AMERIQUEST TECHNOLOGIES INC, 10-K405, 1998-01-13

AMERIQUEST TECHNOLOGIES INC
10-K405, 1998-01-13
COMPUTERS & PERIPHERAL EQUIPMENT & SOFTWARE

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 1-10397

AMERIQUEST TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 33-0244136
(STATE OR OTHER JURISDICTION OF INCORPORATION (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
OR ORGANIZATION)

425 PRIVET ROAD
HORSHAM, PENNSYLVANIA 19044
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

(215) 675-9300
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

COMMON STOCK, $.01 PAR VALUE
TITLE OF EACH CLASS

NEW YORK STOCK EXCHANGE
NAME OF EACH EXCHANGE ON WHICH REGISTERED
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No

The aggregate market value of the voting stock held by non-affiliates of
the Registrant as of December 10, 1997 is approximately $7,625,507. For purposes
of making this calculation only, the Registrant has defined "affiliates" as
including all officers, directors and beneficial owners of more than 10% of the
outstanding Common Stock of the Registrant.

The number of shares of the Registrant's Common Stock outstanding as of
December 19, 1997: Common Stock, $.01 par value, 66,881,906 shares.

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

Exhibit Index is on page 24
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PART I

FOREWORD

THE INFORMATION SET FORTH HEREIN IS BASED PRIMARILY ON HISTORICAL
INFORMATION. TO THE EXTENT THAT THIS ANNUAL REPORT ON FORM 10-K INCLUDES
FORWARD-LOOKING STATEMENTS, SUCH STATEMENTS INVOLVE UNCERTAINTY AND RISK, AND
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE REFLECTED IN SUCH
FORWARD-LOOKING STATEMENTS. A LIST OF THOSE FACTORS WHICH MANAGEMENT BELIEVES
COULD ADVERSELY AFFECT THE ACTUAL RESULTS IS SET FORTH IN A SECTION IMMEDIATELY
FOLLOWING THE DESCRIPTION OF AMERIQUEST'S BUSINESS IN THIS PART I UNDER THE
CAPTION "SPECIAL FACTORS TO BE CONSIDERED."

ITEM 1. BUSINESS.

THE COMPANY

AmeriQuest Technologies, Inc., a Delaware corporation ("AmeriQuest" or the
"Company"), maintains its principal executive offices at 425 Privet Road,
Horsham, Pennsylvania 19044, and its telephone number is (215) 675-9300.
AmeriQuest historically conducted its business through its subsidiaries.
However, on July 31, 1996, all of its first-tier subsidiaries were merged into
AmeriQuest, except for AmeriQuest/Kenfil Inc. ("Kenfil"), and AAG, Inc.
(formerly "CMS Enhancements, Inc."). AAG, Inc sold its business on June 19, 1997
and Kenfil sold its last operating businesses in Asia on November 20, 1997.
Accordingly, the description of AmeriQuest's business set forth below does not
address the historical business of its former subsidiaries individually, and
Kenfil, and AAG, Inc. are the only remaining subsidiaries, neither of which is
operational.

During fiscal year 1996 and early 1997 AmeriQuest's sales operations were
divided into five domestic regions, each covering a geographical section of the
country, and three international regions. By October, 1996, AmeriQuest had
reorganized its domestic standard distribution operations in Hollywood, Florida
into specialized business units based on the type of product assigned to each
unit and one general sales unit. In addition, the Advanced Systems Group was to
be operated from Horsham, Pennsylvania; and CMS Enhancements, Inc. operated from
Costa Mesa, California. AmeriQuest had exported from Miami, Florida to South
American markets; and foreign operations operated from Hong Kong and Malaysia
with respect to Asian markets. In April of 1997, AmeriQuest decided to focus its
resources on building the Advanced Systems Group ("ASG") in Pennsylvania and
close or sell all of the remaining divisions. This reorganization was completed
in November, 1997.

AmeriQuest is primarily a national valued-added wholesale distributor of
micro, mini and mid-range computers and related products to value-added
resellers ("VARs") and systems integrators. Mid-range computers range in price
from $15,000 to $500,000. AmeriQuest markets, sells and supports a variety of
products ranging from individual components to complete systems that have been
fully configured, assembled and tested prior to delivery to the customer.
AmeriQuest's strategy is to emphasize the sale of complete systems and to
provide a high level of value-added services, including consultation on
component selection and system assembly and configuration, testing and technical
support services. AmeriQuest also provides a variety of programs and seminars
designed to enhance its customers' technical capabilities.

AmeriQuest currently markets more than 13,000 products to value-added
resellers and systems integrators throughout the United States. AmeriQuest
focuses its marketing efforts on the products of a limited number of key vendors
in order to become one of the leading distributors for each of its principal
vendors. This enables AmeriQuest to develop product-specific technical expertise
that enhances its value-added support services. AmeriQuest attempts to minimize
competition among vendors' products while maintaining some overlap to provide
protection against product shortages or discontinuations.

Control of AmeriQuest. Computer 2000, Inc., a wholly-owned subsidiary of
Computer 2000 AG (collectively referred to herein as "C-2000") owns 36,349,878
shares of AmeriQuest's Common Stock representing approximately 54% of the issued
and outstanding shares of AmeriQuest Common Stock. Additionally, on May 6, 1997
AmeriQuest issued 300,000 shares of its Series H Cumulative Convertible
Preferred Stock (convertible into 41,958,042 shares, or approximately 63% of the
total outstanding shares of

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AmeriQuest Common Stock prior to conversion) to Computer 2000 Inc. in
consideration of the payment by Computer 2000 Inc. of $30,000,000 cash. In
addition, C-2000 holds achievement warrants and a maintenance option to
purchase from AmeriQuest 9,392,515 shares of AmeriQuest Common Stock or
approximately 15% of the total issued and outstanding shares of AmeriQuest
Common Stock. However, on a fully-diluted basis, all such shares, Common and
Preferred, and the exercise of currently exercisable warrants would increase
C-2000's ownership from approximately 54% to approximately 74%. As a result of
its ownership of more than 50% of AmeriQuest's voting shares, C-2000 assumed
control of the Board of Directors of AmeriQuest in August 1995.

STRATEGY

Although management believes that its niche strategy, when coupled with
cost reductions, as appropriate, will return AmeriQuest to profitability, there
are numerous risks and uncertainties and no assurance can be given that the new
strategy will succeed or that the Company will become profitable. Management
will periodically review the need to further reduce costs should sales for any
reason not materialize in amounts sufficient to cover the existing cost
structure.

PRODUCTS

AmeriQuest seeks to sell products from nationally-recognized vendors that
provide all the components most VARs require to fully configure their computer
systems. All new products are extensively tested prior to inclusion in
AmeriQuest's distribution network.

The following is a description of the major categories of products
currently sold by AmeriQuest and the principal current vendors of those
products:

Personal Computers -- AmeriQuest distributes laptop, desktop and mini-tower
personal computers manufactured by Acer, Hewlett Packard, IBM, Trigem and
Unisys.

Advanced Computer Systems -- AmeriQuest distributes mid-range computer
servers manufactured by Acer, IBM (RISC 6000 models) and Unisys, together with
software from IBM, including AIX and Lotus Notes, and connectivity products from
IBM, including routers, bridges and switches.

Communications and Networks -- AmeriQuest distributes local area network
("LAN") software and specialized hardware products manufactured by Novell, IBM,
D-Link and Unisys. In addition, the Company distributes modems and other
communication products manufactured by Digi International and Multi-Tech
Systems.

Peripherals and Supplies -- AmeriQuest distributes a broad line of laser,
ink-jet and dot matrix printers, monitors, terminals, stand-by power supplies,
accessories and supplies manufactured by numerous companies including Okidata,
Lexmark, Citizen, Genicom, Relisys, Unisys, Wyse, Acer, IBM, American Power,
Imation(3M), Hansol and Hewlett Packard.

Software -- AmeriQuest sells a variety of operating systems and LAN
software products generally as part of its advanced systems sales. AmeriQuest
has also commenced the sale of certain applications software for Unix and
midrange systems. Among the manufacturers of these software products are IBM and
SCO.

Services -- AmeriQuest arranges for leasing and maintenance options for all
products to customers, at additional cost. AmeriQuest also provides Engineering
services to those customers who do not have the capability or capacity to either
design or install system solutions with their own resources.

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VENDOR RELATIONS

To maintain strong relationships with its principal vendors, AmeriQuest
focuses on marketing the products of a limited number of key vendors. AmeriQuest
selects its product lines to minimize competition among vendors' products while
maintaining some overlap to provide protection against product shortages or
discontinuations. Accordingly, historical revenues from sale of products of the
three leading vendors, IBM, Hewlett Packard, and Unisys, represent approximately
22%, 7% and 14%, respectively, of the ASG segment of the Company's revenue for
the last six months of the year ended September 30, 1997 (fiscal 1997). The
Company is focused on increasing its share of business represented by each of
Hewlett Packard and Unisys to 25% and has made investment in its sales force to
achieve such objective.

AmeriQuest must obtain permission from IBM to create new authorized IBM
resellers ("IRAs") and must deal with contractual limitations in acquiring
additional existing IRAs who may be dissatisfied with the service of a
competitive distributor. IRAs are contractually precluded from purchasing IBM
product except from their designated distributor for one year, which limits the
ability of AmeriQuest to market its products to IRAs currently "assigned" to
other distributors. Also IBM does not authorize a new reseller to market IBM
product unless such reseller can meet minimum revenue requirements.
Accordingly, AmeriQuest's ability to market to existing IRAs (other than those
IRAs currently "assigned" to it) and its ability to assist in the development
of new IRAs to expand the IBM revenue base of AmeriQuest is constrained by
IBM's current strategy and policy of defining and controlling the IRAs.
Additionally, IBM requires distributors of its mid-range computer systems to
meet certain minimum purchase levels. AmeriQuest is required to purchase $30
million of IBM mid-range computers during calendar 1997 in order to retain the
right to distribute IBM mid-range computers and AmeriQuest believes that it has
satisfied this requirement. No assurance can be given that AmeriQuest will be
able to meet the purchase requirements that might be imposed upon it in the
future by IBM, nor has AmeriQuest received confirmation from IBM that it has
met the required purchase levels of calendar 1997. Although, IBM could refuse
to sell product to AmeriQuest at any time, it would be more likely to refuse
following any period that AmeriQuest might fail to meet the mandated purchase
levels. Although IBM indicated that it would terminate the right of AmeriQuest
to distribute mid-range computer systems if AmeriQuest did not meet the target
purchase levels, AmeriQuest would retain the right to sell IBM mid-range
computer systems directly to end users. Such limitations to the authorization
of resellers and the imposition of sales performance requirements do not exist
with respect to the Company's relationship with Hewlett Packard and Unisys.

AmeriQuest, like most hardware distributors, sells products throughout the
United States for vendors on a nonexclusive basis without geographic
restriction. AmeriQuest has distribution agreements with most of its vendors and
believes they are in the form customarily used by each vendor and generally
contain provisions which allow termination by either party upon as little as
thirty days' notice. Most of AmeriQuest's major distribution agreements provide
price protection by giving AmeriQuest a credit, subject to specified
limitations, in the amount of any price reductions by the vendor between the
time of the initial sale to AmeriQuest and the subsequent notice of price change
to AmeriQuest. Most of the major distribution agreements also give AmeriQuest
qualified return privileges on slow-moving inventory. AmeriQuest's distribution
agreements do not restrict AmeriQuest from selling similar products manufactured
by competitors. Except as noted above with respect to IBM, any minimum purchase
provisions in AmeriQuest's distribution agreements are at levels that AmeriQuest
believes do not impose significant risk that AmeriQuest will not be able to
achieve such minimum purchase requirements.

From time-to-time, the demand for certain products sold by AmeriQuest
exceeds the supply available from the vendor. AmeriQuest believes that its
ability to compete has not been adversely affected to a material extent by these
periodic shortages, although sales may be adversely affected for an interim
period. In order to limit the impact of such shortages, AmeriQuest generally
attempts to include comparable products from more than one vendor in its product
line.

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SALES AND DISTRIBUTION

During fiscal year 1997 AmeriQuest's sales operations of the Advanced
Systems Group in Pennsylvania were divided into three domestic regions,
Northeast, Southeast and Western, each covering a geographical section of the
country.

Compensation for sales personnel is largely based on the gross profits
generated from sales. All of AmeriQuest's sales personnel receive technical
training and are responsible for opening new accounts and serving established
accounts. AmeriQuest places some emphasis on telemarketing as a sales method,
however, most of the Company's sales personnel operate in the field.

Customer orders are generally made by a toll-free telephone call with a
sales representative in AmeriQuest's sales offices, and the order is entered
into AmeriQuest's computer system. The sales representative has access to
available information on inventory and customer credit status and, upon
reviewing this data, can enter the order immediately. Shipment is usually made
the same day, except on orders that require assembly and testing or purchase
from a vendor. Customers may also pick up their orders at the designated
warehouse. All orders are handled on a prepayment, C.O.D. or credit basis
depending on the customer's creditworthiness and previous payment history. In
addition, AmeriQuest assists some resellers in obtaining equipment financing
through third-party floor planning programs from Deutsche Financial Services,
IBM Credit Corporation, AT&T Capital, the FINOVA Group, Inc. and Transamerica
Inventory Finance. Because of AmeriQuest's prompt delivery times, it does not
generally maintain a substantial order backlog.

CUSTOMERS AND CUSTOMER SERVICES

The Company sells to more than 3,500 computer resellers. The Company's
customers include VARs, corporate resellers, systems integrators, and
consultants. AmeriQuest estimates that a majority of its sales are to VARs and
systems integrators. The Company's smaller customers often do not have the
resources to establish a large number of direct purchasing relationships or to
stock significant product inventories. Consequently, they tend to purchase a
high percentage of their products from distributors. Larger resellers often
establish direct relationships with manufacturers for their more popular
products, but utilize distributors for slower-moving products and for fill-in
orders of fast-moving products which may not be available on a timely basis from
manufacturers. No customer has accounted for more than ten percent of
AmeriQuest's net sales during 1997, 1996 or 1995. Sales by AmeriQuest are not
seasonal to any material extent, except for the sale of IBM RISC product which
has historically evidenced shipment of 40% of total yearly revenues in the
fourth quarter of each of the last two calendar years.

Through the Company's wholesale distribution business, customers are
offered a single source of supply, prompt delivery, financing programs,
engineering services, customer leasing and maintenance and customer support.

Prompt Delivery. In most areas serviced by the Company, orders received by
6:00 p.m. local time are typically shipped the same day, provided the required
inventory is in stock. AmeriQuest typically delivers products from its Horsham,
Pennsylvania warehouse via United Parcel Service and other common carriers, with
customers in key commercial regions of the United States receiving orders within
one to two working days of shipment. AmeriQuest also will provide overnight air
handling if requested and paid for by the customer. These services allow
computer resellers to minimize inventory investment yet provide responsive
service to their customers. For larger customers in the United States,
AmeriQuest is able to provide a fulfillment service so that orders are shipped
directly to the computer resellers' customer, thereby reducing the need for
computer resellers to maintain inventories of certain products.

Customer Support. The Company currently offers computer resellers a single
source for over 13,000 competitively priced hardware and software products. By
purchasing from the Company, the reseller only needs to comply with a single set
of ordering, billing and product return procedures and may also benefit from
attractive volume pricing. The Company also provides training and product
information to its reseller customers.

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AmeriQuest permits the return of products within certain time limits and
under certain conditions subject to a restocking charge, provided that the
products are unused. Products that are defective upon arrival are handled on a
manufacturers' warranty return basis without any restocking charge.

Unlike its competitors, AmeriQuest offers its resellers terms that reflect
those that are offered by each manufacturer's individual warranty program. This
pass-through of manufacturers' warranties is one of the value-added services
that AmeriQuest provides to its customer base.

Financing Programs. AmeriQuest extends credit to qualified resellers,
thereby augmenting their ability to purchase products from a variety of sources.
Additionally, AmeriQuest arranges floor planning and lease financing through a
number of credit institutions and offers programs that permit credit card
purchases by qualified customers. To facilitate a reseller's ability to pursue
large purchase orders within the United States, the Company offers an
"assignment of proceeds" program. By instituting this practice AmeriQuest can,
based upon the credit worthiness of the end-user customer, assist its resellers
in securing purchase orders in excess of what their normal credit facilities
would otherwise allow.

COMPETITION

Competition in the technical distribution of mid-range computer systems is
limited, but intense. Principal national distributors are Dickens, JBA
International, Western Micro, MicroAge and Gates/Arrow. Additionally it is
reasonable to expect that the large broad-line distributors such as Ingram Micro
Inc., Merisel, Inc. and Tech Data Corporation, who have substantially greater
financial resources than AmeriQuest, may enter the market in pursuit of the
substantially greater gross profit margins of technical distribution.

Competition is primarily based upon availability of product, price,
technical support and other support services. AmeriQuest believes that it is
generally competitive with respect to each of these factors and that its
principal, competitive advantages are its personal sales relationships,
technical strength and other support services, and speed and accuracy of
delivery.

EMPLOYEES

As of September 30, 1997, AmeriQuest had 80 full-time employees associated
with the ongoing business of AmeriQuest, including 40 persons employed in sales,
sales support and marketing functions. None of AmeriQuest's employees are
covered by a collective bargaining agreement. AmeriQuest considers its relations
with its employees to be good.

SPECIAL FACTORS TO BE CONSIDERED

ADDITIONAL LOSSES AND CAPITAL REQUIRED

Continued Losses. The Company has experienced significant operating losses
during recent fiscal years and recorded a net loss of $67.6 million in fiscal
year ended June 30, 1995, a net loss of $33.6 million in fiscal 1996 and a net
loss of $41.3 million in fiscal 1997. The fiscal 1995 loss included the
write-off of approximately $23.8 million of intangible assets and the
liquidation of inventory associated with the termination of the Company's
entertainment software business. In addition, the fiscal 1995 loss included
costs associated with the integration of the significant acquisitions which took
place during that fiscal year. The Company recorded a net loss of $33.6 million
during fiscal 1996 (including lease termination and moving costs of $6.4
million). During the year ended September 30, 1997, the Company had operating
losses of $41.3 million which included restructuring, asset impairment and
relocation costs of $26.4 million associated with the close down of the
unprofitable distribution businesses.

Additional Capital Required. In the event that operating losses continue,
it is likely that the Company would need to raise additional capital to cover
those losses. There is no assurance that additional capital is available, or if
available, can be secured on terms favorable to the Company. The Company has no
commitment from C-2000 to provide additional funding to the Company, although
C-2000 has guaranteed certain amounts due to two of the Company's suppliers
and $5 million to IBM Credit Corporation

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("IBMCC"). AmeriQuest currently has outstanding an intercompany demand loan from
C-2000 in the amount of $27.7 million dollars. This intercompany loan was
incurred as a result of C-2000's payment of $27.7 million dollars to certain
lenders whose line of credit to AmeriQuest were previously guaranteed by
C-2000. The intercompany loan is non-interest bearing, does not require the
current payment of principal, and is secured by a security interest in all of
AmeriQuests' assets, subordinate only to amounts owed to IBMCC. Although the
loan is a demand loan, Computer 2000 AG has agreed to forebear from taking any
legal action or commencing any legal process to collect any amounts owed under
the intercompany demand loan prior to September 30, 1998. See "Certain
Relationships and Related Transactions." Notwithstanding the agreement by
C-2000 to defer payment of the loan prior to September 30, 1998, certain
specified events such as, but not limited to, merger, sale or reorganization of
the Company will make the loan immediately due and payable.

In addition to the intercompany indebtedness to C-2000 referenced above,
AmeriQuest was indebted to IBMCC in the amount of $3,064,000 at September 30,
1997 under a $20 million line of credit on an interest rate of prime plus
2.625%. IBMCC has approved waivers of prior defaults by the Company under the
Inventory and Working Capital Financing Agreement. The line of credit expires
February 28, 1998. However, as of January 9, 1998, IBMCC agreed to extend the
credit agreement with a reduced line of $5 million from March 1, 1998 until
September 30, 1998. As of December 31, 1997 the Company's indebtedness to IBMCC
was $12,353,000. During December 1997 the Company purchased $6 million of IBM
products, primarily to meet the minimum purchase commitment needed to retain IBM
MIR distributions rights. Under the terms of the IBM vendor agreement, the
Company can return a significant portion of these IBM products and may be
required to do so in order to reduce the IBMCC line of credit from $20 million
to $5 million at February 28, 1998.

MARKET CONSIDERATIONS

The New York Stock Exchange ("NYSE") has repeatedly indicated that
AmeriQuest is not in compliance with certain of the NYSE's requirements for
continued listing on the NYSE. The NYSE could delist AmeriQuest's Common Stock
at any time, thereby adversely affecting the public market for such securities.

The price of the Company's Common Stock has been subject to significant
price fluctuations, and there can be no assurance that the price of the
Company's Common Stock will stabilize. In addition, the trading volume for the
Company's Common Stock has generally been relatively small. A large increase in
share trading volume in a short period of time could cause a significant change
in share trading prices.

NEED TO INCREASE SALES VOLUME

As a distributor, the Company must operate on small gross margins. Further,
the Company must incur operating expenses to maintain a sufficient level of
inventory, facilities, sales staff and support personnel necessary to support
sales of products. Although the Company continues to explore possible cost
reduction measures, it believes that further significant reductions in its
operating expenses will be difficult to achieve without also reducing the sales
volumes currently being generated from operations. As a result of these and
other factors, the Company must achieve substantially greater sales volumes at
satisfactory margins than it has in the past in order to achieve profitability.
The estimate by management, reported in the Form 10-Q for the period ended March
31, 1997, that a 25%-40% increase in sales would be required in order for ASG to
achieve a break-even level of operations on a stand-alone basis has proven to be
cautious as a result of aggressive cost reductions since the issuance of the
report. However, the loss of a significant vendor, such as IBM, would cause that
estimate of a 25% sales increase to reach profitability to remain reliable. As
noted above, IBM's policies restrict the ability of the company to increase
sales to existing IRAs by reason of restrictions imposed by IBM on IRAs which
effectively preclude a switch by the IRAs to AmeriQuest except on an annual
basis as the contract of each respective IRA is renewed. While the Company's new
management is attempting to increase sales and its share of business represented
by such vendors as Hewlett Packard and Unisys, there can be no assurance that
sales will increase or that any increases will be of sufficient magnitude or
will occur soon enough to permit the Company to achieve profitability without
additional business or financial restructuring.

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NEED TO MAINTAIN VENDOR BASE

The Company principally distributes computer products manufactured by other
vendors, principally IBM and Hewlett Packard. Accordingly, the Company's
relationships with its existing vendors are critical to its ability to purchase
on a favorable basis the products that it resells. In addition, from
time-to-time the Company may need to initiate relationships with additional
vendors without jeopardizing the Company's existing vendor relationships. Any
inability of the Company to preserve its existing vendor relationships or to add
new vendors when needed will have a material, adverse effect on its future
results of operations, and particularly with respect to the loss of any of the
three lead vendors, IBM, Hewlett Packard or Unisys. The Company is also
dependent upon its vendors' willingness or ability to make timely shipment of
the products ordered by the Company. The failure of vendors to make shipments on
a timely basis could cause a material disruption of the Company's sales. In the
past, the Company has at times experienced delays in its ability to fill
customer orders, due to the inability of certain suppliers to meet their volume
and schedule requirements and/or due to the Company's shortages of cash
resources. Delays in shipments from suppliers can cause fluctuations in the
Company's short-term results and contribute to order cancellations.
Additionally, AmeriQuest must meet certain purchase requirements imposed by IBM
to maintain its distributor status of IBM's mid-range computer systems. IBM has
indicated that it would terminate the right of AmeriQuest to distribute
mid-range computer systems if AmeriQuest did not meet the purchase levels of
calendar 1997 or any future calendar years. AmeriQuest has not received
confirmation from IBM that it has met the calendar 1997 purchase requirements.
No assurance can be given that AmeriQuest will be able to achieve purchases at
levels required by IBM.

RAPID CHANGES IN TECHNOLOGY AND MARKETS

The computer industry in general, and the specific markets in which the
Company competes, are characterized by rapidly changing technology, often
resulting in short product life cycles, rapid price declines, inventory
imbalances when compared with market demands, and significant shifts in market
dynamics. The Company believes its success is highly dependent upon its ability
to react to technological changes and shifts in market demand by continuing to
provide costcompetitive products that respond to current market needs. As a
value-added wholesale distributor, the Company is particularly vulnerable to
changes caused by technological innovation. The introduction of new products and
the phasing out of old products requires the Company to carefully manage its
inventory to minimize inventory obsolescence. The Company has experienced
significant losses due to inventory obsolescence in the past and losses due to
selling products acquired as vendor surpluses. Should the Company fail to
provide new products on a timely basis that respond to industry demands, the
Company's operating results would be adversely affected.

COMPETITION

The Company competes in an industry characterized by intense and increasing
competition. Principal national distributors in the technical distribution of
mid-range computer systems with which the Company competes include Dickens, JBA
International, Western Micro, MicroAge and Gates/Arrow. Many of the Company's
major competitors have substantially greater financial, marketing and other
resources than the Company. Competition in the computer products distribution
industry is based primarily on price, product availability, and technical
support services provided, and to a lesser extent on speed of delivery,
convenience and the level of marketing. Because of the intense competition
within the industry, the Company has been unable to date to increase its market
share. As technological changes occur, the Company's products have had shorter
and shorter product life cycles, and new competing products are introduced by
other vendors and resellers. Moreover, the manner in which computer products are
distributed and sold is changing, and new methods of distribution and sale may
emerge or expand. Additionally, the requirements imposed by IBM on IRAs to buy
only from an "assigned" distributor make it more difficult for AmeriQuest to
compete for the business of existing IRAs. These factors, among others, will
likely cause continued competitive pressures on the Company in the future.

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DEPENDENCE UPON KEY PERSONNEL

The Company's success depends to a significant degree upon the continued
contributions of its key management, marketing, product development and
operational personnel and the Company's ability to retain and continue to
attract highly skilled personnel. Competition for employees in the computer
industry is intense, and there can be no assurance that the Company will be able
to attract and retain qualified employees. The Company has recently made a
number of management changes, and has had substantial layoffs and other employee
departures. If the Company continues to experience financial difficulties, it
may become increasingly difficult for it to hire new employees and retain
current employees. The Company does not carry any key person life insurance with
respect to any of its personnel.

POSSIBLE SALES BY STOCKHOLDERS

Approximately 10,884,905 outstanding shares (16%) of the Company's Common
Stock are eligible for resale pursuant to the provisions of Rule 144 under the
Securities Act of 1933 or current resale Registration Statements. The Company
has also agreed to register the shares of the Common Stock of the Company issued
or issuable to C-2000 consisting of 36,349,878 shares presently held by C-2000
and 9,392,515 additional shares subject to issuance upon the exercise of
outstanding warrants and an option held by C-2000. The Company may grant
additional registration rights when it issues securities in the future. The
public sale of the foregoing shares, or the perception that such shares may be
sold, may have the effect of substantially depressing the market price of the
Company's Common Stock and causing substantial fluctuations in the price of the
Company's Common Stock.

FORWARD-LOOKING INFORMATION

Future operating results may be impacted by a number of factors that could
cause actual results to differ materially from those stated herein, which
reflect management's current expectations. These factors include worldwide
economic and political conditions, industry specific factors, the Company's
ability to maintain access to external financing sources (including C-2000) and
its financial liquidity, the Company's ability to manage expense levels, the
Company's ability to retain key vendors, the continued financial strength of the
Company's customers, and the Company's ability to accurately anticipate customer
demand and manage inventories.

This Annual Report on Form 10-K contains certain forward-looking statements
that are based on current expectations. In light of the important factors that
can materially affect results, including those set forth above and elsewhere in
this Annual Report on Form 10-K, the inclusion of forward-looking information
herein should not be regarded as a representation by the Company or any other
person that the objectives or plans of the Company will be achieved. The Company
may encounter competitive, technological, financial, legal and business
challenges making it more difficult than expected to continue as a value-added
wholesale distributor; competitive conditions within the computer industry may
change adversely; demand for the products distributed by the Company may weaken;
the Company may be unable to retain existing key vendors and existing key
management personnel; inventory risks may rise due to shifts in market demand;
the Company's forecasts may not accurately anticipate market demand; and there
may be other material adverse changes in the Company's operations or business.
Certain important presumptions affecting the forward-looking statements made
herein include, but are not limited to, (i) timely identifying and delivering
new products as well as enhancing existing products, (ii) completing current
restructuring plans, and (iii) accurately forecasting cash needs. Assumptions
relating to budgeting, marketing, advertising, product mix and other management
decisions are subjective in many respects and thus susceptible to
interpretations and periodic revisions based on actual experience and business
developments, the impact of which may cause the Company to alter its marketing,
cash expenditures or other budgets, which may in turn affect the Company's
financial position and results of operations.

8
<PAGE> 10

ITEM 2. PROPERTIES.

AmeriQuest's principal offices are located in leased facilities in Horsham,
Pennsylvania, which consists of approximately 30,000 square feet of office space
and 75,000 square feet of warehouse space on a single level.

