal to the  lesser  of (i)  seventy  percent
(70.0%) of the  aggregate  net book value or (ii) fifty  percent  (50.0%) of the
aggregate  net fair market  value of all Eligible  Inventory  then owned by such
Borrower or a Marine  Subsidiary  or owned of record by an Owner Trustee for the
beneficial  interest of such Borrower or any Marine  Subsidiary of such Borrower
(provided,  however,  that  there  shall be  excluded  from this  clause (b) the
aggregate net book value or aggregate net fair market value, as the case may be,
of all items of  Eligible  Inventory  which are  either  (i)  off-lease  or (ii)
subject to a Lease under which any  applicable  lease or rental  payment is more
than  ninety  (90) days past due,  but only to the extent and in the amount that
the aggregate  net book value or net fair market  value,  as the case may be, of
such otherwise  excluded  Eligible  Inventory exceeds fifteen percent (15.0%) of
the respective net book value or net fair market value of all Eligible Inventory
included in this clause (b) notwithstanding this proviso),

                  less

         (c) the  aggregate  Consolidated  Funded  Debt of  such  Borrower  then
outstanding,  excluding the aggregate principal amounts of the Loans outstanding
for such Borrower under the Facility,

in each  case  computed,  (1) with  respect  to any  requested  Loan,  as of the
requested  Funding Date (and shall include the item(s) of Eligible  Inventory to
be acquired  with the proceeds of the requested  Loan),  and (2) with respect to
the delivery of any monthly Borrowing Base Certificate to be furnished  pursuant
to  Section  5.1.3,  as of the last day of the  calendar  month for  which  such
Borrowing  Base  Certificate  is  furnished  (provided,  that for the purpose of
computing  the  Borrowing  Base,  in the  event  that any  Borrower  or a Marine
Subsidiary of such Borrower shall own less than one hundred percent  (100.0%) of
the record or beneficial  interests in any item of Eligible Inventory,  with one
or more of the other Equipment Growth Funds owning of record or beneficially the
remaining interests, there shall be included only such Borrower's or such Marine
Subsidiary's,  as the case may be,  ratable  interest  in such item of  Eligible
Inventory).

         "Borrowing Base  Certificate"  means,  with respect to any Borrower,  a
certificate  with  appropriate  insertions  setting forth the  components of the
Borrowing  Base of such  Borrower as of the last day of the month for which such
certificate is submitted or as of a requested  Funding Date, as the case may be,
which  certificate shall be substantially in the form set forth in Exhibit B and
certified by a Responsible Officer of such Borrower.

         "Business Day" means any day which is not a Saturday, Sunday or a legal
holiday under the laws of the States of California or North Carolina or is not a
day on which banking  institutions  located in the States of California or North
Carolina are  authorized  or permitted  by law or other  governmental  action to
close and,  with  respect to LIBOR  Loans,  means any day on which  dealings  in
foreign  currencies  and exchanges may be carried on by Agent and Lenders in the
London interbank market.

         "Casualty  Loss" means any of the following  events with respect to any
item of Eligible Inventory:  (a) the actual total loss or compromised total loss
of such item of Eligible  Inventory;  (b) such item of Eligible  Inventory shall
become lost, stolen,  destroyed,  damaged beyond repair or permanently  rendered
unfit  for use for any  reason  whatsoever;  (c)  the  seizure  of such  item of
Eligible Inventory for a period exceeding sixty (60) days or the condemnation or
confiscation  of such item of Eligible  Inventory;  or (d) such item of Eligible
Inventory shall be deemed under its lease to have suffered a casualty loss as to
the entire item of Eligible Inventory.

         "Charges"  means,  with respect to any  Borrower,  all federal,  state,
county,  city,  municipal,  local,  foreign or other governmental taxes, levies,
assessments,  charges  or  claims,  in each case then due and  payable,  upon or
relating to (a) the Loans made to such Borrower  hereunder,  (b) such Borrower's
employees,  payroll,  income or gross receipts, (c) such Borrower's ownership or
use  of any of its  Properties  or  assets  or (d)  any  other  aspect  of  such
Borrower's business.

         "Closing" means the time at which each of the conditions  precedent set
forth in  Section 3 to the making of the first  Loan  hereunder  shall have been
duly fulfilled or satisfied by each Borrower.

         "Closing Date" means the date on which Closing occurs.

         "Code"  means  the  Internal  Revenue  Code of 1986,  as  amended,  the
Treasury  Regulations adopted thereunder and the Treasury  Regulations  proposed
thereunder  (to  the  extent  Requisite  Lenders,   in  their  sole  discretion,
reasonably  determine that such proposed  regulations  set forth the regulations
that  apply in the  circumstances),  as the same may be in  effect  from time to
time.

         "Commitment" means with respect to each Lender the amounts set forth on
Schedule A and "Commitments" means all such amounts collectively, as each may be
amended from time to time upon the  execution  and delivery of an  instrument of
assignment  pursuant to Section 11.10,  which  amendments  shall be evidenced on
Schedule 1.1.

         "Commitment Termination Date" means November 2, 1998.

         "Compliance  Certificate"  means,  with  respect  to  any  Borrower,  a
certificate signed by a Responsible  Officer of such Borrower,  substantially in
the  form of  Exhibit  E,  with  such  changes  as Agent  may from  time to time
reasonably  request  for the  purpose of having such  certificate  disclose  the
matters certified therein and the method of computation thereof.

         "Consolidated  EBITDA" means,  for any Borrower,  as measured as at any
date of determination for any period on a consolidated basis, the sum of (a) the
Consolidated  Net  Income of such  Borrower,  plus (b) all  amounts  treated  as
expenses for  depreciation and the amortization of intangibles of any kind, plus
(c) all accrued taxes on or measured by income,  plus (d) Consolidated  Interest
Expense, and in the cases of clauses (b), (c) and (d), above, each to the extent
included in the determination of Consolidated Net Income.

         "Consolidated Funded Debt" means, for any Borrower,  as measured at any
date of determination on a consolidated  basis, the total amount of all interest
bearing  obligations  (including   Indebtedness  for  borrowed  money)  of  such
Borrower,  capital lease obligations of such Borrower as a lessee and the stated
amount of all  outstanding  undrawn  letters of credit  issued on behalf of such
Borrower or for which such Borrower is liable.

         "Consolidated  Intangible Assets" means, for any Person, as measured at
any date of determination on a consolidated basis, all intangible assets of such
Person.

         "Consolidated Interest Expense" means, for any Borrower, as measured at
any date of  determination  for any period on a  consolidated  basis,  the gross
interest  expense of such Borrower for the period  (including  all  commissions,
discounts,  fees and other charges in connection  with standby letters of credit
and similar instruments), less interest income for that period.

         "Consolidated  Net Income" means, for any Borrower,  as measured at any
date of determination for any period on a consolidated basis, the net income (or
loss) of such Borrower for such period taken as a single accounting period.

         "Consolidated Net Worth" means, for any Person, as measured at any date
of  determination,   the  difference  between   Consolidated  Total  Assets  and
Consolidated Total Liabilities.

         "Consolidated Tangible Net Worth" means, for any Person, as measured at
any date of  determination,  the difference  between  Consolidated Net Worth and
Consolidated Intangible Assets.

         "Consolidated  Total Assets" means, for any Person,  as measured at any
date of determination on a consolidated basis, all assets of such Person.

         "Consolidated  Total Liabilities" means, for any Person, as measured at
any date of  determination  on a  consolidated  basis,  all  liabilities of such
Person.

         "Contingent  Obligation"  means,  as to any  Person,  (a) any  Guaranty
Obligation  of  that  Person  and (b)  any  direct  or  indirect  obligation  or
liability, contingent or otherwise, of that Person, (i) in respect of any letter
of credit or similar  instrument  issued for the account of that Person or as to
which that Person is otherwise liable for  reimbursement of drawings,  (ii) with
respect to the  Indebtedness  of any  partnership or joint venture of which such
Person  is a partner  or a joint  venturer,  (iii) to  purchase  any  materials,
supplies or other property from, or to obtain the services of, another Person if
the relevant  contract or other  related  document or  obligation  requires that
payment for such materials,  supplies or other  property,  or for such services,
shall be made  regardless  of whether  delivery of such  materials,  supplies or
other property is ever made or tendered,  or such services are ever performed or
tendered,  or (iv) in respect of any interest rate  protection  contract that is
not entered into in connection with a bona fide hedging  operation that provides
offsetting  benefits to such  Person.  The amount of any  Contingent  Obligation
shall (subject, in the case of Guaranty Obligations, to the last sentence of the
definition of "Guaranty  Obligation") be deemed equal to the maximum  reasonably
anticipated  liability  in respect  thereof,  and shall,  with respect to clause
(b)(iv) of this definition, be marked to market on a current basis.

         "Debt Service Ratio" means, as measured separately for each Borrower as
at any date of  determination,  the ratio of (a) Consolidated  EBITDA to (b) the
sum of (i) Consolidated  Interest Expense plus (ii) an amount equal to three and
one-eighths  percent (3.125%) of Consolidated  Funded Debt (Consolidated  EBITDA
and  Consolidated  Interest  Expense to be measured on a quarterly basis for the
current fiscal quarter).

         "Default Rate" has the meaning set forth in Section 2.3.

         "Designated  Deposit Account" means a demand deposit account maintained
by Borrowers with FUNB designated by written notice from Borrowers to Agent.

         "Dollars"  and the sign "$" means lawful money of the United  States of
America.

         "EGF"  means  PLM   Equipment   Growth  Fund,   a  California   limited
partnership.

         "EGF  II"  means  PLM  Equipment  Growth  Fund,  a  California  limited
partnership.

         "EGF III" means PLM  Equipment  Growth Fund III, a  California  limited
partnership.

         "EGF IV" has the meaning set forth in the Preamble to this Agreement.

         "EGF V" has the meaning set forth in the Preamble to this Agreement

         "EGF VI" has the meaning set forth in the Preamble to this Agreement

         "EGF VII" has the meaning set forth in the Preamble to this Agreement.

         "Eligible  Assignee"  means (a) a commercial  bank organized  under the
laws of the United States,  or any state thereof,  and having a combined capital
and surplus of at least $100,000,000,  (b) a commercial bank organized under the
laws of any other  country  which is a member of the  Organization  for Economic
Cooperation and Development, or a political subdivision of any such country, and
having a combined  capital and surplus of at least  $100,000,000,  provided that
such bank is acting through a branch or agency located in the United States, and
(c) any Bank Affiliate.

         "Eligible Inventory" means, with respect to any Borrower, all Trailers,
Aircraft and Aircraft engines, Railcars,  cargo-containers,  marine vessels and,
if approved by Requisite Lenders, other related Equipment, in each case owned by
such  Borrower  or a Marine  Subsidiary  of such  Borrower  (or  jointly by such
Borrower and one or more of the other Equipment Growth Funds) or, subject to the
approval  of  Agent,  any  owner  trust  of  which  such  Borrower  is the  sole
beneficiary or owner (or is the beneficiary or owner jointly with one or more of
the other Equipment Growth Funds), as applicable,  or solely with respect to any
marine vessel registered in Liberia, The Bahamas,  Hong Kong, Singapore or other
registry acceptable to Agent in its sole discretion, any nominee entity of which
such Borrower or a Marine Subsidiary of such Borrower is the sole beneficiary or
direct or indirect  owner (or as the  beneficiary  or direct or  indirect  owner
jointly with one or more of the other Equipment Growth Funds).

         "Employee  Benefit  Plan"  means,  with  respect to any  Borrower,  any
Pension Plan and any employee  welfare  benefit plan, as defined in Section 3(1)
of ERISA,  that is maintained for the employees of such Borrower,  FSI or any of
FSI's Subsidiaries or any ERISA Affiliate of such Borrower.

         "Environmental Claims" means, with respect to any Borrower, all claims,
however  asserted,  by any  Governmental  Authority  or  other  Person  alleging
potential  liability or responsibility for violation of any Environmental Law or
for release or injury to the  environment or threat to public  health,  personal
injury  (including  sickness,   disease  or  death),  property  damage,  natural
resources damage, or otherwise  alleging liability or responsibility for damages
(punitive  or  otherwise),   cleanup,   removal,  remedial  or  response  costs,
restitution,  civil or criminal  penalties,  injunctive relief, or other type of
relief,  resulting  from or based upon (a) the presence,  placement,  discharge,
emission or release  (including  intentional  and  unintentional,  negligent and
non-negligent,  sudden or non-sudden,  accidental or  non-accidental  placement,
spills, leaks, discharges,  emissions or releases) of any Hazardous Material at,
in,  or  from  Property,  whether  or not  owned  by such  Borrower,  FSI or any
Subsidiary  of FSI,  or (b) any  other  circumstances  forming  the basis of any
violation, or alleged violation, of any Environmental Law.

         "Environmental Laws" means all foreign,  federal,  state or local laws,
statutes, common law duties, rules, regulations,  ordinances and codes, together
with  all   administrative   orders,   directed  duties,   requests,   licenses,
authorizations   and  permits  of,  and  agreements   with,   any   Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters,  including the Comprehensive  Environmental Response,  Compensation and
Liability Act of 1980,  the Clean Air Act, the Federal Water  Pollution  Control
Act of 1972, the Solid Waste Disposal Act, the Federal Resource Conservation and
Recovery Act, the Toxic  Substances  Control Act and the Emergency  Planning and
Community Right-to-Know Act.

         "Environmental Permit" has the meaning set forth in Section 4.1.15.

         "Equipment"  means,  with  respect  to  any  Borrower,   all  items  of
transportation related equipment owned directly or beneficially by such Borrower
or by any Marine  Subsidiary of such Borrower and held for lease or rental,  and
shall include  items of equipment  legal or record title to which is held by any
owner trust or nominee entity in which such Borrower or any Marine Subsidiary of
such Borrower holds the sole beneficial interest.

         "Equipment Growth Funds" means any and all of EGF, EGF II, EGF III, EGF
IV, EGF V, EGF VI, EGF VII and Income Fund I.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
amended,  as the same may be in  effect  from  time to time,  and any  successor
statute.

         "ERISA  Affiliate"  means,  as  applied  to any  Person,  any  trade or
business  (whether  or not  incorporated)  which is a member of a group of which
that Person is a member and which is under common  control within the meaning of
the regulations promulgated under Section 414 of the Code.

         "Eurodollar  Reserve  Percentage" means the maximum reserve  percentage
(expressed as a decimal,  rounded  upward to the nearest  1/100th of one percent
(0.01%)) in effect from time to time  (whether or not  applicable to any Lender)
under  regulations  issued by the  Federal  Reserve  Board for  determining  the
maximum  reserve  requirement  (including any emergency,  supplemental  or other
marginal reserve requirement) with respect to Eurocurrency  liabilities having a
term comparable to such Interest Period.

         "Event of Default" means any of the events set forth in Section 8.1.

         "Facility" means the total Commitments described in Schedule A, as such
Schedule A may be amended  from time to time as set forth on Schedule  1.1,  for
the  revolving  credit  facility  described  in Section  2.1.1 to be provided by
Lenders  to  Borrowers,  on a several  but not joint  basis,  according  to each
Lender's Pro Rata Share.

         "Federal  Funds  Rate"  means,  for any day,  the rate set forth in the
weekly   statistical   release   designated  as  H.15(519),   or  any  successor
publication,  published  by  the  Federal  Reserve  Board  (including  any  such
successor,  "H.15(519)")  for such  day  opposite  the  caption  "Federal  Funds
(Effective)".  If on any  relevant  day  such  rate  is  not  yet  published  in
H.15(519),  the rate for  such  day  will be the  rate  set  forth in the  daily
statistical  release  designated as the Composite 3:30 p.m.  Quotations for U.S.
Government Securities,  or any successor  publication,  published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotation") for such day under the caption "Federal Funds Effective Rate". If on
any relevant day the appropriate rate for such previous day is not yet published
in either H.15(519) or the Composite 3:30 p.m. Quotation,  the rate for such day
will be the arithmetic  mean of the rates for the last  transaction in overnight
Federal funds arranged prior to 9:00 a.m. (New York time) on that day by each of
three leading brokers of Federal funds transactions in New York City selected by
Agent.

         "Federal  Reserve  Board"  means the Board of  Governors of the Federal
Reserve System and any successor thereto.

         "Form 1001" has the meaning set forth in Section 2.14.6.

         "Form 4224" has the meaning set forth in Section 2.14.6.

         "FSI" means PLM Financial Services, Inc., a Delaware corporation.

         "Funded Debt Ratio" means, as measured  separately for each Borrower as
at any date of determination,  the ratio of (a) the Consolidated  Funded Debt of
such  Borrower to (b) the sum of (i) the  aggregate net fair market value of the
Equipment  owned of record  and  beneficially  by such  Borrower  or any  Marine
Subsidiary  of such  Borrower  or owned of  record by an Owner  Trustee  for the
beneficial  interest of such Borrower or any Marine  Subsidiary of such Borrower
plus (ii) the unrestricted cash available for the purchase of Eligible Inventory
for such Borrower  (provided,  that for the purpose of computing the Funded Debt
Ratio,  in the event that any Borrower or a Marine  Subsidiary  of such Borrower
shall own less than one hundred  percent  (100.0%)  of the record or  beneficial
interests  in any item of  Equipment,  with one or more of the  other  Equipment
Growth Funds owning of record or  beneficially  the remaining  interests,  there
shall be included any such Borrower's or such Marine  Subsidiary's,  as the case
may be, ratable interest in such item of Equipment).

         "Funding Date" means with respect to any proposed borrowing  hereunder,
the date funds are  advanced  to any  Borrower  for any Loan  requested  by such
Borrower.

         "GAAP" means generally  accepted  accounting  principles set forth from
time to time in the opinions and  pronouncements  of the  Accounting  Principles
Board and the American  Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies with
similar  function of  comparable  stature and  authority  within the  accounting
profession),  or in such  other  statements  by such  other  entity as may be in
general use by significant segments of the U.S. accounting profession, which are
applicable to the circumstances as of the date of determination.
         "Governmental   Authority"  means  (a)  any  federal,   state,  county,
municipal or foreign  government,  or  political  subdivision  thereof,  (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department,  instrumentality  or public  body,  (c) any court or  administrative
tribunal or (d) with respect to any Person,  any  arbitration  tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.

         "Guaranty"  means that certain Guaranty dated as of September 27, 1995,
executed by FSI in favor of Lenders and Agent.


         "Guaranty  Obligation"  means, as applied to any Person,  any direct or
indirect  liability of that Person with respect to any  Indebtedness,  lease for
capital  equipment  other than  Equipment,  dividend,  letter of credit or other
obligation  (the  "primary   obligations")   of  another  Person  (the  "primary
obligor"),  including any obligation of that Person,  whether or not contingent,
(a) to purchase, repurchase or otherwise acquire such primary obligations or any
property constituting direct or indirect security therefor, or (b) to advance or
provide  funds (i) for the payment or discharge of any such primary  obligation,
or (ii) to maintain  working capital or equity capital of the primary obligor or
otherwise to maintain the net worth or solvency or any balance sheet item, level
of income or  financial  condition  of the primary  obligor,  or (c) to purchase
property, securities or services primarily for the purpose of assuring the owner
of any such  primary  obligation  of the ability of the primary  obligor to make
payment of such primary obligation,  or (d) otherwise to assure or hold harmless
the holder of any such primary obligation  against loss in respect thereof.  The
amount  of any  Guaranty  Obligation  shall be  deemed  equal to the  stated  or
determinable  amount of the primary obligation in respect of which such Guaranty
Obligation  is  made  or,  if  not  stated  or if  indeterminable,  the  maximum
reasonably anticipated liability in respect thereof.

         "Hazardous  Materials"  means all those  substances which are regulated
by, or which may form the  basis of  liability  under,  any  Environmental  Law,
including all substances  identified under any Environmental Law as a pollutant,
contaminant,  hazardous waste, hazardous  constituent,  special waste, hazardous
substance,  hazardous  material,  or toxic substance,  or petroleum or petroleum
derived substance or waste.

         "IMI" means PLM Investment  Management,  Inc., a California corporation
and a wholly-owned Subsidiary of FSI.

         "Income  Fund I" has the  meaning  set  forth in the  Preamble  to this
Agreement.

         "Indebtedness"  means, as to any Person,  (a) all  indebtedness of such
Person for borrowed money, (b) all leases of equipment of such Person as lessee,
(c) to the extent not included in clause (b), above,  all capital leases of such
Person as lessee,  (d) any  obligation of such Person for the deferred  purchase
price of Property or services (other than trade or other accounts payable in the
ordinary  course of business  and not more than ninety (90) days past due),  (e)
any  obligation  of such  Person  that is  secured  by a Lien on  assets of such
Person, whether or not that Person has assumed such obligation or whether or not
such obligation is non-recourse to the credit of such Person, (f) obligations of
such Person  arising under  acceptance  facilities or under  facilities  for the
discount of accounts  receivable  of such Person and (g) any  obligation of such
Person to reimburse the issuer of any letter of credit issued for the account of
such Person upon which a draw has been made.

         "Indemnified Liability" has the meaning set forth in Section 10.2.

         "Indemnified Person" has the meaning set forth in Section 10.2.

         "Interest  Differential"  means,  with respect to any  prepayment  of a
LIBOR Loan on a day other than an Interest Payment Date on which such LIBOR Loan
matures,  the  difference  between (a) the per annum  interest rate payable with
respect to such LIBOR Loan as of the date of the prepayment and (b) the Adjusted
LIBOR on, or as near as  practicable  to, the date of the prepayment for a LIBOR
Loan  commencing  on such  date and  ending  on the  last day of the  applicable
Interest Period.  The determination of the Interest  Differential by Agent shall
be conclusive in the absence of manifest error.

         "Interest Payment Date" means, with respect to any LIBOR Loan, the last
day of each Interest  Period  applicable to such Loan and, with respect to Prime
Rate Loans,  the first Business Day of each calendar month following the Funding
Date of such Prime Rate Loan; provided, however, that if any Interest Period for
a LIBOR Loan exceeds three (3) months,  interest  shall also be paid on the date
which falls three (3) months after the beginning of such Interest Period.

         "Interest Period" means, with respect to any LIBOR Loan, the one-month,
two-month or three-month period selected by the Requesting  Borrower pursuant to
Section 2, in each  instance  commencing on the  applicable  Funding Date of the
Loan; provided, however, that any Interest Period which would otherwise end on a
day that is not a Business  Day shall end on the next  succeeding  Business  Day
except that in the instance of any LIBOR Loan, if such next succeeding  Business
Day falls in the next calendar month,  the Interest Period shall end on the next
preceding Business Day.

         "Investment  Company Act" means the Investment  Company Act of 1940, as
amended (15 U.S.C. ss. 80a-1 et seq.), as the same may be in effect from time to
time, or any successor statute thereto.

         "IRS" means the Internal Revenue Service and any successor thereto.

         "Lease" means, for any Borrower,  each and every item of chattel paper,
installment  sales  agreement,  equipment lease or rental  agreement  (including
progress payment authorizations)  relating to an item of Equipment of which such
Borrower is the record or  beneficial  lessor and in respect of which the lessee
and lease terms (including,  without limitation, as to rental rate, maturity and
insurance coverage) are acceptable to Agent, in its reasonable  discretion.  The
term "Lease" includes (a) all payments to be made thereunder,  (b) all rights of
such Borrower therein, and (c) any and all amendments,  renewals,  extensions or
guaranties thereof.

         "Lender's Side Letter" means the fee letter agreement dated November 3,
1997, by and among Borrowers, TEC AcquiSub, AFG and BMO.

         "Lending  Office"  means,  with  respect to any  Lender,  the office or
offices of the Lender  specified as its lending office  opposite its name on the
applicable  signature page hereto, or such other office or offices of the Lender
as it may from time to time notify Borrowers and Agent.

         "LIBOR"  means,  with  respect to any Loan to be made,  continued as or
converted  into a LIBOR Loan,  the London  Inter-Bank  Offered Rate  (determined
solely by Agent), rounded upward to the nearest 1/16th of one percent (0.0625%),
at which  Dollar  deposits  are  offered  to Agent by major  banks in the London
interbank market at or about 11:00 a.m., London time, on the second Business Day
prior to the first day of the related  Interest Period with respect to such Loan
in an aggregate amount  approximately equal to the amount of such Loan and for a
period  of time  comparable  to the  number of days in the  applicable  Interest
Period.  The  determination of LIBOR by Agent shall be conclusive in the absence
of manifest error.

         "LIBOR Loan" means a Loan that bears interest based on Adjusted LIBOR.

         "Lien"  means  any  mortgage,  pledge,  hypothecation,  assignment  for
security,  security  interest,  encumbrance,  levy,  lien or charge of any kind,
whether  voluntarily  incurred  or arising  by  operation  of law or  otherwise,
affecting any Property,  including any agreement to grant any of the  foregoing,
any conditional sale or other title retention agreement, any lease in the nature
of a security  interest,  and the filing of or  agreement to file or deliver any
financing statement (other than a precautionary financing statement with respect
to a lease that is not in the nature of a  security  interest)  under the UCC or
comparable law of any jurisdiction.

         "Limited  Partnership  Agreement"  means  (a)  for EGF V,  the  Limited
Partnership Agreement dated as of November 14, 1989, (b) for EGF VI, the Amended
and Restated Limited Partnership Agreement dated as of December 20, 1991 and (c)
for EGF VII, the Third Amended and Restated Limited Partnership Agreement of EGF
VII dated as of May 10,  1993,  as amended by the First  Amendment  to the Third
Amended and Restated Limited Partnership Agreement dated May 28, 1993 and by the
Second  Amendment to Third Amended and Restated  Limited  Partnership  Agreement
dated as of January 21, 1994.

         "Loan" has the meaning set forth in Section 2.1.1.

