Document:

<PAGE>   1
                                                                    Exhibit 10.1

                                   SLI, INC.

                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

        AMENDMENT NO. 3 TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT,
                    AMENDMENT NO. 1 TO SECURITY AGREEMENT AND
            AMENDMENT NO. 2 TO AMENDED AND RESTATED PLEDGE AGREEMENT

         This Amendment (the "Amendment"), dated as of August 13, 2001 (the
"Effective Date"), is among SLI, Inc., an Oklahoma corporation, as Borrower, the
Guarantors party to the Credit Agreement (as defined below), the Lenders party
to the Credit Agreement, the Co-Agents to the Credit Agreement, ABN AMRO Bank
N.V., as Documentation Agent, First Union National Bank, as Syndication Agent
and Fleet National Bank f/k/a BankBoston, N.A., as Administrative Agent (the
"Administrative Agent"). The parties agree as follows:

         1.       Credit Agreement; Definitions. This Agreement amends (a) the
Second Amended and Restated Credit Agreement dated as of October 29, 1999 among
the parties hereto and the Lenders (as in effect prior to giving effect to this
Agreement, the "Credit Agreement"), (b) the Security Agreement dated as of July
3, 2000 between the Administrative Agent and SLI Lighting Company (the "SLI
Lighting Company Security Agreement") and (c) the Amended and Restated Pledge
Agreement dated as of July 3, 2000 between the Administrative Agent and SLI
Lighting Products, Inc. (the "SLI Lighting Products Pledge Agreement"). Terms
defined in the Credit Agreement as amended hereby (the "Amended Credit
Agreement") and not otherwise defined herein are used with the meaning so
defined.

         2.       Amendment of Credit Agreement. Effective upon the Effective
Date hereof, the Credit Agreement is amended as follows:

                  2.1      Amendment of Schedule 2.1. Schedule 2.1, the List of
         Lenders and Revolving Credit Commitments, is amended to read in its
         entirety as set forth on Exhibit A hereto. Amounts in respect of
         principal, interest, commitment fees, Letter of Credit fees and other
         amounts payable hereunder shall be payable in accordance with the terms
         of the Credit Agreement for periods prior to the Effective Date of this
         Amendment and in accordance with the Amended Credit Agreement for
         periods from and after the Effective Date of this Amendment.

                  2.2      Amendment of Section 1.1.

                           (a)      The definition of "Applicable Margin" set
                  forth in Section 1.1 is hereby amended to read in its entirety
                  as follows:

                           "Applicable Margin" means, for any Type of Loans for
                  any Payment Period (as defined below), the respective rates
                  indicated below for Loans of such Type opposite the applicable
                  Leverage Ratio indicated below for such Payment Period (or as
                  provided in the final paragraph of this definition, for part
                  of a Payment Period):

<PAGE>   2

<TABLE>
<CAPTION>

                  LEVEL         Range of Leverage Ratio     Applicable Margin for      Applicable Margin for
                                                            LIBOR Loans                Base Rate Loans
                                                            (% per annum)              (% per annum)

                  <S>           <C>                         <C>                        <C>
                  I.            Greater than or equal to    3.00%                      1.50%
                                3.50 to 1
                  II.           Greater than or equal to    1.75%                      0.25%
                                3.25 to 1 but less than
                                3.50 to 1
                  III.          Greater than or equal to    1.50%                      0.00%
                                2.50 to 1 but less than
                                3.25 to 1
                  IV.           Greater than or equal to    1.25%                      0.00%
                                2.00 to 1 but less than
                                2.50 to 1
                  V.            Greater than or equal to    1.00%                      0.00%
                                1.50 to 1 but less than
                                2.00 to 1
                  VI.           Less than 1.50 to 1         0.75%                      0.00%
</TABLE>

                           For purposes hereof, a "Payment Period" means the
                  period from October 29, 1999 until one Business Day after the
                  receipt by the Lenders of the Compliance Certificate for
                  fiscal quarter ending March 31, 2000 (the "Initial Payment
                  Period"), and thereafter, the period commencing one Business
                  Day after the receipt by the Lenders of the Compliance
                  Certificate for each fiscal quarter thereafter until the
                  receipt of the Compliance Certificate for the next fiscal
                  quarter;

                           Provided that, if the Compliance Certificate is not
                  delivered as provided in Section 6.1, the Applicable Margin
                  shall be set at Level I until the Compliance Certificate is
                  delivered to the Lenders and the Lenders have waived any
                  existing Event of Default.

                           Notwithstanding the foregoing, the Applicable Margin
                  for the Payment Periods commencing on or after June 30, 2001
                  shall be Level I. Anything in this Agreement to the contrary
                  notwithstanding, the Applicable Margin shall be the

                                       -2-
<PAGE>   3

                  highest rates provided for above during any Payment Period
                  when an Event of Default shall have occurred and be
                  continuing.

                           (b)      The definition of "Special Counsel" set
                                    forth in Section 1.1 is hereby amended to
                                    read in its entirety as follows:

                           "Special Counsel" means Ropes & Gray, in its capacity
                  as special counsel to Fleet National Bank (successor to
                  BankBoston, N.A.), as Administrative Agent of the credit
                  facilities contemplated hereby.

                  2.3      Amendment of Section 6.1. Section 6.1 is hereby
amended to include Section 6.1(i), which will read in its entirety as follows:

                           (i)      as soon as available and in any event within
                           30 days after the end of each month:

                                    (i)      consolidated and consolidating
                           statements of profits and losses of members of the
                           Consolidated Group for such period and for the period
                           from the beginning of the respective fiscal year to
                           the end of such period, setting forth in each case in
                           comparative form the corresponding consolidated and
                           consolidating figures for the corresponding period in
                           the preceding fiscal year, and a detailed report of
                           the management of the Borrower discussing the
                           Consolidated Group's financial performance and
                           results of operations for such period.

                  2.4      Amendment of Section 7.4. Section 7.4 is hereby
amended to include Section 7.4(e), which will read in its entirety as follows:

                           (e)      Without limitation or extending the
                  foregoing provisions of this Section 7.4, the Administrative
                  Agent and the Lenders hereby expressly consent and agree to
                  the release of any security interest in any collateral of SLI
                  Lighting Company.

                  2.5      Amendment of Section 7.9(a). Section 7.9(a) is hereby
amended to read in its entirety as follows:

                  (a)      Maximum Leverage Ratio. The Consolidated Group will
         not permit the Leverage Ratio at any time (i) during the period from
         the date hereof to the end of the quarterly fiscal period ending on
         April 1, 2001 to exceed 3.75 to 1.00; (ii) during the period beginning
         on April 2, 2001 and ending on September 29, 2001 to exceed 4.6 to
         1.00; and (iii) on September 30, 2001 and during any quarterly fiscal
         period thereafter to exceed 3.5 to 1.00.

                  2.6      Amendment to Section 10.1(b). Section 10.1(b) is
hereby amended to read in its entirety as follows:

                                      -3-
<PAGE>   4

                  (b)      if to the Administrative Agent, to Fleet National
         Bank, 100 Federal Street, Mail Code 01-07-05, Boston, Massachusetts
         02021, Attention of Paul Holian, Vice President (Telecopy No. (617)
         434-6471), with a copy to Ropes & Gray, One International Place,
         Boston, Massachusetts 02110, Attention of David McKay, Esq. (Telecopy
         No. 617-951-7050);

         2.7      Amendment to Section 10.4(b). Section 10.4(b)(ii) is hereby
amended to read in its entirety as follows:

                           (ii)     except in the case of an assignment to a
                  Lender or an Affiliate of a Lender or an assignment of the
                  entire remaining amount of the assigning Lender's Revolving
                  Credit Commitment or the 364 Day Revolving Credit Commitment,
                  the amount of the Revolving Credit Commitment or the 364 Day
                  Revolving Credit Commitment of the assigning Lender subject to
                  each such assignment (determined as of the date the Assignment
                  and Acceptance with respect to such assignment is delivered to
                  the Administrative Agent) shall not be less than $5,000,000
                  unless the Administrative Agent otherwise consents; provided
                  that for such purposes, the amount of outstanding Loans and
                  unused Commitments shall be determined without regard to any
                  Swing Loans then outstanding.

         3.       Amendment of SLI Lighting Company Security Agreement.
Effective upon the Effective Data hereof, the SLI Lighting Company Security
Agreement is amended as follows:

                  (a)      Amendment to Section 16. Section 16 is hereby amended
         to read in its entirety as follows:

                  16.      Termination; Assignment, etc. This Agreement and the
         security interest in the Collateral created hereby shall terminate upon
         the earlier of (a)(i) the consummation of the sale, lease, transfer or
         other disposition of all or substantially all of the assets of the
         Debtor, (ii) the consummation of the sale, transfer or other
         disposition of all the capital stock of the Debtor to a third party not
         affiliated with the Debtor or (iii) the merger or consolidation of the
         Debtor with a third party not affiliated with the Debtor in which the
         Debtor is not a surviving corporation, each in accordance with the
         Credit Agreement, or (b) the date on which all of the Secured
         Obligations have been paid and finally discharged in full. In such
         event, the Administrative Agent agrees to execute appropriate releases
         of liens on the Collateral and provide such third party, in the case of
         termination in accordance with clause (a) above, with written
         acknowledgement of such termination. No waiver by the Administrative
         Agent or by any other holder of Secured Obligations of any default
         shall be effective unless in writing nor operate as a waiver of any
         other default or of the same default on a future occasion. In the event
         of a sale or assignment of part or all of the Secured Obligations by
         any Secured Party, each such Secured Party may assign or transfer their
         respective rights and interest under this Agreement in whole or in part
         to the purchaser or purchasers of such Secured Obligations, whereupon
         such purchasers shall become vested with all of the powers and rights
         of the Secured Party hereunder.

                                      -4-
<PAGE>   5

         4.       Amendment of SLI Lighting Products Pledge Agreement. Upon the
consummation of the sale, transfer or other disposition of all of the capital
stock of SLI Lighting Company by SLI Lighting Products, in accordance with the
Credit Agreement (the "SLI Lighting Company Transaction"), (i) the
Administrative Agent will return to SLI Lighting Products the pledged stock
certificates for SLI Lighting Company as promptly as practicable following the
consummation of the SLI Lighting Company Transaction and (ii) the SLI Lighting
Products Pledge Agreement will be amended as follows:

                  (a)      Amendment of Schedule I. Schedule I is amended to
         read in its entirety as set forth on Exhibit B hereto.

         5.       Release of Guarantors. Effective upon the Effective Date
hereof, SLI Lighting Company shall be released as a Guarantor under the Credit
Agreement and shall be removed as Guarantor from the signature page to the
Credit Agreement.

         6.       Representations and Warranties. In order to induce the Lenders
to enter into this Amendment, each of the Borrower and the Guarantors hereby
represents and warrants that (i) each of the representations and warranties
contained in Article IV of the Credit Agreement will be true and correct on the
Effective Date hereof and (ii) no Default or Event of Default will exist.

         7.       Special Commitment Fee. The Borrower agrees to pay to the
Administrative Agent, for the account of each Lender that executes a counterpart
hereto, on the Effective Date a commitment fee in the amount of .10% of the sum
of such Lender's Revolving Credit Commitment and such Lender's 364 Day Revolving
Credit Commitment as set forth on Exhibit A hereto.

         8.       Payment of Agent's Legal Expenses. Upon or prior to the
effectiveness of this Amendment, the Borrower agrees to pay the reasonable legal
fees and expenses of the Agent with respect to the Credit Agreement, this
Amendment and the transactions contemplated hereby.

         9.       Conditions to Effectiveness. This Amendment shall become
effective and be deemed effective as of the Effective Date if, and only if, the
Administrative Agent shall have received duly executed counterparts of this
Amendment from the Borrower and the Required Revolving Credit Lenders.

         10.      General. The Amended Credit Agreement and all of the Credit
Documents are each confirmed as being in full force and effect. This Agreement,
the Amended Credit Agreement and the other Credit Documents referred to herein
or therein constitute the entire understanding of the parties with respect to
the subject matter hereof and thereof and supersede all prior and current
understandings and agreements, whether written or oral. Each of this Agreement
and the Amended Credit Agreement is a Credit Document and may be executed in any
number of counterparts, which together shall constitute one instrument, and
shall bind and inure to the benefit of the parties and their respective
successors and assigns, including as such successors and assigns all holders of
any Credit Obligation. This Agreement shall be governed

                                      -5-
<PAGE>   6

by and construed in accordance with the laws (other than the conflict of law
rules) of The Commonwealth of Massachusetts.

                 [The rest of this page is intentionally blank]

                                      -6-
<PAGE>   7

Amendment  No. 3 to Credit Agreement
         Each of the undersigned has caused this Agreement to be executed and
delivered by its duly authorized officer as an agreement under seal as of the
date first written above.

                                          BORROWER

                                          SLI, INC.

                                          By
                                             -------------------------------
                                          Name:
                                          Title:

                                          GUARANTORS:

                                          CHICAGO MINIATURE LAMP -
                                          SYLVANIA LIGHTING INTERNATIONAL, INC.

                                          CHICAGO MINIATURE OPTOELECTRONIC
                                          TECHNOLOGIES, INC.

                                          CML AIR, INC.

                                          CML FIBEROPTICS, INC.

                                          ELECTRO FIBEROPTICS CORP.

                                          ELECTRO-MAG INTERNATIONAL, INC.

                                          SLI LIGHTING COMPANY

                                          SLI LIGHTING PRODUCTS, INC.

                                          By
                                             -----------------------------------
                                                   Name:  Richard F. Parenti
                                                   Title: Secretary or Clerk

<PAGE>   8

                                          A&S ELECTRIC spol s.r.o.

                                          ALBA SPEZIALLAMPEN GmbH

                                          ALBA SPEZIALLAMPEN HOLDING GmbH

                                          ALBA TECHNOLOGY (M) Sdr. Bhd.

                                          BADALEX LIMITED

                                          CCC DE MEXICO, S.A. DE C.V.

                                          CHICAGO MINIATURE LAMP - SYLVANIA
                                          LIGHTING INTERNATIONAL I, B.V.

                                          LIGHTHOUSE INVESTMENT HOLDINGS LIMITED

                                          SLI MINIATURE LIGHTING GmbH und Co. KG

                                          W. ALBRECHT GRUNDSTUCKSGESELLSCHAFT
                                          GmbH und CO. Gbr

                                          CHICAGO MINIATURE LAMP (CANADA) INC.

                                          By
                                             -----------------------------------
                                          Name: Richard F. Parenti
                                          Under Power of Attorney
                                          Dated
                                                ---------------

<PAGE>   9

                                          ADMINISTRATIVE AGENT

                                          FLEET NATIONAL BANK,
                                          as Administrative Agent

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          CO-AGENTS:

                                          KEYBANK NATIONAL ASSOCIATION
                                          as Co-Agent

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          CITICORP USA, INC.
                                          as Co-Agent

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

<PAGE>   10

                                          BAYERISCHE HYPO UND VEREINSBANK AG,
                                          NEW YORK BRANCH
                                          as Co-Agent

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          SYNDICATION AGENT:

                                          FIRST UNION NATIONAL BANK
                                          as Syndication Agent

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          DOCUMENTATION AGENT:

                                          ABN AMRO BANK N.V.
                                          as Documentation Agent

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------------
                                          Name:
                                          Title:

<PAGE>   11

                                          The foregoing amendment is approved by
                                          the Lenders signing below:

                                          LENDERS:

                                          FLEET NATIONAL BANK

                                          By
                                            -------------------------------
                                          Name:
                                          Title:

                                          ABN AMRO BANK N.V.

                                          By
                                            -------------------------------
                                          Name:
                                          Title:

                                          By
                                            -------------------------------
                                          Name:
                                          Title:

<PAGE>   12

                                          FIRST UNION NATIONAL BANK

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          BANK OF AMERICA, N.A.

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          BAYERISCHE HYPO UND VEREINSBANK AG,
                                          NEW YORK BRANCH

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

<PAGE>   13

                                          CITICORP USA, INC.

