BANK OF AMERICA BUSINESS LOAN AGREEMENT

 BANK OF AMERICA                                    BUSINESS LOAN AGREEMENT
NATIONAL TRUST AND SAVINGS ASSOCIATION             (RECEIVABLES AND INVENTORY)
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This Agreement dated as of September 28, 1995, is between BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION (the "Bank") and HEATING & COOLING
SUPPLY, INC. (the "Borrower").

1.      DEFINITIONS

In addition to the terms which are defined elsewhere in this Agreement, the
following terms have the meanings indicated for the purposes of this Agreement:

1.1     "BORROWING BASE" means, as to the Borrower, a value of up to (i) eighty
percent (80%) of the Eligible Accounts, plus (ii) (A) the lesser of (x) during
the Higher Advance Rate Period sixty percent (60%) and at all other times fifty
percent (50%) of Eligible Inventory consisting of finished goods inventory
supplied by Rheem plus Two Million Five Hundred Thousand Dollars ($2,500,000) or
(y) eighty percent (80%) of Eligible Inventory consisting of finished goods
inventory supplied by Rheem, plus (B) during the Higher Advance Rate Period
sixty percent (60%) and at all other times fifty percent (50%) of the Eligible
Inventory other than Eligible Inventory consisting of finished goods inventory
supplied by Rheem, PROVIDED, HOWEVER, the maximum amount of the Borrowing Base
which may be derived from (A) plus (B) above, shall not exceed Fifteen Million
Five Hundred Thousand Dollars ($15,500,000).

In determining the value of Acceptable Inventory to be included in the Borrowing
Base, the Bank will use the lowest of (i) the Borrower's cost determined on a
first in first out weighted average method, (ii) the Borrower's estimated market
value, or (iii) the Bank's reasonable independent determination of the resale
value of such inventory in such quantities and on such terms as the Bank deems
reasonably appropriate.

1.2     "ACCEPTABLE RECEIVABLE" means an account receivable which satisfies 
the following requirements:

(a)     The account has resulted from the sale of goods or the performance of
        services by the Borrower in the ordinary course of the Borrower's
        business.

(b)     There are no conditions which must be satisfied before the Borrower is
        entitled to receive payment of the account. Accounts arising from COD
        sales, consignments or guaranteed sales are not acceptable.

(c)     The debtor upon the account does not claim any defense to payment and
        has not asserted any counterclaims or offsets against the Borrower. To
        the extent any credit balances exist in favor of the debtor, such credit
        balances shall be deducted from the account balance. To the extent that
        an invoice of that account is disputed, the disputed invoice shall be
        deducted from the account balance.

(d)     The account represents a genuine obligation of the debtor for goods sold
        and accepted by the debtor, or for services performed for and accepted
        by the debtor.

(e)     The Borrower has sent an invoice to the debtor in the amount of the
        account.

(f)     The account is owned by the Borrower free of any title defects or any
        liens or interests of others except the security interest in favor of
        the Bank.

(g)     The debtor upon the account is not any of the following:

        (i)     an employee, affiliate, parent or subsidiary of the Borrower, or
                an entity which has common officers or directors with the
                Borrower.
        (ii)    the U.S. government or any agency or department of the U.S.
                government unless the Bank agrees in writing to accept the
                obligation and the Borrower complies with the procedures in the
                Federal Assignment of Claims Act of 1940 with respect to the
                obligation.
                                      -1-

        (iii)   any state, county, city, town or municipality.

        (iv)    any person or entity located in a foreign country unless the
                account is supported by a letter of credit issued by a bank
                acceptable to the Bank.

        (v)     any person or entity to whom the Borrower is obligated for goods
                purchased by the Borrower or for services performed for the
                Borrower. This will not exclude accounts upon which any such
                debtor is obligated to the extent that the accounts exceed the
                amount of the Borrower's obligation to such debtor.

(h)     The account is not in default.  An account will be considered in 
        default if any of the following occur:

        (i)     The account is not paid within the 90 day period starting on its
                invoice date;

        (ii)    The debtor obligated upon the account suspends business, makes a
                general assignment for the benefit of creditors, or fails to pay
                its debts generally as they come due; or

        (iii)   Any petition is filed by or against the debtor obligated upon
                the account under any bankruptcy law or any other law or laws
                for the relief of debtors.

(i)     The account is not the  obligation  of a debtor who is in default 
        (as defined  above) on 25% or more of the accounts upon which such 
        debtor is obligated.

(j)     The account does not arise from the sale of goods which remain in the
        Borrower's possession or under the Borrower's control.

(k)     The account is not evidenced by a promissory note or chattel paper.

(l)     The account is otherwise acceptable to the Bank.

In addition to the foregoing limitations, the dollar amount of accounts included
as Acceptable Receivables which are the obligations of a single debtor shall not
exceed the concentration limit established for that debtor. To the extent the
total of such accounts exceeds a debtor's concentration limit, the amount of any
such excess shall be excluded. The concentration limit for each debtor shall be
equal to 10% of the total amount of the Borrower's Acceptable Receivables at
that time. 

1.3     "ACCEPTABLE INVENTORY" means inventory which satisfies the following
requirements:

(a)     The  inventory  is owned by the  Borrower  free of any title  defects 
        or any liens or  interests  of others except the security interest in 
        favor of the Bank.

(b)     The inventory is permanently located at locations which the Borrower has
        disclosed to the Bank and which are acceptable to the Bank. If the
        inventory is covered by a negotiable document of title (such as a
        warehouse receipt) that document must be delivered to the Bank.

(c)     The inventory is held for sale or use in the ordinary course of the
        Borrower's business and is of good and merchantable quality. Inventory
        which is obsolete, unsalable, damaged, defective, discontinued or
        slow-moving, or which has been returned by the buyer, is not acceptable.
        Display items, work-in-process and packing and shipping materials are
        not acceptable.

(d)     The inventory is not placed on consignment.

(e)     Inventory which Bank in good faith  exercised,  in a commercially  
        reasonable  manner,  deems as Acceptable Inventory.

1.4     "CREDIT LIMIT" means the amount of Twenty-Five Million Dollars
($25,000,000).

                                       -2-

2.      FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS

2.1     LINE OF CREDIT AMOUNT.

(a)     During the availability period described below, the Bank will provide a
        line of credit to the Borrower. The amount of the line of credit (the
        "Facility 1 Commitment") is equal to the lesser of (i) the Credit
        Limit or (ii) the Borrowing Base.

(b)     This is a revolving line of credit for advances with a within line
        facility for letters of credit. During the availability
        period, the Borrower may repay principal amounts and reborrow them.

(c)     The Borrower agrees not to permit the outstanding principal balance of
        the line of credit plus the outstanding amounts of any letters of
        credit, including amounts drawn on letters of credit and not yet
        reimbursed, to exceed the Facility 1 Commitment. If the
        Borrower exceeds this limit, the Borrower will immediately pay the
        excess to the Bank upon the Bank's demand. The Bank may apply payments
        received from the Borrower under this Paragraph to the obligations of
        the Borrower to the Bank in the order and manner as the Bank, in its
        discretion, may determine.

2.2     AVAILABILITY   PERIOD.   The  line  of  credit  is  available  between
the  date  of  this  Agreement  and October 1, 1998 (the "Facility No. 1 
Expiration Date") unless the Borrower is in default.

2.3     CONDITIONS  TO EACH  EXTENSION  OF  CREDIT.  Before  each  extension  
of credit  under the line of  credit, including the first, the Borrower will 
deliver the following to the Bank if requested by the Bank:

(a)     a borrowing certificate, in form and detail satisfactory to the Bank,
        setting forth the Acceptable Receivables and the Acceptable Inventory
        on which the requested extension of credit is to be based;

(b)     copies of the invoices or the record of invoices from the Borrower's
        sales journal for such Acceptable Receivables and a listing of the names
        and addresses of the debtors obligated thereunder; and

(c)     copies of the delivery receipts, purchase orders, shipping instructions,
        bills of lading and other documentation pertaining to such Acceptable
        Receivables.

2.4     INTEREST RATE.

(a)     Unless the Borrower elects an optional interest rate as described
        below, the interest rate is the Bank's Reference Rate minus one-half
        (.50) of a percentage point.

