TRAVIS BOATS & MOTORS INC
EXHIBIT 10.49 - LOAN AND SECURITY AGREEMENT
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>3
<FILENAME>0003.txt
<DESCRIPTION>EXHIBIT 10.49 - LOAN AND SECURITY AGREEMENT
<TEXT>


EXHIBIT 10.49

                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.

                           LOAN AND SECURITY AGREEMENT
                           ---------------------------

         THIS  LOAN  AND  SECURITY  AGREEMENT  (the  "Agreement")  is made as of
____________,  2000, by and between TRANSAMERICA  COMMERCIAL FINANCE CORPORATION
(the   "Lender")  and  the  Persons   listed  on  Schedule  I  attached   hereto
(individually, a "Borrower" and collectively, the "Borrowers").

         THE PARTIES HERETO agree as follows:


                            ARTICLE ONE. DEFINITIONS
                            ------------------------

         SECTION 1.1. DEFINED TERMS.  In addition to terms defined elsewhere  in
this  Agreement or any  Supplement  or Exhibit  hereto,  when used  herein,  the
following terms shall have the following meanings:

                  (A) "Account  Debtor"  shall mean  individually,  and "Account
Debtors" shall mean collectively, each Person who is or who may become obligated
to any Borrower under,  with respect to, or on account of an Account  Receivable
or other Collateral.

                  (B) "Accounts  Receivable" shall mean any and all accounts (as
such term is defined in the UCC) of any Borrower and each and every right of any
Borrower  to (i) the  payment of money or (ii) the  receipt or  disbursement  of
products,  goods, services or other valuable  consideration,  whether such right
now exists or hereafter  arises,  whether such right arises out of a sale, lease
or other  disposition  of Inventory,  or out of a rendering of services,  or any
other transaction or event,  whether such right is created,  generated or earned
by any Borrower or by some other Person who subsequently  transfers its interest
to any Borrower,  whether such right is or is not already earned by performance,
and howsoever  such right may be  evidenced,  together with all other rights and
interests (including all liens and security interests) which any Borrower may at
any time have by law or  agreement  against any Account  Debtor or other  Person
obligated  to make any such  payment or against  any  property  of such  Account
Debtor or other Person.

                  (C) "ACH Debit" shall mean an Automated  Clearing  House debit
by a Collecting Bank.

                  (D)  "Adjusted  Libor"  means  the rate per  annum  determined
pursuant to the following formula:

                           Adjusted Libor =          Libor
                                             ---------------------
                                           100%- Reserve Percentage.

                  (E)  "Affiliate"  shall mean  individually,  and  "Affiliates"
shall mean  collectively,  each Person which,  directly or  indirectly,  owns or
controls,  on an aggregate  basis,  at least a five percent (5%) interest in any
other  Person,  or which is  controlled  by or is under common  control with any
other Person.

                  (F) "Borrowing  Base" shall mean the sum of the following from
time to time,  less any reserves as Lender in its sole  discretion  elects:  (i)
100% of  Borrowers'  then  existing  Eligible  Inventory  A,  plus  (ii)  95% of
Borrowers' then existing Eligible Inventory B, plus (iii) 75% of Borrowers' then
existing  Eligible  Inventory  C;  plus  (iv) 95% of  Borrowers'  then  existing
Eligible Inventory D; plus (v) 90% of Borrowers' then Eligible Inventory E, plus
(vi) 70% of the NADA "low wholesale" value of Borrowers' then Eligible Inventory
F, plus (vii) 50% of Borrowers'  then  Eligible  Inventory G, plus (viii) 80% of
Borrower's Eligible Accounts  Receivable.,  plus (ix) the following amounts: (a)
for the period  commencing  with the Closing  Date and ending on March 30, 2000,


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


$347,895.00; and (b) for the period commencing with March 31, 2000 and ending on
June 29, 2000, $312,895.72; and (c) commencing on June 30, 2000 and at all times
thereafter, zero.

                  (G)  "Business  Day" shall mean any day (other than a Saturday
or Sunday) on which the Federal Reserve Bank of Chicago is open for business.

                  (H) "Business Plan" shall mean any projected balance sheet and
profit and loss  statement of Borrower for the annual  period ending on the last
day of any of  Borrower's  fiscal year,  prepared in accordance  with  generally
accepted accounting principles, together with appropriate supporting details and
a  statement  of  underlying  assumptions,  and  containing  at least an  income
statement and balance sheet  projections,  all prepared by Borrower's  president
and/or chief financial officer.

                  (I)  "Closing  Date" shall mean the date upon which all of the
terms and conditions of the Documents to make the first Revolving Loan have been
met or fulfilled to the satisfaction of Lender.

                  (J) "Code"  shall mean the Internal  Revenue Code of 1986,  as
amended from time to time.

                  (K)  "Collateral"  shall mean the following  property owned by
any  Borrower,  howsoever  arising,  wherever  located  and whether now owned or
existing or hereafter existing or acquired:

                  (i)    all Accounts Receivable;

                  (ii)   all Inventory;

                  (iii)  any  and  all  monies,  reserves,   deposits,   deposit
                         accounts, securities, cash, cash equivalents, balances,
                         credits,  and  interest  and  dividends  on  any of the
                         above,  of or in the  name  of  such  Borrower,  now or
                         hereafter  with the  Lender  and any and all other like
                         property of any kind and  description of or in the name
                         of such Borrower,  now or hereafter,  for any reason or
                         purpose whatsoever, in the possession or control of, or
                         in  transit  to,  the Lender or any agent or bailee for
                         the Lender;

                  (iv)   all chattel paper, contract rights and instruments;

                  (v)    all General Intangibles;


                  (vi)   all  books,  records  and  computer  records in any way
                         relating  to  the  property  described  in  clauses (i)
                         through (v) above; and

                  (vii)  any  and  all  substitutions,  renewals,  improvements,
                         replacements,  additions  and  proceeds  of (i) through
                         (vi)  above,  including,  without limitation,  proceeds
                         of  insurance  policies  for the property  described in
                         clauses (i) through (vi) above.


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.




                  (L)  "Collateral  Locations"  shall mean for each Borrower the
locations  for such  Borrower set forth on Exhibit  1.1(L)  attached  hereto and
those transient boat shows or events  typically  attended by Borrowers or any of
them in the ordinary course of business.

                  (M) "Collecting Bank" shall mean individually, and "Collecting
Banks" shall mean collectively,  such banks required and acceptable to Lender to
collect and remit funds in accordance with this Agreement.

                  (N)  "Collection Accounts" shall have the  meaning  set  forth
in Section 3.3(B) of this Agreement.

                  (O)   "DFS  "  shall   mean   Deutsche   Financial   Services,
Corporation.

                  (P) "DFS  Intercreditor  Agreement"  shall  mean that  certain
intercreditor  agreement.by  and  between  Lender  and  DFS in form  and  manner
satisfactory  to  Lender  dated  the  date of  this  Agreement  relating  to the
Liabilities  and the DFS Financing,  as may be amended and/or restated from time
to time.

                  (Q) "DFS  Financing"  shall mean that certain  financing  more
fully described on Exhibit 1.1(Q) attached hereto, as may be amended,  extended,
renewed, supplemented, replaced and /or restated from time to time.

                  (R)  "Default  Rate"  shall  mean,  as  of  the  date  of  any
determination,  a rate equal to the lesser of (i) 4% above the Pre-Default Rate;
or (ii) the Prime Rate, plus 6%; or (iii) the highest rate allowed by applicable
law.

                  (S) "Documents" shall mean this Agreement, the Guaranties, the
Guarantor  Security  Agreements,  any EDI  matter and any other  instruments  or
documents required or contemplated hereunder or thereunder, whether now existing
or at any time hereafter arising.

                  (T) "EDI" shall mean  electronic  data  interchange  including
facsimile transmission.

                  (U) "Eligible  Accounts  Receivable" shall mean those Accounts
Receivable of Borrower which the Lender deems in its reasonable  discretion,  to
be eligible. Without limitation of the foregoing,  unless otherwise agreed to in
writing by the Lender,  the following  shall not  constitute  Eligible  Accounts
Receivable:  (i)  Accounts  Receivable  which  remain  unpaid 45 days  after the
contract date of such Accounts Receivable; (ii) Accounts Receivable not financed
by a lender  acceptable,  in  Lender's  sole  discretion,  to Lender;  and (iii)
Accounts Receivable with respect to which the Account Debtor is a Borrower,  any
guarantor of the Liabilities, any Travis Entity or a director, officer, employee
or Affiliate of any Borrower or any guarantor of the Liabilities;  (iv) Accounts
Receivable with respect to which the Account Debtor is either (a) not a resident
of the United  States or (b)  located  outside  the United  States  unless  such
Account  Receivable  is  either  (I)  subject  to a letter of credit in form and
manner satisfactory to Lender or (II) insured in form and manner satisfactory to
Lender; (v) Accounts  Receivable in dispute or with respect to which the Account
Debtor has asserted or may assert a  counterclaim  or has or may have a right of
setoff unless such Account Debtor has waived in writing all rights to offset and
setoff;  (vi) Accounts Receivable with respect to which the Lender does not have
a first and valid fully perfected security interest;  (vii) Accounts  Receivable
with  respect to which the Account  Debtor is the subject of a  bankruptcy  or a
similar  insolvency  proceeding  or has made an  assignment  for the  benefit of
creditors  or whose  assets have been  conveyed  to a receiver  or trustee;  and
(viii) Accounts Receivable with respect to which the Account Debtor's obligation
to pay is either on a "COD" basis or is  conditional  upon the Account  Debtor's
approval or is otherwise  subject to any repurchase  obligation or return right,
as with sales made on a bill-and-hold, guaranteed sale, sale-and-return, sale on
approval or consignment basis.


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


                  (V)  "Eligible  Inventory"  shall mean such  Inventory  of any
Borrower located on the Collateral Locations for such Borrower that Lender deems
in  its  reasonable  discretion  to  be  eligible.  Without  limitation  of  the
foregoing,  unless  otherwise  agreed to by the Lender,  the following shall not
constitute  Eligible  Inventory  for any  Borrower:  (i)  Inventory  which is in
transit  from  its  manufacturer;  (ii)  Inventory  which  is  not in  good  and
merchantable  condition,  or not either currently usable or currently salable in
the  ordinary  course  of any  Borrower's  business;  (iii)  Inventory  which is
obsolete;  (iv) Inventory  which the Lender  determines,  in the exercise of its
reasonable  discretion and in accordance with the Lender's customary  reasonable
business  practices  and in good faith,  to be  unacceptable  due to age,  type,
category  and/or  quantity;  (v) Inventory with respect to which the Lender does
not have a first and valid fully  perfected  security  interest;  (vi) Inventory
which is stored  with on a bailment,  consignment,  warehouse  or similar  third
party  arrangement,  unless such bailee,  consignee,  warehouse Person, or other
third  party,  as  applicable,  delivers  to  Lender  an  agreement  in form and
substance  satisfactory  to  Lender;  (vii)  work-in-process  inventory;  (viii)
Inventory not located on the  Collateral  Locations of such  Borrower;  and (ix)
demonstration models.

                  (W)  "Eligible  Inventory  A" shall  mean such  then  Eligible
Inventory of any Borrower that is up to * days from the date of purchase by such
Borrower which the Lender deems in its reasonable discretion to be eligible that
is manufactured by a Vendor subject to a Vendor Repurchase  Agreement.  Eligible
Inventory A shall include  returned and  repossessed  Inventory  that is unused,
undamaged which any Borrower intends to resell to another Person.

                  (X)  "Eligible  Inventory  B" shall  mean such  then  Eligible
Inventory  of any  Borrower  that is between * days from the date of purchase by
such Borrower which the Lender deems in its reasonable discretion to be eligible
that is  manufactured  by a Vendor  subject  to a Vendor  Repurchase  Agreement.
Eligible  Inventory B shall include  returned and repossessed  Inventory that is
unused, undamaged which any Borrower intends to resell to another Person.

                  (Y)  "Eligible  Inventory  C" shall  mean such  then  Eligible
Inventory of any Borrower  that is more than * days from the date of purchase by
such Borrower which the Lender deems in its reasonable discretion to be eligible
that is  manufactured  by a Vendor  subject  to a Vendor  Repurchase  Agreement.
Eligible  Inventory C shall include  returned and repossessed  Inventory that is
unused, undamaged which any Borrower intends to resell to another Person.

                  (Z)  "Eligible  Inventory  D" shall  mean such  then  Eligible
Inventory  of any  Borrower  consisting  of  watercraft,  watercraft  motors and
watercraft  trailers  that are up to * days  from the date of  purchase  by such
Borrower  that are  purchased on open  account by any  Borrower  that the Lender
deems in its reasonable  discretion to be eligible.  Eligible  Inventory D shall
include returned and repossessed  Inventory that is unused,  undamaged which any
Borrower intends to resell to another Person.

                  (AA)  "Eligible  Inventory  E" shall  mean such then  Eligible
Inventory  of any  Borrower  consisting  of  watercraft,  watercraft  motors and
watercraft  trailers  that are  between * days from the date of purchase by such
Borrower  that are  purchased on open  account by any  Borrower  that the Lender
deems in its reasonable  discretion to be eligible.  Eligible  Inventory E shall
include returned and repossessed  Inventory that is unused,  undamaged which any
Borrower intends to resell to another Person.


____________________________
*Indicates Confidential  Treatment Requested.  The redacted  material  has  been
filed separately with the Commission.


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


                  (BB) "Eligible Inventory F" shall mean such Eligible Inventory
of any Borrower that is used  Inventory  consisting of watercraft in one or more
of the Borrowers'  possession in the aggregate less than * days from the date of
purchase by such Borrower which the Lender deems in its reasonable discretion to
be  eligible.  Eligible  Inventory  F shall  include  returned  and  repossessed
Inventory  that is  undamaged  which any  Borrower  intends to resell to another
Person.

                  (CC) "Eligible Inventory G" shall mean such Eligible Inventory
of any Borrower that is parts and accessories Inventory that the Lender deems in
its  reasonable  discretion to be eligible.  Eligible  Inventory G shall include
returned and repossessed  Inventory that is undamaged which any Borrower intends
to resell to another Person.