         "Loan  Document"  when used in the singular and "Loan  Documents"  when
used in the plural means any and all of this Agreement,  the Notes,  the Lockbox
Agreement  and the  Guaranty  and any and all other  agreements,  documents  and
instruments executed and delivered by or on behalf or support of any Borrower to
Agent or any Lender or any of their respective  authorized  designees evidencing
or otherwise  relating to the Advances and the Liens granted to Agent, on behalf
of Lenders,  with respect to the Advances,  as the same may from time to time be
amended, modified, supplemented or renewed.

         "Lockbox" has the meaning set forth in Section 5.9.

         "Lockbox  Agreement"  means the Lockbox  Agreement  dated May 31, 1996,
among Borrowers, FUNB and Agent on behalf of Lenders, relating to the Lockbox.

         "Marine  Subsidiary"  means,  for any  Borrower,  a Subsidiary  of such
Borrower (in which the remaining record or beneficial ownership interests may be
held by TEC AcquiSub or any Equipment  Growth Fund) organized for the purpose of
holding legal record title to one or more marine vessels or to aircraft rotables
and spare parts.

         "Material Adverse Effect" means, with respect to any Borrower,  any set
of circumstances or events which (a) has or could reasonably be expected to have
any material adverse effect  whatsoever upon the validity or  enforceability  of
any Loan  Document,  (b) is or could  reasonably  be expected to be material and
adverse to the condition (financial or otherwise) or business operations of such
Borrower  or FSI,  (c)  materially  impairs or could  reasonably  be expected to
materially   impair  the  ability  of  such  Borrower  or  FSI  to  perform  its
Obligations,  or (d)  materially  impairs or could  reasonably  be  expected  to
materially  impair the  ability of Agent or any Lender to enforce  any of its or
their legal remedies pursuant to the Loan Documents.

         "Maturity  Date" means,  with respect to each Loan  advanced by Lenders
hereunder,  the date  which is one  hundred  seventy-nine  (179)  days after the
Funding  Date of such Loan or such  earlier  or later date as  requested  by the
Requesting  Borrower  and  approved  by  Requisite  Lenders,  in their  sole and
absolute discretion; provided, however, in no event shall any Maturity Date be a
date which is later than the Commitment Termination Date.

         "Maximum Availability" has the meaning set forth in Section 2.1.1.

         "Multiemployer   Plan"  means,   with  respect  to  any   Borrower,   a
"multiemployer  plan" as defined in Section  4001(a)(3)  of ERISA,  and to which
such Borrower,  FSI or any of FSI's  Subsidiaries or any ERISA Affiliate of such
Borrower,  FSI or any of FSI's  Subsidiaries is making, or is obligated to make,
contributions or has made, or been obligated to make,  contributions  within the
preceding five (5) years.

         "Note" has the  meaning set forth in Section  2.1.1(a)(i),  and any and
all replacements, substitutions and renewals thereof.

         "Notice of Borrowing"  means a notice given by any Borrower to Agent in
accordance  with  Section  2.7,  substantially  in the form of  Exhibit  F, with
appropriate insertions.

         "Notice  of  Conversion/Continuation"  means  a  notice  given  by  any
Borrower to Agent in accordance with Section 2.8,  substantially  in the form of
Exhibit G, with appropriate insertions.

         "Obligations" means, with respect to any Borrower, all loans, advances,
liabilities and  obligations for monetary  amounts owing by such Borrower to any
Lender or Agent, whether due or to become due, matured or unmatured,  liquidated
or  unliquidated,  contingent  or  non-contingent,  and all covenants and duties
regarding  such  amounts,  of any kind or nature,  arising under any of the Loan
Documents.  This term includes,  without  limitation,  all  principal,  interest
(including  interest that accrues after the commencement of a case or proceeding
against such Borrower  under the  Bankruptcy  Code),  fees,  including,  without
limitation,  any  and all  prepayment  fees,  facility  fees,  commitment  fees,
arrangement  fees,  agent fees and  attorneys'  fees and any and all other fees,
expenses,  costs or other sums chargeable to such Borrower under any of the Loan
Documents.

         "Operating  Agreement"  means the Fifth Amended and Restated  Operating
Agreement of Income Fund I, entered into as of January 24, 1995.

         "Opinion of Counsel" means the favorable written legal opinion of Susan
Santo,  general  counsel  of FSI,  on behalf of FSI for  itself  and as the sole
general  partner  or  managing   member,   as  applicable,   of  each  Borrower,
substantially in the form of Exhibit D.

         "Other Taxes" has the meaning set forth in Section 2.14.2.

         "Overadvance"  has the meaning set forth in Sections  2.1.1(a)(iii) and
(iv).

         "Owner  Trustee"  means  any  Person  acting in the  capacity  of (a) a
trustee for any owner trust or (b) a nominee entity,  in each case holding title
to any  Eligible  Inventory  pursuant to a trust or similar  agreement  with any
Borrower or FSI.

         "PBGC" means the Pension Benefit Guaranty Corporation and any successor
thereto.

         "Pension  Plan"  means,  with  respect to any  Borrower,  any  employee
pension  benefit plan,  as defined in Section 3(2) of ERISA,  that is maintained
for the  employees of such  Borrower,  FSI or any of FSI's  Subsidiaries  or any
ERISA Affiliate of such Borrower, FSI or any of FSI's Subsidiaries, other than a
Multiemployer Plan.

         "Permitted Liens" has the meaning set forth in Section 6.1.

         "Permitted  Rights of  Others"  means,  as to any  Property  in which a
Person has an interest, (a) an option or right to acquire a Lien that would be a
Permitted Lien, (b) the reversionary  interest of a lessor under a lease of such
Property and (c) an option or right of the lessee under a lease of such Property
to purchase such property at fair market value.

         "Person" means any individual, sole proprietorship,  partnership, joint
venture,   limited  liability  company,  trust,   unincorporated   organization,
association,  corporation,  institution, public benefit corporation, firm, joint
stock company, estate, entity or Governmental Authority.

         "PLMI" means PLM International, Inc., a Delaware corporation.

         "Potential  Event of Default"  means a condition or event which,  after
notice or lapse of time or both, will constitute an Event of Default.

         "Prepayment Date" has the meaning set forth in Section 2.2.2.

         "Prime  Rate"  means,  at any  time,  the rate of  interest  per  annum
publicly  announced from time to time by FUNB as its prime rate.  Each change in
the Prime Rate shall be  effective as of the opening of business on the day such
change in the Prime Rate occurs.  The parties hereto  acknowledge  that the rate
announced  publicly by FUNB as its Prime Rate is an index or base rate and shall
not necessarily be its lowest rate charged to FUNB's customers or other banks.

         "Prime Rate Loan" means any  borrowing  which bears  interest at a rate
determined with reference to the Prime Rate.

         "Property" means any interest in any kind of property or asset, whether
real, personal or mixed, whether tangible or intangible.

         "Pro Rata Share" means,  for any Lender,  the proportion  such Lender's
Commitment  with respect to the Facility has to the aggregate of all Commitments
with respect to the Facility.

         "Public  Utility  Holding Company Act" means the Public Utility Holding
Company Act of 1935, as amended (15 U.S.C.  ss. 79 et seq.) as the same shall be
in effect from time to time, and any successor statute thereto.

         "Railcar"  means  all  railroad  rolling  stock,   including,   without
limitation,  all coal, timber,  plastic pellet,  tank, hopper, flat and box cars
and locomotives.

         "Reaffirmation of Guaranty" means the Acknowledgement and Reaffirmation
of  Guaranty,  dated as of November 3, 1997,  executed by each of FSI and PMI in
favor of Lenders reaffirming its obligations under its respective Guaranty.

         "Regulations  G, T, U and X" means,  collectively,  Regulations G, T, U
and X adopted by the Federal  Reserve  Board (12 C.F.R.  Parts 207, 220, 221 and
224, respectively) and any other regulation in substance substituted therefor.

         "Requesting  Borrower" means any Borrower requesting a Loan pursuant to
Section 2.1.1.

         "Requirement  of Law" means,  as to any Person,  any law  (statutory or
common),  treaty, rule, regulation,  guideline or determination of an arbitrator
or of a Governmental  Authority,  in each case applicable to or binding upon the
Person or any of its  property or to which the Person or any of its  property is
subject.

         "Requisite Lenders" means any combination of Lenders whose combined Pro
Rata Share (and voting interest with respect thereto) of all amounts outstanding
under this  Agreement,  or, in the event there are no amounts  outstanding,  the
Commitments,  is greater than sixty-six and two-thirds  percent (66 2/3%) of all
such amounts outstanding or the total Commitments, as the case may be; provided,
however,  that in the event there are only two (2)  Lenders,  Requisite  Lenders
means both Lenders.

         "Responsible  Officer"  means  for  (i)  FSI,  any  of  the  President,
Executive  Vice  President,  Chief  Financial  Officer,  Secretary  or Corporate
Controller of FSI having  authority to request  Advances or perform other duties
required  hereunder,  and (ii) Borrowers,  any of the President,  Executive Vice
President,  Chief Financial Officer, Secretary or Corporate Controller of FSI as
the sole  general  partner  of EGF V, EGF VI or EGF VII,  as the case may be, or
sole manager of Income Fund I, in each case having authority to request Advances
or perform other duties required hereunder

         "SEC" means the  Securities  and Exchange  Commission and any successor
thereto.

         "Solvent"  means, as to any Person at any time, that (a) the fair value
of the  Property  of such  Person is greater  than the  amount of such  Person's
liabilities  (including  disputed,  contingent and unliquidated  liabilities) as
such value is  established  and  liabilities  evaluated  for purposes of Section
101(31) of the  Bankruptcy  Code;  (b) the present  fair  saleable  value of the
Property  in an orderly  liquidation  of such Person is not less than the amount
that will be required to pay the probable  liability of such Person on its debts
as they become absolute and matured; (c) such Person is able to realize upon its
Property and pay its debts and other liabilities (including disputed, contingent
and  unliquidated  liabilities) as they mature in the normal course of business;
(d) such  Person does not intend to, and does not  believe  that it will,  incur
debts or  liabilities  beyond  such  Person's  ability  to pay as such debts and
liabilities  mature;  and (e)  such  Person  is not  engaged  in  business  or a
transaction,  and is not about to engage in business or a transaction, for which
such Person's property would constitute unreasonably small capital.

         "Subsidiary"  means,  with  respect  to any  Person,  any  corporation,
association,  partnership,  limited  liability  company or other business entity
(other than  Equipment  Growth  Funds) of which an  aggregate  of fifty  percent
(50.0%) or more of the  beneficial  interest (in the case of a  partnership)  or
fifty  percent  (50%) or more of the  outstanding  stock,  units or other voting
interest  having  ordinary  voting  power to elect a majority of the  directors,
managers or trustees of such Person  (irrespective of whether,  at the time, the
stock,  units or other  voting  interest  of any other  class or classes of such
Person shall have or might have voting  power by reason of the  happening of any
contingency)  is  at  the  time,  directly  or  indirectly,   owned  legally  or
beneficially by such Person and/or one or more Subsidiaries of such Person.

         "Taxes" has the meaning set forth in Section 2.14.1.

         "TEC" means PLM  Transportation  Equipment  Corporation,  a  California
corporation and a wholly-owned Subsidiary of FSI.

         "TEC AcquiSub" means TEC AcquiSub,  Inc., a California  special purpose
corporation and a wholly-owned Subsidiary of TEC.

         "TEC  AcquiSub   Agreement"  means  the  Second  Amended  and  Restated
Warehousing  Credit  Agreement  dated as of November  3, 1997,  by and among TEC
AcquiSub,  Lenders  and Agent,  and as the same may from time to time be further
amended, modified, supplemented, renewed, extended or restated.

         "Termination  Event"  means,  with  respect  to  any  Borrower,  (a)  a
"reportable event" described in Section 4043 of ERISA and the regulations issued
thereunder  (other  than a  reportable  event not subject to the  provision  for
30-day notice to the PBGC under such regulations), or (b) the withdrawal of such
Borrower, FSI or any of FSI's Subsidiaries or any of their ERISA Affiliates from
a  Pension  Plan  during  a plan  year in which  any of them was a  "substantial
employer"  as  defined in Section  4001(a)(2)  of ERISA,  or (c) the filing of a
notice of intent to terminate a Pension Plan or the  treatment of a Pension Plan
amendment as a termination  under Section 4041 of ERISA,  or (d) the institution
of  proceedings  to terminate a Pension Plan by the PBGC, or (e) any other event
or condition which might constitute  grounds under Section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Pension Plan.

         "Trailer"  means (a)  vehicles  having a minimum  length of twenty (20)
feet used in trailer or freight car service and constructed for the transport of
commodities or containers from point to point and (b) associated equipment.

         "UCC" means the Uniform  Commercial  Code as the same may, from time to
time, be in effect in the State of North  Carolina;  provided,  however,  in the
event  that,  by  reason  of  mandatory  provisions  of law,  any and all of the
attachment,  perfection or priority of the Lien of Agent,  on behalf of Lenders,
in and to any collateral is governed by the Uniform Commercial Code as in effect
in a jurisdiction  other than the State of North Carolina,  the term "UCC" shall
mean the Uniform  Commercial  Code as in effect in such other  jurisdiction  for
purposes of the provisions  hereof  relating to such  attachment,  perfection or
priority and for purposes of definitions related to such provisions.

         "Utilization  Leases"  means  Leases  for  Equipment  held for lease in
pooling or similar  arrangements  where the actual  rental  payments  under such
Lease is based on and for the  actual  period  of  utilization  of such  item of
Equipment rather than the Lease term.

         1.2 Accounting  Terms. Any accounting term used in this Agreement shall
have, unless otherwise  specifically  provided herein,  the meaning  customarily
given such term in accordance  with GAAP,  and all financial data required to be
submitted by this  Agreement  shall be prepared and computed,  unless  otherwise
specifically  provided  herein,  in accordance  with GAAP. That certain terms or
computations  are explicitly  modified by the phrase "in  accordance  with GAAP"
shall in no way be  construed  to limit the  foregoing.  In the event  that GAAP
changes during the term of this  Agreement such that the covenants  contained in
Section 7 would  then be  calculated  in a  different  manner or with  different
components,  (a) the  parties  hereto  agree to  amend  this  Agreement  in such
respects as are necessary to conform those  covenants as criteria for evaluating
each Borrower's  financial  condition to substantially the same criteria as were
effective  prior to such change in GAAP and (b) each Borrower shall be deemed to
be in  compliance  with the  covenants  contained in the  aforesaid  subsections
during the sixty (60) day period following any such change in GAAP if and to the
extent that each Borrower would have been in compliance  therewith under GAAP as
in effect immediately prior to such change.

         1.3 Other Terms.  All other undefined terms contained in this Agreement
shall, unless the context indicates otherwise, have the meanings provided for by
the UCC to the extent the same are used or defined therein.  The words "herein,"
"hereof"  and  "hereunder"  and  other  words of  similar  import  refer to this
Agreement as a whole,  including the Exhibits and Schedules hereto, all of which
are by this reference  incorporated  into this  Agreement,  as the same may from
time to time be amended,  modified or  supplemented,  and not to any  particular
section,  subsection or clause contained in this Agreement. The term "including"
shall  not be  limiting  or  exclusive,  unless  specifically  indicated  to the
contrary. The term "or" is disjunctive;  the term "and" is conjunctive. The term
"shall" is mandatory; the term "may" is permissive. Wherever from the context it
appears  appropriate,  each term stated in either the  singular or plural  shall
include the singular and plural, and pronouns stated in the masculine,  feminine
or neuter gender shall include the masculine, feminine and the neuter.

         1.4 Schedules And Exhibits. Any reference to a "Section," "Subsection,"
"Exhibit," or "Schedule" shall refer to the relevant Section or Subsection of or
Exhibit or Schedule to this  Agreement,  unless  specifically  indicated  to the
contrary.

SECTION 2.     AMOUNT AND TERMS OF CREDIT.

         2.1 Commitment To Lend.

                  2.1.1 Revolving Facility.  Subject to the terms and conditions
of this  Agreement and in reliance upon the  representations  and  warranties of
Borrowers  set forth herein,  Lenders  hereby agree to make Advances (as defined
below) of immediately  available funds to Borrowers,  on a revolving basis, from
the Closing Date until the Business Day  immediately  preceding  the  Commitment
Termination Date, in the aggregate  principal amount outstanding at any time not
to exceed  the  lesser of (a the total  Commitments  for the  Facility  less the
aggregate principal amount then outstanding under the TEC AcquiSub Agreement and
under the AFG Agreement or (b) for any one Borrower,  its  respective  Borrowing
Base, or (c) $35,000,000 (such lesser amount being the "Maximum  Availability"),
as more fully set forth in this Section  2.1.1.  The  obligation of Borrowers to
repay the Advances made to any Borrower shall be several but not joint.

         (a) Facility Commitments.

         (i) On the Funding  Date  requested by any  Borrower  (the  "Requesting
Borrower"),  after such Borrower shall have satisfied all applicable  conditions
precedent  set  forth in  Section  3,  each  Lender  shall  advance  immediately
available funds to Agent (each such advance being an "Advance")  evidencing such
Lender's Pro Rata Share of a loan ("Loan"). Agent shall immediately advance such
immediately  available funds to such Borrower at the Designated  Deposit Account
(or such other deposit account at FUNB or such other financial institution as to
which such Borrower and Agent shall agree at least three (3) Business Days prior
to the  requested  Funding  Date) on the Funding Date with respect to such Loan.
The Requesting  Borrower shall pay interest accrued on the Loan at the rates and
in the manner set forth in Section 2.1.1(b). Subject to the terms and conditions
of this  Agreement,  the  unpaid  principal  amount of each Loan and all  unpaid
interest  accrued  thereon,  together with all other fees,  expenses,  costs and
other  sums  chargeable  to  the  Requesting  Borrower  incurred  in  connection
therewith shall be due and payable no later than the Maturity Date of such Loan.
Each Loan advanced hereunder by each Lender shall be evidenced by the Requesting
Borrower's  revolving  promissory  note  substantially  in the form of Exhibit A
(each a "Note").

         (ii) The  obligation  of  Lenders  to make any Loan  from  time to time
hereunder shall be limited to the then applicable Maximum Availability.  For the
purpose of  determining  the amount of the Borrowing  Base  available at any one
time,  the amount  available  shall be the total amount of the Borrowing Base as
set forth in the  Borrowing  Base  Certificate  delivered  to Agent  pursuant to
Section 3.2.1 with respect to such  requested  Loan.  Nothing  contained in this
Agreement  shall under any  circumstance be deemed to require any Lender to make
any Advance under the Facility which, in the aggregate principal amount,  either
(1)  taking  into  account  such  Lender's  portion  of  the  principal  amounts
outstanding  under this  Agreement and the making of such  Advance,  exceeds the
lesser of (A) such  Lender's  Commitment  for the Facility and (B) such Lender's
Pro Rata Share of the Requesting  Borrower's  Borrowing Base, or (2) taking into
account such Lender's  portion of the aggregate  principal  amounts  outstanding
under this Agreement,  under the TEC AcquiSub Agreement, under the AFG Agreement
and the  making  of such  Advance,  exceeds  such  Lender's  Commitment  for the
Facility.


         If at any time and for any reason the aggregate principal amount of the
         Loan(s)  then  outstanding  to any  Borrower  shall  exceed the Maximum
         Availability  for such  Borrower  (the amount of such  excess,  if any,
         being an "Overadvance"), such Borrower shall immediately repay the full
         amount of such Overadvance, together with all interest accrued thereon;
         provided,  however,  that if such Overadvance occurs solely as a result
         of a  decrease  in the  amount of the  Borrowing  Base due  solely to a
         decrease in the  computation of the Borrowing Base under clause (b), as
         set forth on a Borrowing Base  Certificate  delivered to Agent pursuant
         to Section 5.1.3,  then, to the extent of such decrease,  such Borrower
         shall not be required under this Section  2.1.1(a)(iii)  to prepay such
         Overadvance  but Lenders  shall have no  obligation to make or fund any
         Loans hereunder so long as such  Overadvance  condition shall remain in
         effect.


         Amounts  borrowed by Borrowers  under this  Facility may be repaid and,
prior to the Commitment Termination Date and subject to the applicable terms and
conditions precedent to borrowings  hereunder,  reborrowed;  provided,  however,
that no Loan  shall have a  Maturity  Date  which is later  than the  Commitment
Termination  Date and no LIBOR Loan shall have an Interest  Period  ending after
the Maturity Date.


         Each request for a Loan hereunder shall  constitute a reaffirmation  by
         the Requesting Borrower and the Responsible Officer requesting the same
         that the representations and warranties contained in this Agreement are
         true,  correct and complete in all material respects to the same extent
         as  though  made on and as of the date of the  request,  except  to the
         extent such  representations  and warranties  specifically relate to an
         earlier date,  in which event they shall be true,  correct and complete
         in all material respects as of such earlier date.

         (b) Each  Loan.  Each  Loan made by  Lenders  hereunder  shall,  at the
Requesting Borrower's option in accordance with the terms of this Agreement,  be
either in the form of a Prime  Rate Loan or a LIBOR  Loan.  Subject to the terms
and  conditions of this  Agreement,  each Loan shall bear interest on the sum of
the unpaid principal balance thereof  outstanding on each day from the date when
made,  continued or converted  until such Loan shall have been fully repaid at a
rate per annum equal to the Prime  Rate,  as the same may  fluctuate  on a daily
basis, or the Adjusted  LIBOR,  as the case may be, plus the Applicable  Margin.
Interest  on  each  Loan  funded  hereunder  shall  be due  and  payable  by the
Requesting  Borrower in arrears on each Interest  Payment Date, with all accrued
but unpaid  interest on such Loan being due and payable on the date such Loan is
repaid,  whether by prepayment  or at maturity,  and with all accrued but unpaid
interest being due and payable by the  Requesting  Borrower on the Maturity Date
for such Loan.

         Each  Advance  made by a  Lender  as part of a Loan  hereunder  and all
repayments  of  principal  with  respect to such  Advance  shall be evidenced by
notations made by such Lender on the books and records of such Lender; provided,
however,  that the failure by such Lender to make such notations shall not limit
or  otherwise  affect  the  obligations  of any  Borrower  with  respect  to the
repayments  of  principal  or payments  of interest on any Advance or Loan.  The
aggregate  unpaid amount of each Advance set forth on the books and records of a
Lender  shall be  presumptive  evidence of such  Lender's  Pro Rata Share of the
principal amount owing and unpaid by any Borrower under its Note.

         2.1.2  Funding.  Promptly  following  the  receipt  of  such  documents
required  pursuant to Section  3.2.1 and approval of a Loan by the Agent,  Agent
shall notify by telephone, telecopier, facsimile or telex each Lender of the (a)
Requesting Borrower, (b) the principal amount (including Lender's Pro Rata Share
thereof) and (c) Funding Date of the Loan requested by such Requesting Borrower.
Not later than 1:00 p.m., North Carolina time, on the Funding Date for any Loan,
each  Lender  shall  make an  Advance  to Agent for the  account  of  Requesting
Borrower in the amount of its Pro Rata Share of the Loan being  requested.  Upon
satisfaction of the applicable  conditions precedent set forth in Section 3, all
Advances  shall be credited in  immediately  available  funds to the  Designated
Deposit Account.

         2.1.3  Utilization Of The Loans.  The Loans made under the Facility may
be used solely for the purpose of acquiring the specific items of Equipment.

         2.2 Repayment And Prepayment.

         2.2.1  Repayment.   Unless  prepaid  pursuant  to  Section  2.2.2,  the
principal  amount of each Loan hereunder made to a Requesting  Borrower shall be
repaid by the Requesting Borrower to Lenders not later than the Maturity Date of
such Loan.

         2.2.2 Voluntary  Prepayment.  Subject to Section 2.18, any Borrower may
in the  ordinary  course of such  Borrower's  business,  upon at least three (3)
Business  Days' written  notice,  or  telephonic  notice  promptly  confirmed in
writing to Agent, which notice shall be irrevocable, prepay any Loan in whole or
in part.  Such notice of  prepayment  shall  specify the date and amount of such
prepayment and whether such prepayment is of Prime Rate Loans or LIBOR Loans, or
any combination  thereof.  Such  prepayment of Loans,  together with any amounts
required  pursuant to Section 2.18, shall be in immediately  available funds and
delivered to Agent not later than 1:00 p.m.,  North  Carolina  time, on the date
for prepayment  stated in such notice (the "Prepayment  Date").  With respect to
any  prepayment  under this Section  2.2.2,  all interest on the amount  prepaid
accrued up to but excluding the date of such prepayment shall be due and payable
on the Prepayment Date.

         2.2.3 Mandatory Prepayments.

         (a) In the event that any item of Eligible  Inventory  shall be sold or
assigned  by any  Borrower or any Marine  Subsidiary  of such  Borrower,  or the
ownership  interests  (whether Stock or otherwise) of any Borrower in any Marine
Subsidiary  of such Borrower  owning  record or beneficial  title to any item of
Eligible  Inventory  shall be sold or  transferred,  then  such  Borrower  shall
immediately prepay the Loan made with respect to such Eligible Inventory so sold
or  assigned  or with  respect to the  Eligible  Inventory  owned by such Marine
Subsidiary so sold or  transferred,  together with any accrued  interest on such
Loan to the date of  prepayment  and any  amounts  required  pursuant to Section
2.18. The sale or assignment of Eligible  Inventory by an Owner Trustee,  or the
sale or  assignment  of any  Borrower's  or any Marine  Subsidiary's  beneficial
interest  in any owner  trust (or  nominee  entity)  holding  title to  Eligible
Inventory, shall be considered a sale or assignment, as the case may be, of such
Eligible Inventory by such Borrower or such Marine  Subsidiary,  as the case may
be.