(b)     The Reference Rate is the rate of interest publicly announced from time
        to time by the Bank in San Francisco, California, as its Reference Rate.
        The Reference Rate is set by the Bank based on various factors,
        including the Bank's costs and desired return, general economic
        conditions and other factors, and is used as a reference point for
        pricing some loans. The Bank may price loans to its customers at, above,
        or below the Reference Rate. Any change in the Reference Rate shall take
        effect at the opening of business on the day specified in the public
        announcement of a change in the Bank's Reference Rate.

2.5     REPAYMENT TERMS.

(a)     The Borrower will pay interest on November 1, 1995, and then monthly
        thereafter until payment in full of any principal outstanding under this
        line of credit.

(b)     The Borrower will repay in full all principal and any unpaid  interest 
        or other charges  outstanding  under this line of credit no later than 
        the Facility No. 1 Expiration  Date. Any amount  bearing  interest at an
        optional  interest rate (as described  below) may be repaid at the end
        of the applicable  interest  period, which shall be no later than the 
        Facility No. 1 Expiration Date.

2.6     OPTIONAL INTEREST RATES. Instead of the interest rate based on the 
Bank's Reference Rate, the Borrower may elect to have all or portions of the 
line of credit (during the availability period) bear interest at the rate(s) 
described below during an interest period agreed to by the Bank and the 
Borrower. Each interest rate is a rate per year. Interest will be paid on the 
last day of each interest period, and on the first day of each month 

                                       -3-

during the interest period. At the end of any interest period, the interest rate
will revert to the rate based on the Reference Rate, unless the Borrower has
designated another optional interest rate for the portion.

2.7     LIBOR RATE. The Borrower may elect to have all or portions of the 
principal balance bear interest at the LIBOR Rate plus nine-tenths (.90) of a 
percentage point.

Designation of a LIBOR Rate portion is subject to the following requirements:

(a)     The interest period during which the LIBOR Rate will be in effect will
        be 7, 14, 21, 30, 60, 90, 180 or 365 days. The last day of the interest
        period will be determined by the Bank using the practices of the London
        inter-bank market.

(b)     Each LIBOR Rate portion will be for an amount not less than Five Hundred
        Thousand Dollars ($500,000) for interest periods of 30 days or longer.
        For shorter maturities, each Libor Rate portion will be for an amount
        which, when multiplied by the number of days in the applicable
        interest-period, is not less than fifteen million (15,000,000) dollar
        days.

(c)     The Borrower shall irrevocably request a LIBOR Rate portion no later
        than 9:00 a.m. San Francisco Time three (3) banking days before the
        commencement of the interest period.

(d)     The "LIBOR Rate" means the interest rate determined by the following
        formula, rounded upward to the nearest 1/100 of one percent. (All
        amounts in the calculation will be determined by the Bank as of the
        first day of the interest period.)

                       LIBOR Rate =            London Rate
                                    -----------------------------------
                                       (1.00 - Reserve Percentage)
        Where,

        (i)    "London Rate" means the interest rate (rounded upward to the
               nearest l/16th of one percent) at which the Bank's London Branch,
               London, Great Britain, would offer U. S. dollar deposits for the
               applicable interest period to other major banks in the London
               inter-bank market at approximately 11:00 a.m. London time two (2)
               banking days before the commencement of the interest period.

        (ii)   "Reserve Percentage" means the total of the maximum reserve
               percentages for determining the reserves to be maintained by
               member banks of the Federal Reserve System for Eurocurrency
               Liabilities, as defined in Federal Reserve Board Regulation D,
               rounded upward to the nearest 1/100 of one percent. The
               percentage will be expressed as a decimal, and will include, but
               not be limited to, marginal, emergency, supplemental, special,
               and other reserve percentages.

(e)    The Borrower may not elect a LIBOR Rate with respect to any principal
       amount which is scheduled to be repaid before the last day of the
       applicable interest period.

(f)    Any portion of the principal balance already bearing interest at the
       LIBOR Rate will not be converted to a different rate during its interest
       period.

(g)    Each prepayment of a LIBOR Rate portion whether voluntary, by reason of
       acceleration or otherwise, will be accompanied by the amount of accrued
       interest on the amount prepaid and a prepayment fee as described below. A
       "prepayment" is a payment of an amount on a date earlier than the
       scheduled payment date for such amount as required by this Agreement. The
       prepayment fee shall be equal to the amount (if any) by which:

        (i)    the additional interest which would have been payable during the
               interest period on the amount prepaid had it not been prepaid,
               exceeds

        (ii)   the interest which would have been recoverable by the Bank by
               placing the amount prepaid on deposit in the London inter-bank
               market for a period starting on the date on which it was prepaid
               and ending on the last day of the interest period for such
               portion (or the scheduled payment date for the amount prepaid, if
               earlier).

                                       -4-

(h)     The Bank will have no obligation to accept an election for a LIBOR Rate
        portion if any of the following described events has occurred and is
        continuing:

        (i)    Dollar deposits in the principal amount, and for periods equal to
               the interest period, of a LIBOR Rate portion are not available in
               the London Inter-bank market; or

        (ii)   the LIBOR Rate does not accurately reflect the cost of a LIBOR 
               Rate portion.

2.8     CD RATE. The Borrower may elect to have all or portions of the principal
balance of the line of credit bear interest at the CD Rate plus nine-tenths
(.90) of a percentage point.

Designation of a CD Rate portion is subject to the following requirements:

(a)     The interest period during which the CD Rate will be in effect will be
        30, 60, 90, 180 or 365 days long (or, at the Bank's option, for other
        maturities requested by the Borrower).

(b)     Each CD Rate portion will be for an amount not less than Five Hundred
        Thousand Dollars ($500,000).

(c)     The Borrower may not elect a CD Rate with respect to any portion of the
        principal balance of the line of credit which is scheduled to be repaid
        before the last day of the applicable interest period.

(d)     Any portion of the principal balance of the line of credit already
        bearing interest at the CD Rate will not be converted to a different
        rate during its interest period.

(e)     The "CD Rate" means the interest rate determined by the following
        formula. (All amounts in the calculation will be determined by the Bank
        as of the first day of the interest period, and will be rounded upward
        to the nearest 1/100 of one percent.)

            CD Rate  =  CERTIFICATE OF DEPOSIT RATE  +  Assessment Rate
                        ---------------------------
                        (1.00 - Reserve Percentage)
        Where,

        (i)     "Assessment Rate" means the annual assessment rate that is
                payable to the Federal Deposit Insurance Corporation (or any
                successor) ("FDIC") by a member of the Bank Insurance Fund that
                is classified as well capitalized and within supervisory
                subgroup "A" (or a comparable successor assessment risk
                classification within the meaning of 12 C.F.R.ss.327.3(d)) for
                insuring time deposits at offices of such member in the United
                States. If the FDIC ceases to assess time deposits based upon
                such classifications, then the Bank shall, in its discretion,
                select an appropriate successor Assessment Rate from among the
                range of annual assessment rates that are payable to the FDIC by
                commercial banks for insuring time deposits at offices of such
                banks in the United States.

        (ii)    "Certificate of Deposit Rate" means the arithmetic average of
                the rates of interest bid by two or more certificate of deposit
                dealers for the purchase at face value of certificates of
                deposit:

                bullet    with a term equal to the applicable CD Rate interest 
                          period;
                bullet    in an amount equal to the CD Rate portion; and
                bullet    issued by major United States banks.

                The certificate of deposit dealers will be selected by the Bank
                and will be of recognized standing.

        (iii)   "Reserve Percentage" means the total of the maximum reserve
                percentages for determining the reserves to be maintained by
                member banks of the Federal Reserve System for:

                bullet    non-personal time deposits in the United States;

                bullet    in the  amount of One Hundred Thousand Dollars 
                          ($100,000) or more;

                bullet    with a term equal to the applicable CD Rate interest 
                          period.

                The percentage will be expressed as a decimal, and will include,
                but not be limited to, marginal, emergency, supplemental,
                special, and other reserve percentages.

                                       -5-

(f)     Each prepayment of a CD Rate portion, whether voluntary, by reason of
        acceleration or otherwise, will be accompanied by the amount of accrued
        interest on the amount prepaid, and a prepayment fee equal to the amount
        (if any) by which:

        (i)     the additional interest which would have been payable on the
                amount prepaid had it not been paid until the last day of the
                interest period, exceeds

        (ii)    the interest which would have been recoverable by the Bank by
                placing the amount prepaid on deposit in the certificate of
                deposit market for a period starting on the date on which it was
                prepaid and ending on the last day of the interest period for
                such portion.

