Document:

<PAGE>   1
                                                                    EXHIBIT 10.3

                 AGREEMENT TO TERMINATE THE MANAGEMENT AGREEMENT

        This Agreement to Terminate the Management Agreement ("Termination
Agreement"), effective as of December 31, 1999 (the "Effective Date"), is made
by and between IOI MANAGEMENT SERVICES OF COLORADO, a Colorado business
corporation (the "IOI Management Corporation") and FROC, P.C., a Colorado
professional corporation ("FROC II") (the parties, at times, are collectively
referred to herein as the "Parties").

                                    RECITALS

        WHEREAS, currently there is that certain Management Services Agreement
dated March 11, 1998 pursuant to which IOI Management Corporation provides
management services to Front Range Orthopedic Clinic, P.C., a Colorado
professional corporation ("FROC I") (the "Initial Management Agreement"), as
amended by that certain Recruitment Agreement and Modification to Management
Services Agreement dated April 13, 1999 (the "Recruitment and Modification
Agreement"; the Initial Management Agreement as modified by the Recruitment and
Modification Agreement is referred to as the "Management Agreement");

        WHEREAS, FROC I has assigned or contemporaneously with the execution
hereof will assign the Management Agreement to FROC II; and

        WHEREAS, FROC II desires to, and IOI Management Corporation agrees to,
terminate the Management Agreement, and in consideration thereof FROC II agrees
to, and shall, pay to IOI Management Corporation Seven Hundred Fifty Thousand
Dollars ($750,000) pursuant to a promissory note payable in twenty-five (25)
consecutive and equal monthly payments (the "Promissory Note"), as described
further in Section 2, below;

        WHEREAS, subsequent to the termination of the Management Agreement, IOI
Management Corporation shall assign all of its rights in the Promissory Note to
Integrated Orthopaedics, Inc., a Texas corporation ("IOI"), and FROC II shall
agree to such assignment.

        NOW, THEREFORE, for and in consideration of the mutual covenants and
consideration set forth herein, the receipt and sufficiency of which is
acknowledged by all the Parties hereto, the Parties hereto agree as follows:

                              TERMS AND CONDITIONS

1. Recitals. The above recitals are true and correct as stated and are
incorporated herein by this reference.

2. Termination of Management Agreement. Each of IOI Management Corporation and
FROC II agree that effective as of the Effective Date, the Initial Management
Agreement, as amended and modified by the Recruitment and Modification Agreement
shall be terminated, null and void and of no further force and effect. In
consideration for IOI Management Corporation's agreement to terminate the
Initial Management Agreement, as amended and modified by the Recruitment and
Modification Agreement, FROC II agrees to pay to IOI Management Corporation
Seven Hundred Fifty Thousand Dollars ($750,000), payable in twenty-five (25)

<PAGE>   2

consecutive and equal monthly payments of Thirty Thousand Dollar ($30,000)
installments pursuant to a promissory note substantially in the form of Exhibit
A attached hereto. FROC II consents to the assignment of the Promissory Note
from IOI Management Corporation to IOI as provided for at the end of the
Promissory Note. FROC II understands and agrees that as of the Effective Date,
neither IOI Management Corporation nor IOI has any duty or obligation to provide
any services of any nature whatsoever to FROC II.

3. Miscellaneous.

        3.1 Attorneys' Fees. If any Party institutes litigation or arbitration
to interpret or enforce this Termination Agreement, or to recover damages for
breach of this Termination Agreement, the non-prevailing party shall bear the
attorneys' fees and litigation costs (including any attorneys' fees and costs
for appeals) incurred by the prevailing party.

        3.2 Further Acts. Each Party will do such further acts, including
executing and delivering additional agreements or instruments as the other may
reasonably require, to consummate, perform, evidence or confirm the covenants
and conditions contained in this Termination Agreement.

        3.3 Applicable Law and Venue. This Termination Agreement shall be
construed, interpreted and enforced according to the laws of the State of
Colorado without giving effect to the laws of the domicile of any nonresident
party, and venue for any action arising hereunder shall be in Colorado.

        3.4 Integration. The making, execution and delivery of this Termination
Agreement by the Parties has not been induced by any representations,
statements, warranties, or agreements other than those expressed in this
Termination Agreement. Except as otherwise set forth in this Termination
Agreement and the documents and agreements executed by the Parties hereto in
connection with this Termination Agreement, this Termination Agreement embodies
the entire understanding of the Parties with respect to the subject matter of
this Termination Agreement.

        3.5 Preparation of Agreement. Each Party represents and warrants that it
was represented by, or had the opportunity to be represented by, counsel in
connection with the negotiation of this Termination Agreement and each party
hereto and its or his, as applicable, counsel participated in the negotiation
and drafting of this Termination Agreement. Accordingly, this Termination
Agreement shall not be construed more favorably for any party hereto regardless
of who is responsible for its preparation.

        3.6 Parties in Interest. This Termination Agreement and all of the
terms, covenants and conditions herein shall bind and inure to the benefit of
the Parties hereto and their respective permitted successors and assigns. This
Termination Agreement may not be assigned by any Party hereto without the other
Party's written consent.

        3.7 Severability. If any provision of this Termination Agreement is
found to violate any statute, regulation, rule, order or decree of any
governmental authority, court, agency or exchange, such invalidity shall not be
deemed to affect any other provision hereof or the validity of the remainder of
this Termination Agreement, and such invalid provision shall be deemed

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deleted from this Termination Agreement to the minimum extent necessary to cure
such violation.

        3.8 Headings. The section and other headings contained in this
Termination Agreement are for reference purposes only and shall not affect in
any way the meaning or interpretation of this Termination Agreement.

        3.9 Waiver. A waiver of any breach or violation of any term, provision,
or covenant contained herein shall not be deemed a continuing waiver, or a
waiver of any future or past breach or violation, or a waiver of any other term,
provision or covenant of this Termination Agreement.

        3.10 Confidentiality. Each of the Parties hereto agrees to keep all
terms of this Termination Agreement and all terms of the documents and
agreements executed pursuant to the terms of this Termination Agreement
confidential, except with respect to communications the undersigned has with:
(i) its advisors, such as accountants or attorneys, to assist in interpreting or
enforcing the terms of this Termination Agreement and the documents and
agreements executed pursuant to the terms of this Termination Agreement; and
(ii) third parties as necessary to carry out the terms of this Termination
Agreement as long as the undersigned divulges only the minimal information
necessary to carry out the terms of this Termination Agreement.

        3.11 No Disparagement. FROC II agrees that it shall not make any
disparaging statements about IOI Management Corporation, any of IOI Management
Corporation 's affiliated corporations, or any directors, officers or employees
of IOI Management Corporation or the IOI Management Corporation's affiliated
corporations. FROC II agrees that IOI Management Corporation has a legitimate
business interest justifying such no disparagement condition and agreement. IOI
Management Corporation agrees it shall not make any disparaging statements about
FROC II. IOI Management Corporation agrees that FROC II has a legitimate
business interest justifying such no disparagement condition and agreement.

                      [SIGNATURES FOLLOW ON THE NEXT PAGE]

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<PAGE>   4

        In witness whereof, the Parties hereto have executed this Termination
Agreement as of the day and year above written.

                                             THE MEDICAL PRACTICE:

                                             FROC, P.C., a Colorado professional
                                             corporation

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

                                             IOI MANAGEMENT CORPORATION:

                                             IOI MANAGEMENT SERVICES OF
                                             COLORADO, INC., a Colorado business
                                             corporation

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

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<PAGE>   5

                                    EXHIBITS
<TABLE>
<CAPTION>

         EXHIBIT           DESCRIPTION
         ---------         -----------

         <S>               <C>
         Exhibit A         Promissory Note
</TABLE><PAGE>

                                                                   EXHIBIT 10(a)

                               AMENDED & RESTATED
                              MERCHANDISE AGREEMENT
                                  BY AND AMONG
                      INTERTAN, INC., INTERTAN CANADA LTD.,
          INTERTAN AUSTRALIA LTD., TECHNOTRON SALES CORP. PTY. LIMITED,
                                       AND
                                TANDY CORPORATION
                           AND A&A INTERNATIONAL, INC.