The following table sets forth information regarding the regional offices
of AmeriQuest and its subsidiaries:

<TABLE>
<CAPTION>
SQUARE FEET LEASE EXPIRATION YEAR OPENED
----------- ---------------- -----------
<S> <C> <C> <C>
LOCATION
Horsham, PA.......................... 105,000 1/31/98(1) 1978
Atlanta, GA.......................... 6,000 9/30/00 1997
Maple Shade, NJ...................... 1,400 8/31/00 1997
St. Louis, MO........................ 1,400 11/30/00 1997
SUBLEASED(2)
Anaheim, CA.......................... 62,298 2/29/00 1995
Alpharetta, GA....................... 1,924 9/30/99 1994
</TABLE>

- ---------------
(1) Commencing February 1, 1998 this lease will become a month-to-month tenancy
terminable upon 30 days prior written notice from either AmeriQuest or the
Landlord. AmeriQuest is currently evaluating prospect for replacement
facilities of approximately 50,000 square feet.

(2) Sub-lessees are in default. Proceedings are being undertaken to evict the
current sub-lessees in preparation for re-lease of these properties to other
sub-tenants, which are yet to be located.

ITEM 3. LEGAL PROCEEDINGS.

AmeriQuest is both a plaintiff and defendant from time-to-time in lawsuits
incidental to its business. AmeriQuest management believes that none of such
current proceedings individually or in the aggregate, will have a material
adverse effect on AmeriQuest's financial position and results of operations.

While not expected to be of material effect to the Company, Kenfil Inc. vs.
RLI Insurance Company, Superior Court of the State of California, County of Los
Angeles, No. BC 108564 filed July 12, 1994, involves litigation instituted by
Kenfil Inc. to recover additional monies for the damage it incurred in the
Northridge earthquake of January 17, 1994. The defendant cross-claimed on August
12, 1994 for return of the $840,000 it had paid on claims submitted by Kenfil
Inc., based on affidavits from former Kenfil employees alleging that they had
been instructed following the earthquake to intentionally destroy additional
inventory. The defendant's theory is that the policy was voided ab initio by the
fraudulent actions of Kenfil Inc.'s employees; while Kenfil Inc.'s position is
that fraud unauthorized by the corporation but committed by a few employees does
not operate to void the contract. The defendant's theory is premised on the
language of the contract, while Kenfil Inc.'s position is supported by a case
from the California Supreme Court. Messrs. Irwin Bransky and Nelson Landman,
former officers of Kenfil Inc. at the time of the earthquake, have pleaded
guilty to mail fraud relating to the mailing of documents asserting the
destruction of inventory from the earthquake where such destruction actually
occurred in large part following the earthquake. However, their actions were not
attributed to Kenfil Inc. during the course of the criminal proceedings. Kenfil
Inc. has a continuing claim against the defendant for additional amounts never
paid under the contract for the interruption of the business of Kenfil Inc. and
claims against Messrs. Bransky and Landman for the damages occasioned to Kenfil
Inc. by their unauthorized and unratified criminal conduct. No assurance can be
given as to the final outcome of this legal matter.

While not expected to be of material effect to the Company, Leading Edge
Products, Inc. vs. AmeriQuest Technologies, Inc., involves suit against
AmeriQuest/NCD Inc., one of the Company's predecessors in interest, wherein
Leading Edge is asserting breach of contract and unjust enrichment. In its
complaint Leading Edge alleges a $1,055,438 debt and seeks double or triple
damages, interest, attorney's fees, and costs. The Company responded to the
complaint by denying liability and asserted counterclaims for breach of
contract, breach of implied covenant of good faith and fair dealing, breach of
warranty, and unjust enrichment.

9
<PAGE> 11

In its counterclaim the Company seeks to recover money damages in the amount
determined by the court, double or triple damages, interest, attorney's fees,
and costs. The case is in its early stages and the accounting information has
yet to be exchanged. The Company's accounting information indicates that the
Company owes Leading Edge a total of $451,852. The information received to date,
however, indicates that the Company's potential exposure is at least $451,852
and may be as high as $678,597. No assurance can be given as to the final
outcome of this legal matter.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

See Part II, Item 4 of the Company's 10-Q for the period ending June 30,
1997 for a description of the results of the Annual Meeting of Stockholders of
the Company held July 1, 1997.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The following table sets forth the market prices for the shares of Common
Stock of AmeriQuest. The prices reflect the high and low closing prices quoted
on the New York Stock Exchange for each calendar quarter since December 31,
1994.

AMERIQUEST

<TABLE>
<CAPTION>
HIGH LOW
-- ----
<S> <C> <C>
1995
First Quarter........................... 3 1/4 2 1/4
Second Quarter.......................... 3 1/4 1 3/4
Third Quarter........................... 2 1/8 1 1/8
Fourth Quarter.......................... 1 3/8 5/8
1996
First Quarter........................... 1 1/4 3/4
Second Quarter.......................... 1 1/2 3/4
Third Quarter........................... 15/16 1/2
Fourth Quarter.......................... 1 7/8 7/16
1997
First Quarter........................... 1 3/8 5/8
Second Quarter.......................... 3/4 6/16
Third Quarter........................... 9/32 3/16
Fourth Quarter.......................... 9/32 1/4
</TABLE>

On December 10, 1997, the stock of AmeriQuest closed at $0.25 per share on
the New York Stock Exchange. As of that date AmeriQuest had approximately 1,079
shareholders of record.

10
<PAGE> 12

ITEM 6. SELECTED FINANCIAL DATA.

The following selected consolidated financial data has been derived from
and should be read in conjunction with the audited consolidated financial
statements of AmeriQuest, and the notes thereto, and with "Management's
Discussion and Analysis of Results of Operations and Financial Condition",
included elsewhere herein and incorporated herein by this reference (dollars in
thousands, except share data).

<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED YEAR ENDED ENDED
SEPTEMBER SEPTEMBER SEPTEMBER YEARS ENDED JUNE 30,
30, 30, 30, ----------------------------------
1997 1996 1995 1995 1994 1993
---------- ---------- ---------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales(1)................ $ 218,877 $ 424,708 $ 100,723 $ 416,571 $ 87,593 $ 73,082
Income (loss) before
taxes..................... (41,311) (33,609) (7,041) (67,566) (7,971) 236
Net income (loss)(2)........ (41,311) (33,609) (7,041) (67,566) (7,971) 236
Net Income (loss) per
share..................... (0.63) (0.76) (0.30) (3.76) (1.33) 0.08
Total assets................ 26,079 116,372 115,531 128,008 65,145 20,274
Long-term obligations(3).... 0 3,122 6,686 24,515 3,442 1,817
Stockholders' equity
(deficit)................. (23,392) (11,206) 17,565 (25,709) 12,875 8,644
Weighted average shares
outstanding............... 66,881,906 44,208,983 23,786,127 17,993,440 5,973,511 3,060,908
</TABLE>

- ---------------
(1) The sales increase in 1995 was due primarily to acquisitions. The sales
increase in 1994 compared to 1993 was largely due to the initiation of a
broader distribution strategy.

(2) The losses in 1995 were due principally to abandonment of U.S. software
operations, consists of integrating prior acquisitions and the write-down of
assets. Losses in 1994 and 1992 related principally to corporate
restructuring.

(3) For the year ended June 30, 1995, Includes the $18 million advance from
Computer 2000 related to its equity investment (see Note 9 to the
Consolidated Financial Statements) and $5.8 million associated with the
issuance of 6.8 million shares of the Company's common stock required to
complete the Robec merger (see Note 2 to the Consolidated Financial
Statements).

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.

SIGNIFICANT EVENTS

Commencing in the first half of fiscal 1994 and through early fiscal 1996,
the Company completed the acquisition of three regional distributors. Kenfil
Inc., Ross White Enterprises, Inc. d/b/a "National Computer Distributors"
("NCD"), and Robec, Inc. The Company issued 15,864,608 shares of its common
stock and paid total consideration of approximately $29.5 million for these
acquisitions. During the quarter ended June 30, 1995 the Company closed the U.S.
entertainment software distribution business. The Company's Singapore operation
was sold in the quarter ended March 31, 1995 and its Australian operation was
closed in the quarter ended March 31, 1996.

On April 9, 1997 the Board approved a wide-ranging restructuring plan
encompassing head-count reductions and facility closures with the goal of
focusing on and strengthening the activities of its Advanced Systems Group
("ASG"), which had the highest gross margins of its distribution businesses, at
that time. The Company announced that projected losses for the year ending
September 30, 1997 could be in the range of approximately $45,000,000, partly as
the result of estimated charges in the amount of $25,000,000 related to the
planned restructuring, and $2,000,000 of restructuring costs and provisions
earlier included in operating results predating the authorization of the
restructuring (please reference Note 1 on page F-7). The restructuring measures
were necessitated by the fact that revenues for the quarter ended March 31, 1997
were substantially below expectations, primarily due to the inability of the
Company to compete effectively in the standard distribution of computer
products. Management also continued the investigation of possible other
dispositions.

11
<PAGE> 13

On May 6, 1997 AmeriQuest issued 300,000 shares of its Series H Cumulative
Convertible Preferred Stock (convertible into 41,958,042 shares of AmeriQuest
Common Stock) -- to Computer 2000 Inc. in consideration of the payment by
Computer 2000 Inc. of $30,000,000. This infusion fulfilled a previously
announced commitment from Computer 2000 Inc. to make such an investment.

On June 19, 1997 CMS Enhancements Inc. sold substantially all of its assets
to CMS Peripherals Inc., a company formed by the former managing director of CMS
Enhancements Inc., Mr. Ken Burke. CMS Enhancements Inc., as part of the
transaction has changed its name to AAG Inc. AmeriQuest Technologies Inc. also
signed a non-competition agreement with CMS Peripherals with a term of five
years prohibiting use of the former name of the subsidiary and assembly or
manufacture of disk drives.

On September 30, 1997, Computer 2000 AG paid AmeriQuest's outstanding lines
of credit in the amount of $27.7 million (formerly guaranteed by Computer 2000
AG) and converted the loans to a non-interest bearing intercompany demand loan,
deferring demand of payment through September 30, 1998, but subordinated to the
Company's working capital lender.

AmeriQuest/Kenfil Inc. sold its wholly-owned subsidiaries Kenfil
Distribution (Far East) Limited, a Hong Kong corporation and Kenfil Distribution
(M) Sdn. Bhd., a Malaysian corporation, to Regentland Holdings Ltd. for proceeds
of $2,939,062 pursuant to a Stock Purchase Agreement dated November 20, 1997.
The purchase price was equivalent to repayment of a loan and the net book value
of the assets sold plus a premium of $450,000, and was paid by issuance of a
dividend from Kenfil Distribution (Far East) Limited to AmeriQuest/Kenfil Inc.
in the amount of $1,717,106, the loan repayment of $771,956 from Kenfil
Distribution (Far East) Limited to AmeriQuest/Kenfil Inc., and the payment of
$450,000 from Regentland Holdings Ltd. Regentland Holdings Ltd. was formed by
Mr. Simon Yip, the former Chief Executive Officer of Kenfil Distribution (Far
East) Limited to accommodate his purchase of such entities. Concurrent with the
closing, the Board of Directors of AmeriQuest/Kenfil Inc. received an opinion
from Chase Securities, Inc. to the effect that the terms of the sale were fair
to AmeriQuest Technologies, Inc. as the sole stockholder of AmeriQuest/Kenfil
Inc. from a financial point of view. This sale completed the restructuring plan
announced in April, 1997.

Effective September 30, 1995 the Company changed its fiscal year-end from
June 30 to September 30. Transition information for the three months ended
September 30, 1995 is included in the Company's financial statements due to the
change. The following table presents the Company's results of operations as a
percent of sales:

<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED YEARS ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, JUNE 30,
1997 1996 1995 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales........................................ 100.0% 100.0% 100.0% 100.0%
Gross Profit................................. 7.2 5.5 7.4 3.8
Selling, general and administrative.......... 16.1 10.8 12.9 12.8
Intangible write-off......................... 4.1 -- -- 5.7
Restructuring................................ 4.3 1.5 -- --
Interest..................................... 1.6 1.1 1.4 1.5
Net Loss..................................... 18.9 7.9 7.0 16.2
</TABLE>

NET SALES

During the fiscal year ended September 30, 1997 sales decreased 49%
compared to the twelve months ended September 30, 1996. Sales decreases were
mainly attributable to the Company's decision to sell CMS Enhancements, Inc.,
and to close the North American and export distribution divisions and focus on
and strengthen the activities of its Advanced Systems Group. Historical revenues
of ASG from sale of products of its three leading vendors, IBM , Hewlett
Packard, and Unisys, represent approximately 22%, 7% and 14%, respectively of
the last six months of fiscal year 1997 revenues. The Company is currently
focused on increasing its share of business represented by each of Hewlett
Packard and Unisys to 25% and has made

12
<PAGE> 14

investment in its sales force to achieve such objective. Sales increases in the
fiscal year ended September 30, 1996 and June 30, 1995 were due primarily to the
acquisitions of NCD, Robec and Kenfil during early fiscal 1995.

COST OF SALES AND GROSS PROFIT

Gross profit increased to 7.2% of sales for the fiscal year ended September
30, 1997 compared to 5.5% for the twelve months ended September 30, 1996. The
improvement was partially attributable to the closing of the lower margin
standard distribution businesses and continuation of the higher margin Advanced
Systems Group revenue and related margin. Gross profit decreased to 5.5% of
sales for the fiscal year ended September 30, 1996 compared to 7.4% for the
three months ended September 30, 1995. The decline was primarily attributable to
continued extreme price competition within the industry and lower levels of
vendor rebates due to the lack of availability of certain product lines.

During the fiscal year ended June 30, 1995 gross profit was affected by
competition and significant inventory losses related to the elimination of
certain product lines, loss of certain vendors and a strategy to reduce
inventories to increase operating cash flow. Gross profit in the fiscal year
ended June 30, 1994 reflects a much greater concentration of business in the
area of higher margin disk drive manufacturing.

AmeriQuest manages its inventories by maintaining sufficient quantities to
achieve high order fill rates while at the same time attempting to stock only
those products in high demand with a rapid turnover rate. Inventory balances
will fluctuate as the Company adds new product lines and when appropriate makes
larger purchases from manufacturers when the terms of purchases are considered
advantageous. The Company contracts with certain vendors who provide limited
price protection and stock return privileges to help reduce the risk of loss to
the Company due to manufacturer price reductions. Price protection, however,
will not protect the Company against slow moving and obsolete inventory. In
addition, returns from vendors of refurbished product previously returned to the
vendor due to defects must be sold at reduced prices decreasing overall margins.

An integral aspect of AmeriQuest's business is to exchange products sold to
customers which are either incompatible units or do not work for a variety of
technical or other reasons. If such products are ultimately determined to be
defective, AmeriQuest, under contract terms with its vendors, is able to return
such products to its vendors. Under such agreements AmeriQuest's economic risk
is nominal and generally limited to the cost of freight and technical services,
both of which cost categories are expensed currently. A warranty and return
reserve of approximately $0.4 and $1.5 million is reflected in the balance
sheets at September 30, 1997 and September 30,1996, respectively.

The Company receives funds under incentive programs based upon volume sales
or purchase of the vendors products. The incentive funds reduce the cost of the
products sold. Incentive programs resulted in $2.4 million for the year ended
September 30, 1997, $2.5 million for the year ended September 30, 1996 and $2.4
million for the fiscal year ended June 30, 1995. Incentive rebates for the
quarter ended September 30, 1995 were $0.6 million.

AmeriQuest anticipates that it will continue to experience pressure on
gross sale margins due to industry competition. Although AmeriQuest expects that
it will be able to reduce other cost of sale items, selling, general and
administrative expenses as a percent of sales, no assurance can be given as to
whether such reduction in fact will occur or as to the actual amount of any such
reductions. To the extent gross margins decline and the Company is not
successful in reducing selling, general and administrative expenses as a
percentage of sales, the Company will experience further negative operating
results.

OPERATING EXPENSES

For the fiscal years ended September 30, 1997 and 1996 and the fiscal year
ended June 30, 1995 selling, general and administrative expenses, exclusive of
the loss on sublease and charges for relocation, restructuring and the write-off
of intangibles were approximately 16.1%, 10.8% and 12.8% of sales, respectively.
Selling, general and administrative expenses for the quarter ended September 30,
1995 was 12.9% of sales. Selling,

13
<PAGE> 15

general and administrative expenses have declined during the periods as a result
of the integration of the Company's recent acquisitions and reductions in bad
debt expense.

During the year ended September 30, 1997, the Company incurred significant
operating and personnel costs to close down the unprofitable distribution
businesses. During the 1997 fiscal year the Company recorded a $9.3 million
charge to expense the restructuring of the Company's sales and administrative
staffing and planned closing of rented facilities. During fiscal years 1996 and
1995 the Company incurred significant costs to resolve certain lawsuits and
complete an information systems conversion. In addition, bad debt expense was
significant in fiscal 1996 as the Company increased export sales to higher
credit risk Brazilian customers During the year ended September 30, 1996 the
Company also recorded a $6.4 million charge to expense for the sublease of its
California headquarters building and the cost to relocate its headquarters to
Florida.

During fiscal 1995, the Company wrote-off intangibles of $23.8 million
associated with the decision to terminate its entertainment software
distribution business in the U.S. and the elimination of certain redundant
regional distribution businesses. In addition, the Company incurred significant
costs associated with the closure of redundant warehouse facilities and the
reduction of personnel. The Company also wrote-off a significant amount of
customer receivables related to the termination of its entertainment software
distribution business and recorded bad debt reserves related to lower volume and
high credit risks.

Operating expenses are reduced by advertising revenues and market
development funds received from vendors as subsidy for or incentive to market
their products. Funds received during the fiscal year ended September 30, 1997
totaled $2.0 million and funds of $2.8 million were received for each of the
fiscal years ended September 30, 1996 and June 30, 1995 and $.4 million for the
quarter ended September 30, 1995.

OPERATING RESULTS

The annual and quarterly operating results of the domestic operations of
the Company have varied considerably due to the acquisition of distribution
companies, closure and sale of certain subsidiaries and operating units and a
reduced emphasis on manufacturing and assembly for all but mass storage assembly
products, which has also ceased as of June 19, 1997.

INTEREST EXPENSE

Interest expense decreased from $4.8 million during the year ended
September 30, 1996 compared to $3.5 million for the year ended September 30,
1997 due to (i) guarantees provided by C-2000 to banks which charged lower
interest rates and (ii) equity infusions from C-2000, offset by continued
losses. Interest expense increased in the year ended June 30, 1995 compared to
the prior fiscal year due to increased levels of debt to fund acquisitions and
operating losses.

INCOME TAXES

In the period July 1, 1993 through September 30, 1997 no income tax benefit
was recorded as it is not more likely than not that the Company will realize the
tax benefit of its deferred tax assets, including tax-loss carry forwards.

INFLATION

To date AmeriQuest has not been significantly affected by inflation.
Moreover, technological changes in the electronics industry have generally
resulted in price reductions, despite increases in certain costs which may be
affected by inflation.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 1997 the Company had $7.7 million in cash and had borrowed
$3.1 million against lines of credit. The Company generated $21.7 million in
cash from operating activities during the year ended September 30, 1997 compared
to usage of cash of $28.8 million for the year ended September 30, 1996. Cash
generated by operations in fiscal 1997 resulted primarily from collection of
accounts receivable and liquidation

14
<PAGE> 16

of inventory offset by full settlement of payment with discontinued vendors.
Sale of assets during fiscal 1997 generated an additional $3.5 million of cash.
Cash receipts were applied to reduce outstanding obligations under lines of
credit.

Accounts receivable days increased during fiscal 1997, representing longer
payment terms extended to customers in order to be competitive. Inventory
turnover increased in both fiscal years 1997 and 1996, reflecting an intentional
reduction in stock carried in an effort to reduce obsolescence costs and
carrying costs necessary to support the business.

At September 30, 1997 the Company had a stockholders' deficit of $23.4
million after operating losses of $41.3 million in the year ended September 30,
1997 and $33.6 million in the year ended September 30, 1996.

The Company had maintained bank lines of credit guaranteed by C-2000 with
four German banks which totaled $27.7 million on September 30, 1997. The
interest rates on such lines of credit were Libor-based. On September 30, 1997,
Computer 2000 AG paid the outstanding bank lines of credit which totaled $27.7
million and converted the loans to a non-interest bearing intercompany demand
loan, and agreed to defer demand of payment through September 30, 1998 and
subordinate its loan to the working capital lender. See "Certain Relationships
and Related Transactions." Notwithstanding the agreement by C-2000 to defer
demand of payment of the loan prior to September 30, 1998, certain specified
events such as, but not limited to, the merger, sale or reorganization of the
Company will make the loan immediately due and payable.

The Company maintains a $20 million line of credit with IBM Credit
Corporation ("IBMCC") which is secured by substantially all of the Company's
assets. Interest rates on the IBMCC line are prime plus 2.625%. Borrowings under
the IBMCC line at September 30, 1997 and 1996 totaled $3.1 million and $12.3
million, respectively. Borrowings under the IBMCC line of credit are limited to
a contractual percentage of eligible inventories and receivables. The terms of
the line include restrictive covenants which require the maintenance of specific
levels of tangible net worth, working capital and operating results. IBMCC has
subsequently approved amendments to the agreement which waive prior defaults.
The IBMCC line is reduced to $5 million on February 28, 1998 and expires on
September 30, 1998.

Operating activities in the upcoming year will require additional cash from
external financing sources. While management believes that the Company's current
sources of external financing, are adequate to meet its current operating
requirements through September 30, 1998, a significant portion of these
external financing sources are represented by the supplier and IBMCC guarantees
and intercompany loan of $27.7 million from Computer 2000 AG. Management
believes that the C-2000 non interest bearing $27.7 million loan and the $5
million line of credit from IBMCC will be adequate for the Company to
accomplish its fiscal 1998 operating plan and to meet its financial obligations
on a timely basis during fiscal 1998.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements, notes thereto, and the report of independent
public accountants thereon are included herein. Supplementary data, including
quarterly financial information, is included following the financial statements.
A list of the information so included is set forth in response to Item 14(a)
entitled "Exhibits, Financial Statement Schedules, and Reports on Form 8-K,"
which is incorporated herein by this reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None

15
<PAGE> 17

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The following table sets forth certain information regarding the current
directors and executive officers of AmeriQuest.

<TABLE>
<CAPTION>
NAME AGE POSITION
------------------------------- ---- ------------------------------------------------------
<S> <C> <C>
Alexander C. Kramer, Jr........ 54 President and a Director
Jon D. Jensen.................. 54 Chief Operating Officer, Chief Financial Officer and
Secretary
Harry Krischik................. 46 Chairman of the Board of Directors
Manfred H. Guenzel............. 46 Director
Richard Obermaier.............. 37 Director
Anton Roedl.................... 34 Director
Marc L. Werner................. 39 Vice Chairman and Director
J.R. Dick Iverson.............. 68 Director
</TABLE>

Alexander C. Kramer, Jr. (age 54) served as Vice President -- Operations of
Robec, Inc. for thirteen years prior to its acquisition in November 1995 by
AmeriQuest. From November 1995 he served in various capacities, and during
fiscal 1997 he served as Vice President -- General Manager of the Advanced
Systems Group. On October 8, 1997, he was appointed by the Board of Directors to
serve as President following the resignation of Mr. Michael Dressen; and he was
also elected on October 8, 1997 by the Board to serve as a Director of
AmeriQuest.

Jon D. Jensen (age 54) served as Vice President of Finance and Chief
Financial Officer of Robec, Inc. from September, 1994 until its acquisition by
AmeriQuest in November, 1995. From November, 1995 to January, 1997, he served
AmeriQuest as Vice President of Planning and Business Process Re-engineering, at
which time he was appointed to serve as Vice President of Finance. On October 8,
1997, he was appointed by the Board of Directors to serve as Chief Operating
Officer, Chief Financial Officer and Secretary of AmeriQuest following the
resignation of Mr. Holger Heims as Chief Financial Officer and Secretary, and
his replacement of Mr. John Tonnison as Chief Operating Officer. For six years
prior to September, 1994, Mr. Jensen had served as Chief Financial Officer,
Controller and Treasurer of Philadelphia Gear Company.

Dr. Harry Krischik (age 46) has served as a Member of the Executive Board
of Computer 2000 AG for more than the last five years, with responsibility for
the areas of logistics, electronic data processing and human resources. He is
now responsible for worldwide sales and also has regional responsibility for
Southern Europe, North America and Latin America.

Manfred H. Guenzel (age 46) was appointed to serve as a Member of the
Executive Board of Computer 2000 AG in January 1996. From August 1990 until
January 1996, he served as Head of Corporate
Development/Acquisitions/Controlling (Energy, Chemistry, Aluminum Refractories,
Telecommunications) for VIAG AG, the ultimate parent of Computer 2000 AG.

Richard Obermaier (age 37) has served as Controller and Senior Staff Member
of Mergers & Acquisitions for Computer 2000 AG since July, 1995. From 1991
through July, 1995, he served as a Senior Staff Member in the corporate finance
department at Allianz AG, engaged in mergers and acquisitions.

Anton Roedl (age 34) joined Computer 2000 AG in September 1996 to serve as
Manager of Taxation. From 1990 to August 1996 he was employed by KPMG Peat
Marwick where his last position was that of a Supervising Senior in the audit
department. He was elected by the Board of Directors to serve as a Director
following the resignation of Mr. Holger Heims.

Marc L. Werner (age 40) serves as President and Chief Executive Officer of
Cornucopias Capital Advisors. He was employed by Werner Co. and various
companies affiliated with Werner Co. from 1986 until April 30, 1997, with his
last position there being that of Chief Executive Officer, President and
Director for

16
<PAGE> 18

Werner Financial, Inc. Mr. Werner is a Certified Public Accountant, and holds a
Bachelor of Science degree in Accounting from Northern Illinois University.

J. R. Dick Iverson (age 69) is currently retired, except for his service on
the board of directors of AmeriQuest, Telegen Corporation and ComStream
Corporation, a subsidiary of Spar Aerospace Limited. From 1986 to 1994 he served
as Chief Executive Officer and President of the American Electronics
Association.

On October 8, 1997, Michael Dressen resigned as President of the Company,
Holger Heims resigned as Chief Financial Officer and Secretary of the Company
and John Tonnison was replaced as Chief Operating Officer of the Company. On
October 8, 1997, Alexander C. Kramer, Jr. was elected President of the Company,
and Jon Jensen was elected Chief Operating Officer, Chief Financial Officer and
Secretary of the Company.

The Company has an Audit Committee, which currently consists of two
directors: Marc L. Werner and J. R. Dick Iverson. Messr's Werner and Iverson
are neither officers nor employees of the Company or any of its affiliates. The
Compensation Committee consists of Dr. Harry Krischik and Marc L. Werner. The
Compensation Committee is concerned primarily with establishing executive
compensation policies for the Company. See "Executive Compensation --
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions."

In May, 1997, the Company formed an Acquisition Committee, which consists
of two directors: Marc L. Werner and Richard Obermaier. The Acquisition
Committee was formed to investigate, evaluate and negotiate potential
acquisitions, mergers and divestitures involving AmeriQuest or its assets. The
Acquisition Committee serves at the discretion of the Board of Directors of the
Company and may be disbanded at any time by resolution of the Company's Board of
Directors.

17
<PAGE> 19

ITEM 11. EXECUTIVE COMPENSATION.

The following table provides information concerning the annual and
long-term compensation of the Chief Executive Officer of AmeriQuest and each of
the four other highest paid executive officers who served as such at the end of
fiscal year 1997 and their titles at such date, and for two of the other highest
paid executive officers who terminated their employment with AmeriQuest prior to
the end of fiscal year 1997 (collectively, the "Named Executive Officers") for
services rendered to AmeriQuest and its subsidiaries in all capacities during
the fiscal years 1997, 1996 and 1995. This information includes the dollar
values of base salaries and bonus awards, and certain other compensation, if
any, whether paid or deferred. AmeriQuest does not provide long-term
compensation benefits other than stock options. On October 8, 1997, Michael
Dressen resigned as President of the Company, Holger Heims resigned as Chief
Financial Officer and Secretary of the Company and John Tonnison was replaced as
Chief Operating Officer of the Company. On October 8, 1997, Alexander C. Kramer,
Jr. Was elected President of the Company, and Jon D. Jensen was elected Chief
Operating Officer, Chief Financial Officer and Secretary of the Company.

<TABLE>
<CAPTION>
ANNUAL COMPENSATION(1) (4)
------------------------------ ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY(2) BONUS(5) COMPENSATION
- ------------------------------------------------- ---- -------- -------- ------------
<S> <C> <C> <C> <C>
Michael Dressen,................................. 1997 $250,000 $165,000 107,393
President 1996 40,000 -0- -0-
1995 -0- -0- -0-

Holger Heims,.................................... 1997 150,000 200,000 87,128
Chief Financial Officer and Secretary 1996 150,000 -0- -0-
1995 -0- -0- -0-

John Tonnison,................................... 1997 150,000 199,749 84,000
Chief Operating Officer 1996 107,000 16,837 -0-
1995 -0- -0- -0-

Alexander C. Kramer, Jr.,........................ 1997 150,000 165,000 -0-
Vice President, Advanced Systems Group 1996 150,000 19,974 -0-
1995 150,000 4,154 -0-

Andrew J. Lewis,................................. 1997 80,000 76,250 101,604
Controller 1996 80,000 1,588 -0-
1995 -0- -0- -0-

Richard McIntyre,................................ 1997 104,873 11,586 264,285(3)
Vice President -- Sales 1996 133,750 15,918 -0-
1995 -0- -0- -0-

John Hudson,..................................... 1997 122,563 95,569 85,967(3)
Vice President -- U.S. Sales 1996 39,385 11,006 -0-
1995 -0- -0- -0-
</TABLE>

- ---------------
(1) In fiscal years 1997, 1996 and 1995, no executive officer received
perquisites or other personal benefits, securities or property which
exceeded the lesser of $50,000 or 10% of such executive officer's salary and
bonus, excepting Michael Dressen who received housing and health care
reimbursement of $57,393.