(g)     The Bank will have no obligation to accept an election for a CD Rate
        portion if any of the following described events has occurred and is
        continuing:

        (i)     Dollar deposits in the principal amount, and for periods equal
                to the interest period, of a CD Rate portion are not available
                in the certificate of deposit market; or

        (ii)    the CD Rate does not accurately reflect the cost of a CD Rate
                portion.

2.9     OFFSHORE  RATE.  The  Borrower  may elect to have all or portions of 
the  principal  balance of the line of credit bear interest at the Offshore 
Rate plus nine-tenths (.90) of a percentage point.

Designation of an Offshore Rate portion is subject to the following
requirements:

(a)     The interest period during which the Offshore Rate will be in effect
        will be one year or less. The last day of the interest period will be
        determined by the Bank using the practices of the offshore dollar
        inter-bank market.

(b)     Each Offshore Rate portion will be for an amount not less than Five
        Hundred Thousand Dollars ($500,000) for interest periods of 30 days or
        longer. For shorter maturities, each Offshore Rate portion will be for
        an amount which, when multiplied by the number of days in the applicable
        interest period, is not less than fifteen million (15,000,000)
        dollar-days.

(c)     The "Offshore Rate" means the interest rate determined by the following
        formula, rounded upward to the nearest 1/100 of one percent. (All
        amounts in the calculation will be determined by the Bank as of the
        first day of the interest period.)

                    Offshore Rate = GRAND CAYMAN RATE
                                    ---------------------------
                                    (1.00 - Reserve Percentage)
        Where,

        (i)     "Grand Cayman Rate" means the interest rate (rounded upward to
                the nearest 1/16th of one percent) at which the Bank's Grand
                Cayman Branch, Grand Cayman, British West Indies, would offer
                U.S. dollar deposits for the applicable interest period to other
                major banks in the offshore dollar inter-bank markets.

        (ii)    "Reserve Percentage" means the total of the maximum reserve
                percentages for determining the reserves to be maintained by
                member banks of the Federal Reserve System for Eurocurrency
                Liabilities, as defined in the Federal Reserve Board Regulation
                D, rounded upward to the nearest 1/100 of one percent. The
                percentage will be expressed as a decimal, and will include, but
                not be limited to, marginal, emergency, supplemental, special,
                and other reserve percentages.

(d)     The Borrower may not elect an Offshore Rate with respect to any portion
        of the principal balance of the line of credit which is scheduled to be
        repaid before the last day of the applicable interest period.

(e)     Any portion of the principal balance of the line of credit already
        bearing interest at the Offshore Rate will not be converted to a
        different rate during its interest period.

                                       -6-

(f)     Each prepayment of an Offshore Rate portion, whether voluntary, by
        reason of acceleration or otherwise, will be accompanied by the amount
        of accrued interest on the amount prepaid, and a prepayment fee equal to
        the amount (if any) by which:

        (i)     the additional interest which would have been payable on the
                amount prepaid had it not been paid until the last day of the
                interest period, exceeds

        (ii)    the interest which would have been recoverable by the Bank by
                placing the amount prepaid on deposit in the offshore dollar
                market for a period starting on the date on which it was prepaid
                and ending on the last day of the interest period for such
                portion.

(g)     The Bank will have no obligation to accept an election for an Offshore
        Rate portion if any of the following described events has occurred and
        is continuing:

        (i)     Dollar deposits in the principal amount, and for periods equal
                to the interest period, of an Offshore Rate portion are not
                available in the offshore dollar inter-bank market; or

        (ii)    the Offshore Rate does not accurately reflect the cost of an
                Offshore Rate portion.

2.10    LETTERS OF CREDIT. This line of credit may be used for financing standby
letters of credit with a maximum maturity of 365 days but not to extend
beyond the Facility No. 1 Expiration Date. The amount of the letters of
credit outstanding at any one time (including amounts drawn on the letters
of credit and not yet reimbursed) may not exceed One Million Dollars
($1,000,000).

The Borrower agrees:

(a)     any sum drawn under a letter of credit may, at the option of the Bank,
        be added to the principal amount outstanding under this Agreement. The
        principal amount will bear interest and be due as described elsewhere in
        this Agreement.

(b)     if there is a default under this Agreement, to immediately prepay and
        make the Bank whole for any outstanding letters of credit.

(c)     the issuance of any letter of credit and any amendment to a letter of
        credit is subject to the Bank's written approval and must be in form and
        content satisfactory to the Bank and in favor of a beneficiary
        acceptable to the Bank.

(d)     to sign the Bank's form Application and Agreement for Standby Letter 
        of Credit.

(e)     to pay any issuance and/or other fees that the Bank notifies the
        Borrower will be charged for issuing and processing letters of credit
        for the Borrower.

(f)     to allow the Bank to automatically  charge its checking account for 
        applicable fees,  discounts,  and other charges.

3.      FACILITY NO. 2: LINE OF CREDIT AMOUNT AND TERMS

3.1     LINE OF CREDIT AMOUNT.

(a)     During the availability period described below, the Bank will provide a
        line of credit to the Borrower. The amount of the line of credit (the
        "Facility 2 Commitment") is Five Hundred Thousand Dollars
        ($500,000).

(b)     This is a non-revolving line of credit for equipment loans. Any
        amount borrowed, even if repaid before the end of the availability
        period, permanently reduces the remaining available line of credit.

(c)     Each equipment loan shall be used to purchase equipment for use in the
        Borrower's business. All equipment acquired with the proceeds of such
        advances shall be free and clear of any security interests, liens,
        encumbrances or rights of others except the security interests of the
        Bank under any security agreements required under this Agreement. Each
        request for an equipment loan shall be accompanied by a copy of the
        purchase order or invoice for the equipment to be purchased with the
        proceeds of the 

                                       -7-

        advance. The amount of each advance shall not exceed 80% of the 
        purchase price of such equipment if it is new, or 80% of the 
        liquidation value of used equipment determined by an appraiser approved
        by the Bank.

(d)     Each equipment loan must be for at least One Hundred Thousand Dollars
        ($100,000), or for the amount of the remaining available line of credit,
        if less.

(e)     The Borrower will execute a promissory note in form and substance
        satisfactory to the Bank at the time each equipment loan is made and
        each equipment loan shall be repaid at the times and in the amounts set
        forth in such promissory note.

(f)     The Borrower agrees not to permit the outstanding principal balance of
        the line of credit to exceed the Facility 2 Commitment. Currently,
        one note exists under this line of credit in the amount of $281,778.71.

3.2     AVAILABILITY PERIOD. The line of credit is available between the date of
this Agreement and October 1, 1998 (the "Facility No. 2 Expiration Date") unless
the Borrower is in default.

3.3     INTEREST RATE. The interest rate is the Bank's Reference Rate plus
one-quarter (.25) of a percentage point.

3.4     REPAYMENT TERMS.

(a)     The Borrower will pay interest on November 1, 1995, and then monthly
        thereafter until payment in full of any principal outstanding under this
        line of credit.

(b)     The principal amount of each equipment loan will be amortized for a term
        of sixty (60) months and repaid in such monthly installments
        commencing with the first day of the month following the date the
        equipment loan is made, provided however, that on the Facility No. 2
        Expiration Date, the Borrower will repay the remaining principal balance
        plus any interest then due.

(c)     The Borrower may prepay any equipment loan in full or in part at any
        time. The prepayment will be applied to the most remote installment of
        principal due under this Agreement.

4.      FEES AND EXPENSES

4.1 FACILITY NO. 1 LOAN FEE. The Borrower agrees to pay a Fifty Thousand Dollar
($50,000) fee due on or before the date of execution of this Agreement.

4.2     EXPENSES.

(a)     The Borrower agrees to immediately repay the Bank for expenses that
        include, but are not limited to, filing, recording and search fees,
        appraisal fees, title report fees, and documentation fees.

(b)     The Borrower agrees to reimburse the Bank for any expenses it incurs in
        the preparation of this Agreement and any agreement or instrument
        required by this Agreement. Expenses include, but are not limited to,
        reasonable attorneys' fees, including any allocated costs of the Bank's
        in-house counsel.