         (b)  In  the  event  that  any of the  Eligible  Inventory  shall  have
sustained a Casualty Loss, the applicable  Borrower shall promptly  notify Agent
and Lenders of such Casualty Loss and make arrangements reasonably acceptable to
the Agent to cause any and all cash  proceeds  received  by such  Borrower to be
paid to Lenders as a  prepayment  hereunder.  To the extent not so prepaid,  the
Loan funded with respect to such Eligible Inventory will nevertheless be paid by
such Borrower as provided in Section 2.2.1.

         2.3 Calculation Of Interest;  Post-Maturity  Interest.  Interest on the
Loans shall be computed  on the basis of a  365/366-day  year for all Prime Rate
Loans and a  360-day  year for all LIBOR  Loans  and the  actual  number of days
elapsed in the period during which such interest accrues.  In computing interest
on any Loan,  the date of the making of such Loan shall be included and the date
of payment  shall be excluded.  Each change in the  interest  rate of Prime Rate
Loans based on changes in the Prime Rate and each change in the  Adjusted  LIBOR
based on changes in the Eurodollar  Reserve Percentage shall be effective on the
effective date of such change and to the extent of such change. Agent shall give
Borrowers notice of any such change in the Prime Rate; provided,  however,  that
any failure by Agent to provide Borrowers with notice hereunder shall not affect
Agent's  right to make changes in the interest rate of any Loan based on changes
in the Prime Rate. Upon the occurrence and during the  continuation of any Event
of Default under this  Agreement,  Advances  under this  Agreement  will, at the
option  of  Requisite  Lenders,  bear  interest  at a rate  per  annum  which is
determined by adding two percent (2.00%) to the Applicable  Margin for such Loan
(the  "Default  Rate").  This may result in the  compounding  of  interest.  The
imposition  of a  Default  Rate  will not  constitute  a waiver  of any Event of
Default.

         2.4 Manner Of Payments.  All repayments or prepayments of principal and
all payments of interest,  fees,  costs,  expenses and other sums  chargeable to
Borrowers  under this  Agreement,  the Notes or any of the other Loan  Documents
shall  be in  lawful  money of the  United  States  of  America  in  immediately
available  funds and delivered to Agent,  for the account of Lenders,  not later
than 1:00 p.m.,  North  Carolina  time, on the date due at First Union  National
Bank of North  Carolina,  One First  Union  Center,  301 South  College  Street,
Charlotte, North Carolina 28288, Attention:  Hannah Carmody, or such other place
as shall have been designated in writing by Agent.

         2.5 Payment On Non-Business Days. Whenever any payment to be made under
this  Agreement,  the Note or any of the other Loan Documents shall be stated to
be due on a day which is not a Business  Day,  such payment shall be made on the
next  succeeding  Business Day and such  extension of time shall in such case be
included  in the  computation  of the  payment of  interest  thereon;  provided,
however, that no Loan shall have remained outstanding after the Maturity Date of
such Loan.

         2.6  Application  Of  Payments.  All  payments to or for the benefit of
Lenders  hereunder  shall be applied to the  Obligations of any Borrower  making
payment in the  following  order:  (a) then due and payable fees as set forth in
Section  2.1.1(a)(i) and, at the direction of such Borrower or upon prior notice
given to such Borrower by Agent,  other then due and payable fees,  expenses and
costs; (b) then due and payable interest payments and mandatory prepayments; and
(c) then due and payable principal payments and optional  prepayments;  provided
that if an Event of Default shall have occurred and be continuing, Lenders shall
have the exclusive right to apply any and all such payments against the then due
and owing  Obligations  of such Borrower as Lenders may deem  advisable.  To the
extent any Borrower fails to make payment required hereunder or under any of the
other Loan Documents,  each Lender is authorized to, and at its sole option may,
make such payments on behalf of such Borrower.  To the extent  permitted by law,
all amounts  advanced by any Lender  hereunder or under other  provisions of the
Loan Documents shall accrue interest at the same rate as Loans hereunder.

         s2.7 Procedure For The Borrowing Of Loans.

         2.7.1 Notice Of Borrowing.  Each  borrowing of Loans shall be made upon
any Requesting  Borrower's  irrevocable written notice delivered to Agent in the
form  of a  Notice  of  Borrowing,  executed  by a  Responsible  Person  of such
Requesting Borrower, with appropriate insertions (which Notice of Borrowing must
be received by Lender prior to 12:00 noon, Charlotte, North Carolina time, three
(3) Business Days prior to the requested Funding Date) specifying:

         (a) the amount of the requested  borrowing,  which,  if a LIBOR Loan is
requested, shall be not less than One Million Dollars ($1,000,000);

         (b) the requested Funding Date, which shall be a Business Day;

         (c) whether the borrowing is to be comprised of one or more LIBOR Loans
or Prime Rate Loans; and

         (d) the duration of the Interest  Period  applicable  to any such LIBOR
Loans  included in such Notice of  Borrowing.  If the Notice of Borrowing  shall
fail to specify the duration of the Interest Period for any borrowing  comprised
of LIBOR Loans, such Interest Period shall be three (3) months.

         2.7.2  Unavailability  Of LIBOR  Loans.  Unless  Agent shall  otherwise
consent,  during the  existence  of an Event of Default  or  Potential  Event of
Default, Borrowers may not elect to have a Loan made as a LIBOR Loan.

         2.8 Conversion And Continuation Elections.

         2.8.1 Election.  Each Borrower may, upon irrevocable  written notice to
Agent:

         (a) elect to convert on any  Business  Day, any Prime Rate Loan (or any
portion thereof in an amount equal to at least One Million Dollars ($1,000,000))
into a LIBOR Loan; or

         (b) elect to  convert  on any  Interest  Payment  Date any  LIBOR  Loan
maturing on such  Interest  Payment Date (or any portion  thereof)  into a Prime
Rate Loan; or

         (c) elect to  continue  on any  Interest  Payment  Date any LIBOR  Loan
maturing on such  Interest  Payment  Date (or any  portion  thereof in an amount
equal to at least One Million Dollars ($1,000,000));

provided,  that if the  aggregate  amount  of LIBOR  Loans  outstanding  to such
Borrower  shall have been  reduced,  by payment,  prepayment,  or  conversion of
portion  thereof,   to  be  less  than   $1,000,000,   such  LIBOR  Loans  shall
automatically  convert  into  Prime Rate  Loans,  and on and after such date the
right of such  Borrower to continue  such Loans as, and convert such Loans into,
LIBOR Loans shall terminate.

         2.8.2 Notice Of Conversion.  Each  conversion or  continuation of Loans
shall be made upon any Borrower's  irrevocable written notice delivered to Agent
in the form of a Notice of  Conversion/Continuation,  executed by a  Responsible
Person  of  such  Borrower,   with  appropriate   insertions  (which  Notice  of
Conversion/Continuation  must  be  received  by  Lender  prior  to  12:00  noon,
Charlotte,  North  Carolina time, at least three (3) Business Days in advance of
the proposed conversion date or continuation date specifying:

         (a) the proposed conversion date or continuation date;

         (b) the aggregate amount of Loans to be converted or continued;

         (c) the nature of the proposed conversion or continuation; and

         (d) the duration of the requested Interest Period.

         2.8.3 Interest  Period.  If upon the expiration of any Interest  Period
applicable to any LIBOR Loan, the Requesting Borrower has failed to select a new
Interest  Period to be  applicable to such LIBOR Loan,  such  Borrower  shall be
deemed to have  elected  to  convert  such  LIBOR  Loan  into a Prime  Rate Loan
effective as of the last day of such current Interest Period.

         2.8.4  Unavailability  Of LIBOR  Loans.  Unless  Agent shall  otherwise
consent,  during the  existence  of an Event of Default  or  Potential  Event of
Default, Borrowers may not elect to have a Loan converted into or continued as a
LIBOR Loan.

         2.9  Discretion  Of Lenders As To Manner Of  Funding2.9  Discretion  Of
Lenders As To Manner Of Funding. Notwithstanding any provision of this Agreement
to the contrary,  each Lender shall be entitled to fund and maintain its funding
of all or any  part of its  LIBOR  Loans  in any  manner  it  elects,  it  being
understood,  however, that for the purposes of this Agreement all determinations
hereunder  shall be made as if such Lender  actually  funded and maintained each
LIBOR Loan through the purchase of deposits having a maturity  corresponding  to
the  maturity of the LIBOR Loan and bearing an interest  rate equal to the LIBOR
rate  (whether  or  not,  in  any  instance,   Lender  shall  have  granted  any
participations  in such Loan).  Each  Lender  may, if it so elects,  fulfill any
commitment to make LIBOR Loans by causing a foreign  branch or affiliate to make
or continue such LIBOR Loans;  provided,  however, that in such event such Loans
shall be deemed for the  purposes  of this  Agreement  to have been made by such
Lender,  and the obligation of Borrowers to repay such Loans shall  nevertheless
be to such Lender and shall be deemed held by such Lender, to the extent of such
Loans, for the account of such branch or affiliate.

         2.10 Distribution Of Payments2.10 Distribution Of Payments. Agent shall
immediately  distribute  to each  Lender,  at such  address as each Lender shall
designate,  its  respective  interest  in  all  repayments  and  prepayments  of
principal and all payments of interest and all fees, expenses and costs received
by Agent on the same day and in the same type of funds as payment was  received.
In the event Agent does not  distribute  such payments on the same day received,
if such payments are received by Agent by 1:00 p.m.,  North Carolina time, or if
received  after such time,  on the next  succeeding  Business  Day, such payment
shall accrue interest at the Federal Funds Rate.

         2.11 Agent's Right To Assume Funds Available For  Advances2.11  Agent's
Right To Assume  Funds  Available  For  Advances.  Unless  Agent shall have been
notified by any Lender no later than the  Business  Day prior to the  respective
Funding  Date of a Loan that such  Lender does not intend to make  available  to
Agent an Advance in immediately  available funds equal to such Lender's Pro Rata
Share of the total  principal  amount of such Loan,  Agent may assume  that such
Lender has made such  Advance to Agent on the date of the Loan and Agent may, in
reliance  upon such  assumption,  make  available to the  Requesting  Borrower a
corresponding  Advance. If Agent has made funds available to such Borrower based
on such assumption and such Advance is not in fact made to Agent by such Lender,
Agent shall be entitled to recover the  corresponding  amount of such Advance on
demand from such Lender. If such Lender does not promptly pay such corresponding
amount upon Agent's demand, Agent shall notify such Requesting Borrower and such
Requesting  Borrower  shall  repay such  Advance  to Agent.  Agent also shall be
entitled to recover from such Lender interest on such Advance in respect of each
day from the date such Advance was made by Agent to such Requesting  Borrower to
the date such  corresponding  amount is recovered by Agent at the Federal  Funds
Rate.  Nothing in this  Section  2.11 shall be deemed to relieve any Lender from
its  obligation to fulfill its Commitment or to prejudice any rights which Agent
or such  Requesting  Borrower  may have  against  such Lender as a result of any
default by such Lender under this Agreement.

         2.12  Agent's  Right To Assume  Payments  Will Be Made By  Borrower2.12
Agent's Right To Assume  Payments  Will Be Made By Borrower.  Unless Agent shall
have been notified by any Borrower  prior to the date on which any payment to be
made by such  Borrower  hereunder is due that such  Borrower  does not intend to
remit such payment, Agent may, in its sole discretion, assume that such Borrower
has remitted such payment when so due and Agent may, in its sole  discretion and
in reliance upon such assumption,  make available to each Lender on such payment
date an amount equal to such Lender's Pro Rata Share of such assumed payment. If
such Borrower has not in fact remitted such payment to Agent,  each Lender shall
forthwith  on demand  repay to Agent the  amount of such  assumed  payment  made
available to such Lender, together with interest thereon in respect of each date
from and  including  the date such  amount was made  available  by Agent to such
Lender to the date such amount is repaid to Agent at the Federal Funds Rate.

         2.13 Capital  Requirements.  If any Lender  determines  that compliance
with any law or  regulation  or with any  guideline  or request from any central
bank or other  Governmental  Authority  (whether or not having the force of law)
has or would have the effect of  reducing  the rate of return on the  capital of
such Lender or any corporation  controlling  such Lender as a consequence of, or
with reference to, such Lender's Commitment or its making or maintaining its Pro
Rata  Share of the  Loans  below  the  rate  which  such  Lender  or such  other
corporation could have achieved but for such compliance (taking into account the
policies  of such  Lender or  corporation  with  regard to  capital),  then each
Borrower  shall,  from time to time,  upon written demand by such Lender (with a
copy  of  such  demand  to  Agent),  immediately  pay to such  Lender  (a)  such
additional  amounts as shall be sufficient  to  compensate  such Lender or other
corporation for such reduction  resulting from such  Borrower's  Loans or (b) in
the case  where  such  reduction  results  from  compliance  with any such  law,
regulation,  guideline or request  affecting  only the  Commitments  and not the
Loans, such additional  amounts as shall be sufficient to compensate such Lender
or other  corporation for such reduction based on each Borrower's  percentage of
average  usage  of  the  Commitments  versus  the  total  average  usage  by all
Borrowers. A certificate submitted by such Lender to any Borrower,  stating that
the amounts set forth as payable to such Lender are true and  correct,  shall be
conclusive  and binding for all purposes,  absent  manifest  error.  Each Lender
agrees promptly to notify effected Borrowers and Agent of any circumstances that
would cause any Borrower to pay  additional  amounts  pursuant to this  section,
provided  that the  failure  to give such  notice  shall not  affect  Borrowers'
obligation to pay any such additional amounts.

         2.14 Taxes.

         2.14.1  No  Deductions.  Subject  to  Subsection  2.14.7,  any  and all
payments by each Borrower to each Lender or Agent under this Agreement  shall be
made free and clear of, and without  deduction or  withholding  for, any and all
present or future taxes, levies, imposts,  deductions,  charges or withholdings,
and all liabilities with respect thereto,  excluding, in the case of each Lender
and Agent, such taxes (including income taxes or franchise taxes) as are imposed
on or measured by each Lender's net income (all such non-excluded taxes, levies,
imposts,  deductions,  charges,  withholdings and liabilities  being hereinafter
referred to as "Taxes").

         2.14.2  Miscellaneous  Taxes.  In  addition,  Borrowers  shall  pay any
present or future  stamp or  documentary  taxes or any other  excise or property
taxes,  charges or similar levies which arise from any payment made hereunder or
from the execution,  delivery or registration  of, or otherwise with respect to,
this  Agreement or any other Loan Documents  (hereinafter  referred to as "Other
Taxes").

         2.14.3  Indemnity.  Subject to Subsection  2.14.7,  each Borrower shall
indemnify  and hold  harmless each Lender and Agent for the full amount of Taxes
or Other Taxes  (including any Taxes or Other Taxes imposed by any  jurisdiction
on amounts  payable  under this  Section  2.14) paid by such  Lender or Agent in
relation  to any  payments  made  by or  Obligations  of such  Borrower  and any
liability (including penalties, interest, additions to tax and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted.  Payment under this indemnification shall be made
within thirty (30) days from the date any Lender or Agent makes  written  demand
therefor.

         2.14.4 Required Deductions. If any Borrower shall be required by law to
deduct  or  withhold  any Taxes or Other  Taxes  from or in  respect  of any sum
payable hereunder to any Lender or Agent, then, subject to Subsection 2.14.7:

         (a) the sum  payable  shall be  increased  as  necessary  so that after
making all required deductions  (including  deductions  applicable to additional
sums payable under this Section 2.14) such Lender or Agent,  as the case may be,
receives  an  amount  equal  to the  sum it  would  have  received  had no  such
deductions been made;

         (b) such Borrower shall make such deductions, and

         (c) such  Borrower  shall pay the full amount  deducted to the relevant
taxation authority or other authority in accordance with applicable law.

         2.14.5  Evidence of Payment.  Within thirty (30) days after the date of
any payment by any Borrower of Taxes or Other Taxes, such Borrower shall furnish
to Agent  the  original  or a  certified  copy of a receipt  evidencing  payment
thereof, or other evidence of payment satisfactory to Agent.

         2.14.6 Foreign Persons.  Each Lender which is a foreign person (i.e., a
person other than a United States person for United  States  Federal  income tax
purposes) shall:

         (a) No later  than the date  upon  which  such  Lender  becomes a party
hereto deliver to Borrowers  through Agent two (2) accurate and complete  signed
originals  of IRS Form  4224 or any  successor  thereto  ("Form  4224"),  or two
accurate and complete signed originals of IRS Form 1001 or any successor thereto
("Form 1001"),  as  appropriate,  in each case indicating that such Lender is on
the date of delivery thereof entitled to receive payments of principal, interest
and fees under this  Agreement  free from  withholding  of United States Federal
income tax;

         (b) If at any time such Lender  makes any changes  necessitating  a new
Form 4224 or Form 1001, with reasonable  promptness deliver to Borrowers through
Agent in replacement for, or in addition to, the forms  previously  delivered by
it hereunder,  two accurate and complete  signed  originals of Form 4224; or two
accurate and complete  signed  originals of Form 1001, as  appropriate,  in each
case indicating that the Lender is on the date of delivery  thereof  entitled to
receive payments of principal,  interest and fees under this Agreement free from
withholding of United States Federal income tax;

         (c) Before or promptly after the occurrence of any event (including the
passing of time but  excluding  any event  mentioned in (ii) above)  requiring a
change in or  renewal  of the most  recent  Form  4224 or Form  1001  previously
delivered by such Lender,  deliver to Borrowers  through  Agent two accurate and
complete original signed copies of Form 4224 or Form 1001 in replacement for the
forms previously delivered by the Lender; and

         (d) Promptly upon any Borrower's or Agent's  reasonable request to that
effect,  deliver to such Borrower or Agent (as the case may be) such other forms
or similar  documentation as may be required from time to time by any applicable
law,  treaty,  rule or regulation in order to establish such Lender's tax status
for withholding purposes.

         2.14.7  Income  Taxes.  Borrowers  will  not be  required  to  pay  any
additional  amounts in respect of United States  Federal  income tax pursuant to
Subsection  2.14.4 to  Lender  for the  account  of any  Lending  Office of such
Lender:

         (a) If the  obligation  to pay such  additional  amounts would not have
arisen but for a failure by such  Lender to comply  with its  obligations  under
Subsection 2.14.6 in respect of such Lending Office;

         (b) If such Lender  shall have  delivered  to  Borrowers a Form 4224 in
respect of such Lending  Office  pursuant to  Subsection  2.14.6 and such Lender
shall not at any time be entitled to exemption  from deduction or withholding of
United States Federal  income tax in respect of payments by Borrowers  hereunder
for the  account of such  Lending  Office for any reason  other than a change in
United States law or regulations or in the official  interpretation  of such law
or regulations by any Governmental  Authority charged with the interpretation or
administration  thereof  (whether or not having the force of law) after the date
of delivery of such Form 4224; or

         (c) If such Lender  shall have  delivered  to  Borrowers a Form 1001 in
respect of such Lending Office  pursuant to Subsection  2.14.6,  and such Lender
shall not at any time be entitled to exemption  from deduction or withholding of
United States Federal  income tax in respect of payments by Borrowers  hereunder
for the  account of such  Lending  Office for any reason  other than a change in
United States law or  regulations or any applicable tax treaty or regulations or
in the official  interpretation  of any such law,  treaty or  regulations by any
Governmental Authority charged with the interpretation or administration thereof
(whether or not having the force of law) after the date of delivery of such Form
1001.

         2.14.8  Reimbursement Of Costs. If, at any time, any Borrower  requests
any Lender to deliver any forms or other  documentation  pursuant to  Subsection
2.14.6(a),  then such Borrower  shall,  on demand of such Lender  through Agent,
reimburse such Lender for any costs and expenses (including  reasonable attorney
fees) reasonably  incurred by such Lender in the preparation or delivery of such
forms or other documentation.

         2.14.9  Jurisdiction.  If any  Borrower is  required to pay  additional
amounts to any Lender or Agent pursuant to Subsection  2.14.4,  then such Lender
shall  use  its  reasonable  good  faith  efforts  (consistent  with  legal  and
regulatory  restrictions) to change the jurisdiction of its Lending Office so as
to eliminate any such  additional  payment by such Borrower which may thereafter
accrue  if such  change,  in the  judgment  of  such  Lender,  is not  otherwise
disadvantageous to such Lender.

         2.15 Illegality.

         2.15.1 LIBOR Loans. If any Lender shall determine that the introduction
of any  Requirement  of Law, or any change in any  Requirement  of Law or in the
interpretation  or  administration  thereof,  has made it unlawful,  or that any
central bank or other  Governmental  Authority has asserted that it is unlawful,
for such  Lender or its  Lending  Office to make LIBOR  Loans,  then,  on notice
thereof by Lender to the Requesting  Borrower,  the obligation of such Lender to
make LIBOR Loans shall be suspended  until such Lender  shall have  notified the
Requesting Borrower that the circumstances  giving rise to such determination no
longer exists.

         2.15.2  Prepayment.  If a Lender shall determine that it is unlawful to
maintain any LIBOR Loan,  Borrowers shall prepay in full all LIBOR Loans of such
Lender then outstanding,  together with interest accrued thereon,  either on the
last day of the Interest Period thereof if such Lender may lawfully  continue to
maintain  such LIBOR Loans to such day, or  immediately,  if such Lender may not
lawfully  continue  to  maintain  such LIBOR  Loans,  together  with any amounts
required to be paid in connection therewith pursuant to Section 2.18.

         2.15.3 Prime Rate Borrowing.  If any Borrower is required to prepay any
LIBOR Loan immediately as provided in Section 2.2.3, then concurrently with such
prepayment,  such Borrower  shall borrow,  in the amount of such  prepayment,  a
Prime Rate Loan.

         2.16 Increased Costs. If any Lender shall determine that, due to either
(a)  the  introduction  of or  any  change  (other  than  any  change  by way of
imposition of or increase in reserve requirements included in the calculation of
the  LIBOR) in or in the  interpretation  of any  Requirement  of Law or (b) the
compliance  with  any  guideline  or  request  from  any  central  bank or other
Governmental  Authority (whether or not having the force of law), there shall be
any  increase in the cost to such Lender of agreeing to make or making,  funding
or maintaining  any LIBOR Loans,  then Borrowers  shall be liable on a joint and
several  basis for,  and shall from time to time,  upon demand  therefor by such
Lender,  pay to  such  Lender  such  additional  amounts  as are  sufficient  to
compensate such Lender for such increased costs.

         2.17 Inability To Determine  Rates. If Agent shall have determined that
for any reason adequate and reasonable  means do not exist for  ascertaining the
LIBOR for any requested Interest Period with respect to a proposed LIBOR Loan or
that the LIBOR  applicable for any requested  Interest  Period with respect to a
proposed  LIBOR Loan does not  adequately and fairly reflect the cost to Lenders
of funding such Loan, Agent will forthwith give notice of such  determination to
Borrowers  and each Lender.  Thereafter,  the  obligation  of Lenders to make or
maintain LIBOR Loans,  as the case may be,  hereunder  shall be suspended  until
Agent, upon instruction from Requisite Lenders,  revokes such notice in writing.
Upon  receipt of such  notice,  Borrowers  may revoke any Notice of Borrowing or
Notice of Conversion/Continuation  then submitted. If a Borrower does not revoke
such notice,  Lenders shall make,  convert or continue the Loans, as proposed by
such Borrower,  in the amount  specified in the applicable  notice  submitted by
such  Borrower,  but such Loans shall be made,  converted  or continued as Prime
Rate Loans instead of LIBOR Loans, as the case may be.

         2.18 Prepayment Of LIBOR Loans. Each Borrower agrees, severally but not
jointly,  that in the event that such Borrower  prepays or is required to prepay
any LIBOR Loan by  acceleration or otherwise or fails to draw down or convert to
a LIBOR Loan after giving notice thereof, it shall reimburse each Lender for its
funding losses due to such prepayment or failure to draw.  Borrowers and Lenders
hereby agree that such funding losses shall consist of the sum of the discounted
monthly  differences for each month during the applicable or requested  Interest
Period, calculated as follows for each such month:

         (a)  Principal  amount of such LIBOR Loan times (number of days between
the  date of  prepayment  and the  last day in the  applicable  Interest  Period
divided by 360), times the applicable Interest Differential, plus

         (b) all actual  out-of-pocket  expenses  (other  than those  taken into
account in the calculation of the Interest Differential) incurred by Lenders and
Agent  (excluding  allocation of any expense  internal to Lenders and Agent) and
reasonably  attributable to such payment,  prepayment or failure to draw down or
convert as described  above;  provided that no  prepayment  fee shall be payable
(and no credit or rebate  shall be  required)  if the  product of the  foregoing
formula is not a positive number.

3.  CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND THE MAKING 
OF LOANS.

         3.1  Effectiveness  of  This  Agreement.   The  effectiveness  of  this
Agreement is subject to the satisfaction of the following conditions precedent:

         3.1.1 Partnership,  Company And Corporate  Documents.  Agent shall have
received,  in form and substance  satisfactory  to Lenders and their  respective
counsel a certified  copy of the records of all actions taken by each  Borrower,
FSI  and  PLMI,  including  all  resolutions  of  each  Borrower  and  corporate
resolutions of FSI and PLMI, authorizing or relating to the execution,  delivery
and  performance  of  this  Agreement  and  the  other  Loan  Documents  and the
consummation of the transactions contemplated hereby and thereby.

         3.1.2 Notes. Agent shall have received new Notes, in form and substance
satisfactory to Lenders, and duly executed and delivered by each Borrower, which
Notes  shall  replace  and  supersede  the Notes  issued by  Borrowers  to Agent
pursuant to the Growth Fund Agreement.

         3.1.3  Opinion Of  Counsel.  Agent shall have  received  an  originally
executed  Opinion of Counsel,  in form and  substance  satisfactory  to Lenders,
dated as of the Closing Date and  addressed to Lenders,  together with copies of
any  officer's  certificate  or  legal  opinion  of  other  counsel  or law firm
specifically identified and expressly relied upon by such counsel.