(2) Salary compensation includes amounts paid for vacation time not taken by the
employees.

(3) Messrs. Richard McIntyre and John Hudson terminated their employment on May
9, 1997 and August 25, 1997, respectively, and the amounts set forth under
the column entitled "All Other Compensation" represents severance payments
and other compensation to which they were entitled under their respective
employment arrangements.

18
<PAGE> 20

(4) Includes amounts paid during the fiscal year as a bonus for the employee's
cooperation to move to Florida and where applicable the employees' cost to
return to California.

(5) Includes loyalty bonus paid to ensure continuity and orderly completion of
close of Florida operation.

OPTION EXERCISES AND FISCAL YEAR END VALUES

The following table provides, as to the Named Executive Officers,
information concerning unexercised stock options at September 30, 1997. None of
the executive officers exercised any stock options during fiscal year 1997.

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SEPTEMBER 30, 1997 SEPTEMBER 30, 1997(1)
----------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Michael Dressen............................ -0- -0- -0- -0-
Holger Heims............................... -0- -0- -0- -0-
John Tonnison.............................. -0- -0- -0- -0-
Alexander C. Kramer, Jr.(2)................ 37,635 16,129 -0- -0-
Andrew J. Lewis............................ -0- -0- -0- -0-
Richard McIntyre........................... -0- -0- -0- -0-
John Hudson................................ -0- -0- -0- -0-
</TABLE>

- ---------------
(1) Based on the closing price of AmeriQuest's Common Stock on the New York
Stock Exchange on September 30, 1997.

(2) Represents 16,129 shares as having vested with respect to an option granted
on June 7, 1994 and 21,506 shares as having vested under an option granted
March 22, 1993.

EMPLOYMENT CONTRACTS

As of October 1, 1997, the Company entered into an Employment Agreement
with Alexander C. Kramer, Jr. Providing for an annual salary of $200,000 plus
eligibility for bonus up to 114% of annual salary. The Employment Agreement
provides for six months severance if the employee is terminated without cause
and 12 months severance if the employee is terminated or resigns following a
diminution of responsibility within 12 months after a change of control.

As of October 1, 1997, the Company entered into an Employment Agreement
with Jon Jensen providing for an annual salary of $157,500 plus eligibility for
bonus up to 114% of annual salary. The Employment Agreement provides for six
months severance if the employee is terminated without cause and 12 months
severance if the employee is terminated or resigns following a diminution of
responsibility within 12 months after a change of control.

COMPENSATION OF OUTSIDE DIRECTORS

AmeriQuest pays its outside Directors, Marc L. Werner and J.R. Dick
Iverson, $2,500 per calendar quarter plus expenses incurred to attend Board
meetings. All directors are also eligible to receive stock and/or stock options
as a form of compensation. The Company has agreed to pay Marc L. Werner $5,000
per month, commencing as of October, 1997, plus reimbursement of expenses for
his services as Chairman of the Acquisition Committee of the Board.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During fiscal 1997 the Compensation Committee consisted of Dr. Harry
Krischik and Marc L. Werner. Dr. Krischik is a member of the Executive Board of
Computer 2000 AG.

19
<PAGE> 21

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth, as of November 30, 1997, information
relating to the beneficial ownership of AmeriQuest's Common Stock by (i) each
person known to AmeriQuest to be the beneficial owner of more than five percent
of AmeriQuest's outstanding Common Stock, (ii) each director, (iii) each of the
Named Executive Officers, and (iv) all directors and executive officers as a
group. AmeriQuest knows of no agreements among its shareholders which relate to
voting or investment power over its Common Stock.

<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL OWNERSHIP AS OF
NOVEMBER 30, 1997(1)
NUMBER OF SHARES
NAME AND ADDRESS OF BENEFICIAL ------------------------------------ PERCENT OF OUTSTANDING
OWNER COMMON PREFERRED CLASS OF SECURITY(19)
- ----------------------------------- ---------- ---------------- ----------------------
<S> <C> <C> <C>
Computer 2000 Inc.(2).............. 43,385,158 56%
Wolfratshauser Strasse 84 300,000 Series H 100%
81379 Munchen, Germany
Computer 2000 AG(2)................ 43,385,158 56%
Wolfratshauser Strasse 84 300,000 Series H 100%
81379 Munchen, Germany
DIRECTORS AND OFFICERS(17)
Michael Dressen(3)................. -0- -0- 0%
Holger Heims(4).................... -0- -0- 0%
Harry Krischik(5).................. 43,385,158 56%
300,000 Series H 100%
Manfred H. Guenzel(6).............. 43,385,158 56%
300,000 Series H 100%
Richard Obermaier(7)............... 43,385,158 56%
300,000 Series H 100%
Anton Roedl(8)..................... -0- -0- *
John Tonnison(9)................... -0- -0- 0%
Alexander C. Kramer, Jr.(10)....... 37,635 -0- *
Marc L. Werner(11)................. 20,000 -0- *
J.R. Dick Iverson(12).............. 10,000 -0- *
Andrew J. Lewis(13)................ -0- -0- 0%
Richard McIntyre(14)............... -0- -0- 0%
John Hudson(15).................... -0- -0- 0%
All officers and directors as a
group (13 persons)(17)........... 43,452,793(16)(18) 59%
300,000 Series H 5)(6)(7) 100%
</TABLE>

- ---------------
* Denotes less than 1%

(1) Unless otherwise indicated below, the persons and entities named in the
table have sole voting and sole investment power with respect to all shares
beneficially owned, subject to community property laws where applicable.

(2) Includes shares owned directly by Computer 2000 Inc., a wholly-owned
subsidiary of Computer 2000 AG. The amount reflected in the table includes
7,035,280 shares subject to outstanding Achievement Warrants in favor of
Computer 2000 Inc., which are currently exercisable. The warrants and
option held by Computer 2000 Inc. are as follows:

<TABLE>
<S> <C>
Achievement Warrants.......... 7,035,280
Maintenance Option............ 2,357,235
</TABLE>

20
<PAGE> 22
The Series H Cumulative Convertible Preferred Stock held by Computer 2000
Inc. is convertible into 41,958,042 shares of Common Stock, which, when
combined with the Common Stock beneficially owned by Computer 2000, Inc. on
November 30, 1997 would equal 74% of the outstanding Common Stock upon
conversion.

(3) Mr. Dressen became President of AmeriQuest on August 1, 1996, and was
appointed to serve as a Director on September 12, 1996. Mr. Dressen
resigned his positions on October 8, 1997.

(4) Mr. Heims served during 1997 as Executive Vice President, Chief Financial
Officer, Secretary and a Director of AmeriQuest. Mr. Heims resigned his
positions on October 8, 1997.

(5) Represents the shares held of record by Computer 2000 Inc. (see footnote
(2) above). Mr. Krischik is a Member of the Executive Board of Computer
2000 AG, and therefore may be deemed to have shared voting power over the
shares of AmeriQuest held by Computer 2000 Inc. There are a total of five
persons who serve as a Member of the Executive Board of Computer 2000 AG,
of which Mr. Krischik is one. Mr. Krischik disclaims beneficial ownership
of all shares of AmeriQuest held by Computer 2000 Inc. Mr. Krischik is a
nominee of Computer 2000 AG, and serves as the Chairman of the Board of
Directors of AmeriQuest.

(6) Represents the shares held of record by Computer 2000, Inc. (see footnote
(2) above). Mr. Guenzel is a Member of the Executive Board of Computer 2000
AG, and therefore may be deemed to have shared voting power over the shares
of AmeriQuest held by Computer 2000 Inc. There are a total of five persons
who serve as a Member of the Executive Board of Computer 2000 AG, of which
Mr. Guenzel is one. -- Mr. Guenzel disclaims beneficial ownership of all
shares of AmeriQuest held by Computer 2000 Inc. Mr. Guenzel is a nominee of
Computer 2000 AG, and serves as a Director of AmeriQuest.

(7) Represents the shares held of record by Computer 2000, Inc. (see footnote
(2) above). Mr. Obermaier is an officer and director of Computer 2000 Inc.,
and therefore may be deemed to have shared voting power over the shares of
AmeriQuest held by Computer 2000 Inc. Mr. Obermaier disclaims beneficial
ownership of all shares of AmeriQuest held by Computer 2000 Inc. Mr.
Obermaier is a nominee of Computer 2000 AG, and serves as a Director of
AmeriQuest.

(8) Mr. Roedl disclaims beneficial ownership of all shares of AmeriQuest held
by Computer 2000 Inc., because although he is an employee of Computer 2000
AG, he is not an officer or director of Computer 2000 Inc. nor is he a
member of the Executive Board of Computer 2000 AG, which is the level at
Computer 2000 AG which would decide the manner in which AmeriQuest shares
would be voted by Computer 2000 Inc. Mr. Roedl is a nominee of Computer
2000 AG, and serves as a Director of AmeriQuest.

(9) Mr. Tonnison served as Chief Operating Officer during fiscal 1997, until he
was replaced by Mr. Jon Jensen on October 8, 1997.

(10) Includes 37,635 shares subject to stock options exercisable within 60 days
after November 30, 1997. Mr. Kramer served as Vice President -- Advanced
Systems Group during fiscal 1997, and is now serving as President.

(11) Includes 20,000 shares of Common Stock held of record by Mr. Werner as
custodian for certain of his children.

(12) Mr. Iverson commenced service as a Director of AmeriQuest on July 10, 1996.

(13) Mr. Lewis served as Controller of AmeriQuest during fiscal 1997.

(14) Mr. McIntyre served as Vice President -- Sales until his severance from
employment on May 31, 1997.

(15) Mr. Hudson served as Vice President -- U.S. Sales until his severance from
employment on September 30, 1997.

(16) Includes 37,635 shares subject to stock options and warrants currently
vested and issuable upon exercise of such options and warrants.

(17) The address for the executive officers and directors and proposed directors
is: 425 Privet Road, Horsham, Pennsylvania 19044.

21
<PAGE> 23

(18) The executive officers of AmeriQuest at November 30, 1997 were Alexander C.
Kramer, Jr. and Jon Jensen. The shares reflected in the table as owned by
all officers and directors as a group includes the shares referred to in
footnotes (5) through (12) above.

(19) For purposes of determining the percentage of outstanding Common Stock held
by each person or group set forth in the table, the number of shares held
by a person or group is divided by the number of shares of AmeriQuest's
Common Stock outstanding on November 30, 1997 (66,881,906) plus the number
of shares of Common Stock subject to outstanding stock options and warrants
exercisable currently or within 60 days of November 30, 1997 by such person
or group, in accordance with Rule 13d-3(d)(1) under the Securities Exchange
Act of 1934, as amended. Percentages of less than 1% are represented by an
asterisk.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

In December 1995, Computer 2000 AG issued guarantees to certain lenders to
secure up to $66 million of lines of credit such lenders might extend to
AmeriQuest. In November 1996 Computer 2000 AG increased the $66 million of
credit lines to $76 million. These borrowings were used in part to reduce the
Company's interest-bearing indebtedness under its previously outstanding lines
of credit from approximately $52 million to zero, resulting in a reduction, as
of September 30, 1996, in the average interest rate on the Company's total
outstanding indebtedness from approximately 11.0% per annum to approximately
6.4% per annum. In return for the guarantees, AmeriQuest agreed to pay Computer
2000 AG one-half of one percent (0.5%) per annum of the amounts guaranteed, on a
weighted average basis, and provided Computer 2000 AG with a security interest
in all of AmeriQuest's assets, and agreed to seek refinancing of its outstanding
debt as soon as reasonably practicable. Computer 2000 AG's guarantees expired on
September 30, 1997, at which time Computer 2000 AG paid the amounts guaranteed
in full, totaling $27.7 million. AmeriQuest is now indebted to Computer 2000 AG
in the amount of $27.7 million under the terms of the Reimbursement and Security
Agreement of December 1995. This intercompany loan is non-interest bearing, and
is guaranteed by all the assets of AmeriQuest, subordinate only to the security
interests of IBMCC. Notwithstanding the agreement by C-2000 to defer payment of
the loan prior to September 30, 1998, certain specified events such as, but not
limited to, merger, sale or reorganization of the Company will make the loan
immediately due and payable. In the opinion of management, this financing is
more favorable to AmeriQuest than could have been obtained from unaffiliated
third party lenders. Additionally, C-2000 has guaranteed certain amounts due to
two of the Company's suppliers and $5 million to IBMCC.
------------------------------

On May 6, 1997, AmeriQuest issued and sold to Computer 2000 Inc. 300,000
shares of its Series H Cumulative Convertible Preferred Stock (the "Preferred
Stock") (convertible as of November 30, 1997 at an exercise price of $.715 per
share into 41,958,042 shares of AmeriQuest Common Stock) for a purchase price of
$30 million. The proceeds of the sale were used to partially pay down
AmeriQuest's existing bank credit lines. A preferred dividend of 7% per annum is
being accrued pursuant to the terms of the Preferred Stock. In the opinion of
management this financing is at least as favorable to AmeriQuest as could have
been obtained from unaffiliated third party lenders.
------------------------------

On April 19, 1997, AmeriQuest and Computer 2000 AG entered into identical
indemnification agreements with Board members Dr. Harry Krischik, Manfred
Guenzel, Michael Dressen, Holger Heims, Robert H. Beckett, Marc L. Werner and J.
R. Dick Iverson, and with John Tonnison. Subsequently, Computer 2000 AG entered
into indemnification agreements identical to those executed on April 19, 1997
with newly elected Board members, Messrs. Richard Obermaier, Anton Roedl and
Alexander C. Kramer, Jr. and executive officer Jon D. Jensen. The
indemnification agreements so executed are referred to hereinafter as the
"Indemnification Agreements."

AmeriQuest's Certificate of Incorporation provides that AmeriQuest as a
corporation will indemnify its directors and officers to the fullest extent
permitted by law and shall advance expenses in connection therewith.

22
<PAGE> 24

Among other things, each of the Indemnification Agreements provides that in
the event an indemnitee becomes a party to certain specified legal proceedings
by reason of an Indemnifiable Event (as defined below), AmeriQuest and Computer
2000 AG, jointly and severally, shall indemnify such indemnitee to the fullest
extent permitted by law against Indemnifiable Expenses (as defined below) if the
indemnitee acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of AmeriQuest and, with respect to any
criminal proceeding or investigation, had no reasonable cause to believe his
conduct was unlawful. In the event an indemnitee becomes a party to a legal
proceeding by or in the right of AmeriQuest to procure a judgment in its favor
by reason of an Indemnifiable Event, AmeriQuest and Computer 2000 AG, jointly
and severally, shall indemnify such indemnitee to the fullest extent permitted
by law against Indemnifiable Expenses actually and reasonably incurred by the
Indemnitee in connection with such legal proceeding or any appeal therefrom, if
the indemnitee acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of AmeriQuest, except that no
indemnification shall be made in respect of any such legal proceeding as to
which the indemnitee shall have been adjudged to be liable to AmeriQuest unless
and only to the extent that the court in which such proceeding was brought shall
determine that the indemnitee is fairly and reasonably entitled to indemnity for
such Indemnifiable Expenses. All such indemnification will be subject to the
terms and conditions set forth in the Indemnification Agreements.

As used in each of the Indemnification Agreements, "Indemnifiable Expenses"
means any and all costs, charges and expenses, including, without limitation,
attorneys' fees and other fees, expenses in connection with the investigation,
defense or appeal of any legal proceeding, judgments, fines and amounts paid in
settlement (including all interest, assessments and other charges paid or
payable in connection with or in respect of any such attorneys' fees and other
fees and expenses, judgments, fines or amounts paid in settlement) actually and
reasonably incurred by the Indemnitee in connection with the legal proceeding or
any appear therefrom. The term "Indemnifiable Event" means any actual or
asserted event or occurrence related to the fact that the indemnitee is or was a
director, officer, employee, agent or fiduciary of AmeriQuest, or is or was
serving at the request of AmeriQuest as a director, officer, employee, trustee,
agent, or fiduciary of another corporation, partnership, joint venture, employee
benefit plan, trust, or other entity, or anything done or not done by the
indemnitee in any such capacity.

------------------------------

AmeriQuest leases its facility in Horsham, Pennsylvania from Bowe 3
Partners at a lease rate of approximately $522,000 per year for 105,000 square
feet of office and warehouse space. The Lease for this facility was first
scheduled to terminate on December 31, 1996, but by mutual agreement of the
parties was extended on September 10, 1996 through January 31, 1998 at the same
rate as that in effect for September 1996. On December 5, 1997, the Lease was
further extended to expire by its terms on March 31, 1998, with rent payable
after January 31, 1998 at the current rate. Alexander C. Kramer, Jr., President
and a Director of the Company, is a partner in Bowe 3 Partners. In the opinion
of management, the terms of the Lease are as favorable to AmeriQuest as those
which could be obtained from unaffiliated third parties.

SEVERANCE ARRANGEMENTS WITH PRIOR MEMBERS OF MANAGEMENT

During fiscal 1997 several officers terminated their employment with
AmeriQuest as part of its efforts to reduce overhead expenses and retain
personnel skilled enough to effect a turn-around of the Company. The following
table sets forth the amounts of severance payments made and the names of the
officers to whom such payments were made.

<TABLE>
<CAPTION>
EMPLOYEE DATE OF SEVERANCE
NAME AND POSITION SEVERANCE CONTRACT RIGHT PAID
--------------------------------------- --------------- -------------- ---------
<S> <C> <C> <C>
Dennis Fairchild....................... January 7, 1997 $ 75,000 $75,000(1)
Richard McIntyre....................... May 9, 1997 $ 75,000 $75,000(2)
John Hudson............................ August 25, 1997 -0- $37,500(3)
</TABLE>

- ---------------
(1) Mr. Fairchild also received reimbursement of moving expenses totaling
$65,000 and reimbursement of his home rental while in Florida of $12,000.

(2) Mr. McIntyre also received a payment for adjustment of housing expenses
incurred in reliance on promise of future employment of $126,220.

(3) Mr. Hudson also received $20,000 as incentive pay to remain with AmeriQuest
through the date of his termination and a relocation bonus of $20,000.

23
<PAGE> 25

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) Financial Statements and Schedules

<TABLE>
<CAPTION>
PAGE
REFERENCE
---------
<S> <C>
(1) Financial Statements included in Part II of this Report:
Report of Independent Certified Public Accountants.......... F-1
Consolidated Statements of Operations....................... F-2
Consolidated Balance Sheets................................. F-3
Consolidated Statements of Stockholders' Deficit............ F-4
Consolidated Statements of Cash Flows....................... F-5
Notes to Consolidated Financial Statements.................. F-7
(2) Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts and F-19
Reserves...................................................
</TABLE>

(b) Reports on Form 8-K

Current report on Form 8-K dated November 20, 1997 to report the dale of
Kenfil Distribution (Far East), a Hong Kong Corporation and Kenfil Distribution
(M) Sd. Bhd., a Malaysian corporation, formerly wholly owned subsidiaries of
AmeriQuest/Kenfil Inc., a wholly owned subsidiary of the Registrant.

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE OF DOCUMENT PAGE NO. LOCATION OF FILING
- --------- ------------------------------------------- -------- ------------------------------
<S> <C> <C> <C>
3.01(a)* Certificate of Incorporation of AmeriQuest SEC File No. 1-10397
as amended through September 22, 1994. 10-K for June 30, 1994

3.01(b)* Amendment to the Certificate of SEC File No. 1-10397
Incorporation of AmeriQuest dated April 1, 10-K for September 30, 1996
1996 pursuant to which authorized Common
Stock was increased to 200,000,000 shares
and authorized Preferred Stock was restored
to 5,000,000 shares

3.01(c) Certificate of Designations for Series H SEC File No. 1-10397
Preferred Stock issued and issuable to 10-K for September 30, 1997
Computer 2000.

3.02* By-laws of AmeriQuest 189 SEC File No. 33-81726

4.01* Reference is made to Exhibits 3.01 and
3.02, the Certificate of Incorporation and
By-laws, which define the rights of
security holders

4.02* Specimen Stock Certificate 274 SEC File No. 33-81726

10.01* Inventory and Working Capital Financing SEC File No. 1-10397
Agreement dated May 5, 1995 by and between 10-K for June 30, 1995
CDS Distribution, Inc. and IBM Credit
Corporation, as amended.

10.02* Inventory and Working Capital Financing SEC File No. 0-18115
Agreement dated September 21, 1994 by and 8-K dated September 22, 1994
between Robec, Inc. and IBM Credit
Corporation, as amended.
</TABLE>

24
<PAGE> 26

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE OF DOCUMENT PAGE NO. LOCATION OF FILING
- --------- ------------------------------------------- -------- ------------------------------
<S> <C> <C> <C>
10.03 Reimbursement and Security Agreement dated SEC File No. 1-10397
December 20, 1995 by and between AmeriQuest 10-K for September 30, 1997
and Computer 2000 AG

10.05* Incentive Stock Option Plan SEC File No. 2-96539

10.06* Employee Stock Bonus Plan SEC File 33-23809

10.07* 1996 Equity Incentive Plan SEC File No. 1-10397

10.08* Employment Agreement for Michael Dressen SEC File No. 1-10397
10-K for September 30, 1996

10.09* Employment Agreement for Holger Heims SEC File No. 1-10397
10-K for September 30, 1996

10.10 Employment Agreement for Alexander C. SEC File No. 1-10397
Kramer, Jr. 10-K for September 30, 1997

10.11 Employment Agreement for Jon D. Jensen SEC File No. 1-10397
10-K for September 30, 1997

10.12 Form of Indemnification Agreement by and To be filed by Amendment
between and among Computer 2000 AG and
Officers and Directors Michael Dressen,
Holger Heims, Harry Krischik, Manfred
Guenzel, Richard Obermeier, Anton Roedl,
Marc L. Werner, J. R. Dick Iverson, John
Tonnison, Alexander C. Kramer, Jr. and Jon
D. Jensen

10.13* Purchase Agreement dated August 7, 1995 by SEC File No. 1-10397
and between AmeriQuest and Computer 2000 AG 8-K dated August 7, 1995

10.14 Preferred Stock Purchase Agreement dated To be filed by Amendment
April 28, 1997 by and between AmeriQuest
and Computer 2000 AG

10.21* Lease Agreement dated January 1, 1994, as SEC File No. 1-10397
amended, by and between AmeriQuest as 10-K for September 30, 1996
successor in interest by merger to the
interests of Robec, Inc. and Bowe 3
Partners

10.22 Lease Agreement dated September 8, 1997, by SEC File No. 1-10397
and between AmeriQuest and AP Southeast 10-K for September 30, 1997
Portfolio Partners LP d/b/a Highwoods
Anderson.

10.23 Lease Agreement dated August 26, 1997, by SEC File No. 1-10397
and between AmeriQuest and Tall Oaks 10-K for September 30, 1997
Associates, LP

10.25* Lease Agreement dated January 25, 1995, as SEC File No. 1-10397
amended, by and between AmeriQuest and 10-K for September 30, 1996
Anaheim Technology Center

10.26* Sublease dated as of September 4, 1996 by SEC File No. 1-10397
and between AmeriQuest and Central Video, 10-K for September 30, 1996
Inc.

21.01 Subsidiaries of AmeriQuest SEC File No. 1-10397
10-K for September 30, 1997
</TABLE>

25
<PAGE> 27

<TABLE>
<CAPTION>
EXHIBIT
NO. TITLE OF DOCUMENT PAGE NO. LOCATION OF FILING
- --------- ------------------------------------------- -------- ------------------------------
<S> <C> <C> <C>
23.01 Consent of Arthur Andersen LLP to the SEC File No. 1-10397
incorporation of their report included in 10-K for September 30, 1997
the Annual Report on Form 10-K of
AmeriQuest for the fiscal year ended
September 30, 1997 into certain of
AmeriQuest's previously filed Registration
Statements.

24.01 Powers of Attorney for Messrs. Harry SEC File No. 1-10397
Krischik, Manfred H. Guenzel, Anton Roedl, 10-K for September 30, 1997
Richard Obermaier, Alexander C. Kramer,
Jr., Marc L. Werner and J.R. Dick Iverson

27.01 Financial Data Schedule (for SEC use only) SEC File No. 1-10397
10-K for September 30, 1997
</TABLE>

- ---------------
* Incorporated herein by reference to the indicated filing pursuant to Rule
12b-32 under the Securities Exchange Act of 1934, as amended, and Rule 24 of
the Commission's Rules of Practice.

26
<PAGE> 28

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1933, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of
Horsham, State of Pennsylvania, on the 12th day of January, 1998.

AmeriQuest Technologies, Inc.

/s/ ALEXANDER C. KRAMER
--------------------------------------
By: Alexander C. Kramer
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ ------------------------------ ------------------

<C> <S> <C>
/s/ ALEXANDER C. KRAMER President and a Director January 12, 1998
- ------------------------------------------ (Principal Executive
Alexander C. Kramer Officer)
/s/ JON D. JENSEN Chief Financial Officer, Chief January 12, 1998
- ------------------------------------------ Operating Officer and
Jon D. Jensen Secretary (Principal
Financial and Accounting
Officer)

/s/ DR. HARRY KRISCHIK Director January 12, 1998
- ------------------------------------------
Dr. Harry Krischik**

/s/ MANFRED H. GUENZEL Director January 12, 1998
- ------------------------------------------
Manfred H. Guenzel**

/s/ RICHARD OBERMAIER Director January 12, 1998
- ------------------------------------------
Richard Obermaier**

/s/ ANTON ROEDL Director January 12, 1998
- ------------------------------------------
Anton Roedl**

/s/ MARC L. WERNER Director January 12, 1998
- ------------------------------------------
Marc L. Werner**

/s/ J. R. DICK IVERSON Director January 12, 1998
- ------------------------------------------
J. R. Dick Iverson**

/s/ ALEXANDER C. KRAMER
- ------------------------------------------
Alexander C. Kramer*,
Attorney-in-Fact

/s/ JON JENSEN
- ------------------------------------------
Jon Jensen,**
Attorney-in-Fact
</TABLE>

27
<PAGE> 29

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
- --------------------------------------------------------------------------------

TO AMERIQUEST TECHNOLOGIES, INC.:

We have audited the accompanying consolidated balance sheets of AmeriQuest
Technologies, Inc. (a Delaware corporation) and subsidiaries (AmeriQuest) as of
September 30, 1997 and 1996 and the related consolidated statements of
operations, stockholders' deficit and cash flows for the years then ended and
for the three months ended September 30, 1995 and for the year ended June 30,
1995. These financial statements are the responsibility of AmeriQuest's
management. Our responsibility is to express an opinion on these financial
statements based on our audits. We did not audit the consolidated financial
statements of Kenfil Distribution (Far East) Limited, which statements reflect
total assets and total revenues of 24 percent and 11 percent in 1997,
respectively, of the consolidated totals. Those statements were audited by other
auditors whose report has been furnished to us and our opinion, insofar as it
relates to the amounts included for those entities, is based solely on the
report of the other auditors.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.

In our opinion, based on our audits and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of AmeriQuest Technologies, Inc. and subsidiaries, as of
September 30, 1997 and 1996, and the results of their operations and their cash
flows for the years then ended and for the three months ended September 30, 1995
and for the year ended June 30, 1995 in conformity with generally accepted
accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as whole. Schedule II is presented for purposes of
complying with the Securities and Exchange Commissions rules and is not a
required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Miami, Florida,
December 16, 1997 (Except
with respect to the
matters discussed in Note
12, as to which the date
is January 9, 1998).