     THIS AMENDED AND RESTATED MERCHANDISE AGREEMENT ("Merchandise Agreement" or
"Agreement") is made and entered into by and among InterTAN, Inc. ("ITI"), a
corporation organized under the laws of the State of Delaware and having its
principal offices at Concord, Ontario, Canada; InterTAN Canada Ltd. ("ITC"), a
corporation organized under the laws of Alberta, Canada and having its principal
offices at Barrie, Ontario, Canada; InterTAN Australia Ltd. ("ITA"), a
corporation organized under the laws of New South Wales ("N.S.W."), Australia
and having its principal offices at Mount Druitt, N.S.W., Australia; Technotron
Sales Corp. Pty. Limited ("Technotron"), a corporation organized under the laws
of N.S.W., Australia, having its principal offices at Mount Druitt, N.S.W.,
Australia; (ITI, ITC, ITA and Technotron and their respective current or future
subsidiaries being collectively referred to herein as the "ITI-GROUP"); and
Tandy Corporation (Tandy Corporation and its subsidiaries being herein referred
to as "TANDY"), a corporation organized under the laws of the State of Delaware
and having its principal offices at Fort Worth, Texas, and A&A International,
Inc. ("A&A"), a corporation organized under

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<PAGE>

the laws of the State of Nevada and having its principal office at Fort Worth,
Texas and being a wholly-owned subsidiary of Tandy.

                              W I T N E S S E T H:

     WHEREAS, ITI is the parent corporation of all of the other members of the
ITI-GROUP, through direct or indirect stock ownership; and

     WHEREAS, the parties desire to enter into this Merchandise Agreement which
states the agreements of the parties with respect to the purchase of merchandise
by the ITI-GROUP from and through TANDY and A&A and the designation of A&A as
the exclusive agent and exporter in the Far East (as herein defined)of products
for the members of the ITI-GROUP; and

     WHEREAS, in order to enable the ITI-GROUP to act as a single business
enterprise to obtain the benefits of this Merchandise Agreement, each member of
the ITI-GROUP desires to guarantee to TANDY and A&A the obligations of each of
the other members of the ITI-GROUP for any and all of their respective payment
obligations under this Merchandise Agreement as well as the indemnity
obligations of each under the terms of that certain Distribution Agreement dated
as of September 30, 1986, as amended;

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements contained herein, the parties
hereto agree as follows:

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                                   ARTICLE I
                                  MERCHANDISE

     1.1  Purchase of Merchandise.  Any member of the ITI-GROUP may purchase
          -----------------------
through A&A merchandise bearing trademarks owned or licensed by TANDY and sold
in its United States company-owned Radio Shack stores carrying a full line of
merchandise, including new and replacement models, which merchandise is
manufactured in the Far East and included in the then-current Radio Shack U.S.
catalog or, if TANDY ceases publication of such Radio Shack U.S. catalogs,
merchandise regularly sold in TANDY's full line company-owned Radio Shack
stores, in either case at merchandise prices to be negotiated.  Any other
merchandise not manufactured in the Far East and not included in the then-
current Radio Shack U.S. catalog or not regularly sold in TANDY's full line
company-owned Radio Shack stores may be purchased by members of the ITI-GROUP
through A&A or TANDY only on mutual agreement between A&A or TANDY and any such
member.  Members of the ITI-GROUP shall have no right to purchase through TANDY
or A&A any item of merchandise offered for sale by TANDY in any of its retail
stores other than in TANDY's company-owned United States Radio Shack stores
offering a full line of Tandy/Radio Shack merchandise.

     1.2  Designation of A&A as Exclusive Export Agent.  Each member of the ITI-
          --------------------------------------------
GROUP hereby appoints A&A as its exclusive agent and exporter of products
obtained in the Far East, (including

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<PAGE>

Japan, Korea, Taiwan, China, Hong Kong, Singapore, Philippines, Asia, Malaysia,
Thailand, Indonesia and Macao) and imported into Canada and Australia for those
items of merchandise which A&A is obliged to source or agrees to source for the
ITI-GROUP pursuant to paragraph 1.1.

     1.3  Ordering of Merchandise by Members of the ITI-GROUP.
          ---------------------------------------------------

Definition:  "Same SKU Merchandise" as used hereafter means ITI-Group-ordered
-----------
merchandise which bears the same SKU designation as that ordered by A&A for sale
in Tandy's Radio Shack stores in the United States and is the same product
(allowing for differences in packaging and instructions) as that sold in the
Tandy-owned Radio Shack stores in the United States.  Once a product is
identified as "Same SKU Merchandise" it shall remain "Same SKU Merchandise" for
so long as it is sold in Tandy-owned RadioShack stores in the United States,
even if either party changes its SKU number.  Neither party may change an SKU
number of a product identified as Same SKU Merchandise without the consent of
the other party, which will not be unreasonably withheld.

          (a) When ordering merchandise from vendors in countries in the Far
     East other than Korea, each ITI-Group member shall send to A&A, at the
     applicable A&A offices in the Far East, confirmation booking telexes, e-
     mail or other electronic transmissions, as specified by A&A, ("Bookings")
     followed thereafter by purchase orders ("P.O.s"), and when ordering
     merchandise from vendors in Korea, each ITI-Group member shall

                                      -4-
<PAGE>

     send to the A&A office designated by A&A Bookings followed thereafter by
     P.O.s on A&A's form of P.O., which Bookings shall specify in each case (1)
     the vendor, (2) the quantity and price of the merchandise ordered, (3) the
     purchaser/consignee and (4) A&A as payor or accountee. Upon receipt of such
     P.O.s, A&A, subject to Section 1.10(a)(ii) hereof, shall provide notice of
     such Bookings to the vendors named therein on behalf of, and as agent for
     the applicable ITI-Group member.

          (b) In consideration of A&A performing its obligations under Section
     1.3(a) hereof, each ITI-Group member shall open and maintain a letter of
     credit (L/C) for the benefit of A&A in such amounts and on such terms as
     provided for herein, with banks acceptable to A&A. Each L/C shall (i) be
     irrevocable in form, (ii) valid until the shipment date (such shipment date
     being the later of the estimated shipment date and the scheduled shipment
     date of any Open Order) furthest away in time of any Open Order covered by
     such L/C, (iii) specify the applicable ITI-Group member as the applicant of
     the L/C, (iv) specify A&A International, Inc., 100 Throckmorton Street,
     Suite 1200, Fort Worth, Texas 76102, U.S.A. as the beneficiary, (v) provide
     for payment to A&A in United States dollars, and (vi) provide for payment
     to A&A upon the delivery of an original letter or telecopy thereof signed
     by the President, any Vice President or the Controller of A&A (or any other
     employee of A&A to whom such responsibility has been delegated in writing),
     which letter or

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<PAGE>

     telecopy shall provide (1) the L/C number, (2) the U.S. dollar amount being
     drawn and (3) a certification that the drawing is in respect of an F.O.B.
     shipment of consumer electronic goods made pursuant to a P.O. issued by a
     member of the ITI-Group.

          (c) Twice every calendar month A&A shall deliver, by telecopy, e-mail
     or telex, a notice to the ITI-Group concerning L/C coverage on Open Orders
     (the "L/C Notice") ("Open Orders" being Bookings placed or confirmed by A&A
     with vendors for merchandise not yet shipped) instructing the ITI-Group to
     cause the issuing bank of the L/C to adjust such L/C by the amount provided
     for in the L/C Notice. In addition, in the months of April, June and July,
     A&A shall deliver by telecopy, e-mail or telex an additional notice to the
     ITI-Group member to cause the issuing bank of each L/C to adjust such L/C
     as of the first day of May, July and August, as the case may be, by the
     additional amount, if any, reflecting the ten percent (10%) increase of L/C
     coverage of Open Orders in each of such months over the previous month as
     required pursuant to subsections 1. 3 (e) (ii) , (iii) and (iv) hereof.