                  (DD)  "Event of  Default"  shall have the meaning set forth in
Section 7.1 of this Agreement.

                  (EE) "Fixed  Charge  Coverage  Ratio" for any 12 month  period
shall  mean a  fraction,  (i) the  numerator  of  which is the  Travis  Entities
earnings before interest,  taxes, depreciation and amortization in such 12 month
period and (ii) the  denominator  of which are the  payments  of  principal  and
interest  required  to be  made  by the  Travis  Entities  on  all  indebtedness
(including,  but not limited to, capitalized  leases) to all lenders (including,
but not limited to, Lender and all Persons  providing any Third Party Financing)
in such 12 month period.

                  (FF)  "Floor  Plan   Arrangement"   shall  mean  any  Eligible
Inventory  of any  Borrower  (i)  which  is the  subject  of a Free  Floor  Plan
Agreement with a Vendor that is in full force and effect; and (ii) for which the
invoice has been sent directly to Lender by the vendor of the Eligible Inventory
for payment by Lender directly to such vendor.

                  (GG) "Floor  Plan  Interest  Rebate" and "Floor Plan  Interest
Rebates" shall have the meanings set forth in Section 5.2 of this Agreement.

                  (HH) "Free Floor Plan Agreement"  shall mean  individually and
"Free Floor Plan Agreements" shall mean collectively, each agreement in form and
manner  reasonably  satisfactory  to Lender  by and  between  the  Vendor of any
Eligible  Inventory  and  Lender  pursuant  to  which  such  Vendor  has made an
unqualified  agreement to provide free floor planning of such Eligible Inventory
for a specified  period of time (a "Free Floor Plan  Period") to a Borrower  and
such Vendor shall be paying interest to Lender on such Eligible Inventory during
such Free Floor Plan Period.

                  (II) "Free Floor Plan Period" shall have the meaning set forth
in Section 1.1(II) of this Agreement.

                  (JJ) "General  Intangibles" shall mean all general intangibles
(as such term is defined in the UCC) owned by any Borrower,  including,  but not
limited  to  goodwill,   trademarks,  trade  names,  licenses,  patents,  patent
applications,  copyrights,  inventions,  franchises,  books and  records  of any
Borrower, designs, trade secrets, registrations, prepaid expenses, all rights to
and payments of refunds, overpayments,  rebates and return of monies, including,
but not limited to, sales tax refunds, tax refunds, tax refund claims and rights
to and  payments of refunds,  overpayments  or  overfundings  under any pension,
retirement  or  profit  sharing  plans to the  extent  allowable  by law and any
guarantee,  security  interests  or other  security  held by or  granted  to any
Borrower  to  secure  payment  by an  Account  Debtor  of any  of  the  Accounts
Receivable.

                  (KK)  "Guarantor"  shall mean  individually  and  "Guarantors"
shall mean  collectively,  each of the  Persons  listed on  Schedule II attached
hereto.


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.



                  (LL) "Guarantor Security  Agreement" and "Guarantors  Security
Agreements" shall have the meaning set forth in Section 3.9 of this Agreement.

                  (MM) "Guaranty" shall mean individually and "Guaranties" shall
mean   collectively   each  Guaranty  of  the  Guarantors  in  form  and  manner
satisfactory to Lender.

                  (NN) "Guarantor  Collateral" shall mean the following property
owned by any  Guarantor,  howsoever  arising,  wherever  located and whether now
owned or existing or hereafter existing or acquired:

                  (i)    all Accounts Receivable;

                  (ii)   all Inventory;

                  (iii)  any  and  all  monies,  reserves,   deposits,   deposit
                         accounts, securities, cash, cash equivalents, balances,
                         credits,  and  interest  and  dividends  on  any of the
                         above,  of or in the  name  of such  Guarantor,  now or
                         hereafter  with the  Lender  and any and all other like
                         property of any kind and  description of or in the name
                         of such Guarantor,  now or hereafter, for any reason or
                         purpose whatsoever, in the possession or control of, or
                         in  transit  to,  the Lender or any agent or bailee for
                         the Lender;

                  (iv)   all chattel paper, contract rights and instruments;

                  (v)    all General Intangibles;

                  (vi)   all books,  records  and  computer  records  in any way
                         relating  to  the  property  described  in  clauses (i)
                         through (v) above; and

                  (vii)  any  and  all  substitutions,  renewals,  improvements,
                         replacements,  additions  and  proceeds  of (i) through
                         (vi) above, including, without limitation,  proceeds of
                         insurance   policies  for  the  property  described  in
                         clauses (i) through (vi) above.

                  (OO)  "Interest  Rate " shall  mean (i) if Libor and  Adjusted
Libor is available and can be computed,  Adjusted Libor, plus the Libor Interest
Rate  Spread;  or (ii) if for any  reason  Libor is not  available  or cannot be
computed pursuant to the provisions of this Agreement,  the Prime Rate, plus the
Prime Interest Rate Spread.

                  (PP) "Interest  Coverage  Ratio" for any 12 month period shall
mean a fraction,  (i) the  numerator of which is the Travis  Entities'  earnings
before  interest and taxes in such 12 month period and (ii) the  denominator  of
which  are  the  payments  of  interest  made  by  the  Travis  Entities  on all
indebtedness  to all lenders  (including,  bit not  limited  to,  Lender and all
Persons providing any Third Party Financing) in such 12 month period.

                  (QQ) "Inventory" shall mean any and all goods, finished goods,
whole goods, materials, raw materials, work-in-progress, components or supplies,
wheresoever  located and whether now owned or hereinafter  acquired and owned by
any Borrower, including, without limitation, goods, finished goods, whole goods,


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.



materials,  raw materials,  work-in-process,  components or supplies in transit,
wheresoever  located,  whether now owned or hereafter  acquired by any Borrower,
which are held for demonstration,  illustration,  sale or lease, furnished under
any  contract  of  service  or  held  as  raw  materials,   work-in-process  for
manufacturing or processing or supplies for manufacturing or processing, and all
materials  used or consumed in the business of any  Borrower,  and shall include
such  other  property,  the sale or  disposition  of which has given  rise to an
Accounts  Receivable and which has been returned to or repossessed or stopped in
transit by or on behalf of any Borrower, but shall not include property owned by
third parties in the possession of any Borrower.

                  (RR)  "Liabilities"  shall mean all liabilities,  indebtedness
and  obligations  of the Borrowers,  and each of them, to the Lender,  howsoever
created,  arising or  evidenced,  whether  now  existing or  hereafter  arising,
whether direct or indirect (including those acquired by assignment), absolute or
contingent,  due or to become  due,  primary  or  secondary,  joint or  several,
whether existing or arising through discount, overdraft,  purchase, direct loan,
participation,  operation of law, written or oral agreement or agreement created
by  EDI  or  otherwise,   including,   but  not  limited  to,  all  liabilities,
indebtedness and obligations of any Borrower to the Lender, whether now existing
or hereafter  arising,  pursuant to any letter of credit,  any standby letter of
credit, any floor plan agreement, or any of the Documents and reasonable outside
attorneys' and  paralegals'  fees or charges  relating to the preparation of the
Documents and the enforcement of Lender's rights, remedies,  powers and security
interests under this Agreement,  including,  but not limited to, the drafting of
any documents in the preparation and enforcement of the Loans.

                  (SS) "Libor" shall mean, as of the date of any  determination,
the highest 30 day "Libor rate" (rounded  upward,  if necessary,  to the nearest
1/16 of 1%) published in the "Money Rates" column of the The Wall Street Journal
on the first  business  day of the month.  In the event The Wall Street  Journal
shall,  for any  reason,  fail or  cease to  publish  the 30 day  Libor  rate of
interest,  Lender shall choose a comparable  publication to use as the basis for
the Libor  rate of  interest.  Libor is the base  interest  rate  charged by the
Lender on commercial loans to a substantial number of the Lender's good business
customers,  but it is not  necessarily the Lender's lowest interest rate charged
to any customer.  Libor is subject to change by the Lender without notice of any
kind.

                  (TT)     *.

                  (UU) "Line of  Credit"  shall  have the  meaning  set forth in
Section 2.1 of this Agreement.

                  (VV) "Loan" shall mean  individually,  and "Loans"  shall mean
collectively, each of the Revolving Loans.

                  (WW) "Lock Box Account" and "Lock Box Accounts" shall have the
meanings set forth in Section 3.3(B) of this Agreement.

                  (XX)  "Material  Adverse  Change"  shall  mean a change in the
financial condition of any Borrower that would cause a reasonable person to have
concern  regarding such Borrower's  ability to continue  operating in its normal
course of business.

                  (YY) "Maximum Credit Amount" shall mean $50,000,000.00, United
States funds.

                  (ZZ)  "Mortgagee  Waivers" shall have the meaning set forth in
Section 3.7 of this Agreement.


____________________________
*Indicates Confidential  Treatment Requested.  The redacted  material  has  been
filed separately with the Commission.


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


                  (AAA)  "NADA  "  shall  mean   National   Automobile   Dealers
Association, or its equivalent chosen by Lender.

                  (BBB) "Net Loans" shall mean the Loans  outstanding  from time
to time minus the lesser of (i) $25,000,000.00;  or (ii) the aggregate amount of
Eligible  Inventory that is under a Free Floor Plan Period to Borrowers  under a
Floor Plan Arrangement at the time of calculation.

                  (CCC) "Net  Worth"  shall mean the total  amount of issued and
outstanding  capital stock,  plus paid in capital and retained earnings and less
treasury stock.

                  (DDD)  "Objected  Loan" and  "Objected  Loans"  shall have the
meanings set forth in Section 2.7(A) of this Agreement.

                  (EEE)  "Parent" shall mean Travis Boats & Motors, Inc. and its
successors and assigns.

                  (FFF) "Permitted Indebtedness" shall mean (i) the Liabilities;
and (ii) current  accounts  payable  arising in the ordinary course of business;
and (iii) the Subordinated  Debt; and (iv) the indebtedness more fully set forth
on Exhibit 1.1(FFF) attached hereto; and (v) indebtedness up to $1,000,000.00 at
any time.

                  (GGG)  "Permitted  Liens" shall mean (i) for current taxes not
delinquent or taxes being contested in good faith and by appropriate proceedings
and for which adequate reserves have been established; and (ii) liens arising in
the ordinary course of business for sums not due or sums being contested in good
faith and by appropriate  proceedings and for which adequate  reserves have been
established,  but not involving any deposits,  advances or borrowed money or the
deferred  purchase  price of property or  services;  and (iii) liens in favor of
Lender;  and (iv) liens specifically  permitted pursuant to this Agreement;  and
(v) those  liens more fully set forth on Exhibit  1.1(GGG)  attached  hereto and
(vi) liens in favor of the holders of the  Subordinated  Debt that are expressly
subordinated to the liens in favor of Lender.

                  (HHH) "Person" shall mean  individually,  and "Persons"  shall
mean  collectively,  any individual,  sole  proprietorship,  partnership,  joint
venture,   trust,   unincorporated   organization,   association,   corporation,
institution,  entity,  party or government  (whether national,  federal,  state,
county,  city,  municipal  or  otherwise  including,   without  limitation,  any
instrumentality, division, agency, body or department thereof).

                  (III)  "Pre-Default  Rate" shall  mean,  as of the date of any
determination,  the per annum rate equal to from time to time of the  greater of
(A) _%; or (B) the Interest Rate.

                  (JJJ)    *.

The next section is intentionally "(LLL)".

                  (LLL)  "Prime  Rate"  shall  mean,  as  of  the  date  of  any
determination,  the highest "prime rate" for financial  institutions  located in
the United  States of America  published in the "Money  Rates" column of the The
Wall Street  Journal on the first  business  day of the month.  In the event The
Wall Street  Journal shall,  for any reason,  fail or cease to publish the prime
rate of interest,  Lender shall  choose a comparable  publication  to use as the
basis for the  prime  rate of  interest.  The Prime  Rate is the  interest  rate
charged  by the  Lender  on  commercial  loans to a  substantial  number  of the

____________________________
*Indicates Confidential  Treatment Requested.  The redacted  material  has  been
filed separately with the Commission.


                                  Page 8 of 41

<PAGE>

                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


Lender's good business customers,  but it is not necessarily the Lender's lowest
interest  rate charged to any  customer.  The Prime Rate is subject to change by
the Lender without notice of any kind.

                  (MMM)  "Quarterly Floor Plan Average Daily Balance" shall mean
the average daily balance of loans outstanding  relating to Borrowers' Inventory
that is subject to a Floor Plan  Arrangement as calculated on a monthly basis on
the last day of each  month  based on the  number of days in the 3 month  period
ending on the date of calculation.

                  (NNN)    "Revolving  Loan" and  "Revolving  Loans"  shall have
the meanings set forth in Section 2.1 of this Agreement.

                  (OOO)  "Reserve  Percentage"  means  the  maximum  rate of all
reserve requirements  (including,  but not limited to, any marginal,  emergency,
supplemental or other special  reserves)  imposed by any governmental  Person on
Lender, pursuant to or relating to the Loans, including,  but not limited to, by
the Board of Governors of the Federal Reserve System (or any  successor),  under
Regulation D on Eurocurrency  liabilities (as such term is defined in Regulation
D) for the  applicable  month as of the first day of such month,  but subject to
any amendments to such reserve  requirement by such Board or its successor,  and
taking into account any  transitional  adjustments  thereto  becoming  effective
during  such  month.  For  purposes  of  this  definition,  any  portion  of the
Liabilities subject to a Libor based interest  calculation shall be deemed to be
Eurocurrency liabilities as defined in Regulation D without benefit of or credit
for  prorations,  exemptions or offsets under  Regulation D, provided  Lender is
subject to such regulation with respect to or relating to the Loans.