F-1
<PAGE> 30

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, JUNE 30,
1997 1996 1995 1995
------------- ------------- ------------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
NET SALES............................. $ 218,877 $ 424,708 $ 100,723 $ 416,571
COST OF SALES......................... 203,199 401,165 93,308 400,820
----------- ----------- ----------- -----------
Gross Profit..................... 15,678 23,543 7,415 15,751
OPERATING EXPENSES
Selling, general and
administrative................. 35,160 45,998 13,019 53,471
Intangibles write-off............ 9,036 -0- -0- 23,777
Restructuring, asset impairment
and relocation costs........... 9,338 6,400 -0- -0-
----------- ----------- ----------- -----------
53,534 52,398 13,019 77,248
----------- ----------- ----------- -----------
Loss from operations............. (37,856) (28,855) (5,604) (61,497)
Interest expense................. 3,455 4,754 1,437 6,069
----------- ----------- ----------- -----------
Net loss......................... $ (41,311) $ (33,609) $ (7,041) $ (67,566)
=========== =========== =========== ===========
Net loss per common share and
common share equivalent........ $ (0.63) $ (0.76) $ (0.30) $ (3.76)
=========== =========== =========== ===========
Weighted average shares
outstanding.................... 66,881,906 44,208,983 23,786,127 17,993,440
=========== =========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-2
<PAGE> 31

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
SEPTEMBER 30, SEPTEMBER 30,
1997 1996
------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents....................................... $ 7,680 $ 2,300
Accounts receivable, net of allowances for doubtful accounts of
$2,156 and $5,811 as of September 30, 1997 and September 30,
1996, respectively........................................... 9,006 56,492
Inventories..................................................... 7,066 38,019
Other current assets............................................ 935 2,837
--------- ---------
Total current assets......................................... 24,687 99,648
PROPERTY AND EQUIPMENT, NET....................................... 1,272 6,134
INTANGIBLE ASSETS, net of accumulated amortization of $1,961 as of
September 30, 1996.............................................. -0- 9,546
OTHER ASSETS...................................................... 120 1,044
--------- ---------
26,079 116,372
========= =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable................................................ 9,492 36,152
Due to Computer 2000............................................ 27,664 -0-
Lines of credit................................................. 3,064 77,446
Other current liabilities....................................... 9,251 10,858
--------- ---------
Total current liabilities.................................... 49,471 124,456

LONG-TERM OBLIGATIONS............................................. -0- 3,122

COMMITMENTS AND CONTINGENCIES (NOTES 5, 7, 8 AND 12)

STOCKHOLDERS' DEFICIT
Preferred Stock, $.01 par value, 7% cumulative dividend,
convertible into common, 300,000 shares authorized and
outstanding; entitled to $30,000,000 in involuntary
liquidation.................................................. 30,000 -0-
Common stock, $.01 par value; authorized 200,000,000 shares;
issued and outstanding 66,881,906 and 67,047,392 shares as of
September 30, 1997 and September 30, 1996, respectively...... 669 670
Additional paid-in capital...................................... 111,145 111,144
Accumulated deficit............................................. (165,206) (123,020)
--------- ---------
Total stockholders' deficit.................................. (23,392) (11,206)
--------- ---------
$ 26,079 $ 116,372
========= =========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-3
<PAGE> 32

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

STATEMENTS OF STOCKHOLDERS' DEFICIT

<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
--------------------- -------------------- PAID-IN RETAINED
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT
---------- ------- ---------- ------ ---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JUNE 30, 1995............. -0- -0- 22,966,711 $230 $ 56,196 $ (82,135)
Conversion of subordinated note
payable............................. 810,811 8 -0- -0- 17,992
Sale of subsidiary.................... -0- -0- (350,000) (4) (697)
Common stock issued by private
placement and other................. -0- -0- 1,229,429 12 1,719
Exercise of employee stock options.... -0- -0- 50,000 1 37
Sale of preferred stock............... 1,785,714 18 -0- -0- 31,229
Net loss for the three months ended
September 30, 1995.................. -0- -0- -0- -0- -0- (7,041)
---------- ------- ---------- ---- -------- ---------
BALANCES AT SEPTEMBER 30, 1995........ 2,596,525 $ 26 23,896,140 $239 $106,476 $ (89,176)
Exercise of employee stock options.... -0- -0- 82,500 1 3
Preferred stock issued for
acquisition......................... 25,830 -0- -0- -0- 1,603
Common stock issued for acquisition... -0- -0- 3,969,905 40 2,367
Exercise of warrants by Computer
2000................................ 301,249 3 -0- -0- 232
Common stock issued for legal
settlement.......................... -0- -0- 500,000 5 305
Common stock issued for series G
preferred stock dividend............ -0- -0- 197,958 2 233 (235)
Preferred stock conversion............ (2,923,604) (29) 33,104,371 330 (302)
Exercise of warrants by Computer
2000................................ -0- -0- 5,296,518 53 227
Net loss for the year ended September
30, 1996............................ -0- -0- -0- -0- -0- (33,609)
---------- ------- ---------- ---- -------- ---------
BALANCES AT SEPTEMBER 30, 1996........ -0- -0- 67,047,392 $670 $111,144 $(123,020)
Correction of outstanding shares that
were authorized but never issued in
connection with settlement of
debt(1)............................. -0- -0- (165,486) (1) 1
Sale of preferred stock............... 300,000 30,000
Accrued Dividend on Preferred Stock... -0- -0- -0- -0- -0- (875)
Net loss for the year ended September
30, 1997............................ -0- -0- -0- -0- -0- (41,311)
---------- ------- ---------- ---- -------- ---------
BALANCES AT SEPTEMBER 30, 1997........ 300,000 $30,000 66,881,906 $669 $111,145 $(165,206)
========== ======= ========== ==== ======== =========
</TABLE>

- ---------------
(1) Correction of Outstanding Shares -- The number of outstanding shares of
Common Stock was corrected to account for shares that were authorized but
never issued in connection with settlement of debt, and the elimination of
duplicate shares erroneously issued upon exercise of an employee stock
option.

The accompanying notes are an integral part of these consolidated financial
statements

F-4
<PAGE> 33

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED YEAR ENDED ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, JUNE 30,
1997 1996 1995 1995
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net loss.................................. $ (41,311) $ (33,609) $ (7,041) $(67,566)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization........... 2,664 3,235 691 4,723
Gain on sale of division assets......... (385) -0- -0- -0-
Restructuring, asset impairment and
relocation costs..................... 13,849 956 -0- 25,317
Provision for losses on accounts
receivable........................... 4,970 1,661 758 5,787
Provision for losses on inventory....... 4,032 7,482 462 17,039
Changes in operating assets and
liabilities:
(Increase) decrease in accounts
receivable......................... 38,655 (6,564) 3,995 (3,016)
(Increase) decrease in inventories... 25,581 (5,028) 6,304 (390)
(Increase) decrease in other
assets............................. 2,704 1,305 868 (189)
Increase (decrease) in accounts
payable and other.................. (29,027) 1,728 (10,050) (25,312)
-------- -------- -------- --------
Net cash provided by (used in) operating
activities.............................. 21,732 (28,834) (4,013) (43,607)
CASH FLOW FROM INVESTING ACTIVITIES:
Proceeds from sale of division assets... 3,550 -0- -0- -0-
Net cash paid for acquisition of
businesses, net of cash acquired..... -0- -0- -0- (1,973)
Capital expenditures, net of
disposals............................ (62) (1,798) (1,361) (4,316)
-------- -------- -------- --------
Net cash provided by (used in)
investing activities............... 3,488 (1,798) (1,361) (6,289)
CASH FLOW FROM FINANCING ACTIVITIES:
Net borrowings (repayment) under lines
of credit............................ (77,504) 32,202 (27,701) 20,926
Increase in due to Computer 2000........ 27,664 -0- -0- -0-
Proceeds from subordinated debt......... -0- -0- -0- 18,000
Proceeds from sale of Preferred and
Common Stock......................... 30,000 520 32,315 8,740
-------- -------- -------- --------
Net cash provided by (used in)
financing activities............... (19,840) 32,722 4,614 47,666
-------- -------- -------- --------
Net increase (decrease) in cash and cash
equivalents.......................... 5,380 2,090 (760) (2,230)
Cash and cash equivalents at beginning
of period............................ 2,300 210 970 3,200
-------- -------- -------- --------
Cash and cash equivalents at end of
period............................... $ 7,680 $ 2,300 $ 210 $ 970
======== ======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements

F-5
<PAGE> 34

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
(DOLLARS IN THOUSANDS)

Interest on lines of credit:..... During the fiscal year ended September 30,
1997, September 30, 1996, the three months
ended September 30, 1995, and the fiscal
year ended June 30, 1995, the Company paid
interest costs of approximately $3,614,
$4,774, $1,886, and $5,974, respectively.

Income taxes:.................... During the fiscal years ended September 30,
1997 and September 30, 1996, the three
months ended September 30, 1995, and the
fiscal year ended June 30, 1995, the
Company made no income tax payments.

Noncash investing and financing
activities:

Acquisition of Robec minority
interest:........................ During the fiscal year ended September 30,
1996, the Company issued 6,750,874 shares
of common stock valued at $4,245 in
exchange for the remaining minority
interest of Robec, Inc.

Legal settlement:................ During the fiscal year ended September 30,
1996, the Company issued 500,000 shares of
common stock for full settlement of an
accrued legal liability of $310.

Conversion of subordinated note
payable and preferred stock into
common stock:.................... During the fiscal year ended September 30,
1996, the Company converted 2,923,604
shares of preferred stock into 33,104,371
shares of the Company's common stock.

During the three months ended September 30,
1995, the Company issued 810,811 shares of
preferred stock upon conversion of an
$18,000 subordinated note payable.

Intangible write-off:............ During the quarter ended March 31, 1997,
the Company wrote-off $9,036 of intangibles
related to the termination of its standard
distribution business.

During the fiscal year ended June 30, 1995,
the Company wrote-off $23,777 of
intangibles related to the termination of
its entertainment software business and
impairment of intangible assets at certain
acquired regional distributors.

Dividends on Preferred Stock:.... During the fiscal year ended September 30,
1997, the Company has accrued $875 in
dividends payable to preferred stock
convertible into shares of common stock at
the Company's election.

The accompanying notes are an integral part of these consolidated financial
statements

F-6
<PAGE> 35

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business. AmeriQuest Technologies, Inc. and subsidiaries
("Company" or "AmeriQuest") is primarily a national valued-added wholesale
distributor of micro, mini and mid-range computers and related products to
value-added resellers ("VARs") and systems integrators.

The Company's current business focus is to continue second tier
distribution in areas which minimize direct competition with the largest
competitors, and to concentrate on selling higher-margin mid-range computer
systems, complementary and related individual computer components, and
arrangements for maintenance and leasing services. AmeriQuest provides
value-added services and technical support to its customer base. AmeriQuest
focuses on marketing the products of a limited number of key vendors. AmeriQuest
selects its product lines to minimize competition among vendors' products while
maintaining some overlap to provide protection against product shortages or
discontinuations. Historical revenues from sale of products of the three leading
vendors, IBM, Hewlett Packard and Unisys, represent approximately 22%, 7% and
14%, respectively, of the ASG segment of the Company's overall revenue. No other
vendor represents 10% or more of the Company's purchases. In addition, no one
customer represents more than 10% of consolidated revenues.

Restructuring, Asset Impairment and Relocation Costs. On April 9, 1997,
the Board approved a wide-ranging restructuring plan with the goal of focusing
on the Company's Advanced Systems Group ("ASG"). The plan included closure of
all warehouse facilities, other than ASG, which is based in Horsham,
Pennsylvania. The restructuring has resulted in the closure of warehouse
facilities in Visalia, California, Miami, Florida, Dallas, Texas, and Chicago,
Illinois. In addition the number of employees has been reduced to 84 employees
in the US. The Company has also closed its corporate headquarters in Florida and
moved two employees to Horsham. At September 30, 1997, the Company has accrued
$3,738,000 of cost related to the restructuring plan which may be incurred from
litigation, closing of facilities and other restructuring costs. The
restructuring plan was implemented, but not completed, throughout fiscal year
1997 and resulted in a substantial reduction in sales revenue with the goal of
returning the Company to profitability in future years.

Sales, for the year ended September 30, 1997, of the businesses to be
closed were approximately $126 million.

The components of the restructuring, asset impairment and relocation costs
for the year ended September 30, 1997 are as follows (dollars in thousands):

<TABLE>
<S> <C>
Impairment of intangible assets............................................ $ 9,036
-------
Restructuring, Asset Impairment and Relocation Costs:
Abandonment of leasehold improvements and other property and equipment... 2,448
Lease payments in excess of sublease income.............................. 1,362
Employee severance costs................................................. 2,680
Relocation costs........................................................... 670
Other...................................................................... 2,178
-------
Total classified as restructuring, asset impairment and
relocation costs................................................ $ 9,338
Provision for losses on inventory and vendors (included in cost of
sales)................................................................... 4,032
Provision for losses on accounts receivable (included in SG&A expenses).... 3,945
-------
Total costs relating to restructuring, asset impairment and
relocation for the year ended September 30, 1997................ $26,351
=======
</TABLE>

F-7
<PAGE> 36

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

During fiscal year 1996, the Company closed its corporate headquarters in
California and moved its operations to Florida. The components of the loss on
sublease and relocation costs are as follows (dollars in thousands):

<TABLE>
<S> <C>
Abandonment of leasehold improvements............................... $ 956
Lease payments in excess of sublease income......................... 2,744
Personnel costs..................................................... 1,455
Other............................................................... 1,245
------
$6,400
======
</TABLE>

Basis of consolidation. The consolidated financial statements include the
accounts of AmeriQuest and its wholly-owned subsidiaries. All significant
intercompany accounts and transactions have been eliminated.

Accounting period. Effective September 30, 1995, the Company changed its
fiscal year end to September 30. The Company's 1995 fiscal year ended on the
Saturday closest to June 30, 1995. The year end dates for the past three fiscal
years were September 30, 1997, September 30, 1996 and July 1, 1995. For
presentation purposes, fiscal year end 1995 is referred to as June 30.

Inventories. Inventories consist principally of computer hardware and
software held for resale and are stated at the lower of first-in, first-out or
market. Reserves for inventory obsolescence and slow moving product are provided
based upon specified criteria, such as recent sales activity and date of
purchase.

Property and equipment. Property and equipment are stated at cost.
Depreciation and amortization are computed using straight line method over
estimated useful lives as follows:

<TABLE>
<S> <C>
Equipment............................... 5 years
Furniture and fixtures.................. 5 years
Leasehold improvements.................. Lease term
Vehicles................................ 3 to 5 years
</TABLE>

Maintenance, repairs and minor renewals are charged directly to expense as
incurred. Additions and betterments to property and equipment are capitalized.
When assets are disposed of, the related cost and accumulated depreciation
thereon are removed from the accounts and any resulting gain or loss is included
in operations.

Intangible assets. Intangible assets relate primarily to acquired
distribution channels and related vendor relationships and market positions.
Intangibles are amortized using the straight-line method from the date of
acquisition over the expected period to be benefited, initially estimated at 10
years. In determining the appropriate amortization period, the Company
considered the historical length of the acquiree's vendor relationships and the
overall size and quality of the vendors and their product offerings. On a
quarterly basis, the Company assesses the recoverability of intangible assets
based upon consideration of past performance and future expectations of
undiscounted cash flow on an acquisition by acquisition basis to the extent
separately identifiable, in accordance with Statement of Financial Accounting
Standards No.121 "Accounting for the Impairment of Long-Lived Assets and For
Long Lived Assets to be Disposed of." To the extent separate assessment of such
acquired intangibles is no longer feasible (i.e. as a result of integrating
multiple acquisitions into a single business unit), such assessment is performed
on a combined basis as appropriate.

As a result of these assessments, during the quarter ended March 31, 1997,
the Company wrote-off approximately $9 million of intangibles related to the
termination of its standard distribution business.

During the year ended June 30, 1995, in anticipation of the completion of
Computer 2000 AG's (Computer 2000) equity investment, the Company, with input
from Computer 2000 management, terminated its entertainment software business to
focus its management efforts and capital in the higher margin, value-

F-8
<PAGE> 37

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

added products, application software and computer hardware distribution
businesses. Management determined that future operating cash flow from certain
regional acquisitions were not sufficient to recover the related intangible
assets. As a result of these assessments, the Company wrote-off approximately
$23.8 million of intangibles related to the termination of its software business
and the impairment of intangibles related to acquired regional distributors.

Market development funds and volume incentive rebates. In general, vendors
provide various incentive programs to the Company. The funds received under
these programs are determined based on purchases and/or sales of the vendors'
product and the performance of certain training, advertising and other market
development activities. Revenue associated with these funds is recorded when
earned either as a reduction of selling, general and administrative expenses or
product cost, according to the specific nature of the program.

Sales recognition. Sales are recorded as of the date shipments are made to
customers. Sales returns and allowances are reflected as a reduction in sales
and recorded in inventory at expected net realizable value. The Company permits
the return of products within certain time limits and will exchange returned
products. Products that are defective upon arrival are handled on a warranty
return basis with the Company's vendors. The Company provides for product
warranty and return obligations at the point of sale based on estimates of
expected future costs.

Translation of foreign currencies. Assets and liabilities of foreign
subsidiaries are translated at the rate of exchange in effect at the balance
sheet date; income and expenses are translated at the average rates of exchange
prevailing during the year. The related translation adjustments and foreign
currencies gains and losses resulting from transactions denominated in foreign
currencies were not material.

Income taxes. The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes" (SFAS 109),
which requires an asset and liability approach in accounting for income taxes
payable or refundable at the date of the financial statements as a result of all
events that have been recognized in the financial statements and as measured by
the provisions of enacted laws. Additionally, SFAS 109 requires that deferred
tax assets be evaluated and a valuation allowance be established if it is "more
likely than not" that all or a portion of the deferred tax asset will not be
realized.

Net loss per common share and common share equivalent. Net loss per common
share and common share equivalent is computed by dividing net loss and dividends
applicable to preferred stock by the weighted average number of shares of common
stock and common stock equivalents outstanding. Common stock equivalents that
increase earnings per share or decrease loss per share are excluded from the
computation. In February, 1997, the Financial Accounting Standards Board issued
SFAS 128, "Earnings Per Share" effective for fiscal years ending after December
15, 1997. SFAS 128 simplifies the calculation of earnings per share to measure
the performance of an entity over a reporting period for both basic earnings per
share and diluted earnings per share. SFAS 128 does not currently have an impact
on the Company's earnings per share as the Company is incurring net losses.

Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting periods. Actual results could differ from those estimates.

Reclassifications: Certain amounts in the prior periods have been
reclassified to conform to the current year's presentation.

2. ACQUISITIONS AND DISPOSITIONS

F-9
<PAGE> 38

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Distribution (Far East) Limited to AmeriQuest/Kenfil Inc., and the payment of
$450,000 from Regentland Holdings Ltd.

Regentland Holdings Ltd. was formed by Mr. Simon Yip, the former Chief
Executive Officer of Kenfil Distribution (Far East) Limited to accommodate his
purchase of such entities. Concurrent with the closing, the Board of Directors
of AmeriQuest/Kenfil Inc. received an opinion from Chase Securities, Inc. to the
effect that the terms of the sale were fair to AmeriQuest Technologies, Inc. as
the sole stockholder of AmeriQuest/Kenfil Inc. from a financial point of view.

On June 19, 1997 CMS Enhancements Inc. sold substantially all of its assets
to CMS Peripherals Inc., a company formed by the former managing director of CMS
Enhancements Inc., Mr. Ken Burke. CMS Enhancements Inc., as part of the
transaction has changed its name to AAG Inc. AmeriQuest Technologies Inc. also
signed a non-competition agreement with CMS Peripherals with a term of five
years. Proceeds from the sale of the assets of CMS Enhancements, Inc. was $3.55
million, with a gain of $385,000, which was classified as a reduction of
selling, general and administrative expenses in the accompanying Statement of
Operations.

The Company had previously pursued a strategy of growth through acquisition
by acquiring regional distributors with the goal of creating a national
distributor of value-added computers, subsystems and peripherals. The success of
this strategy was dependent upon the ability of the Company to effectively
consolidate and integrate the operations of the acquired businesses, combine
different cultures and obtain adequate financing to complete acquisitions and
fund working capital requirements. All of the Company's acquisitions completed
during fiscal years June 30, 1994 through September 30, 1996 have been accounted
for in accordance with the purchase method of accounting. The Company's
consolidated financial statements include acquiree's results of operations from
the effective acquisition dates.

The per share valuation of the Company's common stock issued in connection
with the following acquisitions represents a discount from the quoted market
price, based upon the weighted average discounts received on recently completed
private equity cash transactions. Management believes this method of valuation
is the best indication of fair value due to the Company's thin stock trading
value and small public float.

AmeriQuest/Kenfil, Inc. ("Kenfil"). As of June 30, 1994, the Company
acquired 51% of the outstanding common stock of Kenfil for common stock of the
Company. Kenfil distributed microcomputer software in both the U.S. and Asia. As
of September 1994, the Company acquired the remaining 49% of the outstanding
common stock of Kenfil and converted certain trade and subordinated debt of
Kenfil for common and preferred stock, subsequently converted to common stock of
the Company. During the fiscal year ended June 30, 1995, the former U.S.
operations of Kenfil, including principally educational and entertainment
software distribution, were terminated by the Company. Total consideration given
for the Kenfil acquisition was 5,846,162 shares of the Company's common stock
valued at approximately $14 million, plus transaction costs of $785,000.

Robec, Inc. ("Robec"). As of September 1994, the Company acquired 50.1% of
the outstanding common stock of Robec for common stock of the Company. Robec was
a distributor of computer products and services, specializing in systems and
UNIX applications based in Horsham, Pennsylvania. In November 1995, the Company
acquired the remaining 49.9% of Robec outstanding common stock not owned by the
Company. The Robec merger agreement required the Company to issue additional
common shares to provide former and current Robec shareholders participating in
the merger with a minimum value associated with the Company's common stock
issued or to be issued to complete the merger transaction. Based upon the
exchange ratio included in the Robec merger agreement, 1,402,805 shares of the
Company's common stock valued at $2.7 million were issued in exchange for 50.1%
of Robec's common stock in September 1994. Due to the minimum value provisions
and adjustments to the exchange ratio included in the amended Robec merger

F-10
<PAGE> 39

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

agreement, an additional 3,969,905 shares of the Company's common stock, 25,830
shares of Series G convertible preferred stock, (convertible into 2,583,011
shares of common stock) and a related preferred stock dividend of 197,958 shares
of common stock were issued to complete the Robec merger. The additional common
and preferred shares issued were valued at $4.2 million. Total consideration,
after conversion of the Series G convertible preferred stock into common stock,
was 8,153,679 shares of the Company's common stock valued at $6.9 million, plus
transaction costs of $265,000.

National Computer Distributors. In November 1994, the Company acquired all
of the outstanding common stock of Ross White Enterprises, Inc. d/b/a "National
Computer Distributors" ("NCD") for cash and common stock of the Company. NCD was
a distributor of computer products and services, specializing in systems and
connectivity applications. Total consideration given in the NCD acquisition was
1,864,767 shares of the Company's common stock valued at $4.1 million and cash
of $3.4 million.

Management believed that distribution channel access represented the most
significant intangible acquired in connection with the acquisitions discussed
above. Management initially assigned a 10 year economic life to this intangible
asset as that is the period in which management expects to derive benefit from
the existing vendor relationships and market positions. Management determined
that 10 years was an appropriate economic life based upon the historical length
of the acquiree's vendor relationships and the overall size and quality of the
acquiree's vendors and their product offerings. See Note 1 for a discussion of
the Company's policy for evaluating the realization of the intangible assets,
the termination of the standard distribution business, the termination of the
entertainment software business and the related write-off of intangibles.

The following unaudited pro forma combined information shows the results of
the Company's operations for the fiscal year ended June 30, 1995, as though the
acquisitions and the Computer 2000 equity investment (see Note 9) all had
occurred as of the beginning of the fiscal year (in thousands except per share
data):

<TABLE>
<CAPTION>
YEAR ENDED
JUNE 30,
1995
-------------
<S> <C>
Revenues........................................................ $ 520,134
Net loss........................................................ (70,020)
Net loss per share.............................................. (1.33)
Weighted average shares......................................... 52,729,000
</TABLE>

The pro forma results have been prepared for comparative purposes only and
are not necessarily indicative of the actual results of operations had the
acquisitions taken place at the beginning of the indicated period or the results
that may occur in the future. Furthermore, the pro forma results do not give
effect to cost savings or incremental costs which may occur as a result of the
integration and consolidation of the acquired companies.

The entertainment software business of Kenfil contributed revenues of $25
million and incurred net losses of $25.9 million on a pro forma basis during
fiscal year 1995.

3. INVENTORIES

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1997 1996
------- --------
<S> <C> <C>
Finished goods............................................ $ 6,927 $ 36,684
Raw materials and subassemblies........................... 139 1,335
------ -------
$ 7,066 $ 38,019
====== =======
</TABLE>

F-11
<PAGE> 40

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Inventories are reflected net of reserves of approximately $1.3 million,
and $6.8 million at September 30, 1997 and 1996, respectively. In estimating the
inventory reserves, management relied upon its knowledge of the industry,
projected sales volumes, current inventory levels, and aging of product on-hand.
Because of the assumptions used, the amounts the Company will ultimately realize
could differ materially in the near term from the net inventory balances as
included in the accompanying financial statements. Inventories do not contain
any labor or overhead. The Company manages its inventories by maintaining
sufficient quantities to achieve high order fill rates while at the same time
attempting to stock only those products in high demand with a rapid turnover
rate. Inventory balances will fluctuate as the Company adds new product lines
and when appropriate, makes large purchases from manufacturers when the terms of
such purchases are considered advantageous. Short product life years and rapid
technological obsolescence significantly increases the risk of declines in
inventory value and the lack of recovery of inventory balances at recorded
values. The Company's contracts with most of its vendors provide price
protection and stock return privileges to reduce to some degree the risk of loss
to the Company due to manufacturer price reductions and slow moving or obsolete
inventory.

4. PROPERTY AND EQUIPMENT

Property and equipment consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
-------------------
1997 1996
------- -------
<S> <C> <C>
Equipment................................................ $ 3,224 $ 8,362
Furniture and fixtures................................... 1,497 3,391
Leasehold improvements................................... 329 2,266
Less accumulated depreciation and amortization........... (3,778) (7,885)
------ ------
$ 1,272 $ 6,134
====== ======
</TABLE>

5. LINES OF CREDIT

As of September 30, 1997, the Company maintained floor planning
arrangements with IBM Credit Corporation (IBMCC) for a maximum credit line of
$20 million, bearing interest at the lender's prime rate plus two and
five-eighths percent (11.625 percent at September 30, 1997). The borrowing base
under the IBMCC facility is limited to a contractual percentage of eligible
inventories and receivables, which totaled approximately $7.2 million at
September 30, 1997. At September 30, 1997, all inventories and accounts
receivable were pledged as collateral under this facility and IBMCC holds liens
on substantially all other assets owned by the Company. The amount outstanding
under this arrangement at September 30, 1997 was approximately $3.1 million.

At September 30, 1997, the terms of the IBMCC lending agreement included
certain restrictive covenants which required the maintenance of specified
financial ratios generally related to tangible net worth, working capital and
total debt to tangible net worth. At various dates during fiscal years 1996 and
1997 and at September 30, 1997, the Company was in default with certain
financial covenants. In December 1997, the Company received a waiver to its
credit agreement with IBMCC, which waived the financial covenants the Company
was not in compliance with at September 30, 1997. The IBMCC line of credit
expires February 28, 1998. (See note 12).

In December 1995, the Company obtained lines of credit with four
Germany-based financial institutions at Libor-based interest rates which, in the
aggregate, provided for revolving credit totaling $66 million as of September
30, 1996. In October 1996, the total credit granted under these credit
facilities was increased by $10 million to allow a maximum extension of
financing to the Company of $76 million. All of the aforementioned German lines
of credit were guaranteed by Computer 2000 at September 30, 1996. Computer

F-12
<PAGE> 41

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

2000's guarantees expired on September 30, 1997. On September 30, 1997, Computer
2000, paid the outstanding bank lines of credit which totaled $27.7 million and
converted the loans to a noninterest bearing demand loan, agreed to defer demand
of payment through September 30, 1998, and subordinate its loan to the working
capital lender. Notwithstanding the agreement by C-2000 to defer demand of
payment of the loan prior to September 30, 1998, certain specified events such
as, but not limited to, the merger, sale or reorganization of the Company will
make the loan immediately due and payable. Additionally, C-2000 has guaranteed
$5 million to IBMCC (see Note 12) and certain amounts due to two of the
Company's suppliers.

The weighted average interest rate for all borrowings under the above
credit facilities was 6.3%, 6.4%, 11.0%, and 11.2% at September 30 of 1997, 1996
and 1995 and June 30, 1995, respectively.

6. INCOME TAXES

The deferred tax assets, net of the valuation allowance, of the Company
consist of the following (in thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
----------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Inventory reserves......................... $ 498 $ 2,694 $ 5,420
Allowance for doubtful accounts............ 868 2,253 3,440
Other, including restructuring charge...... 8,964 5,780 2,110
Net operating loss carryforwards........... 46,163 38,663 25,619
Valuation allowance........................ (56,493) (49,390) (36,589)
-------- -------- --------
$ -0- $ -0- $ -0-
======== ======== ========
</TABLE>

The valuation allowances at September 30, 1997, 1996 and 1995 were provided
because it is not more likely than not, as defined in SFAS 109, that the
deferred tax benefits will be realized through operations. The valuation
allowances recorded against deferred tax assets are based on management's
estimates related to the Company's ability to realize these benefits.
Appropriate adjustments will be made to the valuation allowances if
circumstances warrant in future periods. Such adjustments may have a significant
impact on the Company's financial statements.