(c)     The Borrower agrees to reimburse the Bank for the cost of periodic
        audits and appraisals of the personal property collateral securing
        this Agreement, at such intervals as the Bank may reasonably require.
        The audits and appraisals may be performed by employees of the Bank or
        by independent appraisers. As long as the Borrower is not in default,
        the maximum amount which the Borrower will be required to reimburse the
        Bank for all audits and appraisals during any calendar year will be
        limited to Four Thousand Five Hundred Dollars ($4,500).

5.      COLLATERAL

5.1     PERSONAL PROPERTY. The Borrower's obligations to the Bank under this
Agreement will be secured by personal property the Borrower now owns or will own
in the future as listed below. The collateral is further defined in security
agreement(s) executed by the Borrower. In addition, all personal property
collateral securing 

                                       -8-

this Agreement shall also secure all other present and future obligations of the
Borrower to the Bank (excluding any consumer credit covered by the federal Truth
in Lending law, unless the Borrower has otherwise agreed in writing). All
personal property collateral securing any other present or future obligations of
the Borrower to the Bank shall also secure this Agreement.

(a)     Machinery, equipment, and fixtures.

(b)     Inventory.

(c)     Receivables.

6.      DISBURSEMENTS, PAYMENTS AND COSTS

6.1     REQUESTS FOR CREDIT. Each request for an extension of credit will be 
made in writing in a manner acceptable to the Bank, or by another means 
acceptable to the Bank.

6.2     DISBURSEMENTS AND PAYMENTS. Each disbursement by the Bank and each 
payment by the Borrower will be:

(a)     made at the Bank's branch (or other location) selected by the Bank from
        time to time;

(b)     made for the account of the Bank's branch selected by the Bank from 
        time to time;

(c)     made in immediately available funds, or such other type of funds 
        selected by the Bank;

(d)     evidenced  by  records  kept by the  Bank.  In  addition,  the Bank 
        may,  at its  discretion,  require  the  Borrower to sign one or more 
        promissory notes.

6.3     TELEPHONE AUTHORIZATION.

(a)     The Bank may honor telephone instructions for advances or repayments or
        for the designation of optional interest rates given by any one of the
        individuals authorized to sign loan agreements on behalf of the
        Borrower, or any other individual designated by any one of such
        authorized signers.

(b)     Advances will be deposited in and repayments will be withdrawn from the
        Borrower's account number 14503-00097, or such other of the Borrower's
        accounts with the Bank as designated in writing by the Borrower.

(c)     The Borrower indemnifies and excuses the Bank (including its officers,
        employees, and agents) from all liability, loss, and costs in connection
        with any act resulting from telephone instructions it reasonably
        believes are made by any individual authorized by the Borrower to give
        such instructions. This indemnity and excuse will survive this
        Agreement's termination.

6.4     DIRECT DEBIT (PRE-BILLING).

(a)     The Borrower agrees that the Bank will debit the Borrower's deposit
        account number 14503-00097, or such other of the Borrower's accounts
        with the Bank as designated in writing by the Borrower (the "Designated
        Account") on the date each payment of principal and interest and any
        fees from the Borrower becomes due (the "Due Date"). If the Due Date is
        not a banking day, the Designated Account will be debited on the next
        banking day.

(b)     Approximately 1 day prior to each Due Date, the Bank will mail to the
        Borrower a statement of the amounts that will be due on that Due Date
        (the "Billed Amount"). The calculation will be made on the assumption
        that no new extensions of credit or payments will be made between the
        date of the billing statement and the Due Date, and that there will be
        no changes in the applicable interest rate.

(c)     The Bank will debit the Designated Account for the Billed Amount,
        regardless of the actual amount due on that date (the "Accrued Amount").
        If the Billed Amount debited to the Designated Account differs from the
        Accrued Amount, the discrepancy will be treated as follows:

                                       -9-

        (i)     If the Billed Amount is less than the Accrued Amount, the Billed
                Amount for the following Due Date will be increased by the
                amount of the discrepancy. The Borrower will not be in default
                by reason of any such discrepancy.

        (ii)    If the Billed Amount is more than the Accrued Amount, the Billed
                Amount for the following Due Date will be decreased by the
                amount of the discrepancy.

        Regardless of any such discrepancy, interest will continue to accrue
        based on the actual amount of principal outstanding without compounding.
        The Bank will not pay the Borrower interest on any overpayment.

(d)     The Borrower will maintain sufficient funds in the Designated Account to
        cover each debit. If there are insufficient funds in the Designated
        Account on the date the Bank enters any debit authorized by this
        Agreement, the debit will be reversed.

6.5     BANKING DAYS. Unless otherwise provided in this Agreement, a banking 
day is a day other than a Saturday or a Sunday on which the Bank is open for 
business in California. For amounts bearing interest at an offshore rate 
(if any), a banking day is a day other than a Saturday or a Sunday on which the
Bank is open for business in California and dealing in offshore dollars. All 
payments and disbursements which would be due on a day which is not a banking
day will be due on the next banking day. All payments received on a day which is
not a banking day will be applied to the credit on the next banking day.

For amounts bearing interest at a LIBOR Rate, a banking day is a day other than
a Saturday or a Sunday on which the Bank is open for business in California, New
York and London and dealing in offshore dollars.

6.6     TAXES. The Borrower will not deduct any taxes from any payments it 
makes to the Bank. If any government authority imposes any taxes on any payments
made by the Borrower, the Borrower will pay the taxes and will also pay to the
Bank, at the time interest is paid, any additional amount which the Bank
specifies as necessary to preserve the after-tax yield the Bank would have
received if such taxes had not been imposed. Upon request by the Bank, the
Borrower will confirm that it has paid the taxes by giving the Bank official tax
receipts (or notarized copies) within 30 days after the due date. However, the
Borrower will not pay the Bank's net income taxes.

6.7     ADDITIONAL COSTS. The Borrower will pay the Bank, on demand, for the 
Bank's reasonable costs or losses arising from any statute or regulation, or any
request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The costs and losses will be
allocated to the loan in a manner determined by the Bank, using any reasonable
method. The costs include the following:

(a)     any reserve or deposit requirements; and

(b)     any capital requirements relating to the Bank's assets and commitments
        for credit.

6.8     INTEREST CALCULATION. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day year and
the actual number of days elapsed. This results in more interest or a higher fee
than if a 365-day year is used.

6.9     INTEREST ON LATE PAYMENTS. At the Bank's sole option in each instance,
any amount not paid when due under this Agreement (including interest) shall
bear interest from the due date at the Bank's Reference Rate plus 1.00
percentage point This may result in compounding of interest.

6.10    DEFAULT RATE. Upon the occurrence and during the continuation of any
default under this Agreement, advances under this Agreement will at the option
of the Bank bear interest at a rate per annum which is 2.00 percentage points
higher than the rate of interest otherwise provided under this Agreement. This
will not constitute a waiver of any event of default.

6.11    OVERDRAFTS. At the Bank's sole option in each instance, the Bank may 
do one of the following :

(a)     The Bank may make advances under this Agreement to prevent or cover an
        overdraft on any account of the Borrower with the Bank. Each such
        advance will accrue interest from the date of the advance or the 

                                       -10-

        date on which the account is overdrawn, whichever occurs first, at the 
        interest rate described in this Agreement.

(b)     The Bank may reduce the amount of credit otherwise available under this
        Agreement by the amount of any overdraft on any account of the Borrower
        with the Bank.

This paragraph shall not be deemed to authorize the Borrower to create
overdrafts on any of the Borrower's accounts with the Bank.

6.12    PAYMENTS IN KIND. The proceeds of collections of the Borrower's accounts
receivable, when received by the Bank in kind, shall be credited to interest,
principal, and other sums owed to the Bank under this Agreement in the order and
proportion determined by the Bank in its sole discretion. All such credits will
be conditioned upon collection and any returned items may, at the Bank's option,
be charged to the Borrower.

7.      CONDITIONS

The Bank must receive the following items, in form and content acceptable to the
Bank, before it is required to extend any credit to the Borrower under this
Agreement:

7.1     AUTHORIZATIONS. Evidence that the execution, delivery and performance 
by the Borrower (and each guarantor) of this Agreement and any instrument or
agreement required under this Agreement have been duly authorized.

7.2     SECURITY AGREEMENTS. Signed original security agreements, assignments,
financing statements and fixture filings (together with collateral in which the
Bank requires a possessory security interest), which the Bank requires.