                  (PPP)  "Subordinated  Debt"  shall mean  indebtedness  due and
owing by any  Borrower to any Person  (whether  such  indebtedness  shall be now
existing or  hereinafter  arising)  which is permitted to exist pursuant to this
Agreement  and is  subordinated  to the  Liabilities,  all as  evidenced  by the
agreements, documents and instruments attached to the Subordination Agreements.

                  (QQQ) "Subordination  Agreement" shall mean individually,  and
"Subordination Agreements" shall mean collectively,  each agreement given to the
Lender from time to time by any Person with  respect to the  Subordinated  Debt,
all in the form and manner reasonably satisfactory to Lender.

                  (RRR)  "Tangible  Net Worth" shall mean as of any date the sum
of Borrowers' (i) net worth as reflected on its last  twelve-month  consolidated
fiscal financial statements, plus (ii) 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 plus (iii)  Subordinated  Debt,  and plus (iv)  unamortized
income,  less the sum of Borrowers' (a) intangible  assets,  including,  without
limitation, unamortized leasehold improvements,  goodwill, franchises, licenses,
patents, trade names,  copyrights,  service marks, brand names, covenants not to
compete  and any other  asset  which  would be  treated as an  intangible  under
generally  accepted  accounting  principles;  (b) prepaid expenses (however such
item shall not  include  prepaid  inventory);  (c)  franchise  fees;  (d) notes,
Accounts Receivable and other amounts owed to it by any guarantor,  Affiliate or
employee of any Borrower;  (e) losses since the end of such fiscal year; and (f)
interest  in the  cash  surrender  value  of  officer's  or  shareholder's  life
insurance policies.

                  (SSS)  "Termination Date" shall mean the date 3 years from the
date of this Agreement.

                  (TTT) "Third  Party  Financing"  shall mean such  indebtedness
consented  to in writing by Lender due from time to time by any  Borrower to any
an all Persons solely relating to the financing of such Borrower.

                  (UUU) "Third Party  Waiver" and "Third  Party  Waivers"  shall
have the meanings set forth in Section 3.6 of this Agreement.


                                  Page 9 of 41

<PAGE>

                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


                  (VVV) "Transaction  Statement" shall mean a statement which at
Lender's option or Borrower's  reasonable request may be issued by Lender to any
Borrower  from  time  to  time  which  identifies  the  Inventory  and  Accounts
Receivable  financed  and/or  the Loans  made and the terms  and  conditions  of
repayment therefor.

                  (WWW)  "Travis  Entity" shall mean  individually,  and "Travis
Entites" shall mean collectively,  any Borrower (other than a shareholder of any
Borrower  which is not also a Borrower),  any Guarantor and any Affiliate of any
Borrower  that may exist at any time and from time to time,  including,  but not
limited to, the Persons listed on Exhibit 1.1(WWW) attached hereto.

                  (XXX) "UCC" shall mean the Uniform  Commercial Code as enacted
and amended in the State of Illinois.

                  (YYY) "Vendor" shall mean  individually,  and "Vendors"  shall
mean collectively, each vendor of Inventory to any Borrower.

                  (ZZZ) "Vendor  Repurchase  Agreement" shall mean  individually
and "Vendor Repurchase  Agreements" shall mean  collectively,  each agreement in
form and manner reasonably satisfactory to Lender by and between a Vendor of any
Inventory  and  Lender  pursuant  to which such  Vendor has made an  unqualified
agreement to repurchase such Inventory from Lender.

         SECTION 1.2. OTHER TERMS. Accounting terms used in this Agreement which
are not specifically  defined shall have the meanings  customarily given them in
accordance with generally accepted accounting  principles in effect from time to
time.  Terms used in this Agreement which are defined in the UCC, shall,  unless
the context indicates otherwise or are otherwise defined in this Agreement, have
the meanings provided for by the UCC.


                               ARTICLE TWO. LOANS
                               ------------------

         SECTION 2.1. LOAN AMOUNT.  Subject to the terms and  conditions of this
Agreement,  on the date  upon  which  all of the  terms  and  conditions  of the
Documents have been met or fulfilled to the satisfaction of Lender (the "Closing
Date"),  the Lender  shall make loans in the  aggregate  to the  Borrowers  on a
revolving basis (such loans being herein called  individually a "Revolving Loan"
and collectively the "Revolving Loans") from time to time in such amounts as the
Borrowers  may from time to time  request  up to the  lesser of (A) the  Maximum
Credit Amount; or (B) the Borrowing Base from time to time (the lesser of (A) or
(B) shall be referred to as the "Line of Credit");  provided,  however, that (i)
Eligible  Inventory  shall be valued at the lower of cost or market  value using
the first in, first out method of inventory accounting;  and (ii) each borrowing
by any Borrower  hereunder  with respect to any  Revolving  Loan shall be in the
aggregate  principal  amount of at least (a)  $1,000.00  if made  directly  to a
vendor  of  Inventory  subject  to  a  Vendor  Repurchase  Agreement;   and  (b)
$500,000.00  if made directly to Borrowers;  and (iii)  repayments  from time to
time of the Line of Credit shall be available to be  reborrowed  pursuant to the
terms  and  conditions  of  this  Agreement;  and  (iv) if the  Revolving  Loans
outstanding  at any time or from time to time  exceeds the  advance  limitations
described  above,  Borrowers  shall  pay on  demand to the  Lender  such  amount
necessary to  eliminate  such excess;  and (v) the Lender's  commitment  to make
Revolving  Loans  shall  remain in  effect  for a period  to and  including  the
Termination  Date;  and (vi)  notwithstanding  anything  else  contained in this
Agreement,  (a) upon the occurrence and continuance of any Event of Default, and
in every such event, the Lender may, in its sole discretion,  immediately  cease
to make  Revolving  Loans;  and (b)  Borrowers  shall repay to the Lender on the
Termination  Date all  Revolving  Loans,  plus  interest  accrued to the date of
payment.


                                 Page 10 of 41

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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


         SECTION 2.2. USE OF LOAN PROCEEDS. The proceeds of any borrowing by the
Borrowers  pursuant to the Revolving Loans shall be used by the Borrowers solely
for  refinancing  existing  indebtedness  of the  Borrowers,  providing  working
capital for Borrowers and paying for operating  expenses and the fees, costs and
expenses of the Lender as provided for in this Agreement.

         SECTION  2.3.  REQUESTS  FOR  REVOLVING  LOANS.  Each  request  by  the
Borrowers for any  Revolving  Loan under the Line of Credit shall be (A) made in
writing, by EDI or by telephone and if by telephone, shall be promptly confirmed
in  writing;  and (B) and  shall  be  signed  by a duly  authorized  officer  of
Borrowers. Each Revolving Loan shall be sent by Federal Reserve wire transfer as
directed by Borrowers in writing or by EDI or through acceptance of an ACH Debit
by a  Collecting  Bank.  Lender  shall  not be  required  to make  more than one
Revolving  Loan to Borrowers  on any day. The date and amount of each  Revolving
Loan made by the Lender and of each repayment of principal  thereon  received by
the Lender  shall be recorded by the Lender in the records of the Lender and the
aggregate  unpaid  principal  amount shown on such records shall be  rebuttable,
presumptive  evidence of the principal owing and unpaid on the Revolving  Loans.
The failure to record any such amount on such records shall not, however,  limit
or otherwise  affect the  obligations  of the  Borrowers to repay the  principal
amount of the Revolving Loans together with all interest accruing thereon.

         SECTION 2.4.  INTEREST.
                       --------

                  (A) General.  The outstanding  principal  balance of the Loans
and the other obligations hereunder shall bear interest before the occurrence of
an Event of Default on the average daily  outstanding  balance  thereof,  at the
Pre-Default  Rate.  Notwithstanding  anything else contained in this  Agreement,
with respect to the Loans,  Borrowers shall only be obligated to pay interest on
the Net Loans outstanding from time to time. Interest will be calculated for the
actual  number of days  elapsed on the basis of a year  consisting  of 360 days.
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 an
Event of Default  shall be due and payable by  Borrowers  monthly in arrears for
each month  immediately upon receipt of a billing statement from Lender for such
month; provided,  however, that Borrowers agrees that Lender may provide for the
payment of any accrued  interest  hereunder  by making a  Revolving  Loan on the
first  day of any  month  for the  prior  month's  accrued  interest.  Upon  the
occurrence  of an  Event of  Default  and for so long as such  Event of  Default
continues,  such interest  shall accrue at the Default Rate and shall be payable
upon demand.

                  (B) Change of Law. Notwithstanding any other provisions of the
Documents,  if at any time Lender shall  determine in good faith that any change
in applicable  laws,  treaties or regulations or in the  interpretation  thereof
makes it unlawful  for Lender to create or continue to maintain  any Libor based
interest rate, it shall promptly so notify the undersigned and the obligation of
Lender to create, continue or maintain such Libor based interest rate under this
Agreement  shall  terminate until it is no longer unlawful for Lender to create,
continue or maintain such Libor based interest rate. Borrower, on demand, shall,
if the continued  maintenance of any Libor based  interest rate is unlawful,  at
its option,  either (i) thereupon prepay the outstanding principal amount of the
affected Libor based interest rate,  together with all interest  accrued thereon
and all other  amounts  payable  to  Lender  with  respect  thereto  under  this
Agreement;  or (ii) convert the principal amount of the Liabilities into a Prime
Rate  based  interest  rate  available  hereunder,  subject  to  the  terms  and
conditions of this Agreement.

                  (C).  Unavailability  of Deposits or  Inability  to  Ascertain
Libor.  Notwithstanding  any other provision of this Agreement,  if prior to the
commencement  of any month,  Lender shall  determine  that deposits of any Libor
based interest rate during such month are not readily available to Lender in the
relevant  market or by reason of  circumstances  affecting the relevant  market,
adequate and reasonable  means do not exist for  ascertaining  Libor or Adjusted
Libor,  then Lender shall  promptly  give notice  thereof to  Borrowers  and the
obligations  of Lender to create,  continue  or effect by  conversion  any Libor
based interest rate for such month shall terminate and the interest rate in this
Agreement  shall be converted into a Prime Rate based  interest rate;  provided,
however,  that when  deposits  in such  amount and for any month  shall again be


                                 Page 11 of 41

<PAGE>

                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


readily available in the relevant market and adequate and reasonable means exist
for  ascertaining  Libor or Adjusted Libor,  the undersigned then shall have the
option  of  reconverting  the  method  of  computing  the  interest  rate on the
Liabilities into a Libor based interest rate.

                  (D) Taxes and Increased Costs. With respect to any Libor based
interest  rate,  if Lender shall  determine in good faith that any change in any
applicable law, treaty, regulation or guideline (including,  without limitation,
Regulation D of the Board of Governors of the Federal Reserve System) or any new
law,  treaty,  regulation  or  guideline,  or any  interpretation  of any of the
foregoing by any governmental  authority charged with the administration thereof
or any  central  bank or  other  fiscal,  monetary  or  other  authority  having
jurisdiction  over Lender or its lending branch or any Libor based interest rate
contemplated by this Agreement (whether or not having the force of law) shall:

                  (i) impose,  increase, or deem applicable any reserve, special
deposit or similar requirement against assets held by, or deposits in or for the
account of, or loans by, or any other  acquisition of funds or disbursements by,
Lender  which is not in any instance  already  accounted  for in  computing  the
interest rate applicable to such Libor based interest rate;

                  (ii) subject  Lender,  any Libor based  interest  rate or this
Agreement to any tax (including,  without limitation, any United Stated interest
equalization  tax or similar tax however named  applicable to the acquisition or
holding of debt obligations and any interest or penalties with respect thereto),
duty,  charge,  stamp tax,  fee,  deduction  or  withholding  in respect of this
Agreement, any Libor based interest rate or this Agreement, except such taxes as
may be measured  by the  overall  net income or gross  receipts of Lender or its
lending branches and imposed by the jurisdiction,  or any political  subdivision
or taxing authority thereof, in which Lender's principal executive office or its
lending branch is located;

                  (iii)  change the basis of taxation  of payments of  principal
and  interest  due  from the  undersigned  to  Lender  hereunder  or under  this
Agreement to the extent it evidences  any Libor based  interest rate (other than
by a change in taxation of the overall net income or gross  receipts of Lender);
or

                  (iv)  impose  on  Lender  any  penalty  with  respect  to  the
foregoing or any other condition regarding this Agreement, its disbursement, any
Libor based interest rate or this Agreement to the extent it evidences any Libor
based interest rate;

and  Lender  shall  determine  that the  result  of any of the  foregoing  is to
increase the cost (whether by incurring a cost or adding to a cost) to Lender of
creating or maintaining any Libor based interest rate hereunder or to reduce the
amount of  principal  or interest  received  or  receivable  by Lender  (without
benefit of, or credit for, any prorations,  exemption,  credits or other offsets
available   under  any  such  laws,   treaties,   regulations,   guidelines   or
interpretations  thereof), then the interest rate on the this Agreement shall be
converted  to a  Prime  Rate  based  interest  rate.  If  Lender  makes  such  a
determination,  Lender shall provide to the  undersigned  a certificate  setting
forth the computation of the increased cost or reduced amount as a result of any
event  mentioned  herein in  reasonable  detail  and such  certificate  shall be
conclusive if reasonably determined.