          (d) The L/C Notice shall specify (i) the aggregate U.S. dollar amount
     of all Open Orders issued by and relating to the ITI-Group (or member, as
     the case may be) as of the date of such notice and as reflected in A&A's
     records; (ii) the percentage applicable to (i) above as set out in
     subsection (e) below; and (iii) the U.S. dollar amount by which the L/C
     intended to cover

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<PAGE>

     Open Orders shall be adjusted and the aggregate U.S. dollar amount of the
     L/C after giving effect to such adjustment; provided, however, that in the
                                                 --------  -------
     case of Open Orders for products intended for sale in Canada and Australia
     and placed after May 15, 1996, the L/C Notice shall specify instead of the
     above, the following: (i) the aggregate U.S. dollar amount of all Open
     Orders issued by and relating to ITC, or ITA, as appropriate, less the
     aggregate U.S. dollar amount of Same SKU Merchandise as of the date of such
     notice and as reflected in A&A's records; (ii) the percentage applicable to
     (i) above as set out in subsection (e) below; (iii) the aggregate U.S.
     dollar amount of Same SKU Merchandise on Open Orders issued by and relating
     to ITC, or ITA, as appropriate, as of the date of such notice and as
     reflected in A&A's records; (iv) the percentage applicable to (iii) above
     as set out in subsection (e) below; and (v) the U.S. dollar amount by which
     each L/C intended to cover Open Orders shall be adjusted and the aggregate
     U.S. dollar amount of each L/C after giving effect to such adjustment.

          (e) The percentage of the aggregate U.S. dollar amount of Open Orders
     specified in the L/C Notice to be covered by the L/C maintained by the
     ITI-Group (or member, as the case may be) with respect to such Open Orders
     shall be in the following amounts for the following periods:

               (i) December 1 through April 30: 60% of the aggregate U.S. dollar
          Amount of the Open Orders covered by the

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<PAGE>

          applicable L/C as specified in the L/C Notice;

               (ii) May 1 through June 30: 70% of the aggregate U.S. dollar
          amount of the Open Orders covered by the applicable L/C as specified
          in the L/C Notice;

               (iii) July 1 through July 31: 80% of the aggregate U.S. dollar
          amount of the Open Orders covered by the applicable L/C as specified
          in the L/C Notice;

               (iv) August 1 through August 31: 90% of the aggregate U.S. dollar
          amount of the Open Orders covered by the applicable L/C as specified
          in the L/C Notice;

               (v) September 1 through September 30: 80% of the aggregate U.S.
          dollar amount of the Open Orders covered by the applicable L/C as
          specified in the L/C Notice; and

               (vi) October 1 through November 30: 70% of the aggregate U.S.
          dollar amount of the Open Orders covered by the applicable L/C as
          specified in the L/C Notice.

               and provided further, that, in the case of Open Orders for
               --- -------- -------
          products intended for sale in Canada and Australia and placed after
          May 15, 1996, the percentage of the aggregate U.S. dollar amount of
          Open Orders specified in each L/C Notice to be covered by ITC, or ITA,
          as appropriate, with respect to such Open Orders shall be adjusted as
          follows for Same SKU Merchandise:

                    (x) Aggregate U.S. dollar amount of Open Orders less the
               aggregate U.S. dollar amount of Same SKU Merchandise, the
               resulting amount then multiplied by the applicable percentage

                                      -8-
<PAGE>

               stated in Section 1.3(e)(i), (ii), (iii), (iv), (v) and (vi)
               above AND
                     ---

                    (y) The aggregate U.S. dollar amount of Same SKU
               Merchandise, multiplied by 60%, the result of which shall be
               multiplied by the applicable percentage stated in Section
               1.3(e)(i), (ii), (iii), (iv), (v), and (vi) above.

               (f) Within ten (10) business days of receipt of an L/C Notice (a
          business day being a day in which commercial banks are open for
          business in the United States) the ITI-Group (or member as the case
          may be), shall have caused such issuing bank to have (i) adjusted such
          L/C by the amount specified in the L/C Notice and (ii) sent to TANDY
          and A&A, or A&A's advising bank, by telecopy or telex, confirmation of
          the adjustment to such L/C by the amount specified in the L/C Notice.

               (g) With respect to any payment to be made to A&A for merchandise
          shipped under an Open Order, at the time of shipment A&A shall be
          entitled to draw on the L/C covering such Open Order the U.S. dollar
          amount of such shipment in accordance with the terms and conditions of
          the L/C, provided, however, that in the event that any Cash Deficiency
          Payments (as defined in Section 1.10(a) hereof) have been deposited by
          the ITI-Group (or member, as the case may be) with A&A as provided in
          Section 1.10(a) hereof, the amount of lower payment shall be effected
          first, by set-off by A&A from the amount of such Cash Deficiency
          Payments and second, by a drawing by A&A under the applicable L/C for
          the

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<PAGE>

          balance of such payment not set-off by the Cash Deficiency Payments.

               (h) The ITI-Group covenants and agrees with TANDY and A&A that so
          long as this Agreement is in effect and L/Cs are required to be issued
          as provided for herein, the ITI-Group (or member, as the case may be)
          shall deliver monthly to TANDY and A&A a statement with respect to the
          ITI-Group setting forth as of the date of such statement (i) the
          maximum principal amount (in U.S. dollars and the denominated
          currencies) of all credit facilities provided by such banks in
          connection with which the ITI-Group (or member, as the case may be)
          may request an L/C to be issued (the "Credit Facilities"), (ii) the
          amounts (in U.S. dollars and the denominated currencies of the
          applicable Credit Facilities) of all borrowing notices or requests for
          credit delivered to any L/C issuing bank by the ITI-Group (or member,
          as the case may be) to the extent not reflected in (iii) below, (iii)
          the aggregate principal amount in U.S. dollars of outstanding
          indebtedness owed by the ITI-Group (or member, as the case may be),
          under the Credit Facilities, (iv) the scheduled due date for repayment
          of such outstanding amounts, (v) the aggregate amount of all cash
          balances of the ITI-Group (or member, as the case may be), and (vi)
          such other information relating to the Credit Facilities and the L/Cs
          as may be reasonably requested by TANDY or A&A.

                                      -10-
<PAGE>

               (i) As an alternative procedure to that stated in Section 1.3(a)
          through (h) above, the parties agree that the ITI-Group (or member, as
          the case may be) may post one or more standby letters of credit
          ("SL/C's") on terms acceptable to A&A, in an amount or amounts
          acceptable to A&A at banks acceptable to A&A. The ITI-Group shall
          notify A&A in writing of their intent to use this alternative
          procedure at least 60 days prior to implementation of this alternative
          procedure. Each SL/C shall (i) be irrevocable in form, (ii) valid for
          a full calendar year, (iii) specify the ITI-Group (or member, as the
          case may be) as the accountee (applicant), (iv) specify A&A
          International, Inc., 100 Throckmorton Street, Suite 1200, Fort Worth,
          Texas 76102, U.S.A. as the beneficiary, (v) provide for payment to A&A
          in United States dollars, and (vi) provide for payment to A&A upon the
          delivery of an original letter, or telecopy or facsimile transmission
          thereof signed by the President, any Vice President or the Controller
          of A&A (or any other employee of A&A to whom such responsibility has
          been delegated in writing), which letter shall provide (1) the SL/C
          number (if any), and (2) the amount, in U.S. dollars, that the
          ITI-Group (or member, as the case may be) has failed to pay and which
          is past due. The ITI-Group hereby agrees and the banks shall agree,
          that no affidavit or sworn certification shall be required from A&A in
          order for A&A to draw on the SL/C. The ITI-Group agrees to pay A&A all
          amounts due within five (5) days from the date of the payment request,
          and

                                      -11-
<PAGE>

          agrees that upon its failure to do so, A&A shall be entitled to
          immediately present the letter described above to the bank and draw
          upon the SL/C for payment. Further, if for any reason A&A is unable to
          draw upon the SL/C for payment, A&A may declare the ITI-Group in
          default of this Agreement, terminate same, and enforce its rights
          hereunder.