         3.1.4  Reaffirmation  of  Guaranty.   Agent  shall  have  received  the
Reaffirmation of Guaranty,  in form and substance  satisfactory to Lenders, duly
executed and delivered by PLMI.

         3.1.5  TEC  AcquiSub  Amendment.  Agent  shall  have  received  the TEC
AcquiSub  Agreement,  duly  executed  and  delivered  by TEC  AcquiSub,  and all
conditions  precedent to the  effectiveness of the TEC AcquiSub  Agreement shall
have been satisfied.

         3.1.6 AFG Agreement.  Agent shall have received the AFG Agreement, duly
executed and delivered by AFG, and all conditions precedent to the effectiveness
of the AFG Agreement shall have been satisfied.

         3.1.7 Bringdown  Certificate.  Separate  certificates,  dated as of the
Closing Date, of the Chief Financial Officer or Corporate  Controller of FSI, in
its capacity as the sole general partner of EGF V, EGF VI and EGF VII and as the
sole  manager of Income Fund I, to the effect that (i) the  representations  and
warranties  of each  Borrower  contained  in  Section 4 are true,  accurate  and
complete in all material  respects as of the Closing Date as though made on such
date and (ii) no Event of  Default  or  Potential  Event of  Default  under this
Agreement has occurred.

         3.1.8 Fees.  Agent shall have  received the Agent's Side Letter and BMO
shall have received the Lender's  Side Letter,  each duly executed by Borrowers,
TEC AcquiSub and AFG, and Agent and BMO shall have  received the fees  described
in the Agent's Side Letter and Lender's Side Letter, respectively.

         3.1.9 Other Documents.  Agent shall have received such other documents,
information  and items from Borrowers and FSI as reasonably  requested by Agent.
3.2 All Loans3.2 All Loans.  Unless waived in writing by Requisite Lenders,  the
obligation of any Lender to make any Advance is subject to the  satisfaction  of
the following further conditions precedent:

         3.2.1 Notice Of Borrowing. At least three (3) Business Days before each
Loan  hereunder  with respect to any  acquisition  of Equipment by any Borrower,
Agent shall have  received  (i) Notice of  Borrowing  and (ii) a Borrowing  Base
Certificate,  with  appropriate  insertions,  executed  by the  Chief  Financial
Officer or Corporate Controller of such Borrower.

         3.2.2  No  Event  Of  Default.  No event  shall  have  occurred  and be
continuing  or would  result  from the making of any Loan on such  Funding  Date
which  constitutes an Event of Default or Potential  Event of Default under this
Agreement or under (and as separately  defined in) the TEC AcquiSub Agreement or
under (and as separately defined in) the AFG Agreement,  or which with notice or
lapse of time or both would constitute an Event of Default or Potential Event of
Default  under this  Agreement  or under the TEC  AcquiSub  Agreement or the AFG
Agreement.

         3.2.3   Representations   And  Warranties.   All   representations  and
warranties  contained in the Loan Documents shall be true, accurate and complete
in all material respects with the same effect as though such representations and
warranties  had been made on and as of such  Funding  Date (except to the extent
such  representations and warranties  specifically relate to an earlier date, in
which case they shall be true, accurate and complete in all material respects as
of such earlier date).

         3.2.4  Insurance.  The  insurance  required  to be  maintained  by such
Borrower pursuant to the Loan Documents shall be in full force and effect.

         3.2.5  Other   Instruments.   Agent  shall  have  received  such  other
instruments and documents as it may have reasonably  requested from Borrowers in
connection with the Loans to be made on such date.

         3.3 Further  Conditions To All Loans.  Notwithstanding  anything to the
contrary  contained  in this  Agreement,  unless  waived in writing by Requisite
Lenders,  no Lender shall have any  obligation  hereunder to make any Advance if
any of the following events shall occur:

         3.3.1 General Partner Or Manager.  FSI shall have ceased to be the sole
general partner of any of EGF V, EGF VI or EGF VII or the sole manager of Income
Fund I, whether due to the voluntary or  involuntary  withdrawal,  substitution,
removal  or  transfer  of FSI from or of all or any  portion  of  FSI's  general
partnership interest or capital contribution in such Borrower.

         3.3.2  Removal  Of General  Partner Or  Manager.  Twenty  five  percent
(25.0%) or more of the limited partners  (measured by such partners'  percentage
interest) of any  Equipment  Growth Fund shall at any time vote to remove FSI as
the general  partner of such Equipment  Growth Fund or a majority in interest of
Class A members, as that term is defined in the Operating  Agreement,  of Income
Fund I shall at any time vote to remove FSI as manager of Income Fund I, in each
case, regardless of whether FSI is actually removed.

         3.3.3  Purchaser.  Requesting  Borrower,  TEC  AcquiSub,  FSI or  their
Subsidiaries  shall have ceased to be the  purchaser of Eligible  Inventory  for
such Requesting Borrower.

 4.    BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES.

         4.1 General Representations And Warranties.  Each Borrower,  severally,
as to  itself,  but not  jointly  as to the other  Borrowers  and FSI,  and FSI,
jointly and  severally  with each  Borrower as to each such  Borrower  and as to
itself,  hereby  warrant and represent to Agent and each Lender as follows,  and
agree  that  each of said  warranties  and  representations  shall be  deemed to
continue until full,  complete and  indefeasible  payment and performance of the
Obligations and shall apply anew to each borrowing hereunder:

         4.1.1 Existence And Power.  Each Borrower is a limited  partnership or,
in the  case  of  Income  Fund  I, a  limited  liability  company,  and FSI is a
corporation,  each duly organized,  validly  existing and in good standing under
the laws of the  jurisdiction  of its  organization  and is duly  qualified  and
licensed as a foreign corporation,  partnership or limited liability company, as
applicable, and authorized to do business in each jurisdiction within the United
States  where its  ownership  of  Property  and assets or  conduct  of  business
requires such qualification.  Each Borrower and FSI has the power and authority,
rights and  franchises  to own their  Property  and assets and to carry on their
businesses as now  conducted.  Each Borrower and FSI has the power and authority
to  execute  and  deliver  the Loan  Documents  (to the  extent  each is a party
thereto) and all other instruments and documents contemplated hereby or thereby.

         4.1.2 Loan Documents And Notes  Authorized;  Binding  Obligations.  The
execution, delivery and performance of this Agreement and each of the other Loan
Documents  to which any  Borrower  is a party and  delivery  and payment of such
Borrower's respective Note have been duly authorized by all necessary and proper
action on the part of such Borrower. The execution,  delivery and performance of
this Agreement and each of the other Loan Documents to which FSI is a party have
been duly authorized by all necessary and proper corporate action on the part of
FSI. The Loan Documents constitute legally valid and binding obligations of each
Borrower and FSI, as the case may be, enforceable against each Borrower and FSI,
to the  extent  any one of them is a party  thereto,  in  accordance  with their
respective  terms,  except as enforcement  thereof may be limited by bankruptcy,
insolvency  or  other  laws  affecting  the  enforcement  of  creditors'  rights
generally.

         4.1.3 No Conflict;  Legal Compliance.  (a) The execution,  delivery and
performance  of this  Agreement,  and each of the other Loan  Documents  and the
execution,  delivery  and  payment of the Notes  will not:  (i)  contravene  any
provision of FSI's  certificate of incorporation or bylaws;  (ii) contravene any
provision of any Borrowers'  Limited  Partnership  Agreements or, in the case of
Income Fund I, Operating Agreement or other formation or organization  document;
or (iii) contravene,  conflict with or violate any applicable law or regulation,
or any order, writ, judgment,  injunction, decree, determination or award of any
Governmental  Authority,  which  contravention,  conflict or  violation,  in the
aggregate,  may have Material Adverse Effect; and (b) the execution and delivery
of this  Agreement,  and each of the other Loan  Documents and the execution and
delivery of the Notes will not violate or result in the breach of, or constitute
a default  under any  indenture  or other  loan or  credit  agreement,  or other
agreement or instrument  which are, in the aggregate,  material and to which any
Borrower or FSI is a party or by which any Borrower,  FSI or their  Property and
assets may be bound or affected. Neither any Borrower nor FSI is in violation or
breach of or default under any law, rule,  regulation,  order,  writ,  judgment,
injunction,  decree,  determination or award or any contract,  agreement, lease,
license,  indenture or other instrument to which any one of them is a party, the
non-compliance  with,  the  violation  or breach of or the  default  under which
would, with reasonable likelihood, have a Material Adverse Effect.

         4.1.4   Financial   Condition.   Each   Borrower's  and  FSI's  audited
consolidated  financial  statements as of December 31, 1996 and  Borrowers'  and
FSI's unaudited consolidated financial statements as of June 30, 1997, copies of
which  heretofore  have  been  delivered  to  Agent  by such  Borrower  and FSI,
respectively,  and all other  financial  statements  and other data submitted in
writing by any  Borrower and FSI to Agent or any Lender in  connection  with the
request for credit granted by this Agreement, are true, accurate and complete in
all  material  respects,  and said  financial  statements  and other data fairly
present the consolidated financial condition of such Borrower and FSI, as of the
date thereof,  and have been prepared in accordance with GAAP, subject to fiscal
year-end  audit  adjustments.  There has been no material  adverse change in the
business,  properties  or  assets,  operations,   prospects,   profitability  or
financial or other condition of any Borrower or FSI since December 31, 1996.

         4.1.5 Executive  Offices.  The current  location of each Borrower's and
FSI's chief executive  offices and principal  places of business is set forth on
Schedule 4.1.5.

         4.1.6 Litigation.  Except as disclosed on Schedule 4.1.6,  there are no
claims, actions, suits,  proceedings or other litigation pending or, to the best
of each Borrower's and FSI's knowledge,  after due inquiry,  threatened  against
any Borrower, FSI or any of FSI's Subsidiaries,  including,  without limitation,
TEC AcquiSub,  at law or in equity before any Governmental  Authority or, to the
best  of  each  Borrower's  and  FSI's   knowledge,   after  due  inquiry,   any
investigation by any Governmental Authority of any Borrower's or FSI's or any of
FSI's Subsidiaries',  including,  without limitation,  TEC AcquiSub's,  affairs,
Properties  or assets  which would,  with  reasonable  likelihood,  if adversely
determined, have a Material Adverse Effect. Other than any liability incident to
the litigation or proceedings disclosed on Schedule 4.1.6, neither any Borrower,
nor  FSI nor any of  FSI's  Subsidiaries,  including,  without  limitation,  TEC
AcquiSub, has any Contingent Obligations which are not provided for or disclosed
in the financial  statements  delivered to Agent  pursuant to Sections 4.1.4 and
5.1.

         4.1.7 Material Contracts.  Schedule 4.1.7 lists all currently effective
contracts and agreements  (whether  written or oral) to which each Borrower is a
party and which (i) could involve the payment or receipt by such Borrower  after
the date of this  Agreement of more than $250,000 or (ii)  otherwise  materially
affect the  business,  operations  or financial  condition of any Borrower  (the
"Material  Contracts").  Except as  disclosed  on Schedule  4.1.7,  there are no
material defaults under any such Material Contract by any Borrower,  to the best
of each Borrower's knowledge,  by any other party to any such Material Contract.
Each  Borrower  has  delivered  to Agent  true and  correct  copies  of all such
contracts  or  agreements  (or,  with respect to oral  contracts or  agreements,
written descriptions of the material terms thereof).

         4.1.8  Consents And Approvals.  Except as set forth in Schedule  4.1.8,
all consents and approvals of, filings and registrations with, and other actions
in respect  of, all  Governmental  Authorities  required  to be  obtained by any
Borrower,  FSI or any of FSI's  Subsidiaries  in order to make or consummate the
transactions  contemplated  under the Loan  Documents have been, or prior to the
time when required will have been,  obtained,  given,  filed or taken and are or
will be in full force and effect.

         4.1.9  Other  Agreements.  Neither any  Borrower,  FSI nor any of FSI's
Subsidiaries,  including,  without limitation, TEC AcquiSub, is a party to or is
bound by any agreement, contract, lease, license or instrument, or is subject to
any restriction under its respective charter or formation documents,  which has,
or is likely in the  foreseeable  future to have,  a  Material  Adverse  Effect.
Neither any  Borrower  nor FSI has entered into and, as of the Closing Date does
not  contemplate  entering  into,  any material  agreement or contract  with any
Affiliate  of any  Borrower  or FSI on terms  that are  less  favorable  to such
Borrower or FSI than those that might be  obtained at the time from  Persons who
are not such Affiliates.

         4.1.10  Employment  And  Labor  Agreements.  There  are  no  collective
bargaining  agreements or other labor  agreements  covering any employees of any
Borrower, FSI or any of FSI's Subsidiaries.

         4.1.11  ERISA.  No Borrower  has an Employee  Benefit  Plan  subject to
ERISA. All Pension Plans of FSI and any of FSI's Subsidiaries, that are intended
to be qualified under Section 401(a) of the Code have been determined by the IRS
to  be  qualified  or  FSI  or  any  of  FSI's  Subsidiaries  will  obtain  such
determination  prior to  instituting  such a Pension  Plan.  All  Pension  Plans
existing as of the date hereof continue to be so qualified. No "reportable event
(as  defined  in Section  4043 of ERISA) has  occurred  and is  continuing  with
respect to any Pension Plan for which the thirty-day notice  requirement may not
be waived other than those of which the appropriate  Governmental  Authority has
been notified.  All Employee  Benefit Plans of FSI or any of FSI's  Subsidiaries
have been operated in all material  respects in accordance  with their terms and
applicable law, including ERISA, and no "prohibited  transaction" (as defined in
ERISA and the Code) that would result in any material liability to FSI or any of
FSI's Subsidiaries has occurred with respect to any such Employee Benefit Plan.

         4.1.12  Labor  Matters.  There are no strikes or other  labor  disputes
against any Borrower,  FSI or any of FSI's  Subsidiaries or, to the best of each
Borrower's  and FSI's  knowledge,  after due  inquiry,  threatened  against  any
Borrower,  FSI  or any of  FSI's  Subsidiaries,  which  would,  with  reasonable
likelihood,  have a Material Adverse Effect.  All payments due from any Borrower
or FSI on account of employee  health and welfare  insurance  which would,  with
reasonable likelihood, have a Material Adverse Effect if not paid have been paid
or, if not due, accrued as a liability on the books of such Borrower or FSI.

         4.1.13 Margin Regulations. Neither any Borrower nor FSI own any "margin
security", as that term is defined in Regulations G and U of the Federal Reserve
Board,  and the proceeds of the Loans under this Agreement will be used only for
the purposes contemplated hereunder. None of the Loans will be used, directly or
indirectly,  for the purpose of purchasing or carrying any margin security,  for
the  purpose of  reducing  or retiring  any  indebtedness  which was  originally
incurred to purchase or carry any margin security or for any other purpose which
might cause any of the Loans under this  Agreement  to be  considered a "purpose
credit"  within the meaning of  Regulations  G, T, U and X. Neither any Borrower
nor FSI will take or permit  any agent  acting on its  behalf to take any action
which  might  cause this  Agreement  or any  document  or  instrument  delivered
pursuant hereto to violate any regulation of the Federal Reserve Board.

         4.1.14  Taxes.  All  federal,  state,  local and foreign  tax  returns,
reports and  statements  required to be filed by any  Borrower,  FSI and, to the
best of each Borrower's and FSI's knowledge,  after due inquiry, by any of FSI's
Subsidiaries have been filed with the appropriate Governmental Authorities where
failure to file  would,  with  reasonable  likelihood,  have a Material  Adverse
Effect,  and all material Charges and other  impositions shown thereon to be due
and payable by any Borrower,  FSI or such Subsidiary have been paid prior to the
date on which any fine,  penalty,  interest or late charge may be added  thereto
for nonpayment thereof, or any such fine, penalty, interest, late charge or loss
has been paid,  or such  Borrower,  FSI or such  Subsidiary  is  contesting  its
liability  therefore  in good  faith and has  fully  reserved  all such  amounts
according  to GAAP in the  financial  statements  provided to Agent  pursuant to
Section 5.1. Each  Borrower,  FSI and, to the best of each  Borrower's and FSI's
knowledge,  after due inquiry,  each of FSI's Subsidiaries has paid when due and
payable  all  material  Charges  upon  the  books of any  Borrower,  FSI or such
Subsidiary  and no  Government  Authority  has  asserted  any Lien  against  any
Borrower,  FSI or any of FSI's  Subsidiaries  with  respect  to unpaid  Charges.
Proper and accurate amounts have been withheld by each Borrower, FSI and, to the
best of each Borrower's and FSI's  knowledge,  after due inquiry,  each of FSI's
Subsidiaries from its employees for all periods in full and complete  compliance
with the  tax,  social  security  and  unemployment  withholding  provisions  of
applicable federal, state, local and foreign law and such withholdings have been
timely paid to the respective Governmental Authorities.

         4.1.15 Environmental Quality.

         (a) Except as specifically  disclosed in Schedule 4.1.15,  the on-going
operations of each Borrower,  FSI and each of FSI's  Subsidiaries  comply in all
material respects with all Environmental Laws, except such non-compliance  which
would not (if enforced in accordance with applicable law) result in liability in
excess of $250,000 in the aggregate.

         (b) Except as specifically disclosed in Schedule 4.1.15, each Borrower,
FSI  and  each  of  FSI's  Subsidiaries  has  obtained  all  licenses,  permits,
authorizations   and   registrations   required  under  any   Environmental  Law
("Environmental Permits") and necessary for its ordinary course operations,  all
such Environmental Permits are in good standing, and each Borrower, FSI and each
of FSI's Subsidiaries is in compliance with all material terms and conditions of
such Environmental
Permits.

         (c) Except as specifically  disclosed in Schedule  4.1.15,  neither any
Borrower,  FSI or any of FSI's  Subsidiaries nor any of their respective present
Property  or  operations  is subject to any  outstanding  written  order from or
agreement  with any  Governmental  Authority  nor  subject  to any  judicial  or
docketed   administrative   proceeding,   respecting  any   Environmental   Law,
Environmental Claim or Hazardous Material.

         (d) Except as specifically  disclosed in Schedule 4.1.15,  there are no
Hazardous  Materials or other conditions or circumstances  existing with respect
to any Property,  or arising from  operations  prior to the Closing Date, of any
Borrower,  FSI or any of FSI's Subsidiaries that would reasonably be expected to
give rise to  Environmental  Claims with a potential  liability of any Borrower,
FSI or any of FSI's  Subsidiaries in excess of $250,000 in the aggregate for any
such condition, circumstance or Property.

         4.1.16 Trademarks,  Patents, Copyrights,  Franchises And Licenses. Each
Borrower and FSI and, to the best of their knowledge, after due inquiry, each of
FSI's  Subsidiaries  possess and owns all  necessary  trademarks,  trade  names,
copyrights,  patents, patent rights,  franchises and licenses which are material
to the conduct of their business as now operated.

         4.1.17  Full  Disclosure.  As  of  the  Closing  Date,  no  information
contained in this Agreement,  the other Loan Documents or any other documents or
written  materials  furnished by or on behalf of any Borrower or FSI to Agent or
any  Lender  pursuant  to the terms of this  Agreement  or any of the other Loan
Documents  contains any untrue or  inaccurate  statement  of a material  fact or
omits to state a material fact necessary to make the statement  contained herein
or therein not misleading in light of the circumstances under which made.

         4.1.18  Other  Regulations.  Neither  any  Borrower  nor FSI is:  (a) a
"public  utility  company"  or a  "holding  company,"  or  an  "affiliate"  or a
"subsidiary  company"  of a  "holding  company,"  or an  "affiliate"  of  such a
"subsidiary  company," as such terms are defined in the Public  Utility  Holding
Company Act or (b) an "investment  company," or an "affiliated  person" of, or a
"promoter"  or "principal  underwriter"  for, an  "investment  company," as such
terms  are  defined  in the  Investment  Company  Act.  The  making of the Loans
hereunder  and the  application  of the proceeds and  repayment  thereof by each
Borrower and the performance of the transactions  contemplated by this Agreement
and the other Loan  Documents  will not violate any provision of the  Investment
Company Act or the Public Utility Holding  Company Act, or any rule,  regulation
or order issued by the SEC thereunder.

         4.1.19 Solvency. Each Borrower and FSI are Solvent.

         4.2   Representations  And  Warranties  At  Time  Of  First  Advance4.2
Representations  And  Warranties  At Time Of  First  Advance.  At the  time  any
Borrower makes a request for an initial borrowing hereunder, each such Borrower,
severally,  as to itself, but not jointly as to the other Borrowers and FSI, and
FSI, jointly and severally with each Borrower as to each such Borrower and as to
itself,  hereby  warrant and represent to Agent and each Lender as follows,  and
agree  that  each of said  warranties  and  representations  shall be  deemed to
continue until full,  complete and  indefeasible  payment and performance of the
Obligations and shall apply anew to each additional borrowing hereunder:

         4.2.1  Power And  Authority.  Each  Borrower  and FSI has the power and
authority  to perform the terms of the Loan  Documents  (to the extent each is a
party thereto) and all other  instruments and documents  contemplated  hereby or
thereby.

         4.2.2 No Conflict.  The performance of this Agreement,  and each of the
other Loan  Documents and the payment of the Notes will not violate or result in
the breach of, or  constitute  a default  under any  indenture  or other loan or
credit agreement,  or other agreement or instrument which are, in the aggregate,
material and to which any  Borrower or FSI is a party or by which any  Borrower,
FSI or their Property and assets may be bound or affected.

         4.2.3 Consents And Approvals. No approval,  authorization or consent of
any trustee or holder of any  indebtedness  or obligation of any Borrower or FSI
or of any other Person under any such  material  agreement,  contract,  lease or
license or similar document or instrument to which such Borrower,  FSI or any of
FSI's  Subsidiaries  is a party  or by  which  such  Borrower,  FSI or any  such
Subsidiary is bound, is required to be obtained by any such Borrower, FSI or any
such  Subsidiary in order to make or consummate  the  transactions  contemplated
under the Loan Documents.

         4.3 Survival Of Representations  And Warranties.  So long as any of the
Commitments  shall be available and until payment and performance in full of the
Obligations,  the representations  and warranties  contained herein shall have a
continuing effect as having been true when made.

5. BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS.

         Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI,  jointly and severally with each Borrower as to each
Borrower and as to itself (and, where applicable, PLMI) covenant and agree that,
so long as any of the  Commitments  shall be available and until full,  complete
and indefeasible  payment and performance of the  Obligations,  unless Requisite
Lenders shall  otherwise  consent in writing,  each Borrower and FSI shall do or
cause to have done all of the following:

         5.1 Records And Reports. Maintain, and cause each of FSI's Subsidiaries
to  maintain,  a system of  accounting  administered  in  accordance  with sound
business practices to permit  preparation of financial  statements in conformity
with GAAP, and deliver to Agent or caused to be delivered to Agent:

         5.1.1  Quarterly  Statements.  As soon as practicable  and in any event
within sixty (60) days after the end of each quarterly accounting period of each
Borrower,  FSI and PLMI, except with respect to the final fiscal quarter of each
fiscal year,  in which case as soon as  practicable  and in any event within one
hundred twenty (120) days after the end of such fiscal quarter, consolidated and
consolidating  balance  sheets  of FSI and  PLMI  and a  balance  sheet  of each
Borrower as at the end of such period and the related  consolidated  (and, as to
statements  of income  only for FSI,  consolidating)  statements  of income  and
stockholders'  or  members'  equity  of each  Borrower  and FSI and the  related
consolidated  statements of income,  stockholders'  or members'  equity and cash
flows of PLMI (and,  as to statements  of income only,  consolidating)  for such
quarterly accounting period,  setting forth in each case in comparative form the
consolidated figures for the corresponding  periods of the previous year, all in
reasonable  detail and  certified  by the Chief  Financial  Officer or Corporate
Controller of the general  partner or manager of each  Borrower,  as applicable,
FSI and PLMI  that  they (i) are  complete  and  fairly  present  the  financial
condition  of such  Borrower,  FSI and PLMI as at the  dates  indicated  and the
results of their  operations  and  changes  in their  cash flow for the  periods
indicated, (ii) disclose all liabilities of each Borrower, FSI and PLMI that are
required to be reflected or reserved against under GAAP,  whether  liquidated or
unliquidated,  fixed or  contingent  and (iii) have been  prepared in accordance
with  GAAP,  subject  to  changes  resulting  from  audit  and  normal  year-end
adjustment;

         5.1.2 Annual Statements. As soon as practicable and in any event within
one hundred twenty (120) days after the end of each fiscal year of each Borrower
and PLMI,  consolidated and  consolidating  balance sheets of PLMI and a balance
sheet of each  Borrower as at the end of such year and the related  consolidated
(and,  as to statements  of income only for PLMI,  consolidating)  statements of
income,  stockholders'  or members'  equity and cash flows of each Borrower,  if
applicable,  and PLMI for such  fiscal  year,  setting  forth in each  case,  in
comparative  form  the  consolidated  figures  for  the  previous  year,  all in
reasonable detail and (i) in the case of such consolidated financial statements,
accompanied  by  a  report  thereon  of  an  independent  public  accountant  of
recognized national standing selected by each Borrower and PLMI and satisfactory
to Agent,  which report shall  contain an opinion  which is not qualified in any
manner or which otherwise is satisfactory  to Requisite  Lenders,  in their sole
discretion,  and (ii) in the case of such  consolidating  financial  statements,
certified by the Chief Financial Officer or Corporate Controller of PLMI;

         5.1.3 Borrowing Base  Certificate.  As soon as practicable,  and in any
event not later than fifteen (15) days after the end of each  calendar  month in
which a Loan has been, or is, outstanding, a Borrowing Base Certificate dated as
of the last day of such month,  duly  executed by a Chief  Financial  Officer or
Corporate  Controller of the general  partner or manager of each Borrower,  with
appropriate insertions;

         5.1.4 Compliance Certificate. As soon as practicable,  and in any event
not later than forty-five (45) days after the end of each fiscal quarter of each
Borrower,  a  Compliance  Certificate  dated as of the  last day of such  fiscal
quarter,  and executed by the Chief Financial Officer or Corporate Controller of
the general partner or manager of such Borrower, with appropriate insertions.