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          KEYBANK NATIONAL ASSOCIATION

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          LLOYDS TSB BANK PLC

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

<PAGE>   14

                                          BANKONE, NA (Main Office: Chicago)

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          BANK OF TOKYO-MITSUBISHI TRUST COMPANY

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          COMERICA BANK

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

<PAGE>   15

                                          BNP PARIBAS, AS SUCCESSOR IN INTEREST
                                          TO BANQUE NATIONALE DE PARIS

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          NATIONAL WESTMINSTER BANK PLC

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          WACHOVIA BANK, N.A.

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

<PAGE>   16

                                          THE BANK OF NOVA SCOTIA

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          NATEXIS BANQUE

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          THE BANK OF NEW YORK

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                      -10-
<PAGE>   17

                                          KBC BANK, N.V.

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          FLEET NATIONAL BANK (successor by
                                          merger to Summit Bank)

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          BANK HAPOALIM B.M.

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

                                          By
                                            ------------------------------
                                          Name:
                                          Title:

<PAGE>   18

                                                                       Exhibit A

                                  SCHEDULE 2.1

                LIST OF LENDERS AND REVOLVING CREDIT COMMITMENTS

<TABLE>
<CAPTION>

                                                     Revolving Credit                   364 Day Revolving
Lender                                               Commitment                         Credit Commitment
------                                               ----------                         -----------------

<S>                                                  <C>                                <C>
Fleet National Bank                                  $38,400,000                        $10,893,617.00
ABN AMRO Bank, N.V.,                                 $27,000,000                        $7,659,575.00
     Documentation Agent
First Union National Bank,                           $27,000,000                        $7,659,575.00
     Syndication Agent
Bank of America, N.A.                                $18,000,000                        $0
Bayerische Hypo und Vereinsbank AG,                  $18,000,000                        $5,106,383.00
     New York Branch, Co-Agent
Citicorp USA, Inc., Co-Agent                         $18,000,000                        $5,106,383.00
KeyBank National Association,Co-Agent                $18,000,000                        $5,106,383.00
Lloyds TSB Bank PLC                                  $15,000,000                        $4,255,320.00
BankOne, N.A.                                        $12,000,000                        $3,404,255.00
Bank of Tokyo-Mitsubishi Trust Company               $12,000,000                        $3,404,255.00
Comerica Bank                                        $12,000,000                        $3,404,255.00
BNP Paribas, as successor in interest
    to Banque Nationale de Paris                     $12,000,000                        $3,404,255.00
National Westminster Bank PLC                        $12,000,000                        $3,404,255.00
Wachovia                                             $12,000,000                        $3,404,255.00
The Bank of Nova Scotia                              $12,000,000                        $3,404,255.00
Natexis Banque                                       $9,000,000                         $2,553,192.00
The Bank of New York                                 $7,200,000                         $2,042,553.00
KBC Bank, N.V.                                       $7,200,000                         $2,042,553.00
Summit Bank                                          $7,200,000                         $2,042,553.00
Bank Hapoalim B.M.                                   $6,000,000                         $1,702,128.00
</TABLE>

<PAGE>   19

                                                                       Exhibit B

                                   SCHEDULE I
                                   ----------
                          (to Amended Pledge Agreement)

                                  PLEDGED STOCK
<TABLE>
<CAPTION>

Listed Company
and Address                        Description                       No. of Shares               Certificate No.(s)
-----------                        -----------                       -------------               ------------------

<S>                                 <C>                              <C>                         <C>
CCC de Mexico,                      65% of the outstanding
S.A. de C.V.                        share capital

Electro-Mag International,
Inc.                                100% of the outstanding
                                    common stock
</TABLE>

                                  PLEDGED NOTES

<TABLE>
<CAPTION>
                                                            Outstanding                         Maturity
Issuer                     Date          Face Amount        Principal Amount                      Date
------                     ----          -----------        ----------------                      ----
<S>                        <C>           <C>                <C>                                 <C>

</TABLE>Exhibit 10.1

              ACCOUNTS RECEIVABLE AND INVENTORY FINANCING AGREEMENT
                                      (MD)

THIS AGREEMENT (as from time to time amended,  "THIS  AGREEMENT") is dated as of
July 13, 2001 and is by and between TRANSAMERICA COMMERCIAL FINANCE CORPORATION,
a Delaware corporation with a branch office at 5595 Trillium Boulevard,  Hoffman
Estates,  Illinois 60192 ("TCFC"),  and the person listed in the section of this
Agreement   entitled  "List  of  Dealers"  (each  individually  a  "DEALER"  and
collectively the "DEALER").

                                    RECITALS

A.   Dealers do business together or are related entities.

B.   Dealers  desire to have one common  credit  facility  instead  of  separate
     credit  facilities  and have  requested TCFC to extend such a common credit
     facility.

C.   The parties agree that this  Agreement  amends and restates in its entirety
     any security or other loan agreement  among TCFC and any one or more of the
     Dealers dated prior to the date hereof.

     The parties further agree as follows:

SECTION 1. DEFINITIONS.

1.1  UCC  DEFINED  TERMS.   "ACCOUNT  DEBTOR,"   "CHATTEL  PAPER,"   "DOCUMENT,"
"EQUIPMENT,"   "FIXTURE,"  "GENERAL  INTANGIBLES,"  "GOODS,"  "INSTRUMENT,"  and
"PROCEEDS"  shall  have the  meanings  assigned  to such terms in Article 9, and
"PERSONS"  shall  have the  meaning  assigned  to such term in Article 1, of the
Illinois Uniform Commercial Code (the "UCC") as of the date of this Agreement.

1.2 ACCOUNTING  TERMS.  Accounting  terms used in this Agreement and not defined
herein  shall  have the  meanings  customarily  given  them in  accordance  with
generally accepted accounting principles.

1.3 OTHER DEFINED TERMS.

     (a) The following terms when used herein shall have the following meanings:

     "ACCESSORIES"  - new and unused  power  strips,  ribbons,  carrying  cases,
trays,  toner cartridges,  and other accessories to Hardware or Software against
which TCFC elects, in its sole discretion, to make Advances.

     "ACCOUNTS"  - rights of any Dealer to  payment  for Goods sold or leased or
services  rendered not evidenced by an  Instrument or Chattel Paper  (whether or
not earned by performance),  and all rights pertaining to such Goods,  including
rights of stoppage in transit.

     "AFFILIATE"  - any Person (i) that  directly or  indirectly  controls or is
controlled by, or is under common control with any Dealer, (ii) that directly or
beneficially  owns 5% or more of the  voting  stock  (or if any  Dealer is not a
corporation,  the  equity) of any  Dealer,  (iii) that is a  director,  partner,
manager or officer (or Person  holding an equivalent  position) of any Dealer or
any Person  referred to in clause (i) or (ii) above,  or (iv) any natural Person
related to any Person referred to in clause (i), (ii) or (iii) above.

     "APPROVED  RETURN CREDITS" -  collectively,  all of each Dealer's rights to
credits  for  returns  by such  Dealer  due from and  approved  by a Seller  and
determined  by TCFC in its sole  discretion  to be eligible for inclusion in the
Borrowing  Base. No such credits shall be Approved Return Credits if (i) subject
to  set-off  or  counterclaim;  (ii)  from a  Seller  TCFC no  longer  considers
satisfactory for the purposes of Loans; (iii) disputed;  or (iv) not immediately
payable to TCFC.

     "BUSINESS DAY" - a day (other than Saturday or Sunday) on which the Federal
Reserve Bank of Chicago is open for business.

     "COLLATERAL"  -  collectively,  the  following  property  and  interests in
property of each Dealer,  whether now or hereafter  existing,  owned,  licensed,
<PAGE>
leased,  consigned by, acquired or arising and wherever  located:  (i) Accounts,
Chattel  Paper,  cash,  Documents,  Equipment,  Fixtures,  General  Intangibles,
Instruments,  Inventory,  leases,  payments under leases, and Supplier Benefits;
all accessions, accessories, returns, repossessions,  substitutions, repairs and
replacements; and all reserves, however created, of any Dealer in the possession
or control of TCFC;  (ii) all Proceeds and products of the foregoing;  and (iii)
all books and records relating to the same.

     "CREDIT LIMIT" - $4,000,000.00  in the aggregate for Inventory  Loans,  and
Working  Capital Loans  including the Letter of Credit  Facility.  The Letter of
Credit Facility (as defined in Section 2.2) shall not exceed  $1,000,000.00.  In
addition,  the maximum amount of outstanding  Working Capital Loans that will be
permitted at any one time shall be limited to $600,000.00.

     "EDI" - electronic data interchange including facsimile transmission.

     "FREE FLOOR PERIOD" - as to any Participating Seller, a period equal to the
number of days during which such Participating  Seller is willing to effectively
assume the cost of financing  Inventory purchased by any Dealer by granting TCFC
a TCFC Offset.

     "GUARANTOR" - any Person,  other than a Dealer, who is a guarantor,  surety
or issuer of a letter of credit or is otherwise  primarily or secondarily liable
on or with respect to any Liabilities to TCFC.

     "HARDWARE"  -  means  Eligible  Inventory  which  consists  of  any  of the
following:  new and unused computer central processing units, monitors,  plates,
scanners,  memory  units,  VGA  cards,  circuit  boards,  disc and tape  drives,
communications  hardware  (e.g.  modems) and printers,  and office  machinery of
every kind and  nature,  including  but not limited to  photocopiers,  facsimile
machines,  typewriters,  word processors,  micrographic machinery,  calculators,
point of sale  tabulating  machinery,  cash registers,  industrial  broadcasting
machinery,  industrial  audio/video  machinery,  cellular  telephones and mobile
communications machinery.

     "IN TRANSIT  INVENTORY" - means Inventory shipped or to be shipped under an
Approval but not received by any Dealer which will constitute Eligible Inventory
when received by any Dealer.

     "INVENTORY"  - Goods owned by or  consigned  by or to any Dealer  which are
held for sale or lease or furnished or to be furnished  under any  agreement for
service,  or which are raw  materials,  work in  process  or  materials  used or
consumed in any Dealer's business,  including,  without limitation, any Goods in
transit to any Dealer which are the subject of an  outstanding  Approval,  Goods
which were Inventory and are returned  Goods or Goods  repossessed or stopped in
transit  by any  Dealer,  and all  other  Goods in the  possession  or under the
control of any Dealer which are not Equipment.

     "INVOICE" - a  statement  (in writing or by EDI) to TCFC from a Person TCFC
believes to be a Seller  stating that Goods have been shipped,  or are available
for shipment, to a Dealer.

     "LAWS" - all  laws,  ordinances,  regulations,  and  rules of all  federal,
state,  county,  municipal,  foreign and other governments,  including,  without
limitation, any instrumentality, division, agency, body, or department thereof.

     "LIABILITIES" - collectively, all liabilities, obligations and indebtedness
to TCFC or to any TCFC  Affiliate  of any and  every  kind and  nature,  whether
heretofore,  now or hereafter arising,  due or payable and howsoever  evidenced,
created,  incurred,  acquired  or owing,  whether  primary,  secondary,  direct,
contingent,  fixed or  otherwise  (including  obligations  of  performance)  and
whether arising or existing under written or oral agreement or agreement created
by EDI or by operation of law including,  without  limitation,  all liabilities,
obligations  and  indebtedness  of  Dealers  and each of them to TCFC under this
Agreement and any Other Agreement.

     "LIEN" - any lien, security interest,  claim or other encumbrance,  whether
arising by agreement or by operation of law.

     "LOANS" - Working Capital Loans  (including any amounts  outstanding  under
the Letter of Credit  Facility),  Inventory  Loans and other  loans made by TCFC
pursuant to this Agreement.

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<PAGE>
     "MATERIAL  ADVERSE  CHANGE" - a material  adverse change in any Dealer's or
any  Guarantor's  condition  (financial or otherwise),  business,  operations or
prospects or in the Collateral.

     "OTHER AGREEMENTS" - Instruments,  security agreements, mortgages, deeds of
trust,  guarantees,  subordination  agreements,  powers of  attorney,  consents,
assignments, notices, leases, financing statements and other written agreements,
documents or EDI matter whether heretofore,  now, or hereafter executed by or on
behalf of any Dealer and/or any  Guarantor and delivered to TCFC,  together with
all  agreements  and  documents  referred  to therein or herein or  contemplated
thereby or hereby.

     "PARTICIPATING SELLER" - any Seller having an agreement with TCFC providing
for the repurchase from TCFC of Inventory sold or to be sold to any Dealer.

     "PRICE PROTECTION PAYMENTS" - collectively,  all of each Dealer's rights to
any rebate or credit with respect to  Inventory  purchased by such Dealer from a
Seller as a result of a reduction  in the price of such  Inventory  after Dealer
orders such Inventory.

     "PRIME RATE" - for any calendar  month the highest of the following  rates:
(i) the highest  "prime rate"  published in the "Money Rates" column of the Wall
Street  Journal on the first  Business Day of the month;  or (ii) the highest of
the rates publicly  announced on such date by Bank of America,  N.A.,  Bank One,
N.A. or The Northern  Trust Company (or their  successors)  as their  respective
reference,  prime, corporate base or similar benchmark rate, whether or not such
announced rates are the lowest rates charged by such banks, or (iii) the highest
of the  commercial  paper rates for any term  published  in the Federal  Reserve
statistical  release  (H.15)  for the  date  coincident  with  or most  recently
preceding  the first  Business  Day of such  month,  provided  however  that for
purposes of this  agreement the Prime Rate shall in no event be less than 6% per
annum.

     "REPURCHASE  AGREEMENT" - a written  agreement by a Seller to purchase from
TCFC Inventory sold to any Dealer by such Seller.

     "SELLER"  - any  Person  from whom any  Dealer  purchases  or may  purchase
Inventory or who advises TCFC that it has sold or may sell Inventory to Dealer.

     "SOFTWARE" - new and unused discs containing  programs for the operation of
Hardware and any  instructional  materials that are included with discs, both in
the factory-sealed shrink wrapped packaging.

     "SUBSIDIARY"  - any  corporate  Affiliate  in which any Dealer  directly or
indirectly  owns more than 50% of the  outstanding  stock having ordinary voting
power to elect a majority of such Affiliate's  board of directors  (irrespective
of whether at the time stock of any other  class or classes  shall or might have
voting power by reason of the happening of any contingency).

     "SUPPLIER  BENEFITS" -  collectively,  all of each  Dealer's  rights to any
Price Protection  Payments,  rebates,  discounts,  credits,  factory  holdbacks,
incentive  payments and other  amounts  which at any time are due to such Dealer
from a Seller or other supplier of Inventory.

     "TCFC  AFFILIATE" - any Person that  directly or  indirectly  controls,  is
controlled by, or is under common control with TCFC.

     "TCFC  OFFSET" - any amount  owed by a Seller to TCFC,  including,  without
limitation,  any discount,  payment or other benefit,  in  consideration of TCFC
financing any Dealer's acquisition of Inventory.

     "TRANSACTION  STATEMENT" - means a statement  which at TCFC's option may be
issued by TCFC to any Dealer from time to time which  identifies  the  Inventory
financed  and/or  the Loan  made  and the  terms  and  conditions  of  repayment
therefor.

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<PAGE>
     (b) The  following  terms are  defined in the  following  sections  of this
Agreement:

Term                          Section        Term                      Section
----                          -------        ----                      -------

"ACH Debit"                     2.6          "ERISA"                     6.6
"Approvals"                     2.1          "GAAP"                      6.1
"Blocked Accounts"              3.5          "Indebtedness"              6.6
"Borrowing Base"                2.4(a)       "Inventory Loans"           2.2
"Borrowing Base Certificate"    2.5(b)       "Loan Account"              2.7
"Capital Expenditures"          6.6          "Lock Box Accounts"         3.5
"Capitalized Leases"            6.6          "Permitted Liens"           7.5
"Collecting Banks"              3.5          "Permitted Locations"       6.4
"Collection Accounts"           3.5          "Records"                   6.5
"Default"                       9.1          "Start Date"                2.9(b)
"Eligible Account"              2.4(b)       "Subordinated Debt"         6.6
"Eligible Inventory"            2.4(c)       "UCC"                       1.1
                                             "Working Capital Loans"     2.2

SECTION 2. THE CREDIT.