               (j) (i) The parties agree that the ITI-Group, as an alternative
          or conjunctive procedure to that stated in Section 1.3(b) through (i)
          above, may from time to time post one or more Surety Bonds
          (individually a "Surety Bond" and collectively, the "Surety Bonds") in
          form and substance acceptable to A&A in an amount or amounts
          acceptable to A&A and with a surety or sureties acceptable to A&A. The
          Surety Bond(s) may be posted as either partial or complete fulfillment
          of the security required hereunder, up to the penal amount of the
          Surety Bond(s). In the event the amounts due and owing under this
          Agreement, for which an L/C would have been otherwise required,
          exceeds the penal sum of the Surety Bond(s), the ITI-Group shall
          arrange for L/C's (as per Section 1.3(b) through (i) above) or Cash
          Deposits to secure payments as required under this Agreement. Each
          Surety Bond posted by the ITI-Group shall contain such terms and
          conditions as deemed mutually acceptable to A&A, the ITI-Group, and
          the issuer of the Surety Bond. Notwithstanding anything herein to the
          contrary, no Surety Bond shall be deemed acceptable to A&A until such
          time as A&A has, in writing, acknowledged and accepted such

                                      -12-
<PAGE>

          Surety Bond. If, for any reason, A&A is unable to draw upon any Surety
          Bond for payment, A&A may declare the ITI-Group in default of this
          Agreement and absent a cure by the ITI-Group, may terminate same and
          enforce its rights hereunder.

                    (ii) The ITI-Group agrees that, regarding A&A's right to
               receive payment under any Surety Bond, and, as a material
               inducement for A&A to enter into this Agreement and to accept a
               Surety Bond in lieu of a documentary letter of credit, the
               ITI-Group jointly and severally hereby waives any and all claims,
               defenses or offsets of any kind that it or any member has or may
               have against A&A relating to, or serving as a basis for,
               non-payment under any Surety Bond posted under this Agreement.
               Without limiting the foregoing, all of the following are hereby
               waived and shall not be asserted by the ITI-Group or any member
               thereof as a defense, a claim for reimbursement, or a basis for
               non- payment under any Surety Bond:

                         (1) Any claim or defense based upon the ITI-Group's, or
                    any member's, failure to pay A&A due to force majeure,
                    laches, impracticability, impossibility, or
                    unconscionability, material alteration of this Agreement,
                    extension of time to pay, failure to mitigate by A&A,
                    improper/inadequate notice of default, usury, or release or
                    loss of collateral.

                         (2) Any claim or defense based upon nonconformity of
                    finished product with the corresponding purchase

                                      -13-
<PAGE>

                    order or similar documents.

                         (3) Any claim or defense based upon warranties or
                    representations, whether express or implied, made by A&A to
                    the ITI-Group and/or any member thereof under the terms of
                    this Agreement.

                    (iii) In the event of a default in payment by any member of
               the ITI- Group necessitating a claim to be made under any Surety
               Bond, A&A agrees to use commercially reasonable efforts to assist
               the ITI-Group (or member, as the case may be) to cancel product
               orders placed by the ITI-Group (or member, as the case may be) in
               accordance with Section 1.10(c) of this Agreement, as previously
               amended.

                    (iv) Open Orders secured by any Surety Bond posted in the
               manner as described in (i) above shall be subject to (1) the same
               percentage formula as applicable to L/C postings and (2) the Same
               SKU Merchandise formula, each as specified in Section 1.3(e) of
               this Agreement. Prior to the posting of any Surety Bond under
               this Section 1.3(j), the ITI-Group shall notify A&A in writing as
               to the manner in which the full face amount of any Surety Bond
               shall be allocated between the members of the ITI-Group. The
               ITI-Group shall be entitled to reallocate, from time to time, the
               full face amount of any Surety Bond between the ITI-Group
               members; provided A&A shall be notified not less than ten (10)
               days prior to any such reallocation of the full face amount.

                                      -14-
<PAGE>

          1.4  Purchasing Agent's Commission.  A&A will perform the export agent
               -----------------------------
services described above for the following purchasing agent's commission
described below:

                                     Purchasing Agent's Commission
                                     -----------------------------
                                    Unit Price             Unit Price
                                    ----------             ----------
                                  Under $1.00 F.O.B.    Over $1.00 F.O.B.
                                  -------------------   ------------------

Merchandise                         6% gross margin       4% gross margin
(excluding parts)

Parts (spare &/or                  10% gross margin      10% gross margin
repair parts for
finished goods)

"unit" price = the price per item, or per group of items (if such items are sold
at a single price for a certain number of items), normally charged by a
manufacturer.

"gross profit" = sales price minus unit price

"gross margin" = gross profit of an item divided by the sales price

"sales price" = unit price plus gross profit

                X
Formula:  --------------                  where "X" = gross profit
          unit price + X     = a          and "a" = gross margin desired

          FORMULA EXAMPLE 1:
          UNIT PRICE = $.50
          GROSS MARGIN DESIRED = 6%

          ( X
           ---
           .5 + X) = 6%

          Steps:   1.  X = (.5 + X) x .06
                   2.  X = .03 + .06X
                   3.  X - .06X = .03
                   4.  .94X = .03
                   5.  X = .03
                           ---
                           .94

                   X (gross profit) = .0319

                                      -15-
<PAGE>

                   unit price + gross profit = sales price
                            .5 + .0319 = $.5319

                   gross margin = .0319 (gross profit)
                                  --------------------
                                  .5319 (sales price)     = 6%

     The ITI-GROUP will pay to A&A a per-unit purchasing agent's commission of
$.032 on each unit with a unit price of $.50.

     Add-on Calculations:  unit price x  6.38% = gross profit necessary
                                                 for 6% gross margin
                           unit price x  4.17% = gross profit necessary
                                                 for 4% gross margin
                           unit price x 11.11% = gross profit necessary
                                                 for 10% gross margin

     ADD-ON CALCULATION EXAMPLE:

     $.50 x 6.38% = .0319 gross profit necessary for 6% gross margin

     .0319 (gross profit)
     --------------------
     .5319 (sales price)    = 6% gross margin

     The ITI-GROUP will pay to A&A a per-unit purchasing agent's commission of
$.032 on each unit with a unit price of $.50

     1.5 Purchasing Agent/Exporter Fee. In addition to the purchasing agent's
         -----------------------------
commission, A&A shall receive a Purchasing Agent/Exporter Fee ("P/E Fee"). The
P/E Fee shall consist of a minimum annual base fee of U.S.$710,000 from the
ITI-GROUP, subject to increase as provided below. A portion of the minimum
annual base fee will be paid in quarterly installments of 12-1/2% of the minimum
annual base fee. Such quarterly installments shall be due and payable on the
last day of September, December, March and June of each year during the term
hereof. The balance of the

                                      -16-
<PAGE>

P/E Fee may be paid by a merchandise credit, as described below, to the extent
purchases through A&A are sufficient. The settlement of the balance will be made
on or before August 31 following the end of each Annual Period ("AP"). An AP is
from July 1 through June 30. "AP Sales" shall be the net sales reported in the
audited, consolidated Annual Report of the ITI-GROUP.

          The minimum annual base fee will be increased by an additional sum, if
any, based upon the following calculation (all figures in U.S. dollars):

          AP Sales over $400,000,000
          --------------------------
                 $400,000,000              x  $710,000

          EXAMPLE:  AP Sales = $412,000,000
          -------

          Purchasing Agent/Exporter Fee ("P/E Fee") =
          -----------------------------------------

          $710,000 + [(12,000,000
                       -----------
                       400,000,000) x $710,000] = $731,300

     Fees on all purchases made on or before January 24, 1999 shall be
calculated in accordance with the terms and conditions of the merchandise
agreement in effect as of January 24, 1999, adjusted for the portion of the AP
during which it was in effect, and shall take into account purchases made by
InterTAN U.K. Limited prior to its sale and disassociation from the ITI-Group on
January 25, 1999.