         SECTION 2.5.      PAYMENTS AND COLLECTIONS.
                           ------------------------

                  (A) General.  All payments  hereunder  shall be made,  without
setoff or counterclaim, to Lender prior to 3:00 p.m. , Chicago time, on the date
due at its office in immediately available funds at Chicago, Illinois or at such
other place as may be reasonably designated by Lender to Borrowers 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  succeeding
Business Day, and such extension of time shall be included in the computation of
interest, fees and charges, without penalty other than such additional interest,
fees and charges.  Notwithstanding anything to the contrary herein, all items of
payment for purposes of (i)  determining  the  occurrence of an Event of Default
shall be deemed received upon actual receipt by Lender at its bank, The Northern
Trust Bank,  Chicago,  Illinois or such bank as Lender may use as its depository


                                 Page 12 of 41

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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


bank from time to time,  unless  subsequently  dishonored  for any reason;  (ii)
calculating  the Borrowing Base shall be applied by Lender against the principal
of and/or interest on any Loans on the Business Day deemed received  pursuant to
this Section by Lender at its bank, The Northern Trust Bank,  Chicago,  Illinois
or such bank as Lender  may use as its  depository  bank from time to time;  and
(iii)  calculating  interest  shall be  deemed to have  been  applied  by Lender
against  the  principal  of  and/or  interest  on any Loan on the  Business  Day
received by Lender,  whether such payment is by check,  wire, ACH debit or other
means.  Lender may at any time in its reasonable  business discretion change the
time for payment of future Loans or change the terms of such financing by giving
Borrowers a thirty (30) day notice  specifying such change,  provided,  however,
that if Lender  desires  to reduce any  advance  rate on any  specific  Eligible
Inventory,  then if Borrowers request in writing to have Lender release its lien
on such specific  Eligible  Inventory,  then Lender shall reasonably review such
request and if Lender releases such lien, on such specific  Eligible  Inventory,
such release shall be without penalty to Borrowers pursuant to Section 2.6(A) of
this Agreement.

                  (B)  Revolving  Loans.  Borrowers  shall  repay to the  Lender
on the Termination Date all Revolving  Loans,  plus interest accrued to the date
of payment.

                  (C)  Special  Draws of the Line of  Credit.  Lender  is hereby
authorized  to make a Revolving  Loan with the  proceeds  disbursed  directly to
Lender to make any required payments of principal,  interest,  fees and/or costs
currently due and owing by Borrowers and not yet paid pursuant to the Documents.

         SECTION 2.6.      SPECIAL LINE OF CREDIT FEES.
                           ---------------------------

                  (A) Early Termination.  If the Borrower voluntarily terminates
the Line of Credit, contemporaneously with such termination,  Borrower shall pay
Lender an amount equal to 1/2% of the Maximum Credit Amount if such  termination
occurs on or before the day prior to the Termination Date.

         SECTION 2.7.      STATEMENTS.
                           ----------

                  (A) Acceptance.  Borrowers agree to pay the Loans and interest
on the  Loans  in  accordance  with  this  Agreement  and the  other  Documents.
Borrowers  agrees  that the terms  and  conditions  stated  in each  Transaction
Statement shall be accepted as to the Loans  identified  therein if not objected
to in writing by Borrowers  within 60 days after the date of such statement.  If
Borrowers  object to any specific Loans  (individually,  an "Objected  Loan" and
collectively,  the "Objected  Loans"),  then where applicable the Objected Loans
shall be  subject  to the terms and  conditions  of the most  recently  accepted
Transaction  Statement  related to Loans covering the same model of Inventory or
Accounts  Receivable  financed,  as applicable.  If there is no such  previously
accepted Transaction  Statement relating to the Objected Loans,  Borrowers agree
that,  in  addition  to any other  right or  remedy  Lender  may have  under the
Documents,  the Objected  Loans  related to the objected  Transaction  Statement
shall,  notwithstanding any other provision of the Documents, be due and payable
within 90 days after the date of such Objected  Loans and interest  shall accrue
at the interest rate in effect pursuant to the Documents.

                  (B)  Adjustment.  Subject to  Sections  2.6(A) and (C) of this
Agreement,  any statement with respect to any  Liabilities  sent to Borrowers by
Lender, including without limitation any Transaction Statement, shall be subject
to subsequent  adjustment by Lender but shall be presumed  accurate  evidence of
Liabilities and information  covered thereby,  unless Lender shall have received
written notice from Borrowers specifying any error within 60 days after the date
of  such  statement.   Notwithstanding  such  notice  by  Borrowers  to  Lender,
Borrowers'  obligation to make payments to Lender with respect to such statement
shall not be waived or extended  unless and until Lender  consents in writing to
such waiver or extension.

                  (C) Savings Provisions.  All agreements between Lender and any
Borrower,  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


                                 Page 13 of 41


<PAGE>


                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


interest contracted for, charged,  received, paid or agreed to be paid to Lender
exceed the  maximum  amount  permissible  under  applicable  law.  If,  from any
circumstance whatsoever, interest would otherwise be payable to Lender 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,  Lender
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
Lender and not to the payment of interest,  or if such excess  interest  exceeds
the unpaid balance of the principal amount of Liabilities to Lender, such excess
shall be  refunded  to  Borrowers.  All  interest  paid or  agreed to be paid to
Lender, to the extent permitted by applicable law, shall be amortized, prorated,
allocated and spread throughout the full term of this Agreement until payment in
full of all principal  obligations  owing by Borrowers so that interest for such
full term shall not exceed the maximum amount permitted by applicable law.

         SECTION 2.8. TERMS AND TERMINATION.  The term of this Agreement, unless
sooner terminated as provided in this Agreement,  shall be until the Termination
Date; provided, however, that Lender may terminate this Agreement immediately by
written  notice to Borrowers in whole or only with respect to certain  Inventory
if Borrowers  shall lose or relinquish  any right to sell or deal in any product
line of Inventory that would materially  affect Borrowers  ability to operate in
the  ordinary  course  of  business,  or if  Borrowers  fails  to pay any of the
Objected Loans due to an objection to the terms of any Transaction Statement and
Lender  determines that the  Transaction  Statement does not contain a bona fide
error.  Upon  termination of this  Agreement,  all Liabilities to Lender (or, if
this Agreement is terminated only with respect to certain Inventory, Liabilities
to Lender relative to such Inventory)  shall become  immediately due and payable
without notice or demand. Upon any termination, Borrowers shall remain liable to
Lender for all Liabilities to Lender,  including  without  limitation  interest,
fees,  charges and  expenses  arising  prior to or after the  effective  date of
termination,  and all of Lender's rights and remedies and its security  interest
shall continue until all  Liabilities to Lender are paid and all  obligations of
Borrowers  are  performed  in full.  No  provision  of this  Agreement  shall be
construed to obligate Lender to make any Loans,  following the occurrence of any
Event of Default.

                            ARTICLE THREE. COLLATERAL
                            -------------------------

         SECTION 3.1. SECURITY INTERESTS.  To secure payment of the Liabilities,
each Borrower hereby irrevocably pledges, assigns,  transfers,  conveys and sets
over to the  Lender  and  hereby  grants  to the  Lender a first  and  paramount
security  interest  in and to the  Collateral  owned by it,  howsoever  arising,
wherever  located and whether  now owned or  existing or  hereafter  existing or
acquired.  The parties  acknowledge  and agree that Lender shall have a purchase
money security  interest in and to all Inventory of the Borrowers as provided by
law.

         SECTION 3.2.  PERFECTION AND FILING  REQUIREMENTS.  Each Borrower shall
perform  any and all acts  reasonably  requested  by the  Lender  to  establish,
maintain  and  continue  the  Lender's  security  interests  and  liens  in  the
Collateral,  including but not limited to,  executing  financing  statements and
such other  instruments  and documents  when and as reasonably  requested by the
Lender.

         SECTION  3.3.  COLLECTION  OF  ACCOUNTS  RECEIVABLE.  Unless  otherwise
provided  herein,  Borrowers  may  collect  at their own  expense  the  Accounts
Receivable  in  the  ordinary  course  of  business;   provided,  however,  that
Borrowers'  authorization  to collect the Accounts  Receivable is subject to the
following:

                  (A) The Lender,  may, in its sole and  reasonable  discretion,
notify any or all of the Account Debtors at any time (i) whether before or after
the occurrence of an Event of Default,  that the Accounts  Receivable  have been
assigned to the Lender;  and/or (ii)  following  the  occurrence  of an Event of
Default,  that all further  payments on the Accounts  Receivable  should be paid
solely to the Lender.  When  requested by the Lender after the  occurrence of an


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


Event of Default, Borrowers at their expense will notify or cause to be notified
any or all  Account  Debtors to pay  directly to the Lender any sum or sums then
due or to become due on the  Accounts  Receivable  or any part  thereof  and all
bills and statements  thereafter sent by Borrowers to such Account Debtors shall
state that the same have been  assigned to the Lender and are payable  solely to
the Lender.

                  (B) The  Lender,  at any time  whether  before  or  after  the
occurrence of an Event of Default,  may in its sole and  reasonable  discretion,
require  any  Borrower  to   establish   and   maintain   "lock  box"   accounts
(individually,  a "Lock Box Account" and collectively, the "Lock Box Accounts"),
and,  Borrowers,  at their  expense,  will  notify or cause to be  notified  all
Account Debtors to pay directly any sum or sums then due or to become due on the
Accounts  Receivable to such Lock Box  Accounts.  So long as no Event of Default
has  occurred,  the Lock  Box  Accounts  shall  be  subject  to the  control  of
Borrowers.  Following  the  occurrence  of any  Event of  Default,  the Lock Box
Accounts shall be subject to the control of Lender. In the event Lender requires
Lock Box Accounts to be established  pursuant to this Section,  Borrowers  shall
establish the Lock Box Accounts with such Collecting Banks reasonably acceptable
to Lender to which all Account  Debtors  shall  directly  remit all  payments on
Accounts  Receivable  and in which each Borrower 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
reasonably  satisfactory to Lender, that: all payments made to Lock Box Accounts
are the sole and  exclusive  property  of  Lender;  they have no right to setoff
against  Lock Box  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 Lender,
funds deposited into Lock Box Accounts (collectively, the "Collection Accounts")
to Lender on a daily  basis in such bank and account as Lender  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
Lender, whether on the Accounts Receivable or as proceeds of other Collateral or
otherwise,  shall  following the occurrence of any Event of Default be under the
sole  dominion  and  control  of  Lender  and  will be  applied  on  account  of
Liabilities  as provided  herein.  Following the  establishment  of any Lock Box
Accounts pursuant to this Section, Borrowers and their Affiliates shall receive,
as trustee for Lender, any monies,  checks,  notes, drafts or any other payments
relating to and/or  proceeds of Accounts  Receivable or other  Collateral  which
come  into  the  possession  or  under  the  control  of any  Borrower  or their
Affiliates and immediately  remit, or cause to be remitted,  the same in kind to
Lender at Lender's  office set forth above.  Borrowers  shall pay Lender any and
all reasonable  fees,  costs and expense which Lender incurs in connection  with
Collection  Accounts and with  collecting any check or item of payment  received
and/or  delivered to any Collecting  Bank or Lender on account of Liabilities to
Lender.  Borrowers  shall  reimburse  Lender  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 Lender's  indemnification  of such Collecting Banks relating to a
Collection Account.

                  (C)  In  the  event  an  Account   Debtor  is  notified  under
Subsections  3.3(A) or 3.3(B) of this Agreement or one or more Events of Default
have  occurred  under the terms of this  Agreement,  the  Lender  shall have and
succeed  to all  rights,  remedies,  securities  and liens of each  Borrower  in
respect to such Accounts  Receivable  or other  Collateral,  including,  but not
limited to, the right of stoppage in transit of any  merchandise,  guarantees or
other contracts or suretyship with respect to any such merchandise,  warranties,
unpaid seller's liens,  statutory liens,  artisans' liens, or the right to other
collateral  security  held by or to which  such  Borrower  is  entitled  for the
payment of any such merchandise, and shall have the right to enforce the same in
its name or to direct the  enforcement  thereof by such Borrower for the benefit
of the Lender, and such Borrower shall, at the reasonable request of the Lender,
deliver to the  Lender a separate  written  assignment  of any of the same.  The
Lender,  however, shall not incur any obligation or liability of any Borrower to
any Account Debtor,  including,  but not limited to,  obligations or liabilities
pursuant to any contract,  agreement,  warranty,  guarantee,  judicial decree or
jury award. The Lender, in such an event, is also hereby irrevocably  authorized
to receive,  open and dispose of all mail addressed to each Borrower,  to notify
the  Post  Office  authorities  to  change  the  address  for  delivery  of such
Borrower's  mail  to an  address  designated  by the  Lender,  to  endorse  such
Borrower's name on all notes, checks,  drafts, bills of exchange,  money orders,
commercial paper of any kind whatsoever,  and any other instruments or documents


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


received howsoever in payment of the Accounts  Receivable,  or any part thereof,
and the  Lender  or any  officer  or  employee  thereof  is  hereby  irrevocably
constituted and appointed agent and  attorney-in-fact  for such Borrower for the
foregoing purpose.

                  (D) Borrower in the aggregate shall not collect, compromise or
accept any sum in full payment or satisfaction of any of the Accounts Receivable
totaling more than  $50,000.00 in the  aggregate  for  materially  less than the
amount due  without  the express  written  consent of the Lender,  except in the
ordinary course of business. The consent of Lender required in this clause shall
not be unreasonably withheld or delayed.

                  (E) The Lender may directly  request any Account  Debtor for a
written  confirmation of the Accounts  Receivable at any reasonable time whether
before or after the occurrence of an Event of Default.

                  (F) All  collections of Accounts  Receivable  through the Lock
Box Accounts  shall be credited  against the Line of Credit on such Business Day
as the  date of  receipt  by  Lender  of  immediately  available  funds  of such
collections.

         SECTION 3.4. USE OF COLLATERAL.  Borrowers  shall at all times keep the
Collateral in good condition and repair and free and clear of all unpaid charges
(including, but not limited to, taxes), liens and encumbrances, and shall pay or
cause to be paid all obligations as they come due, including but not limited to,
mortgage payments,  real estate taxes,  assessments and rent due on the premises
where  the  Collateral  is  or  may  be  located,  except  for  charges,  liens,
encumbrances and obligations  being contested in good faith by Borrowers and for
which adequate reserves have been  established.  Borrowers agree that (except as
provided in the immediately  preceding  sentence) in the event Borrowers fail to
pay such obligations,  the Lender may, at its sole and arbitrary discretion, pay
such  obligations  for the  account of  Borrowers.  The Lender  may, in its sole
discretion,  discharge taxes,  liens or security interests or other encumbrances
at any  time  levied  or  placed  on the  Collateral  and  may,  in its sole and
arbitrary   discretion,   pay  for  the  maintenance  and  preservation  of  the
Collateral.  Any payments  made by the Lender  pursuant to this Section shall be
repayable  to the  Lender by  Borrowers  immediately  upon the  Lender's  demand
therefor,  with interest at a rate equal to the highest  interest rate described
in this  Agreement  in  effect  from time to time  during  the  period  from and
including the date funds are so expended by the Lender to the date of repayment,
and any such amounts due and owing the Lender shall be an additional  obligation
of Borrowers to the Lender secured hereunder.