7.3     EVIDENCE OF PRIORITY. Evidence that security interests and liens in 
favor of the Bank are valid, enforceable, and prior to all others' rights and
interests, except those the Bank consents to in writing. All title documents for
motor vehicles must show the Bank's interest.

7.4     LANDLORD'S WAIVER AND CONSENT. For any personal property collateral 
located on real property which is subject to a mortgage or deed of trust or
which is not owned by the Borrower, a Landlord's Waiver and Consent from the
owner of the real property and the holder of any mortgage or deed of trust as
set forth on the attached Schedule "A."

7.5     INSURANCE. Evidence of insurance coverage, as required in the 
"Covenants" section of this Agreement.

7.6     SUBORDINATION AGREEMENTS. Subordination agreements in favor of the Bank
signed by Rheem Manufacturing Company and Watsco, Inc.

7.7     APPRAISALS. Appraisals prepared by appraisers acceptable to the Bank 
with respect to the liquidation value of the Borrower's equipment as required
under Paragraph 3.1 of this Agreement.

7.8     OTHER REQUIRED DOCUMENTATION. An inventory repurchase agreement, in form
satisfactory to the Bank, provided by PACE Industries, Inc., and Rheem
Manufacturing Company.

7.9     CONDITIONS TO EACH EQUIPMENT LOAN ADVANCE. Before each extension of 
credit under the Facility No. 2, including the first, a promissory note pursuant
to paragraph 3.1(e) above.

7.10    OTHER ITEMS.  Any other items that the Bank reasonably requires.

8.      REPRESENTATIONS AND WARRANTIES

When the Borrower signs this Agreement, and until the Bank is repaid in full,
the Borrower makes the following representations and warranties. Each request
for an extension of credit constitutes a renewed representation.

8.1     ORGANIZATION  OF  BORROWER.  The Borrower  is a  corporation  duly 
formed and existing  under the laws of the state where organized.

                                       -11-

8.2     AUTHORIZATION. This Agreement, and any instrument or agreement required
hereunder, are within the Borrower's powers, have been duly authorized, and do
not conflict with any of its organizational papers.

8.3     ENFORCEABLE AGREEMENT. This Agreement is a legal, valid and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and any instrument or agreement required hereunder, when executed and
delivered, will be similarly legal, valid, binding and enforceable.

8.4     GOOD  STANDING.  In each state in which the  Borrower  does  business,
it is properly licensed, in good standing, and, where required, in compliance
with fictitious name statutes.

8.5     NO  CONFLICTS.  To the  best of  Borrower's  knowledge  this  Agreement
does not conflict with any law, agreement, or obligation by which the Borrower
is bound.

8.6     FINANCIAL  INFORMATION.  All  financial  and other  information  that 
has been or will be supplied to the Bank, is:

(a)     sufficiently  complete  to give  the Bank  accurate  knowledge  of the
        Borrower's  (and  any  guarantor's) financial condition.

(b)     in form and content required by the Bank.

(c)     in compliance with all government regulations that apply.

8.7     LAWSUITS. There is no lawsuit, tax claim or other dispute pending or
threatened against the Borrower which, if lost, would impair the Borrower's
financial condition or ability to repay the loan, except as have been disclosed
in writing to the Bank.

8.8     COLLATERAL. All collateral required in this Agreement is owned by the
grantor of the security interest free of any title defects or any liens or
interests of others.

8.9     PERMITS, FRANCHISES. The Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged.

8.10    OTHER  OBLIGATIONS.  The  Borrower is not in default on any  obligation
for borrowed money, any purchase money obligation or any other material lease,
commitment, contract, instrument or obligation.

8.11    INCOME TAX  RETURNS.  The  Borrower  has no knowledge  of any pending
assessments or adjustments of its income tax for any year.

8.12    NO EVENT OF DEFAULT. To the best of Borrower's knowledge there is no 
event which is, or with notice or lapse of time or both would be, a default
under this Agreement.

8.13    MERCHANTABLE  INVENTORY.   All  inventory  which  is  included  in  the
Borrowing Base is of good and merchantable quality and free from defects.

8.14    ERISA PLANS.

(a)     To the best of Borrower's knowledge the Borrower has fulfilled its
        obligations, if any, under the minimum funding standards of ERISA and
        the Code with respect to each Plan and is in compliance in all material
        respects with the presently applicable provisions of ERISA and the Code,
        and has not incurred any liability with respect to any Plan under Title
        IV of ERISA.

(b)     To the best of Borrower's knowledge no reportable event has occurred
        under Section 4043(b) of ERISA for which the PBGC requires 30 day
        notice.

(c)     No action by the Borrower to terminate or withdraw from any Plan has
        been taken and no notice of intent to terminate a Plan has been filed
        under Section 4041 of ERISA.

                                       -12-

(d)     No proceeding has been commenced with respect to a Plan under Section
        4042 of ERISA, and no event has occurred or condition exists which might
        constitute grounds for the commencement of such a proceeding.

(e)     The following terms have the meanings indicated for purposes of this 
        Agreement:

        (i)     "Code" means the Internal Revenue Code of 1986, as amended 
                from time to time.

        (ii)    "ERISA" means the Employee Retirement Income Act of 1974, as
                amended from time to time.

        (iii)   "PBGC" means the Pension Benefit Guaranty Corporation
                established pursuant to Subtitle A of Title IV of ERISA.

        (iv)    "Plan" means any employee pension benefit plan maintained or
                contributed to by the Borrower and insured by the Pension
                Benefit Guaranty Corporation under Title IV of ERISA.

8.15    LOCATION OF BORROWER. The Borrower's place of business (or, if the 
Borrower has more than one place of business, its chief executive office) is
located at the address listed under the Borrower's signature on this Agreement.

9.      COVENANTS

The Borrower agrees, so long as credit is available under this Agreement and
until the Bank is repaid in full:

9.1     USE OF  PROCEEDS  FOR  FACILITY  NO.  1. To use the  proceeds  of the
revolving line of credit only for operating capital.

9.2     USE OF  PROCEEDS  FOR  FACILITY  NO. 2. To use the  proceeds of the  
non-revolving line of credit only for purchasing equipment.

9.3     FINANCIAL  INFORMATION.  To provide the following financial  
information and statements and such additional information as requested by the
Bank from time to time:

(a)     Within 120 days of the Borrower's fiscal year end, the Borrower's annual
        financial statements accompanied by a management letter. These
        financial statements must be audited (with an unqualified
        opinion) by a Certified Public Accountant ("CPA") acceptable to the
        Bank.

(b)     Within 30 days of the period's end, the Borrower's monthly
        financial statements. These financial statements may be Borrower
        prepared.

(c)     Within 60 days of the Borrower's fiscal year end, the Borrower's annual
        projections prepared on a monthly basis including a balance sheet,
        income statement and cash flows.

(d)     Within the period(s) provided in (a) and (b) above, a compliance
        certificate of the Borrower signed by the Chief Financial Officer or the
        President of the Borrower setting forth (i) the information and
        computations (in sufficient detail) to establish that the Borrower is in
        compliance with all financial covenants at the end of the period covered
        by the financial statements then being furnished and (ii) whether there
        existed as of the date of such financial statements and whether here
        exists as of the date of the certificate, any default under this
        Agreement and, if any such default exists, specifying the nature thereof
        and the action the Borrower is taking and proposes to take with respect
        thereto.

(e)     A borrowing certificate setting forth the respective amounts of
        Acceptable Receivables and Acceptable Inventory as of the last day of
        each month within twenty (20) days after month end, and if requested by
        the Bank copies of the invoices or the record of invoices from the
        Borrower's sales journal for such Acceptable Receivables and copies of
        the delivery receipts, purchase orders, shipping instructions, bills of
        lading and other documentation pertaining to such Acceptable
        Receivables.

(f)     Statements showing an aging and reconciliation of the Borrower's
        receivables within twenty (20) days after the end of each month.

                                       -13-

(g)     A statement showing an aging of accounts payable within twenty (20)
        days after the end of each month.

(h)     If the Bank requires the Borrower to deliver the proceeds of accounts
        receivable to the Bank upon collection by the Borrower, a schedule of
        the amounts so collected and delivered to the Bank.

(i)     An inventory listing and a shrinkage report, within twenty (20) days
        after the end of each month; the listing must include a description of
        the inventory, its location and cost, and such other information as the
        Bank may require. The shrinkage report may be reported on the borrowing
        certificate.