         5.1.5  Reports.  At Agent's  request,  promptly  upon receipt  thereof,
copies of all reports  submitted to each  Borrower,  FSI or PLMI by  independent
public  accountants in connection with each annual,  interim or special audit of
the financial statements of such Borrower, FSI or PLMI made by such accountants;

         5.1.6 Insurance  Reports.  (i) On the date six months after the Closing
Date and thereafter upon Agent's reasonable  request,  which request will not be
made more than once during any calendar  year (unless an Event of Default  shall
have  occurred  and be  continuing),  a report  from each  Borrower's  insurance
broker,  in such detail as Agent may  reasonably  request,  as to the  insurance
maintained  or  caused  to be  maintained  by  each  Borrower  pursuant  to this
Agreement,  demonstrating  compliance with the requirements  hereof and thereof,
and (ii) as soon as possible  and in no event later than fifteen (15) days prior
to the  expiration  date of any  insurance  policy  of any  Borrower,  a written
confirmation  that such policy is in process of renewal and is not terminated or
subject  to a notice of  non-renewal  from  such  Borrower's  insurance  broker;
provided,  however, that such Borrower shall give Agent prompt written notice if
changes  affecting  risk  coverage  will be made to such policy or if the policy
will be terminated;

         5.1.7 Certificate Of Responsible Officer.  Promptly upon any officer of
any  Borrower or FSI  obtaining  knowledge  (a) of any  condition or event which
constitutes  an Event of  Default  or  Potential  Event of  Default  under  this
Agreement,  (b) that any Person has given any notice to any Borrower,  FSI, TEC,
TEC AcquiSub or PLMI or taken any other action with respect to a claimed default
or event or  condition  of the type  referred  to in Section  8.1.2,  (c) of the
institution  of any  litigation  or of the  receipt of written  notice  from any
Governmental  Authority  as to  the  commencement  of any  formal  investigation
involving  an alleged or asserted  liability  of any  Borrower,  FSI,  TEC,  TEC
AcquiSub or PLMI equal to or greater  than  $500,000 or any adverse  judgment in
any litigation  involving a potential  liability of any Borrower,  FSI, TEC, TEC
AcquiSub or PLMI equal to or greater than $500,000, or (d) of a material adverse
change in the business,  operations,  properties, assets or condition (financial
or otherwise) of any Borrower,  FSI, TEC, TEC AcquiSub or PLMI, a certificate of
a  Responsible  Officer of any Borrower or FSI, as  applicable,  specifying  the
notice  given or action  taken by such  Person  and the  nature of such  claimed
default,  Event of Default,  Potential Event of Default,  event or condition and
what action such Borrower,  FSI, TEC, TEC AcquiSub or PLMI has taken,  is taking
and proposes to take with respect thereto;

         5.1.8  Employee  Benefit  Plans.  Promptly upon  becoming  aware of the
occurrence of any (a)  Termination  Event in connection with any Pension Plan or
(b) "prohibited  transaction" (as such term is defined in ERISA and the Code) in
connection  with any Employee  Benefit Plan or any trust created  thereunder,  a
written notice specifying the nature thereof, what action any Borrower or any of
its ERISA  Affiliates  has taken,  is taking or  proposes  to take with  respect
thereto,  and, when known, any action taken or threatened by the IRS or the PBGC
with respect thereto;

         5.1.9 ERISA  Notices.  With  reasonable  promptness,  copies of (a) all
notices received by any Borrower, FSI, any of FSI's Subsidiaries or any of their
ERISA Affiliates of the PBGC's intent to terminate any Pension Plan or to have a
trustee appointed to administer any Pension Plan, (b) each Schedule B (Actuarial
Information) to the annual report (Form 5500 Series) filed by any Borrower, FSI,
any of FSI's  Subsidiaries  or any of their ERISA  Affiliates  with the IRS with
respect to each Pension Plan covering  employees of any Borrower,  FSI or any of
FSI's  Subsidiaries,  and (c) all notices received by any Borrower,  FSI, any of
FSI's  Subsidiaries or any of their ERISA  Affiliates from a Multiemployer  Plan
sponsor concerning the imposition or amount of withdrawal  liability pursuant to
Section 4202 of ERISA;

         5.1.10 Pension Plans. Promptly upon receipt by any Borrower, FSI or any
of FSI's  Subsidiaries,  any  challenge  by the IRS to the  qualification  under
Section 401 or 501 of the Code of any Pension Plan;

         5.1.11 SEC  Reports.  As soon as  available  and in no event later than
five (5) days  after the same shall have been filed with the SEC, a copy of each
Form 8-K Current Report,  Form 10-K Annual Report,  Form 10-Q Quarterly  Report,
Annual Report to Shareholders, Proxy Statement and Registration Statement of any
Borrower and PLMI;

         5.1.12 Tax Returns.  Upon the request of Agent,  copies of all federal,
state, local and foreign tax returns and reports in respect of income, franchise
or other  taxes on or measured by income  (excluding  sales,  use or like taxes)
filed by or on behalf of any Borrower and FSI; and

         5.1.13 Additional  Information.  Such other information  respecting the
condition or  operations,  financial or otherwise,  of any Borrower and PLMI and
its  Subsidiaries  as  Agent or any  Lender  may  from  time to time  reasonably
request, and such information regarding the lessees under Leases as any Borrower
from time to time receives or Agent or any Lender reasonably requests.

         All financial statements of Borrowers,  FSI and PLMI to be delivered by
any Borrower and FSI to Agent  pursuant to this Section 5.1 will be complete and
correct and present  fairly the financial  condition of each  Borrower,  FSI and
PLMI as of the date thereof; will disclose all liabilities of each Borrower, FSI
and PLMI that are  required  to be  reflected  or reserved  against  under GAAP,
whether  liquidated or  unliquidated,  fixed or  contingent;  and will have been
prepared  in  accordance  with  GAAP.  All tax  returns  submitted  to  Agent by
Borrowers  and FSI will,  to the best of each  Borrower's  and FSI's  knowledge,
after due inquiry, be true and correct.  Each Borrower and FSI hereby agree that
each time any one of them submits a financial  statement or tax return to Agent,
such  Borrower and FSI shall be deemed to represent  and warrant to Lenders that
such  financial  statement  or tax  return  complies  with all of the  preceding
requirements set forth in this paragraph.

         5.2  Existence;  Compliance  With  Law.  Each  Borrower  and FSI  shall
preserve  and  maintain,  and  FSI  shall  cause  each  of  FSI's  Subsidiaries,
including,  without limitation,  TEC AcquiSub,  to preserve and maintain,  their
existence and all of their licenses,  permits,  governmental approvals,  rights,
privileges and franchises  necessary or desirable in the normal conduct of their
businesses  as now conducted or presently  proposed to be conducted  (including,
without  limitation,  their qualification to do business in each jurisdiction in
which such  qualification  is necessary  or desirable in view of its  business);
conduct,  and cause each of FSI's Subsidiaries,  including,  without limitation,
TEC AcquiSub,  and any Owner Trustee to conduct,  its business in an orderly and
regular manner;  and comply,  and cause each of FSI's  Subsidiaries,  including,
without limitation,  TEC AcquiSub, and any Owner Trustee, to comply, with (a) as
to any Borrower,  its Limited  Partnership  Agreement,  Operating  Agreement and
other  organizational  documents,  as applicable,  and as to FSI and each of its
Subsidiaries, including, without limitation, TEC AcquiSub, the provisions of its
respective certificate or articles of incorporation,  as applicable,  and bylaws
and (b) the requirements of all applicable laws, rules, regulations or orders of
any  Governmental   Authority  and  requirements  for  the  maintenance  of  any
Borrower's,   FSI's  or  such   Subsidiary's   insurance,   licenses,   permits,
governmental  approvals,  rights,  privileges and franchises,  except, in either
case,  to the extent  that the  failure to comply  therewith  would not,  in the
aggregate, with reasonable likelihood, have a Material Adverse Effect.

         5.3 Insurance.  Each Borrower and FSI shall maintain and keep in force,
and  cause  each of  FSI's  Subsidiaries,  including,  without  limitation,  TEC
AcquiSub,  to maintain  and keep in force  insurance of the types and in amounts
then customarily carried in lines of business similar to that of Borrowers,  FSI
or any of FSI's Subsidiaries as the case may be, including,  but not limited to,
fire, extended coverage, public liability, property damage, environmental hazard
and workers'  compensation,  in each case carried with financially sound Persons
and  in  amounts  satisfactory  to  Requisite  Lenders  (subject  to  commercial
reasonableness as to each type of insurance);  provided, however, that the types
and amounts of  insurance  shall not provide any less  coverage for any Borrower
than  provided  as of the  Closing  Date by the  existing  blanket  policies  of
insurance  for PLMI and its  Subsidiaries.  All such  policies  as to  liability
insurance shall carry endorsements naming Agent and each Lender as an additional
insured and, upon the reasonable request of Agent, all such policies of property
insurance  shall carry  endorsements  naming Agent as principal loss payee as to
any  property  owned by  Borrowers  and  financed by  Lenders,  and in each case
indicating that (a) any loss thereunder shall be payable to Agent or Lenders, as
the  case  may  be,   notwithstanding   any   action,   inaction  or  breach  of
representation  or  warranty  by any  Borrower  or FSI;  (b)  there  shall be no
recourse  against  any Lender for  payment of  premiums  or other  amounts  with
respect  thereto,  and (c) at least fifteen (15) days' prior  written  notice of
cancellation,  lapse or material  change in coverage  shall be given to Agent by
the insurer.

         5.4 Taxes And Other  Liabilities.  Promptly pay and discharge and cause
each  of  FSI's  Subsidiaries,  including,  without  limitation,  TEC  AcquiSub,
promptly to pay and discharge all material Charges when due and payable,  except
(a)  such  as may be  paid  thereafter  without  penalty  or (b)  such as may be
contested  in good faith by  appropriate  proceedings  and for which an adequate
reserve has been  established  and is maintained in accordance  with GAAP.  Each
Borrower and FSI shall promptly notify Agent of any material challenge,  contest
or proceeding  pending by or against any Borrower,  FSI and PLMI or any of FSI's
Subsidiaries before any taxing authority.

         5.5 Inspection Rights; Assistance. At any reasonable time and from time
to time during normal business  hours,  permit Agent or any Lender or any agent,
representative or employee thereof,  to examine and make copies of and abstracts
from the financial records and books of account of each Borrower,  FSI or any of
FSI's  Subsidiaries,  including,  without  limitation,  TEC AcquiSub,  and other
documents in the possession or under the control of any Borrower,  FSI or any of
FSI's Subsidiaries, including, without limitation, TEC AcquiSub, relating to any
obligation  of any  Borrower  or FSI  arising  under  or  contemplated  by  this
Agreement  and to visit  the  offices  of any  Borrower  or FSI to  discuss  the
affairs,  finances  and accounts of any Borrower or FSI with any of the officers
of any Borrower or FSI, and, upon  reasonable  notice and during normal business
hours  (unless  an Event of  Default or  Potential  Event of Default  shall have
occurred and be  continuing,  in which event no notice is required),  to conduct
audits of and appraise Equipment. Such audits and appraisals shall be subject to
the lessee's right to quiet enjoyment as set forth in the respective lease.

         5.6 Maintenance Of Facilities; Modifications.

         5.6.1  Maintenance Of Facilities.  Each Borrower and FSI shall keep and
cause each of FSI's Subsidiaries,  including,  without limitation, TEC AcquiSub,
to keep,  all of their  respective  Properties  which are useful or necessary to
such  Borrower's,  FSI's  or such  Subsidiary's  business,  in good  repair  and
condition,  normal wear and tear excepted, and from time to time make, and cause
each such  Subsidiary  to make  necessary  repairs  thereto,  and  renewals  and
replacements  thereof  so that  each  Borrower's,  FSI's  or  such  Subsidiary's
Properties shall be fully and efficiently preserved and maintained.

         5.6.2 Certain Modifications To The Equipment. Subject to Section 5.6.1,
each  Borrower  and  FSI  shall   promptly  make,  or  cause  to  be  made,  all
modifications,  additions and adjustments to the Eligible  Inventory as may from
time to time be required by any Governmental  Authority having jurisdiction over
the operation, safety or use thereof.

         5.7 Supplemental Disclosure.  From time to time as may be necessary (in
the event that such  information is not otherwise  delivered by Borrowers or FSI
to  Agent  or  Lenders  pursuant  to  this  Agreement),  so long  as  there  are
Obligations  outstanding  hereunder,  disclose to Agent in writing any  material
matter  hereafter  arising  which,  if existing or occurring at the date of this
Agreement, would have been required to be set forth or described by any Borrower
or FSI in this  Agreement  or any of the other  Loan  Documents  (including  all
Schedules  and Exhibits  hereto or thereto) or which is necessary to correct any
information  set forth or described by Borrowers or FSI  hereunder or thereunder
or in connection herewith which has been rendered inaccurate thereby.

         5.8 Further  Assurances.  In addition to the  obligations and documents
which this Agreement expressly requires Borrowers or FSI to execute, deliver and
perform,  each  Borrower or FSI shall  execute,  deliver and perform,  and shall
cause FSI's  Subsidiaries to execute,  deliver and perform,  any and all further
acts or documents  which Agent or Lenders may  reasonably  require to effectuate
the purposes of this Agreement or any of the other Loan Documents.

         5.9 Lockbox.  Each Borrower shall, unless otherwise directed in writing
by Agent,  cause all remittances  made by the obligor under any Lease to be made
to a lock box (the  "Lockbox")  maintained  with FUNB  pursuant  to the  Lockbox
Agreement. Unless otherwise directed by Agent in writing, all invoices and other
instructions submitted by any Borrower to the obligor relating to Lease payments
shall designate the Lockbox as the place to which such payments shall be made.

         5.10  Environmental  Laws.  Each Borrower and FSI shall,  and FSI shall
cause each of its  Subsidiaries to, conduct its operations and keep and maintain
its Property in material compliance with all Environmental Laws.

SECTION 6.  BORROWER'S AND FSI'S NEGATIVE COVENANTS.

         So long as any of the  Commitments  shall be available  and until full,
complete and  indefeasible  payment and performance of the  Obligations,  unless
Requisite Lenders shall otherwise consent in writing, each Borrower,  severally,
as to  itself,  but not  jointly  as to the other  Borrowers  and FSI,  and FSI,
jointly and  severally  with each  Borrower as to such  Borrower  and to itself,
covenants and agrees as follows:

         6.1 Liens; Negative Pledges; And Encumbrances.  Each Borrower shall not
create,  incur,  assume  or suffer to exist,  and shall not  permit  any  Marine
Subsidiary  of such  Borrower  or  Owner  Trustee  holding  record  title to any
Eligible  Inventory  for the  beneficial  interest  of such  Borrower to create,
incur,  assume  or  suffer  to  exist,  and  FSI  shall  not  permit  any of its
Subsidiaries  (including,  without limitation,  TEC and TEC AcquiSub) to create,
incur, assume or suffer to exist, any Lien of any nature upon or with respect to
any of their  respective  Property,  whether now or hereafter  owned,  leased or
acquired, except (collectively, the "Permitted Liens"):

         6.1.1  Existing  Liens  disclosed on Schedule  6.1,  provided  that the
obligations secured thereby are not increased;

         6.1.2 Liens for Charges if payment shall not at the time be required to
be made in accordance with Section 5.4;

         6.1.3 Liens in respect of pledges,  obligations  or deposits  (a) under
workers'  compensation  laws,  unemployment  insurance and other types of social
security or similar  legislation,  (b) in  connection  with  surety,  appeal and
similar bonds  incidental to the conduct of litigation,  (c) in connection  with
bid,  performance or similar bonds and mechanics',  laborers' and  materialmen's
and  similar  statutory  Liens not then  delinquent,  or (d)  incidental  to the
conduct  of the  business  of  such  Borrower,  any  Marine  Subsidiary  of such
Borrower,  or any Owner Trustee or any of FSI's  Subsidiaries and which were not
incurred in connection  with the borrowing of money or the obtaining of advances
or credit; provided that the Liens permitted by this Section 6.1.3 do not in the
aggregate  materially  detract  from the value of any assets or  property  of or
materially  impair the use  thereof in the  operation  of the  business  of such
Borrower,  any Owner Trustee or any of FSI's Subsidiaries;  and provided further
that  the  adverse  determination  of any  claim  or  liability,  contingent  or
otherwise,  secured by any of such Liens would not either individually or in the
aggregate, with reasonable likelihood, have a Material Adverse Effect;

         6.1.4 Permitted Rights of Others; and

         6.1.5  Liens  granted in favor of Agent on behalf of Lenders  under the
TEC AcquiSub  Agreement  and the  security  agreement  and other loan  documents
delivered by TEC AcquiSub pursuant thereto.

         6.2  Acquisitions.  Each  Borrower  shall not, and shall not permit any
Marine  Subsidiary  of such  Borrower  to,  and FSI shall not permit TEC and TEC
AcquiSub  to,  make any  Acquisition  or enter  into any  agreement  to make any
Acquisition,  other  than with  respect  to the  purchase  of  Equipment  in the
ordinary  course  of  business  or the  formation  or  acquisition  of a  Marine
Subsidiary.

         6.3 Limitations On Indebtedness. Each Borrower shall not create, incur,
assume or suffer to exist, nor permit any Marine  Subsidiary of such Borrower or
Owner Trustee holding record title to any Eligible  Inventory for the beneficial
interest of such Borrower to create,  incur,  assume or suffer to exist, and FSI
shall not permit any of its Subsidiaries (including, without limitation, TEC and
TEC AcquiSub) to create,  incur,  assume or suffer to exist, any Indebtedness or
Contingent  Obligation;  provided,  however,  that this Section 6.3 shall not be
deemed to prohibit:

         6.3.1 The Obligations to Lenders and Agent arising  hereunder and under
the other Loan Documents;

         6.3.2   Existing   Indebtedness   disclosed  on  Schedule   6.3(a)  and
anticipated Indebtedness disclosed on Schedule 6.3(b);

         6.3.3  Indebtedness  of any  Subsidiary  of  FSI,  provided  that  such
Indebtedness is non-recourse as to FSI, TEC and TEC AcquiSub;

         6.3.4 The acquisition of goods, supplies or merchandise on normal trade
credit;

         6.3.5  The  endorsement  of  negotiable  instruments  received  in  the
ordinary course of any Borrower's business as presently conducted;

         6.3.6  Indebtedness  incurred in respect of the deferred purchase price
for an item of  Equipment,  but only to the extent that the  incurrence  of such
Indebtedness  is customary in the industry  with respect to the purchase of this
type of equipment (provided that such Indebtedness shall only be permitted under
this Section 6.3.6 if, taking into account the incurrence of such  Indebtedness,
the Borrower incurring such Indebtedness shall not be in violation of any of the
financial  covenants  set  forth  in  Section  7 if  measured  as of the date of
incurrence as determined by GAAP); and

         6.3.7  Any  Guaranty  Obligations  of  any  Borrower  in  the  form  of
performance  guaranties  undertaken  on  behalf of a Marine  Subsidiary  of such
Borrower  in favor of the  charter  party in  connection  with the  leasing of a
marine vessel on a time charter;

         6.4 Use Of  Proceeds.  Each  Borrower  and FSI shall not, and shall not
permit any Marine  Subsidiary of such Borrower or Owner Trustee  holding  record
title to any Eligible Inventory for the beneficial  interest of such Borrower or
FSI to, use the proceeds of any Loan except for the purpose set forth in Recital
C, above, and shall not, and shall not permit any such Marine Subsidiary or such
Owner  Trustee to, use the  proceeds to repay any loans or advances  made by any
other Person.

         6.5  Disposition Of Assets.  Each Borrower and FSI shall not, and shall
not permit any Marine  Subsidiary of such Borrower or any Owner Trustee  holding
record  title to any  Eligible  Inventory  for the  beneficial  interest of such
Borrower or FSI to, sell,  assign or  otherwise  dispose of, any of its or their
respective assets, except for full, fair and reasonable consideration,  or enter
into any sale and leaseback  agreement  covering any of its or their  respective
fixed or capital assets.

         6.6  Restriction  On Fundamental  Changes.  Each Borrower and FSI shall
not, and shall not permit any Marine  Subsidiary of such Borrower to, enter into
any  transaction  of merger,  consolidation  or  recapitalization,  directly  or
indirectly,  whether by operation of law or otherwise, or liquidate,  wind up or
dissolve itself (or suffer any  liquidation or  dissolution),  or convey,  sell,
lease, assign,  transfer or otherwise dispose of, in one transaction or a series
of transactions,  all or any part of its business,  Property or assets,  whether
now owned or  hereafter  acquired,  or acquire by purchase or  otherwise  all or
substantially  all the  business,  Property  or  assets  of,  or  stock or other
evidence of beneficial  ownership of, any Person,  except sales (a) of Equipment
in the ordinary  course of business  (for the purposes of this Section 6.6, with
respect to any Borrower and any Marine  Subsidiary  of such  Borrower,  ordinary
course of business shall refer to the business of the Equipment Growth Funds and
all Marine Subsidiaries, collectively) and (b) any Subsidiary of FSI (other than
TEC AcquiSub) may be merged or consolidated with or into FSI or any wholly-owned
Subsidiary  of  FSI,  or  be  liquidated,  wound  up or  dissolved,  or  all  or
substantially  all of its  business,  property or assets may be conveyed,  sold,
leased,  transferred or otherwise disposed of, in one transaction or a series of
transactions,  to, FSI or any wholly-owned  Subsidiary of FSI; provided that, in
the case of such a merger or consolidation,  FSI or such wholly-owned Subsidiary
shall be the continuing or surviving corporation.

         .6.7 Transactions  With Affiliates.  Each Borrower shall not, and shall
not permit any Marine  Subsidiary of such Borrower to,  directly or  indirectly,
enter into or permit to exist any transaction  (including,  without  limitation,
the  purchase,  sale,  lease or exchange of any property or the rendering of any
service)  with any of its  Affiliates  on terms that are less  favorable to such
Borrower or such Marine Subsidiary than those that might be obtained at the time
from Persons who are not such Affiliates.

         6.8 Maintenance Of Business. Each Borrower shall not, and FSI shall not
permit any of its existing  Subsidiaries  to, engage in any business  materially
different than the business currently engaged in by such Person.

         6.9 No  Distributions.  Each Borrower  shall not make, pay or set apart
any funds for the  payment of  distribution  to its  partners or members if such
distribution  would cause or result in an Event of Default or Potential Event of
Default.

         6.10 Events Of Default. Each Borrower and FSI shall not take or omit to
take any  action,  which  act or  omission  would,  with the  lapse of time,  or
otherwise  constitute (a) a default,  event of default or Event of Default under
any of the Loan  Documents  or (b) a default  or an event of  default  under any
other material agreement,  contract, lease, license,  mortgage, deed of trust or
instrument  to  which  either  is a party  or by  which  either  or any of their
Properties  or assets is bound,  which default or event of default  would,  with
reasonable likelihood, have a Material Adverse Effect.

         6.11 ERISA.  If any  Borrower  or FSI or any of their ERISA  Affiliates
incurs any  obligation to contribute to any Pension Plan,  then such Borrower or
FSI, as the case may be, shall not (a) terminate, or permit such ERISA Affiliate
to terminate, any Pension Plan so as to result in any liability that would, with
reasonable likelihood, have a Material Adverse Effect or (b) make or permit such
ERISA Affiliate to make a complete or partial  withdrawal (within the meaning of
Section  4201 of  ERISA)  from any  Multiemployer  Plan so as to  result  in any
liability  that  would,  with  reasonable  likelihood,  have a Material  Adverse
Effect.

         6.12 No Use Of Any Lender's  Name.  Each Borrower and FSI shall not use
or authorize  others to use any  Lender's  name or marks in any  publication  or
medium,  including,  without limitation,  any prospectus,  without such Lender's
advance written authorization.

         6.13 Certain  Accounting  Changes.  Each Borrower  shall not change its
fiscal  year end  from  December  31,  nor make  any  change  in its  accounting
treatment  and  reporting  practices  except  as  permitted  by GAAP;  provided,
however,  that should any Borrower change its accounting  treatment or reporting
practices  in a way that  would  cause a change  in the  calculation,  or in the
results of a calculation, of any of the financial covenants set forth in Section
7, below,  then such Borrower  shall  continue to calculate such covenants as if
such  accounting  treatment  or reporting  practice had not been changed  unless
otherwise agreed to by Requisite Lenders.

         6.14 Amendments Of Limited  Partnership Or Operating  Agreements.  Each
Borrower shall not, shall not cause to occur and shall not permit any amendment,
modification  or  supplement  of or to any of the  terms or  provisions  of such
Borrower's Limited  Partnership  Agreement or, in the case of Income Fund I, its
Operating Agreement,  which amendment,  modification or supplement would affect,
limit or otherwise  impair such  Borrower's  ability to pay the  Obligations  or
perform its obligations under this Agreement or any of the other Loan Documents.

SECTION 7. FINANCIAL COVENANTS OF BORROWER AND FSI.