         SECTION 3.6.  THIRD PARTY  WAIVERS.  Borrower  shall  deliver to Lender
landlord waivers, bailee waivers, warehouse waivers or other third party waivers
required by Lender (individually,  a "Third Party Waiver" and collectively,  the
"Third Party Waivers") executed by the lessors, bailors, warehouse owners and/or
operators and consignors of or at the Collateral Locations used by Borrower, all
in form and manner reasonably satisfactory to Lender.

         SECTION 3.7.  MORTGAGEE WAIVER.  Borrowers shall deliver  to  Lender  a
mortgagee  waivers (the "Mortgagee  Waivers")  executed by the mortgagees of the
Corporate Real Property, in form and manner satisfactory to Lender.

         SECTION 3.8 GUARANTIES. The Liabilities, including, but not limited to,
all  obligations of each of the Borrowers to Lender under or in connection  with
the Documents, shall be unconditionally guaranteed by the Guarantors;  provided,
however,  that  notwithstanding  anything else contained in this Agreement,  the
maximum  amount of liability  for the  Liabilities  of each  Guarantor  shall be
unlimited.  To evidence the Guaranties pursuant to this Section,  the Guarantors
shall execute and deliver to Lender the Guaranties.  In the event at any time or
from  time  to  time  Parent   establishes   any  subsidiary  that  owns  assets
substantially  similar to the Collateral  that does not become a Borrower,  such
Person shall,  contemporaneously  with their  establishment (i)  unconditionally
guaranty the Liabilities in substantially the same form as the Guaranties;  (ii)
acknowledge, agree and consent to the terms and provisions of the Documents; and


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.


(iii) be included  within the term  "Guarantor" as used in this  Agreement,  and
execute and deliver a Guaranty and a Guarantor Security Agreement.

         SECTION  3.9  GUARANTOR  COLLATERAL.  As  additional  security  for the
payment and  performance of the  Liabilities  and the payment and performance of
each  Guarantors'  Guaranty,  each  Guarantor  shall pledge and grant a security
interest to Lender in and to the Guarantor  Collateral  owned by such Guarantor.
To evidence to these  pledges and grants of security  interest  pursuant to this
Section,  Borrower shall cause each Guarantor to execute and deliver to Lender a
security   agreement   (individually  a  "Guarantor   Security   Agreement"  and
collectively   the  "Guarantor   Security   Agreements")   in  form  and  manner
satisfactory to Lender.

         SECTION 3.10. CROSS  COLLATERALIZATION.  Each Borrower acknowledges and
agrees that (A) the Collateral  secures all of the Liabilities,  including,  but
not  limited  to, the Loans and (B)  Lender  shall not  release  any lien on the
Collateral  unless and until all the Liabilities  (whether  arising  pursuant to
this Agreement or otherwise) are paid in full; provided,  however,  that nothing
contained in this Section shall preclude  Borrowers  from selling  Collateral in
the ordinary course of business.

                  ARTICLE FOUR. REPRESENTATIONS AND WARRANTIES
                  --------------------------------------------

         SECTION 4.1. BORROWER.  Each Borrower  represents and  warrants to  the
Lender that:

                  (A) Organization,  Etc. It is duly organized, validly existing
and in good  standing  under the laws of the State of its  incorporation  and is
duly  qualified  and in good  standing  or has applied  for  qualification  as a
foreign  corporation  authorized  to do  business  in each  jurisdiction  where,
because of the nature of its activities or  properties,  such  qualification  is
required.

                  (B) Authorization:  No Conflict. The execution and delivery of
the  Documents  are all  within  the  corporate  powers  of it,  have  been duly
authorized by all necessary action,  have, or by the time of their execution and
delivery shall have, received all necessary  governmental or regulatory approval
(if any shall be required),  and do not and will not contravene or conflict with
any provision of (i) law,  rule,  regulation or ordinance,  (ii) the articles of
incorporation or by-laws of it; or (iii) any agreement binding upon it or any of
their properties, as the case may be.

                  (C) Validity and Binding Nature.  The Documents executed by it
are the legal, valid and binding  obligations of it, enforceable  against it, in
accordance with their respective terms,  except as enforceability may be limited
by  bankruptcy,  insolvency,  reorganization  and other  similar laws of general
application  affecting  the rights and remedies of  creditors  and except as the
availability  of specific  performance  or  injunctive  relief is subject to the
discretion of the court before which any proceeding therefor may be brought.

                  (D) Title to Assets.  Except as set forth in Section 4.1(E) of
this  Agreement,  it has good and  marketable  title to all assets  owned by it,
including,  but  not  limited  to,  the  Collateral,  subject  to no (i)  liens,
encumbrances,  security interests, or mortgages;  (ii) zoning,  building,  fire,
health or environmental code violations of any governmental authority; and (iii)
violations of any covenants, conditions or restrictions of record.

                  (E)  Liens.  None  of its  assets  are  subject  to any  lien,
encumbrance or security interest, except for Permitted Liens.

                  (F) Financial Statements.  Its financial statements which have
been  previously  delivered  to  Lender  have  been  prepared  on a basis and in
conformity with generally accepted accounting  principles  consistently applied,
are true and correct and fairly present the consolidated  financial condition of
it as at  the  dates  of  such  financial  statements  and  the  results  of its


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.



operations  for the  periods  then  ended,  and  since  the  date of the  latest
financial  statement  delivered  to Lender  there has been no  Material  Adverse
Change in the financial condition or operations.

                  (G) Litigation and  Contingent  Liabilities.  No litigation or
arbitration,   administrative   or  governmental   proceedings  are  pending  or
threatened  against it that  would,  if  adversely  determined,  materially  and
adversely affect its financial condition or continued operations.

                  (H) No Violations of Laws. It (i) is not in material violation
of any  law,  ordinance,  rule,  regulation,  judgment,  decree  or order of any
federal,  state or local  governmental  body or court; and (ii) has obtained all
required permits,  certificates,  licenses,  approvals and other  authorizations
from  governmental  agencies  and  entities  (whether  federal,  state or local)
necessary to carry on its operation.

                  (I) Burdensome Obligations. Except for indentures, agreements,
leases,  contracts,  deeds or other  instruments  entered  into in the  ordinary
course of business  that are not otherwise  precluded or prohibited  pursuant to
the Documents, it is not a party to any indenture,  agreement,  lease, contract,
deed or other instrument,  or subject to any partnership restrictions or has any
knowledge of anything which would  materially and adversely affect or impair the
business, assets, operations,  properties, or condition, financial or otherwise,
of it.

                  (J) Taxes.  All federal,  state and local tax returns required
to be filed by it have been filed with the appropriate governmental agencies and
all taxes due and payable by it have been timely paid.

                  (K) No  Default  or Event of  Default.  No event or  condition
exists under any  material  agreement,  instrument  or document to which it is a
party or may be  subject,  or by which it or any of its  properties  are  bound,
which constitutes a default or an event of default thereunder, or will, with the
giving of notice,  passage of time, or both, would constitute a default or event
of default thereunder.

                  (L) Employee  Benefit  Plans.  Each employee  benefit plan, if
any, (as defined in Section 3(3) of the Employee  Retirement Income Security Act
of 1974, as amended from time to time) maintained by it complies in all material
respects  with  all  applicable  requirements  of law  and  regulations  and all
payments and  contributions  required to be made with respect to such plans have
been timely made.

                  (M) Federal Laws and Regulations. It is not (i) an "investment
company"  or a company  "controlled",  whether  directly  or  indirectly,  by an
"investment company",  within the meaning of the Investment Company Act of 1940,
as amended;  (ii) a "holding company",  or a "subsidiary  company" of a "holding
company",  or an "affiliate" of a "holding company" or of a "subsidiary company"
of a "holding company", within the meaning of the Public Utility Holding Company
Act  of  1935,  as  amended;  or  (iii)  engaged  principally,  or as one of its
important  activities,  in the business of  extending  credit for the purpose of
purchasing  or carrying  margin stock (within the meaning of Regulation U of the
Board of Governors of the Federal Reserve System).

                  (N)      Fiscal Year.  The fiscal year of it ends on September
30 of each year.

                  (O) Officers of It. As of the Closing Date, each Person listed
below  holds the  respective  office  or  offices  in it set forth  next to such
Person's name:


               Name                         Office
               ----                         ------

           Mark Walton                      President

           Ron Spradling                    Executive Vice President


                                 Page 18 of 41


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                        Confidential Treatment Requested.

        Confidential  portions of this  document  have been  redacted  and filed
separately with the Commission.




           Mike Perrine                     Chief Financial Officer, Secretary
                                            and Treasurer

           David Rogalski                   Assistant Secretary


                  (P)      Genuineness of Accounts Receivable.  All the Accounts
Receivable  of it are  genuine  and were  incurred  in the  ordinary  course  of
business and are not in default.

                  (Q)      Collateral Locations.  All of the tangible Collateral
of each Borrower is located at the Collateral Locations for such Borrower.

                  (R)      Subordinated Debt.  The  agreements,   documents  and
instruments  attached  to  the  Subordination   Agreements  being  executed  and
delivered  contemporaneously  with the execution of this  Agreement are true and
correct copies of all of the  documentation  evidencing the Subordinated Debt of
it in  existence as of the date of this  Agreement  and  represent  the complete
agreement of it to make  payments  with respect to the  Subordinated  Debt,  and
there have been no changes,  modifications,  alterations  or  amendments to such
agreements, documents and instruments.


                             ARTICLE FIVE. COVENANTS
                             -----------------------

         SECTION 5.1.  BORROWERS.  Until all the  Liabilities  are paid in full,
each Borrower covenants and agrees that:

                  (A) Financial Statements and Certificates.  It will furnish to
the Lender (i) within 90 days after the close of each  fiscal year of it, a copy
of the annual  consolidated  audited  report of the  Borrowers  consisting of at
least a balance  sheet,  statement of operating  results and retained  earnings,
statement  of cash  flows and notes to  financial  statements,  profit  and loss
statement  and  statement of changes in  financial  position of it prepared on a
consolidating and consolidated  basis and in conformity with generally  accepted
accounting  principles,   duly  prepared  by  certified  public  accountants  of
recognized  standing selected by it and approved by the Lender,  together with a
certificate  from such accountants to the effect that, in making the examination
necessary for the signing of such annual report by such  accountants,  they have
not become aware of any Event of Default that has occurred and is continuing, or
if they have become aware of any such event, describing it and the steps, if any
taken or being  taken to cure it;  (ii)  within  45 days  after  the end of each
fiscal  quarter  of  it,  (a) a  copy  of an  unaudited  consolidated  financial
statement of the Borrowers prepared in the same manner as the report referred to
in clause  (i)  above,  signed  by the  chief  financial  officer  or  Corporate
Controller of Parent and  consisting of at least a balance sheet as at the close
of such  quarter,  statements  of  earnings,  cash  flow,  income and source and
application  of funds for such quarter and for the period from the  beginning of
such fiscal year to the close of such quarter;  and (b) a certificate  signed by
the President or chief financial  officer of it providing that (I) the financial
statements  being  provided to Lender  pursuant to clauses  (ii)(a) are true and
correct and (II) no Event of Default has  occurred,  including,  but not limited
to, no Event of Default with respect to any of the financial covenants contained
in the  Documents;  and (iii) within 30 days after the end of each month,  (1) a
statement showing age and reconciliation of its Accounts Receivable and accounts
payable for the preceding month and a status of its Inventory  showing location,
age,  components  and value,  in such form and  detail as Lender may  reasonably
request;  and and (2) a certificate  signed by the President or chief  financial
officer of it providing that the financial  statements  being provided to Lender
pursuant to clause  (iii)(1) above is true and correct;  and(iv) if requested by
Lender  in  writing,  (1)  documentation  to  support  the  Accounts  Receivable
statement set forth in clause  (iii)(1)  above,  including,  but not limited to,
sales reports,  cash receipts reports and credit and debit journals;  and/or (2)
copies of all of its bank statements and  reconcilliations  thereof,  including,
but not limited to, Lock Box Accounts  statements;  (v) on the fifteenth  (15th)


                                 Page 19 of 41

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day of each month, (or if such day is not a Business Day, the next day that is a
Business Day) a completed  Lender's  standard form borrowing  base  certificate,
which shall be executed by the President or the chief  financial  officer of the
Borrowers,  and shall  contain  information  as of the last  Business Day of the
immediately  preceding month;  (vi) at least 45 days prior to the end of each of
its fiscal  years,  a copy of its Business  Plan for the  immediately  following
fiscal  year;  (vii)  schedules  of  Accounts  Receivable  in  form  and  manner
acceptable  to Lender  (which shall  include  current  addresses  and  telephone
numbers of Account Debtors) as often as requested by Lender,  (viii) at Lender's
request,  Borrowers shall make available to Lender for inspection copies (or, at
Lender's request after an Event of 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 Receivable;
(ix) the  originals of all  instruments,  chattel  paper,  security  agreements,
guarantees and other documents and property  evidencing or securing any Accounts
Receivable,  immediately  upon receipt thereof and in the same form as received,
with all necessary endorsements to enable Lender to enforce the same; (x) copies
of all  federal  and state tax  returns of it,  including,  but not  limited to,
requests for extensions of such tax returns,  when and as filed;  (xi) copies of
any and all reports, examinations, notices, warnings and citations issued by any
governmental or  quasi-governmental  (whether  federal,  state or local),  unit,
agency,  body or entity with respect to it; and (xii) such other  information as
the Lender from time to time reasonably requests.  Borrowers' failure to deliver
or execute and deliver any of the items listed in this Section  shall not affect
or limit Lender's security interest in the Collateral.