          1.6  Merchandise Credit.  A&A will give the ITI-GROUP a credit up to
               ------------------
but not exceeding the base fee, in the amount obtained by multiplying one-fourth
of one percent (0.25%) times all purchases of merchandise F.O.B.C. (free on
board plus purchasing agent's commission) made by the ITI-GROUP through A&A
during an Annual Period as reflected on invoices or reports issued

                                      -17-
<PAGE>

by A&A to the ITI-GROUP or any of its members. If the total of the quarterly
installments (as described above) plus the merchandise credit for any Annual
Period is less than the P/E Fee, then on or before August 31 following each such
Annual Period, the ITI-GROUP will pay the deficiency to A&A. If the total of the
quarterly installments (as described above) and the Merchandise Credit for any
Annual Period is in excess of the P/E Fee, then on or before August 31 following
each such Annual Period, A&A will refund the excess, but not in excess of the
total of all quarterly installments paid during such Annual Period.

          Formula: P - (I + C) = Amount due or refundable.
          Where:   P = P/E Fee
                   I = Quarterly Installments paid toward the minimum
                       base fee during AP
                   C = Merchandise Credit earned during AP
          (All figures in U.S. Dollars)

          Example 1:
          ----------

          Assuming purchases of merchandise F.O.B.C. by the ITI-GROUP through
          A&A of $130,000,000 during an Annual Period, the formula would have
          the results indicated below:

          $731,300-[($88,750x4)+($130,000,000x0.0025)]=$51,300

          The ITI-GROUP would pay A&A $51,300 on or before August 31.

          Example 2:
          ----------

          Assuming purchase of merchandise F.O.B.C. by the ITI-GROUP through A&A
          of $400,000,000 during an Annual Period, the formula would have the
          results indicated below:

          $731,300-[($88,750x4)+($400,000,000x0.0025)]=($623,700)

          A&A would refund to the ITI-GROUP on or before August 31 $500,000
          which is the maximum amount of the refund due under this Section 1.6.

          Credits on all purchases made on or before January 24, 1999

                                      -18-
<PAGE>

          shall be calculated in accordance with the terms and conditions of the
          merchandise agreement in effect as of January 24, 1999, adjusted for
          the portion of the AP during which it was in effect, and shall take
          into account purchases made by InterTAN U.K. Limited prior to its sale
          and disassociation from the ITI-Group on January 25, 1999.

     1.7 Adjustment for First Annual Period. During the first AP under this
         ----------------------------------
Merchandise Agreement, the calculations set out in Sections 1.5 and 1.6 above
will be adjusted as follows:

          (a) The adjusted AP will be the period from January 25, 1999 through
     June 30, 1999.

          (b) AP Sales will be the net sales reported in the audited,
     consolidated Annual Report of the ITI-GROUP, less the sales for each fiscal
                                                  ----
     quarter reported in the published ITI-GROUP Quarterly Reports for the
     periods ending September 30, 1998 and December 31, 1998, plus an adjustment
     to be determined by the parties for InterTAN U.K. Limited sales occurring
     between January 1, 1999 and January 24, 1999, inclusive.

          (c) The minimum annual base fee for purposes of calculating the P/E
     Fee for the adjusted AP will be U.S. $355,000. The minimum annual base fee
     during the first AP will be increased by an additional sum, if any, based
     upon the following calculation (all figures in U.S. dollars):

           AP Sales Over $200,000,000
           --------------------------
                $200,000,000            x 355,000

          Example: AP Sales = $225,000,000
          -------

                                (25,000,000
                                -------------
          P/E Fee = $355,000 + [ 200,000,000) x $355,000] = $399,375

                                      -19-
<PAGE>

          (d) An installment of $88,750 will be due for each of the two
     remaining quarters of the first AP payable on or before March 31, 1999; and
     June 30, 1999. The ITI-Group would pay $221,875 on or before August 31,
     1999.

          (e) The merchandise credit will be obtained by multiplying one-fourth
     of one percent (0.25%) times all purchases of merchandise F.O.B.C. made
     during the adjusted AP set out in Section 1.7(a) above, not to exceed the
     adjusted base fee set out in Section 1.7(c) above.

          EXAMPLE:
          -------

          Assuming purchases of merchandise F.O.B.C. by the ITI-GROUP through
A&A of $110,000,000 during the first AP as adjusted, the formula set out in
Section 1.6 using the first year adjustments would have the results indicated
below:

          $399,375-[($88,750 x 2)+($110,000,000 x 0.0025)]=($53,125)

     A&A would refund to the ITI-Group $53,125 on or before August 31, 1999.

     1.8 Payment Terms. Invoices for commissions, fees and expenses chargeable
         -------------
to the ITI-GROUP under this Agreement shall be due and payable within thirty
(30) days of the receipt of invoice or facsimile thereof by the applicable
ITI-GROUP member. In the alternative, A&A, at its option, may bill for
commissions, fees and expenses charged to the ITI-GROUP under this Agreement by
means of a month-end statement which statement shall be due and payable within
fifteen (15) days of the statement date. Anything

                                      -20-
<PAGE>

in this Agreement notwithstanding, P/E Fee installments are due as set out in
Section 1.5 above and, during the first AP, as set out in Section 1.7(d) and the
ITI-GROUP will pay those installments to A&A as set out in paragraphs 1.5 and
1.7 without requirement of an invoice or statement from A&A. If a Surety Bond or
SL/C is used in place of an L/C, the ITI-Group agrees to pay A&A by wire
transfer all amounts due for merchandise in the amount(s) specified in the
applicable Merchandise Payment Request ("MPR") within three (3) business days
from the date of receipt of the applicable MPR by the ITI-Group (or member, as
the case may be), the form of which will be provided by A&A. Notwithstanding the
foregoing, A&A may, in its sole discretion, extend the payment period and adjust
any amount(s) specified in a MPR in order to resolve any inaccuracies or
discrepancies, or to make similar adjustments to the MPR which may be required.

     1.9 Interest Charges. Past due amounts owed to A&A hereunder shall accrue
         ----------------
interest at the prime rate published in the Money Rates section of The Wall
Street Journal on the date the amounts become past due, plus one (1) percentage
point per annum.

     1.10  Cash  Deficiency Payments; Cancellation of Open Orders; Non-
           -----------------------------------------------------------
Acceptance of Bookings.
-----------------------

          (a) (i) If at any time the ITI-Group or any member fails or is unable
     to maintain or adjust any L/C for any reason whatsoever, in the form and in
     the amounts and during the periods provided for hereunder, the ITI-Group
     shall immediately pay into

                                      -21-
<PAGE>

     an account designated by A&A in immediately available funds the U.S. dollar
     amount equal to the difference between (x) the U.S. dollar amounts of Open
     Orders required to be covered at such time by L/Cs as provided for
     hereunder and (y) the U.S. dollar amounts of Open Orders actually covered
     by L/Cs and Cash Deficiency Payments at such time (such payment being a
     "Cash Deficiency Payment").

               (ii) Within five (5) business days of receipt of notice by A&A
          from the ITI-Group of a repayment obligation under this Section
          1.10(a)(ii), A&A shall repay in immediately available funds to the
          ITI-Group or its order the U.S. dollar amount equal to the positive
          difference between (x) the U.S. dollar amounts of Open Orders actually
          covered by L/Cs and Cash Deficiency Payments at any time and (y) the
          U.S. dollar amounts of open Orders required to be covered at such time
          by L/Cs and Cash Deficiency Payments as provided for hereunder. Such
          repayments by A&A shall not include interest and shall be made solely
          from and limited to the amounts of Cash Deficiency Payments, if any,
          deposited pursuant to Section 1.10(a)(i) hereof.

          (b) In the event that the ITI-Group, or any member, fails or is unable
     to maintain or adjust any L/C for any reason whatsoever, in the form and in
     the amounts and during the periods provided for hereunder and fails to make
     any Cash Deficiency Payments for any reason whatsoever, in the amounts
     provided for

                                      -22-
<PAGE>

     hereunder, then irrespective of whether A&A has declared or waived any
     event of default pursuant to Section 2.1 hereof, A&A (i) shall be entitled
     in its sole discretion to cancel any Open Order, provided that A&A shall
     use its best efforts, to the extent not contrary to its best interests as
     determined in its sole discretion, to cancel only Open Orders or amounts of
     Open Orders by amounts such that after giving effect thereto the balance of
     Open Orders will be covered by L/Cs and Cash Deficiency Payments in the
     amounts provided for hereunder; and (ii) shall not be required to initiate
     or accept any Booking from the ITI-Group or place or confirm on behalf of
     the ITI-Group any Booking with any vendor unless prior to acceptance or
     placement or confirmation of such Booking the ITI- Group pays into an
     account designated by A&A in immediately available funds the full U.S.
     dollar amount of such Booking. Nothing in this subsection (b) shall be
     construed as limiting in any way the right of A&A to declare an event of
     default pursuant to Section 2.1 hereof.