2.1 APPROVALS.

     (a) TCFC, in its sole discretion,  may issue Approvals  ("APPROVALS")  upon
receipt of a request  (orally,  in  writing or by EDI) from a Seller  requesting
TCFC's  confirmation that it will finance the acquisition by one or more Dealers
of Inventory held for shipment, or shipped, to any Dealer. Such request shall be
an application by all Dealers for an Inventory  Loan.  Partial  shipments may be
made  against  any  Approval  and TCFC may honor  the  related  Invoice  without
inquiry,  regardless  of any  apparent  disproportion  between (i) the  quantity
shipped  and the  amount  of the  related  Invoice,  or (ii) the  amount  of the
Approval and the quantity to be shipped under the Approval.  Until terminated or
revoked,  an  Approval  shall be deemed  outstanding  to the  extent of its face
amount less the amount of Loans made with respect thereto.

     (b) To the fullest  extent  permitted by applicable  law, TCFC shall not be
responsible  for,  and the  obligations  of each  Dealer  to TCFC  shall  not be
affected by (i) performance or  non-performance by any Person other than TCFC of
its  obligations  to  any  Dealer;  (ii)  the  form,  sufficiency,  correctness,
genuineness,  authority of Person signing,  falsification or legal effect of any
documents  called for under any Approval if such  documents on their face appear
to be in order;  (iii) acts or omissions of any Person other than TCFC; (iv) the
existence,  nature,  quality,  quantity,  condition,  value or delivery of Goods
purporting to be represented by Documents, or any difference of Goods from Goods
represented  by  Documents;  (v)  the  validity,  sufficiency,   genuineness  or
collectibility of Documents,  insurance or Instruments, or endorsements thereof;
(vi) any  irregularity  in connection  with shipment;  (vii) breach of agreement
between  any Dealer and a Seller or any other  third  party;  or (viii)  without
limiting the  foregoing,  any act or omission of TCFC not done or omitted in bad
faith.  Dealers shall jointly and severally  indemnify  TCFC against any and all
claims, losses, liabilities, costs and expenses (including reasonable attorneys'
fees)  resulting  from  or  incurred  in  connection  with an  Approval  and not
proximately caused by TCFC's gross negligence or willful misconduct.

     (c) After TCFC has issued an Approval, TCFC shall be deemed to have made an
Inventory  Loan to Dealers under Section 2.2 as of the invoice date specified in
the Invoice  related to such  Approval or such  earlier date as TCFC shall enter
such Loan as a receivable on its books. TCFC may disburse any such Loan directly
to  Seller,  except  that  TCFC  may  set  off  any  TCFC  Offset.  Each  Dealer
acknowledges that it has no right to any TCFC offset.

     (d) TCFC may refuse to issue an  Approval  or may revoke an Approval at any
time in its sole discretion.  All Dealers shall be obligated for all obligations
incurred by TCFC on account of the issuance of any  Approval.  Without  limiting
the foregoing,  Dealer  acknowledges  that TCFC  customarily  revokes  Approvals
approximately  30 days after issuance if TCFC has not received  Invoice relating
thereto, although it is not obliged to do so.

2.2 LOANS.  Subject to the terms and  conditions of this Agreement and the Other
Agreements  and such other terms and conditions as TCFC may from time to time in
its  sole  discretion  determine,  TCFC  may  from  time  to  time  in its  sole
discretion,  make  Loans  to  Dealers  in  connection  with the  acquisition  of

                                       4
<PAGE>
Inventory  ("INVENTORY  LOANS") and other  Loans to Dealers for working  capital
purposes  up to such  amounts  as from time to time may be  requested  by Dealer
("WORKING CAPITAL LOANS").

TCFC may also in its discretion  provide Dealer with a LETTER OF CREDIT FACILITY
pursuant to which TCFC may  provide a guaranty on Dealer's  behalf in favor of a
bank that issues a letter of credit on Dealer's  behalf.  In the event that TCFC
provides such guaranty on Dealer's  behalf the amount of such guaranty  provided
by TCFC  under  the  Letter  of Credit  Facility  shall be deemed an  additional
Working  Capital Loan for any period of time that the guaranty  provided by TCFC
is in effect and shall be considered as an outstanding  Working Capital Loan for
all purposes under this Agreement.

TCFC may also, from time to time in its sole  discretion,  make Loans to Dealers
with respect to Eligible Accounts  designated by any Dealer and approved by TCFC
in writing as being Accounts of high creditworthiness,  such Loans to be in such
amounts and subject to such advance  ratios and repayment  terms and other terms
as TCFC, in its sole discretion,  shall  determine,  and such Loans shall not be
included as Inventory Loans or Working  Capital Loans or such Eligible  Accounts
in the Borrowing Base.

All Loans and other  obligations  hereunder shall be paid by Dealers upon TCFC's
demand unless TCFC otherwise agrees in writing. Each Dealer shall be jointly and
severally  liable with each other Dealer for the full and  punctual  payment and
performance,  when due, whether upon demand, at maturity or earlier by reason of
acceleration or otherwise,  and at all times  thereafter,  of all Liabilities to
TCFC,   including   without   limitation,   all  obligations   relating  to  any
representations,  warranties  and covenants of each Dealer to TCFC and all other
Liabilities  of  each  other  Dealer,   whether  before,  during  or  after  any
bankruptcy, reorganization or arrangement, insolvency, receivership, dissolution
or  liquidation  statute or other law of any  jurisdiction  (each,  a Bankruptcy
Proceeding")  with  respect to any  Dealer,  including  without  limitation  any
Liabilities arising under any guaranty  agreements.  The terms "Dealer" includes
each Dealer in its capacity as a joint and several obligor of the Liabilities of
the other Dealers. All Loans shall constitute a single obligation.

2.3 LOAN LIMITS.  The aggregate  principal  balance of Inventory Loans,  Working
Capital  Loans and  outstanding  Approvals  shall not  exceed  the lesser of the
applicable  Credit Limit or the  Borrowing  Base.  If at any time the sum of the
aggregate  outstanding  principal balance of Inventory Loans and Working Capital
Loans and  outstanding  Approvals  exceeds the lesser of the  applicable  Credit
Limit or the Borrowing  Base,  Dealers shall,  unless TCFC  otherwise  consents,
immediately and without notice or demand of any kind, make such payments to TCFC
as shall be necessary to eliminate such excess.

2.4 BORROWING BASE.

     (a)  "BORROWING  BASE" means the sum of the following less such reserves as
TCFC in its  sole  discretion  elects:  (i) up to 85% of the face  amount  (less
maximum discounts,  credits and allowances which might be taken by or granted to
Account Debtors in connection  therewith) of Eligible  Accounts;  (ii) up to the
percentage  or dollar  amount,  if less,  for each of the  classes  of  Eligible
Inventory (which shall be mutually  exclusive)  determined  pursuant to Schedule
2.4(a),  valued on the lower of cost (using the  first-in,  first-out  method of
inventory accounting) or market.

     (b) "ELIGIBLE ACCOUNT" means each Account which TCFC in its sole discretion
deems  to be an  Eligible  Account.  Without  limiting  TCFC's  discretion,  the
following are not Eligible Accounts: (i) Accounts not representing an undisputed
bona fide  existing  unconditional  obligation  of  Account  Debtors  created by
operating  leases having terms of less than six months or by sale,  delivery and
acceptance  of Goods by  customers  of a Dealer in the  ordinary  course of such
Dealer's  business;  (ii) Accounts which remain unpaid 90 or more days after the
date of the original invoice applicable  thereto;  (iii) all Accounts owing by a
single  Account  Debtor,  if 50% or more  of the  aggregate  amount  due on such
Accounts remain unpaid 90 or more days after the date originally invoiced;  (iv)
Accounts of an Account Debtor to the extent that its aggregate  indebtedness  to
any Dealer  exceeds any credit limit  determined by TCFC in its sole  discretion

                                       5
<PAGE>
for such  Account  Debtor;  (v)  Accounts  in which  TCFC  does not have a first
priority perfected  security  interest;  (vi) Accounts with respect to which the
Account  Debtor has  asserted  a  counterclaim  or has a right of setoff;  (vii)
Accounts for which the prospect of payment or  performance by the Account Debtor
is or may be  impaired  as  determined  by TCFC in its sole  discretion;  (viii)
Accounts with respect to which the Account Debtor is the subject of a bankruptcy
or insolvency  proceeding or has made an assignment for the benefit of creditors
or whose assets have been conveyed to a receiver or trustee;  (ix) Accounts with
respect to which the Account Debtor's  obligation to pay is conditional upon its
approval or is otherwise  subject to any repurchase  obligation or return right,
as with sales made on a bill-and-hold,  guaranteed sale, sale-or-return, sale on
approval or  consignment  basis;  (x) Accounts with respect to which the Account
Debtor is an  Affiliate,  employee or agent of Dealer;  and (xi)  Accounts  with
respect  to which the  Account  Debtor is not a resident  of the United  States.
Accounts  considered Eligible Accounts by TCFC may later be considered not to be
Eligible Accounts by TCFC.

     (c) "ELIGIBLE  INVENTORY" means Inventory which TCFC in its sole discretion
deems  to  be  Eligible  Inventory.  Without  limiting  TCFC's  discretion,  the
following is not Eligible  Inventory:  (i) Inventory  with respect to which TCFC
does not have a first priority perfected security interest; (ii) Inventory which
is obsolete,  not in good  condition or not currently  usable or saleable in the
ordinary course of Dealers'  business;  (iii) Inventory which TCFC determines in
its sole discretion to be unacceptable  due to age, type,  category or quantity;
(iv)  Inventory  (other  than  reasonable  quantities  consisting  of repair and
replacement  parts  acceptable to TCFC) more than 180 days old; (v) Inventory to
which Dealer does not have good title and all  licenses and rights  required for
the sale  thereof;  and (vi)  Inventory  not  located at a  Permitted  Location.
Inventory  considered  Eligible Inventory by TCFC may later be considered not to
be Eligible Inventory by TCFC.

2.5  REQUESTS  FOR  LOANS;  BORROWING  BASE  CERTIFICATES;   OTHER  INFORMATION;
APPOINTMENT OF AGENTS.

     (a) Except for Inventory  Loans  pursuant to Approvals,  all Loans shall be
requested  in writing,  by EDI or by  telephone  and if by  telephone,  shall be
promptly confirmed in writing.  If any one or more of Dealers make a request for
a Loan,  such Dealer,  on behalf of itself and all other Dealers shall forthwith
provide TCFC with such information as required by TCFC.

     (b) Dealers shall provide TCFC a certificate in form  satisfactory  to TCFC
as to the Borrowing Base (the  "BORROWING  BASE  CERTIFICATE")  (i) on the first
business day of each week no later than 12:00 P.M. (Chicago, Illinois Time) (ii)
at the  time of each  request  for a  Working  Capital  Loan as of the  previous
Business  Day,  and (iii) at such other  times as TCFC may  request.  TCFC shall
furnish Dealers,  (which may be given to one or more of Dealers as agent for all
other  Dealers) at Dealers'  request,  the amount of  outstanding  Approvals and
other  information  solely in TCFC's  possession  needed by a Dealer to  prepare
Borrowing Base  Certificates on behalf of itself and all other Dealers.  Dealers
shall be responsible  for  confirming  the accuracy of all other  information in
Borrowing Base  Certificates and in other  certificates and reports furnished by
any Dealer, whether or not such information is provided by TCFC.

     (c) Each Dealer shall provide TCFC with certified  copies of resolutions of
Dealer's Board of Directors and other documents requested by TCFC specifying the
names of Persons  authorized to sign Borrowing Base  Certificates,  on behalf of
Dealers to make  requests for Loans and to otherwise  act for Dealers,  and TCFC
shall be entitled to rely upon such documentation  until given notice in writing
by any Dealer of any change.  TCFC shall be entitled to act on  instructions  of
any Person identifying him or herself as such an authorized Person by telephone,
and  Dealers  shall be bound  thereby  whether or not such Person is actually so
authorized.  Dealers shall  indemnify  TCFC against any and all claims,  losses,
liabilities, costs and expenses (including reasonable attorneys' fees) which may
arise or be created by the acceptance of instructions for making or paying Loans
by telephone.

     (d)  Appointment of Agents.  Each Dealer hereby  irrevocably  appoints each
other  Dealer  as  its  agent  for  receiving  all  notices  (including  without
limitation Change Notices),  statements,  and other communications from TCFC and
for all other  matters  in  dealing  with  TCFC,  including  without  limitation
execution  of Program  Letters and other  agreements.  Any notice,  statement or
other  communication  given to any  Dealer by TCFC  shall be deemed to have been
given  simultaneously  to each  other  Dealer.  TCFC may deal with any Dealer as

                                       6
<PAGE>
agent for all Dealers, and each Dealer is hereby granted an irrevocable power of
attorney on behalf of each other Dealer to bind each other Dealer in  connection
with all  matters  relating  to the  Agreement.  No notice,  statement  or other
communication  given to or agreement with any Dealer  individually  and as agent
for the other  Dealers  under  the  Agreement  need  specify  that such  notice,
statement or other  communication  is given to, or such  agreement is being made
by, any Dealer in its individual  capacity or in its capacity as agent for other
Dealers  and each  Dealer  shall be deemed to be acting on its own behalf and as
agent for all other  Dealers and each notice,  statement or other  communication
shall be deemed to be given to and received by each Dealer  individually  and as
agent for all other Dealers,  unless expressly proved to the contrary in writing
at the time of such action or notice, statement or other communication.

2.6  DISBURSEMENT  OF LOANS.  TCFC, in its sole  discretion,  may make Loans and
issue  Approvals in excess of the Borrowing Base or any applicable  Credit Limit
or any other  limitation  without waiving any right of TCFC to demand  payments,
refuse to make further Loans or issue further  Approvals.  Each Working  Capital
Loan  shall be in  integral  multiples  of $5,000  and shall be sent by  Federal
Reserve wire  transfer as directed by any Dealer in writing or by EDI or through
acceptance of an Automated  Clearing  House debit by a Collecting  Bank (an "ACH
DEBIT"). Each Inventory Loan may be disbursed by TCFC directly to the applicable
Seller. TCFC shall not be required to make more than one Working Capital Loan to
any Dealer on any day.

2.7 LOAN ACCOUNTS.  TCFC shall maintain loan accounts  ("LOAN  ACCOUNTS") in its
internal  data control  systems in which shall be recorded all Loans,  payments,
and other appropriate debits and credits,  including,  without  limitation,  all
interest, fees, charges, and expenses. All entries in the Loan Accounts shall be
made in accordance with TCFC's customary  practices in effect from time to time.
Dealers  shall pay TCFC the  amount  reflected  as owing by them  under the Loan
Accounts and all other  Liabilities  to TCFC as such  amounts  become due or are
demanded pursuant to the terms of this Agreement or any of the Other Agreements.

2.8 STATEMENTS.

     (a) Each  Dealer  and TCFC  agree  that the  terms of any Loan made by TCFC
under the  Agreement,  including but not limited to the due date,  curtailments,
Due In Full  Date,  the  length  of the free  floor  period,  and the  amount of
Interest may vary from time to time and cannot  always be agreed upon in advance
because such terms depend, in part, upon the availability and/or the amount of a
fee paid by  Seller  to TCFC for  financing  of  inventory  hereunder  and other
incentives  provided by Sellers or buying groups,  TCFC's  floorplanning  volume
with certain Sellers or with such Dealer,  and other economic factors which vary
from  time to time.  Thus,  each  Dealer  agrees  to pay each  Loan and  related
Interest in accordance with the Agreement. Each Dealer agrees that the terms and
conditions stated in each Transaction Statement shall be accepted as to the Loan
identified  therein if not objected to in writing by such Dealer  within 30 days
after the date of such statement.  If such Dealer objects, then where applicable
the Loan  shall be  subject  to the terms and  conditions  of the most  recently
accepted  Transaction  Statement  related to a Loan  covering  the same model of
Inventory.  If there is no such previously accepted Transaction Statement,  each
Dealer  agrees that in addition to any other right or remedy TCFC may have under
the Agreement,  the Loan related to the objected Transaction  Statement shall be
due and payable  within 30 days after the date of such Loan and  interest  shall
accrue,  after any applicable free floor period, at the rate of 1.25% per 30 day
month.