         Each Borrower, severally, as to itself, but not jointly as to the other
Borrowers and FSI, and FSI,  jointly and severally with each Borrower as to each
Borrower and as to itself,  covenant and agree that, so long as the  Commitments
hereunder shall be available,  and until full, complete and indefeasible payment
and performance of the Obligations,  including,  without  limitation,  all Loans
evidenced by the Notes,  unless  Requisite  Lenders shall  otherwise  consent in
writing, Borrowers and FSI shall perform the following financial covenants. Each
Borrower and FSI agree and understand that (except as expressly provided herein)
all covenants  under this Section 7 shall be subject to quarterly  compliance or
compliance  as of the date of any request for a Loan  pursuant to Section  3.2.1
(as measured on the last day of each fiscal quarter of such Borrower, or FSI, as
the case may be, or as of the date of any request for a Loan pursuant to Section
3.2.1),  and in each case review by Lenders of the respective  fiscal  quarter's
consolidated  financial  statements  delivered to Agent by each Borrower and FSI
pursuant  to  Section  5.1;  provided,  however,  that the  following  financial
covenants  shall  apply only as to those  Borrowers  requesting  a Loan or as to
which a Loan remains outstanding.

         7.1 Maximum  Funded Debt Ratio.  Each Borrower  shall maintain a Funded
Debt Ratio of not greater than 0.5:1.0.

         7.2 Minimum Debt Service  Ratio.  Each Borrower  shall  maintain a Debt
Service Ratio of not less than 1.75:1.0.

         7.3 Cash Balances.  The Equipment Growth Funds of which FSI is the sole
general  partner  shall  maintain   aggregate   unrestricted  cash  balances  of
$10,000,000.

SECTION 8.  EVENTS OF DEFAULT AND REMEDIES.

         8.1 Events Of Default. As to any Borrower, the occurrence of any one or
more of the  following  shall  constitute  an Event  of  Default  for each  such
Borrower individually:

         8.1.1 Failure To Make Payments. Such Borrower, any Marine Subsidiary of
such  Borrower  or any  Owner  Trustee  holding  record  title  to any  Eligible
Inventory for the  beneficial  interest of such Borrower or FSI fails to pay any
sum due to  Lenders or Agent  arising  under  this  Agreement,  the Note of such
Borrower or any of the other Loan  Documents  when and as the same shall  become
due and payable, whether by acceleration or otherwise and such failure shall not
have been cured to Lenders' satisfaction within five (5) calendar days; or

         8.1.2 Other  Agreements.  (a) Such Borrower,  any Marine  Subsidiary of
such Borrower,  FSI, TEC, TEC AcquiSub or any Owner Trustee holding record title
to any Eligible Inventory for the beneficial  interest of such Borrower defaults
in the  repayment  of any  principal  of or the  payment of any  interest on any
Indebtedness  of such  Borrower,  any such  Marine  Subsidiary,  FSI,  TEC,  TEC
AcquiSub or any such Owner  Trustee,  respectively,  or breaches any term of any
evidence  of such  Indebtedness  or  defaults  in any  payment in respect of any
Contingent  Obligation  (excluding,  as to FSI, any Contingent Obligation of FSI
arising  solely as a result of FSI's  status as a general  partner of any Person
other than such Borrower),  in each case exceeding, in the aggregate outstanding
principal amount, $2,000,000, or such Borrower, any Marine Subsidiary, FSI, TEC,
TEC AcquiSub or any Owner Trustee  breaches or violates any term or provision of
any evidence of such  Indebtedness or Contingent  Obligation or of any such loan
agreement,  mortgage, indenture, guaranty or other agreement relating thereto if
the  effect  of such  breach  is to permit  acceleration  under  the  applicable
instrument, loan agreement, mortgage, indenture, guaranty or other agreement and
such failure  shall not have been cured within the  applicable  cure period,  or
there is an  acceleration  under  the  applicable  instrument,  loan  agreement,
mortgage,  indenture,  guaranty or other agreement;  or (b) PLMI defaults in the
repayment of any principal of or the payment of any interest on any Indebtedness
or defaults in any payment in respect of any Contingent Obligation, in each case
exceeding,  in the aggregate outstanding principal amount,  $2,000,000,  or PLMI
breaches or violates any term or provision of any evidence of such  Indebtedness
or Contingent  Obligation or of any such loan  agreement,  mortgage,  indenture,
guaranty  or  other  agreement  relating  thereto  with  the  result  that  such
Indebtedness  or Contingent  Obligation  becomes or is caused to become then due
and payable in its entirety, whether by acceleration of otherwise; or

         8.1.3 Breach Of  Covenants.  Such  Borrower or FSI fails or neglects to
perform,  keep or observe any of the covenants contained in Sections 2.1.3, 5.2,
5.3,  5.9,  6.1,  6.2,  6.3, 6.4, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.13, or any of the
financial covenants contained in Section 7 of this Agreement; or

         8.1.4 Breach Of  Representations  Or Warranties.  Any representation or
warranty made by or on behalf of such  Borrower or FSI in this  Agreement or any
statement  or  certificate  at any time given in writing  pursuant  hereto or in
connection  herewith  shall be false,  misleading  or incomplete in any material
respect when made; or

         8.1.5 Failure To Cure.  Except as provided in Sections 8.1.1 and 8.1.3,
such  Borrower,  FSI or any Marine  Subsidiary of such Borrower or Owner Trustee
holding record title to any Eligible  Inventory for the  beneficial  interest of
such Borrower or FSI fails or neglects to perform,  keep or observe any covenant
or  provision  of this  Agreement  or of any of the other Loan  Documents or any
other  document  or  agreement  executed  by such  Borrower,  FSI or any  Marine
Subsidiary  of such  Borrower  or  Owner  Trustee  holding  record  title to any
Eligible  Inventory  for the  beneficial  interest  of such  Borrower  or FSI in
connection  therewith  and the  same has not been  cured to  Requisite  Lenders'
satisfaction  within thirty (30) calendar days after such  Borrower,  FSI or any
Marine  Subsidiary of such Borrower or Owner Trustee holding record title to any
Eligible  Inventory  for the  beneficial  interest of such Borrower or FSI shall
become  aware  thereof,  whether by written  notice  from Agent or any Lender or
otherwise; or

         8.1.6  Insolvency.   Such  Borrower,  any  Marine  Subsidiary  of  such
Borrower,  TEC AcquiSub, any other Borrower (but only for so long as Obligations
of such  other  Borrower  remain  or  Commitments  to such  other  Borrower  are
available  under this  Agreement),  FSI, TEC, PLMI or any Owner Trustee  holding
record  title to any  Eligible  Inventory  for the  beneficial  interest of such
Borrower  or FSI or any  other  guarantor  of any of such  Borrower's  or  FSI's
obligations  to Lenders shall (a) cease to be Solvent,  (b) admit in writing its
inability  to pay its  debts  as they  mature,  (c) make an  assignment  for the
benefit of creditors, (d) apply for or consent to the appointment of a receiver,
liquidator,  custodian  or  trustee  for it or  for a  substantial  part  of its
Properties  or business,  or such a receiver,  liquidator,  custodian or trustee
otherwise shall be appointed and shall not be discharged  within sixty (60) days
after such appointment; or

         8.1.7 Bankruptcy Proceedings. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings for relief under any bankruptcy law
or any law for the  relief of debtors  shall be  instituted  by or against  such
Borrower,  any Marine  Subsidiary  of such  Borrower,  TEC  AcquiSub,  any other
Borrower (but only for so long as Obligations  of such other Borrower  remain or
Commitments to such other  Borrower are available  under this  Agreement),  FSI,
TEC, PLMI or any Owner Trustee  holding  record title to any Eligible  Inventory
for the  beneficial  interest of such Borrower or FSI or any other  guarantor of
any of such Borrower's or FSI's obligations to Lenders or any order, judgment or
decree shall be entered  against such  Borrower,  any Marine  Subsidiary of such
Borrower,  TEC AcquiSub, any other Borrower (but only for so long as Obligations
of such  other  Borrower  remain  or  Commitments  to such  other  Borrower  are
available  under this  Agreement),  FSI, TEC, PLMI or any Owner Trustee  holding
record  title to any  Eligible  Inventory  for the  beneficial  interest of such
Borrower  or FSI or any  other  guarantor  of any of such  Borrower's  or  FSI's
obligations to Lenders decreeing its dissolution or division; provided, however,
with respect to an involuntary  petition in bankruptcy,  such petition shall not
have been dismissed within sixty (60) days after the filing of such petition; or

         8.1.8 Material  Adverse  Effect.  There shall have been a change in the
assets, liabilities,  financial condition,  operations,  affairs or prospects of
such Borrower, any Marine Subsidiary of such Borrower,  TEC AcquiSub,  FSI, TEC,
PLMI or any Owner Trustee holding record title to any Eligible Inventory for the
beneficial  interest of such  Borrower or FSI or any other  guarantor  of any of
such  Borrower's  or FSI's  obligations  to  Lenders  which,  in the  reasonable
determination of Requisite Lenders has, either individually or in the aggregate,
had a Material Adverse Effect; or

         8.1.9  Judgments,  Writs  And  Attachments.  There  shall  be  a  money
judgment,  writ or warrant of  attachment  or similar  process  entered or filed
against such Borrower,  any Marine  Subsidiary of such  Borrower,  TEC AcquiSub,
FSI, TEC or any Owner Trustee holding record title to any Eligible Inventory for
the  beneficial  interest  of such  Borrower  or FSI  which  (net  of  insurance
coverage) remains  unvacated,  unbonded,  unstayed or unpaid or undischarged for
more than sixty (60) days  (whether  or not  consecutive)  or in any event later
than five (5) calendar days prior to the date of any proposed  sale  thereunder,
which, together with all such other unvacated,  unbonded,  unstayed,  unpaid and
undischarged  judgments  or  attachments  against  such  Borrower  or any Marine
Subsidiary of such Borrower  exceeds in the  aggregate  $1,000,000;  against FSI
exceeds in the aggregate  $500,000;  against TEC or TEC AcquiSub  exceeds in the
aggregate  $500,000;  or against any Owner Trustee  holding  record title to any
Eligible  Inventory for the beneficial  interest of such Borrower or FSI exceeds
in the aggregate $1,000,000; or against any combination of the foregoing Persons
exceeds in the aggregate $1,000,000; or

         8.1.10  Legal  Obligations.  Any of the Loan  Documents  shall  for any
reason  other  than the full,  complete  and  indefeasible  satisfaction  of the
Obligations  thereunder cease to be, or be asserted by such Borrower, FSI or any
Marine  Subsidiary of such Borrower or Owner Trustee holding record title to any
Eligible  Inventory for the  beneficial  interest of such Borrower or FSI not to
be, a legal,  valid and binding  obligation of such Borrower,  FSI or any Marine
Subsidiary  of such  Borrower  or  Owner  Trustee  holding  record  title to any
Eligible  Inventory  for  the  beneficial  interest  of  such  Borrower  or FSI,
respectively enforceable against such Person in accordance with its terms; or

         8.1.11 TEC AcquiSub Agreement. The occurrence of any "Event of Default"
as  defined  under the TEC  AcquiSub  Agreement  or any other  loan or  security
document related to the TEC AcquiSub Agreement; or

         8.1.12 AFG  Agreement.  The  occurrence  of any "Event of  Default"  as
defined under the AFG Agreement or any other loan or security  document  related
to the AFG Agreement; or

         8.1.13 Change Of General Partner Or Manager.  FSI shall cease to be the
sole general  partner or the sole  manager,  as  applicable,  of such  Borrower,
whether due to the voluntary or involuntary withdrawal, substitution, removal or
transfer  of FSI  from or of all or any  portion  of FSI's  general  partnership
interest or capital contribution in such Borrower; or

         8.1.14 Change Of Purchaser.  Requesting Borrower,  TEC AcquiSub, FSI or
their  Subsidiaries  shall cease to be the  purchaser of Eligible  Inventory for
such Requesting Borrower.

         8.1.15  Criminal  Proceedings.  A criminal  proceeding  shall have been
filed in any court naming any  Borrower,  FSI or any Marine  Subsidiary  of such
Borrower or Owner Trustee holding record title to any Eligible Inventory for the
beneficial  interest of such Borrower or FSI as a defendant for which forfeiture
is a  potential  penalty  under  applicable  federal or state law which,  in the
reasonable  determination  of  Requisite  Lenders,  may have a Material  Adverse
Effect; or

         8.1.16 Action By Governmental  Authority.  Any  Governmental  Authority
enters a decree, order or ruling ("Government Action") which will materially and
adversely  affect any  Borrower's,  any Marine  Subsidiary  of such  Borrower's,
FSI's,  TEC's,  TEC  AcquiSub's  or PLMI's  financial  condition,  operations or
ability to perform or pay such party's  obligations arising under this Agreement
or any instrument or agreement  executed pursuant to the terms of this Agreement
or which will  similarly  affect any Owner Trustee  holding  record title to any
Eligible  Inventory  for the  beneficial  interest of such Borrower or FSI. Such
Borrower  or FSI shall have  thirty  (30) days from the  earlier of the date (a)
Borrower or FSI, as applicable,  first discovers it is the subject of Government
Action or (b) a Lender or any agency gives notice of  Government  Action to take
such steps as are necessary to obtain relief from the Government Action. For the
purpose of this paragraph, "relief from Government Action" means to discharge or
to obtain a dismissal of or release or relief from (i) any Government  Action so
that the affected party or parties do not incur  monetary  liability (A) of more
than  $1,000,000  in the case of any Borrower or any Marine  Subsidiary  of such
Borrower,  (B) of more  than  $500,000  in the  case of  FSI,  (C) of more  than
$500,000  in the  case of TEC,  (D) of more  than  $250,000  in the  case of TEC
AcquiSub,  (E) of more than  $1,000,000 in the case of PLMI, or (F) of more than
$1,000,000,  in the aggregate,  in the case of any  combination of the foregoing
Persons, or (ii) any disqualification of or other limitation on the operation of
any Borrower, any Marine Subsidiary of such Borrower, FSI, TEC, TEC AcquiSub and
PLMI, or any of them, which in the reasonable determination of Requisite Lenders
may have a Material Adverse Effect; or

         8.1.17 Governmental  Decrees.  Any Governmental  Authority,  including,
without limitation,  the SEC, shall enter a decree,  order or ruling prohibiting
the Equipment Growth Funds from releasing or paying to FSI any funds in the form
of management fees, profits or otherwise which, in the reasonable  determination
of Requisite Lenders, may have a Material Adverse Effect.

         8.2 Waiver Of Default.  An Event of Default may be waived only with the
written consent of Requisite Lenders, or if expressly provided,  of all Lenders.
Any Event of Default so waived  shall be deemed to have been cured and not to be
continuing;  but no such  waiver  shall be deemed a  continuing  waiver or shall
extend to or affect any  subsequent  like  default or impair any rights  arising
therefrom.

         8.3  Remedies.  Upon the  occurrence  and  continuance  of any Event of
Default or Potential Event of Default,  Lenders shall have no further obligation
to  advance  money or extend  credit  to or for the  benefit  of the  defaulting
Borrower or any other  Borrower,  regardless of whether such Event of Default or
Potential Event of Default has occurred with respect to such Borrower or another
Borrower.

         In addition, upon the occurrence and during the continuance of an Event
of Default,  except an Event of Default arising under Section 8.1.11 hereof (the
remedies  for  which  shall be  limited  to  those  set  forth in the  preceding
paragraph),  Lenders or Agent, on behalf of Lenders,  may, as to such defaulting
Borrower,  or as to all Borrowers  should such Event of Default  result from the
actions or inactions of FSI, at the option of Requisite  Lenders,  do any one or
more of the following,  all of which are hereby  authorized by each Borrower and
FSI:

                  8.3.1 Declare all or any of the  Obligations  of such Borrower
under this  Agreement,  the Note of such Borrower,  the other Loan Documents and
any other instrument executed by such Borrower pursuant to the Loan Documents to
be immediately due and payable,  and upon such  declaration  such obligations so
declared due and payable shall immediately become due and payable; provided that
if such Event of Default is under part 8.1.6 or 8.1.7 of Section  8.1,  then all
of the  Obligations  of each Borrower shall become  immediately  due and payable
forthwith  without the  requirement  of any notice or other action by Lenders or
Agent;

         8.3.2 Terminate this Agreement as to any future liability or obligation
of Agent or Lenders as to such  Borrower or as to each Borrower if such Event of
Default  results from the actions,  inactions or violation of any covenant of or
by FSI  (excluding,  as to FSI, Events of Default under Section 8.1.2 arising in
relation to  Contingent  Obligation  of FSI arising  solely as a result of FSI's
status as a general partner of any Person other than such Borrower); and

         8.3.3  Exercise in addition to all other  rights and  remedies  granted
hereunder,  any and all rights and remedies  granted under the Loan Documents or
otherwise available at law or in equity.

         8.4 Set-Off.

         8.4.1 During the  continuance  of an Event of Default,  any deposits or
other sums credited by or due from any Lender to any Borrower or FSI  (exclusive
of deposits in accounts  expressly  held in the name of third parties or held in
trust for benefit of third  parties) may be set-off  against the  Obligations of
such  Borrower and any and all other  liabilities,  due or existing or hereafter
arising  and owing by such  Borrower or FSI to  Lenders.  Each Lender  agrees to
notify promptly Borrowers and FSI and Agent of any such set-off;  provided, that
the  failure  to give such  notice  shall not affect  the  validity  of any such
set-off.

                  8.4.2 Each Lender agrees that if it shall, whether by right of
set-off,  banker's lien or similar remedy pursuant to Section 8.4.1,  obtain any
payment as a result of which the outstanding and unpaid principal portion of the
Commitments  of such Lender  shall be less than such  Lender's Pro Rata Share of
the  outstanding  and  unpaid   principal   portion  of  the  aggregate  of  all
Commitments,  such Lender receiving such payment shall  simultaneously  purchase
from each other Lender a participation  in the Commitments  held by such Lenders
so that the  outstanding  and unpaid  principal  amount of the  Commitments  and
participations  in Commitments of such Lender shall be in the same proportion to
the unpaid principal amount of the aggregate of all Commitments then outstanding
as the unpaid principal amount under the Commitments of such Lender  outstanding
immediately  prior to receipt of such payment was to the unpaid principal amount
of the  aggregate  of all  Commitments  outstanding  immediately  prior  to such
Lender's receipt of such payment;  provided,  however, that if any such purchase
shall be made pursuant to this Section 8.4.2 and the payment giving rise thereto
shall thereafter be recovered, such purchase shall be rescinded to the extent of
such recovery and the purchase price restored  without  interest.  Each Borrower
expressly  consents  to the  foregoing  arrangements  and agrees that any Lender
holding a  participation  in a Commitment  deemed to have been so purchased  may
exercise  any and all rights of set-off,  banker's  lien or similar  remedy with
respect to any and all moneys  owing by  Borrower  to such Lender as fully as if
such Lender held a Commitment in the amount of such participation.

         8.5 Rights And Remedies  Cumulative.  The enumeration of the rights and
remedies of Agent and Lenders set forth in this  Agreement is not intended to be
exhaustive  and the  exercise by Agent and Lenders of any right or remedy  shall
not preclude the exercise of any other rights or remedies, all of which shall be
cumulative,  and  shall  be in  addition  to any  other  right or  remedy  given
hereunder or under the Loan Documents or that may now or hereafter  exist in law
or in equity or by suit or otherwise.  No delay or failure to take action on the
part of Agent and Lenders in  exercising  any right,  power or  privilege  shall
operate as a waiver hereof, nor shall any single or partial exercise of any such
right,  power or privilege  preclude  other or further  exercise  thereof or the
exercise of any other  right,  power or  privilege or shall be construed to be a
waiver of any Event of  Default  or  Potential  Event of  Default.  No course of
dealing  between any Borrower,  FSI,  Agent,  or any Lender or their  respective
agents or  employees  shall be  effective  to change,  modify or  discharge  any
provision  of this  Agreement or any of the Loan  Documents  or to  constitute a
waiver of any Event of Default or Potential Event of Default.

SECTION 9.     AGENT.

         9.1 Appointment.  Each of the Lenders hereby irrevocably designates and
appoints First Union National Bank of North Carolina as the Agent of such Lender
under  this  Agreement  and the  other  Loan  Documents,  and each  such  Lender
irrevocably  authorizes First Union National Bank of North Carolina as the Agent
for such Lender to take such action on its behalf under the  provisions  of this
Agreement  and the other Loan  Documents and to exercise such powers and perform
such  duties  as are  expressly  delegated  to the  Agent  by the  terms of this
Agreement and such other Loan Documents,  together with such other powers as are
reasonably  incidental  thereto.  Notwithstanding  any provision to the contrary
elsewhere in this  Agreement or such other Loan  Documents,  the Agent shall not
have any duties or responsibilities, except those expressly set forth herein and
therein,  or  any  fiduciary  relationship  with  any  Lender,  and  no  implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this  Agreement  or the other Loan  Documents  or  otherwise  exist
against Agent.  To the extent any provision of this Agreement  permits action by
Agent,  Agent  shall,  subject to the  provisions  of this  Section 9, take such
action if directed in writing to do so by Requisite Lenders.

         9.2  Delegation  Of Duties.  Agent may execute any of its duties  under
this   Agreement  and  the  other  Loan   Documents  by  or  through  agents  or
attorneys-in-fact  and shall be  entitled  to advice of counsel  concerning  all
matters  pertaining  to such  duties.  Agent  shall not be  responsible  for the
negligence or misconduct of any agents or attorneys-in-fact  selected by it with
reasonable care.

         9.3 Exculpatory Provisions9.3 Exculpatory Provisions. Neither Agent nor
any  of  its  officers,  directors,  employees,  agents,   attorneys-in-fact  or
Affiliates  shall be (a) liable for any action  lawfully  taken or omitted to be
taken by it or such Person  under or in  connection  with this  Agreement or the
other Loan  Documents  (except for its or such Person's own gross  negligence or
willful  misconduct),  or (b)  responsible  in any  manner to any Lender for any
recitals, statements,  representations or warranties made by any Borrower or any
officer  thereof  contained in this  Agreement or the other Loan Documents or in
any certificate, report, statement or other document referred to or provided for
in, or received by Agent under or in  connection  with,  this  Agreement  or the
other Loan  Documents or for the value,  validity,  effectiveness,  genuineness,
enforceability  or  sufficiency of this Agreement or the other Loan Documents or
for any  failure  of any  Borrower  to  perform  its  obligations  hereunder  or
thereunder.  Agent shall not be under any  obligation to any Lender to ascertain
or to inquire  as to the  observance  or  performance  of any of the  agreements
contained in, or conditions of, this  Agreement,  or to inspect the  Properties,
books or records of any Borrower.

         9.4  Reliance By Agent.  Agent shall be entitled to rely,  and shall be
fully protected in relying, upon any note, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed,  sent or made by the proper  Person
or Persons and upon advice and statements of legal counsel  (including,  without
limitation,  counsel to Borrowers),  independent  accountants  and other experts
selected  by Agent.  Agent may deem and treat the payee of any  promissory  note
issued  pursuant to this Agreement as the owner thereof for all purposes  unless
such  promissory  note shall have been  transferred  in accordance  with Section
11.10 hereof.  Agent shall be fully justified in failing or refusing to take any
action under this Agreement and the other Loan  Documents  unless it shall first
receive such advice or concurrence of Requisite  Lenders as it deems appropriate
or it shall first be indemnified to its  satisfaction by Lenders against any and
all  liability  and  expense  which may be incurred by it by reason of taking or
continuing  to take any such  action  except  for its own  gross  negligence  or
willful misconduct. Agent shall in all cases be fully protected in acting, or in
refraining  from acting,  under this  Agreement in accordance  with a request of
Requisite  Lenders,  and such  request  and any  action  taken or failure to act
pursuant thereto shall be binding upon all Lenders.

         9.5 Notice Of Default.  Agent shall not be deemed to have  knowledge or
notice of the  occurrence of any Event of Default or Potential  Event of Default
hereunder  unless  Agent  has  received  notice  from a Lender  or any  Borrower
referring to this Agreement, describing such Event of Default or Potential Event
of Default and stating that such notice is a "notice of  default".  In the event
that Agent  receives such a notice,  Agent shall promptly give notice thereof to
Lenders.  The Agent shall take such action with respect to such Event of Default
or  Potential  Event of Default as shall be  reasonably  directed  by  Requisite
Lenders;  provided  that  unless  and  until  Agent  shall  have  received  such
directions,  Agent may (but  shall not be  obligated  to) take such  action,  or
refrain  from  taking  such  action,  with  respect  to such Event of Default or
Potential  Event of Default as it shall deem  advisable in the best interests of
Lenders.

         9.6  Non-Reliance  On Agent And Other  Lenders.  Each Lender  expressly
acknowledges that neither Agent nor any of its officers,  directors,  employees,
agents,   attorneys-in-fact  or  Affiliates  has  made  any  representations  or
warranties  to it and  that no act by Agent  hereinafter  taken,  including  any
review  of  the  affairs  of  Borrower,   shall  be  deemed  to  constitute  any
representation  or warranty by Agent to any Lender.  Each Lender  represents  to
Agent that it has,  independently  and without  reliance upon Agent or any other
Lender,   and  based  on  such  documents  and  information  as  it  has  deemed
appropriate,  made its own  appraisal of and  investigation  into the  business,
operations, property, financial and other condition and creditworthiness of each
Borrower and FSI and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon Agent or any other Lender, and based on such documents and
information as it shall deem  appropriate at the time,  continue to make its own
credit  analysis,  appraisals and decisions in taking or not taking action under
this Agreement and the other Loan Documents,  and to make such  investigation as
it deems  necessary to inform itself as to the business,  operations,  property,
financial  and other  condition and  creditworthiness  of each Borrower and FSI.
Except  for  notices,  reports  and other  documents  expressly  required  to be
furnished  to the  Lenders by Agent  hereunder  or by the other Loan  Documents,
Agent shall not have any duty or  responsibility  to provide any Lender with any
credit or other  information  concerning  the  business,  operations,  property,
financial and other condition or creditworthiness of each Borrower and FSI which
may  come  into the  possession  of  Agent  or any of its  officers,  directors,
employees, agents, attorneys-in-fact or Affiliates.