The principal elements accounting for the difference between income taxes
computed at the statutory rate and the effective rate are as follows (in
thousands):

<TABLE>
<CAPTION>
SEPTEMBER 30
---------------------------------
1997 1996 1995
-------- -------- -------
<S> <C> <C> <C>
Tax credit computed at statutory rate....... $(15,492) $(13,444) $(2,816)
Intangible write-offs and amortization...... 7,992 400 83
Net operating losses not benefited.......... 7,500 13,044 2,733
-------- -------- -------
$ -0- $ -0- $ -0-
======== ======== =======
</TABLE>

At September 30, 1997, Company had an income tax operating loss
carry-forward of approximately $117 million, which is available to offset
earnings in future periods through 2012, subject to Internal Revenue Code
section 382 limitations discussed below. The Company experienced ownership
changes in 1994 and 1995. For income tax purposes, this results in future annual
limitations on the utilization of net operating loss carry-forwards generated
prior to these ownership changes in August 1995 to approximately $2.6 million
per year. Losses incurred subsequent to the changes in ownership in August 1995
of $54.8 million are not subject to this limitation and are available to offset
earnings in future periods through 2012, unless there is a subsequent change in
control.

F-13
<PAGE> 42

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. COMMITMENTS AND CONTINGENCIES

The Company leases its corporate office, warehouse space and certain
equipment under operating leases. Future minimum rental commitments for all
non-cancelable operating leases at September 30, 1997 are as follows (in
thousands):

<TABLE>
<S> <C>
Year ended September 30,
1998............................................................ $ 862,600
1999............................................................ 467,000
2000............................................................ 243,900
2001............................................................ 16,200
</TABLE>

Total rental expense under non-cancelable agreements for the periods ending
September 30, 1997, September 30, 1996, and September 30, 1995 was approximately
$4,298,000, $3,759,000, and $1,232,000, respectively.

The Company is contingently liable at September 30, 1997 under the terms of
repurchase agreements with financial institutions providing inventory financing
for dealers of the Company's products. The contingent liability under those
agreements approximates the amount financed, reduced by the resale value of any
products which may be repurchased, and the risk of loss is spread over numerous
dealers and financial institutions. Losses under these agreements have been
immaterial in the past. Sales under these agreements during the years ended
September 30, 1997, 1996, for the three months ended September 30, 1995 and for
the year ended June 30, 1995 were approximately $18 million, $16 million, $2
million and $17 million, respectively.

8. LEGAL PROCEEDINGS

While not expected to be of material effect to the Company, Kenfil Inc. vs.
RLI Insurance Company, Superior Court of the State of California, County of Los
Angeles, No. BC 108564 filed July 12, 1994, involves litigation instituted by
Kenfil Inc. to recover additional monies for the damage it incurred in the
Northridge earthquake of January 17, 1994. The defendant cross-claimed on August
12, 1994 for return of the $840,000 it had paid on claims submitted by Kenfil,
Inc., based on affidavits from former Kenfil employees alleging that they had
been instructed following the earthquake to intentionally destroy additional
inventory. The defendant's theory is that the policy was voided ab initio by the
fraudulent actions of Kenfil Inc.'s employees; while Kenfil Inc.'s position is
that the fraud unauthorized by the corporation but committed by a few employees
does not operate to void the contract. The defendant's theory is premised on the
language of the contract, while Kenfil Inc.'s position is supported by a case
from the California Supreme Court. Messrs. Irwin Bransky and Nelson Landman,
former officers of Kenfil Inc. at the time of the earthquake, have pleaded
guilty to mail fraud relating to the mailing of documents asserting the
destruction of inventory from the earthquake where such destruction actually
occurred in large part following the earthquake. However, their actions were not
attributed to Kenfil Inc. during the course of the criminal proceedings. Kenfil
Inc. has a continuing claim against the defendant for additional amounts never
paid under the contract for the interruption of the business of Kenfil Inc. and
claims against Messrs. Bransky and Landman for the damages occasioned to Kenfil
Inc. by their unauthorized and unratified criminal conduct. No assurance can be
given as to the final outcome of this legal matter.

While not expected to be of material effect to the Company, Leading Edge
Products, Inc. vs. AmeriQuest Technologies, Inc. involves suit against
AmeriQuest/NCD Inc., one of the Company's predecessors in interest, wherein
Leading Edge is asserting breach of contract and unjust enrichment. In its
complaint Leading Edge alleges a $1,055,438 debt and seeks double or triple
damages, interest, attorney's fees, and costs. The Company responded to the
complaint by denying liability and asserted counterclaims for breach of
contract, breach of implied covenant of good faith and fair dealing, breach of
warranty, and unjust enrichment.

F-14
<PAGE> 43

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company is also a party to various other legal matters. Based upon
discussions with counsel, management believes that the ultimate outcome of these
matters and the litigation described above will not have a material adverse
effect on the Company's future financial position or its results of operations.

9. COMPUTER 2000 PURCHASE AGREEMENT AND RELATED BUSINESS TRANSACTIONS

In August 1995, Computer 2000 exchanged the $18 million subordinated note
for 810,811 shares of AmeriQuest's Series A preferred stock (convertible into
8,108,110 shares of common stock). In addition, Computer 2000 purchased from
AmeriQuest, for $31.2 million, 1,785,714 shares of Series B preferred stock
(convertible into 17,857,140 shares of common stock). In April 1996, the 810,811
shares of Series A preferred stock and the 1,785,714 shares of Series B
preferred stock, noted above, were converted into 8,108,110 and 17,857,140
shares of common stock, respectively.

In connection with the conversion of the $18 million subordinated note, the
capital infusion of $31.2 million, the completion of the Robec merger and
various private placements throughout the fiscal year, Computer 2000 was issued
warrants to purchase additional shares of common stock at prices ranging from
$.05 to $.53 per common share. During fiscal year ended September 30, 1996,
warrants were exercised by Computer 2000 to purchase 7,868,518 shares of common
stock. Assuming the exercise of the remaining warrants, Computer 2000 will hold
approximately 58% of the outstanding voting stock of the Company.

In March 1996, the shareholders approved an increase in the authorized
common stock of the Company from 30 to 200 million shares.

During November 1996, Computer 2000 had obligated itself to provide
AmeriQuest with additional financing early in calendar 1997 in the amount of $30
million. Computer 2000 fulfilled this obligation in full through the purchase of
preferred stock from the Company, as described in the following paragraph.

In May 1997, Computer 2000 invested $30 million in the Company for which it
received 300,000 shares of Series H Cumulative Convertible Preferred Stock. The
proceeds received were used to partially pay down the outstanding lines of
credit. All of the Company's bank lines of credit were at that time guaranteed
by Computer 2000 AG. These convertible preferred shares carry a 7% per annum
cumulative dividend right, payable at the choice of AmeriQuest in either shares
or cash until June 30, 1998. Thereafter such dividends must be paid in cash. The
shares are convertible into Common Stock at a conversion price of $0.715 per
share of Common Stock.

F-15
<PAGE> 44

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. STOCK OPTION PLANS

The Company has instituted various stock option plans which authorize the
granting of options to key employees, directors, officers, vendors and customers
to purchase shares of the Company's common stock. All grants of options during
the years presented have been to employees or directors and were granted at the
then quoted market price. A summary of shares available for grant and the
options outstanding under the plans is as follows:

<TABLE>
<CAPTION>
SHARES
AVAILABLE OPTIONS PRICE
FOR GRANT OUTSTANDING RANGE
---------- ---------- -------------
<S> <C> <C> <C>
BALANCES AT JUNE 30, 1995............................ 519,693 56,901 $1.50 - 4.50
Increase in shares available for grant............... 2,000,000
Options granted...................................... (2,795,000) 2,795,000 0.05 - 4.50
Options cancelled.................................... 429,327 (429,327) 1.50 - 2.00
---------- ---------- ------------
BALANCES AT SEPTEMBER 30, 1995....................... 154,020 2,422,574 $0.05 - 4.50
Options exchanged in Robec acquisition............... (301,978) 301,978 0.45 - 2.00
Options exercised.................................... (82,500) 0.05
Options cancelled.................................... 447,561 (447,561) 0.45 - 4.50
---------- ---------- ------------
BALANCES AT SEPTEMBER 30, 1996....................... 299,603 2,194,491 $0.05 - 4.50
Options cancelled.................................... 1,628,987 (1,628,987) 0.05 - 3.50
---------- ---------- ------------
BALANCES AT SEPTEMBER 30, 1997....................... 1,928,590 565,504 $0.45 - 4.50
========== ========== ============
</TABLE>

The following table summarizes information about fixed stock options
outstanding at September 30, 1997:

<TABLE>
<CAPTION>
RANGE OF NUMBER OF OUTSTANDING REMAINING WEIGHTED AVERAGE
EXERCISE PRICE AS OF SEPTEMBER 30, 1997 CONTRACTUAL LIFE EXERCISE PRICE
- -------------- ------------------------ ---------------- ----------------
<S> <C> <C> <C>
$0.453 181,907 20 months $0.453
1.325 60,931 6 months 1.325
1.500 152,666 3 months 1.500
3.150 20,000 3 months 3.150
4.500 150,000 18 months 4.500
- -------------- ------- --------- ------
$0.453 - 4.500 565,504 13 months $1.998
============== ======= ========= ======
</TABLE>

The Company applies APB Opinion 25 and related interpretations in
accounting for its plans. No stock options or warrants were granted in fiscal
years 1997 or 1996. Accordingly, no compensation cost has been recorded or
proforma disclosures are required under the provisions of SFAS 123, "Accounting
for Stock-Based Compensation".

Of the 565,504 options outstanding, 529,123 options are currently
exercisable.

F-16
<PAGE> 45

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

11. FOREIGN SALES INFORMATION

A summary of the Company's operations by geographic area is as follows (in
thousands):

<TABLE>
<CAPTION>
FAR
U.S. EAST ELIMINATIONS CONSOLIDATED
--------- ------- ------------ --------
<S> <C> <C> <C> <C>
YEAR ENDED SEPTEMBER 30, 1997
Sales to unaffiliated customers................ $ 194,342 $24,535 -0- $218,877
Loss (income) from operations.................. 37,887 (31) -0- 37,856
Identifiable assets............................ 19,799 6,280 -0- 26,079
YEAR ENDED SEPTEMBER 30, 1996
Sales to unaffiliated customers................ $ 404,151 $20,557 -0- $424,708
Loss (income) from operations.................. 29,231 (376) -0- 28,855
Identifiable assets............................ 110,955 5,417 -0- 116,372
THREE MONTHS ENDED SEPTEMBER 30, 1995
Sales to unaffiliated customers................ $ 94,742 $ 5,981 -0- $100,723
Loss from operations........................... 5,541 63 -0- 5,604
Identifiable assets............................ 109,419 6,112 -0- 115,531
YEAR ENDED JUNE 30, 1995
Sales to unaffiliated customers................ $ 374,552 $42,019 -0- $416,571
Loss from operations........................... 60,746 751 -0- 61,497
Identifiable assets............................ 122,548 5,460 -0- 128,008
</TABLE>

United States sales include export sales of approximately $5.3 million,
$41.9 million, $1.6 million, and $6.4 million made principally to Europe, Latin
America, the Far East and Canada during the fiscal years ended September 30,
1997, September 30, 1996, the three months ended September 30, 1995 and the
fiscal year ended June 30, 1995, respectively. See Footnote 2 for disposition of
the Far East operations.

12. LIQUIDITY AND SUBSEQUENT EVENTS

At September 30, 1997, the Company had borrowed $3.1 million against its
secured line of credit with IBMCC. On September 30, 1997, the Company was not in
compliance with various financial covenants of the agreement. IBMCC has
subsequently issued a waiver to the Agreement which waived prior defaults. The
IBMCC line of credit was scheduled to expire on February 28, 1998.

On January 9, 1998, the Company obtained a commitment letter from IBMCC
(the Commitment Letter) to extend its credit line through September 30, 1998,
subject to certain modifications and conditions. Under the terms of the
Commitment Letter, the credit line will be reduced from $20 million to $5
million on March 1, 1998. The $5 million credit line is guaranteed by Computer
2000 and any amounts owed by the Company to Computer 2000 is subordinated to
the credit line. The Company's collateral advance rates are 100% (or as may be
determined by audit) of IBMCC financed inventory and 80% (50% of which will be
used to compute the maximum advance amount) of eligible accounts receivable.
The Commitment Letter is subject to certain conditions, including a
satisfactory audit of the collateral by IBMCC scheduled to commence on January
12, 1998. In addition, certain financial statement covenants of the IBMCC
credit line will be revised based upon management's estimate of future results.

F-17
<PAGE> 46

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

As of December 31, 1997 the Company's indebtedness to IBMCC was
$12,353,000. During December 1997 the Company purchased $6 million of IBM
products, primarily to meet the minimum purchase commitment needed to retain
IBM MIR distribution rights. Under the terms of the IBM vendor agreement, the
Company may return a significant portion of these IBM products and may be
required to do so in order to reduce the IBMCC line of credit from $20 million
to $5 million at February 28, 1998.

The Company's distribution agreement with IBM requires the Company to
achieve certain purchase levels for IBM's mid-range computer systems. There
is no assurance that the Company will be able to meet the purchase
requirements that might be imposed upon it in the future by IBM. Nor has the
Company received confirmation from IBM that it has met the required purchase
levels for calendar 1997.

Through September 30, 1997, Computer 2000 guaranteed lines of credit with
four German banks. Such guarantees expired on September 30, 1997, at which time
Computer 2000 paid the outstanding bank lines of credit that totaled $27.7
million and converted the loans to a non-interest bearing demand loan. Computer
2000 has agreed to defer demand of payment through September 30, 1998 and
subordinate its loan to IBMCC (See Note 5). It is unlikely that the Company
will have the ability to repay the loan if payment was demanded by Computer
2000.

The Company has no commitment from Computer 2000 to provide additional
funding to the Company, although Computer 2000 has guaranteed $5 million to
IBMCC and certain amounts due to two of the Company's suppliers. Management
believes that its existing cash, the non-interest bearing $27.7 million loan
from Computer 2000, the supplier guarantees and the $5 million line of credit
from IBMCC will be adequate for the Company to continue in business and meet its
financial obligations on a timely basis through September 30, 1998.

The New York Stock Exchange ("NYSE") has repeatedly informed the Company
that it is not in compliance with certain of the NYSE's requirements for
continued listing on the NYSE. The NYSE could delist the Company's common stock
at any time, thereby adversely affecting the public market for such securities.

The Company is considering various strategic alternatives, including
possible merger or sale of the Company.

F-18
<PAGE> 47

SCHEDULE II

AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS BALANCE
BEGINNING COSTS AND ACCOUNTS AT END
DESCRIPTIONS OF PERIOD EXPENSE WRITTEN-OFF OTHER OF PERIOD
- --------------------------------------- ---------- ---------- ---------- ------ ---------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
July 1, 1995 to September 30, 1995... 9,572 758 2,150 8,180
October 1, 1995 to September 30,
1996.............................. 8,180 1,661 4,030 5,811
October 1, 1996 to September 30,
1997.............................. 5,811 4,970 8,625 2,156
Inventory Reserves:
July 1, 1995 to September 30, 1995... 13,779 462 929 13,312
October 1, 1995 to September 30,
1996.............................. 13,312 7,482 13,966 6,828
October 1, 1996 to September 30,
1997.............................. 6,828 4,032 9,537 1,323
</TABLE>

F-19

<PAGE> 1
Exhibit 3.01(c)

CERTIFICATE OF DESIGNATIONS
OF THE
SERIES H CUMULATIVE CONVERTIBLE PREFERRED STOCK
(PAR VALUE $.01 PER SHARE)
OF
AMERIQUEST TECHNOLOGIES, INC.
---------------------

PURSUANT TO SECTION 151 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
---------------------

The undersigned, does hereby certify that the following resolution was duly
adopted by the Board of Directors of AmeriQuest Technologies, Inc., a Delaware
corporation (the "Corporation"), at a meeting duly convened and held on April
23, 1997, at which a quorum was present and acting throughout:

RESOLVED, that pursuant to the authority expressly granted to and vested in
the Board of Directors of the Corporation (the "Board of Directors") by Article
FOURTH of the Certificate of Incorporation of the Corporation, as amended by
that certain Certificate of Amendment effective as of April 1, 1996, (the
"Certificate of Incorporation") the Board of Directors hereby authorizes and
approves the creation and issuance of a new series of Preferred Stock of this
Corporation upon the terms and conditions set forth in these resolutions which
fix the powers, designation, preferences and relative, participating, optional
or other special rights, and the qualifications, limitations or restrictions
thereof, of the shares of such new series, in addition to those set forth in the
Certificate of Incorporation, as follows:

(A) Series H Cumulative Convertible Preferred Stock. The new series
of Preferred Stock of the Corporation authorized hereby shall be designated
the "Series H Cumulative Convertible Preferred Stock" (hereinafter referred
to as the "Series H Preferred Stock"), and shall consist of 300,000 shares,
$.01 par value per share; provided, however, that the Board of Directors
may decrease (but not increase) the number of authorized shares in such
series subsequent to the date of original issuance of shares in such series
(the "Original Issuance Date"), but not below the number of shares of such
series then outstanding. The Series H Preferred Stock is issuable solely in
whole shares that shall entitle the holder thereof to exercise the voting
rights, to participate in the distributions and to have the benefit of all
other rights of holders of Series H Preferred Stock as set forth herein and
in the Certificate of Incorporation.

(B) Rights, Preferences and Restrictions of Series H Preferred
Stock. The Series H Preferred Stock shall have the voting power,
preferences and relative, participating, optional or other special rights,
and the qualifications, limitations or restrictions thereof, as set forth
below. For purposes of this Certificate of Designations, the terms "Common
Stock" and "Preferred Stock" shall have the meanings set forth in the
Certificate of Incorporation in effect as of the Original Issuance Date.

1. Dividend Provisions. The holders of shares of Series H Preferred Stock
shall be entitled to receive dividends payable in cash (or, through and
including the dividend payable on June 30, 1998, at the option of the
Corporation, payable in whole or in part in Common Stock valued as set forth
below), out of any funds legally available therefor, prior and in preference to
any declaration or payment of any dividend (other than a dividend payable in
shares of Common Stock of the Corporation) on the Common Stock and to any
declaration or payment of any dividend on any other series of Preferred Stock of
the Corporation (other than dividends payable in Preferred Stock of the same
series and class upon which such dividend is declared and paid), at the rate of
$7.00 per share of Series H Preferred Stock per annum (as adjusted for any stock
dividends, combinations or splits with respect to such shares), payable
quarterly on the last day of March, June, September and December of each year,
commencing June 30, 1997. Such dividends shall accrue on each share and accrue
from day to day, whether or not earned or declared, and shall be cumulative so
that if such dividends with respect to any previous quarter dividend period at
said rate per share per annum shall not

1
<PAGE> 2

have been paid on or declared and set apart for all shares of Series H Preferred
Stock at the time outstanding, the deficiency shall be fully paid on or declared
and set apart for such shares before the Corporation makes any distribution (as
such term is hereinafter defined) to the holders of Common Stock or any other
series of Series H Preferred Stock. The term "distribution" as used in this
paragraph shall mean the transfer of cash or property without consideration,
whether by way of dividend or otherwise (except a dividend in shares of the
Corporation which are junior to the Series H Preferred Stock as to dividends and
assets and except as contemplated by this Certificate of Designations) or the
purchase or redemption of shares of the Corporation for cash or property (except
for the repurchase of Common Stock from employees, directors, consultants and
advisers pursuant to the terms of stock purchase agreements existing on the
Original Issuance Date under which such shares are issued), including any such
transfer, purchase or redemption by a subsidiary of the Corporation. The time of
any distribution by way of dividend shall be the date of declaration thereof and
the time of any distribution by purchase or redemption of shares shall be the
day cash or property is transferred by the Corporation, whether or not pursuant
to a contract of an earlier date; provided that, where a negotiable debt
security is issued in exchange for shares the time of the distribution is the
date when the Corporation acquires the shares in such exchange. In the event the
Corporation exercises its option to pay any dividend in whole or in part in
Common Stock, such Common Stock shall be valued as follows: (a) if the
Corporation's Common Stock is trading on the New York Stock Exchange (the
"NYSE"), at the closing price on the day such dividend accrues (whether or not
declared); (b) if the Corporation's stock is not trading on the NYSE but is
trading in any other domestic public market, at the price of the last reported
bona fide trade in such market; or (c) if the Corporation's stock is not trading
in any public market, at a price to be determined by an investment banking firm
of national reputation that has not in the prior twelve (12) months performed
any investment banking services for the Corporation or any holder of Series H
Preferred Stock.

2. Liquidation Preference.

(a) Series H Liquidation Preference. In the event of any Liquidation Event
(as defined below), either voluntary or involuntary, the holders of Series H
Preferred Stock shall be entitled to receive by reason of their ownership
thereof, prior and in preference to any distribution of any of the assets of the
Corporation to the holders of Common Stock, or to any other series of Preferred
Stock that may be issued by the Corporation from time to time, an amount per
share in cash equal to the sum of (i) $100.00 for each outstanding share of
Series H Preferred Stock, as adjusted for any stock dividends, combinations or
splits with respect to such share (the "Original Series H Issue Price"), and
(ii) an amount equal to all accrued but unpaid dividends (whether or not
declared) on each such share (the "Liquidation Preference").

(b) Participation. After the distributions described in subsection (a)
above have been paid, the entire remaining assets of the Corporation legally
available for distribution to the stockholders of the Corporation shall be
distributed to the holders of any other series of Preferred Stock then
outstanding, if any, having a liquidation preference over the Common Stock (to
the extent of and in accordance with the liquidation preference rights of such
other series of Preferred Stock) and then among the holders of the Common Stock
pro rata based on the number of shares of Common Stock held by each holder.

(c) Insufficient Funds. If in connection with any Liquidation Event the
Corporation's cash funds legally available for distribution to the holders of
the Series H Preferred Stock are not sufficient to pay the full Series H
Preferred Stock liquidation preference in cash, then any deficiency in the cash
payment of the Series H Preferred Stock liquidation preference shall be paid in
non-cash assets of the Corporation legally available for distribution to the
holders of Series H Preferred Stock. If the cash and non-cash assets legally
available for distribution to the holders of the Series H Preferred Stock shall
be insufficient to permit the full payment to such holders of the full Series H
Preferred Stock liquidation preference, then the entire cash and non-cash assets
of the Corporation legally available for distribution shall be distributed
ratably among the holders of the Series H Preferred Stock in proportion to the
number of such shares owned by each such holder. In connection with the
distribution of any non-cash assets in payment of the Series H Preferred Stock
liquidation preference, the non-cash assets will be valued at their fair market
value, as determined by independent appraisal by an appraiser selected in good
faith by the Board of Directors.

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<PAGE> 3

(d) Liquidation Event. For purposes of this Section 2, a "Liquidation
Event" shall mean any Reorganization Transaction (as defined below),
liquidation, dissolution, or winding up of the Corporation. A reorganization of
the Corporation, for purposes of this Certificate of Designations, shall mean
any consolidation or merger of the Corporation with or into another corporation,
or other entity or person or any other corporate reorganization, or the sale of
all or substantially all of the Corporation's assets to another person, or any
transaction by the Corporation in which an excess of 50% of the Corporation's
voting power is transferred (each, a "Reorganization Transaction").

3. Redemption. Shares of the Series H Preferred Stock shall not be subject
to redemption, either mandatorily or at the option of the Corporation or the
holder thereof.

4. Conversion. The holders of Series H Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):

(a) Right to Convert. Subject to subsection (c), each share of Series
H Preferred Stock shall be convertible (subject to approval by the holders
of the Corporation's Common Stock of the issuance of the common stock
issuable upon such conversion as required by the NYSE), at the option of
the holder thereof, at any time after the Original Issuance Date at the
office of the Corporation or any transfer agent for the Series H Preferred
Stock, into such number of fully paid and nonassessable shares of the
Corporation's Common Stock as is determined by dividing the Liquidation
Preference by the Series H Conversion Price then in effect. The Series H
Conversion Price per share is set forth in subsection 4(c).

(b) Mechanics of Conversion. Before any holder of Series H Preferred
Stock shall be entitled to convert any Shares into shares of Common Stock,
such holder shall deliver the certificate or certificates therefor, with a
duly executed election to convert, to the principal executive office of the
Corporation or of any transfer agent for the Series H Preferred Stock and
shall give written notice to the Corporation at its principal executive
office (which notice and delivery shall be deemed given when received by
the Corporation) of the election to convert some or all of its Shares and
shall state therein the number of Shares to be converted and the name or
names in which the certificate or certificates for shares of Common Stock
are to be issued. The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Series H Preferred Stock
or to the nominee or nominees of such holder, a certificate or certificates
for the number of shares of Common Stock to which such holder shall be
entitled as aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of
the shares of Series H Preferred Stock to be converted, and the person or
persons entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. Following the
conversion of shares of Series H Preferred Stock into Common Stock, as
contemplated by this paragraph (b), the Corporation shall promptly prepare
and deliver a new certificate or new certificates to the holder of Series H
Preferred Stock representing the remaining number or shares of Series H
Preferred Stock still held by such holder following such conversion.

(i) Series H Conversion Price. The Series H Conversion Price shall
be $0.715 (Seventy One and One-Half Cents) per share, which amount is
equal to 110% of the average of the daily closing price per share of the
Common Stock for the 20 consecutive trading days immediately preceding
April 28, 1997.

(ii) Series H Conversion Price Adjustments.

(1) Subdivision, Combination or Reclassification. In the event
that the Corporation at any time or from time to time after the
Original Issuance Date shall declare or pay, without consideration,
any dividend on the Common Stock payable in shares of Common Stock or
in any right to acquire shares of Common Stock for no consideration,
or shall effect a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock (by stock
split, reclassification or otherwise than by payment of a dividend in
Common Stock or in any right to acquire Common Stock), or in the
event the outstanding shares of Common

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<PAGE> 4

Stock shall be combined or consolidated, by reclassification, reverse
stock split or otherwise, into a lesser number of shares of Common
Stock, then the Series H Conversion Price in effect immediately prior
to such event shall, concurrently with the effectiveness of such
event, be proportionately decreased or increased, as appropriate. In
the event that the Corporation shall declare or pay, without
consideration, any dividend on the shares of Common Stock payable in
any right to acquire Common Stock for no consideration, then the
Corporation shall be deemed to have made a dividend payable in shares
of Common Stock in an amount of shares equal to the maximum number of
shares issuable upon exercise of such rights to acquire shares of
Common Stock.

(2) Issuance of Additional Shares. If at any time after the
Original Issuance Date and while there are any shares of Series H
Preferred Stock outstanding, the Corporation shall issue or sell
Additional Shares of Common Stock at a Price Per Share less than the
Series H Conversion Price in effect immediately prior to such
issuance or sale, then the Series H Conversion Price then in effect
shall be adjusted to an amount determined by multiplying the Series H
Conversion Price in effect immediately prior to the new issuance by a
fraction,

(A) the numerator of which is equal to the sum of (x) the number
of shares of Outstanding Common Stock immediately prior to the
issuance of such Additional Shares, and (y) the amount determined by
(i) dividing the aggregate consideration received by the Corporation
upon the issuance of such Additional Shares, by (ii) the Series H
Conversion Price in effect immediately prior to the issuance of the
Additional Shares, and

(B) the denominator of which is the number of shares of
Outstanding Common Stock immediately after the issuance of such
Additional Shares.

For the purposes of this Section 4(c)(ii), the issuance of any
Convertible Securities shall be deemed an issuance at such time of
the Common Stock issuable upon exercise, conversion, or exchange of
the such Convertible Securities if the Price Per Share shall be less
than the Series H Conversion Price in effect at the time of such
issuance. No adjustment of the Series H Conversion Price shall be
made under this Section 4(c)(ii) upon the issuance of any shares of
Common Stock which are issued pursuant to the exercise, conversion,
or exchange of any Convertible Securities if any adjustment shall
previously have been made upon the issuance of any such Convertible
Securities as above provided. Any adjustment of the Series H
Conversion Price made with respect to the issuance of Convertible
Securities shall be reversed if and when any such Convertible
Securities expire or are canceled without being exercised, converted,
or exchanged so that the Series H Conversion Price in effect
immediately upon such cancellation or expiration shall be equal to
the Series H Conversion Price which would have been in effect had the
expired or canceled Convertible Securities never been issued (but any
such reversal of an adjustment shall only apply as to the portion of
the Convertible Security which has expired or been canceled), with
such additional adjustments as would have been made to the Series H
Conversion Price which would have been in effect had such expired or
canceled Convertible Securities never been issued.

The provisions of this Section 4(c)(ii) shall not apply to any issuance or
distribution of Additional Shares if by reason of any other provision of this
Section 4 an adjustment of the Series H Conversion Price results with respect to
such issuance of Additional Shares or if the holders of Series H Preferred Stock
are entitled to receive a distribution of such Additional Shares.

For purposes of this Section 4(c)(ii), the following definitions apply:

"Additional Shares" shall mean shares of Common Stock (including
Common Stock deemed issued upon the issuance of Convertible Securities),
other than Excluded Additional Shares (the issuance of which shall not
result in any adjustment of the Series H Conversion Price).

"Convertible Securities" shall mean any securities (whether debt or
equity) issued by the Corporation which are exercisable, convertible, or
exchangeable into or for shares of Common Stock.

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<PAGE> 5

"Excluded Additional Shares" shall mean:

(1) Any Existing Securities, excluding any increase in the Common
Stock or Convertible Securities which may be issued pursuant to Existing
Securities as a result of any modifications or amendments to Existing
Securities occurring after the Original Issuance Date.