     (b)  Subject  to the  above  section  2.8(a)  and to the  section  entitled
"Savings Provisions",  any statement with respect to any Liabilities sent to any
Dealer by TCFC, including without limitation any Transaction Statement, shall be
subject to subsequent adjustment by TCFC but shall be presumed accurate evidence
of Liabilities and information covered thereby,  unless TCFC shall have received
written  notice from such Dealer  specifying  any error within 30 days after the
date of such statement.  Notwithstanding such notice by any Dealer to TCFC, such
Dealer's  obligation  to make  payments to TCFC with  respect to such  statement
shall not be waived or  extended  unless and until TCFC  consents  in writing to
such waiver or extension.

                                       7
<PAGE>
2.9 INTEREST.

     (a) Except as may be  provided in Section  2.9(b)  below,  the  outstanding
principal  balance of Dealer's Loans and the other  obligations  hereunder shall
bear interest before maturity on the average daily outstanding  balance thereof,
at the  per  annum  rate  equal  to the  from  time  to  time  Prime  Rate  (the
"PRE-DEFAULT  RATE").  TCFC  may at any  time  with  Dealer's  (which  may be by
agreement with any Dealer as agent for the other Dealers)  agreement increase or
decrease the rate of interest or the amount of any interest,  fee or charge, add
or delete fees or charges or make any other change respecting interest,  fees or
charges  applicable  to  outstanding  and  future  Loans and  other  obligations
hereunder,  or any thereof, by giving Dealer's a notice specifying the change at
least 30 days prior to the  change;  and such  notice may be given to any Dealer
individually  and as agent for all other Dealers as provided in section  2.5(d).
All Dealer's  shall be deemed to have agreed to such change if, after TCFC gives
such notice and before  such  change  becomes  effective,  no Dealer  gives TCFC
notice that no additional  Loans which would be subject to such change should be
made. Any such change may, at TCFC's  election,  apply to  outstanding  Loans as
well as future Loans.  Interest will be calculated for the actual number of days
elapsed  on the  basis of a year  consisting  of 360 days.  Except as  expressly
provided to the contrary in Section 2.9(b), interest will accrue from the date a
Loan is made or other  obligation  is incurred.  Interest  accruing on Loans and
other  obligations  hereunder  prior to a Default  shall be due and  payable  by
Dealer's monthly in arrears for each month immediately upon receipt of a billing
statement  from TCFC for such  month but in no event  later than the 15th day of
the following month.  Upon a Default and for so long as such Default  continues,
such interest shall accrue at a rate equal to the lesser of 4% above Pre-Default
rate or the highest  rate allowed by  applicable  law (the  "DEFAULT  RATE") and
shall be payable  upon  demand.  TCFC may  provide for the payment of any unpaid
accrued interest by charging the Loan Accounts.

     (b) In the  case of any  Inventory  Loan  paid to a  Participating  Seller,
interest  shall begin to accrue  pursuant to Section  2.9(a) upon the earlier of
the invoice date referred to in the  Participating  Seller's Invoice or the date
the Loan is entered as a receivable  on TCFC's books ("START  DATE"),  except if
there is a Free Floor  Period  with  respect to such Loan,  such  interest  will
commence to accrue immediately after expiration of the Free Floor Period, or the
number of days  after the  Start  Date,  if any,  set forth in  Schedule  2.9 or
otherwise  as agreed to in writing by TCFC.  If interest on any  Inventory  Loan
commences  to  accrue  after  the  Start  Date of such  Loan and the  Seller  of
Inventory  financed by such Loan fails to fully pay the cost of  financing  such
Inventory  during the period  between the Start Date and the date such  interest
commences  to accrue by honoring or paying any TCFC Offset with  respect to such
Inventory,  Dealers  shall pay TCFC on demand  interest on such Loan as if there
were no Free Floor  Period with  respect to such  Inventory  less any portion of
such TCFC Offset  actually taken or received by TCFC. Each Dealer agrees that it
has no right to any TCFC Offset.

2.10 FEES AND CHARGES.  Dealers  shall pay TCFC fees and charges in such amounts
and as set forth on Schedule 2.10. Interest,  fees and charges not paid when due
shall become part of the  principal of  Liabilities  to TCFC as of the date they
accrue and shall bear  interest  at the Default  Rate.  TCFC may charge the Loan
Accounts for any unpaid accrued interest, fees or charges.

2.11  REAFFIRMATION.  Each  request  for a Loan  made  by any  Dealer  and  each
Borrowing Base  Certificate,  schedule or report furnished by any Dealer to TCFC
shall  constitute a  representation  and warranty by Dealers to TCFC that all of
the  representations and warranties of Dealers in this Agreement and each of the
Other  Agreements are true and correct on the date of such Loan,  Borrowing Base
Certificate,  schedule or report to the same extent as if then made, unless such
Dealer has given TCFC written notice to the contrary prior thereto.

2.12 PAYMENTS AND  COLLECTIONS.  All payments made by check  hereunder  shall be
made, without setoff or counterclaim, to TCFC prior to 12:00 Noon, Chicago time,
on the  date due at its  office  in  immediately  available  funds  at  Chicago,
Illinois  or at such  other  place as may be  designated  by TCFC to  Dealer  in
writing  or by EDI.  Any  payments  received  after  such  time  shall be deemed
received on the next  Business  Day.  Whenever any payment shall be stated to be
due on a date other than a Business  Day,  such  payment may be made on the next

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succeeding  Business  Day,  and such  extension of time shall be included in the
computation  of  interest,  fees and  charges.  Notwithstanding  anything to the
contrary  herein,  all items of payment  for  purposes  of (i)  determining  the
occurrence of a Default shall be deemed  received upon actual receipt by TCFC at
its bank,  The Northern  Trust Bank , Chicago or such other bank as TCFC may use
as its  depository  bank unless  subsequently  dishonored  for any reason;  (ii)
calculating the Borrowing Base shall be applied by TCFC against the principal of
and/or  interest on any Loans on the first Business Day after receipt by TCFC at
its bank the First  National  Bank of Chicago or such other bank as TCFC may use
as its depository bank; and (iii)  calculating  interest shall be deemed to have
been applied by TCFC against the principal of and/or interest on any Loan on the
first  Business  Day after  actual  receipt  by TCFC,  whether  by  check,  wire
transfer, ACH Debit or any other form of payment whatsoever.

Dealer may be eligible for an Early Payment Rebate pursuant to the provisions of
Schedule 2.12.

TCFC may at any time in its  sole  discretion  change  the time for  payment  of
future Loans or change  product  lines of Inventory to be financed and the terms
of such financing by giving Dealer a notice specifying such change.

2.13 FORBEARANCE. TCFC may, in its sole discretion, at any time and from time to
time,  forbear from enforcing any or all of the restrictions  imposed in Section
2, but no such  forbearance  shall impair  TCFC's right under this  Agreement to
require payment of the Loans on demand and/or to refrain from making any Loan or
issuing any Approval.

SECTION 3. COLLATERAL

3.1 GRANT OF SECURITY  INTEREST.  Each Dealer hereby grants to TCFC a continuing
security  interest in all of the  Collateral  of such Dealer as security for the
payment and performance of all Liabilities to TCFC (including without limitation
all  liabilities  of each other Dealer) and of all  obligations of Affiliates to
TCFC  presently  existing or  hereafter  arising or created and whether  arising
directly  or by  assignment.  Such  security  interest  shall  continue  in  all
Collateral  notwithstanding  any payment  for  Liabilities  to TCFC,  in part or
whole,  by Dealers.  Any lien  granted to TCFC in any  collateral  by any Dealer
shall  continue  in  such  Collateral  and  the  proceeds  thereof  upon a sale,
exchange, consignment or other transfer or disposition of such Collateral to any
other Dealer, and no purchase of goods by any Dealer from any other Dealer shall
be  deemed,  as to TCFC,  to be in the  ordinary  course  of  business,  and any
contrary  provision  of  Section  9-306  or  9-307  of the  UCC  or any  similar
provisions of any other  applicable law are hereby expressly waived by Dealer in
favor of TCFC.

3.2 SCHEDULES OF ACCOUNTS.  Dealers shall deliver to TCFC, in form acceptable to
TCFC, schedules of Accounts (which shall include current addresses and telephone
numbers of Account  Debtors) as often as requested but not less  frequently than
semi-annually. Dealers' failure to execute and deliver the same shall not affect
or limit TCFC's security interest in Accounts. At TCFC's request,  Dealers shall
also furnish TCFC with copies (or, at TCFC's request after a Default, originals)
of all orders,  invoices, and similar agreements and documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery,  for  Inventory,  the sale or  disposition  of which has  resulted  in
Accounts. Dealers shall also furnish TCFC an aged Accounts trial balance in such
form and as often as TCFC  reasonably  requests.  TCFC  from time to time in its
name or the  name of a  nominee  may  contact  Account  Debtors  to  verify  the
validity,  amount and any other  matters  relating to  Accounts.  Dealers  shall
deliver  to TCFC  copies (or  originals  after a  Default)  of all  Instruments,
Chattel Paper, security agreements,  guarantees and other documents and property
evidencing  or securing any  Accounts,  within 10 days (or  immediately  after a
Default)  upon receipt  thereof and in the same form as received,  and,  after a
Default, with all necessary endorsements to enable TCFC to enforce the same.

3.3 DISPUTES.  Dealers shall notify TCFC of all disputes and claims with respect
to  Accounts  on the regular  reports  provided  by Dealers to TCFC  pursuant to
Section 3.9. Dealers shall not, without TCFC's prior written consent, accept any
returns, or compromise,  adjust, or grant any discount,  credit,  allowance,  or
extension of time for payment to any Account Debtor,  except in good faith, in a
commercially  reasonable  manner and in the ordinary course of business,  and in
amounts  that will not cause any limit set forth in Section 2.3 to be  exceeded.
After a Default has occurred, TCFC shall have the right, in its sole discretion,
to settle,  accept reduced amounts and adjust disputes and claims directly with,

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<PAGE>
and give releases on behalf of any Dealer to, Account  Debtors for cash,  credit
or otherwise,  upon terms which are commercially reasonable.  In such case, TCFC
will credit the Loan Accounts with only the net amounts of cash received by TCFC
in  payment  of  Accounts,  less all costs and  expenses  (including  reasonable
attorneys'  fees)  incurred  by  TCFC  in  connection  with  the  settlement  or
adjustment of such disputes and claims and the collection of such Accounts.

3.4 ACCOUNT WARRANTIES.  Each Dealer to the best of its knowledge represents and
warrants to TCFC with respect to each of its Accounts  listed in any schedule of
Accounts  that:  (i) such Account is owned by Dealer free and clear of any Liens
other than Permitted  Liens;  (ii) all statements  made and all unpaid  balances
appearing in all  invoices,  Instruments  and other  documents  evidencing  such
Account  are true and  correct  and all such  invoices,  Instruments  and  other
documents  and all of such  Dealer's  books and  records  are genuine and in all
respects what they purport to be, and all  signatories  and endorsers  have full
capacity  to  contract;  (iii) all sales and other  transactions  underlying  or
giving rise to such Account  fully  comply with all  applicable  Laws;  (iv) all
signatures  and  endorsements  on  all  documents,  Instruments  and  agreements
relating to such Account are genuine,  and all such  documents,  Instruments and
agreements are legal,  valid and binding  obligations of such Dealer (and to the
best  of  such  Dealer's  knowledge,  of the  other  parties  thereto),  legally
enforceable  in  accordance  with their  terms;  (v) such Dealer has not,  sold,
assigned, pledged, encumbered,  forgiven (completely or partially),  settled for
less than  payment in full,  or  transferred  or disposed of such Account or any
other Account,  or agreed to do any of the foregoing,  except for the settlement
of Accounts in good faith,  in the ordinary  course of business,  and in amounts
that will not cause any limit set forth in Section 2.3 to be exceeded;  and (vi)
any such  Account,  if Dealers want TCFC to consider it an  "Eligible  Account,"
satisfies the definition of "Eligible Account."

3.5 COLLECTION OF ACCOUNTS. Dealers shall establish lock box accounts ("LOCK BOX
ACCOUNTS") or blocked  accounts  ("BLOCKED  ACCOUNTS") if requested by TCFC with
such  banks  as are  selected  by  Dealer,  but  are  acceptable  to  TCFC  (the
"COLLECTING  BANKS") to which all Account  Debtors,  if required by TCFC,  shall
directly  remit all payments on Accounts  and in which  Dealer will  immediately
deposit,  in kind,  all cash and other payments made for Inventory and all other
Proceeds of Collateral.  The Collecting Banks shall  acknowledge and agree, in a
manner  satisfactory  to TCFC,  that:  all payments made to Lock Box Accounts or
Blocked Accounts are the sole and exclusive property of TCFC; they have no right
to setoff against Lock Box Accounts or Blocked Accounts;  and they will transfer
(i) by wire transfer of immediately available funds (ii) by acceptance of an ACH
Debit or (iii) by any  other  method,  immediately  available  funds in a manner
satisfactory to TCFC, funds deposited into Lock Box Accounts or Blocked Accounts
(collectively,  the "COLLECTION ACCOUNTS") to TCFC on a daily basis in such bank
and  account  as TCFC  shall  designate  or,  in the  case of an ACH  Debit,  as
presented  for  acceptance.  All  payments  made to the  Collection  Accounts or
otherwise  received by the Collecting Banks or TCFC,  whether on the Accounts or
as Proceeds of other  Collateral or otherwise,  shall be under the sole dominion
and  control of TCFC and will be applied  on account of  Liabilities  to TCFC as
provided herein.  Each Dealer and its Affiliates  shall receive,  as trustee for
TCFC, any monies, checks, notes, drafts or any other payments relating to and/or
Proceeds of Accounts or other Collateral which come into the possession or under
the control of such Dealer or Affiliates and  immediately  remit, or cause to be
remitted, the same in kind to TCFC at TCFC's branch office set forth above. Each
Dealer shall jointly and severally pay TCFC any and all fees, costs and expenses
which TCFC reasonably  incurs in connection  with  Collection  Accounts and with
collecting  any  check  or item of  payment  received  and/or  delivered  to any
Collecting  Bank or TCFC on account of  Liabilities  to TCFC.  Each Dealer shall
jointly and severally reimburse TCFC for (i) any loss, cost or damages resulting
from claims  asserted by the  Collecting  Banks in  connection  with  Collection
Accounts or any returned or  uncollected  checks or other items  received by the
Collecting  Banks and (ii) any amount paid to any Collecting Bank arising out of
TCFC's  indemnification  of  such  Collecting  Banks  relating  to a  Collection
Account,  assuming such loss,  cost,  damage or amount paid is not the result of
the gross negligence of TCFC.

                                       10
<PAGE>
3.6 INVENTORY  WARRANTIES.  Each Dealer to the best of its knowledge  represents
and  warrants  to TCFC  with  respect  to each item of  Inventory  listed in any
schedule of  Inventory  that such item is owned by such Dealer free and clear of
any Liens other than  Permitted  Liens;  and if Dealers want TCFC to consider it
"Eligible Inventory" of a specified class,  satisfies the definition of Eligible
Inventory and the requirements of such class.

3.7 RETURNS.  Dealers shall promptly  notify TCFC of all returns of Inventory in
excess of  $50,000.00  received by any Dealer,  in the reports to be provided to
TCFC  pursuant  to  Section  3.9.  After a Default  has  occurred,  no return of
Inventory shall be accepted, and no sale of returned Inventory shall be made, by
Dealer  without  TCFC's  prior  written   consent  which  consent  will  not  be
unreasonably withheld.  After a Default has occurred,  TCFC shall have the right
to accept the return of any Inventory  directly from an Account Debtor,  without
notice to or consent by  Dealer.  Neither  the  delivery  by Dealer of  returned
Inventory to TCFC nor the acceptance by TCFC of returns directly from an Account
Debtor,  shall in any way  affect  Dealer's  obligations  to TCFC on  account of
Liabilities  to  TCFC,  except  to  the  extent  such  Inventory  is  sold  in a
commercially  reasonable  manner by TCFC,  then  such  amount  received  by TCFC
therefore will be credited against Dealer's obligations for the Liabilities.