                  (B)  Books,  Records  and  Inspections.  It will (i)  maintain
complete and accurate books and records;  (ii) permit  reasonable  access by the
Lender to the books and  records  of it;  (iii)  make  entries  on its books and
records,  in form and  manner  reasonably  satisfactory  to  Lender,  disclosing
Lender's  security  interest in the Collateral and shall keep a separate account
on its books of all collections  received  thereon;  and (iv) permit the Lender,
upon reasonable notice, to inspect the properties, whether real or personal, and
operations of it.  Without  limitation of the  foregoing,  it  acknowledges  and
agrees that Lender  shall (a) conduct an annual  complete  field audit of all of
the Borrowers:  and (b) conduct Inventory  inspections at any time and from time
to time,  including,  but not limited to, quarterly  inventory  audits;  and (c)
audit at least 20% of all Inventory at all  locations of  Borrowers,  including,
but not  limited  to,  each of the  Collateral  Location,  at least on an annual
basis; and (d) audit Accounts Receivable not less than annually.

                  (C)  Insurance.  It will  maintain  such  insurance  as may be
required by law and such other  insurance to the extent and against such hazards
and liabilities as is customarily  maintained by companies  similarly  situated.
All property  insurance  policies with respect to the  Collateral  shall contain
loss  payable  clauses  in form and  substance  reasonably  satisfactory  to the
Lender,  naming the  Lender as a loss  payee as its  interest  may  appear,  and
providing  that such  policies  and loss  payable  clauses may not be  canceled,
amended or  terminated  unless at least  thirty (30) days prior  written  notice
thereof has been given to the Lender.  All  insurance  proceeds  received by the
Lender may be retained by the Lender, in its sole discretion, for application to
the payment of any of the principal or interest on the Liabilities  then due and
owing the Lender by it as the Lender may determine.

                  (D) Taxes  and  Liabilities.  It will pay when due all  taxes,
assessments  and other  liabilities  except as  contested  in good  faith and by
appropriate proceedings and for which adequate reserves have been established.

                  (E)  Restriction on Dividends.  It will not declare or pay, or
authorize  a  declaration  or payment  of, any cash  dividend in respect of, any
class of its  capital  stock if an Event of Default  has  occurred or will occur
(including,  but not limited  to,  following  any notice and cure  periods) as a
result of any such dividend.

                  (F)  Indebtedness.  It will not  incur or  permit to exist any
indebtedness or liability for borrowed money or for the deferred  purchase price
of any property or any services, except for Permitted Indebtedness.


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                  (G) Liens. It will not create or permit to exist any mortgage,
pledge,  title retention lien, or other lien,  encumbrance or security  interest
with respect to any Collateral now owned or hereafter acquired and owned, except
for Permitted Liens.

                  (H) Guaranties,  Loans or Advances. It will not become or be a
guarantor or surety of, or otherwise become or be responsible in any manner with
respect to any  undertaking of any other Person,  or make or permit to exist any
loans or advances to any other Person,  except (i) for the  endorsement,  in the
ordinary course of collection, of instruments payable to it or to its order; and
(ii) guaranties  given to Lender;  and (iii)  guaranties given to DFS and/or any
Person  providing  any  financing  to any  Travis  Entity  in  form  and  manner
satisfactory to Lender.

                  (I) Mergers,  Consolidations and Sales. It will not be a party
to any merger or  consolidation  with,  or purchase or otherwise  acquire all or
substantially  all of the  assets or stock of any class of, or any  partnership,
ownership or joint  venture  interest in, any other Person,  or sell,  transfer,
convey or lease all or any  substantial  part of its assets,  or sell or assign,
with or without  recourse,  any Accounts  Receivable,  except (i) with the prior
written  consent  of the  Lender;  or (ii)  solely  with  respect  to a  merger,
consolidation,  purchase or other acquisition,  if Parent provides Lender with a
certificate  signed  by the  President  or  chief  financial  officer  of it (a)
describing  the  nature  of  such  merger,  consolidation,   purchase  or  other
acquisiton;  and (b) providing  that no Event of Default has  occurred,  or will
occur (including,  but not limited to, following any notice and cure periods) as
a result  of any such  merger,  consolidation,  purchase  or other  acquisition,
including,  but not limited to, no Event of Default  with  respect to any of the
financial  covenants  contained in the Documents;  or (iii) acquisitions that in
the  aggregate do not exceed five  percent  (5%) of the value of the  Borrowers'
assets as calculated from time to time.

                  (J) Self-Dealing.  It shall not purchase, acquire or lease any
property from, or sell, transfer or lease any property to (a) any Affiliate, (b)
any officer,  director or shareholder of it or any Affiliate,  (c) any guarantor
of the  Liabilities  or (d) any  member  of the  immediate  family of any of the
foregoing,  except on terms  comparable  to the terms which would  prevail in an
arms-length transaction between unaffiliated third parties.

                  (K)  Stock.  It  will  neither  purchase,  retire,  redeem  or
otherwise  acquire  any shares nor issue any  additional  shares of any class of
capital stock of it, except (i) that it may issue additional  shares of stock in
connection  with any acquisition  assets of another Person  permitted under this
Agreement;  and (ii) the repurchase of up to  $1,000,000.00  in the aggregate of
its capital stock in the open market.

                  (L) Violation of Law. It will not materially  violate any law,
statute,   ordinance,  rule,  regulation,   judgment,  decree,  order,  writ  or
injunction of any federal,  state or local  authority,  court,  agency,  bureau,
board, commission, department or governmental body.

                  (M) Unconditional Purchase Obligations.  It will neither enter
into or be a party to any contract for the  purchase of  materials,  supplies or
other property or services if such contract  requires that payment be made by it
regardless of whether or not delivery is ever made of such  materials,  supplies
or other property or services.

                  (N)  Maintenance  of Business.  It will preserve its corporate
existence  in the  jurisdiction  of  establishment,  as that may be from time to
time,   and  it  will  not  operate  in  any  business  other  than  a  business
substantially  the same as the  business  of it as in effect on the date of this
Agreement.

                  (O) Employee Benefit Plans. It will (i) maintain each employee
benefit  plan as to which it may have any  liability in  substantial  compliance
with all applicable requirements of law and regulations;  (ii) make all payments
and contributions required to be made pursuant to such plans in a timely manner;
and (iii) neither  establish any new employee  benefit plan, agree or contribute


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to any multi-employer  plan nor amend any existing employee pension benefit plan
in a manner which would increase its obligation to contribute to such plan.

                  (P) Use of  Proceeds.  It will not permit any  proceeds of the
Loans  to be used  either  directly  or  indirectly,  for the  purpose,  whether
immediate,  incidental or ultimate, of "purchasing or carrying any margin stock"
within the  meaning of  Regulation  U of the Board of  Governors  of the Federal
Reserve System, as amended from time to time.

                  (Q) Good  Title.  It  shall  at  all times  maintain  good and
marketable title to all of its assets.

                  (R) Officers of It. Each Person listed below will at all times
hold the respective office or offices in it next to such Person's name:

               Name                         Office
               ----                         ------

           Mark Walton                      President

           Ron Spradling                    Executive Vice President

           Mike Perrine                     Chief Financial Officer, Secretary
                                            and Treasurer

           David Rogalski                   Assistant Secretary

                  (S) Eligible  Inventory.  If it  determines  that a previously
scheduled item of Eligible  Inventory  ceases to be an Eligible  Inventory under
any of the criteria  described in Section 1.1 of this  Agreement,  then it shall
immediately notify the Lender thereof.

                  (T)  Certification.  All  reports,  certificates,   schedules,
notices and financial information submitted by it to the Lender pursuant to this
Agreement  shall be certified as true and correct by the  President or the chief
financial officer of it.

                  (U) Collateral  Locations;  Material Adverse Change.  It shall
give  the  Lender  (i) 30 days  prior  written  notice  of the  location  of any
Collateral  at any place  other than the  Collateral  Locations  of it; and (ii)
prompt  written  notice  of any  event,  occurrence  or other  matter  which has
resulted or may result in a Material  Adverse Change in its financial  condition
or business operations.

                  (V) Fiscal Year.  The fiscal year of it shall end on September
30 of each year.

                  (W) Unsubordinated  Debt To Tangible Net Worth Ratio. It shall
not  cause,  suffer  or  permit  the  ratio of (i) the  Travis  Entities'  total
consolidated  liabilities  minus  Subordinated Debt to (ii) the Travis Entities'
Tangible Net Worth plus  Subordinated  Debt to be greater than the  following at
the end of each of its fiscal quarters:

                      6.25 to 1.0  December 31 of each fiscal year
                      6.0 to 1.0   March 31 of each fiscal year
                      5.0 to 1.0   June 30 and September 30 of each fiscal year

                  (X) Tangible Net Worth.  It shall not cause,  suffer or permit
the Travis Entities'  Tangible Net Worth plus  Subordinated Debt to be less than
the following, all as measured at the end of each of its fiscal quarters:


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               $18,000,000.00      December 31, 1999 through March 30, 2000
               $20,000,000.00      March 31, 2000 through June 29, 2000
               $22,500,000.00      June 30, 2000 and at all times thereafter

                  (Y)  Interest   Coverage  Ratio.  The  Travis  Entities  shall
maintain a Interest  Coverage Ratio of not less than 2.0 to 1.0, all as measured
at the end of each fiscal  quarter of it, as calculated  for the 12 month period
ending at the end of such fiscal quarter.

                  (Z) Fixed Charge  Coverage  Ratio.  The Travis  Entities shall
maintain a Fixed Charge  Coverage Ratio of not less than the  following,  all as
measured at the end of each fiscal quarter of it, as calculated for the 12 month
period ending at the end of such fiscal quarter:

                      1.2 to 1.0       Closing Date through June 29, 2000
                      1.5 to 1.0       June 30, 2000 and at all times thereafter

                  (AA) Subordinated Debt.  Except as set forth in the Subordina-
tion  Agreements,  it will not make any  payments  pursuant to the  Subordinated
Debt.

                  (BB) Returns of Inventory.  Borrowers  shall  promptly  notify
Lender of all returns of Inventory  received by Borrowers,  in the reports to be
provided to Lender pursuant to Section 5.1 (A) of this Agreement. After an Event
of Default has occurred,  no return of Inventory shall be accepted,  and no sale
of returned Inventory shall be made, by Borrowers without Lender's prior written
consent.

                  (CC) Inventory  System.  Borrowers  shall maintain a perpetual
inventory  system,  keeping accurate records  itemizing and describing the kind,
type,  age,  quality,  quantity  and  cost  of  Inventory  and  withdrawals  and
additions.  Such records shall be available  for  inspection  during  Borrowers'
usual business hours at the request of Lender or its designee.  Borrowers  shall
conduct a cycle count of  Inventory as  reasonably  requested by Lender so as to
equate  to a full  inventory  count at each  location  on a monthly  basis,  and
promptly  report  the  results  to Lender in form and with such  specificity  as
Lender shall require.

                  (DD) Business  Plan.  Each Business Plan shall (i)  constitute
its best good  faith  estimate  of its  management  regarding  the course of its
business  for the period  covered by such  Business  Plan;  and (ii) be based on
assumptions  which shall be reasonable  and realistic  based on the then current
economic conditions at the time of preparation of such Business Plan.

                  (EE) Restrictions on Use of Assets.  None of the Collateral of
any Borrower  other than the Parent shall be transferred to the Parent or any of
the other Travis Entities that are not a Borrower.

                  (FF)  Within 120 days after the  Closing  Date,  Parent  shall
assign,  transfer, sell or otherwise dispose of its assets located at its retail
locations  in  Austin,  Texas,  San  Antonio,  Texas,  and  Houston,  Texas to a
Guarantor or such other Person who shall  become a Guarantor  and shall  execute
and deliver to Lender a Guaranty and Guarantor Security Agreement.

                  (GG) Within 90 days after the Closing  Date,  Borrowers  shall
establish a separate Lock Box Account at a financial institution satisfactory to
Lender to collect monies solely for the Borrowers.

         SECTION 5.2.  LENDER.  Until the Liabilities  are paid in full,  Lender
agrees to pay to Borrowers a portion of the interest paid by certain  Vendors to
Lender  pursuant  to the Floor Plan  Arrangements  (individually,  a "Floor Plan
Interest Rebate" and collectively, the "Floor Plan Interest Rebates") solely for
the Free  Floor  Plan  Period  under a Floor  Plan  Arrangement.  The Floor Plan


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Interest  Rebates  relating to the Vendors in effect as of the Closing  Date are
set forth on Exhibit 5.2 attached  hereto.  The Floor Plan Interest Rebates made
available to Lender (A) will vary by Vendor;  and (B) may be adjusted  from time
to time, at Lender's  sole  discretion,  upon 30 days prior written  notice from
Lender to Borrower . All Floor Plan  Interest  Rebates for any Vendor  shall (i)
reflect an  annualized  percentage  rate;  and (ii) be calculated on a quarterly
basis based on the calendar quarters ending on the last day of each March, June,
September  and  December;  and (iii) be based on the average  daily  balances of
floor plan with such Vendor  during such  calendar  quarter.  All amounts due by
Lender to  Borrowers  pursuant  to this  Section  shall be offset on a quarterly
basis against amounts due by Borrowers to Lender pursuant to the Documents.