(2) Any Common Stock or Convertible Securities issued after the
Original Issuance Date to any employee, consultant, advisor, officer, or
director of the Corporation or any subsidiary thereof pursuant to any
incentive or compensation agreement, arrangement, or plan approved by
the Board of Directors.

(3) Any Common Stock issued in connection with any stock dividend
on the Common Stock which is also payable to the Series H Preferred
Stock pursuant to any provision of Section 4 hereof.

(4) Any Common Stock issued upon conversion of the Series H
Preferred Stock.

"Existing Securities" shall mean any Common Stock or Convertible
Securities issued with respect to any options, notes, rights, warrants, or
other securities of the Corporation outstanding as of the Original Issuance
Date, and shall include all shares of Series H Preferred Stock issued as of
the Original Issuance Date.

"Outstanding Common Stock" shall mean all shares of Common Stock of
the Corporation outstanding (on a fully diluted basis) at the time of a
calculation under Section 4(c)(ii), assuming for this purpose that all
then-outstanding Convertible Securities are then deemed exercised,
converted, or exchanged into shares of Common Stock.

"Price Per Share" shall be determined as follows:

(1) In the case of an issuance of shares of Common Stock for cash,
the Price Per Share shall mean the per share cash consideration received
by the Corporation for such shares.

(2) The Price Per Share for purposes of Convertible Securities
shall mean the amount equal to the consideration received by the
Corporation upon the issuance of such Convertible Securities, plus the
amount of consideration payable to the Corporation upon exercise,
conversion, or exchange thereof, divided by the aggregate number of
shares of Common Stock that would be issued if all such Convertible
Securities were exercised, exchanged, or converted.

(3) The Price Per Share for purposes of Convertible Securities
shall be determined in each instance as of the date of issuance of the
Convertible Securities without giving effect to any possible future
price adjustments or rate adjustments pursuant to the provisions of such
Convertible Securities which may result from any adjustments in the
Series H Conversion Price pursuant to the provisions of this Section 4.

(4) If a part or all of the consideration received by the
Corporation in connection with the issuance of securities consists of
property other than cash, the value of such consideration shall be the
fair market value of such property as determined by the Board of
Directors in good faith.

(d) Other Distributions. In the event the Corporation shall declare a
distribution payable in securities of other persons, in evidences of
indebtedness issued by the Corporation or other persons or in assets
(excluding cash dividends) or in rights not referred to in Section
4(c)(ii), then, in each such case for the purpose of this Section 4(d), the
holders of Series H Preferred Stock shall be entitled to a proportionate
share of any such distribution as though they were the holders of the
number of shares of Common Stock of the Corporation into which their shares
of Series H Preferred Stock are convertible as of the record date fixed for
the determination of the holders of Common Stock of the Corporation
entitled to receive such a distribution.

(e) Recapitalizations. If at any time or from time to time there
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or reclassification) provision shall be made so that the
holders of Series H Preferred Stock shall thereafter be entitled to
receive, upon conversion of

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<PAGE> 6

their Series H Preferred Stock, the number of shares of stock or other
securities or property of the Corporation, or otherwise, to which a holder
of Common Stock deliverable upon conversion would have been entitled in
such recapitalization as if converted immediately prior to such
recapitalization. In any such case, appropriate adjustment shall be made in
the application of the provisions of this Section 4 with respect to the
rights of the holders of Series H Preferred Stock after the
recapitalization to the end that the provisions of this Section 4
(including adjustment of the Series H Conversion Price, if applicable, then
in effect and the number of shares receivable upon conversion of Series H
Preferred Stock) shall be applicable after that event as nearly equivalent
as may be practicable.

(f) No Impairment. The Corporation will not, by amendment of its
Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 4 and in
the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of the Series H Preferred
Stock against impairment.

(g) Fractional Shares and Certificate as to Adjustments.

(i) No fractional shares shall be issued upon conversion of the
Series H Preferred Stock pursuant to the provisions of this Section 4.
In lieu of fractional shares, the Corporation shall pay in cash the fair
market value of any fractional shares as determined by the Board of
Directors in good faith. The determination of the fractional shares for
which a cash payment will be made shall be determined on the basis of
the total number of shares of the Series H Preferred Stock the holder is
at the time converting into Common Stock and the number of shares of
Common Stock issuable upon such aggregate conversion.

(ii) Upon the occurrence of each adjustment or readjustment of the
Series H Conversion Price pursuant to this Section 4, the Corporation,
at its expense, shall within a reasonable time compute such adjustment
or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series H Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Corporation
shall, within a reasonable time following a written request of any
holder of Series H Preferred Stock, furnish or cause to be furnished to
such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Series H Conversion Price at the time in effect,
and (C) the number of shares of Common Stock and the amount, if any, of
other property which at the time would be received upon the conversion
of a share of Series H Preferred Stock.

(h) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of Series H Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect
the conversion of all outstanding shares of Series H Preferred Stock; and
if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all of the then
outstanding shares of Series H Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Series H Preferred
Stock, the Corporation will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be
sufficient for such purposes.

(i) No Minor Adjustments to Series H Conversion Price. No adjustment
of the Series H Conversion Price shall be made pursuant to this Section 4
in an amount less than one cent ($.01) per share. Adjustment amounts under
one cent ($.01) per share shall be carried forward and taken into account
in any subsequent adjustment calculations.

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<PAGE> 7

5. Notices.

(a) Required Notices.

(i) In the event of any taking by the Corporation of a record of the
holders of any class of securities for the purpose of determining the
holders thereof who are entitled to receive any dividend (other than a cash
dividend) or other distribution, any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities
or property, or to receive any other right; the Corporation shall mail to
each holder of Series H Preferred Stock, at least thirty (30) days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or
right.

(ii) The Corporation shall give each holder of record of Series H
Preferred Stock written notice of any impending Reorganization Transaction
not later than thirty (30) days prior to the stockholders' meeting called
to approve such transaction, or thirty (30) days prior to the closing of
any such Reorganization Transaction, whichever is earlier. Such notice
shall describe the material terms and conditions of the impending
Reorganization Transaction, describe the consideration per share to be
received by the holders of the Common Stock and by the holders of the
Series H Preferred Stock as a result of such Reorganization Transaction,
and the date upon which the conversion rights of the Series H Preferred
Stock terminate in connection with such Reorganization Transaction, and the
Corporation shall thereafter give such holders prompt notice of any
material changes in the information contained in such notice.

(b) Notice Procedures. Any notice required by the provisions of this
Section 5 to be given to a holder of shares of Series H Preferred Stock shall be
given in writing and shall be deemed given if addressed to the holder of record
of such shares at such holder's address appearing on the books of the
Corporation or such other address given in writing by the holder to the
Corporation for the purpose of notice and deposited in the United States mail,
postage prepaid, or with a courier which guaranteed delivery of the notice
within three business days after deposit with such courier, and in either case,
such notice shall be deemed given on the third business day after such deposit.

6. Voting Rights. The holder of each share of Series H Preferred Stock
shall have the right to one vote for each share of Common Stock into which such
Series H Preferred Stock could then be converted (with any fractional share
determined on an aggregate conversion basis being rounded to the nearest whole
share). Shares of Series H Preferred Stock shall have full voting rights and
powers equal to the voting rights and powers of the holders of Common Stock, and
shall be entitled, notwithstanding any provision hereof, to notice of any
stockholders' meeting in accordance with the bylaws of the Corporation. Subject
to the provisions of Paragraph 7 below, Shares of Series H Preferred Stock shall
vote with holders of Common Stock as a single class with respect to any question
upon which holders of Common Stock have the right to vote; provided, however,
that (a) the holders of Series H Preferred Stock will vote as a class on matters
as to which a class vote is required under Delaware law and (b) the holders of
the Series H Preferred Stock shall not vote with the holders of Common Stock or
otherwise with respect to the approval required by the NYSE as set forth in
Section 4(a) above, as to which approval the holders of Series H Preferred Stock
shall have no vote.

7. Restrictions and Limitations. Without the vote or written consent of
the holders of at least eighty percent (80%) of the then outstanding shares of
Series H Preferred Stock, the Corporation will not:

(a) Authorize or issue, or obligate itself to issue, any other equity
security (including any security convertible into or exercisable for any
equity security) senior to or at parity with the Series H Preferred Stock
as to dividend rights, redemption rights or liquidation preferences or
which have voting rights as to matters upon which the holders of Common
Stock are entitled to vote that provide for more votes in any such matters
than one vote for each share of Common Stock into which such equity
security could then be converted into Common Stock in accordance with the
conversion rights of such equity security;

(b) Amend its Certificate of Incorporation (including this Certificate
of Designations) if such amendment would adversely affect any of the
rights, preferences or privileges provided for therein or herein for the
benefit of the shares of Series H Preferred Stock; or

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<PAGE> 8

(c) Engage in a Reorganization Transaction that would adversely affect
any of the rights, preferences or privileges of the Series H Preferred
Stock.

8. Status of Converted Stock. In the event any shares of Series H
Preferred Stock shall be converted pursuant to Section 4 hereof, or are
otherwise acquired by the Corporation, the shares so converted or acquired shall
resume the status of authorized but unissued shares of Series H Preferred Stock.

9. No Preemptive Rights. The holders of the Series H Preferred Stock shall
not have any preemptive rights.

10. Severability of Provisions. Whenever possible, each provision hereof
shall be interpreted in a manner as to be effective an valid under applicable
law, but if any provision hereof should to be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating or otherwise adversely affecting
the remaining provisions hereof.

IN WITNESS WHEREOF, this Certificate of Designations is executed on this
25th day of April, 1997.

AMERIQUEST TECHNOLOGIES, INC.

By: /s/ HOLGER HEIMS
------------------------------------
Name: Holger Heims
Title:. Executive Vice President
and Corporate Secretary

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<PAGE> 9
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 05/16/1997
971160022 - 2124585

CERTIFICATE OF CORRECTION OF
THE CERTIFICATE OF DESIGNATIONS
OF THE SERIES H CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF AMERIQUEST TECHNOLOGIES, INC.

AmeriQuest Technologies, Inc. a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that:

1. The name of the corporation is:

AmeriQuest Technologies, Inc.

2. The Certificate of Designations of the Corporation, which was filed with
the Secretary of State of Delaware on April 28, 1997 (the "Certificate"), is
hereby corrected.

3. The ambiguity to be corrected in said instrument is as follows:

The correction is to clarify any ambiguity that may exist in paragraphs
(B)(4)(a) and (B)(6) in describing the fact that the holders of Series H
Cumulative Convertible Preferred Stock do not have any right to vote
with the holders of Common Stock on an as-converted basis or otherwise
in connection with the vote required pursuant to paragraph (B)(4)(a) of
the Certificate.

4. The portion of the instrument in corrected form is as follows:

Corrections to paragraph (B)(4)(a)

(a) Right to Convert. Subject to subsection (c), each share of Series H
Preferred Stock shall be convertible (subject to approval by the holders
of the Corporation Common Stock of the issuance of the Common Stock
issuable upon such conversion as required by the NYSE), at the option of
the holder thereof, at any time after the Original Issuance Date at the
office of the Corporation or any transfer agent for the Series H
Preferred Stock, into such number of fully paid and nonassessable shares
of the Corporation's Common Stock as is determined by dividing the
Liquidation Preference by the Series H Conversion Price then in effect.
The Series H Conversion Price per share is set forth in subsection 4(c).

Corrections to paragraph (B)(6):
<PAGE> 10
6. Voting Rights. The holder of each share of Series H Preferred Stock
shall have the right to one vote for each share of Common Stock into which
such Series H Preferred Stock could then be converted (with any fractional
share determined on an aggregate conversion basis being rounded to the
nearest whole share). Shares of Series H Preferred Stock shall have full
voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any
provision hereof, to notice of any stockholders' meeting in accordance with
the bylaws of the Corporation. Subject to the provisions of Paragraph 7
below, shares of Series H Preferred Stock shall vote with holders of Common
Stock as a single class with respect to any question upon which holders of
Common Stock have the right to vote; provided, however, that (a) the
holders of Series H Preferred Stock will vote as a class on matters as to
which a class vote is required under Delaware law and (b) the holders of
Series H Preferred Stock shall not vote with the holders of Common Stock or
otherwise with respect to the approval required by the NYSE as set forth in
Section 4(a) above, as to which approval the holders of Series H Preferred
Stock shall have no vote.

Executed on this 15th day of May, 1997.

By: /s/ Holger Heims
------------------------------------
Name: Holger Heims
Title: Executive Vice President and
Corporate Secretary

<PAGE> 1
EXHIBIT 10.03

REIMBURSEMENT AND SECURITY AGREEMENT

The undersigned companies (individually, a "Company" and
collectively, the "Companies") jointly and severally unconditionally agree to
pay C2000 AG ("C2000"), immediately and without demand, any amounts that C2000
may pay, from time to time, on account of guaranties or other assurances of
payment that C2000 enters into for the benefit of any of the Companies.

To secure this reimbursement obligation, each of the Companies
grants C2000 a security interest in the following property of each Company, now
owned or hereafter acquired: inventory, accounts, equipment, general
intangibles, securities (including all capital stock of subsidiaries), deposit
accounts and the proceeds thereof. The Companies will execute and deliver such
financing statements, and take such other actions, as C2000 requests to perfect
these security interests. The Companies agree to negotiate in good faith with
C2000 to put in place an Amended and Restated Reimbursement and Security
Agreement within a reasonable period after the date hereof, which agreement will
contain covenants and other terms typically included in secured credit
facilities entered into with third parties and consistent with the discussion
between AmeriQuest Technologies, Inc. and C2000.

This Agreement shall be governed by the internal laws of the State
of California. This Agreement may be executed in two or more counterparts, each
of which shall constitute one instrument.

IN WITNESS WHEREOF the undersigned have executed this Agreement as
of December 20, 1995.

COMPUTER 2000 AG
By: /s/ Manfred Guenzel
-------------------------------
Title: Co-President

AMERIQUEST TECHNOLOGIES, INC.
By: /s/ Mark Mulford
-------------------------------
Title: President

AMERIQUEST NCD INC.
By: /s/ Mark Mulford
-------------------------------
Title: President
<PAGE> 2
ROBEC, INC.
By: /s/ Mark Mulford
-------------------------------
Title: President

AMERIQUEST / KENFIL, INC.
By: /s/ Mark Mulford
-------------------------------
Title: President

KENFIL DISTRIBUTION (FAR EAST) LTD.
By: /s/ Mark Mulford
-------------------------------
Title: President

KENFIL DISTRIBUTION (M) SDN.BHD
By: /s/ Mark Mulford
-------------------------------
Title: President

CDS DISTRIBUTION INC.
By: /s/ Mark Mulford
-------------------------------
Title: President

CMS ENHANCEMENTS INC.
By: /s/ Mark Mulford
-------------------------------
Title: President

CMS ENHANCEMENT SYSTEMS, INC.
By: /s/ Mark Mulford
-------------------------------
Title: President

ANYBUS TECHNOLOGY CORPORATION
By: /s/ Mark Mulford
-------------------------------
Title: President

CMS ENHANCEMENTS (AUST.) PTY LTD.
By: /s/ Mark Mulford
-------------------------------
Title: President

<PAGE> 1
EXHIBIT 10.10

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is entered into as of October 1,
1997 (the "Effective Date") between AmeriQuest Technologies, Inc., a Delaware
corporation with its principal offices located at 425 Privet Road, Horsham, PA
19044 ("Company"), and Alex C. Kramer, a resident of Pennsylvania ("Employee").

In consideration of the promises and the terms and conditions set forth in this
Agreement, the parties agree as follows:

1. POSITION. During the term of this Agreement, Company will employ Employee,
and Employee will serve Company as the Company's President and Chief
Executive Officer. Employee will report directly to the AmeriQuest Board of
Directors.

2. DUTIES. Employee will serve Company in such capacities and with such duties
and responsibilities as the President and Chief Executive Officer of Company
may from time to time determine. Employee will be bound by Company' operating
policies, procedures, and practices from time to time in effect during
Employee's employment. Employee will perform his duties under this Agreement
at the offices of Company, provided, that Employee may be required to do
extensive traveling in connection with the performance of his duties
hereunder. Employee hereby represents and warrants that he is free to enter
into and fully perform this Agreement and the agreements referred to herein
without breach of any agreement or contract to which he is a party or by
which he is bound.

3. EXCLUSIVE SERVICE. During his employment with Company, Employee will devote
his full time and efforts exclusively to this employment and all his skill
and experience to the performance of his duties and advancing Company's
interests in accordance with Employee's experience and skills. In addition,
during his employment with Company, except for the current Partnerships of
which the Company is aware, Employee will not engage in any consulting
activity except with the prior written approval of Company or at the
direction of Company, and Employee will otherwise do nothing inconsistent
with the performance of his duties hereunder.
<PAGE> 2
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Employment Agreement Alex C. Kramer

4. OBLIGATION NOT TO COMPETE. Employee hereby agrees that while he is employed
by Company (the "Restricted Period"), Employee shall within the territory of
the United States not engage in or provide services to any business that is
competitive with or detrimental to any present or contemplated business of
Company known to Employee. Employee also agrees that, during the Restricted
Period, he shall not in any manner attempt to induce or assist others to
attempt to induce any customer or client of Company to terminate his
association with Company, nor do anything directly or indirectly to interfere
with the relationship between Company and any such persons or concerns in the
territory of the United States. Each of the following activities shall,
without limitation, be deemed to constitute engaging in business within the
meaning of Section 3 and 4: to engage in, work with, have an interest or
concern in, advise, lend money to, guarantee the debts or obligations of, or
permit one's name or any party thereof to be used in connection with, an
enterprise of endeavor, either individually, in partnership or in conjunction
with any person or persons, firms, associations, companies or corporations,
whether as a principal, agent, shareholder, employee, officer, director,
partner, consultant or in any other manner whatsoever; provided, however,
that Employee shall retain the right to invest in or have an interest in
entities traded on any public market or offered by any national brokerage
house, provided that said interest does not exceed ten percent (10%) of the
voting control of said entity. In addition, Employee may make passive
investments in privately held entities that are determined by the Board of
Directors of Company not to be competitors of Company. Company may elect to
extend the term of this non-competition clause for a maximum period of six
months following the termination according to Section 8.1. (b) and 8.1. (c)
provided that a monthly fee in the amount of the last applicable monthly base
salary is paid to Employee.

5. TERM OF AGREEMENT. This Agreement will commence on the Effective Date, and
will continue for a period of twelve (12) months and thereafter unless
terminated pursuant to Section 8 thereof.

6. COMPENSATION AND BENEFITS.

6.1. BASE SALARY. Company agrees to pay Employee a base salary of $
16.667 per month (or $ 200.000 annualized). Employee's salary will
be payable as earned in accordance with Company' customary payroll
practice.

6.2. PERFORMANCE BONUS. - Employee will be eligible to earn a bonus of up
to $ 229.000 (the "Performance Bonus") annually during his
employment with Company. The performance criteria and terms and
conditions relative to the Performance Bonus shall be in accordance
with the attached "Incentive Plan" (Attachment 1).
<PAGE> 3
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Employment Agreement Alex C. Kramer

6.3. ADDITIONAL BENEFITS. Employee will be eligible to participate in
Company's employee benefit plans of general application,
including without limitation those plans covering profit sharing,
executive bonuses stock options, and those plans covering life,
health, an dental insurance in accordance with the rules
established for individual participation in any such plan and
applicable law. Employee shall receive such other benefits,
including vacation, holidays, and sick leave, as Company
generally provides to its employee holding similar positions as
that of Employee.

6.4. VACATION. Four (4) weeks.

6.5. EXPENSES. Company will reimburse Employee for all reasonable and
necessary expenses incurred by Employee in connection with Company's
business, provided that such expenses are deductible to Company, are
in accordance with Company's applicable policy and are properly
documented and accounted for in accordance with the requirements of
the Internal Revenue Service.

7. PROPRIETARY RIGHTS. Employee hereby agrees to execute an Employee
Confidentiality Agreement with Company in substantially the form attached
hereto as Attachment 2.

8. TERMINATION.

8.1 EVENTS OF TERMINATION. Employee's employment with the Company shall
terminate upon any one of the following:

a) the Company's determination made in good faith that it is
terminating Employee for "cause" as defined under Section 8.2
below ("Termination for Cause");

b) six months after the effective date of a written notice sent to
Employee stating that Company is terminating his employment,
without cause, which notice can be given by Company at any time
after the Effective Date at Company's sole discretion, for any
reason or for no reason; or

c) six months after the effective date of a written notice sent to
Company from Employee stating that Employee is electing to
terminate his employment with Company.
<PAGE> 4
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Employment Agreement Alex C. Kramer

d) If a change of control occurs and the employee's responsibilities
are reduced within the following twelve (12) months thereafter.
This termination on the part of the employee must be effected
within six (6) months of the significant reduction in
responsibilities. A "change in control" is deemed to have taken
place when any of the following events occurs: (1) shareholder
approval of a merger or consolidation of the Company with any
other corporation resulting in a change in fifty percent (50%) or
more of the total voting power of the Company; (2) shareholder
approval of a plan of complete liquidation of the Company or an
agreement for the sale or disposition of all or substantially all
of the Company" assets; or (3) any person becomes the beneficial
owner of more than fifty percent (50%) of the Company's total
outstanding securities); and such reduction in responsibilities
is not for cause. Any resignation of employment by Alex C. Kramer
as a consequence of such reduction in responsibilities will be
treated as a termination of employment without cause.

8.2 "CAUSE" DEFINED. For purposes of this Agreement, "cause" for
Employee's termination will exist any time after the happening of
one or more of the following events;

a) a failure or refusal to comply in any material respect with
the reasonable policies, standards or regulations of the
Company;

b) a failure or a refusal in any material respect, faithfully or
diligently, to perform his duties determined by the Company in
accordance with this Agreement or the customary duties of
Employee's employment;

c) unprofessional, unethical or fraudulent conduct or conduct
that materially discredits the Company or is materially
detrimental to the reputation, character or standing of the
Company;

d) dishonest conduct or a deliberate attempt to do an injury to
the Company;

e) Employee's material breach of a term of this Agreement; f) an
unlawful or criminal act which would reflect badly on the
Company in the Company's reasonable judgment; or

g) employee's death.
<PAGE> 5
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Employment Agreement Alex C. Kramer

9. EFFECT OF TERMINATION.

9.1 TERMINATION FOR CAUSE. In the event of any termination of this
Agreement pursuant to Sections 8.1(a) or 8.1( c), the Company shall
pay Employee the compensation and benefits otherwise payable to
Employee under Section 6 through the effective date of termination.
Employee's rights under the Company's benefit plans of general
application shall be determined under the provisions of those plans.

9.2 TERMINATION WITHOUT CAUSE OR VOLUNTARY TERMINATION. In the event of
any termination of this Agreement pursuant to Section 8.1(b), the
Company shall pay Employee the compensation and benefits according
to Section 6 through the last day of the six (6) months period
following the effective date that the notice referred to in Section
8.1(b) is given.

9.3 TERMINATION WITHOUT CAUSE DUE TO CHANGE IN CONTROL. In the event of
any termination of this Agreement pursuant to Section 8.1(d), the
Company shall pay Employee the compensation and benefits according
to Section 6 through the last day of the twelve (12) months period
following the date that the notice referred to in Section 8.1(d) is
given.

10. MISCELLANEOUS.

10.1 ARBITRATION. Employee and Company shall submit to mandatory binding
arbitration in any controversy or claim arising out of, or relating
to, this Agreement or any breach hereof, provided, however, that
Company retains its right to, and shall not be prohibited, limited
or in any other way restricted from, seeking or obtaining equitable
relief from a court having jurisdiction over the parties. Such
arbitration shall be conducted in accordance with the commercial
arbitration rules of the American Arbitration Association in effect
at that time, and judgment upon the determination or award rendered
by the arbitrator may be entered in any court having jurisdiction
thereof.
<PAGE> 6
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Employment Agreement Alex C. Kramer

10.2 SEVERABILITY. If any provision of this Agreement shall be found by
any arbitrator or court of competent jurisdiction to be invalid or
unenforceable, then the parties hereby waive such provision to the
extent that it is found to be invalid or unenforceable and to the
extend that do so would not deprive one of the parties of the
substantial benefit of its bargain. Such provision shall, to the
extend allowable by the law and the preceding sentence be modified
by such arbitrator or court so that it becomes enforceable and, as
modified, shall be enforced as any other provision hereof, all the
other provisions continuing in full force and effect.

10.3. REMEDIES. Company and Employee acknowledge that the service to be
provided by Employee is of a special, unique, unusual,
extraordinary, and intellectual character, which give it peculiar
value the loss of which cannot be reasonably or adequately
compensated in damages in an action at law. Accordingly, Employee
hereby consents and agrees that for any breach or violation by
Employee of any of the provisions of this Agreement including,
without limitation, Section 3, restraining order and/or injunction
may be issued against Employee, in addition to any other rights and
remedies Company may have, at law equity, including without
limitation the recovery of money damages.

10.4. NO WAIVER. The failure by either party at any time to require
performance or compliance by the other of any of its obligations or
agreements shall in no way affect the right to require such
performance or compliance at any time thereafter. The waiver by
either party of a breach of such provision hereof shall not be taken
or held to be a waiver or any preceding or succeeding breach of such
provision or as a waiver of the provision itself. No waiver of any
kind shall be effective or binding, unless it is in writing and is
signed by the party against whom such waiver is sought to be
enforced.

10.5. ASSIGNMENT. This Agreement and all rights hereunder are personal to
Employee and may not be transferred or assigned by Employee at any
time. Company may assign its rights, together with its obligations
thereunder, to any parent, subsidiary affiliate or successor or in
connection with any sale, transfer or other disposition of all or
substantially all of its business and assets, provided, however,
that any such assignee assumes Company's obligations hereunder.
<PAGE> 7
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Employment Agreement Alex C. Kramer

10.6 WITHHOLDING. All sums payable to Employee thereunder shall be
reduced by all federal, state, local, and other withholding and
similar taxes and payments required by applicable law.

10.7 ENTIRE AGREEMENT. This Agreement and the Employee Confidentiality
Agreement constitute the entire and only agreements between the
parties relating to employment of Employee with Company, and this
Agreement supersedes and cancels any and all previous contracts,
arrangements or understandings with respect thereto.

10.8 AMENDMENT. This Agreement may be amended, modified, superseded,
cancelled, renewed or extended only by an agreement in writing
executed by both parties hereto.

10.9 NOTICES. All notices and other communications required or permitted
under this Agreement shall be in writing and hand-delivered, sent by
Fax, sent by certified first-class mail, postage pre-paid, or sent
by nationally recognized express courier service. Such notices and
other communications shall be effective upon receipt if
hand-delivered or sent by Fax, five (5) days after mailing if sent
by mail, and one (1) day after dispatch if sent by express courier,
to the following address, or such other addresses as any party shall
notify the other parties:

If to the Company: AmeriQuest Technologies, Inc.
425 Privet Road
Horsham, PA 19044
Fax Number: (215) 675-7027
Attention: Mr. Harold Streets
Human Resources Manager

If to the Employee: Alex C. Kramer
17 Maude Circle
Paoli, PA 19301

Fax Number: (610) 647-3743

10.10 BINDING NATURE. This Agreement shall be binding upon, and inure to
the benefit of the successors and personal representatives of the
respective parties hereto.

10.11 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall in no way affect the meaning or
interpretation of this Agreement. In

1
<PAGE> 8
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Employment Agreement Alex C. Kramer

this Agreement, the singular includes the plural, the plural
includes the singular, the masculine gender includes both male and
female referents, and the word "or" is used in the inclusive sense.

10.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but
all of which, taken together, constitute one and the same agreement.

10.13 GOVERNING LAW. This Agreement and rights and obligations of the
parties hereto shall be construed in accordance with the laws of the
State of Pennsylvania, without giving effect tot he principles of
conflict of laws.

IN WITNESS WHEREOF, Company and Employee have executed this Agreement as of the
date first above written.

"COMPANY" "EMPLOYEE"

AMERIQUEST TECHNOLOGIES, INC.

Signature: _________________________

Name: Dr. Harry Krischik

Title: Member of the Compensation
Committee

Signature: _________________________ Signature ____________________

Name: Marc Werner Name: Alex C. Kramer

Title: Member of the Compensation Title: President and CEO
Committee

<PAGE> 1
EXHIBIT 10.11

EMPLOYMENT AGREEMENT

This Employment Agreement (the "Agreement") is entered into as of October 1,
1997 (the "Effective Date") between AmeriQuest Technologies, Inc., a Delaware
corporation with its principal offices located at 425 Privet Road, Horsham, PA
19044 ("Company"), and Jon D. Jensen, a resident of Pennsylvania ("Employee").

In consideration of the promises and the terms and conditions set forth in this
Agreement, the parties agree as follows:

1. POSITION. During the term of this Agreement, Company will employ Employee,
and Employee will serve Company as the Company's Vice President, Finance and
Chief Operating Officer. Employee will report directly to the Chief Executive
Officer.

2. DUTIES. Employee will serve Company in such capacities and with such duties
and responsibilities as the Chief Executive Officer of Company may from time
to time determine. Employee will be bound by Company' operating policies,
procedures, and practices from time to time in effect during Employee's
employment. Employee will perform his duties under this Agreement at the
offices of Company, provided, that Employee may be required to do extensive
traveling in connection with the performance of his duties hereunder.
Employee hereby represents and warrants that he is free to enter into and
fully perform this Agreement and the agreements referred to herein without
breach of any agreement or contract to which he is a party or by which he is
bound.