          (c) With respect to cancellation of Open Orders in circumstances other
     than in subsection (b) above, (i) in countries other than Korea, the
     ITI-Group shall have the sole right to cancel any Open Order and to
     negotiate cancellation fees directly with vendors and (ii) in Korea, both
     A&A and the ITI-Group shall have the right to cancel any Open Order. A&A,
     in its capacity as purchasing agent, will assist (provided such assistance
     does not involve the incurrence of any expense on the

                                      -23-
<PAGE>

     part of A&A) the ITI-Group in canceling any Open Order in an attempt to
     mitigate and minimize the ITI-Group's liability to any vendor.

          (d) A&A shall have the option to refuse to act as purchasing
     agent/exporter for the ITI-Group with any vendor with respect to which the
     ITI- Group has canceled, through A&A or otherwise, an Open Order. In such
     circumstances, the ITI-Group may then deal directly with such vendor,
     notwithstanding the terms of this Agreement.

     1.11  Indemnification.
           ----------------
               (a) Each member of the ITI-Group, jointly and severally, hereby
          agrees to indemnify and hold harmless Tandy and A&A and each of their
          respective affiliates, directors, officers, employees, agents and
          advisors (each, an "Indemnified Party") against (i) all claims,
          damages, losses, liabilities, costs, fees (including reasonable
          attorney fees), expenses and charges that may be incurred by, or
          asserted or awarded against an Indemnified Party, in each case arising
          out of or in connection with the cancellation or attempted
          cancellation of any Open Order pursuant to Section 1.10 hereof or
          otherwise, or any proceeding or litigation or threatened proceeding or
          litigation relating thereto; (ii) all costs, fees (including
          reasonable attorney fees), expenses and charges, including without
          limitation all bank fees and charges, that may be incurred by or
          awarded against an Indemnified Party in connection with any drawing
          under any

                                      -24-
<PAGE>

          L/C, or any proceeding or litigation or threatened proceeding or
          litigation relating thereto; and (iii) all costs, damages, losses,
          liabilities, fees (including reasonable attorney fees), expenses and
          charges that may be incurred by or awarded against an Indemnified
          Party, in each case arising out of or in connection with enforcing or
          defending the provisions of this Agreement and any subsequent
          amendments thereto, whether involving any ITI- Group member or any
          third party.

               (b) In connection with any claim for indemnification by an
          Indemnified Party under subsection (a)(i) hereof arising out of or in
          connection with any proceeding or litigation or threatened proceeding
          or litigation by a vendor against any Indemnified Party relating in
          any way to the cancellation or attempted cancellation of an Open
          Order, upon reasonable written notice to Tandy and such Indemnified
          Party, the ITI-Group may at its option contest, manage, and defend any
          such claim for which it has, or may have, responsibility for payment,
          provided that during the pendency of any such proceeding or
          --------
          litigation, the ITI- Group will reimburse such Indemnified Party
          currently on a monthly basis for all reasonable legal and other
          expenses incurred by it in defending, or assisting in the defense of,
          any such proceeding or litigation notwithstanding the absence of a
          judicial or quasi-judicial determination as to the merit of the claim
          or as to the propriety and enforceability of the ITI-Group's
          responsibility for such claim and expenses.

                                      -25-
<PAGE>

     1.12 Fee and Credit Renegotiation. Each of the Purchasing Agent's
          -----------------------------
Commission set out in Section 1.4 above, the Purchasing Agent/Exporter Fee set
out in Section 1.5 above, and the Merchandise Credit set out in Section 1.6
above may be renegotiated by the parties at any time upon the request of either
party.

     1.12A Term.  This Agreement will expire upon the termination of the license
           -----
agreement dated as of January 25, 1999 between Tandy and ITC and the license
agreement dated as of January 25, 1999 between Tandy and ITA.

     1.13    ITA Contact Employee Cost Sharing.
             ----------------------------------

               (a) The ITI-Group may employ one person to act as a focal point
          for operational and planning issues that develop between A&A and the
          ITI-Group, including providing A&A with local market analysis and
          coordinating product development and marketing between the ITI-Group
          and A&A (the "Contact Person"). Tandy agrees to share the reasonable
          and necessary costs of the ITI-Group to maintain one ITA employee in
          Australia to act as the Contact Person with A&A on the following
          basis. If ITA purchases through A&A as purchasing agent the amount of
          merchandise specified as a Purchase Level for ITA below for the
          corresponding fiscal year indicated below, then Tandy will reimburse
          ITA the percentage(s) stated below of the undisputed costs of
          maintaining

                                      -26-
<PAGE>

          the Contact Person for each fiscal year in which ITA achieves such
          Purchase Levels, up to a maximum of U.S. $150,000 in any one fiscal
          year for the Contact Person:

                         (in thousands -- U.S. Dollars)

                                  PURCHASE               TANDY'S COST
                   YEAR          LEVEL - ITA            SHARING % - ITA
                   ----          -----------            ---------------

                  FY `97            19,661                     50%
                  FY `98            23,593                     50%
                  FY `99            24,000*                   100%

          *If ITA purchases from A&A for any FY equal or exceed 24,000, Tandy
          will reimburse the ITI-Group 100% of the costs that are not in
          dispute, up to a maximum of U.S. $150,000 in any fiscal year.

By August 30 of each year, beginning in 1997, ITI-Group purchases will be
calculated for the most recently completed fiscal year ended June 30 to
determine Tandy's share of costs, if any.

               (b) Expatriate Costs. An "expatriate employee" is an employee who
                   ----------------
          has worked for A&A, who is hired by ITA and who moves to a country
          that is not his or her country of permanent residence to act as the
          Contact Person for ITA. Unless otherwise agreed by the parties in
          writing at the time of submission of the costs to Tandy for payment,
          the reasonable and necessary costs for an expatriate employee
          ("Expatriate Costs") are agreed to be the following:

                    1.   Salary and related costs of the customary benefit plans
                         for employees at the same or similar salary level;
                    2.   Automobile allowance;

                                      -27-
<PAGE>

                    3.   Cost of living allowance;
                    4.   Housing allowance;
                    5.   Income tax equalization payments and reasonable tax
                         return preparation costs; and
                    6.   Initial relocation costs of the original expatriate
                         employee only.

In no event shall Tandy pay or share in paying Expatriate Costs past the fiscal
year ending June 30, 2002.  In no event shall Tandy pay or share in paying
Expatriate Costs in excess of U.S. $150,000 in any fiscal year.

               (c) Permanent Resident Costs. The reasonable and necessary costs
                   ------------------------
          for a permanent resident employee ("Permanent Resident Costs") are
          agreed to be the salary, related employee benefit costs, and initial
          relocation costs only, unless otherwise agreed by the parties in
          writing. In no event shall Tandy pay or share in paying Permanent
          Resident Costs in excess of U.S. $150,000.

               (d) Billing and Audit Right. By September 30 of each year, the
                   -----------------------
          ITI-Group shall present detailed billing to Tandy for any costs in
          which Tandy is to share for the most recently completed fiscal year.
          The billing shall be in U.S. dollars based on the average exchange
          rate for the applicable fiscal year and by October 31 of each year
          Tandy shall pay any amount not in dispute. Payment shall be due in
          U.S. Dollars to InterTAN, Inc. in Concord, Ontario, Canada. The ITI-
          Group shall have a fiduciary duty to

                                      -28-
<PAGE>

          Tandy to control the costs of the Contact Person so that such costs
          are at a level consistent with employees of the ITI- Group at the same
          or similar employment levels. Within 30 days after the end of each
          quarter, ITA shall submit to Tandy quarterly reports of all
          reimbursable costs related to the Contact Person for the quarter and
          all purchases for the quarter from A&A. Tandy, at its sole cost, shall
          have the right to audit the records of the ITI-Group concerning the
          Contact Person, and comparable employees of the ITI-Group at the same
          or similar employment levels, upon reasonable notice and during
          regular business hours.