(j)     A listing of the names and addresses of all debtors obligated upon the
        Borrower's accounts receivable within thirty (30) days after the end of
        each fiscal year.

(k)     Promptly upon the Bank's request, such other statements, lists of
        property and accounts, budgets, forecasts or reports as to the Borrower
        and as to each guarantor of the Borrower's obligations to the Bank as
        the Bank may request.

(l)     Copies of Watsco, Inc.'s 10-K Annual Report, Form 10-Q Quarterly Report
        and Form 8-K Current Report within 30 days after the date of filing with
        the Securities and Exchange Commission.

9.4     QUICK  RATIO.  To  maintain  a ratio of quick  assets  to  current  
liabilities  of at least  .40:1.0, measured on a quarterly basis.

"Quick assets" means cash, short-term cash investments, net trade receivables
and marketable securities not classified as long-term investments. For the
purpose of calculating this ratio, current liabilities shall include long term
debt owed to the Bank, outstandings under the Facility No. 1 Commitment

9.5     TANGIBLE NET WORTH.  To maintain tangible net worth equal to at least 
the sum of the following:

(a)     Eleven Million Dollars ($11,000,000); plus

(b)     the sum of 35% of net income after income taxes (without subtracting
        losses) earned in each quarterly accounting period commencing after
        December 31, 1995.

(c)     measured on an annual basis.

"Tangible net worth" means the gross book value of the Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles, and
monies due from affiliates, officers, directors or shareholders of the
Borrower) plus debt subordinated to the Bank in a manner acceptable to the
Bank (using the Bank's standard form) less total liabilities, including but not
limited to accrued and deferred income taxes, and any reserves against assets.

9.6     TOTAL  LIABILITIES  TO  TANGIBLE  NET  WORTH  RATIO.  To  maintain  a 
ratio of total liabilities not subordinated to tangible net worth not exceeding
2.50:1.0, measured on a quarterly basis.

"Total liabilities not subordinated" means the sum of current liabilities plus
long term liabilities, excluding debt subordinated to the Borrower's
obligations to the Bank in a manner acceptable to the Bank, using the Bank's
standard form.

9.7     DEBT SERVICE COVERAGE RATIO.  To maintain a Debt Coverage Ratio of at 
least 1.35:1.0.

"Debt Service Coverage Ratio" means the ratio of the sum of net income after
taxes, plus interest expense, non-cash expenditures, depreciation and
amortization plus new shareholder equity injections and new subordinated debt
less dividends divided by the sum of current portion of long term debt and
capitalized leases plus interest expense. This ratio will be calculated at
the end of each fiscal quarter, using the results of that quarter and each of
the 3 immediately preceding quarters. The current portion of long term debt will
be measured as of the last day of the preceding fiscal year.

                                       -14-

9.8     LIMITATION ON LOSSES. Not incur cumulative losses of more than Five 
Hundred Thousand Dollars ($500,000) in any one fiscal year, measured on a
quarterly basis.

9.9     OTHER DEBTS. Not to have outstanding or incur any direct or contingent
debts or lease obligations (other than those to the Bank), or become liable
for the debts of others without the Bank's written consent.

This does not prohibit:

(a)     Acquiring goods, supplies, or merchandise on normal trade credit.

(b)     Endorsing negotiable instruments received in the usual course of 
        business.

(c)     Obtaining surety bonds in the usual course of business.

(d)     Additional debts and lease obligations for the acquisition of fixed or
        capital assets, to the extent permitted elsewhere in this Agreement.

(e)     Additional debts and lease obligations for business purposes which
        do not exceed a total principal amount of One Million One Hundred
        Thousand Dollars ($1,100,000) in any one fiscal year.

(f)     Debts subordinated to the Bank in a form and substance acceptable to 
        the Bank.

(g)     Direct or contingent debt or lease obligations currently existing.

9.10    OTHER LIENS. Not to create,  assume, or allow any security  interest 
or lien (including judicial liens) on property the Borrower now or later owns,
except:

(a)     Deeds of trust and security agreements in favor of the Bank.

(b)     Liens resulting from those obligations allowed under paragraph 9.8 (e).

(c)     Liens for taxes not yet due.

(d)     Liens currently existing.

9.11    CAPITAL EXPENDITURES. Not to spend or incur obligations (excluding
capital leases) for more than Five Hundred Thousand Dollars ($500,000) in any
single fiscal year to acquire fixed or capital assets.

9.12    DIVIDENDS.  Not to declare or pay any dividends on any of its shares 
in excess of:

(a)     One Hundred Thirty Thousand Dollars ($130,000) on preferred stock; and

(b)     50% of the net income after taxes for the preceding year on common 
        stock.

9.13    NOTICES TO BANK.  To promptly notify the Bank in writing of:

(a)     any lawsuit over Five Hundred Thousand Dollars ($500,000) against 
        the Borrower (or any guarantor).

(b)     any substantial dispute between the Borrower (or any guarantor) and 
        any government authority.

(c)     any failure to comply with this Agreement.

(d)     any material adverse change in the Borrower's (or any guarantor's) 
        financial condition or operations.

(e)     any change in the Borrower's name, legal structure, place of business,
        or chief executive office if the Borrower has more than one place of
        business.

9.14    BOOKS AND RECORDS.  To maintain adequate books and records.

9.15    AUDITS. To allow the Bank and its agents to inspect the Borrower's
properties and examine, audit and make copies of books and records at any
reasonable time. If any of the Borrower's properties, books or records

                                       -15-

are in the possession of a third party, the Borrower authorizes that third 
party to permit the Bank or its agents to have access to perform inspections or
audits and to respond to the Bank's requests for information concerning such
properties, books and records.

9.16    COMPLIANCE WITH LAWS. To comply with the laws (including any fictitious
name statute), regulations, and orders of any government body with authority
over the Borrower's business.

9.17    PRESERVATION OF RIGHTS.  To maintain and preserve all rights,  
privileges,  and franchises the Borrower now has.

9.18    MAINTENANCE OF PROPERTIES. To make any repairs, renewals, or 
replacements to keep the Borrower's properties in good working condition.

9.19    PERFECTION OF LIENS. To help the Bank perfect and protect its security
interests and liens, and reimburse it for related costs it incurs to protect 
its security interests and liens.

9.20    COOPERATION.  To take any action requested by the Bank to carry out 
the intent of this Agreement.

9.21    INSURANCE.

(a)     INSURANCE COVERING COLLATERAL. To maintain all risk property damage
        insurance policies covering the tangible property comprising the
        collateral. Each insurance policy must be in an amount acceptable to
        the Bank. The insurance must be issued by an insurance company
        acceptable to the Bank and must include a lender's loss payable
        endorsement in favor of the Bank in a form acceptable to the Bank.

(b)     GENERAL BUSINESS INSURANCE. To maintain insurance satisfactory to the 
        Bank as to amount, nature and carrier covering property damage 
        (including loss of use and occupancy) to any of the Borrower's 
        properties, public liability insurance including coverage for 
        contractual liability, product liability and workers' compensation, 
        and any other insurance which is usual for the Borrower's business.

(c)     EVIDENCE OF INSURANCE. Upon the request of the Bank, to deliver to the
        Bank a copy of each insurance policy, or, if permitted by the Bank, a
        certificate of insurance listing all insurance in force.

9.22    ADDITIONAL NEGATIVE COVENANTS.  Not to, without the Bank's written 
consent:

(a)     engage in any business activities substantially different from the 
Borrower's present business.

(b)     liquidate or dissolve the Borrower's business.

(c)     enter into any consolidation, merger, pool, joint venture, syndicate, 
        or other combination.

(d)     lease, or dispose of all or a substantial part of the Borrower's 
        business or the Borrower's assets.

(e)     acquire or purchase a business or its assets for a consideration,
        including assumption of debt, in excess of Two Hundred Fifty Thousand
        Dollars ($250,000) in any fiscal year, provided however, that the
        acquisitions entail no assumption of direct or contingent obligations
        of the acquired entities, their employees or principals.

(f)     sell or otherwise dispose of any material assets for less than fair
        market value, or enter into any sale and leaseback agreement covering
        any of its fixed or capital assets.

(g)     voluntarily suspend its business for more than 5 days in any 30 day 
        period.

9.23    ERISA PLANS.  To give prompt written notice to the Bank of:

(a)     The occurrence of any reportable event under  Section 4043(b)  of 
        ERISA for which the PBGC  requires 30 day notice.