3. EXCLUSIVE SERVICE. During his employment with Company, Employee will devote
his full time and efforts exclusively to this employment and all his skill
and experience to the performance of his duties and advancing Company's
interests in accordance with Employee's experience and skills. In addition,
during his employment with Company, except for the current Directorship of
which the Company is aware, Employee will not engage in any consulting
activity except with the prior written approval of Company or at the
direction of Company, and Employee will otherwise do nothing inconsistent
with the performance of his duties hereunder. The employee may continue to
serve as a member of the Board of Directors of The Fredericks Company.
<PAGE> 2
Page 2
Employment Agreement Jon D. Jensen

5. TERM OF AGREEMENT. This Agreement will commence on the Effective Date, and
will continue for a period of twelve (12) months and thereafter unless
terminated pursuant to Section 8 thereof.

6. COMPENSATION AND BENEFITS.

6.1. BASE SALARY. Company agrees to pay Employee a base salary of $
13.125 per month (or $ 157.500 annualized). Employee's salary will
be payable as earned in accordance with Company' customary payroll
practice.

6.2. PERFORMANCE BONUS. - Employee will be eligible to earn a bonus of up
to $ 180.000 (the "Performance Bonus") annually during his
employment with Company. The performance criteria and terms and
conditions relative to the Performance Bonus shall be in accordance
with the attached "Incentive Plan" (Attachment 1).
<PAGE> 3
Page 3
Employment Agreement Jon D. Jensen

6.4. VACATION. Four (4) weeks.

7. PROPRIETARY RIGHTS. Employee hereby agrees to execute an Employee
Confidentiality Agreement with Company in substantially the form attached
hereto as Attachment 2.

8. TERMINATION.

8.1 EVENTS OF TERMINATION. Employee's employment with the Company shall
terminate upon any one of the following:

a) the Company's determination made in good faith that it is
terminating Employee for "cause" as defined under Section 8.2
below ("Termination for Cause");

d) If a change of control occurs and the employee's responsibilities
are reduced within the following twelve (12) months thereafter.
This termination on the part of the employee must be effected
within six (6) months of the significant reduction in
responsibilities. A "change in control" is deemed to have taken
place when any of the following events occurs: (1) shareholder
approval of a merger or consolidation of the Company with any
other corporation resulting in a change in fifty percent (50%) or
more of the total voting power of the Company; (2) shareholder
approval of a plan of complete liquidation of the Company or an
agreement for the sale or disposition of all or substantially all
of the Company" assets; or (3) any person becomes the beneficial
owner of more than fifty percent (50%) of the Company's total
outstanding securities); and such reduction in responsibilities
is not for cause. Any resignation of employment by Jon D. Jensen
as a consequence of such reduction in responsibilities will be
treated as a termination of employment without cause.

8.2 "CAUSE" DEFINED. For purposes of this Agreement, "cause" for
Employee's termination will exist any time after the happening of
one or more of the following events;

a) a failure or refusal to comply in any material respect with
the reasonable policies, standards or regulations of the
Company;

c) unprofessional, unethical or fraudulent conduct or conduct
that materially discredits the Company or is materially
detrimental to the reputation, character or standing of the
Company;

d) dishonest conduct or a deliberate attempt to do an injury to
the Company;

e) Employee's material breach of a term of this Agreement; f) an
unlawful or criminal act which would reflect badly on the
Company in the Company's reasonable judgment; or

g) employee's death.
<PAGE> 5
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Employment Agreement Jon D. Jensen

9. EFFECT OF TERMINATION.

10. MISCELLANEOUS.

10.6 WITHHOLDING. All sums payable to Employee thereunder shall be
reduced by all federal, state, local, and other withholding and
similar taxes and payments required by applicable law.

10.8 AMENDMENT. This Agreement may be amended, modified, superseded,
cancelled, renewed or extended only by an agreement in writing
executed by both parties hereto.

If to the Company: AmeriQuest Technologies, Inc.
425 Privet Road
Horsham, PA 19044
Fax Number: (215) 675-7027
Attention: Mr. Harold Streets
Human Resources Manager

If to the Employee: Jon D. Jensen
291 Tulip Tree Court
Blue Bell, PA 19422

Fax Number: (215) 646-1469

10.10 BINDING NATURE. This Agreement shall be binding upon, and inure to
the benefit of the successors and personal representatives of the
respective parties hereto.

10.11 HEADINGS. The headings contained in this Agreement are for reference
purposes only and shall in no way affect the meaning or
interpretation of this Agreement. In
<PAGE> 8
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Employment Agreement Jon D. Jensen

this Agreement, the singular includes the plural, the plural
includes the singular, the masculine gender includes both male and
female referents, and the word "or" is used in the inclusive sense.

IN WITNESS WHEREOF, Company and Employee have executed this Agreement as of the
date first above written.

"COMPANY" "EMPLOYEE"

AMERIQUEST TECHNOLOGIES, INC.

Signature: _________________________

Name: Dr. Harry Krischik

Title: Member of the Compensation
Committee

Signature: __________________________ Signature ____________________

Name: Marc Werner Name: Jon D. Jensen

Title: Member of the Compensation Title: Vice President, Finance
Committee

<PAGE> 1
Exhibit 10.22

COVER PAGE

The capitalized terms in this Lease shall have the meanings ascribed to
them below, and each reference to such term in the Lease shall incorporate such
meaning therein as if fully set forth therein

TERMS:

LANDLORD: AP Southeast Portfolio Partners, LP d/b/a Highwoods Anderson with
its principal office at 2200 Century Parkway, Suite 800, Atlanta,
Georgia 30345.

TENANT: AmeriQuest Technologies, Inc. a corporation duly organized and
existing under the laws in the state of Pennsylvania with his
principal office at 5600 Oakbrook Parkway, Suite 230, Norcross,
GA 30093.

PREMISES: (a) Suite: 230

(b) Rentable Area: 6,011 square feet

BUILDING: 5600 Oakbrook Parkway, Dekalb County Georgia, which is located
within the Project.

PROJECT: Those certain tracts or parcels of land owned by Landlord from time
to time and being more particularly described on Exhibit "B,"
together with all improvements located thereon or which may
hereafter be constructed thereon.

COMMENCEMENT DATE: September 15, 1997

TERMINATION DATE: September 30, 2000

BASE TAXES AND ASSESSMENTS: $ * per square foot

BASE INSURANCE: $ * per square foot

PERMITTED USES: General office and warehouse

FIRST LEASE YEAR BASE RENT (PER YEAR): $40,574.25

FIRST MONTHS RENT: $ 3,381.19

SECURITY DEPOSIT: $ 3,656.69

AGENT: Lavista Associates, Inc. - Ivan Smith

*The estimated base 1997 taxes and assessments on a per square foot basis based
on annual Gwinnett county building property tax assessment. Landlord will
provide copy of tax notice and resulting per square foot calculation when
available. The base year for insurance will also be 1997.

1
<PAGE> 2
LEASE AGREEMENT

THIS LEASE AGREEMENT, made and entered into as of this 8th day of
September, 1997, by and between AP Southeast Portfolio Partners, LP d/b/a
Highwoods Anderson a Delaware limited partnership ("Landlord"), and
AmeriQuest Technologies, Inc. a Pennsylvania corporation ("Tenant").

In consideration of the premises and covenants contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

1. PREMISES. Landlord does hereby rent and lease to Tenant, and Tenant
does hereby rent and hire from Landlord, during the Lease Term (as hereinafter
defined), that certain space shown on the floor plan attached hereto as Exhibit
"A" and made a part hereof ("Premises"), located in Building 5600 ("Building")
of Oakbrook ("Project"), Dekalb County, Georgia, as more particularly described
on Exhibit "B" attached hereto and made a part hereof. The Premises are deemed
to contain 6,011 rentable square feet ("Rentable Area"). The Project is deemed
to contain 106,680 rentable square feet. As used herein, "Tenant's Share" shall
mean a fraction, the numerator of which shall be the Rentable Area, and the
denominator of which shall be the gross rentable area of the Project. No
easement for light and air is included in the Premises. For purposes of this
Lease, Tenant's Share is deemed to be five point six percent (5.6%).

2. POSSESSION.

a. "Lease Term" means a term commencing on the Commencement Date (as
hereinafter defined) and continuing for 36.5 full calendar months (plus any
partial calendar month if the Commencement Date is not the first day of a
month), unless sooner terminated or extended hereunder.

b. "Commencement Date" means the earlier of the date Tenant first
occupies the Premises or September 15, 1997. If by the Commencement Date
Landlord has not substantially completed the improvements to the Premises
required to be made by Landlord pursuant to Exhibit "D" attached hereto and made
a part hereof (if any), or if Landlord, for any other reason whatsoever, cannot
deliver possession of the Premises to Tenant by the Commencement Date, then the
Commencement Date shall be postponed (and the rent herein provided shall not
commence) until the earlier of either (I) the date of actual occupancy of the
Premises by Tenant or (ii) the date immediately following the day Landlord has
achieved substantial completion of such improvements. Landlord and Tenant shall
each have the option to terminate this lease by written notice to the other if
the Commencement Date has not occurred within six (6) months from the date
hereof. Provided, further, this lease shall automatically terminate without
action on the part of any party hereto if the Commencement Date has not occurred
within twelve (12) months from the date hereof. Landlord shall have no liability
for any delay in delivering possession of the Premises to Tenant.

c. If, and to the extent, Landlord's substantial completion of the
improvements to the Premises pursuant to Exhibit "D" attached hereto is delayed
due to any act or omission of Tenant or anyone acting under or for Tenant (any
such delay being hereinafter referred to as "Tenant's Delay"), then the
Commencement Date shall be the date specified in subsection (b) above, subject
to adjustment as provided therein, but without extension as a result of Tenant's
Delay; provided that from the Commencement Date, as so determined, until the
earlier of (I) the date of actual occupancy of the Premises by Tenant or (ii)
the date immediately following the date Landlord would have achieved substantial
completion of such improvements but for Tenant's Delay, Tenant's obligations
under this Lease shall be limited to the payment of any and all Rent due
hereunder.

2
<PAGE> 3
d. Within five (5) days of written request by Landlord, Tenant
agrees to execute and deliver to Landlord a commencement date agreement setting
forth the exact Commencement Date of the Lease Term and stating that all tenant
improvements to be constructed by Landlord have been substantially completed,
subject to the completion of any outstanding punchlist items.

3. BASE RENT.

a. Tenant shall pay to Landlord at AP Southeast Portfolio Partners,
LP, P.O. Box 100730 Atlanta. Georgia 30384-0730 or at such other place as
Landlord may designate, from and after the Commencement Date, an initial annual
Base Rent of $40,574.25 plus sales tax, if applicable, to be paid without
notice, demand, deduction, or set-off on the first day of each month, in
advance. The Base Rent shall be payable during the Lease Term and shall be
adjusted as set forth in the Special Stipulations attached hereto.

b. As used in this Lease, the term "Rent" shall include Base Rent,
Additional Rent, and all other sums and obligations due Landlord hereunder.

c. Payments of Rent not received by Landlord within five (5)
calendar days of the due date thereof shall be subject to a late charge due and
payable by Tenant to Landlord on the sixth (6th) calendar day after the due date
thereof in an amount equal to twenty five dollars ($25.00) or five percent (5%)
of such past due amount, whichever amount is greater.

4. ADDITIONAL RENT. Additional Rent for any calendar year shall equal
the sum of the following amounts:

a. Tenant's Proportionate Share of any increase in Taxes on the
Property over the amount payable therefor for the calendar year in which the
Commencement Date occurs (the "Base Year"). "Taxes" means all real estate taxes,
assessments (whether for drainage, sewage, or other public improvements), taxes
on rent or on occupancy or use of the Property, and similar governmental
impositions now or hereafter levied or assessed, whether general or special, and
whether imposed by any governmental entity or special taxing or assessment
district (excluding, however, any income, franchise, or similar tax imposed
directly on Landlord or Landlord's net income from the Property), together with
all costs incurred by Landlord in contesting same.

b. Tenant's Proportionate Share of any increase in premiums for
casualty and for liability insurance coverage carried by Landlord for the
Property (including any endorsements or additional coverages that Landlord may
reasonably elect to carry) over the amount payable therefor for the Base Year;
excluding, however, any increased premium attributable solely to a particular
hazardous use of the Property by another tenant.

c. Tenant's Proportionate Share of all costs payable by Landlord
for (a) operating and maintaining (including routine repairs and replacements)
the common areas, facilities, and equipment of the Property, including
landscaping, irrigation systems, parking and loading areas, driveways,
sidewalks, exterior lighting, common signs, garbage collection and disposal,
common water, sewer, plumbing, gas, electric facilities and equipment, common
area security services and equipment (if furnished by Landlord), and other
areas, facilities, or equipment shared by the various tenants in the Building,
(b) assessments, fees, or similar charges imposed on the Property for its share
of the cost of operating and maintaining common areas and facilities of the
business park in which the Property is located, (c) unless separately metered
and payable directly by Tenant, charges by public or private utility companies
for water and sewer usage, and (d) administrative costs, management

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fees and costs and

*The estimated base 1997 taxes and assessments on a per square foot basis
based on annual Gwinnett county building property tax assessment. Landlord
will provide copy of tax notice and resulting per square foot calculation
when available. The base year for insurance will also be 1997.

expenses of providing accounting and bookkeeping services with respect to the
operation and maintenance of the Property. Common Area Maintenance charges will
not reflect major replacements or capital improvements such as roof, parking
lots, and structures.

5. To the extent attributable to the Premises, the entire amount of any
costs payable by Landlord for pest control and vermin extermination in the
Premises. Landlord shall attempt in good faith (without litigation) to keep such
costs reasonably consistent with those of comparable properties in the same
market area.

Additional Rent shall be calculated and appropriately adjusted for each calendar
year (including the Base Year) to reflect costs that would have been incurred
for a full calendar year with the entire rentable area of the Building occupied.
The base year for all additional rent calculations contained in paragraph 1 & 2
of this Exhibit E shall be 1997.

6. UTILITIES. Tenant shall promptly pay the cost of all utility services
furnished to the Premises, including, but not limited to, gas, water,
electricity, garbage collection and other sanitary services, and any initiation
or connection fees for any of the foregoing. Landlord may furnish any utility
service to the Premises, and Tenant shall promptly pay Tenant's Share of the
cost of any such utility to Landlord within ten (10) days of receiving a
statement showing any amount due. Landlord may adjust Tenant's Share for
purposes of this paragraph if Landlord determines that Tenant's use of the
Premises justifies a disproportionate allocation of utility cost to Tenant.

7. SECURITY DEPOSIT. Tenant shall deliver to Landlord a Security Deposit
in the amount of $3,656.69 ("Security Deposit") which sum may be held by
Landlord in a regular business checking account, without any obligation to
accrue interest. The Security Deposit shall be held by Landlord as security for
performance by Tenant of Tenant's covenants and obligations under the Lease and
the Security Deposit shall not constitute, or be considered, an advance of
payment of rent, or a measure of Landlord's damages in the case of default by
Tenant. Without waiving or releasing any liability or obligation of Tenant to
perform under the terms of the Lease, Landlord may from time to time without
prejudice to or waiving or releasing any of the other remedies, use such deposit
to the extent necessary to offset any arrearages of rent or any other damages,
injury, expense, or liability incurred by Landlord as a result of any event of
default by Tenant. Upon receipt of notice from the Landlord that the Security
Deposit or any portion of the Security Deposit has been so applied, Tenant shall
pay to Landlord the amount of the Security Deposit so applied in order to
restore the Security Deposit to its original amount. Within a reasonable time
after termination of the Lease, if Tenant is not then in default under the terms
of the Lease, any remaining balance of the Security Deposit shall be returned by
Landlord to Tenant.

8. USE. The Premises shall be used by Tenant for general office and
warehouse and related purposes and no other. The Premises shall not be used for
any illegal purposes, nor shall the Premises be used in violation of any
governmental regulation, in any manner which would be deemed an extra-hazardous
use by any insurance company insuring the Premises or the Building or would
otherwise vitiate or increase the rate of insurance carried by either Landlord
or Tenant on the Premises or the Building. Tenant shall not do or permit
anything to be done in

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or about the Premises which would in any way obstruct or interfere with the
rights of other tenants of the Building. Tenant hereby agrees to comply with any
and all municipal, county, state and federal statutes, regulations, and
ordinances, all restrictive covenants to which the Building is subject, and
other legal requirements applicable or in any way relating to the use and
occupancy of the Premises.

9. ACCEPTANCE OF PREMISES. Tenant accepts the Premises in their present
condition and as suited for the uses intended by Tenant, subject only to
Landlord's agreement to construct tenant improvements pursuant to Exhibit "D"
attached hereto, if any.

10. ALTERATIONS BY TENANT. Tenant shall make no alterations, additions or
improvements to the Premises without first obtaining the written consent of
Landlord, which consent shall not be unreasonably withheld. Tenant shall conduct
any permitted work in such a manner as not to interfere with the operation of
the Building or the business of other tenants and shall, prior to commencement
of the work, submit to Landlord copies of all necessary permits. Landlord
reserves the right to have final approval of the contractors hired by Tenant.
All alterations, additions or improvements, whether temporary or permanent in
character, made in or upon the Premises, either by Landlord or Tenant, shall be
Landlord's property and at the end of the Lease Term shall remain in or upon the
Premises without compensation to Tenant. If, however, Landlord shall request in
writing, Tenant will, prior to termination of this Lease, remove any and all
alterations, additions and improvements placed or installed by Tenant in the
Premises, and will repair any damage caused by such removal.

11. TENANT'S EQUIPMENT. Any trade fixtures, equipment and other personal
property of Tenant not permanently affixed to the Premises ("Personal Property")
shall remain the property of Tenant. Tenant shall have the right, provided
Tenant is not in default hereunder, to remove the same so long as such removal
does not adversely affect the operation of tenant's business in the Premises.
Subject to any lien rights of Landlord, Tenant shall remove all of the Personal
Property from the Premises prior to any expiration or any termination of this
Lease. Any Personal Property remaining on the Premises after expiration or
termination of this Lease shall be deemed abandoned and may be removed and
disposed of by Landlord, all costs for which shall be paid by Tenant. Tenant at
its sole expense shall immediately repair any damage occasioned to the Premises
by reason of the installation or removal of any Personal Property. Tenant
assumes the risk of any and all damage from any casualty whatsoever to, or theft
or any other loss of, its improvements to, and the Personal Property within, the
Premises.

12. MAINTENANCE AND REPAIR BY LANDLORD

a. Landlord shall, except as provided elsewhere herein and subject
to the negligence of Tenant, its agents or employees, make necessary repairs to
the foundation, exterior walls (excluding windows, window glass, plate glass and
doors) and roof of the Building. Tenant shall promptly report to Landlord any
defective condition in the Premises known to Tenant which Landlord is required
to repair hereunder, and failure to so report shall relieve Landlord of
liability for damages to any personal property, fixtures or Tenant Improvements
located in the Premises resulting from or in connection with such defective
condition.

b. Landlord shall maintain the common areas of the Project,
including parking and landscaped areas.

13. MAINTENANCE AND REPAIR BY TENANT Tenant shall, at its sole expense,
repair, maintain and replace as necessary and keep in good, clean and safe
condition all portions of the Premises which are not, pursuant to Paragraph 11
hereof, specifically the responsibility of Landlord as set forth herein,
including, without limitation,

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all windows, doors, partitions, and utility and HVAC systems. Tenant shall
maintain in force at all times a maintenance contract for the HVAC systems in a
form and with a contractor acceptable to Landlord. A copy of the maintenance
agreement shall be given to Landlord within the first 60 days of Tenant's
occupancy. Tenant is responsible for all repairs to the mechanical systems.
Landlord may, at its option, and without relieving any duty or obligation of
Tenant to perform under the Lease, and after appropriate notice to Tenant,
perform any duty of Tenant hereunder and Tenant shall pay the cost thereof to
Landlord as Additional Rent and shall be subject to any other remedy or right
Landlord may have should the failure to perform constitute a default under the
Lease. Tenant will not injure the Premises, or commit or allow to be committed
any waste therein. Tenant shall repair any damage to the Premises or the
Building caused by Tenant or Tenant's agents, contractors, employees, invitees
and visitors.

14. MECHANIC'S LIENS. Tenant shall keep the Premises, the Building and the
Project free from liens for any work performed, material furnished or
obligations incurred by or for Tenant. Upon the filing of any such lien, Tenant
will cause such lien to be removed within ten (10) days after filing; if not so
removed, Landlord may cause same to be discharged and any amount paid by
Landlord shall bear interest at the rate of eighteen percent (18%) per annum
from the date of payment by Landlord and shall be payable by Tenant to Landlord
upon demand.

15. INSURANCE.

a. Tenant shall obtain and maintain in force throughout the Lease
Term comprehensive general liability, premises and operations insurance in the
amount of not less than $1,000,000.00 for any one injury (including death) and
not less than $2,000,000.00 for any bodily injury (including death) annual
aggregate and not less than $1,000,000.00 for property damage. Said policy shall
name both Landlord and Tenant as insured and shall contain a provision requiring
the insurer to give Landlord at least fifteen (15) calendar days prior written
notice before any termination or expiration of said policy for any reason. Prior
to occupancy of the Premises and prior to the expiration of each term on such
policy Tenant shall deliver to Landlord the original of such policy or a proper
certificate from the insurer.

b. Tenant shall, at its own cost and expense, obtain and keep in
force during the Lease term all risk coverage on its improvements, fixtures,
furnishings, equipment and inventory in and upon the Premises for the full
replacement value thereof.

c. Tenant understands that Landlord may furnish the Insurance
Questionnaire attached hereto as Exhibit "C" and made a part hereof to
Landlord's insurance carrier. Landlord's execution hereof shall not constitute
acknowledgment, approval or the acceptance of responsibility for the materials
and conditions stated therein, nor vitiate any of Tenant's obligations
hereunder. Tenant shall promptly notify Landlord of any change to the truth or
accuracy of the information contained therein promptly upon learning of same.
The operation by Tenant of its business on the Premises other than in accordance
with the information contained in the Insurance Questionnaire shall be a default
hereunder. If any information contained in the Insurance Questionnaire is or
becomes false or inaccurate, or if a use not revealed by Tenant in the Insurance
Questionnaire causes Landlord's insurance costs to increase, Tenant shall be
liable to Landlord for any such increase in cost arising from or in connection
therewith and shall be deemed to be in default under the Lease.

16. WAIVER OF SUBROGATION. All policies of casualty insurance obtained by
Landlord or Tenant with respect to the Premises, the Building, or the contents
thereof shall contain a waiver by the insurer of all right of subrogation in
connection with any loss or damage insured against by such policy. Landlord and
Tenant, to the

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fullest extent permitted by law, each waive all right of recovery against the
other for, and agree to hold the other harmless from liability, for all losses
or damages to the extent of insurance proceeds actually available or that would
have been available (if such policies are not obtained in accordance with the
provisions hereof) under policies required hereby. If such waiver of subrogation
shall not be obtainable or shall be obtainable only at a premium over that
charged without such waiver, the party seeking such waiver shall so notify the
other in writing, and the latter party shall have ten (10) days in which either
(I) to procure on behalf and at the cost of the notifying party insurance with
such waiver from a company or companies reasonably satisfactory to the notifying
party or (ii) to agree to pay such additional premium (in each case, in
equitable proportions).

17. CASUALTY. If the Premises are damaged by fire or other casualty or the
elements to the extent that, in the judgment of Landlord, the damage cannot be
repaired within one hundred twenty (120) days, or if the Building is so damaged
that Landlord shall decide to demolish, rebuild or reconstruct the Building,
this Lease shall, at the option of Landlord, terminate as of the date of such
casualty, and Tenant shall immediately surrender the Premises to Landlord and
pay Rent up to the date of such surrender. If this Lease is not so terminated,
Landlord shall, within a reasonable time, rebuild or repair the Premises to
substantially the same condition in which they existed prior to such damage;
provided, however, Landlord's obligation hereunder shall be limited to the
insurance proceeds available, and paid1 to Landlord on account of such damage
and to improvements initially constructed at Landlord's cost. Promptly upon
completion of Landlord's repairs, Tenant shall repair and replace all other
alterations and improvements installed in the Premises by or for Tenant and the
Personal Property of Tenant. After any casualty to the Premises, Tenant shall
continue to owe and pay Rent, but, subject to the next succeeding sentence, Rent
shall be equitably abated until the earlier of the date possession of the entire
reconstructed Premises is restored to Tenant or the Lease terminates. If the
Premises or any other portion of the Building is damaged by fire or other
casualty resulting from the negligent or willful acts or omissions of Tenant or
any of Tenant's agents, contractors, employees, or invitees, the Rent shall not
be so abated. Landlord shall not be liable to Tenant for inconvenience,
annoyance, loss of profits, expenses or other type of injury or damage resulting
from the repair of any such damage, or any delay in making such repairs, or for
the termination of this Lease as herein provided. Landlord may terminate this
Lease upon any damage or destruction to the Premises occurring during the final
two (2) years of the Lease Term.

18. CONDEMNATION.

a. In the event of a taking of all of the Premises, or such portion
thereof as to substantially impair the use thereof in the sole judgment of
Landlord, then this Lease shall automatically terminate on, and all Rent payable
by Tenant shall be apportioned and paid through, the date of such taking. Tenant
shall have no right or claim to any part of any award made to or received by
Landlord for such taking.

b. In the event of a partial taking for which this Lease is not
terminated, the Rent hereunder shall be equitably reduced, and Landlord shall
restore and reconstruct the Premises (to the extent of the improvements
initially constructed at Landlord's cost) to the extent necessary to make it
reasonably tenantable, but Landlord shall not be required to spend for such work
an amount in excess of the amount received by Landlord for such restoration.

19. INDEMNITY.

Tenant shall indemnify and hold harmless Landlord and Landlord's partners,
officers, employees and agents from and against any and all liabilities,
damages, losses, and expenses (including attorney's fees) arising in

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whole or in part by reason of or in connection with:

(i) any injury to or death of persons or damage to property (a)
on the Premises, or (b) in any manner arising out of, by reason of or in
connection with, the use, non-use or occupancy of the Premises;

(ii)the violation or breach of, or the failure of Tenant to
fully and completely observe and satisfy, any term or condition of this
Lease; or

thereof.

(iii) the violation of any law affecting the Premises or the
use or occupancy

This contract provision notwithstanding, Tenant shall in no way be liable
to Landlord for any of the foregoing proximately caused by gross negligence or
willful malfeasance or misconduct of Landlord.

20. SUBLETTING AND ASSIGNMENT

a. Tenant shall not assign this Lease or sublet the Premises or
any portion thereof without obtaining in each instance the prior written consent
of Landlord. Landlord's consent to Tenant's request to an assignment or sublease
shall not be unreasonably withheld; provided, however, in determining whether or
not to give or withhold its approval of any proposed assignee or subleassee
hereunder, Landlord shall be entitled to consider, without limitation, the
creditworthiness of such proposed assignee or subleassee, the character and/or
type of business of such proposed assignee or subleassee, the impact of such
assignee or subleassee and its business on the image of the Project, and whether
or not such assignee or subleassee will favorably coexist and mix with and not
detract from the character and quality of the Project.

b. If Tenant should desire to assign this Lease or sublet the
Premises or any part thereof, Tenant shall make prior written request to
Landlord, which request shall specify (I) the name and business of the proposed
assignee or subleassee, (ii) the size and location of the space affected, (iii)
the proposed effective date and duration of the assignment or sublease and (iv)
the proposed rental or other consideration to be paid to Tenant by such assignee
or subleassee. Landlord shall have a period of thirty (30) days following
receipt of such notice within which to notify Tenant of its decision regarding
the proposed assignment or sublease. Tenant agrees to reimburse Landlord for
Landlord's reasonable attorney's fees and costs incurred in connection with the
processing and documentation of any request made pursuant to this section.

c. The occupancy of the Premises by any division, subsidiary,
affiliate or other related entity of Tenant or by any successor firm of Tenant
or by any firm into which or with which Tenant may become merged or consolidated
shall be deemed an assignment of this Lease requiring the prior written consent
of Landlord in accordance with this section.

d. Any consent to subletting or assignment shall not be deemed a
waiver of Landlord's right to withhold its consent to any further subletting or
assignment. Notwithstanding any permitted subletting or assignment, Tenant shall
remain obligated to Landlord to discharge all the obligations of Tenant herein
contained and Landlord shall be afforded all remedies provided hereunder in the
event of an uncured default by Tenant. In the event of any permitted assignment
of the Lease or any permitted subletting of the Premises by Tenant, in addition
to Tenant's other obligations hereunder, Tenant shall pay to Landlord the
excess, if any, of (I) the rentals

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and all other charges or consideration of any nature actually received by Tenant
from Tenant's assignee or subtenant under the terms and provisions of such
assignment or sublease or in any manner connected therewith at the time such
rentals and other charges are paid thereunder, over (ii) the total Rent paid by
Tenant to Landlord hereunder, pro-rated based upon the number of square feet
assigned or subleased, in the case of an assignment or a sublease of a portion,
but not all, of the Premises.