3.8 INVENTORY  SYSTEM.  Dealers  shall  maintain a perpetual  inventory  system,
keeping accurate records  itemizing and describing the kind, type, age, quality,
quantity and cost of Eligible  Inventory and  withdrawals  and  additions.  Such
records shall be available for  inspection  during each Dealer's  usual business
hours  upon 2 days  notice by TCFC or  immediately  upon  notice if Dealer is in
Default.  Dealers shall conduct a physical count of Inventory at least once each
quarter,  and  promptly  report  the  results  to  TCFC in form  and  with  such
specificity as TCFC shall reasonably require.

3.9 REPORTS. Dealers shall furnish TCFC the reports required by Schedule 3.9 and
such other reports as TCFC from time to time may  reasonably  request  regarding
Dealers and the Collateral, all in form satisfactory to TCFC. Such reports shall
be for  such  periods,  at such  times  and  with  such  frequency  as TCFC  may
reasonably  designate.  Dealers  shall  immediately  notify  TCFC of  previously
reported  Eligible  Inventory  or Eligible  Accounts  which cease to be Eligible
Inventory or Eligible Accounts. All reports furnished TCFC shall be complete and
accurate in all respects at the time furnished.

3.10 NOTICE TO ACCOUNT DEBTORS.  Each Dealer shall make entries on its books and
records in form  satisfactory  to TCFC disclosing  TCFC's  security  interest in
Accounts  and shall  keep a  separate  account  on its books of all  collections
received  thereon.  Each  Dealer  shall,  in such form and at such times as TCFC
shall request,  give notice to Account  Debtors of TCFC's  security  interest in
such  Dealer's  Accounts,  and TCFC may itself  give such notice at any time and
from time to time in TCFC's or such Dealer's name requiring  Account  Debtors to
pay the Accounts directly to TCFC.

3.11 ADDITIONAL DOCUMENTS.  Each Dealer shall, on request by TCFC, do all things
and execute all financing  statements,  continuation and amendments of financing
statements,  security agreements,  assignments,  affidavits,  reports,  notices,
schedules of Accounts and other agreements and documents,  in form and substance
satisfactory  to TCFC, as TCFC may deem  necessary or useful in order to perfect
and maintain a first-priority security interest such Dealer's Collateral and the
collateral  of each other  Dealer,  or to  otherwise  protect and  preserve  the
Collateral and such security interest,  to enforce such security interest and to
consummate the transactions contemplated under this Agreement.

SECTION 4. CONDITIONS  PRECEDENT.  The following are conditions to TCFC's making
of Loans and giving of Approvals:

4.1 DOCUMENTS.  Each Dealer shall have executed and  delivered,  or caused to be
executed and  delivered,  to TCFC in form and  substance  satisfactory  to TCFC,
financial  statements,  certificates  of  insurance,  loss  payee  endorsements,
certified  resolutions  and  other  certificates,   financing  statements,  debt
subordination's, Instruments, consents, landlord waivers, guaranties, Repurchase
Agreements,  legal  opinions,  security  agreements  and  other  agreements  and
documents  as TCFC shall at any time  specify,  and no  guaranty  or  Repurchase
Agreement has been revoked or terminated.

                                       11
<PAGE>
4.2 NO DEFAULTS.  All of each and every Dealer's  representations and warranties
to TCFC, in this Agreement and otherwise,  are true and correct; No Dealer shall
have breached any of its covenants or agreements with TCFC; and no Default shall
have occurred.

4.3  SECURITY  INTEREST.  TCFC shall have a  first-priority  perfected  security
interest in the Collateral of each Dealer subject only to Permitted Liens.

4.4 NO MATERIAL  ADVERSE  CHANGE.  As determined  by TCFC,  no Material  Adverse
Change shall have  occurred,  and no  litigation,  arbitration  or  governmental
proceeding shall be pending or threatened which may result in a Material Adverse
Change.

SECTION 5.  REPRESENTATIONS AND WARRANTIES.  Each Dealer represents and warrants
that as of the date of this Agreement and for as long as any Liabilities to TCFC
are  outstanding,  (and for so long as this Agreement  shall continue in effect,
whether or not any  Liabilities to TCFC are  outstanding)  each of the following
representations and warranties now is and hereafter will continue to be true and
correct in all material respects:

5.1 EXISTENCE  AND POWER.  Such Dealer is and will continue to be, a corporation
duly  authorized,  validly  existing and in good standing  under the laws of the
jurisdiction   of  its   incorporation   and   qualified  and  licensed  in  all
jurisdictions  in which the nature of its business,  or the ownership or leasing
of its property,  make such qualification or licensing  necessary;  has and will
continue to have all  requisite  power and authority to carry on its business as
it is now, or may hereafter be,  conducted,  and will continue in, and limit its
operations to, the same general line of business it presently conducts.

5.2 AUTHORITY.  The execution,  delivery and  performance by such Dealer of this
Agreement  and the Other  Agreements  have been duly  authorized by its Board of
Directors  and if  necessary,  shareholders;  do not and  will not  require  any
governmental consent,  registration or approval; and do not and will not violate
any Law,  or any  provision  of, nor be grounds  for  acceleration  under,  such
Dealer's  articles or  certificate  of  incorporation  or bylaws or any material
agreement,  indenture,  note or instrument  which is binding upon such Dealer or
any of such Dealer's property.

5.3 NAMES AND TRADE STYLES. Such Dealer's name as set forth in this Agreement is
its correct  corporate name. Such Dealer shall provide TCFC with 30 days advance
written notice before  changing its name or doing business under any other name.
Schedule  5.3 lists  each prior name of such  Dealer and each  fictitious  name,
trade name and trade style by which such Dealer has been or is now known, or has
transacted or now transacts business.

5.4  COMPLIANCE  WITH LAWS.  Such Dealer has  complied  and will comply with all
provisions  of  applicable  Laws if the  failure  to  comply  would  result in a
Material Adverse Change or in a material  impairment of such Dealer's ability or
right  to  carry  on its  business  in  substantially  the  same  manner  as now
conducted.

5.5 AFFILIATES.  Such Dealer does not have any Affiliates except as set forth on
Schedule 5.5.

5.6  LITIGATION AND CONTINGENT  OBLIGATIONS.  Except as heretofore  disclosed to
TCFC in writing and except for claims fully covered by insurance as to which the
insurer  has  admitted  coverage in writing,  no claim,  litigation  (including,
without limitation, derivative action), arbitration, governmental investigation,
proceeding  or inquiry is pending  or, to the best of such  Dealer's  knowledge,
threatened against such Dealer which (i) would, if adversely determined,  result
in a  Material  Adverse  Change or the  ability of such  Dealer to  perform  its
obligations in connection with this Agreement and the Other Agreements,  or (ii)
relates to any of the transactions  contemplated  thereby, and there is no basis
known to Dealer for any of the foregoing.  Other than any liability  incident to
such  claims,  litigation,  proceedings  or  inquiries,  there  are no  material
contingent  obligations not provided for or referred to in financial  statements
heretofore furnished to TCFC.

                                       12
<PAGE>
5.7 OTHER AGREEMENTS. Such Dealer is not in default under any material agreement
to which it is a party or by which it is bound and does not know of any  dispute
regarding any agreement  which,  if determined  adversely to such Dealer,  could
result in a Material Adverse Change.

5.8 ASSETS.  Such Dealer possesses all assets,  licenses,  patents,  copyrights,
service  marks,   trademarks,   trade  names,  government  approvals  and  other
authorizations  and rights  necessary for such Dealer to continue to conduct its
business as heretofore conducted by it.

5.9 TAXES.  Such  Dealer  has filed all tax  reports  and  returns  required  by
applicable Laws except for extensions duly obtained. Such Dealer has either duly
paid all taxes,  duties and charges  indicated  due on the basis of such reports
and returns or has made  adequate  provision  for the payment  thereof,  and the
assessment  of any material  amount of  additional  taxes,  duties or charges in
excess of those paid and reported is not reasonably expected.

5.10 NO CHANGE IN BUSINESS. Since the most recent financial statements furnished
by such Dealer to TCFC, there has been no Material Adverse Change.

5.11 COMPLETE  DISCLOSURE.  There is no fact which such Dealer has not disclosed
to TCFC which could result in a Material Adverse Change or which is necessary to
disclose in order to keep the  foregoing  representations  and  warranties  from
being misleading in any material respect.

SECTION 6.  AFFIRMATIVE  COVENANTS.  Unless TCFC otherwise  consents in writing,
each Dealer shall comply with the agreements in this Section 6.

6.1 BOOKS AND  RECORDS.  Each Dealer  shall at all times  maintain  complete and
accurate books and records  comprising a standard,  modern  accounting system in
accordance with United States generally accepted accounting  principles ("GAAP")
which accurately record and reflect such Dealer's income, expenses, liabilities,
operations,  accounts, and ownership and location of the Collateral,  including,
without limitation,  adequate reserves  (including without  limitation,  for bad
debts,  depreciation  and taxes) in  accordance  with  GAAP.  All such books and
records  and all  documents  relating  to any of the  Collateral  are  and  will
continue to be genuine and in all respects what they purport to be.

6.2 INSURANCE.  Each Dealer shall, at all times, and for such periods of time as
TCFC may require,  insure all insurable  Collateral,  with financially sound and
reputable  insurers  acceptable to TCFC, with extended  coverage against loss or
damage by theft,  embezzlement,  fire, explosion,  flood,  sprinkler,  and other
insurable  events and risks that are  customarily  insured  against by similarly
situated Persons in similar  businesses,  to the extent of the replacement value
thereof.  All  insurance  policies  shall name TCFC as lender  loss  payee,  and
provide that proceeds  payable  thereunder shall be payable directly to TCFC and
that no act or default of such Dealer or any other Person shall affect the right
of  TCFC to  recover  thereunder.  Upon  receipt  of the  proceeds  of any  such
insurance,  TCFC may apply such  proceeds to the Loans as TCFC may  determine in
its sole  discretion,  and then to other  Liabilities to TCFC. Each Dealer shall
maintain  public  liability and third party  property  damage  insurance in such
amounts  and with such  deductibles  as are  acceptable  to TCFC.  Dealer  shall
provide  TCFC with the  original or a  certificate  of each policy of  insurance
which shall  contain a provision  requiring the insurer to give not less than 30
(10 in the case of non-payment of premiums) days advance  written notice to TCFC
in the event of cancellation  or termination  for any reason.  Each Dealer shall
deliver to TCFC,  promptly as rendered,  true and correct  copies of all reports
made to insurance  companies  by such Dealer or by  insurance  companies to such
Dealer.

                                       13
<PAGE>
6.3  FINANCIAL  STATEMENTS.  All  financial  statements  of such  Dealer  now or
hereafter delivered to TCFC have been, and shall be, prepared in conformity with
GAAP consistently  applied, and now and hereafter will completely and accurately
reflect the financial condition and results of such Dealer and its operations at
the times and for the periods therein stated. Such Dealer shall deliver to TCFC:
(i)  quarterly,  unaudited  financial  statements,  (which  term as used in this
Agreement shall include a balance sheet and profit and loss statement) within 45
days after the end of the fiscal  quarter to which they pertain;  (ii) year-end,
unaudited financial statements,  within 45 days after the end of the fiscal year
to  which  they  pertain;  and  (iii)  annual  audited  consolidated   financial
statements for each fiscal year,  accompanied by a certificate of an independent
certified  public  accounting  firm  selected by Dealer and approved by TCFC, in
scope and  substance  acceptable  to TCFC,  within 90 days  after the end of the
fiscal  year to  which  they  pertain.  If  requested  by TCFC  any or all  such
financial  statements  shall be  submitted  on a combined  or  consolidated  and
combining or consolidating basis with the other Dealers.

6.4 LOCATIONS OF COLLATERAL  AND  BUSINESSES.  Such Dealer's  record  respecting
accounts and chattel paper and chief  executive  office and  principal  place of
business  are and shall  continue  to be located at its address set forth on its
signature page hereto;  and the only other  locations at which any Collateral is
located are  referred  to or listed on such  Dealer's  signature  page under the
heading "Business and Warehouse locations" (together with additional  "Permitted
Locations") . "PERMITTED  LOCATIONS" shall mean business and warehouse locations
of any Dealer in the United  States set forth on each  Dealer's  signature  page
hereto or  otherwise  as set forth in  Schedule  6.4.  The books and  records of
Dealer  and all  records  of account  and all  Chattel  Paper (to the extent not
delivered to TCFC) are and shall  continue to be located at the principal  place
of  business  of Dealer.  No Dealer  shall make any  change in the  location  of
Collateral  or of such Dealer's  principal  place of business,  chief  executive
office,  books and records,  or records of account  without TCFC's prior written
consent.

6.5 ACCESS TO COLLATERAL AND RECORDS.  TCFC, and any person  designated by TCFC,
shall have free access to, and the right without  hindrance or delay to inspect,
audit, examine and test the Collateral, wherever located, and to inspect, audit,
check,  copy and make  extracts  from any Dealer's and its  accountant's  books,
records and  accounts  ("RECORDS")  including,  but not limited to, all computer
programs and devices or programs  related thereto,  printouts,  computer runs or
discs,  minute books,  journals,  ledgers,  work papers,  financial  statements,
orders,  receipts,  correspondence  and other  data  relating  to such  Dealer's
business  or to any  transactions  of such  Dealer,  no matter how or where such
Records may be maintained,  generated or stored. For such purposes, TCFC and its
agents at no charge may enter into and remain upon a Dealer's  premises as often
and for so long as reasonably  necessary.  To the extent  reasonably  necessary,
TCFC and its agents may use all computers and other  equipment and devices which
such Dealer owns,  leases or otherwise has  available;  provided that TCFC shall
not have any such  rights  with  respect  to  proprietary  information  of third
parties,  nor,  unless a Default has occurred,  the right to make copies of such
Dealer's proprietary computer programs. To the extent necessary to carry out the
rights provided for herein,  such Dealer irrevocably  authorizes and directs any
Person including, but not limited to, any of such Dealer's directors,  officers,
employees, agents, accountants and attorneys having possession or control of any
of the Records to make them available to TCFC to the extent such Records are not
subject to the attorney-client or other evidentiary  privilege of Dealer.  After
the  occurrence  of a Default,  TCFC shall have the right to  possession  of the
Records  relating to the Collateral for so long as reasonably  necessary to make
full use thereof in aid of TCFC's rights under this Agreement. Each Dealer shall
permit  TCFC to  discuss  such  Dealer's  condition  (financial  or  otherwise),
business,  operations  and  prospects  with  employees and  accountants  of such
Dealer.

6.6 FINANCIAL  COVENANTS.  So long as any Liabilities to TCFC remain outstanding
and (even if no Liabilities to TCFC are  outstanding)  so long as this Agreement
remains in effect,  each Dealer  shall  comply with the  financial  covenants in
Schedule  6.6. As used in this  Agreement,  the  following  terms shall have the
following meanings:

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<PAGE>
     "TANGIBLE NET WORTH" as of any date shall mean the sum of such Dealer's (a)
net worth as reflected on its last twelve-month fiscal financial statements, (b)
net earnings since the end of such fiscal year,  both after  provision for taxes
and  with  inventory  determined  on  a  first  in,  first  out  basis  and  (c)
Subordinated  Debt,  less  the  sum of  such  Dealer's  (i)  intangible  assets,
including,  without limitation,  unamortized leasehold  improvements,  goodwill,
franchises,  licenses,  patents,  tradenames,  copyrights,  service marks, brand
names,  and covenants not to compete;  (ii) prepaid  expenses;  (iii)  franchise
fees;  (iv)  notes,  Accounts  and other  amounts  owed to it by any  Guarantor,
Affiliate  or employee of Dealer;  (v) losses since the end of such fiscal year;
and (vi) interest in the cash surrender value of officer's or shareholder's life
insurance policies.