(b)     Any action by the Borrower to terminate or withdraw from a Plan or the
        filing of any notice of intent to terminate under Section 4041 of ERISA.

                                       -16-

(c)     Any notice of noncompliance made with respect to a Plan under 
        Section 4041(b) of ERISA.

(d)     The commencement of any proceeding with respect to a Plan under 
        Section 4042 of ERISA.

10.     HAZARDOUS WASTE INDEMNIFICATION

The Borrower will indemnify and hold harmless the Bank from any loss or
liability directly or indirectly arising out of the use, generation,
manufacture, production, storage, release, threatened release, discharge,
disposal or presence of a hazardous substance. This indemnity will apply whether
the hazardous substance is on, under or about the Borrower's property or
operations or property leased to the Borrower. The indemnity includes but is not
limited to attorneys' fees (including the reasonable estimate of the allocated
cost of in-house counsel and staff). The indemnity extends to the Bank, its
parent, subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys and assigns. For these purposes, the term "hazardous
substances" means any substance which is or becomes designated as "hazardous" or
"toxic" under any federal, state or local law. This indemnity will survive 
repayment of the Borrower's obligations to the Bank.

11.     DEFAULT

If any of the following events occur, the Bank may do one or more of the
following: declare the Borrower in default, stop making any additional credit
available to the Borrower, and require the Borrower to repay its entire debt
immediately and without prior notice. If an event of default occurs under the
paragraph entitled "Bankruptcy," below, with respect to the Borrower, then, the
entire debt outstanding under this Agreement will automatically become due
immediately.

11.1    FAILURE TO PAY. The Borrower  fails to make a payment  under this  
Agreement  within 15 days after the date when due.

11.2    LIEN PRIORITY. The Bank fails to have an enforceable first lien 
(except for any prior liens to which the Bank has consented in writing) on or 
security interest in any property given as security for this loan.

11.3    FALSE INFORMATION.  The Borrower has given the Bank false or misleading
information or representations.

11.4    BANKRUPTCY.  The  Borrower  (or any  guarantor)  files a bankruptcy
petition, a bankruptcy petition is filed against the Borrower (or any
guarantor), or the Borrower (or any guarantor) makes a general assignment for
the benefit of creditors.

11.5    RECEIVERS.  A receiver or similar official is appointed for the
Borrower's (or any guarantor's) business, or the business is terminated.

11.6    JUDGMENTS. Any judgments or arbitration awards are entered against the
Borrower (or any guarantor); or the Borrower (or any guarantor) enters into any
settlement agreements with respect to any litigation or arbitration, in an
aggregate amount of Two Hundred Fifty Thousand Dollars ($250,000) or more in
excess of any insurance coverage, and such judgment or arbitration award shall
remain undischarged, unvacated, unbonded or unstayed for a period of 45 days or
in any event 5 days prior to the time of any proposed sale under any such
judgment.

11.7    GOVERNMENT  ACTION.  Any  government  authority  takes action that the
Bank believes materially adversely affects the Borrower's (or any guarantor's)
financial condition or ability to repay.

11.8    MATERIAL  ADVERSE  CHANGE.  A  material  adverse  change  occurs  in 
the Borrower's (or any guarantor's) financial condition, properties or
prospects, or ability to repay the loan.

11.9    CROSS-DEFAULT. Any default occurs under any agreement in connection with
any credit in excess of One Hundred Thousand Dollars ($100,000) any Borrower (or
any guarantor) has obtained from anyone else or which any Borrower (or any
guarantor) has guaranteed.

                                       -17-

11.10   DEFAULT UNDER  RELATED  DOCUMENTS.  Any guaranty,  subordination  
agreement, security agreement, or other document required by this Agreement is
violated or no longer in effect.

11.11   OTHER BANK AGREEMENTS. The Borrower (or any guarantor) fails to meet the
conditions of, or fails to perform any obligation under any other agreement the
Borrower (or any guarantor) has with the Bank or any affiliate of the bank,
which failure continues unremedied for more than 15 days following written
notice from the Bank.

11.12   ERISA PLANS. The occurrence of any one or more of the following events
with respect to the Borrower, provided such event or events could reasonably be
expected, in the judgment of the Bank, to subject the Borrower to any tax,
penalty or liability (or any combination of the foregoing) which, in the
aggregate, could have a material adverse effect on the financial condition of
the Borrower with respect to a Plan:

(a)     A reportable event shall occur with respect to a Plan which is, in the
        reasonable judgment of the Bank likely to result in the termination of
        such Plan for purposes of Title IV of ERISA.

(b)     Any Plan termination (or commencement of proceedings to terminate a
        Plan) or the Borrower's full or partial withdrawal from a Plan.

11.13   OTHER BREACH UNDER AGREEMENT. The Borrower fails to meet the conditions
of, or fails to perform any obligation under, any term of this Agreement not
specifically referred to in this Article. If, in the Bank's opinion, the breach
is capable of being remedied, the breach will not be considered an event of
default under this Agreement for a period of 15 days after the date on which the
Bank gives written notice to such Borrower; provided, however, that the Bank
will not be obligated to extend any additional credit to the Borrowers during
that period.

11.14   CHANGE OF OWNERSHIP.  Watsco, Inc. and Rheem  Manufacturing  Company
shall at all times fail to own 100% of the capital stock of the Borrower.

12.     ENFORCING THIS AGREEMENT; MISCELLANEOUS

12.1    GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be made under
generally accepted accounting principles, consistently applied.

12.2    CALIFORNIA LAW. This Agreement is governed by California law.

12.3    SUCCESSORS AND ASSIGNS. This Agreement is binding on the Borrower's 
and the Bank's successors and assignees. The Borrower agrees that it may not
assign this Agreement without the Bank's prior consent. The Bank may sell
participations in or assign this loan with the Borrower's consent, and which
consent shall not be unreasonably withheld, and may exchange financial
information about the Borrower with actual or potential participants or
assignees; provided that such actual or potential participants or assignees
shall agree to treat all financial information exchanged as confidential. If a
participation is sold or the loan is assigned, the purchaser will have the right
of set-off against the Borrower.

12.4    ARBITRATION.

(a)     This paragraph concerns the resolution of any controversies or claims
        between the Borrower and the Bank, including but not limited to those
        that arise from:

        (i)     This Agreement (including any renewals, extensions or 
                modifications of this Agreement);

        (ii)    Any document, agreement or procedure related to or delivered 
                in connection with this Agreement;

        (iii)   Any violation of this Agreement; or

        (iv)    Any claims for damages resulting from any business conducted
                between the Borrower and the Bank, including claims for injury
                to persons, property or business interests (torts).

                                       -18-

(b)     At the request of the Borrower or the Bank, any such controversies or
        claims will be settled by arbitration in accordance with the United
        States Arbitration Act. The United States Arbitration Act will apply
        even though this Agreement provides that it is governed by California
        law.

(c)     Arbitration  proceedings will be administered by the American  
        Arbitration  Association and will be subject to its commercial rules 
        of arbitration.

(d)     For purposes of the application of the statute of limitations, the
        filing of an arbitration pursuant to this paragraph is the equivalent of
        the filing of a lawsuit, and any claim or controversy which may be
        arbitrated under this paragraph is subject to any applicable statute of
        limitations. The arbitrators will have the authority to decide whether
        any such claim or controversy is barred by the statute of limitations
        and, if so, to dismiss the arbitration on that basis.

(e)     If there is a dispute as to whether an issue is arbitrable, the
        arbitrators will have the authority to resolve any such dispute.

(f)     The decision that results from an arbitration  proceeding  may be 
        submitted to any authorized  court of law to be confirmed and enforced.

(g)     The procedure described above will not apply if the controversy or
        claim, at the time of the proposed submission to arbitration, arises
        from or relates to an obligation to the Bank secured by real property
        located in California. In this case, both the Borrower and the Bank must
        consent to submission of the claim or controversy to arbitration. If
        both parties do not consent to arbitration, the controversy or claim
        will be settled as follows:

        (i)     The Borrower and the Bank will designate a referee (or a panel
                of referees) selected under the auspices of the American
                Arbitration Association in the same manner as arbitrators are
                selected in Association-sponsored proceedings;

        (ii)    The designated referee (or the panel of referees) will be
                appointed by a court as provided in California Code of Civil
                Procedure Section 638 and the following related sections;

        (iii)   The  referee  (or the  presiding  referee of the  panel)  will
                be an active  attorney  or a retired judge; and

        (iv)    The award that results from the decision of the referee (or the
                panel) will be entered as a judgment in the court that appointed
                the referee, in accordance with the provisions of California
                Code of Civil Procedure Sections 644 and 645.