                        ARTICLE SIX. CONDITIONS PRECEDENT
                        ---------------------------------

         SECTION 6.1.  SPECIAL  CONDITIONS  PRECEDENT TO THE MAKING OF THE FIRST
LOAN.  Lender's  obligation to make the first Loan is subject to the fulfillment
of each and every one of the following  conditions prior to or contemporaneously
with the making of such first loan:

                  (A) Delivery of Documents. The Lender shall have received each
of the  following,  in form and  substance  satisfactory  to the  Lender and its
counsel, and where applicable, duly executed and recorded:

                  (i)    Certificates   of  the  Secretaries  of  Borrowers  and
                         certifying  as to (a) all  corporate  actions taken and
                         consents   made   by   Borrowers   to   authorize   the
                         transactions  provided for or  contemplated  under this
                         Agreement and the execution,  delivery and  performance
                         of the Documents;  and (b) the names of the officers or
                         employees   of   Borrowers   authorized   to  sign  the
                         Documents, together with a sample of the true signature
                         of each such Person.  (Lender may conclusively  rely on
                         such  certificates  until  formally  advised  by a like
                         certificate of any changes therein.);

                  (ii)   Acknowledgment copies from the appropriate governmental
                         authority  of all  Uniform  Commercial  Code  financing
                         statements  required to perfect the  Lender's  security
                         interests in the Collateral;

                  (iii)  Copies  of  Uniform   Commercial  Code,  tax  lien  and
                         judgment searches made with such  governmental  offices
                         as Lender deems necessary;

                  (iv)   Certificates  of  insurance  and loss  payable  clauses
                         covering the Collateral and meeting the requirements of
                         this Agreement;

                  (v)    The Third Party Waivers;

                  (vi)   The Mortgagee Waivers;

                  (vii)  The Guaranties;


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                  (viii) The Guarantor Security Agreements;

                  (ix)   The Subordination Agreements, if any;

                  (xi)   The executed opinion of counsel to Borrowers  addressed
                         to the Lender and dated the date of this Agreement;

                  (xii)  Certified  copies of the  Articles of Incorporation  or
                         Charter  and  By-laws  of  Borrowers,  as  restated  or
                         amended as to the date of this Agreement;

                  (xiii) Certificates  of  good  standing  for  Borrowers in the
                         jurisdiction of their  incorporation,  in the principal
                         places in which they conduct  business and in places in
                         which they own real estate and/or Collateral;

                  (xiv)  A writing from Borrowers'  certified public accountants
                         (selected   by   Borrowers   and  approved  by  Lender)
                         addressed   to  Lender   acknowledging   that  (a)  all
                         financial  statements  prepared by such accountants are
                         also being  prepared  for the benefit of Lender and (b)
                         Lender  shall  rely  on  such   financial   statements;
                         provided  that such type of writing is  available  from
                         Borrowers'    regularly   employed   certified   public
                         accountants based upon the level of diligence conducted
                         by  such   accountants   as  of  the  Closing  Date  in
                         Borrowers' audited financial statements

                  (xv)   DFS Intercreditor Agreement ; and

                  (xvi)  Such other instruments or documents as the  Lender  may
                         reasonably request.

         SECTION 6.2. GENERAL CONDITIONS  PRECEDENT TO EACH LOAN. In addition to
all other requirements of this Agreement,  including,  but not limited to, those
set forth in Section 6.1 of this  Agreement,  Lender's  obligation  to make each
Loan is subject to the fulfillment of each and every of the following conditions
prior to or contemporaneously with the making of each and every such Loan:

                  (A) No  Event of  Default.  No Event  of  Default  shall  have
occurred and be continuing,  may occur with the giving of notice, the passage of
time or both or shall result from the making of any Loan.

                  (B) No  Material  Adverse  Change.  There  shall  have been no
Material  Adverse  Change in the  business  of the  Borrowers  or the  financial
condition of the Borrowers from the most recent financial  statements  submitted
by Borrowers to Lender.

                  (C)  Continuation  of  Representations  and  Warranties.   The
representations  and warranties  contained in this  Agreement  shall be true and
correct in all  material  respects  as of the making of any Loan,  with the same
effect as though made on such dates.


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                        ARTICLE SEVEN. EVENTS OF DEFAULT
                        --------------------------------

         SECTION 7.1. EVENTS OF DEFAULT. Each of the following acts, occurrences
or omissions shall  constitute an event of default under this Agreement  (herein
referred  to as an "Event of  Default"),  whatever  the reason for such Event of
Default  and  whether it shall be  voluntary  or  involuntary  or be effected by
operation of law or pursuant to any judgment or order of any court or any order,
rule or regulation of any governmental or nongovernmental body or tribunal:

                  (A) Any Borrower shall default in the payment  when due of any
principal amount due and owing to the Lender; or

                  (B) Any Borrower shall fail to pay any interest amount due and
owing  to the  Lender  within  thirty  (30)  days  of the  billing  date of such
interest; or

                  (C) Except  for  the Event of  Default  set  forth in  Section
7.1(A) of this Agreement,  default,  and  continuance  thereof for 25 days after
written notice  thereof to Borrowers by the Lender,  in the payment of any other
amount  owing by  Borrowers  or any  Guarantor  to the  Lender  pursuant  to the
Documents or pursuant to any other agreement, note, instrument or guarantee; or

                  (D) Any representation or warranty made by any Borrower or any
Guarantor  contained  in the  Documents  shall  at any time  prove to have  been
incorrect in any material respect when made and not cured as of the date of such
discovery; or

                  (E) Any  Borrower  or  any  Guarantor  shall  default  in  the
performance or observance of any term,  covenant,  condition or agreement on its
part to be performed or observed under the Documents (not  constituting an Event
of Default  under any other  clause of this Section 7.1 of this  Agreement)  and
such default shall continue  unremedied for 25 days after written notice thereof
shall have been given by the Lender to Borrowers; or

                  (F) Either:  (i) any  Borrower or any  Guarantor  shall become
insolvent  or generally  fail to pay, or admit in writing its  inability to pay,
such Person's  debts as they become due, or a proceeding  under any  bankruptcy,
reorganization,  arrangement  of  debt,  insolvency,  readjustment  of  debt  or
receivership law or statute is filed by or against any Borrower or any Guarantor
or any  Borrower  or any  Guarantor  makes  an  assignment  for the  benefit  of
creditors;  provided,  however, that no Event of Default shall exist pursuant to
this Subsection E, Clause (i) due to an involuntary  bankruptcy case, proceeding
or petition filed against any Borrower or any Guarantor  unless such involuntary
case,  proceeding or petition shall not have been dismissed or withdrawn  within
60 days after the date of such  involuntary  filing;  or (ii) corporate or other
action  shall be taken by any  Borrower  or any  Guarantor  for the  purpose  of
effectuating  any of the  foregoing;  provided,  further,  that  notwithstanding
anything else  contained in this  Agreement no Travis Entity which is both (a) a
borrower to Lender,  DFS or any other Person providing  financing to such Travis
Entity similar to the Loans or the DFS Financing; and (b) a guarantor to Lender,
DFS or such  other  Person  shall be deemed  insolvent  solely by virtue of such
guaranty; or

                  (G) If  notice  is  given  that  $1,000,000.00  or more of the
Collateral is subject to levy, attachment, seizure, or confiscation or uninsured
loss;  provided,  however,  that the deductible  amount on any insurance  policy
currently in effect on the Collateral  shall not be considered an uninsured loss
pursuant to this Subsection; or

                  (H) any Borrower or any Guarantor shall be dissolved,  whether
voluntarily or involuntarily  and such Person has not taken all actions required
to become reinstated,  unless (i) in the case of a Borrower,  all assets of such
Borrower have been  transferred  to another  Borrower;  or (ii) in the case of a
Guarantor,  all assets of such Guarantor have been  transferred to a Borrower or
another Guarantor; or


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                  (I) Subject to any applicable cure and/or notice periods,  any
material  default  shall  occur  under  any  material  agreement,   document  or
instrument  binding  upon any  Borrower or any  Guarantor,  or any assets of any
Borrower  or any  Guarantor,  including,  but not limited to, any default in the
payment when due of any principal of or interest on any  indebtedness  for money
borrowed or guaranteed by any, or any default in the payment when due, or in the
performance or observance of, any material obligation of, or condition agreed to
by, any Borrower or any  Guarantor  with respect to any purchase or lease of any
real or personal property or services; or

                  (J) Any default or event of default  (howsoever such terms are
defined) shall occur under any Third Party Financing; or

                  (K) Any default or event of default  (howsoever such terms are
defined) shall occur under the DFS Financing.

                             ARTICLE EIGHT. REMEDIES

         SECTION 8.1.  REMEDIES UPON DEFAULT.  Upon the occurrence  and  contin-
uance of any Event of Default, and the expiration of any applicable cure period,
and in every such event:

                  (A) notwithstanding anything in the Documents,  Lender may, in
its sole and arbitrary discretion,  declare the principal of and interest on any
or all of the  Loans,  and all other  amounts  owed under the  Documents,  to be
forthwith due and payable without presentment,  demand,  protest or other notice
of any kind, all of which are hereby expressly waived; and

                  (B) Lender may, in its sole and arbitrary discretion,  without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby  expressly  waived,  exercise all of the remedies of a secured  party and
mortgage holder under  applicable law,  including,  but not limited to, the UCC,
and all of its rights and remedies under the Documents; and

                  (C) Lender may require any Borrower to make the Collateral and
the records  pertaining  to the  Collateral  available  to the Lender at a place
designated by the Lender which is reasonably convenient or may take repossession
of the Collateral and the records  pertaining to the Collateral  without the use
of any judicial process and without any prior notice thereof to Borrowers; and

                  (D) except as  otherwise  provided by law,  Lender may, at its
option, and in its sole and arbitrary discretion,  sell the Collateral at public
or private  sale upon such  commercially  reasonable  terms and  conditions  and
Lender may purchase the Collateral at any such sale, and apply the net proceeds,
after deducting all costs,  expenses and attorneys' fees incurred at any time in
the  collection  of the  indebtedness  of  Borrowers  to the  Lender  and in the
protection  and sale of the  Collateral,  to the  payment of said  indebtedness,
returning  the  remaining  proceeds,  if any, to  Borrowers,  with each Borrower
remaining liable for any amount remaining unpaid after such application; and

                  (E) the  Lender  may,  at its  option,  and in its  reasonable
discretion,  grant extensions,  compromise claims and settle Accounts Receivable
for less than face value, all without prior notice to Borrowers; and


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                  (F) Lender may, at its option,  and in its sole and  arbitrary
discretion,  use,  in  connection  with  any  assembly  or  disposition  of  the
Collateral, any trademark,  trade name, trade style, copyright,  patent right or
technical  process used or utilized by any Borrower provided such use is only to
assemble or dispose of such Collateral; and

                  (G) each  Borrower  shall,  upon the  request  of the  Lender,
forthwith upon receipt, transmit and deliver to the Lender in the form received,
all  cash,  checks,  drafts  and  other  instruments  for the  payment  of money
(properly  endorsed,  where  required,  so that such items may be  collected  by
Lender)  which may be received  by such  Borrower at any time in full or partial
payment of any Collateral.  No Borrower shall commingle any such items which may
be so received  by such  Borrower  with any other of its funds or  property  but
shall hold them separate and apart from their own funds or property and in trust
for the Lender until delivery is made to Lender; and

                  (H) the  Lender  may,  at its  option,  and in its  reasonable
discretion,  accept the return of any Inventory directly from an Account Debtor,
without notice to or consent by any Borrower; and

                  (I) Lender may exercise all of its rights and remedies against
any of the Guarantors under applicable law and the Documents.

         SECTION 8.2.  REMEDIES ARE SEVERABLE  AND  CUMULATIVE.  All  provisions
contained  herein  pertaining  to any  remedy  of the  Lender  shall  be and are
severable  and  cumulative  and in  addition  to all other  rights and  remedies
available  in the  Documents,  at law and in  equity,  any  one or  more  may be
exercised simultaneously or successively.  Any notification required pursuant to
this Article  Eight or under  applicable  law shall be  reasonably  and properly
given to  Borrowers  at the  address  and by any of the  methods of giving  such
notice as set forth in this Agreement, at least 5 days before taking any action.

                           ARTICLE NINE. MISCELLANEOUS
                           ---------------------------

         SECTION 9.1. NO WAIVER;  MODIFICATIONS IN WRITING.  No failure or delay
on the part of Lender in exercising any right,  power or remedy  pursuant to the
Documents  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise  of any such  right,  power or remedy  preclude  any  other or  further
exercise  thereof,  or the  exercise  of any other  right,  power or remedy.  No
amendment,  modification,  supplement, termination or waiver of any provision of
the Documents, nor any consent by Lender to any departure by any Borrower or any
Guarantor therefrom,  shall be effective unless the same shall be in writing and
signed by Lender.  Any waiver of any  provision of the Documents and any consent
by Lender to any  departure by any Borrower or any  Guarantor  from the terms of
any provision of the Documents shall be effective only in the specific  instance
and for the  specific  purpose  for which  given.  No notice to or demand on any
Borrower  or any  Guarantor  in any  case  shall  entitle  any  Borrower  or any
Guarantor  to any  other  or  further  notice  or  demand  in  similar  or other
circumstances.

         SECTION  9.2.  SET-OFF.   Lender  shall  have  the  right  to  set-off,
appropriate and apply toward payment of any of the Liabilities, in such order of
application  as Lender  may from time to time and at any time  elect,  any cash,
credit,  deposits,  accounts,  securities and any other property of any Borrower
which is in transit to or in the  possession,  custody or control of Lender,  or
any agent, bailee, or Affiliate of Lender. each Borrower hereby grants to Lender
a security interest in all such property.