                                   ARTICLE II

                                    DEFAULT

  2.1  Events of Default.
       -----------------

               (a) The use of A&A as exclusive agent for the purchase of
          merchandise under Article I of this Merchandise Agreement by any and
          all members of the ITI- GROUP and all obligations of A&A related
          thereto may be terminated by TANDY or A&A upon written notice to ITI
          (it being understood and agreed by all parties to this Merchandise
          Agreement that neither TANDY nor A&A shall be required to give any
          such notice to any other member of the ITI-GROUP and that notice to
          ITI constitutes notice to all members of the ITI-GROUP), at its
          principle offices at Concord, Ontario, Canada in the event of the
          occurrence of any of the following events of default:

                                      -29-
<PAGE>

                    (i) Any member of the ITI-GROUP:

                         (A) fails to make any payment to TANDY or A&A, when
                    due, of any purchasing agent's commission or purchasing
                    agent/exporter fee, or any other amounts payable to TANDY or
                    A&A under this Merchandise Agreement; or

                         (B) fails to perform any other material obligation
                    under this Merchandise Agreement, including, without
                    limitation, the guarantee obligations set forth in Article
                    III hereof; or

                    (ii) Any member of the ITI-GROUP defaults on any agreement,
               including lease agreements, to which any member of the ITI-GROUP
               and TANDY are parties or are in privity with third parties; or

                    (iii) Any license agreement between TANDY, as licensor, and
               any member of the ITI-GROUP, as licensee, expires or is
               terminated for any reason, or any member of the ITI-GROUP fails
               to make payment of any sums of money due to TANDY under any
               license agreement; or

                                      -30-
<PAGE>

                    (iv) There is a "change of control" of ITI, ITC, or ITA as
               that phrase is used and defined in the respective license
               agreements between TANDY and any member of the ITI-GROUP, which
               amended and restated license agreements are being entered into
               contemporaneously with this Merchandise Agreement.

               (b) The ITI-GROUP, acting collectively by and through ITI, shall
          have the right to cure certain events of default as follows:

                    (i) In the event of the occurrence of an event of default
               under Section 2.1(a)(i) above, the ITI-GROUP shall have the right
               to cure such event of default within thirty (30) days from and
               after the date of written notice by TANDY or A&A of such event of
               default; provided, however, that the right to cure any such event
               of default shall be limited and shall not exceed a total of three
               times during each AP on defaults under 2.1(a)(i)B and payment
               defaults on monthly amounts due; or once each AP on payment
               defaults on quarterly amounts due;

                    (ii) In the event of the occurrence of an event of default
               under Section 2.1(a)(ii) above, the ITI-GROUP shall have the
               right to cure such event of default in accordance with the
               provisions, if any, relating to the cure of an event of default
               contained in any agreement included within the scope of the
               provisions of such Section; and

                    (iii) In the event of the occurrence of an event of default
               under the provisions of Section 2.1(a)(iii) above, the ITI-GROUP
               shall have the right to cure such event of default in

                                      -31-
<PAGE>

               accordance with the provisions of the respective license
               agreements referred to in such Section relating to the cure of an
               event of default; provided, however, that the ITI-GROUP shall not
               have the right to extend the term of an expired license agreement
               between TANDY, as licensor, and any member of the ITI-GROUP, as
               licensee, and upon termination or expiration of any such license
               agreement this Merchandise Agreement shall terminate and shall be
               of no further force or effect.

               (c) The ITI-Group shall not have the right to cure an event of
          default resulting from a "change of control" as described in Section
          2.1(a)(iv) above.

     2.2 Acceleration of Payment. Upon written notice to members of the ITI-
         -----------------------
GROUP, TANDY or A&A may also declare any and all purchasing agent's commissions
and purchasing agent/exporter fees, as well as any other amounts payable to
TANDY or A&A under this Merchandise Agreement, to be immediately due and payable
upon any of the events of default described in Sections (i) through (v) of
Section 2.1(a) above, subject to the right of the ITI-GROUP to cure certain
specified events of default as provided in Section 2.1(b) above, provided that
TANDY or A&A may not take any action contemplated by this Section 2.2 so long as
the failure of the ITI-GROUP to make payments under Section 2.1(a)(ii)(A) above
is the result of a reasonable dispute pursued in good faith and, with regard to
such dispute, TANDY has received from the ITI-GROUP within five (5) business
days prior to the date payment is due

                                      -32-
<PAGE>

under this Agreement a detailed written notice of the amounts, invoices, and the
basis for dispute, and provided further that all undisputed amounts are paid to
TANDY or A&A in accordance with the terms of this Agreement. The parties shall
make their best, good faith effort to resolve any such dispute within thirty
(30) days after the due date of the statement or invoice which includes the
disputed amounts. Within fifteen (15) days after the due date of the statement
or invoice which includes the disputed amounts, the chief financial officer of
the ITI-GROUP and the chief financial officer of A&A shall attempt to resolve
the matter. In the event the chief financial officers are unable to resolve the
dispute within the initial fifteen (15) day period, the chief executive officer
of the ITI-GROUP and the chief executive officer of Tandy shall discuss the
matter during the fifteen (15) days next following in an attempt to resolve the
dispute. In any event, if the dispute is not resolved within thirty (30) days
after the due date of the statement or invoice which includes the disputed
amount, then A&A shall have the right to terminate, without notice, the right of
the ITI-GROUP to purchase products through A&A and to immediately terminate,
without notice, all purchasing agent services performed by A&A under Sections
1.1 and 1.2 of this Agreement.

     2.3  Non-assignment and Termination.  The ITI-GROUP acknowledges that its
          ------------------------------
right to purchase products through TANDY or A&A as provided in Article I of this
Merchandise Agreement, any

                                      -33-
<PAGE>

economic benefits secured by TANDY or A&A from its vendors for members of the
ITI-GROUP under any licensing, software and hardware agreements, and the
agreement of A&A to perform purchasing agent services for members of the
ITI-GROUP as provided in Section 1.2 of this Merchandise Agreement, are
nonassignable, except with the express written consent of TANDY and A&A, which
consent may be withheld by TANDY or A&A in their sole discretion. Further, such
rights and obligations shall terminate automatically, without need for any
action, including notice from TANDY or A&A, in the event any member of the
ITI-GROUP (a) becomes insolvent,

          (b) initiates or otherwise becomes the subject of a foreign or
     domestic receivership, arrangement, composition, liquidation,
     reorganization, bankruptcy, or other insolvency proceeding, or

          (c) enters into an arrangement or composition for the benefit of
     creditors.

                                  ARTICLE III
                   GUARANTEE BY EACH MEMBER OF THE ITI-GROUP

     3.1 Guarantee. Each of InterTAN, Inc., InterTAN Canada Ltd., InterTAN
         ---------
Australia Ltd. and Technotron Sales Corp. Pty. Limited (hereinafter "Guarantors"
or each "Guarantor") hereby irrevocably and unconditionally, jointly and
severally, guarantees to TANDY and A&A the due and punctual payments, observance
and

                                      -34-
<PAGE>

performance of all of the obligations, terms, conditions and covenants of each
of the other members of the ITI-GROUP pursuant to this Merchandise Agreement,
including, but without limitation, the payment to TANDY and/or A&A when due of
the purchasing agent's commissions, purchasing agent/exporter fees and any other
amounts payable to TANDY or A&A under this Merchandise Agreement. This Guarantee
is a continuing guarantee and shall be binding upon each Guarantor, its
successors and assigns, and shall inure to the benefit of, and be enforceable
by, TANDY and A&A, their successors, transferees and assigns.