(h)     This provision does not limit the right of the Borrower or the Bank to:

        (i)     exercise self-help remedies such as setoff;

        (ii)    foreclose against or sell any real or personal property 
                collateral; or

        (iii)   act in a court of law, before, during or after the arbitration
                proceeding to obtain:

                (A)     an interim remedy; and/or

                (B)     additional or supplementary remedies.

(i)     The pursuit of or a successful action for interim, additional or
        supplementary remedies, or the filing of a court action, does not
        constitute a waiver of the right of the Borrower or the Bank, including
        the suing party, to submit the controversy or claim to arbitration if
        the other party contests the lawsuit. However, if the controversy or
        claim arises from or relates to an obligation to the Bank which is
        secured by real property located in California at the time of the
        proposed submission to arbitration, this right is limited according to
        the provision above requiring the consent of both the Borrower and the
        Bank to seek resolution through arbitration.

                                       -19-

(j)     If the Bank forecloses against any real property securing this
        Agreement, the Bank has the option to exercise the power of sale under
        the deed of trust or mortgage, or to proceed by judicial foreclosure.

12.5    SEVERABILITY; WAIVERS. If any part of this Agreement is not enforceable,
the rest of the Agreement may be enforced. The Bank retains all rights, even if
it makes a loan after default. If the Bank waives a default, it may enforce a
later default. Any consent or waiver under this Agreement must be in writing.

12.6    ADMINISTRATION  COSTS.  The Borrower  shall pay the Bank for all  
reasonable  costs incurred by the Bank in connection with administering this 
Agreement.

12.7    ATTORNEYS' FEES. The Borrower shall reimburse the Bank for any 
reasonable costs and attorneys' fees incurred by the Bank in connection with the
enforcement or preservation of any rights or remedies under this Agreement and
any other documents executed in connection with this Agreement, and including
any amendment, waiver, "workout" or restructuring under this Agreement. In the
event of a lawsuit or arbitration proceeding, the prevailing party is entitled
to recover costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or arbitrator. As
used in this paragraph, "attorneys' fees" includes the allocated costs of the
Bank's in-house counsel.

12.8    ONE AGREEMENT.  This Agreement and any related  security or other  
agreements required by this Agreement, collectively:

(a)     represent the sum of the understandings  and agreements  between the 
        Bank and the Borrower  concerning this credit;

(b)     replace any prior oral or written agreements between the Bank and the 
        Borrower concerning this credit; and

(c)     are  intended by the Bank and the  Borrower as the final,  complete
        and  exclusive  statement of the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail.

12.9    DISPOSITION OF SCHEDULES, REPORTS, ETC. DELIVERED BY BORROWER. The Bank
will not be obligated to return any schedules, invoices, statements, budgets,
forecasts, reports or other papers delivered by the Borrower. The Bank will
destroy or otherwise dispose of such materials at such time as the Bank, in its
discretion, deems appropriate.

12.10   RETURNED MERCHANDISE. Until the Bank exercises its rights to collect the
accounts receivable as provided under any security agreement required under this
Agreement, the Borrower may continue its present policies for returned
merchandise and adjustments. Credit adjustments with respect to returned
merchandise shall be made immediately upon receipt of the merchandise by the
Borrower or upon such other disposition of the merchandise by the debtor in
accordance with the Borrower's instructions. If a credit adjustment is made with
respect to any Acceptable Receivable, the amount of such adjustment shall no
longer be included in the amount of such Acceptable Receivable in computing the
Borrowing Base.

12.11   VERIFICATION OF RECEIVABLES. The Bank may at any time, either orally or
in writing, request confirmation from any debtor of the current amount and 
status of the accounts receivable upon which such debtor is obligated.

12.12   INDEMNIFICATION. The Borrower agrees to indemnify the Bank against, and
hold the Bank harmless from, all claims, actions, losses, costs and expenses
(including attorneys' fees and allocated costs for in-house legal services)
incurred by the Bank and arising from any contention, whether well-founded or
otherwise, that there has been a failure to comply with any law regulating the
Borrower's sales or leases to or performance of services for debtors obligated
upon the Borrower's accounts receivable and disclosures in connection therewith.
This indemnity will survive repayment of the Borrower's obligations to the Bank
and termination of this Agreement.

                                       -20-

12.13   NOTICES. All notices required under this Agreement shall be personally
delivered or sent by first class mail, postage prepaid, to the addresses on the
signature page of this Agreement, or to such other addresses as the Bank and the
Borrower may specify from time to time in writing.

12.14   HEADINGS. Article and paragraph headings are for reference only and 
shall not affect the interpretation or meaning of any provisions of this
Agreement.

12.15   PRIOR AGREEMENT SUPERSEDED. This Agreement supersedes the Senior
Revolving Credit Agreement entered into as of October 15, 1990, between the Bank
and the Borrower, and any credit outstanding thereunder shall be deemed to be
outstanding under this Agreement.

This Agreement is executed as of the date stated at the top of the first page.

BANK OF AMERICA
NATIONAL TRUST AND SAVINGS ASSOCIATION    HEATING & COOLING SUPPLY, INC.

X  /s/ SUSAN J. PEPPING                    X  /s/ MARK T. ANDERSON
 -------------------------------------     -----------------------------------
BY:       SUSAN J. PEPPING                BY:      MARK T. ANDERSON
TITLE:    VICE PRESIDENT                  TITLE:   VICE PRESIDENT, FINANCE

ADDRESS WHERE NOTICES TO THE BANK         ADDRESS WHERE NOTICES TO THE BORROWER
ARE TO BE SENT:                           ARE TO BE SENT:

San Diego RCBO #1450
450 B Street                              3980 Home Avenue
San Diego, California  92101              San Diego, California  92105

                                       -21- 

Basic Info X:

Name: BANK OF AMERICA BUSINESS LOAN AGREEMENT
Type: Loan Agreement
Date: Nov. 14, 1995
Company: WATSCO INC
State: Florida

Other info:

Date:

  • September 28 , 1995
  • October 1 , 1998
  • November 1 , 1995
  • Saturday
  • Sunday
  • last day of each month within twenty 20 days after month end
  • December 31 , 1995
  • fiscal quarter
  • October 15 , 1990

Organization:

  • BANK OF AMERICA NATIONAL TRUST
  • Two Million Five Hundred Thousand Dollars
  • Higher Advance Rate Period
  • Fifteen Million Five Hundred Thousand Dollars
  • Bank 's London Branch
  • Federal Deposit Insurance Corporation
  • Bank Insurance Fund
  • Bank 's Grand Cayman Branch
  • Federal Reserve System
  • Federal Reserve Board Regulation D
  • Agreement for Standby Letter of Credit
  • Four Thousand Five Hundred Dollars
  • Bank 's Reference Rate
  • PACE Industries , Inc.
  • Pension Benefit Guaranty Corporation
  • Chief Financial Officer
  • Securities and Exchange Commission
  • Eleven Million Dollars
  • Two Hundred Fifty Thousand Dollars
  • Watsco , Inc.
  • Rheem Manufacturing Company
  • American Arbitration Association
  • California Code of Civil Procedure Sections 644
  • Senior Revolving Credit Agreement

Location:

  • AMERICA
  • San Francisco
  • Great Britain
  • Grand Cayman
  • British West Indies
  • U.S.
  • New York
  • London
  • United States
  • San Diego
  • California

Money:

  • $ 2,500,000
  • $ 15,500,000
  • Twenty-Five Million Dollars
  • $ 25,000,000
  • fifteen million
  • $ 1,000,000
  • $ 281,778.71
  • $ 50,000
  • $ 4,500
  • $ 11,000,000
  • $ 1,100,000
  • $ 130,000
  • $ 500,000
  • $ 250,000
  • $ 100,000

Person:

  • U. S.
  • SUSAN J. PEPPING
  • MARK T. ANDERSON

Time:

  • 9:00 a.m.
  • 11:00 a.m.

Percent:

  • eighty percent
  • sixty percent
  • 60 %
  • fifty percent
  • 25 %
  • 10 %
  • one percent
  • 80 %
  • 35 %
  • 50 %
  • 100 %