         SECTION 9.3. NOTICES, ETC. All notices, demands, instructions and other
communications  required  or  permitted  to be given to or made  upon any  party
hereto shall be in writing personally  delivered or sent by overnight courier or
by  facsimile  machine,  and shall be deemed  to be given for  purposes  of this
Agreement on the day that such writing is delivered or sent by facsimile machine
or one (1) day after such notice is sent by  overnight  courier to the  intended


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recipient  thereof in accordance with the provisions of this Section 9.3. Unless
otherwise  specified  in a  notice  sent or  delivered  in  accordance  with the
foregoing  provisions of this Section 9.3 of this Agreement,  notices,  demands,
instructions and other  communications in writing shall be given to or made upon
the respective parties hereto at their respective  addresses  indicated for such
party below:

         If to the Borrowers:        Travis Boats & Motors, Inc.
                                     5000 Plaza on the Lake
                                     Suite 250
                                     Austin, Texas 78746
                                     Attention:  President
                                     Phone:  (512) 347-8787
                                     Fax No.:  (512) 329-0480


         With copies to:             Mitchell Savrick, Esq.
                                     Hohmann & Taube, LLP
                                     100 Congress Avenue, Suite 1600
                                     Austin, Texas 78701
                                     Phone:  (512)472-5997
                                     Fax No.:  (512)472-5248


         If to the Lender:           Transamerica Commercial Finance Corporation
                                     5595 Trillium Boulevard
                                     Hoffman Estates, Illinois 60192
                                     Attn:  Ted Denniston
                                     Phone:  (847) 747-7769
                                     Fax No.:  (847) 747-7436


         With a copy to:             Steven Bright, Esq.
                                     Levenfeld Pearlstein Glassberg Tuchman
                                     Bright Goldstein  & Schwartz, LLC
                                     33 West Monroe Street
                                     21st Floor
                                     Chicago, Illinois 60602
                                     Phone:  (312) 456-0525
                                     Fax:  (312) 346-8434

         SECTION  9.4.  COSTS,  EXPENSES AND TAXES.  Borrowers  agree to pay all
reasonable out-of-pocket fees and expenses of Lender (including, but not limited
to,  UCC  Filing and Search  Fees and fees and  expenses  of outside  counsel to
Lender  and  paralegals)  in  connection  with  the  making  of  the  Loans  and
preparation,  administration  and  enforcement  of the  Documents and the Loans,
including,  but not limited to, Lender's standard wire transfer and check return
fees, all as may be established and changed by Lender from time to time. Without
limitation of the foregoing, each Borrower acknowledges and agrees that Lender's
reasonable  field  audit fees and  reasonable  out of pocket  expenses  shall be
charged  to  Borrowers.  In  addition,  Borrowers  shall pay any and all  stamp,
transfer and other taxes payable or determined to be payable in connection  with
the  execution  and  delivery  of the  Documents  and  agrees to hold the Lender
harmless from and against any and all  liabilities  with respect to or resulting
from  any  delay  in  paying  or  omission  to pay  such  taxes.  If any suit or
proceeding  arising  from  any of  the  foregoing  is  brought  against  Lender,
Borrowers,  to the extent and in the manner directed by Lender,  will resist and


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defend such suit or  proceeding or cause the same to be resisted and defended by
counsel approved by Lender. If Borrowers shall fail to do any act or thing which
it has covenanted to do under this Agreement or any  representation  or warranty
on the part of Borrowers  contained in this Agreement shall be breached,  Lender
may, in its sole and arbitrary discretion,  after 25 days written notice is sent
to Borrowers,  do the same or cause it to be done or remedy any such breach, and
may expend its funds for such  purpose;  and any and all  amounts so expended by
the Lender shall be repayable  to the Lender by Borrowers  immediately  upon the
Lender's demand therefor,  with interest at a rate equal to the highest interest
rate set forth in this  Agreement  in effect from time to time during the period
from and  including  the date  funds  are so  expended  by Lender to the date of
repayment,  and any such amounts due and owing Lender shall be deemed to be part
of the Liabilities  secured  hereunder.  The obligations of Borrowers under this
Section shall survive the termination of this Agreement and the discharge of the
other obligations of Borrowers under the Documents.

         SECTION 9.5.  COMPUTATIONS.  Where the character or amount of any asset
or liability or item of income or expense is required to be  determined,  or any
consolidation  or other  accounting  computation is required to be made, for the
purpose of this  Agreement,  such  determination  or calculation  shall,  to the
extent applicable and except as otherwise  specified in this Agreement,  be made
in accordance with generally accepted  accounting  principles applied on a basis
consistent with those at the time in effect.

         SECTION  9.6.  FURTHER  ASSURANCES.  each  Borrower  agrees  to do such
further  acts and things and to execute and  deliver to Lender  such  additional
assignments,  agreements,  powers,  documents  and  instruments  as  Lender  may
reasonably  require or deem  advisable  to carry into effect the purposes of the
Documents,  or to confirm unto Lender its rights,  powers and remedies under the
Documents.

         SECTION 9.7. COUNTERPARTS. This Agreement may be executed in any number
of  counterparts,  each of  which  counterparts,  once  they  are  executed  and
delivered,  shall be deemed  to be an  original  and all of which  counterparts,
taken together, shall constitute but one and the same agreement.

         SECTION 9.8.  BINDING  EFFECTS;  ASSIGNMENT.  This  Agreement  shall be
binding  upon,  and inure to the benefit of,  Lender,  each  Borrower  and their
respective  successors,  assigns,  representatives  and heirs. No Borrower shall
assign any of its rights nor delegate  any of its  obligations  under  Documents
without the prior written consent of Lender and no such consent by Lender shall,
in  any  event,  relieve  any  Borrower  of any of  its  obligations  under  the
Documents.

         SECTION  9.9.  HEADINGS.  Captions  contained  in  this  Agreement  are
inserted only as a matter of convenience  and in no way define,  limit or extend
the scope or intent of this  Agreement or any  provision of this  Agreement  and
shall not affect the construction of this Agreement.

         SECTION  9.10.  ENTIRE  AGREEMENT.  This  Agreement,  together with the
Documents, contains the entire agreement between the parties hereto with respect
to the transactions contemplated herein and supersede all prior representations,
agreements,  covenants and understandings,  whether oral or written,  related to
the subject matter of the Agreement.  Except as  specifically  set forth in this
Agreement, Lender makes no covenants to any Borrower, including, but not limited
to, any other commitments to provide any additional financing to any Borrower.

         SECTION 9.11.  GOVERNING  LAW. This  Agreement  shall be deemed to be a
contract made under the laws of the State of Illinois and for all purposes shall
be construed in accordance with the laws of the State of Illinois.

         SECTION  9.12.  SEVERABILITY  OF  PROVISIONS.  Any  provision  of  this
Agreement which is prohibited or unenforceable in any jurisdiction  shall, as to
such  jurisdiction,  be  ineffective  only to the extent of such  prohibition or


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unenforceability without invalidating the remaining provisions of this Agreement
or  affecting  the  validity or  enforceability  of such  provision in any other
jurisdiction.

         SECTION 9.13.  CONFLICT.  In  the event of any  conflict  between  this
Agreement  and any of the other  Documents,  the terms  and  provisions  of this
Agreement shall govern and control.

         SECTION 9.14. POWER OF ATTORNEY.  Each Borrower hereby grants to Lender
an  irrevocable  power of attorney  coupled  with an interest,  authorizing  and
permitting Lender, at its option but without obligation, at such Borrower's sole
expense,  in  such  Borrower's  name  or  otherwise,  to the  extent  reasonably
determined by Lender to be necessary or advisable in order to carry out Lender's
rights or remedies or any  Borrower's  obligations  pursuant to the Documents to
the extent any  Borrower  has failed or refused to execute or fulfill any of its
obligations  pursuant to the  Documents to do any or all of the  following:  (a)
execute on behalf of such Borrower any financing statement,  or any continuation
or amendment  thereof,  security  agreement,  assignment of rentals from real or
personal property,  report,  notice,  schedule of Accounts  Receivable,  and any
other agreement or document that Lender may, in its reasonable discretion,  deem
advisable  in  order to (i)  perfect,  maintain  or  improve  Lender's  security
interest in the Collateral or other property intended to constitute  Collateral,
or (ii) exercise a right of such Borrower or Lender,  or (iii) fully  consummate
the  transactions  contemplated  under this  Agreement  and the  Documents;  (b)
execute on behalf of such Borrower,  any invoice relating to any of the Accounts
Receivable,  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,  material supplier's or other Lien, or assignment
or satisfaction  thereof; (c) take control in any manner of any cash or non-cash
proceeds of Collateral; endorse such Borrower'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  Lender's
possession;  and sign such Borrower's  name to any  verification of its Accounts
Receivable and notices thereof to such Borrower's  Account Debtors;  (d) endorse
all checks and other  forms of  remittances  in payment of  Accounts  Receivable
received  by  Lender  "Pay  to the  Order  of  Transamerica  Commercial  Finance
Corporation",  or in such other  manner as Lender may  choose;  (e) notify  post
office  authorities to change the address for delivery of any of such Borrower's
mail to an address  designated by Lender and receive and open all mail addressed
to  such  Borrower  and  make  such  disposition  as  is  reasonable  under  the
circumstances,  and Lender will endeavor to provide such Borrower with originals
or copies  thereof;  (f) 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;  (g)  following  the  occurrence of an Event of
Default,  demand  payment of Accounts  Receivable,  enforce  payment of Accounts
Receivable by legal proceedings or otherwise,  and enforce any and all rights of
such  Borrower  in  Accounts  Receivable;  grant  extensions  of  time  to  pay,
compromise  claims and settle  Accounts  Receivable for less than face value and
execute all releases and other documents in connection therewith; (h) 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 such
Borrower's  name on any  instrument  or other item of payment or the proceeds of
such policy;  and (i) take any action or pay any sum  required of such  Borrower
pursuant to this Agreement,  and any other present or future agreements  between
Lender and such  Borrower  and do all acts and  things  which are  necessary  to
fulfill such Borrower's obligations under this Agreement.

         SECTION 9.15.  JURISDICTION;  WAIVER.  EACH BORROWER  ACKNOWLEDGES THAT
THIS  AGREEMENT  IS BEING  SIGNED BY THE  LENDER  IN  PARTIAL  CONSIDERATION  OF
LENDER'S  RIGHT TO  ENFORCE  IN THE  JURISDICTION  STATED  BELOW  THE  TERMS AND
PROVISION  OF THIS  AGREEMENT  AND THE  DOCUMENTS.  EACH  BORROWER  CONSENTS  TO
JURISDICTION IN THE STATE OF ILLINOIS AND VENUE IN ANY FEDERAL OR STATE COURT IN
THE  COUNTY OF COOK FOR SUCH  PURPOSES  AND WAIVES ANY AND ALL RIGHTS TO CONTEST
SAID  JURISDICTION  AND  VENUE  AND  ANY  OBJECTION  THAT  SAID  COUNTY  IS  NOT
CONVENIENT.  EACH  BORROWER  WAIVES ANY RIGHTS TO  COMMENCE  ANY ACTION  AGAINST
LENDER IN ANY  JURISDICTION  EXCEPT THE AFORESAID  COUNTY AND STATE.  LENDER AND
EACH BORROWER  HEREBY EACH EXPRESSLY WAIVE ANY AND ALL RIGHTS TO A TRIAL BY JURY
IN ANY ACTION,  PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY OF THE PARTIES AGAINST


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ANY OTHER PARTY WITH RESPECT TO ANY MATTER  WHATSOEVER  RELATING TO, ARISING OUT
OF OR IN ANY WAY CONNECTED WITH THE LOANS, THE DOCUMENTS AND/OR THE TRANSACTIONS
WHICH ARE THE SUBJECT OF THE DOCUMENTS.

             (THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.)



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         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered at Cook County,  Illinois as of the date first above
written.

         LENDER:           TRANSAMERICA COMMERCIAL FINANCE CORPORATION
         ------


                           By:_________________________________

                           Title:  Vice President

             (THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK.)


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         BORROWERS:                    TRAVIS BOATS & MOTORS, INC.
         ---------



                                       By:________________________________
                                       Title: Secretary




                       (SIGNATURES CONTINUE ON NEXT PAGE.)


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                                     TRAVIS BOATING CENTER GEORGIA, INC.



                                     By:________________________________
                                     Title:Secretary



                                     TRAVIS BOATING CENTER FLORIDA, INC.



                                     By:__________________________________
                                     Title:  Secretary




                       (SIGNATURES CONTINUE ON NEXT PAGE.)



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                                         ADVENTURE MARINE & OUTDOORS, INC.



                                         By:__________________________________
                                         Title:  Secretary


                                         ADVENTURE MARINE SOUTH, INC.



                                         By:________________________________
                                         Title:  Secretary


                                         ADVENTURE BOAT BROKERAGE, INC.



                                         By:__________________________________
                                         Title:  Secretary



                     (SIGNATURES CONTINUE ON THE NEXT PAGE.)


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                                        TBC MANAGEMENT, INC.


                                        By:__________________________________
                                        Title:  Secretary



                                        TBC MANAGEMENT, LTD.


                                        By:__________________________________
                                        Title:  Secretary



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    TRANSAMERICA COMMERCIAL FINANCE CORPORATION - TRAVIS BOATS & MOTORS, INC.
                           LOAN AND SECURITY AGREEMENT
                         -------------------------------

                              EXHIBIT/SCHEDULE LIST
                              ---------------------

                                                            Exhibit/Schedule No.
                                                            --------------------

List of Borrowers                                               I

List of Guarantors                                              II

Collateral Locations                                            1.1(L)

DFS Financing                                                   1.1(Q)

Permitted Indebtedness                                          1.1(FFF)

Permitted Liens                                                 1.1(GGG)

Travis Entities                                                 1.1(WWW)

*                                                               *




________________________
*Indicates Confidential  Treatment Requested.   The redacted  material has  been
filed separately with the Commission.


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                   SCHEDULE I TO TRAVIS BOATS & MOTORS, INC. -
                           LOAN AND SECURITY AGREEMENT
                         -------------------------------

                                List of Borrowers
                                -----------------

Travis Boats & Motors, Inc.
TBC Management, Ltd.
TBC Management, Inc.
Travis Boating Center Georgia, Inc.
Travis Boating Center Florida, Inc.
Adventure Marine & Outdoors, Inc.
Adventure Marine South, Inc.
Adventure Boat Brokerage, Inc.


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                 EXHIBIT 1.1(L) TO TRAVIS BOATS & MOTORS, INC. -
                           LOAN AND SECURITY AGREEMENT
                         -------------------------------

                              Collateral Locations
                              --------------------

         1.       Travis Boats & Motors, Inc.
                  5000 Plaza on the Lake
                  Suite 250
                  Austin, Texas  78746



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                  EXHIBIT 5.2 TO TRAVIS BOATS & MOTORS, INC. -
                           LOAN AND SECURITY AGREEMENT
                         --------------------------------

                                       *
                                       -

                           *
                           *
                           *
                           *
                           *
                           *


_______________________________
*Indicates  Confidential  Treatment  Requested.  The redacted  material has been
filed separately with the Commission.




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</TEXT>
</DOCUMENT>