                                   ARTICLE IV
                         REPRESENTATIONS AND WARRANTIES

  Each member of the ITI-GROUP represents and warrants to TANDY and A&A as
follows:

     4.1 Due Authority; Enforceability; No Breach. The execution, delivery and
         ----------------------------------------
performance by it of this Agreement and the consummation of the transactions
contemplated hereby, have been duly authorized by its Board of Directors and by
all other necessary corporate action. This Agreement has been duly executed and
delivered by it and is a legal, valid and binding obligation of it, enforceable
against it. Neither the execution, delivery and performance by it of this
Agreement, nor the consummation by it of the transactions contemplated hereby,
nor the compliance by

                                      -35-
<PAGE>

it with, or fulfillment by it of the terms and provisions hereof will

               (i) conflict with or result in a breach or violation of any of
          the terms, conditions or provisions of its certificate of
          incorporation or bylaws, or applicable corporate organizational
          documents; (ii) with or without the giving of notice or lapse of time
          or both, conflict with or result in a breach or violation of, or
          default under, or permit the acceleration of any obligation under any
          provision of any agreement, indenture, mortgage, lien, lease or other
          instrument or restriction of any kind to which it is a party or by
          which it is otherwise bound or affected; or (iii) violate any
          judgment, order, writ, injunction, decree, law, statute, rule or
          regulation applicable to it.

                                   ARTICLE V
                                 MISCELLANEOUS

     5.1 Severability. In the event that any provision of this Merchandise
         ------------
Agreement shall be determined to be invalid or prohibited by law, such provision
shall be ineffective to the extent of such invalidity or prohibition without
invalidating the remainder of this Merchandise Agreement.

     5.2 Waiver. No failure or delay in exercising any right, power or remedy
         ------
under any provision of this Merchandise Agreement shall operate as a waiver of
or otherwise shall prejudice any of

                                      -36-
<PAGE>

the rights, powers or remedies of TANDY or A&A. No right, power or remedy herein
conferred upon TANDY or A&A is intended to be exclusive of any other right,
power or remedy, and each and every such right, power or remedy shall be
cumulative of every other right, power or remedy given hereunder or now or
hereafter existing at law or in equity or by statute or otherwise.

     5.3 Amendment. This Merchandise Agreement may be amended only by a document
         ---------
subscribed in writing by all parties hereto.

     5.4 Notices. All notices pursuant to this Merchandise Agreement shall be in
         -------
writing and shall be deemed given when personally delivered or when mailed by
certified or registered mail, return receipt requested, postage prepaid and
properly addressed, or when sent by legible facsimile transmission (proper
transmission confirmed) properly addressed as follows:

     If to any ITI-Group member:    InterTAN, Inc.
                                    The Royal Centre
                                    3300 Highway #7
                                    Suite 904
                                    Concord, Ontario L4K 4M3
                                    Attn:  General Counsel
                                    Fax:  (905)760-9722

     If to Tandy or A&A:            Tandy Corporation
                                    100 Throckmorton St., Ste. 1800
                                    Fort Worth, Texas  76102
                                    Attn:  Mr. Mark C. Hill
                                    Senior Vice President, Corporate
                                    Secretary and General Counsel
                                    Fax: (817)415-2647

     5.5 Counterparts. This Merchandise Agreement may be executed in
         ------------
counterparts, any or all of which shall constitute one and the same document.

                                      -37-
<PAGE>

     5.6 Further Assurances. TANDY and A&A each member of the ITI-GROUP agree
         ------------------
that they will at any time and from time to time, upon request of the other,
execute, acknowledge and deliver all such further instruments and documents and
to do, or cause to be done, all such further acts as may be required to carry
out the purpose and intent of this Merchandise Agreement.

     5.7 Merger of Prior Negotiations. All prior negotiations and agreements
         ----------------------------
between the parties hereto with respect to the subject matter of this
Merchandise Agreement are merged herein.

     5.8 Binding effect. This Merchandise Agreement shall be binding on the
         --------------
parties hereto and their respective permitted successors and permitted assigns.

     5.9  Headings.  The article and section headings in this Merchandise
          --------
Agreement are for convenience and reference only, and shall not be utilized in
any way to explain, modify, amplify or add to the interpretation, construction
or meaning of this Merchandise Agreement.

                                   ARTICLE VI
                  GOVERNING LAW AND SUBMISSION TO JURISDICTION

     6.1  TEXAS LAW APPLICABLE; SUBMISSION TO JURISDICTION.  THIS MERCHANDISE
          -------------------------------------------------------------------
AGREEMENT AND ALL AMENDMENTS THERETO, AND ANY AND ALL CLAIMS, DEMANDS OR ACTIONS
--------------------------------------------------------------------------------
OR IN ANY WAY RELATING THERETO OR INVOLVING ANY DISPUTE BETWEEN OR AMONG ANY OF
-------------------------------------------------------------------------------
THE PARTIES HERETO,
------------------

                                      -38-
<PAGE>

WHETHER ARISING IN CONTRACT OR TORT, AT LAW, IN EQUITY OR STATUTORILY, SHALL BE
-------------------------------------------------------------------------------
GOVERNED, CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
--------------------------------------------------------------------------------
TEXAS, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CHOICE OF LAWS OF SUCH STATE.
------------------------------------------------------------------------------
EACH PARTY HERETO IRREVOCABLY SUBMITS ITSELF TO THE EXCLUSIVE JURISDICTION OF
-----------------------------------------------------------------------------
THE COURTS OF THE FEDERAL COURTS OF THE UNITED STATES, NORTHERN DISTRICT OF
---------------------------------------------------------------------------
TEXAS, FORT WORTH DIVISION, AND TO THE COURTS OF THE STATE OF TEXAS LOCATED IN
------------------------------------------------------------------------------
TARRANT COUNTY, TEXAS, AS TO ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY
------------------------------------------------------------------------
RELATING TO THE MERCHANDISE AGREEMENT, AS IT MAY BE AMENDED FROM TIME TO TIME,
------------------------------------------------------------------------------
AND AGREES AND CONSENTS THAT SERVICE OF PROCESS MAY BE HAD UPON IT IN
---------------------------------------------------------------------
ACCORDANCE WITH THE PROCEDURES, RULES AND LAWS OF TEXAS IN ANY SUCH DISPUTES.
-----------------------------------------------------------------------------
EACH MEMBER OF THE ITI-GROUP HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL
--------------------------------------------------------------------------
PROCESS ON IT AND IRREVOCABLY APPOINTS CT CORPORATION SYSTEM, 350 N. ST.PAUL
----------------------------------------------------------------------------
STREET, DALLAS, TEXAS 75201, AS THE REGISTERED AGENT FOR THE PURPOSE OF
-----------------------------------------------------------------------
ACCEPTING SERVICE OF PROCESS WITHIN THE STATE OF TEXAS AND AGREES TO OBTAIN A
-----------------------------------------------------------------------------
LETTER FROM CT CORPORATION SYSTEM ACKNOWLEDGING THE SAME. EACH MEMBER OF THE
----------------------------------------------------------------------------
ITI-GROUP ALSO CONSENTS TO SERVICE OF PROCESS BY REGISTERED MAIL DIRECTED TO ITS
--------------------------------------------------------------------------------
PRINCIPAL OFFICE AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED TEN (10)
-----------------------------------------------------------------------------
DAYS AFTER THE SAME SHALL HAVE BEEN POSTED.
------------------------------------------

                                      -39-
<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this Merchandise Agreement
to be effective as of January 25, 1999.

                                    InterTAN, Inc.

                                    /s/Brian E. Levy
                                    By: Brian E. Levy
                                    Title: President & Chief Executive Officer

                                    InterTAN Canada Ltd.

                                    /s/Brian E. Levy
                                    By: Brian E. Levy
                                    Title: President

                                    InterTAN Australia Ltd.

                                    /s/Brian E. Levy
                                    By: Brian E. Levy
                                    Title: Director

                                    Technotron Sales Corp. Pty. Limited

                                    /s/Brian E. Levy
                                    By: Brian E. Levy
                                    Title: Director

                                    Tandy Corporation

                                    /s/Dwain H. Hughes
                                    By: Dwain H. Hughes
                                        Senior Vice President and
                                        Chief Financial Officer

                                    A&A International, Inc.

                                    /s/David Christopher
                                    By: David Christopher
                                        President

                                      -40-

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