         9.7  Indemnification.  Each  Lender  agrees to  indemnify  Agent in its
capacity as such (to the extent not reimbursed by Borrowers and without limiting
the  obligation  of Borrowers  to do so),  ratably  according to the  respective
amounts of their Pro Rata Share of the Commitments, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs,  expenses or  disbursements  of any kind whatsoever which may at any time
(including,  without limitation, at any time following the payment of the Loans)
be imposed on,  incurred by or asserted  against Agent in any way relating to or
arising out of this  Agreement  or the other Loan  Documents,  or any  documents
contemplated   by  or  referred  to  herein  or  therein  or  the   transactions
contemplated  hereby or thereby or any action taken or omitted by Agent under or
in connection with any of the foregoing; provided that no Lender shall be liable
for the  payment  of any  portion  of  such  liabilities,  obligations,  losses,
damages, penalties,  actions, judgments, suits, costs, expenses or disbursements
resulting solely from Agent's bad faith, gross negligence or willful misconduct.
The  agreements in this Section 9.7 shall survive the repayment of the Loans and
all other amounts payable hereunder.

         9.8 Agent In Its Individual Capacity. Agent and its Affiliates may make
loans to, accept deposits from and generally engage in any kind of business with
any  Borrower or FSI as though Agent were not Agent  hereunder.  With respect to
Advances  made or renewed  by it,  Agent  shall have the same  rights and powers
under this Agreement and the other Loan Documents as any Lender and may exercise
the same as though it were not Agent, and the terms "Lender" and "Lenders" shall
include Agent in its individual capacity.

         9.9 Resignation And Appointment Of Successor Agent. Agent may resign at
any time by giving thirty (30) days' prior written notice thereof to Lenders and
Borrowers;  provided,  however,  that the retiring Agent shall continue to serve
until a successor  Agent shall have been selected and approved  pursuant to this
Section  9.9.  Upon any such  notice,  Agent  shall  have the right to appoint a
successor  Agent;  provided,  however,  that if such  successor  shall  not be a
signatory to this Agreement, such appointment shall be subject to the consent of
Requisite Lenders.  Agent may be replaced by Requisite Lenders,  with or without
cause;  provided,  however,  that  any  successor  agent  shall  be  subject  to
Borrowers' consent, which consent shall not be unreasonably  withheld.  Upon the
acceptance of any appointment as an Agent hereunder by a successor  Agent,  such
successor  Agent  shall  thereupon  succeed  to and become  vested  with all the
rights,  powers,  privileges and duties of the retiring Agent,  and the retiring
Agent shall be discharged from its duties and obligations  under this Agreement.
After any retiring  Agent's  resignation  hereunder as Agent,  the provisions of
this Section 9 shall inure to its benefit as to any actions  taken or omitted to
be taken by it while it was Agent under this Agreement.

SECTION 10.  EXPENSES AND INDEMNITIES.

         10.1  Expenses.  Borrowers  and Lenders  agree that,  as the  following
costs,  expenses,  charges and other disbursements  benefit each Borrower and as
such costs,  expenses,  charges and other disbursements cannot easily be ratably
allocated to the account of any Borrower or  Borrowers,  each  Borrower,  unless
otherwise specified in this Section 10.1, shall pay, as its Obligation, promptly
on  demand,  and in any  event  within  thirty  (30)  days of the  invoice  date
therefor, (a) all costs, expenses,  charges and other disbursements  (including,
without  limitation,  all reasonable  attorneys' fees and allocated  expenses of
outside  counsel and in-house legal staff)  incurred by or on behalf of Agent or
any Lender in  connection  with the  preparation  of the Loan  Documents and all
amendments  and  modifications  thereof,  extensions  thereto  or  substitutions
therefor, and all costs, expenses, charges or other disbursements incurred by or
on behalf of Agent or any Lender  (including,  without limitation all reasonable
attorney's  fees and allocated  expenses of outside  counsel and in-house  legal
staff) in  connection  with the  furnishing  of opinions of counsel  (including,
without  limitation,  any opinions  requested by Lenders as to any legal matters
arising  hereunder) and of Borrowers'  performance  of and  compliance  with all
agreements and conditions contained herein or in any of the other Loan Documents
on its part to be performed  or complied  with;  (b) all other costs,  expenses,
charges and other disbursements  incurred by or on behalf of Agent or any Lender
in connection  with the  negotiation,  preparation,  execution,  administration,
continuation and enforcement of the Loan Documents,  and the making of the Loans
hereunder; (c) all costs, expenses,  charges and other disbursements (including,
without  limitation,  all reasonable  attorney's fees and allocated  expenses of
outside  counsel and in-house legal staff)  incurred by or on behalf of Agent or
any Lender in  connection  with the  assignment  or attempted  assignment to any
other Person of all or any portion of any Lender's interest under this Agreement
pursuant to Section  11.10;  and (d)  regardless of the existence of an Event of
Default or Potential Event of Default, all legal, appraisal,  audit, accounting,
consulting  or other  fees,  costs,  expenses,  charges  or other  disbursements
incurred  by or on  behalf  of  Agent  or any  Lender  in  connection  with  any
litigation,  contest, dispute, suit, proceeding or action (whether instituted by
Lenders,  Agent,  any  Borrower  or any other  Person)  seeking to  enforce  any
Obligations  of, or collecting  any payments due from,  any Borrower  under this
Agreement and the Notes,  all of which amounts shall be deemed to be part of the
Obligations;  provided,  however,  that Lenders shall be entitled to collect the
full amount of such costs, expenses,  charges and other disbursements only once.
Notwithstanding anything to the contrary contained in this Section 10.1, so long
as no Event of Default or Potential  Event of Default shall have occurred and be
continuing,  all appraisals of the Eligible Inventory shall be at the expense of
Lenders.  If an Event of  Default  or  Potential  Event of  Default  shall  have
occurred  and be  continuing,  such  appraisals  shall be at the  expense of the
Requesting Borrower.

         10.2  Indemnification.  Whether  or not the  transactions  contemplated
hereby shall be consummated:

         10.2.1 General Indemnity. Each Borrower, as to itself, and FSI, jointly
and severally as to itself and each  Borrower,  shall pay,  indemnify,  and hold
each Lender, Agent and each of their respective officers, directors,  employees,
counsel,  agents and attorneys-in-fact  (each, an "Indemnified Person") harmless
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  actions, judgments, suits, costs, charges, expenses or disbursements
(including  reasonable  attorney's  fees  and the  allocated  cost  of  in-house
counsel)  of any  kind or  nature  whatsoever  with  respect  to the  execution,
delivery, enforcement,  performance and administration of this Agreement and any
other Loan Documents,  or the transactions  contemplated hereby and thereby, and
with respect to any investigation, litigation or proceeding (including any case,
action or proceeding before any court or other  Governmental  Authority relating
to bankruptcy, reorganization, insolvency, liquidation, dissolution or relief of
debtors or any appellate  proceeding)  related to this Agreement or the Loans or
the use of the  proceeds  thereof,  whether or not any  Indemnified  Person is a
party thereto (all the foregoing,  collectively, the "Indemnified Liabilities");
provided,  that  Borrowers  and FSI shall have no  obligation  hereunder  to any
Indemnified  Person with  respect to  Indemnified  Liabilities  arising from the
gross negligence or willful misconduct of such Indemnified Person.

         10.2.2 Environmental Indemnity.

                         (a) Each Borrower,  to the extent of its pro rata share
         of ownership of Property involved in any  investigation,  litigation or
         proceeding,  as set forth below,  and FSI hereby  jointly and severally
         agree to indemnify,  defend and hold harmless each Indemnified  Person,
         from and against any and all liabilities, obligations, losses, damages,
         penalties,  actions,  judgments,  suits,  costs,  charges,  expenses or
         disbursements  (including  reasonable attorneys' fees and the allocated
         cost of in-house counsel and of internal  environmental audit or review
         services),   which  may  be  incurred  by  or  asserted   against  such
         Indemnified  Person in connection with or arising out of any pending or
         threatened investigation, litigation or proceeding, or any action taken
         by any Person,  with respect to any Environmental  Claim arising out of
         or related to any Property owned,  leased or operated by such Borrower.
         No  action  taken by legal  counsel  chosen  by Agent or any  Lender in
         defending against any such  investigation,  litigation or proceeding or
         requested  remedial,  removal or  response  action  shall  (except  for
         actions which constitute fraud, willful misconduct, gross negligence or
         material  violations of law) vitiate or in any way impair Borrowers' or
         FSI's  obligation  and duty  hereunder to indemnify  and hold  harmless
         Agent and each Lender.  Agent and all Lenders  agree to use  reasonable
         efforts to  cooperate  with  Borrowers  respecting  the  defense of any
         matter indemnified hereunder,  except insofar as and to the extent that
         their  respective  interests  may be adverse to  Borrowers' or FSI's in
         Agent's or such Lender's sole discretion.

                         (b) In no event shall any site visit,  observation,  or
         testing by Agent or any Lender be deemed a  representation  or warranty
         that  Hazardous  Materials  are or are not present in, on, or under the
         site,  or  that  there  has  been  or  shall  be  compliance  with  any
         Environmental  Law.  Neither  Borrowers,  FSI nor any  other  Person is
         entitled to rely on any site visit, observation, or testing by Agent or
         any Lender.  Except as otherwise provided by law, neither Agent nor any
         Lender owes any duty of care to protect Borrowers,  or any one of them,
         or any other Person against,  or to inform Borrowers or any other party
         of, any Hazardous  Materials or any other adverse  condition  affecting
         any site or Property.  Neither  Agent nor any Lender shall be obligated
         to  disclose  to  Borrowers,  FSI or any  other  Person  any  report or
         findings  made as a result of, or in connection  with,  any site visit,
         observation, or testing by Agent or any Lender.

         10.2.3  Survival;  Defense.  The obligations in this Section 10.2 shall
survive  payment of all other  Obligations.  At the election of any  Indemnified
Person,  Borrowers  shall defend such  Indemnified  Person  using legal  counsel
satisfactory to such Indemnified Person in such Person's reasonable  discretion,
at the sole cost and  expense  of  Borrowers,  which cost and  expense  shall be
allocated to Borrowers  according to such Borrower's pro rata share of ownership
of any Property in relation to which such  obligations  arise. All amounts owing
under this  Section  10.2 shall be paid within  thirty  (30) days after  written
demand.

SECTION 11.  MISCELLANEOUS.

         11.1  Survival.   All  covenants,   agreements,   representations   and
warranties  made herein  shall  survive the  execution  and delivery of the Loan
Documents and the making of the Loans hereunder.

         11.2 No Waiver By Agent Or Lenders.  No failure or delay on the part of
Agent or any Lender in the exercise of any power,  right or privilege under this
Agreement,  the Note or any of the other Loan Documents shall impair such power,
right or privilege or be construed to be a waiver of any default or acquiescence
therein,  nor shall any single or partial  exercise of any such power,  right or
privilege  preclude  other or further  exercise  thereof or of any other  right,
power or privilege.

         11.3  Notices.  Except as  otherwise  provided in this  Agreement,  any
notice or other communication  herein required or permitted to be given shall be
in writing and may be delivered in person, with receipt acknowledged, or sent by
telex,  facsimile,  telecopy,  computer  transmission  or by United States mail,
registered or certified,  return  receipt  requested,  or by Federal  Express or
other  nationally  recognized  overnight  courier  service,  postage prepaid and
confirmation of receipt  requested,  and addressed as set forth on the signature
pages to this Agreement or at such other address as may be substituted by notice
given as herein  provided.  The giving of any notice  required  hereunder may be
waived in writing by the party  entitled to receive such notice.  Every  notice,
demand, request, consent, approval, declaration or other communication hereunder
shall be deemed to have been duly  given or served on the date on which the same
shall have been  personally  delivered,  with receipt  acknowledged,  or sent by
telex,   facsimile,   telecopy  or  computer   transmission   (with  appropriate
answerback), three (3) Business Days after the same shall have been deposited in
the United  States mail or on the next  succeeding  Business Day if the same has
been sent by Federal Express or other nationally  recognized  overnight  courier
service.  Failure or delay in delivering copies of any notice, demand,  request,
consent, approval,  declaration or other communication to the persons designated
above to receive copies shall in no way adversely  affect the  effectiveness  of
such  notice,  demand,  request,   consent,   approval,   declaration  or  other
communication.

         11.4 Headings.  Section and  subsection  headings in this Agreement are
included  herein for  convenience  of reference  only and shall not constitute a
part of this Agreement for any other purpose or be given any substantive effect.

         11.5 Severability11.5  Severability.  Whenever possible, each provision
of this  Agreement,  the Note  and each of the  other  Loan  Documents  shall be
interpreted  in such a manner as to be valid,  legal and  enforceable  under the
applicable  law of any  jurisdiction.  Without  limiting the  generality  of the
foregoing sentence, in case any provision of this Agreement,  the Note or any of
the other Loan Documents shall be invalid,  illegal or  unenforceable  under the
applicable law of any jurisdiction, the validity, legality and enforceability of
the remaining provisions, or of such provision in any other jurisdiction,  shall
not in any way be affected or impaired thereby.

         11.6 Entire Agreement; Construction; Amendments And Waivers.

         11.6.1 This  Agreement,  the Notes and each of the other Loan Documents
dated as of the date hereof,  taken together,  constitute and contain the entire
agreement  among  Borrowers,  Lenders and Agent and  supersede any and all prior
agreements,  negotiations,  correspondence,  understandings  and  communications
between the parties,  whether  written or oral,  respecting  the subject  matter
hereof.

                  11.6.2 This  Agreement is the result of  negotiations  between
and has been  reviewed by each  Borrower,  FSI, and each Lender  executing  this
Agreement  as of the  Closing  Date and  Agent  and  their  respective  counsel;
accordingly,  this  Agreement  shall be deemed to be the  product of the parties
hereto,  and no ambiguity  shall be construed in favor of or against  Borrowers,
FSI, Lenders or Agent. Borrowers,  FSI, Lenders and Agent agree that they intend
the literal  words of this  Agreement  and the other Loan  Documents and that no
parol evidence shall be necessary or appropriate to establish Borrowers',  FSI's
any Lender's or Agent's actual intentions.

                  11.6.3 No amendment,  modification,  discharge or waiver of or
consent to any  departure  by any  Borrower or FSI from,  any  provision in this
Agreement or any of the other Loan  Documents  relating to (a) the definition of
"Borrowing  Base" or "Requisite  Lenders," (b) any increase of the amount of any
Commitment, (c) any reduction of principal,  interest or fees payable hereunder,
(d) any  postponement  of any  date  fixed  for any  payment  or  prepayment  of
principal or interest  hereunder  or (e) this Section  11.6.3 shall be effective
without  the  written  consent  of all  Lenders.  Any and all other  amendments,
modifications,  discharges or waivers of, or consents to any departures from any
provision of this Agreement or of any of the other Loan  Documents  shall not be
effective  without  the  written  consent of  Requisite  Lenders.  Any waiver or
consent with respect to any provision of the Loan  Documents  shall be effective
only in the  specific  instance  and for the  specific  purpose for which it was
given.  No notice to or demand on any Borrower or FSI in any case shall  entitle
any Borrower or FSI to any other or further notice or demand in similar or other
circumstances.  Any  amendment,  modification,  waiver or  consent  effected  in
accordance  with this  Section 11.6 shall be binding upon each Lender then party
hereto and each subsequent Lender, on Borrower, and on FSI.

         11.7 Reliance By Lenders.  All covenants,  agreements,  representations
and warranties  made herein by each Borrower or FSI shall,  notwithstanding  any
investigation  by Lenders or Agent be deemed to be  material to and to have been
relied upon by Lenders.

         11.8  Marshalling;  Payments  Set  Aside.  Lenders  shall  be  under no
obligation  to marshall  any assets in favor of any Borrower or any other person
or against or in payment of any or all of the  Obligations.  To the extent  that
any  Borrower  makes a payment or  payments  to Lenders or Agent,  or Lenders or
Agent,  on behalf of Lenders,  enforce their or its Liens or exercises  their or
its rights of set-off,  and such  payment or  payments  or the  proceeds of such
enforcement  or  set-off  or any  part  thereof  are  subsequently  invalidated,
declared to be fraudulent or preferential, set aside or required to be repaid to
a trustee,  receiver or any other party under Title 11 of the United States Code
or under any other similar federal or state law, common law or equitable  cause,
then to the extent of such recovery the  obligation  or part thereof  originally
intended to be satisfied shall be revived and continued in full force and effect
as if such  payment  had not been made or such  enforcement  or set-off  had not
occurred.

         11.9 No Set-Offs By  Borrowers.  All sums  payable by  Borrowers or FSI
pursuant to this Agreement, the Note or any of the other Loan Documents shall be
payable  without  notice or demand and shall be payable in United States Dollars
without set-off or reduction of any manner whatsoever.

         11.10 Binding Effect, Assignment.

                  11.10.1 This Agreement,  the Note and the other Loan Documents
shall be binding  upon and shall inure to the benefit of the parties  hereto and
thereto and their respective successors and assigns, except that no Borrower nor
FSI may assign its rights  hereunder or  thereunder  or any  interest  herein or
therein without the prior written consent of each Lender.  Each Lender shall (a)
have the right in  accordance  with this Section 11.10 to sell and assign to any
Eligible  Assignee  all or any portion of its interest  (provided  that any such
partial assignment shall not be for a principal amount of less than Five Million
Dollars  ($5,000,000))  under  this  Agreement,  the Notes  and the  other  Loan
Documents,  together  with a ratable  interest in the AFG  Agreement and the TEC
AcquiSub Agreement and the related Notes and other Loan Documents (as separately
described and defined in those agreements), subject to the prior written consent
of the affected Borrower,  which consent shall not be unreasonably withheld, and
(b) to grant any participation or other interest herein or therein,  except that
each  potential  participant to which a Lender intends to grant any rights under
Sections 2.9, 2.10, 5.1 or 10.2 shall be subject to the prior written consent of
the  affected  Borrower,  which  consent  shall  not be  unreasonably  withheld;
provided,  however,  that no such sale,  assignment or participation grant shall
result in requiring  registration  under the Securities Act of 1933, as amended,
or qualification under any state securities law.

                  11.10.2  Subject to the  limitations of this Section  11.10.2,
each  Lender may sell and assign,  from time to time,  all or any portion of its
Pro Rata Share of the Commitments to any of its Affiliates or, with the approval
of the  affected  Borrower  and FSI (which  approval  shall not be  unreasonably
withheld),  to any other financial  institution  acceptable to Agent, subject to
the assumption by such assignee of the share of the Commitments so assigned. The
assignment to such Affiliate or other financial  institution  shall be evidenced
by an  Assignment  and  Assumption  in the form of  Exhibit H  ("Assignment  and
Acceptance")  executed by the  assignor  Lender  (hereinafter  from time to time
referred to as the  "Assignor  Lender") and such  Affiliate  or other  financial
institution  (which,  upon  such  assignment  shall  become a  Lender  hereunder
(hereinafter  from time to time  referred  to as the  "Assignee  Lender")).  The
Assignment  and  Assumption  need not include any of the  economic or  financial
terms upon which such Assignee  Lender receives the assignment from the Assignor
Lender,  and such terms need not be disclosed to or approved by such Borrower or
FSI; provided only that such terms do not diminish the obligations undertaken by
such  Assignee   Lender  in  the  Assignment  and  Assumption  or  increase  the
obligations  of Borrowers or FSI under this  Agreement.  Upon  execution of such
Assignment  and  Assumption,  (a) the definition of  "Commitments"  in Section 1
hereof and the Pro Rata Shares set forth  therein  shall be deemed to be amended
to  reflect  each  Lender's  share  of the  Commitments,  giving  effect  to the
assignment  and (b) the Assignee  Lender shall,  from the effective  date of the
instrument of assignment and assumption,  be subject to all of the  obligations,
and  entitled  to all of the  rights,  of a Lender  hereunder,  except as may be
expressly  provided to the contrary in the  Assignment  and  Assumption.  To the
extent the  obligations  hereunder  of the  Assignor  Lender are  assumed by the
Assignee Lender, the Assignor Lender shall be relieved of such obligations. Upon
the assignment of any interest by any Assignor  Lender  pursuant to this Section
11.10.2, such Assignor Lender agrees to supplement Schedule 1.1 to show the date
of such  assignment,  the Assignor  Lender,  the Assignee  Lender,  the Assignee
Lender's  address  for  notice  purposes  and the amount of the  Commitments  so
assigned.

                  11.10.3  Subject to the  limitations of this Section  11.10.3,
any Lender may also grant,  from time to time,  participation  interests  in the
interests  of such  Lender  under this  Agreement,  the Notes and the other Loan
Documents to any other financial  institution without notice to, or approval of,
any Borrower or FSI. The grant of such a participation interest shall be on such
terms as the granting Lender determines are appropriate,  provided only that (a)
the holder of such participation  interest shall not have any of the rights of a
Lender under this Agreement  except, if the  participation  agreement  expressly
provides,  rights under Sections 2.9, 2.10, 5.1 and 10.2, and (b) the consent of
the holder of such a participation interest shall not be required for amendments
or waivers of provisions of the Loan Documents other than, if the  participation
agreement  expressly  provides,  those which (i) increase the monetary amount of
any  Commitment,  (ii) decrease any fee or any other monetary  amount payable to
Lenders,  or (iii) extend the date upon which any monetary  amount is payable to
Lenders.

         11.11  Counterparts.   This  Agreement  and  any  amendments,  waivers,
consents or  supplements  hereto may be executed in any number of  counterparts,
and by different parties hereto in separate counterparts,  each of which when so
executed and delivered  shall be deemed an original,  but all such  counterparts
together shall constitute but one and the same  instrument.  Each such agreement
shall become effective upon the execution of a counterpart  hereof or thereof by
each of the parties  hereto or thereto,  delivery  of each such  counterpart  to
Agent.

         11.12 Equitable Relief.  Borrowers and FSI recognize that, in the event
any  Borrower  or  FSI  fails  to  perform,  observe  or  discharge  any  of its
obligations or liabilities  under this Agreement,  the Notes or any of the other
Loan Agreements,  any remedy at law may prove to be inadequate relief to Lenders
or Agent;  therefore,  Borrowers and FSI agree that Lenders or Agent, if Lenders
or Agents so request,  shall be entitled to temporary and  permanent  injunctive
relief in any such case without the necessity of proving actual damages.

         11.13  Written  Notice Of Claims;  Claims  Bar11.13  Written  Notice Of
Claims;  Claims Bar.  EACH  BORROWER  AND FSI HEREBY  AGREE THAT EACH SHALL GIVE
PROMPT WRITTEN NOTICE OF ANY CLAIM OR CAUSE OF ACTION IT BELIEVES IT HAS, OR MAY
SEEK TO ASSERT OR ALLEGE  AGAINST  ANY  LENDER OR AGENT,  WHETHER  SUCH CLAIM IS
BASED IN LAW OR EQUITY, ARISING UNDER OR RELATED TO THIS AGREEMENT, THE NOTES OR
ANY OF THE OTHER LOAN DOCUMENTS OR TO THE LOANS  CONTEMPLATED  HEREBY OR THEREBY
OR ANY ACT OR  OMISSION  TO ACT BY ANY  LENDER OR AGENT WITH  RESPECT  HERETO OR
THERETO,  AND THAT IF IT SHALL  FAIL TO GIVE SUCH  PROMPT  NOTICE TO AGENT  WITH
REGARD TO ANY SUCH CLAIM OR CAUSE OF ACTION,  IT SHALL BE DEEMED TO HAVE WAIVED,
AND SHALL BE FOREVER  BARRED FROM  BRINGING OR ASSERTING  SUCH CLAIM OR CAUSE OF
ACTION IN ANY SUIT, ACTION OR PROCEEDING IN ANY COURT OR BEFORE ANY GOVERNMENTAL
AUTHORITY.

         11.14  Waiver Of  Punitive  Damages.  NOTWITHSTANDING  ANYTHING  TO THE
CONTRARY  CONTAINED IN THIS  AGREEMENT,  EACH BORROWER AND FSI HEREBY AGREE THAT
EACH  SHALL  NOT SEEK FROM  LENDERS  OR AGENT,  UNDER ANY  THEORY OF  LIABILITY,
INCLUDING, WITHOUT LIMITATION, ANY THEORY IN TORTS, ANY PUNITIVE DAMAGES.

         11.15 Relationship Of Parties.  The relationship  between Borrowers and
FSI, on the one hand, and Lenders and Agent,  on the other,  is, and at all time
shall remain  solely that of a borrower and lenders.  Neither  Lenders nor Agent
shall under any  circumstances be construed to be partners or joint venturers of
Borrowers or FSI or any of their  Affiliates;  nor shall Lenders nor Agent under
any  circumstances be deemed to be in a relationship of confidence or trust or a
fiduciary  relationship with Borrowers or FSI or any of their Affiliates,  or to
owe any  fiduciary  duty to any Borrower or any of its  Affiliates.  Lenders and
Agent do not undertake or assume any  responsibility or duty to Borrowers or FSI
or any of their Affiliates to select, review, inspect,  supervise, pass judgment
upon or otherwise  inform  Borrowers or any of their Affiliates of any matter in
connection  with  its or their  Property,  any  collateral  held by Agent or any
Lender  or the  operations  of  Borrowers  or FSI  or any of  their  Affiliates.
Borrowers and each of their Affiliates shall rely entirely on their own judgment
with respect to such matters, and any review, inspection,  supervision, exercise
of  judgment  or supply of  information  undertaken  or assumed by any Lender or
Agent in  connection  with such matters is solely for the  protection of Lenders
and Agent and neither Borrowers nor any Affiliate is entitled to rely thereon.