     "INDEBTEDNESS"  shall mean (i) debt for borrowed  money or for the deferred
purchase price of property or services in respect of which such Dealer is liable
as obligor or otherwise or assures a creditor  against  loss,  (ii)  obligations
under any leases which have been or in  accordance  with GAAP should be recorded
as capitalized leases  ("CAPITALIZED  LEASES")upon which obligations such Dealer
or any Affiliate is liable, and (iii) unfunded obligations of such Dealer or any
Affiliate  under a  "multiemployer  plan,"  as such  term is  defined  under the
Employment Retirement Security Act of 1974, as amended ("ERISA"), required to be
accrued by GAAP.

     "CAPITAL  EXPENDITURES"  shall mean all  expenditures,  or  agreements  for
expenditures,  for fixed assets, improvements or replacements,  or substitutions
or additions thereto, which have a useful life of more than one year, including,
without  limitation,  the  direct or  indirect  acquisition  of assets by way of
increased product or services charges,  offset items or otherwise,  and includes
payments under Capitalized Leases.

     "SUBORDINATED   DEBT"  shall  mean  Indebtedness  of  such  Dealer  to  any
Guarantor,  Affiliate, or employee of such Dealer which is fully subordinated to
all Liabilities to TCFC in a manner satisfactory to TCFC.

6.7 NOTICE OF CONTINGENCIES. Forthwith upon learning of the occurrence of any of
the following, Dealers shall furnish TCFC written notice describing the same and
the  steps  being  taken  by  Dealer  with  respect  thereto:  (i) any  expected
uncollectibility of, material delay in collection of, or other impairment of any
Eligible  Account,  (ii) the  occurrence  of a Default  or an event,  which with
notice  or  lapse  of time or  both,  would  constitute  a  Default,  (iii)  the
institution  or  threatened  institution  of, or any  adverse  determination  or
materially adverse development in, any litigation, arbitration,  governmental or
other  proceeding  which,  if adversely  determined,  would result in a Material
Adverse  Change or the ability such of Dealer or any other Dealer to perform its
respective   obligations  in  connection   with  this  Agreement  or  the  Other
Agreements,  (iv) notice from a  governmental  Person that  Dealer's  operations
violate any applicable Law in any material  respect,  or (v) any event which has
resulted or may result in a Material  Adverse  Change or material  impairment in
the ability of such Dealer or any other Dealer to perform its obligations  under
this Agreement or the Other Agreements.

6.8 TAXES.  Such Dealer shall promptly file all tax returns  required by Law and
pay all taxes, fees and other governmental charges for which it is liable.

6.9 ADDITIONAL  AFFIRMATIVE  COVENANTS.  Such Dealer shall comply with all other
covenants, if any, set forth in Schedule 6.9.

6.10  INDEMNIFICATION.  To the fullest extent not prohibited by applicable  Law,
such Dealer shall jointly and severally indemnify TCFC and each of its officers,
directors,  employees  and agents  ("INDEMNITIES")  from and against any and all
claims,  losses,   liabilities,   costs  (including,   without  limitation,  all
documentary,  recording,  filing,  mortgage or other stamp taxes or duties), and
expenses  (including  reasonable  attorneys' fees) (irrespective of whether such
Indemnitie  is a party to the action for which  indemnification  is sought) (the
"INDEMNIFIED Liabilities"),  incurred by Indemnities or any of them as a result,
or arising out of or relating to (i) any transaction  financed or to be financed

                                       15
<PAGE>
in whole or in part,  directly or  indirectly,  with the proceeds of any Loan or
involving any Loan, or (ii) the execution,  delivery, performance or enforcement
of  this  Agreement  or  the  Other  Agreements,   except  for  any  Indemnified
Liabilities  finally  determined  by a court of competent  jurisdiction  to have
arisen on  account  of the  relevant  Indemnity's  gross  negligence  or willful
misconduct. In addition, TCFC shall indemnify Dealer and its officers, directors
and employees from and against any and all claims, losses,  liabilities,  costs,
and expenses  (including  reasonable  attorneys'  fees) incurred by Dealer,  its
officers,  directors  or employees as a result of any action or omission by TCFC
which is  judicially  determined  (after any appeals are  exhausted) to be gross
negligence or wilfull misconduct on the part of TCFC.  Obligations  provided for
in this Section 6.10 and in Sections 2.1(b) and 2.5(c) shall survive termination
of this Agreement and shall not be reduced or impaired by any investigation made
by or on behalf of TCFC or any other Indemnity.

SECTION 7. NEGATIVE COVENANTS.  Unless TCFC otherwise consents in writing,  each
Dealer shall comply with the agreements in this Section 7.

7.1 CORPORATE STRUCTURE. Such Dealer shall not: (i) recapitalize, dissolve or be
a party to any merger or consolidation  or acquire all or  substantially  all of
the  assets of any other  Person;  (ii) amend its  certificate  or  articles  of
incorporation  or bylaws,  except to effect a change in its corporate name after
it has  notified  TCFC  pursuant  to  Section  5.3 and  provided  TCFC with such
financing  statements  as TCFC may request  and an exact copy of the  amendment;
(iii) except with prior written consent of TCFC redeem,  purchase,  or otherwise
retire,  declare or pay any dividend,  return capital to any of its shareholders
or otherwise make any other distribution on or in respect of any shares of stock
(or any other equity  interest) of such Dealer;  or (iv) issue or distribute any
stock or other securities for  consideration  without prior written consent from
TCFC.

7.2  INDEBTEDNESS.  Such  Dealer  shall  not:  (i)  incur or permit to exist any
Indebtedness  except for Liabilities to TCFC,  deferred taxes,  current accounts
payable  arising  in the  ordinary  course  of  business  and not  overdue,  and
non-current  accounts  payable  which such Dealer is contesting in good faith by
appropriate  proceedings;  or (ii) guarantee,  endorse or become responsible for
obligations  of any other Person or incur any contingent  obligation  other than
endorsements of negotiable  instruments for collection in the ordinary course of
business.

7.3 DISPOSAL OF COLLATERAL.  Dealer shall not sell, lease,  transfer,  assign or
otherwise dispose of any of the Collateral or any other asset except for (A) the
sale (not subject to a  repurchase  obligation  or return  right) of finished at
retail  Inventory in the ordinary course of business to persons other than other
Dealers;  and (B) sales or transfers  of Inventory to other  Dealers (but not to
Affiliates  who are not also  Dealers)  subject to the other  provisions of this
Agreement.  Such Dealer shall not sell Inventory to an Affiliate except to other
Dealers as permitted in the preceding sentence.

7.4 NEW FACILITIES. Such Dealer shall not open any new stores, warehouses, sales
offices, service sites or other facilities, without written notification to TCFC
at least 60 days prior to such opening.

7.5  ENCUMBRANCES.  Except for the security  interest  granted by such Dealer to
TCFC pursuant to this Agreement,  such Dealer shall not create, incur, assume or
suffer to exist any Lien other than those set forth on Schedule 7.5 or consented
to in writing by TCFC ("PERMITTED LIENS").

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<PAGE>
7.6 AFFILIATES AND  INVESTMENTS.  Such Dealer shall not: (i) create or permit to
exist any Affiliate not listed on Schedule 5.5 who is not a natural  Person;  or
(ii) purchase or otherwise acquire,  hold or invest in any interest, or make any
loan or advance to, or enter into any  arrangement  for the purpose of providing
funds or credit to, any Person,  except for investments in direct obligations of
or instruments  unconditionally guaranteed by the United States, or certificates
of  deposit  issued by a member  bank of the  Federal  Reserve  System  having a
combined  capital and surplus of at least  $50,000,000,  or in any money  market
account maintained with such a bank.

7.7 TRANSACTIONS  WITH  AFFILIATES.  Such Dealer shall not enter into, or cause,
suffer or permit to exist:  (i) any  arrangement or agreement with any Affiliate
(except within respect to any sale of Inventory to any other Dealer as permitted
by Section  7.3 above)  requiring  any  payment to be made by such  Dealer to an
Affiliate  for Goods or services  even if not  received  by Dealer;  or (ii) any
other arrangement or agreement  (including,  without limitation,  any employment
agreement or agreement to pay directors'  fees) with any Affiliate  which is not
in the  ordinary  course of business of such  Dealer,  or which is on terms less
favorable than otherwise  reasonably  attainable on an arm's length basis from a
Person not an Affiliate.

7.8 ADDITIONAL  NEGATIVE  COVENANTS.  Such Dealer shall at all times comply with
the additional negative covenants, if any, set forth on Schedule 7.8.

SECTION 8.  APPLICATION  OF  PAYMENTS.  Notwithstanding  any  provision  of this
Agreement  or in any Other  Agreement,  Dealers  waive  the right to direct  the
application  of any and all  payments  received  by TCFC from any Dealer or with
respect to any  Collateral.  TCFC shall have the continuing  exclusive  right to
apply and reapply any and all  payments  received,  whether  with respect to the
Collateral or otherwise,  against Liabilities to TCFC in such manner as TCFC may
deem  advisable,  notwithstanding  any  entry by TCFC  upon any of its books and
records.

SECTION 9. DEFAULT AND REMEDIES.

9.1 DEFAULT.  The  occurrence of any one or more of the  following  events shall
constitute a "DEFAULT,"  and Dealers shall provide TCFC with  immediate  written
notice thereof:

     (a) Any warranty of any Dealer or any Guarantor to TCFC is now or hereafter
breached  or any  representation,  statement,  report  or  certificate  made  or
delivered to TCFC by Dealer or any of Dealer's officers,  employees or agents or
any Guarantor is now or hereafter incorrect,  false, untrue or misleading in any
respect;

     (b) Any Dealer shall fail to promptly remit any Account payment or to repay
any Liabilities to TCFC when due or declared to be due;

     (c) Any Dealer or any  Guarantor  shall fail to perform or comply with,  or
otherwise shall breach, any provision of this Agreement or any Other Agreement;

     (d) Any Dealer shall fail to promptly  perform or comply with any provision
of any  agreement now or hereafter  existing with any third party which,  if not
performed  would  result in a  Material  Adverse  Change or any  guaranty  shall
terminate  or any letter of credit or other  obligation  of a  Guarantor  or any
Dealer with respect to any Liabilities or the Collateral  shall terminate or not
be received at least 30 days prior to its stated expiration or maturity;

     (e)  Any or all of the  Collateral  shall  become  the  subject  of a levy,
assessment, attachment, seizure or Lien which impairs its value, the prospect of
payment or performance, or the priority of TCFC's security interest;

     (f) Dissolution,  termination of existence,  insolvency or business failure
of any  Dealer or any  Guarantor;  or  appointment  of a  receiver,  trustee  or
custodian,  for all or any part of the property of,  general  assignment for the

                                       17
<PAGE>
benefit of creditors by, or the  commencement  of any  proceeding by or against,
any Dealer or any Guarantor under any  reorganization,  bankruptcy,  insolvency,
arrangement,  readjustment  of  debt,  dissolution  or  liquidation  law  of any
jurisdiction;

     (g) Any  Dealer  or any  Guarantor  shall  conceal,  remove or permit to be
concealed  or removed any part of its property  with intent to hinder,  delay or
defraud its  creditors,  or make or suffer any  transfer of any of its  property
which may be fraudulent under any bankruptcy,  fraudulent  conveyance or similar
Law;

     (h) A Material Adverse Change shall occur;

     (i) TCFC in good faith reasonably  believes that prospect of payment of any
Liabilities to TCFC is materially impaired or deems itself insecure; or

     (j) Any of the following Persons shall for any reason,  including,  without
limitation death, cease to be actively engaged in the management of the Dealers:
Ted Li and Cynthia Lee.

9.2  REMEDIES.

     (a) Upon or at any time after the  occurrence  of a Default,  TCFC,  at its
option,  with or without  notice to any  Dealers,  may do any one or more of the
following:(i) cease advancing money, issuing Approvals or extending credit to or
for the benefit of Dealer under this  Agreement  and any Other  Agreement;  (ii)
terminate  this  Agreement;   (iii)  revoke  any  outstanding  Approvals;   (iv)
accelerate and declare all or any part of the Liabilities to TCFC (including any
applicable early  termination  fees) to be immediately due and payable,  and, in
such event,  Dealers shall deposit cash  collateral with TCFC in an amount equal
to the aggregate amount of outstanding Approvals;  (v) take possession of any or
all of the  Collateral  wherever it may be found,  and for that purpose  Dealers
authorize TCFC without judicial  process to enter onto any of Dealers'  premises
without  hindrance to search for, take possession of, and keep,  store,  sell or
remove any or all of the Collateral;  (vi) require Dealer to assemble any or all
of the Collateral and make it available to TCFC at a place or places  designated
by TCFC reasonably  convenient to TCFC and Dealers, and to remove the Collateral
to such  locations as TCFC may deem  advisable;  (vii)  complete  processing  or
repair of all or any portion of the  Collateral  prior to a disposition  thereof
and, for such purpose and for the purpose of removal,  TCFC shall have the right
to use any Dealer's  premises,  Equipment and any and all other property without
charge;  (viii) sell, ship,  reclaim,  lease or otherwise  dispose of all or any
portion of the  Collateral in its condition at the time TCFC obtains  possession
or after further manufacturing,  processing or repair, at any one or more public
and/or private sale(s) (including, without limitation, execution sales), in lots
or in  bulk,  for  cash or  otherwise,  and any  notification  shall  be  deemed
reasonably  and properly  given if sent at least 10 days before a disposition of
any Collateral, (and any such notice may be given to any Dealer individually and
as agent for all other Dealers); and Dealers agree that sale at wholesale of any
of the Collateral  will be a commercially  reasonable  disposition and that TCFC
may  purchase  all or any part of the  Collateral  at public sale and in lieu of
actual payment of such purchase  price,  may set-off the amount thereof  against
Liabilities to TCFC;  (ix) demand payment of, and collect any Accounts,  Chattel
Paper,  Instruments,  and  General  Intangibles  and other  Collateral  and,  in
connection therewith, each Dealer irrevocably authorizes TCFC to endorse or sign
such  Dealer's  name  on  all  collections,   receipts,  Instruments  and  other
documents,  to take  possession  of and open mail  addressed  to such Dealer and
remove therefrom  payments made with respect to Collateral or Proceeds  thereof,
and, in TCFC's sole discretion,  to grant extensions of time to pay,  compromise
claims and settle  Accounts and the like for less than face value;  and (x) TCFC
shall have the right to obtain  access to any of any  Dealer's  data  processing
equipment,  computer  hardware  and  software  relating to the  Collateral  and,
subject  to the terms of any  licenses  with  third  parties,  to use all of the
foregoing  and   information   contained   therein  in  any  manner  TCFC  deems
appropriate.

     (b) Each Dealer  agrees that the sale of  Inventory by TCFC to a Person who
is liable to TCFC under a guaranty,  endorsement,  Repurchase  Agreement  or the
like shall not be deemed to be a transfer subject to Section 9-504(5) of the UCC
or any similar provision of any other applicable Law, and each Dealer waives any
provision to the contrary of such Law.

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<PAGE>
     (c) Any and all reasonable  attorneys' fees, expenses,  costs,  liabilities
and obligations incurred by TCFC with respect to the foregoing shall become part
of Liabilities to TCFC, be due on demand, and bear interest at the Default Rate.

     (d) Anything  contained  herein to the contrary  notwithstanding,  upon the
occurrence of a Default  described in Section 9.1(f) or 9.1(g),  all Liabilities
to TCFC,  including  without  limitation,  accrued interest thereon shall become
immediately due and payable without notice or election by TCFC.

9.3  REMEDIES  CUMULATIVE.  In addition to rights and remedies set forth in this
Agreement,  TCFC shall have all rights  and  remedies  accorded a secured  party
under the UCC and other  applicable  Laws and in any other agreement or document
now or hereafter executed by Dealer for TCFC's benefit.  All rights and remedies
are  cumulative and none is exclusive.  Exercise or partial  exercise by TCFC of
one or more rights or  remedies  shall not be deemed an  election,  nor bar TCFC
from  subsequent  exercise or partial  exercise of any other rights or remedies.
The  failure  or delay of TCFC to  exercise  any  rights or  remedies  shall not
operate as a waiver thereof,  but all rights and remedies shall continue in full
force  and  effect  until all  Liabilities  to TCFC  have  been  fully  paid and
performed.

9.4  RECOVERED  PAYMENTS.  To the  extent any  Dealer or any  Guarantor  makes a
payment to TCFC or TCFC  enforces its security  interest or exercises a right of
setoff,  and such payment or the proceeds of such enforcement or exercise 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  Person under any  bankruptcy  law,  state or federal  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 exercise had not occurred.

SECTION 10. POWER OF ATTORNEY.

10.1 POWER OF ATTORNEY.  Dealer  hereby grants to TCFC an  irrevocable  power of
attorney  coupled with an interest,  authorizing  and  permitting  TCFC,  at its
option but without  obligation,  at Dealer's sole  expense,  in Dealer's name or
otherwise,  to the  extent  reasonably  determined  by TCFC to be  necessary  or
advisable  in order to carry out TCFC's  rights or  remedies to do any or all of
the following:

     A) At any time:

          1)  execute  on behalf  of  Dealer  any  financing  statement,  or any
continuation or amendment  thereof,  security  agreement,  assignment of rentals
from real or personal property,  report,  notice,  schedule of Account,  and any
other  agreement or document that TCFC may, in its reasonable  discretion,  deem
advisable in order to (i) perfect,  maintain or improve TCFC's security interest
in the Collateral or other property intended to constitute  Collateral,  or (ii)
fully  consummate  the  transactions  contemplated  under this Agreement and the
Other Agreements;

          2) execute on behalf of Dealer,  any invoice relating to any Account ,
any  draft  against  or  notice  to any  Account  Debtor,  any proof of claim in
bankruptcy,  or other similar document against any Account Debtor, any notice or
claim of mechanic's,  materialman's or other Lien, or assignment or satisfaction
thereof;

          3) pay, contest or settle any Lien with respect to the Collateral,  or
any  judgment  based  thereon,  or  otherwise  take any action to  terminate  or
discharge the same;

          4) endorse  all checks and other  forms of  remittances  in payment of
Accounts received by TCFC "Pay to the Order of Transamerica  Commercial  Finance
Corporation";

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<PAGE>
          5) settle  and  adjust,  and give  releases  of,  any claim  under any
insurance  policy  that  relates to any of the  Collateral  and  obtain  payment
therefor,  and make all  determinations  and decisions  with respect to any such
policy and endorse  Dealer's name on any  Instrument or other item of payment or
the proceeds of such policy.

          6) exercise any right of TCFC.

     B) After Default by Dealer:

          1) sign Dealer's name to any  verification of its Accounts and notices
thereof to Dealer's Account  Debtors;  or take control in any manner of any cash
or non-cash proceeds of Collateral;

          2) notify post office  authorities  to change the address for delivery
of any of Dealer's  mail to an address  designated  by TCFC and receive and open
all mail addressed to Dealer and make such  disposition  as is reasonable  under
the  circumstances,  and TCFC will endeavor to provide  Dealer with originals or
copies thereof;

          3) demand  payment of Accounts,  enforce  payment of Accounts by legal
proceedings or otherwise,  and endorse any and all rights of Dealer in Accounts;
grant extensions of time to pay,  compromise claims and settle Accounts for less
than face value and execute  all  releases  and other  documents  in  connection
therewith;

          4) endorse Dealer's name upon any Instruments,  money orders, bills of
lading, freight bills, Chattel Paper or other agreements or documents,  evidence
of payment or Collateral that may come into TCFC possession;

          5) take any action or pay any sum required of Dealer  pursuant to this
Agreement,  and any other present or future  agreements  between TCFC and Dealer
and do all acts and things which are necessary to fulfill  Dealer's  obligations
under this Agreement; or

          6) exercise any right of Dealer.

SECTION 11. TERM AND TERMINATION.

11.1 TERM AND TERMINATION.  The term of this Agreement, unless sooner terminated
as  provided  in this  Agreement,  shall be for two years  from the date of this
Agreement  and shall  automatically  renew  from year to year  thereafter  until
terminated  at the end of the second  year or any  subsequent  one-year  renewal
period of such term by either party by at least 60 days prior written  notice to
the other; provided TCFC may terminate this Agreement (i) immediately by written
notice to Dealers in whole or only with respect to certain  product lines if any
Dealer shall lose or relinquish any right to sell or deal in any product line of
Inventory,  or (ii) at any time by at  least 90 days  prior  written  notice  to
Dealer,  and Dealer may terminate this Agreement at any time by at least 90 days
prior written notice to TCFC and payment of the Early  Termination Fee set forth
in Schedule  2.10 with such notice (and such notice  maybe given by or to Dealer
individually  and as agent for all other Dealers.  Any notice given to TCFC by a
Dealer shall be on behalf of all Dealers).  Upon  termination of this Agreement,
all  Liabilities to TCFC (or, if this Agreement is terminated  only with respect
to certain  product  lines,  Liabilities to TCFC relative to such product lines)
shall become  immediately  due and payable  without  notice or demand.  Upon any
termination,  each Dealer shall  remain  liable to TCFC for all  Liabilities  to
TCFC, including without limitation interest,  fees, charges and expenses arising
prior to or after the effective  date of  termination,  and all of TCFC's rights
and remedies and its security  interest shall continue until all  Liabilities to
TCFC are paid and all  obligations  of each  Dealer are  performed  in full.  No
provision of this  Agreement  shall be  construed  to obligate  TCFC to make any
Loans.

SECTION 12. GENERAL.

12.1 NOTICES.  All notices to be given under this Agreement  shall be in writing
and shall be served either personally or by depositing the same with a reputable
overnight  courier with charges prepaid or provided for, or in the United States
mail,  first-class postage prepaid,  by ordinary,  registered or certified mail,
addressed  to TCFC or  addressed  to any one or more of  Dealers at its or their
respective  chief  executive  office shown on their  respective  signature  page

                                       20
<PAGE>
hereto or at any other  address as shall be designated by one party in a written
notice to the other  party.  Any such notice  shall be deemed to have been given
upon delivery in the case of personal delivery,  one Business Day after being so
deposited with a reputable  overnight courier, or 3 Business Days after being so
deposited in the United States mail, except that any notice of change of address
shall not be effective until actually received. In addition,  notice may be sent
by facsimile  transmission,  which shall be effective upon  confirmation  to the
sender that such transmission was received,  provided a hard copy of such notice
is sent within 24 hours of such transmission.

12.2  ATTORNEYS'  FEES AND COSTS.  Dealers  shall pay TCFC the amount of (i) all
reasonable fees,  costs and expenses  (including  reasonable  attorneys' fees of
TCFC's in house and outside counsel) incurred by TCFC in collecting  Liabilities
to TCFC,  enforcing,  protecting or perfecting  TCFC's security  interest in the
Collateral or in connection  with any matters  contemplated by or arising out of
this Agreement.

12.3 BENEFIT. This Agreement and documents  contemplated hereby shall be binding
upon and  inure to the  benefit  of the  parties  hereto  and  their  respective
successors  and  assigns;  provided  that no Dealer may assign any of its rights
under this Agreement without the prior written consent of TCFC, such consent not
to be  unreasonably  withheld,  and any  prohibited  assignment  shall  be void.
References  herein to TCFC  shall be deemed to refer to TCFC and its  successors
and assigns.  No consent by TCFC to any assignment  shall relieve Dealers or any
Guarantor  from their  respective  liability for any  Liabilities to TCFC or any
other obligation unless expressly granted by TCFC in writing.

12.4 NON-WAIVER BY TCFC.

     (a) The failure of TCFC at any time to require  Dealers  strictly to comply
with any of the  provisions of this Agreement or any Other  Agreement  shall not
waive or diminish  any right of TCFC  thereafter  to demand and  receive  strict
compliance  therewith or with any other provision;  and any waiver of any breach
shall not waive or affect any other breach,  whether prior or subsequent thereto
and  whether of the same or a different  type.  None of the  provisions  of this
Agreement or any Other  Agreement shall be deemed waived by any act or knowledge
of TCFC or its agents or employees, but only by a specific written waiver signed
by an agent of TCFC and delivered to Dealers.

     (b) TCFC shall have the right to seek  recourse  against any one or more of
Dealers or any Guarantor,  and no election by TCFC to seek recourse against less
than all such parties shall constitute a waiver of TCFC's right to seek recourse
against the others.

     (c)  Time  is of  the  essence  in  the  performance  of  all  of  Dealers'
obligations under this Agreement.

12.5 WAIVERS BY DEALERS.

     (a) Each Dealer waives:  (i) notice of the creation,  renewal or accrual of
any  Liabilities  to TCFC or of TCFC's  reliance  upon any Dealer's  agreements,
representations  and  warranties  in this  Agreement;  (ii)  demand of  payment,
protest,  notice of protest,  notice of default or dishonor,  notice of payment,
notice of release, compromise,  settlement,  extension or renewal of any Chattel
Paper, Instrument, Account, General Intangible, Document or guaranty at any time
held by TCFC from any  Dealer,  any other  Dealer  any  Guarantor,  or any other
Person; (iii) notice of intent to accelerate, and notice of acceleration, of the
Liabilities,  any  notice  of any  action  taken or to be  taken by TCFC  unless
expressly  required by this Agreement;  (iv) any right of contribution  from any
other Dealer or any  Guarantor;  (v) any right to require TCFC to institute  any
action or suit or to exhaust  TCFC's rights and remedies  against any Collateral
or any other Dealer any Guarantor  before  proceeding  against such Dealer;  and
(vi) any obligation of TCFC to marshal any assets in favor of any Dealer.

                                       21
<PAGE>
     (b) Each Dealer  consents  that TCFC may,  without in any manner  affecting
such Dealer's  joint and several  liability  for any  Liabilities  to TCFC:  (i)
extend in whole or in part (by renewal or otherwise),  modify, premature, change
or release any  obligation  of any  Guarantor;  (ii) sell,  release,  surrender,
modify, impair, exchange,  substitute or extend the duration or the time for the
performance  or  payment of any and all  Collateral  or other  property,  of any
nature and from whomsoever received, held by TCFC as security for the payment or
performance of any Liabilities to TCFC or any other Dealer or any obligations of
any other Dealer or any Guarantor; and (iii) settle, adjust or compromise any of
TCFC's claims against such Dealer or any other Dealer or any Guarantor.

12.6 DEALER'S COSTS;  TCFC  EXPENDITURES.  All obligations of Dealers under this
Agreement and the Other  Agreements shall be performed at Dealers' sole cost and
expense unless otherwise  indicated in this Agreement.  If Dealers shall fail to
pay taxes, insurance, assessments, costs or expenses which Dealers' are required
to pay under this  Agreement,  or fails to keep the  Collateral  free from Liens
except for Permitted Liens, TCFC may, in its sole discretion,  make expenditures
for any or all of such  purposes,  and the  amount so  expended,  together  with
interest  thereon at the Default Rate shall be part of the  Liabilities to TCFC,
payable on demand.

12.7  CUSTODY  AND  PRESERVATION  OF  COLLATERAL.  TCFC  shall be deemed to have
exercised  reasonable care in the custody and  preservation of Collateral in its
possession  if it takes such action for that purpose as Dealers shall request in
writing, but failure by TCFC to comply with any such request shall not of itself
be deemed a failure  to  exercise  reasonable  care,  and no  failure by TCFC to
preserve  or protect any right with  respect to such  Collateral  against  prior
parties,  or to do any act with respect to the  preservation  of such Collateral
not  requested  by  Dealers,  shall of itself be  deemed a failure  to  exercise
reasonable care in the custody or preservation of such Collateral.

12.8 CREDIT  INFORMATION.  TCFC may at any time investigate or make inquiries of
former or current  creditors  of any Dealer or other  Persons and provide to any
creditors or other Persons any and all  financial,  credit or other  information
regarding or relating to any Dealer,  whether supplied by such Dealer to TCFC or
otherwise obtained by TCFC.

12.9  SEVERABILITY.  If any provision of this  Agreement is held by any court of
competent  jurisdiction  to be invalid or otherwise  unenforceable,  such defect
shall not affect any other  provision and the remainder of this Agreement  shall
be  effective  as though such  defective  provision  had not been a part of this
Agreement.

12.10  SINGULAR/PLURAL  MEANING. The meaning of all terms used in this Agreement
shall be equally  applicable  to both  singular  and plural  forms of such terms
unless the context otherwise requires.

12.11 AMENDMENT.  Except as otherwise expressly provided in Section 2.9 or 2.12,
the provisions of this Agreement may not be waived, altered, modified or amended
except in a writing  executed by duly  authorized  offices of Dealers and a duly
authorized agent officer of TCFC.

12.12  GOVERNING  LAW.  THIS  AGREEMENT  SHALL BE  CONSTRUED  IN ALL RESPECTS IN
ACCORDANCE  WITH,  AND GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF
LAW PROVISIONS) OF THE STATE OF ILLINOIS, EXCEPT THAT QUESTIONS AS TO PERFECTION
OF TCFC'S SECURITY INTEREST AND THE EFFECT OF PERFECTION OR NON-PERFECTION SHALL
BE GOVERNED BY THE LAW WHICH WOULD BE APPLICABLE EXCEPT FOR THIS SECTION.

12.13 WAIVER OF TRIAL BY JURY. TO THE EXTENT  PERMITTED BY  APPLICABLE  LAW, THE
PARTIES  HERETO  EACH WAIVE ANY RIGHT TO A TRIAL BY JURY ON ANY  CLAIM,  DEMAND,
ACTION,  CAUSE OF ACTION OR COUNTERCLAIM  ARISING UNDER OR IN ANY WAY RELATED TO
THIS AGREEMENT,  AND UNDER ANY THEORY OF LAW OR EQUITY,  WHETHER NOW EXISTING OR
HEREAFTER ARISING.

                                       22
<PAGE>
12.14  SUBMISSION TO  JURISDICTION;  WAIVER OF BOND. Each Dealer consents to the
jurisdiction  of any federal,  state or municipal court located within the State
of  California  and waives  any  objection  which such  Dealer may have based on
improper  venue or forum non  conveniens to the conduct of any proceeding in any
such court.  Each Dealer  waives,  to the extent  permitted  by law, any bond or
surety or security upon such bond which might, but for this waiver,  be required
of TCFC.  Nothing  contained in this  section  shall affect the right of TCFC to
serve legal  process in any manner  permitted by law or affect the right of TCFC
to bring any action or  proceeding  against  any Dealer or its  property  in the
courts of any other jurisdiction.

12.15 SAVINGS  PROVISIONS.  All agreements between TCFC and any Dealer,  whether
now  existing or  hereafter  arising,  and whether  written or oral,  are hereby
limited by this section. In no contingency, whether by reason of acceleration or
the  maturity  of  the  amounts  due  hereunder  or  otherwise,  shall  interest
contracted for, charged,  received, paid or agreed to be paid to TCFC exceed the
maximum  amount  permissible  under  applicable  law. If, from any  circumstance
whatsoever, interest would otherwise be payable to TCFC in excess of the maximum
lawful amount,  the interest  shall be reduced to the maximum  amount  permitted
under  applicable law; and if, from any  circumstance,  TCFC shall have received
anything of value deemed  interest by  applicable  law, in excess of the maximum
lawful amount, an amount equal to any excess of interest shall be applied to the
reduction of the principal  amount of Liabilities to TCFC and not to the payment
of  interest,  or if such  excess  interest  exceeds  the unpaid  balance of the
principal  amount of  Liabilities  to TCFC,  such  excess  shall be  refunded to
Dealers. All interest paid or agreed to be paid to TCFC, to the extent permitted
by applicable law, shall be amortized, prorated, allocated and spread throughout
the full term of this Agreement (including any Free Floor Periods) until payment
in full of all principal  obligations  owing by Dealer so that interest for such
full term shall not exceed the maximum amount permitted by applicable law.

12.16  LIMITATION  OF REMEDIES  AND  DAMAGES.  In the event there is any dispute
under this Agreement, the aggrieved party's remedy in connection with any action
arising  under or in any way  related  to this  Agreement  shall be limited to a
breach of contract action and any damages in connection therewith are limited to
actual  and  direct  damages,  except  that  TCFC may seek  equitable  relief in
connection with any attempt to realize upon it Collateral.