         11.16  Obligations Of Each Borrower.  Each Borrower and FSI agrees that
its liability  hereunder shall be the immediate,  direct, and primary obligation
of such  Borrower or FSI, as the case may be, and shall not be  contingent  upon
the Agent's or any Lender's  exercise or  enforcement  of any remedy it may have
against any other Borrower,  FSI or any other person,  or against any collateral
or any security for the  Obligations.  Without  limiting the  generality  of the
foregoing,  the Obligations shall remain in full force and effect without regard
to and shall not be impaired or affected  by, nor shall such  Borrower or FSI be
exonerated or discharged by, any of the following events:

         11.16.1   Insolvency,    bankruptcy,    reorganization,    arrangement,
adjustment,  composition,  assignment  for  the  benefit  of  creditors,  death,
liquidation,  winding up or  dissolution of any Borrower or any guarantor of the
Obligations of any Borrower;

         11.16.2 Any limitation, discharge, or cessation of the liability of any
other  Borrower or any guarantor for the  Obligations of such other Borrower due
to any statute, regulation or rule of law, or any invalidity or unenforceability
in whole or in part of the documents  evidencing  the  Obligations of such other
Borrower or any guaranty of the Obligations of such other Borrower;

         11.16.3 Any merger,  acquisition,  consolidation or change in structure
of any Borrower or any guarantor of the Obligations of any Borrower or any sale,
lease,  transfer or other  disposition  of any or all of the  assets,  shares or
interests  in or of any  Borrower or any  guarantor  of the  Obligations  of any
Borrower;

         11.16.4 Any assignment or other  transfer,  in whole or in part, of any
Lender's  interests in and rights under this  Agreement or any of the other Loan
Documents,  including,  without limitation, any assignment or other transfer, in
whole or in part, of Banks' interests in and to any collateral;

         11.16.5 Any claim, defense,  counterclaim or setoff, other than that of
prior performance,  that any Borrower or any guarantor of the Obligations of any
Borrower  may have or assert,  including,  but not  limited  to, any  defense of
incapacity  or lack of  corporate or other  authority  to execute any  documents
relating to the Obligations of any Borrower or any collateral;

         11.16.6  Agent's  or any  Lender's  amendment,  modification,  renewal,
extension,  cancellation  or surrender of any agreement,  document or instrument
relating to this  Agreement,  the Obligations of any Borrower or any collateral,
or any exchange, release, or waiver of any collateral;

         11.16.7  Agent's or any Lender's  exercise or nonexercise of any power,
right  or  remedy  with  respect  to  the  Obligations  of any  Borrower  or any
collateral,  including, but not limited to, the compromise,  release, settlement
or waiver with or of any Borrower or any other person;

         11.16.8 Agent's or any Lender's vote,  claim,  distribution,  election,
acceptance, action or inaction in any bankruptcy case related to the Obligations
of any Borrower or any collateral; and

         11.16.9 Any  impairment or invalidity of any  collateral or any failure
to perfect any of Agent's liens thereon.

         11.17  Co-Borrower  Waivers.  Each  Borrower  and FSI hereby  expressly
waives (a) diligence,  presentment, demand for payment and protest affecting any
other Borrower's or FSI's liability under the Loan Documents;  (b) discharge due
to any disability of any Borrower or FSI; (c) any defenses of any other Borrower
or FSI to  obligations  under the Loan  Documents  not arising under the express
terms of the Loan  Documents or from a material  breach  thereof by Agent or any
Lender  which  under  applicable  law has the  effect of  discharging  any other
Borrower  from the  Obligations  of any  Borrower as to which this  Agreement is
sought to be  enforced;  (d) the  benefit of any act or omission by Agent or any
Lender  which  directly or  indirectly  results in or aids the  discharge of any
other Borrower from any of the  Obligations of any such Borrower by operation of
law or otherwise;  (e) all notices  whatsoever,  including,  without limitation,
notice of acceptance of the incurring of the  Obligations  of any Borrower;  (f)
any  right it may have to  require  Agent or any  Lender to  disclose  to it any
information  that Agent or Lenders may now or hereafter  acquire  concerning the
financial  condition or any circumstances that bear on the risk of nonpayment by
any other  Borrower,  including  the  release  of such other  Borrower  from its
Obligations  hereunder;  and (g) any requirement  that Agent and Lenders exhaust
any right,  power or remedy or proceed  against any other  Borrower or any other
security  for, or any  guarantor  of, or any other party  liable for, any of the
Obligations  of  any  Borrower,   or  any  portion  thereof  (including  without
limitation  any  requirements  set forth in Section  26-7 of the North  Carolina
General  Statutes).  Each  Borrower  specifically  agrees  that it shall  not be
necessary  or required,  and  Borrowers  shall not be entitled to require,  that
Agent or any  Lender  (i) file suit or  proceed  to assert or obtain a claim for
personal  judgment  against  any  other  Borrower  for  all or any  part  of the
Obligations  of any Borrower;  (ii) make any effort at collection or enforcement
of all or any part of the  Obligations of any Borrower from any Borrower;  (iii)
foreclose  against or seek to realize upon any  collateral or any other security
now or  hereafter  existing  for  all  or any  part  of the  Obligations  of any
Borrower;  (iv) file suit or  proceed  to obtain or assert a claim for  personal
judgment  against any Borrower or any guarantor or other party liable for all or
any part of the  Obligations  of any Borrower;  (v) exercise or assert any other
right or remedy to which Agent or any Lender is or may be entitled in connection
with the  Obligations  of any  Borrower or any  security  or  guaranty  relating
thereto to assert;  or (vi) file any claim against assets of one Borrower before
or as a condition of enforcing  the liability of any other  Borrower  under this
Agreement or the Notes.

         11.18 Governing Law. Except as otherwise  expressly  provided in any of
the Loan  Documents,  in all respects,  including  all matters of  construction,
validity and performance,  this Agreement and the Obligations  arising hereunder
shall be governed by, and construed and enforced in accordance with, the laws of
the State of North  Carolina  applicable to contracts made and performed in such
state,  without regard to the principles thereof regarding conflict of laws, and
any applicable laws of the United States of America.

         11.19 Consent To Jurisdiction. Each Borrower and FSI hereby irrevocably
consent to the personal  jurisdiction of the state and federal courts located in
Mecklenburg  County,  North Carolina,  in any action,  claim or other proceeding
arising out of any dispute in connection with this  Agreement,  the Note and the
other Loan Documents, any rights or obligations hereunder or thereunder,  or the
performance of such rights and  obligations.  Each Borrower  hereby  irrevocably
consents  to the  service of a summons and  complaint  and other  process in any
action,  claim or proceeding  brought by Agent or any Lender in connection  with
this Agreement or the other Loan Documents,  any rights or obligations hereunder
or thereunder,  or the performance of such rights and obligations,  on behalf of
itself or its Property, in the manner specified in Section 11.3. Nothing in this
Section  11.19 shall  affect the right of the Agent or any Lender to serve legal
process in any other manner  permitted by applicable  law or affect the right of
Agent or any Lender to bring any action or  proceeding  against any  Borrower or
its properties in the courts of any other jurisdictions.

         11.20 No Novation.  This Agreement is not intended to be, and shall not
be construed to create,  a novation or accord and  satisfaction,  and, except as
otherwise  provided herein, the Growth Fund Agreement shall remain in full force
and effect.  Without  limiting the generality of the foregoing,  Section 10.2 of
the Growth Fund Agreement shall survive the  effectiveness  of the Agreement and
shall remain enforceable  against both the Borrowers and EGF II, EGF III and EGF
IV.

         11.21 Waiver Of Jury Trial. TO THE EXTENT  PERMITTED BY APPLICABLE LAW,
EACH BORROWER AND FSI, BY EXECUTION  HEREOF,  AND THE AGENT AND EACH LENDER,  BY
ACCEPTANCE HEREOF, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT THEY
MAY  HAVE  TO A TRIAL  BY  JURY  IN  RESPECT  OF ANY  LITIGATION  BASED  ON THIS
AGREEMENT,  OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONNECTION WITH THIS AGREEMENT,  OR ANY
COURSE OF CONDUCT, COURSE OF DEALING,  STATEMENTS (WHETHER VERBAL OR WRITTEN) OR
ACTIONS  OF  ANY  PARTY  WITH  RESPECT  HERETO.  THIS  PROVISION  IS A  MATERIAL
INDUCEMENT  TO THE AGENT AND EACH LENDER TO ACCEPT THIS  AGREEMENT AND THE NOTES
EXECUTED AND DELIVERED BY EACH BORROWER PURSUANT TO THIS AGREEMENT.

         11.22 BMO As Lender.  Upon the  Closing,  BMO shall be a Lender for all
purposes of this Agreement and the other Loan  Documents,  and shall be entitled
to the rights and benefits and be subject to the  obligations  of a Lender under
and in accordance  with and subject to the terms of this Agreement and the other
Loan Documents.

         WITNESS the due  execution  hereof by the  respective  duly  authorized
officers of the undersigned as of the date first written above.

BORROWER               PLM EQUIPMENT GROWTH FUND V

                       BY PLM FINANCIAL SERVICES, INC.,
                       ITS GENERAL PARTNER


         By
                       J. Michael Allgood
                       Chief Financial Officer

                       PLM EQUIPMENT GROWTH FUND VI

                       BY PLM FINANCIAL SERVICES, INC.,
                       ITS GENERAL PARTNER


         By
                       J. Michael Allgood
                       Chief Financial Officer


                       PLM EQUIPMENT GROWTH & INCOME FUND VII

                       BY PLM FINANCIAL SERVICES, INC.,
                       ITS GENERAL PARTNER


         By
                       J. Michael Allgood
                       Chief Financial Officer


                       PROFESSIONAL LEASE MANAGEMENT INCOME FUND I, L.L.C.

                       BY PLM FINANCIAL SERVICES, INC.,
                       ITS MANAGER


         By
                       J. Michael Allgood
                       Chief Financial Officer

                       Notice to any Borrower to be sent to:

                       [Insert name of Borrower]
                       c/o PLM Financial Services, Inc.
                       One Market Plaza
                       Steuart Street Tower, Suite 900
                       San Francisco, CA  94105
                       Attention:    J. Michael Allgood
                                     Vice President of Finance
                                     and Chief Financial Officer
                                     Telephone:                 415/974-1399
                                     Telecopy:         415/882-0860

                                     With a copy to:

                                     TEC AcquiSub, Inc.
                                     One Market Plaza
                                     Steuart Street Tower, Suite 900
                                     San Francisco, CA  94105

                                     Attention:                 General Counsel
                                     Telephone:                 415/896-1138
                                     Facsimile:                 415/882-0860

FSI                    PLM FINANCIAL SERVICES, INC.


         By
                       J. Michael Allgood
                       Chief Financial Officer
                       Notice to be sent to:

                       PLM Financial Services, Inc.
                       One Market Plaza
                       Steuart Street Tower, Suite 900
                       San Francisco, CA  94105
                       Attention:     J. Michael Allgood
                                      Vice President of Finance
                                      and Chief Financial Officer
                                      Telephone:                 415/974-1399
                                      Telecopy:         415/882-0860

AGENT                  FIRST UNION NATIONAL BANK
                       OF NORTH CAROLINA


         By
         Printed Name:
         Title:

                       Notice to be sent to:

                       First Union National Bank of North Carolina
                       One First Union Center
                       301 South College Street
                       Charlotte, NC  28288
                       Attention:     Milton Anderson,
                                      Director
                                      Telephone:                 704/383-5164
                                      Facsimile:                 704/374-4092

LENDERS                FIRST UNION NATIONAL BANK
                       OF NORTH CAROLINA


         By
         Printed Name:
         Title:


                       Notice to be sent to:

                       First Union National Bank of North Carolina
                       One First Union Center
                       301 South College Street
                       Charlotte, NC  28288
                       Attention:        Milton Anderson,
                                         Director
                                         Telephone:                 704/383-5164
                                         Facsimile:                 704/374-4092
                         
                       BANK OF MONTREAL


         By:
         Printed Name:
         Title:


                        Notice to be sent to:

                        Bank of Montreal
                        ==========================
                        Attention:                 ______________
                        Telephone:                 ______________
                        Facsimile:                 ______________

The undersigned acknowledges and agrees to Section 11.20 of this Agreement.

                        PLM EQUIPMENT GROWTH FUND II

                        BY PLM FINANCIAL SERVICES, INC.,
                        ITS GENERAL PARTNER


         By
                        J. Michael Allgood
                        Chief Financial Officer


                        PLM EQUIPMENT GROWTH FUND III

                        BY PLM FINANCIAL SERVICES, INC.,
                        ITS GENERAL PARTNER


         By
                        J. Michael Allgood
                        Chief Financial Officer

                        PLM EQUIPMENT GROWTH FUND IV

                        BY PLM FINANCIAL SERVICES, INC.,
                        ITS GENERAL PARTNER


         By
                        J. Michael Allgood
                        Chief Financial Officer


<PAGE>





                          ACKNOWLEDGEMENT OF AMENDMENT
                          AND REAFFIRMATION OF GUARANTY
                                 (Growth Funds)


         SECTION 1. PLM  International,  Inc.  ("PLMI") hereby  acknowledges and
confirms  that it has reviewed and  approved  the terms and  conditions  of this
Third Amended and Restated Warehousing Credit Agreement ("Agreement").

         SECTION 2. PLMI hereby  consents to this  Agreement and agrees that its
Guaranty of the  Obligations of Borrowers  under the Growth Fund Agreement shall
continue  in full  force  and  effect  under the  Agreement,  shall be valid and
enforceable and shall not be impaired or otherwise  affected by the execution of
this  Agreement or any other  document or  instrument  delivered  in  connection
herewith.

         SECTION 3. PLMI  represents and warrants  that,  after giving effect to
this Agreement, all representations and warranties contained in its Guaranty are
true, accurate and complete as if made the date hereof.

GUARANTOR                 PLM INTERNATIONAL, INC.


                          By
                               J. Michael Allgood
                               Chief Financial Officer

                               


<PAGE>





                                   SCHEDULE A

                                  (COMMITMENTS)


                                                              Pro
                                                              Rate
Lender                           Commitment                  Share

First Union National Bank        $35,000,000                   70%
 of North Carolina

Bank of Montreal                 $15,000,000                   30%


                                    


<PAGE>


                          WAREHOUSING CREDIT AGREEMENT

                                TABLE OF CONTENTS

                                                                Page

SECTION 1.......................................................DEFINITIONS  2

         1.1      Defined Terms.................................2
         1.2      Accounting Terms..............................18
         1.3      Other Terms...................................18
         1.4      Schedules And Exhibits........................19

SECTION 2........................................AMOUNT AND TERMS OF CREDIT 19

         2.1      Commitment To Lend............................19
                             (a)    Facility Commitments........19
                             (b)    Each Loan...................20
                  2.1.2      Funding............................21
                  2.1.3      Utilization Of The Loans...........21
         2.2      Repayment And Prepayment......................21
                  2.2.1      Repayment..........................21
                  2.2.2      Voluntary Prepayment...............21
                  2.2.3      Mandatory Prepayments..............22
         2.3      Calculation Of Interest; Post-Maturity Interest..22
         2.4      Manner Of Payments...............................22
         2.5      Payment On Non-Business Days.....................23
         2.6      Application Of Payments..........................23
         2.7      ...............Procedure For The Borrowing Of Loans  23
                  2.7.1      ....Notice Of Borrowing  23
                  2.7.2      ....Unavailability Of LIBOR Loans  24
         2.8      ...............Conversion And Continuation Elections  24
                  2.8.1      ....Election  24
                  2.8.2      ....Notice Of Conversion  24
                  2.8.3      ....Interest Period  24
                  2.8.4      ....Unavailability Of LIBOR Loans  25
         2.9      .............Discretion Of Lenders As To Manner Of Funding 25
         2.10     Distribution Of Payments..................................25
         2.11     Agent's Right To Assume Funds Available For Advances......25
         2.12     Agent's Right To Assume Payments Will Be Made By Borrower.26
         2.13     Capital Requirements......................................26
         2.14     Taxes.....................................................26
2.14.1     ..........................No Deductions  26
                  2.14.2     ........Miscellaneous Taxes  27
                  2.14.3     ........Indemnity  27
                  2.14.4     ........Required Deductions  27
                  2.14.5     ........Evidence of Payment  27
                  2.14.6     ........Foreign Persons  27
                  2.14.7     ........Income Taxes  28
                  2.14.8     ........Reimbursement Of Costs  29
                  2.14.9     ........Jurisdiction  29
         2.15     ...................Illegality  29
                  2.15.1     ........LIBOR Loans  29
                  2.15.2     ........Prepayment  29
                  2.15.3     ........Prime Rate Borrowing  29
         2.16     ...................Increased Costs  29
         2.17     ...................Inability To Determine Rates  30
         2.18     Prepayment Of LIBOR Loans.............30

SECTION 3.     CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT 
               AND THE MAKING OF LOANS 30

         3.1      Effectiveness of This Agreement.........................30
                  3.1.1      Partnership, Company And Corporate Documents.30
                  3.1.2      ............Notes  31
                  3.1.3      Opinion Of Counsel...........................31
                  3.1.4      Reaffirmation of Guaranty....................31
                  3.1.5      .................TEC AcquiSub Amendment  31
                  3.1.6      .................AFG Agreement  31
                  3.1.7      Bringdown Certificate...........31
                  3.1.8      ................................Fees  31
                  3.1.9      ....................Other Documents  31
         3.2      All Loans...................31
                  3.2.1      .................Notice Of Borrowing  32
                  3.2.2      .................No Event Of Default  32
                  3.2.3      .................Representations And Warranties  32
                  3.2.4      .................Insurance  32
                  3.2.5      .................Other Instruments  32
         3.3      Further Conditions To All Loans..32
                  3.3.1      .................General Partner Or Manager  32
                  3.3.2      ......Removal Of General Partner Or Manager  32
                  3.3.3      ............   Purchaser.  33

SECTION 4.............BORROWERS' AND FSI'S REPRESENTATIONS AND WARRANTIES 33

         4.1      ...............General Representations And Warranties  33
                  4.1.1      Existence And Power.................33
                  4.1.2      Loan Documents And Notes Authorized; Binding 
                             Obligations........................... 33
                  4.1.3      No Conflict; Legal Compliance...........33
                  4.1.4      Financial Condition.....................34
                  4.1.5      Executive Offices.......................34
                  4.1.6      Litigation..............................34
                  4.1.7      Material Contracts......................34
                  4.1.8      Consents And Approvals..................35
                  4.1.9      Other Agreements........................35
                  4.1.10     ........Employment And Labor Agreements  35
                  4.1.11     .......ERISA  35
                  4.1.12     .......Labor Matters  35
                  4.1.13     .......Margin Regulations  36
                  4.1.14     .......Taxes  36
                  4.1.15     .......Environmental Quality  36
                  4.1.16     .......Trademarks, Patents, Copyrights, 
                                    Franchises And Licenses  37
                  4.1.17     .......Full Disclosure  37
                  4.1.18     .......Other Regulations  37
                  4.1.19     .......Solvency  37
         4.2      ..................Representations And Warranties
                                    At Time Of First Advance  37
                  4.2.1      Power And Authority.............38
                  4.2.2      No Conflict.....................38
                  4.2.3      Consents And Approvals..........38
         4.3      Survival Of Representations And Warranties..38

SECTION 5..................BORROWERS' AND FSI'S AFFIRMATIVE COVENANTS 38

         5.1      Records And Reports........................38
                  5.1.1      .........Quarterly Statements  38
                  5.1.2  Annual Statements.................39
                  5.1.3      ....Borrowing Base Certificate  39
                  5.1.4      ....Compliance Certificate  39
                  5.1.5      ....Reports  39
                  5.1.6      ....Insurance Reports  40
                  5.1.7      ....Certificate Of Responsible Officer  40
                  5.1.8      ....Employee Benefit Plans  40
                  5.1.9      ....ERISA Notices  40
                  5.1.10     ....Pension Plans  41
                  5.1.11     ....SEC Reports  41
                  5.1.12     ....Tax Returns  41
                  5.1.13     ....Additional Information  41
         5.2      Existence; Compliance With Law.....41
         5.3      Insurance..........................42
         5.4      Taxes And Other Liabilities........42
         5.5      Inspection Rights; Assistance......42
         5.6      Maintenance Of Facilities; Modifications....43
                  5.6.1      Maintenance Of Facilities........43
                  5.6.2      Certain Modifications To The Equipment...43
         5.7      Supplemental Disclosure.............................43
         5.8      Further Assurances..................................43
         5.9      ...........Lockbox  43
         5.10     ...........Environmental Laws  44

SECTION 6..................BORROWER'S AND FSI'S NEGATIVE COVENANTS 44

         6.1      Liens; Negative Pledges; And Encumbrances...........44
         6.2      Acquisitions........................................45
         6.3      Limitations On Indebtedness.........................45
         6.4      Use Of Proceeds.....................................46
         6.5      Disposition Of Assets...............................46
         6.6      Restriction On Fundamental Changes..................46
         6.7      Transactions With Affiliates........................46
         6.8      Maintenance Of Business.............................46
         6.9      No Distributions....................................47
         6.10     Events Of Default...................................47
         6.11     ERISA...............................................47
         6.12     No Use Of Any Lender's Name.........................47
         6.13     Certain Accounting Changes..........................47
         6.14     Amendments Of Limited Partnership Or Operating Agreements..47

SECTION 7...................FINANCIAL COVENANTS OF BORROWER AND FSI 47

         7.1      .............Maximum Funded Debt Ratio  48
         7.2      .............Minimum Debt Service Ratio  48
         7.3      .............Cash Balances  48

SECTION 8......................EVENTS OF DEFAULT AND REMEDIES 48

         8.1      Events Of Default...48
                  8.1.1      .........Failure To Make Payments  48
                  8.1.2      .........Other Agreements  48
                  8.1.3      .........Breach Of Covenants  49
                  8.1.4      .........Breach Of Representations Or Warranties 49
                  8.1.5      .........Failure To Cure  49
                  8.1.6      .........Insolvency  49
                  8.1.7      .........Bankruptcy Proceedings  50
                  8.1.8      .........Material Adverse Effect  50
                  8.1.9      .........Judgments, Writs And Attachments  50
                  8.1.10     .........Legal Obligations  50
                  8.1.11     .........TEC AcquiSub Agreement  51
                  8.1.12     .........AFG Agreement  51
                  8.1.13     .........Change Of General Partner Or Manager  51
                  8.1.14     .........Change Of Purchaser  51
                  8.1.15     .........Criminal Proceedings  51
                  8.1.16     .........Action By Governmental Authority  51
                  8.1.17     .........Governmental Decrees  52
         8.2      Waiver Of Default...52
         8.3      Remedies............52
         8.4      Set-Off.............53
         8.5      Rights And Remedies Cumulative..53

SECTION 9...................................................AGENT 54

         9.1      Appointment...............................54
         9.2      Delegation Of Duties......................54
         9.3      Exculpatory Provisions....................54
         9.4      Reliance By Agent.........................54
         9.5      Notice Of Default.........................55
         9.6      Non-Reliance On Agent And Other Lenders...55
         9.7      Indemnification...........................56
         9.8      Agent In Its Individual Capacity..........56
         9.9      Resignation And Appointment Of Successor Agent..56

SECTION 10................EXPENSES AND INDEMNITIES 56




         10.1     Expenses.................................56 
         10.2     Indemnification..........................57
                  10.2.1     ...................General Indemnity  57
                  10.2.2     .............Environmental Indemnity  58
                  10.2.3     .............Survival; Defense  58

SECTION 11.............................MISCELLANEOUS 59

         11.1     Survival..............................................59
         11.2     No Waiver By Agent Or Lenders.........................59
         11.3     Notices...............................................59
         11.4     Headings..............................................59
         11.5     Severability..........................................59
         11.6     Entire Agreement; Construction; Amendments And Waivers..60
         11.7     Reliance By Lenders..................................60
         11.8     Marshalling; Payments Set Aside......................60
         11.9     No Set-Offs By Borrowers.............................61
         11.10    ...........Binding Effect, Assignment 61
         11.11    ...........Counterparts 62
         11.12    ...........Equitable Relief 62
         11.13    ...........Written Notice Of Claims; Claims Bar 62
         11.14    ...........Waiver Of Punitive Damages 63
         11.15    ...........Relationship Of Parties 63
         11.16    ...........Obligations Of Each Borrower 63
         11.17    ...........Co-Borrower Waivers 64
         11.18    ...........Governing Law 65
         11.19    ...........Consent To Jurisdiction 65
         11.20    ...........No Novation 66
         11.21    ...........Waiver Of Jury Trial 66
         11.22    ...........BMO As Lender. 66


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                                INDEX OF EXHIBITS


Exhibit A                           Form of Revolving Promissory Note

Exhibit B                  Form of Borrowing Base Certificate

Exhibit C                  Form of Opinion of Counsel

Exhibit D                  Form of Compliance Certificate

Exhibit E                           Form of Notice of Borrowing

Exhibit F                           Form of Notice of Conversion/Continuation

Exhibit G                           Form of Assignment and Acceptance

                                                      


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                                                INDEX OF SCHEDULES


Schedule A                          Commitments

Schedule 1.1                        Amendments to Schedule A

Schedule 4.1.5             Executive Offices and Principal Places of Business

Schedule 4.1.6             Litigation

Schedule 4.1.7             Material Contracts

Schedule 4.1.8             Consent and Approvals

Schedule 4.1.15                     Environmental Disclosures

Schedule 6.1                        Existing Liens

Schedule 6.3(a)                     Existing Indebtedness

Schedule 6.3(b)                     Anticipated Indebtedness





                                                      


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