12.17  INTEGRATION.  THIS  AGREEMENT AND THE OTHER  WRITINGS  REFERRED TO HEREIN
REPRESENT THE FINAL AGREEMENT  BETWEEN THE PARTIES,  EMBODY THE ENTIRE AGREEMENT
BETWEEN THE PARTIES HERETO AND SUPERSEDE ALL PRIOR AGREEMENTS AND UNDERSTANDINGS
RELATING TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL  AGREEMENTS  BETWEEN THE PARTIES.  Unless  expressly
provided in the  Agreement,  the Agreement does not terminate any other security
agreement between TCFC and any one or more of Dealers.

12.18  EFFECTIVENESS.  This Agreement shall not become an agreement  between the
parties  until  accepted  by TCFC in  Illinois.  Dealer  waives  notice  of such
acceptance.

12.19 LIST OF DEALERS.  The following  persons are parties to this  Agreement as
Dealers:

     Pacific Magtron, Inc.
--------------------------------------------------------------------------------

     Pacific Magtron Georgia, Inc.
--------------------------------------------------------------------------------

Dated:  July 13, 2001.

Accepted in Illinois:

TRANSAMERICA COMMERCIAL FINANCE CORPORATION

By:  /s/  Christopher C. Meals
     ------------------------------------
     Christopher C. Meals
Its: Vice President - Credit

                                       23
<PAGE>
                        SIGNATURE PAGE AS TO EACH DEALER

ATTEST:                         DEALER
(or witness)
/s/ Hui "Cynthia" Lee           PACIFIC MAGTRON, INC.
------------------------        ------------------------------------------------
                                (Name of corporation, partnership or individual)
Title Secretary

                                By: /s/ Theodore S. Li
                                    --------------------------------------------

                                Title: President
                                       -----------------------------------------
                                Tax ID No: 77-0228715
                                           -------------------------------------

                                Dealer's Chief Executive Office and Principal
                                Place of Business:

                                1600 California Circle
                                Milpitas, CA. 95035

                                Dealer is a corporation organized and existing
                                under the laws of the State of

This signature page is part of the foregoing  Accounts  Receivable and Financing
Agreement  of Dealer and the other  Dealers  listed  therein  with  Transamerica
Commercial Finance Corporation dated June 29, 2001.

BUSINESS AND  WAREHOUSE  LOCATIONS.  [Include  whether  owned [O] or leased [L];
also,  if  Dealer  is not in  possession  of  such  Dealer's  Collateral  at any
location,  specify  by  footnote  the  person  that  is in  possession  of  such
Collateral]:

     Address        City        County        State        Zip        O/L
     -------        ----        ------        -----        ---        ---

                                       24
<PAGE>
                        SIGNATURE PAGE AS TO EACH DEALER

ATTEST:                         DEALER
(or witness)
/s/ Theodore S. Li              PACIFIC MAGTRON (GA), INC.
------------------------        ------------------------------------------------
                                (Name of corporation, partnership or individual)
Title Secretary

                                By: /s/ Hui "Cynthia" Lee
                                    --------------------------------------------

                                Title: President
                                       -----------------------------------------
                                Tax ID No: 58-2570713
                                           -------------------------------------

                                Dealer's Chief Executive Office and Principal
                                Place of Business:

                                5835 Oakbrook PArkway
                                Norcross, GA. 30093

                                Dealer is a corporation organized and existing
                                under the laws of the State of

This signature page is part of the foregoing  Accounts  Receivable and Financing
Agreement  of Dealer and the other  Dealers  listed  therein  with  Transamerica
Commercial Finance Corporation dated June 29, 2001.

BUSINESS AND  WAREHOUSE  LOCATIONS.  [Include  whether  owned [O] or leased [L];
also,  if  Dealer  is not in  possession  of  such  Dealer's  Collateral  at any
location,  specify  by  footnote  the  person  that  is in  possession  of  such
Collateral]:

     Address        City        County        State        Zip        O/L
     -------        ----        ------        -----        ---        ---

                                       25
<PAGE>
                                 SCHEDULE 2.4(A)

                         BORROWING BASE PERCENTAGES MENU

     For  purposes  of  calculating  the  Borrowing  Base  with  respect  to the
following  classes  of  Eligible  Inventory  pursuant  to  SECTION  2.4(A),  the
following  percentages  shall apply,  provided  however,  that in no event shall
availability  from all classes of eligible  Inventory  exceed  $1,500,000 in the
agregate:

     Class FS. NEW INVENTORY SUBJECT TO A REPURCHASE AGREEMENT.  Hardware and/or
     Software and/or Accessories subject to a Repurchase Agreement which, at the
     time of  determination  of the Borrowing Base, is new and unused located on
     Dealer's  premises after subtraction of the amount of accounts payable owed
     by Dealer to Sellers with  respect to the brands of  Inventory  included in
     this Class as based upon the most recent month-end  accounts payable report
     submitted  by Dealer to TCFC,  or at TCFC's sole  discretion , based upon a
     more recent accounts payable report submitted by Dealer:  Up to 100% of the
     value of such Class of Inventory.

     Class NS. NEW  INVENTORY  NOT SUBJECT TO A REPURCHASE  AGREEMENT.  Hardware
     and/or Software and/or  Accessories  described as business  software,  disk
     drives and memory not subject to a Repurchase  Agreement which, at the time
     of  determination  of the Borrowing  Base, is new and unused and located on
     Dealer's premises: Up to 30% of the value of such Class of Inventory.

     Class IT. IN TRANSIT INVENTORY. Hardware and/or Software and/or Accessories
     subject to a Repurchase  Agreement  which, at the time of  determination of
     the Borrowing Base, is new and unused In Transit  Inventory:  Up to 100% of
     the value of such Class of Inventory.

                                       26
<PAGE>
                                  SCHEDULE 2.9

                               INTEREST PROVISIONS

Interest will accrue on Inventory Loans at the rate of the Prime Rate, in effect
from time to time (such  applicable rate defined as the  "PRE-DEFAULT  INVENTORY
LOAN RATE").  Interest will be calculated  for the actual number of days elapsed
on the basis of a year consisting of 360 days. Upon a Default and for so long as
such Default continues, such interest shall accrue at a rate equal to the lesser
of four percent (4.0%) above the Pre-Default  Inventory Loan Rate or the highest
rate allowed by applicable law (the  "INVENTORY LOAN DEFAULT RATE") and shall be
payable  upon  demand.  TCFC may provide  for the payment of any unpaid  accrued
interest by charging the Loan Accounts.

In the case of any  Inventory  Loan with  respect to which a Free  Floor  period
applies,  interest at the Pre-Default Inventory Loan Rate on each such Inventory
Loan will commence on the day following the last day of the Free Floor Period or
after the Start Date. Dealer acknowledges that the Free Floor Period, if any, is
determined by the Participating  Seller in its sole discretion and can change at
any time.

All Working  Capital Loans shall bear interest at an annual rate of equal to the
Prime Rate,  in effect from time to time, as more fully set forth in Section 2.9
(a) of the Agreement.

                                       27
<PAGE>
                                 SCHEDULE 2.10

                             FEES AND CHARGES MENU

WIRE TRANSFER FEE:

Dealer  shall  pay to TCFC a wire  transfer  fee of  $25.00  for  same  day wire
transfer requests of Working Capital Loans pursuant to SECTION 2.6.

AUDIT FEE:

Dealer  shall pay to TCFC upon  being  billed  therefore  the  following  fee in
connection  with each audit of Collateral or Records  performed by TCFC pursuant
to SECTION 6.5 of this agreement: $1,000.00 semi-annually provided that no event
of Default  has  occurred.  If an event of default  shall have  occurred  and be
continuing, then no limit on the amount of such cost and expense shall apply.

EARLY TERMINATION FEE:

In the event  this  Agreement  is  terminated  by TCFC by reason of a Default by
Dealer or if this Agreement is terminated by Dealer, and either such termination
occurs prior to the end of the initial two year term of this Agreement,  then in
addition to the aggregate outstanding balance of all Liabilities (existing as of
the effective date of termination),  including,  without limitation, all accrued
interest,  fees and other charges due and payable under this  Agreement,  Dealer
shall pay to TCFC,  as  liquidated  damages  and not as a penalty in the case of
such  termination  by  TCFC  and as a  prepayment  premium  in the  case of such
termination  by Dealer,  an early  termination  fee as of the effective  date of
termination  equal  to: An amount  equal  to:  (I) 1.0% of the then  established
Credit Limit.

NSF FEE:

TCFC  shall  charge  Dealer a fee of $25.00  for each  check of  Dealer  that is
returned unpaid for non-sufficient funds.

FLAT CHARGE:

Dealer shall pay to TCFC a fee equal to 0.50% of the original  principal  amount
of each Inventory Loan with respect to which no Free Floor Period applies.  Such
fees shall be due and  payable by Dealer  monthly  immediately  upon  receipt of
billing  statement  from TCFC for such month but in no event later than the 15th
day of the following month.

NON-UTILIZATION LINE FEE

If at the end of six month from  activation of the Credit Line,  the  cumulative
utilization  of the Credit Line (but  excluding  any Working  Capital Loans made
pursuant   to  the  Letter  of  Credit   Facility)   does  not  meet  or  exceed
$1,500,000.00, Dealer shall pay a fee to TCFC equal to $10,000.00.

                                       28
<PAGE>
                                  SCHEDULE 2.12

                            PAYMENTS AND COLLECTIONS

A)   INVENTORY  LOANS:  All  Inventory  Loans with respect to which a Free Floor
     period applies, shall be paid at the end of the Free Floor period end date.
     Inventory  Loans without a Free Floor  period,  shall be paid 30 days after
     its Start Date.

B)   WORKING  CAPITAL  LOANS:  All  Working  Capital  Loans  shall  be paid in 1
     installment payable 60 days after the date of such Working Capital Advance.

C)   Notwithstanding the above, principal payments otherwise due between the 1st
     and 15th day of a month  shall be due and payable on the 10th of such month
     and principal  payments  otherwise due between the 16th and the last day of
     the month shall be due on the 20th of such month.

EARLY PAYMENT REBATE

Dealer shall be eligible for an Early  Payment  rebate with respect to Inventory
Loans which have a 60 day Free Floor  Period  applicable  to them.  In the event
that Dealer repays any  Inventory  Loan in full before the end of such sixty day
Free Floor Period of such  Inventory  Loan,  then Dealer shall be entitled to an
Early Payment  Rebate equal to 1.0% of the face amount of such  Inventory  Loan.
Any such Early Payment Rebates earned by Dealer during a calendar month shall be
paid by TCFC to Dealer by the 15th day of the following month.

                                       29
<PAGE>
                                  SCHEDULE 3.9

                                  REPORTS MENU

Dealer shall  provide TCFC with the  following  reports,  in form and  substance
satisfactory  to TCFC,  and such other  reports as TCFC may request from time to
time:

     Borrowing Base Certificates to be submitted with each Working Capital Loan.

     Monthly  Inventory reports as of the prior month end due by the 10th day of
     each month.  Such reports  shall  contain a schedule of Inventory by value,
     cost, type, availability, brand, model and location.

     Monthly accounts  receivable and accounts  payable reports  (including aged
     trial balance of accounts and concentration  report describing sales volume
     and account balances by customer) as of the prior month end due by the 10th
     day of each month.

     Monthly sales and cash  receipts  journals as of the prior month end due by
     the 10th day of each month end.

     Monthly bank statements and  reconciliation's  within 30 days of each month
     end.

     Quarterly 10Q statements due no later than 45 days after each quarter end.

     Year-end audited and consolidated financial statements due no later than 90
     days after month end.

     Annual Financial  Projection for each fiscal year,  submitted no later than
     45  days  before  the  end of  the  prior  fiscal  year.  ANNUAL  FINANCIAL
     PROJECTION  shall  mean the  projected  balance  sheet and  profit and loss
     statement of Dealer, prepared in accordance with GAAP. Dealer warrants each
     Annual  Financial  Projection is and will be the best  available good faith
     estimate of Dealer's  management  regarding the course of Dealer's business
     for the period covered  thereby.  Dealer also warrants each Annual Fnancial
     Projection, and the assumption on which such Annual Financial Projection is
     based,  shall be  reasonable  and realistic  based on the current  economic
     conditions.

                                       30
<PAGE>
                                  SCHEDULE 5.3

                                 DEALER'S NAMES

1.   Legal names used in the past 5 years:

     Pacific Magtron, Inc.
     Pacific Magron (GA), Inc.

2.   Trade names and trade styles used in the past 5 years:

     Pacific Magtron, Inc.
     Pacific Magtron (GA), Inc.

3.   Current legal name:

     Pacific Magtron, Inc.
     Pacific Magtron (GA.), Inc.

4.   Current trade names and trade styles:

     Pacific Magtron, Inc.
     Pacific Magtron (GA.), Inc.

                                       31
<PAGE>
                                  SCHEDULE 5.5

                                   AFFILIATES

Dealer has the following Subsidiaries and other Affiliates:

SUBSIDIARIES:  Pacific Magtron (GA), Inc.

OTHER AFFILIATES:

Frontline Network Consulting, Inc.

                                       32
<PAGE>
                                  SCHEDULE 6.4

                               PLACES OF BUSINESS

Dealer's principal place of business:

Address                          City          County         State     Zip
-------                          ----          ------         -----     ---

1600 California Circle           Milpitas      Snta Clara     CA        95035

5835 Oakbrook Parkway            Norcross                     GA        30093

Other Store/Warehouse Locations:  None

Address                          City          County         State     Zip
-------                          ----          ------         -----     ---

                                       33
<PAGE>
                                  SCHEDULE 6.6

                            FINANCIAL COVENANTS MENU

For purposes of this Agreement,  financial covenant  compliance will be measured
as of the last calendar day of each calendar month.

Dealer  covenants  and  agrees  that so long as any of the  Liabilities  to TCFC
remain  outstanding or this Agreement remains in effect,  even if no Liabilities
to TCFC are outstanding:

     INDEBTEDNESS  TO TANGIBLE NET WORTH:  Dealer shall maintain a ratio of Debt
     to Tangible  Net Worth not to exceed:  2.5 to 1.0.  Such  covenant  will be
     measured quarterly.

     TANGIBLE NET WORTH:  Dealer shall  maintain  Tangible Net Worth of not less
     than $7,100,000.00. Such covenant will be measured quarterly.

Interest  Coverage Ratio shall mean for any 12 month period a fraction,  (I) the
numerator of which is the Dealers  earnings  before interest and taxes excluding
any  interest  paid for  mortgage on primary  place of business in such 12 month
period,  and (ii) the  denominator of which are the payments of interest made by
the Dealer and all indebtedness to all lenders  (including,  but not limited to,
TCFC and all  Persons  providing  any third  party  financing)  in such 12 month
period.

     INTEREST  COVERAGE  RATIO:  Dealer shall  maintain a Fixed Charge  Coverage
     Ratio of not less than 1.50 to 1.0, beginning  September 30, 2001, measured
     at the  end of  such  period,  (and  each  fiscal  quarter  thereafter)  as
     calculated  for the 12  month  period  ending  at the  end of  such  fiscal
     quarter.

                                       34
<PAGE>
                                  SCHEDULE 6.9

                        ADDITIONAL AFFIRMATIVE COVENANTS

AUDITED  FINANCIAL  STATEMENTS.  In addition to any other financial  statements,
Dealer is  required to furnish  TCFC with a  compilation  of  Dealer's  year-end
consolidated audited financial statements performed by an independent  certified
public  accounting firm selected by Dealer and approved by TCFC,  within 90 days
following the end of the fiscal year to which they pertain

                                       35
<PAGE>
                                  SCHEDULE 7.5

                                 PERMITTED LIENS

(i)       Liens to secure payment of taxes which are not yet due and payable.

(ii)      Purchase money Liens for the acquisition of Equipment.

(iii)     Deposits under workmen's compensation,  unemployment insurance, social
          security and other similar laws, or to secure statutory or performance
          bonds in the ordinary course of business.

(iv)      Liens which, in TCFC's sole  determination,  do not materially  impair
          the use or lessen the value of the Collateral.

                                       36

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