21. SUBORDINATION.

a. This Lease is, and shall be, subordinate to any mortgage or deed
to secure debt ("Mortgage") which might now or hereafter constitute a lien upon
the Building or the Project. This provision shall be self-operative, and shall
not require any further documentation to evidence or effectuate this
subordination. Upon request by Landlord or the holder of any Mortgage, Tenant
shall execute such documentation as may be requested to evidence the foregoing
subordination and, failing to do so within ten (10) days after request therefor,
does hereby make, constitute and irrevocably appoint Landlord as Tenant's
attorney-in-fact and in Tenant's name, place and stead so to do. Notwithstanding
the foregoing, however, any holder of a Mortgage may elect that this Lease shall
be superior to its Mortgage, and upon written notification of such election this
Lease shall automatically be superior to said Mortgage whether this Lease is
dated prior to or subsequent to the date of the Mortgage.

b. Upon any assignment of this Lease by Landlord, or upon a
foreclosure of any Mortgage or sale in lieu of foreclosure and at the election
of the purchaser at such foreclosure sale or sale in lieu of foreclosure, Tenant
shall be bound to said assignee or any such purchaser under all of the terms,
covenants and conditions of this Lease for the balance of the Lease Term. Tenant
hereby attorns to such succeeding party as its landlord under this Lease, and
agrees to execute all instruments required by such purchaser affirming such
attornrnent.

22. DEFAULTS. Tenant shall be in default under this Lease upon the
occurrence of any one or more of the following events or occurrences, each of
which shall be deemed to be a material default:

a. Tenant fails to pay the full amount of Rent or any other sum due
hereunder punctually on the due date thereof, which failure is not cured within
five (5) days after written demand by Landlord.

b. Tenant fails to fully and punctually observe or perform any of
the terms, conditions or covenants of this Lease, which failure is not cured
within five (5) days after written demand by Landlord; provided, that if such
failure is impossible to cure within such five-day period and Tenant is
diligently pursuing such cure, Tenant shall have an additional period, as
determined by Landlord in its reasonable discretion, not to exceed thirty (30)
days to cure such failure.

c. Tenant fails to take possession or occupancy of, or deserts or
abandons the Premises or the Premises become vacant.

d. Any representation, statement, or warranty made by Tenant Lease,
or in any information sheet or document furnished by Tenant or any guarantor
with respect to the net worth, liabilities, assets, or financial condition of
Tenant guarantor hereof, or any other matter, shall be or prove to be untrue or
misleading.

e. The filing or execution or occurrence of; (a) a petition by or
against Tenant or any guarantor hereof in bankruptcy or seeking any
reorganization, arrangement, composition, readjustment,

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liquidation, dissolution or similar relief under any bankruptcy or insolvency
statute or law, (bb) adjudication of Tenant or any guarantor hereof as a
bankrupt or insolvent, or insolvencyin the bankruptcy or equity sense, (cc) an
assignment by Tenant or any guarantor hereof for the benefit or creditors, (dd)
a petition or proceeding by or against Tenant or any guarantor hereof for, or
the appointment of a trustee, receiver, guardian, conservator or liquidator with
respect to any portion of Tenant's or guarantor's property, (ee) any levy,
execution or attachment against Tenant or any guarantor hereof, or (ff) any
transfer or passage of any interest of Tenant under this Lease by operation of
law.

(i) Tenant fails to fully and punctually observe or perform
any of the terms, conditions or covenants of this Lease, for which Tenant has
already received a written notice and effected cure within the preceding six
months.

23. REMEDIES.

a. Upon occurrence of any one or more of the aforesaid events of
default, Landlord shall have the option to pursue any one or more of the
following remedies without any demand or notice whatsoever (except as expressly
provided in this Lease):

b. Terminate this Lease by giving Tenant notice of termination, in
which event this Lease shall expire and terminate on the date specified in such
notice of termination, and Tenant shall remain liable for all obligations under
this Lease arising up to the date of such termination, and Tenant shall
surrender the Premises to Landlord on the date specified in such notice.

c. Terminate this Lease as provided in subparagraph (a) (I) hereof
and recover from tenant all obligations arising up to the date of such
termination and all damages Landlord may incur by reason of Tenant's default,
including, without limitation, a sum which, at the date of such termination
represents the present value (discounted at a rate equal to the greater of eight
percent (8%) per annum or the then applicable rate of interest as specified in
the financing outstanding on the Project) of the excess, if any, of (aa) the
Rent and all other sums which would have been payable hereunder by Tenant for
the period commencing with the day following the date of such termination and
ending with the date hereinbefore set for the expiration of the full term hereby
granted, over (bb) the aggregate reasonable rental value of the Premises for the
same period, all of which present value of such excess sum shall be deemed
immediately due and payable; provided, however, that such sum shall not be
deemed a penalty or forfeiture, actual damages being difficult or impossible to
measure, and such sum represents the parties' reasonable best estimate of the
damages which would be incurred by Landlord in the event of a breach by Tenant.

d. Without terminating this Lease, declare immediately due and
payable all Rent and other amounts due and coming due under this Lease for the
entire remaining Term hereof, together with all other amounts previously due, at
once, which total amount shall be discounted to the present value (at a rate
equal to the greater of eight percent (8%) per annum or the then applicable rate
of interest specified in the financing outstanding on the Project); provided,
however, that such payment shall not be deemed a penalty or liquidated damages
but shall merely constitute payment in advance for Rent for the remainder of
said Term. Upon making such payment, Tenant shall be entitled to receive from
Landlord all rents received by Landlord from other assignees, tenants, and
subtenants on account of said Premises during the Term of this Lease provided
that the monies to which Tenant shall so become entitled shall in no event
exceed the entire amount actually paid by Tenant to Landlord pursuant to the
preceding sentence less all costs, including refurbishing the Premises and new

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lease commissions, expenses and attorney's fees of Landlord incurred in
connection with the reletting of the Premises.

e. Without terminating this Lease, and with or without notice to
Tenant, Landlord may in Landlord's own name, but as agent for Tenant, enter into
and upon and take possession of the Premises or any part thereof, and, at
Landlord's option, remove persons and property therefrom, and such property, if
any, may be removed and stored in a warehouse or elsewhere at the cost of, and
for the account of, Tenant, all without being deemed guilty of trespass or
becoming liable for any loss or damage which may be occasioned thereby, and
Landlord may rent the Premises or any portion thereof as the agent of Tenant
with or without advertisement, and by private negotiations and for any term upon
such terms and conditions as Landlord may deem necessary or desirable in order
to relet the Premises. Landlord shall in no way be responsible or liable for any
part thereof, or for any failure to collect any rent due upon such reletting.
Upon each such reletting, all rentals received by Landlord from such reletting
shall be applied: first, to the payment of any indebtedness (other than any Rent
due hereunder) from Tenant to Landlord; second, to the payment of any costs and
expenses of such reletting, including without limitation, brokerage fees and
attorneys' fees and costs of alterations and repairs; third, to the payment of
Rent and other charges then due and unpaid hereunder; and the residue, if any,
shall be held by Landlord to the extent and for application in payment of future
Rent as the same may become due and payable hereunder. If the rentals received
from such reletting shall at any time or from time to time be less than
sufficient to pay to Landlord the entire sums then due from Tenant hereunder,
Tenant shall pay any such deficiency to Landlord. Such deficiency shall, at
Landlord's option, be calculated and paid monthly.

f. Without liability to Tenant or any other party and without
constituting a constructive or actual eviction, suspend or discontinue
furnishing or rendering to Tenant any property, material, labor, utilities or
other service, which Landlord is obligated to furnish or render, so long as
Tenant is in default under this Lease.

g. Pursue such other remedies as are available at law or in equity.

h. Landlord's pursuit of any remedy or remedies, including, without
limitation, any one or more of the remedies stated in the foregoing subparagraph
(a), shall not (I) constitute an election of remedies provided in this Lease or
any other remedy or remedies provided by law or in equity, separately or
concurrently or in any combination, or (ii) serve as the basis for any claim of
actual or constructive eviction, or allow Tenant to withhold any payments under
this Lease.

i. No termination of this Lease prior to the normal expiration
thereof, by lapse of time or otherwise, shall affect Landlord's right to collect
Rent for the period prior to termination thereof. No surrender of the Premises
or any part thereof by delivery of keys or otherwise shall operate to terminate
this Lease unless and until expressly accepted in writing by an authorized
officer of Landlord.

j. The foregoing provisions shall apply to any renewal or
extension of this Lease.

24. NOTICE TO MORTGAGEE. Prior to the exercise by Tenant of any remedy
afforded for Landlord's default hereunder, Tenant shall give the holder of any
Mortgage written notification of such default by Landlord and thirty (30) days
within which to cure the same; provided, Tenant's obligation hereunder is
limited to those Mortgage holders of which it has received written notice.

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25. HAZARDOUS SUBSTANCES. Tenant represents and warrants that it will not,
on or about the Premises, make, store, use, treat, transport or dispose of any
hazardous or toxic waste, contaminants, oil, radioactive or other materials the
removal of which is required or the maintenance of which is prohibited,
regulated (unless such regulations are adhered to and Landlord is notified
thereof) or penalized by any local, state or federal agency, authority or
governmental unit.

26. SIGNAGE. Tenant shall not install or maintain any signs visible from
outside the Premises except in accordance with the Rules and Regulations. Tenant
shall be responsible to Landlord for any damage caused by the installation, use
or removal of any sign.

27. ATTORNEY'S FEES. In the event that litigation results from an attempt
by either party hereto to enforce its rights under this Lease, the prevailing
party in such litigation shall be entitled to reimbursement by the
non-prevailing party for any and all reasonable attorneys' fees, and expenses
incurred in connection with such enforcement. Provided, further, in the event
that Landlord utilizes services of an attorney to collect rent due and payable
hereunder Landlord shall further be entitled to collect from Tenant fifteen
percent (15%) of the Rent so collected as attorney's fees. Additionally, Tenant
agrees to reimburse Landlord for any and all reasonable costs and expenses
(including attorneys' fees) which Landlord may incur or pay in connection with
negotiations in which Landlord shall become involved through or on account of
the Lease or in connection with any request by Tenant for review or approval by
Landlord, provided, however, that this obligation shall not apply to any
negotiations between Landlord and Tenant respecting this agreement or any
renewals thereof.

28. TIME OF ESSENCE. Time is of the essence of this Lease.

29. LANDLORD AND TENANT RELATIONSHIP. This Lease shall create the
relationship of landlord and tenant between Landlord and Tenant; no estate shall
pass out of Landlord; and Tenant has only a usufruct not subject to levy and
sale.

30. SALE BY LANDLORD. In the event of any sale, conveyance, transfer or
assignment by Landlord of its interest in and to the Premises, all obligations
and liabilities under this Lease of the party so selling, conveying,
transferring or assigning the Premises arising after the date of such
disposition shall terminate. Tenant shall thereafter look only and solely to the
party to whom or which the Premises were sold, conveyed, transferred, or
assigned for performance of all of Landlord's duties and obligations under this
Lease, including the return of any Security Deposit.

31. SURRENDER OF THE PREMISES. At the termination of this Lease; Tenant
shall surrender the Premises and keys thereof to Landlord in at least as good a
condition as on the Commencement Date, excepting only ordinary wear and tear and
damage arising from any cause not required to be repaired by Tenant.

32. PARTIES. "Landlord" as used in this Lease shall include Landlord's
assigns and successors in title to the Premises. "Tenant" shall include Tenant
and, if this Lease shall be validly assigned or the Premises sublet, shall
include such assignee or subtenant, it's successors and permitted assigns.
"Landlord" and "Tenant" shall include male and female, singular and plural,
corporation, partnership or individual, as may fit the particular parties.

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<PAGE> 13
33. ESTOPPEL CERTIFICATE. At any time and from time to time, Tenant,
within ten (10) days of written request therefore, shall execute, acknowledge
and deliver to Landlord a certificate evidencing whether or not (i)this Lease is
in full force and effect; (ii) this Lease has been amended in any way; (iii)
there are any existing defaults on the part of Landlord hereunder, to the
knowledge of Tenant, and specifying the nature of such defaults, if any; (iv)
the date to which Rent and other amounts due hereunder, if any, have been paid;
and (v) such other matters requested by Landlord. Each certificate delivered
pursuant to this paragraph may be relied on by any prospective purchaser of the
Building or transferee of Landlord's interest hereunder or by any holder or
prospective holder of any mortgage instrument or deed to secure debt now or
hereafter encumbering the Building. Tenant's failure to deliver such statement,
in addition to being a default hereunder, shall be deemed to establish
conclusively that this Lease is in full force and effect except as declared by
Landlord, that Landlord is not in default of any of its obligations under this
Lease, and that Landlord has not received more than one month's rent in advance.

34. RELOCATION. If the Premises have a rentable area of less than 25% of
the Building floor area, at Landlord's option, to be exercised by notice to
Tenant specifying the date of relocation, Landlord may designate any other space
in the Building or the Project to be occupied by Tenant in lieu of the Premises,
provided that said other space is of substantially equal size and area. Landlord
shall be responsible for the reasonable costs and expenses related to Tenant's
move as well as the expense of any renovation or alterations necessary to make
the new space substantially conform to layout and appointment with the original
Premises.

35. SUCCESSORS AND ASSIGNS. The provisions of this Lease shall inure to
the benefit of and be binding upon Landlord and Tenant and their respective
successors, heirs, legal representatives and assigns, subject, however, in the
case of Tenant, to the restrictions on assignment and subletting contained in
this Lease.

36. LIMITATION OF LIABILITY. Landlord's obligations and liability to
Tenant with respect to this Lease shall be limited solely to Landlord's interest
in the Project, and neither Landlord, nor any joint venturer, partner, officer,
director or shareholder of Landlord or any of the joint venturers of Landlord
shall have any personal liability whatsoever with respect to this Lease.

37. RULES AND REGULATIONS. Tenant accepts the Premises subject to and
hereby agrees with Landlord to abide by the Rules and Regulations attached to
this Lease and incorporated herein by reference, together with such additional
Rules and Regulations or amendments thereto as may hereafter from time to time
be reasonably established by Landlord, and such additions or amendments shall be
binding on Tenant upon receipt of same by Tenant.

38. RIGHT OF ENTRY. Landlord shall have the right, but not the obligation,
to enter the Premises at reasonable hours to exhibit same to prospective
purchasers or tenants; to inspect the Premises to see that Tenant is complying
with all Tenant's obligations hereunder; to make repairs required of Landlord
under the terms of this Lease or repairs or modifications to any adjoining
space; and for any other reasonable purpose.

39. NOTICES. Any notice required or permitted to be given hereunder shall
be in writing and either personally delivered, sent by U.S. Certified or
Registered Mail, return receipt requested, postage prepaid, or sent by Federal
Express, or any similar service, to the party being given such notice at the
following addresses:

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<PAGE> 14
LANDLORD: AP Southeast Portfolio Partners, LP
2200 Century Parkway, Suite 800
Atlanta, Georgia 30345

TENANT: AmeriQuest Technologies, Inc.
5600 Oakbrook Parkway, Suite 230
Norcross, GA 30093

The time period in which a response to any notice, demand or request must be
given, if any, shall commence to run from the date of receipt of the notice,
demand or request by the addressee thereof. Rejection or failure to claim
delivery of any such notice, demand or request, or the inability to deliver
because of changed address of which no notice was given, shall be deemed to be
receipt of the notice, demand or request as of the date of deposit in the United
States Mail or the date of attempted personal delivery, as the case may be. By
giving at least thirty (30) days written notice thereof, any party shall have
the right from time to time and at any time to change their respective
addresses.

40. HOLDING OVER. If Tenant remains in possession of the Premises after
expiration of the Lease Term, with Landlord's acquiescence and without any
distinct agreement of the parties, Tenant shall be a tenant at will at a rental
rate equal to two times the rate in effect at the end of this Lease (in addition
to all Additional Rent). There shall be no renewal of the Lease by operation of
law.

41. MISCELLANEOUS. This Lease contains the entire agreement of Landlord
and Tenant and no representations or agreements, oral or otherwise, between the
parties not embodied herein shall be of any force or effect. No failure of
Landlord to exercise any power given Landlord hereunder, or to insist upon
strict compliance by Tenant of any obligation hereunder, and no custom or
practice of the parties at variance with the terms hereof, shall constitute a
waiver of Landlord's right to exercise any right hereunder or demand exact
compliance with the terms hereof. If any clause or provision of this Lease is
illegal, invalid or unenforceable under applicable present or future laws or
regulations effective during the term of this Lease, the remainder of this Lease
shall not be affected. In lieu of each clause or provision of this Lease which
is illegal, invalid or unenforceable, there shall be added as a part of this
Lease a clause or provision as nearly identical as may be possible and as may be
legal, valid and enforceable. This Lease shall be governed by, construed under
and interpreted and enforced in accordance with the laws of the State of
Georgia. Neither this Lease, nor any memorandum of this Lease or reference
hereto, shall be recorded by Tenant without Landlord's consent endorsed thereon.
Landlord shall be excused from the performance of any of its obligations under
this Lease for the period of any delay resulting from any cause beyond its
control, including, without limitation, all labor disputes, governmental
regulations or controls, fires or other casualties, inability to obtain any
material or services or acts of God.

42. DISCLAIMER. Tenant has made its own independent inspection and review
of the premises and the terms and conditions of this Lease and acknowledges and
agrees that Tenant has not, in any way, relied upon any brochure, literature,
representation, guaranty or warranty (whether express or implied, oral or
written) made by Landlord or any agent or representative or employee or attorney
on behalf of Landlord in connection with any aspect of the Leased Premises or
the Project or the terms and conditions of the Lease.

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<PAGE> 15
43. SPECIAL STIPULATIONS. In the event any Special Stipulations are
attached to this the terms thereof shall control in the event of a conflict
between the provisions of this and the provisions thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Lease to be
executed, under seal, in their respective names and on their behalf by their
duly authorized officials, the day and year indicated below.

"LANDLORD"

AP Southeast Portfolio Partners,

By: Highwoods Properties, Inc., general
partner

______________________________________

"TENANT"

AmeriQuest Technologies, Inc.

By: _________________________________

Its: _________________________

Attest: ______________________

Its: _________________________

_______________________________

(CORPORATE SEAL)

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<PAGE> 16
RULES AND REGULATIONS

SIGN DISPLAY. Tenant will provide its own signage for the Premises. Such
signage will be coordinated throughout the park for uniformity and
attractiveness. No sign, tag, label, picture, advertisement or notice shall be
displayed, distributed, inscribed, painted or affixed by Tenant on any part of
the outside or inside of the Building or of the Premises without the prior
written consent of Landlord. All permitted signage shall be maintained in
compliance with applicable governmental rules and regulations, and all
restrictive covenants, governing such signs. Tenant shall be responsible for any
damage caused by the installation, use or removal of any sign. Landlord may
require Tenant to remove all signage at the termination of the Lease and to
repair any damage occasioned by such removal.

DRIVES AND PARKING AREAS. All parking shall be within the property
boundaries and within marked parking spaces. There shall be no on-street parking
and at no time shall any Tenant obstruct drives and loading areas intended for
the use of all Tenants. The drives and parking areas are for the joint and
nonexclusive use of Landlord's tenants, and their agents, customers and
invitees, unless specifically marked. In the event Tenant, its agents,
customers, and/or invitees use a disproportionate portion of the parking,
Landlord shall have the right to restrict Tenant, its agents, customers and/or
invitees to certain parking areas. Tenant shall not permit any fleet trucks to
park overnight in the Building's parking areas.

STORAGE AND LOADING AREAS. Unless specifically approved by Landlord in
writing, no materials, supplies or equipment shall be stored anywhere except
inside the Premises. In no event shall Tenant cause or allow any outside storage
of trash, refuse or debris, whether in the area of the dumpster or otherwise.

LOCKS. No additional locks shall be placed on the doors of the Premises by
Tenant nor shall any existing locks be changed unless Landlord is immediately
furnished with two keys thereto. Landlord will, without charge, furnish Tenant
with two keys for each lock on the entrance doors when Tenant assumes
possession, with the understanding that at the termination or expiration of the
term of the Lease the keys shall be returned.

CONTRACTORS AND SERVICE MAINTENANCE. Tenant will refer all contractors,
contractor's representatives and installation technicians rendering any service
on or to the Premises for Tenant to Landlord for its approval and supervision
before performance of any service. This provision shall apply to all work
performed in the Building, including, but not limited to, installation of
electrical devices and attachments and installations of any nature affecting
floors, walls, woodwork, trim, windows, ceilings, equipment or any other
physical portion of the Building.

LODGING. No Tenant shall at any time occupy any part of the Building as
sleeping or lodging quarters.

REGULATION OF OPERATION AND USE. Tenant shall not place, install or
operate on the Premises or in any part of Building, any engine, stove or
machinery, or conduct mechanical operations or cook thereon or therein, or place
or use in or about the Premises any explosives, gasoline, kerosene, oil, acids,
caustics or any other flammable, explosive or hazardous material without the
prior written consent of Landlord.

WINDOW COVERINGS. Windows facing the Building exterior shall at all times
be wholly clear and uncovered (except for such blinds or curtains or other
window coverings Landlord may provide or approve) so that a full unobstructed
view of the interior of the Premises may be had from outside the Building.

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<PAGE> 17
MODIFICATIONS. Landlord shall have the right from time to time to
modify, add to or delete any of these Rules and Regulations at Landlord's
sole discretion.

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<PAGE> 18
SPECIAL STIPULATIONS

RENTAL SCHEDULE

The following schedule is the Base Rent payable per Paragraph 3a. of this
lease:

Beginning September 15, 1997 through September 30, 1997 the sum of one
thousand four hundred sixty five and 19/100 Dollars ($1,465.18).

Beginning October 1, 1997 through September 30, 1998 the monthly sum of
three thousand three hundred eighty one and 19/100 Dollars ($3,381.19) for
a total annual base rental of forty thousand five hundred seventy-four and
25/100 Dollars ($40,574.25).

Beginning October 1, 1998 through September 30, 1999 the monthly sum of
three thousand five hundred sixteen and 44/100 Dollars ($3,516.44) for a
total annual base rental of forty two thousand one hundred ninety-seven
and 22/100 Dollars ($42,197.22).

Beginning October 1, 1999 through September 30, 2000 the monthly sum of
three thousand six hundred fifty-six and 69/100 Dollars ($3,656.69) for a
total annual base rental of forty three thousand eight hundred eighty and
30/100 Dollars ($43,880.30).

AS-IS CONDITION

Except for the items detailed on Exhibit "D" attached hereto, Tenant agrees to
accept the leased premises in an "as-is" condition. Landlord agrees that the
HVAC, doors, electrical and plumbing fixtures will be in a satisfactory working
condition at the time of occupancy and warrants their condition for ninety (90)
days.

DISCLOSURE STATEMENT

REAL ESTATE BROKERS AND AGENTS. Tenant warrants and represents that Tenant has
had no dealings with any real estate broker or agent, other than AP SOUTHEAST
PORTFOLIO PARTNERS, LP and LAVISTA ASSOCIATES, in connection with the
negotiation or execution of this Lease. LAVISTA ASSOCIATES has represented
Tenant in this transaction and will be paid a commission by Landlord. Tenant
agrees to indemnify and hold Landlord harmless from and against any and all
cost, expense or liability for commissions or other compensation or fees claimed
by any other broker or agent acting or claiming to act for Tenant with respect
to this Lease.

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<PAGE> 19
EXHIBIT "B"
Legal Description

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<PAGE> 20
EXHIBIT "D"

LANDLORD IMPROVEMENTS

It is understood and agreed by both parties that the following improvements will
be provided by the Landlord:

Landlord will provide a $3.OO/psf allowance for paint, carpet and minor
modifications that conform to the building standards.

<PAGE> 1
Exhibit 10.23

LEASE AGREEMENT

LANDLORD and TENANT agree to lease the premises for the term, at the rent stated
herein, and subject to the following terms and conditions ("LANDLORD" and
"TENANT" include all landlords and all tenants under this Lease):

DATE OF LEASE: August 26, 1997

LANDLORD: TALL OAKS TENANT: AMERIQUEST SYSTEMS
ASSOCIATES, L.P. GROUP
c/o Needleman Mgmt Co., Inc. Computer 2000 Group
1060 N. Kings Highway - #250 425 Privet Road
Cherry Hill, NJ 08034 Horsham, PA 19044

LEASED PREMISES: 1000 Lenola Road -- Building Two -- Maple Shade, NJ--08052
SUITE: 203 SIZE: 1400 RSF

TERM: Three (3)years SECURITY DEP.: $1690.00
Beginning: 9/15/97 % OF BUILDING: 07.25
Ending: 8/31/00 BASE YEAR: 1997

RENT FOR THE TERM IS: $60,840.00

Rent is payable in advance on the first day of each month as follows:
9/5/97-8/31/00-- $20,280.00 per annum -- $1,690.00 per month

JANITORIAL SERVICES ARE INCLUDED IN BASE RENT.
UTILITY USE CHARGES ARE NOT INCLUDED IN BASE RENT.
SEE SECTION 32 FOR OPTION TERMS.

PLEASE MAKE CHECKS PAYABLE TO: TALL OAKS ASSOCIATES, LP.
FORWARD TO: Needleman Management Co., Inc.
1060 N. Kings Highway --#250
Cherry Hill, NJ 08034

LIABILITY INSURANCE: Minimum amount for each person injured: $1,000,000.00
Minimum amount for any accident: $1,000,000.00
Minimum amount for property damage: $1,000,000.00

BROKER: Landlord and Tenant recognize NO ONE as the Broker who
brought about this Lease.

USE OF RENTAL SPACE: Administrative/sales office.

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<PAGE> 2
1. ADDITIONAL RENT. As additional rent, Tenant to pay pro rata share
(7.25%)of increases over the Base Year (l997) of real estate and related
taxes, and the aggregate cost of maintaining and operating the Building and
its common areas.

Costs of operating and maintaining the Building will include by way of example
rather than limitation, costs of snow and ice removal; maintenance of elevator
and elevator equipment if applicable, and parking lot and lighting equipment;
cleaning and trash removal; repair and maintenance of storm and sewer system;
electricity used in common areas, where applicable; repainting and maintenance
of signs and light standards; exterior painting, landscaping, materials and
services; and, insurance (general liability, loss of rent, fire and additional
hazard insurance, and other insurance as Landlord deems necessary) which benefit
all tenants in the Building. Notwithstanding the foregoing, costs of maintaining
and operating the Building will exclude capital improvements, leasing
improvements, and tenant improvement work. The first billing for any of these
escalation costs will be presented for payment in early 1997 and will be
calculated by taking 1998 expenses in excess of the 1997 Base Year Expenses.
Sums billed under this paragraph will be due and payable by Tenant within 20
days after receipt of bills from Landlord for the first occurring year, and are
to be paid monthly (estimated amount) for subsequent years.

In addition to the initial billing, Tenant will begin paying 1/12 of this amount
toward the l999 estimated escalation billing. This amount will then be adjusted
annually based upon an actual accounting of the completed year's experience.

All sums or some or any of them, may become due by reason of the failure of
tenant to comply with the terms and conditions of this Lease, and all damages,
costs and expenses Landlord may suffer or incur by reason of any default by
Tenant, and any damages to the demised premises caused by any act or omission of
Tenant, will be payable within fifteen (15) days after receipt of bills from
Landlord.

2. LATE CHARGE. If the Minimum Rent or any Additional Rent is not paid within
ten (10) days from the date same is due, Landlord, at its option, may charge a
late fee of five percent (5%) of the amount due.

3. INSURANCE. Tenant will obtain and keep in effect throughout the Term
insurance policy or policies, issued by any insurance carrier reasonably
satisfactory to Landlord, providing general comprehensive public liability
insurance against claims for personal injury (including death) and property
damage in amounts as stated on Page 1 of this Lease.

4. WAIVER OF SUBROGATION. Each party hereto waives any cause of action it might
have against the other party on account of any loss or damage insured against
under any insurance policy including without limitation liability insurance
policies (to the extent such loss or damage is recoverable under such insurance
policy) that covers the Building, the Leased Premises, Landlord's or Tenant's
fixtures, personal property, leasehold improvements or business, and which names
Landlord or Tenant, as the case may be, as a party insured. All insurance
policies maintained by Landlord or Tenant will, at such parties cost and
expenses, if any, contain provisions, waiving the carrier's rights of recovery
under subrogation or otherwise against the other party.

5. BUILDING SERVICES: MAINTENANCE.

(A) Landlord will provide, within professional standards on each item, the
following services and facilities:

(1) cleaning and maintenance of common areas in the building;

(2) Water and sewer service;

(3) Janitorial service (five business days per week);

(4) Landlord will undertake, at its sole cost and expense, any and
all repairs necessary to maintain the heating, plumbing, air conditioning and
electrical systems, as well as windows, floors (excluding carpeting) and all
other structural items which constitute a part of the Building and Leased
Premises and are installed or furnished by Landlord; provided, however, Landlord
will not be obligated to undertake any of such repairs until the expiration of a
reasonable period of time following notice from Tenant that such repair is
needed, and will use best efforts to resume service. In no event will Landlord
be obligated under this subparagraph to repair any damage caused by any act,
omission or negligence of Tenant or its employees, agents, invitees, licensees,
subtenants, or contractors.

(B) Landlord does not warrant the services and facilities provided for in
subparagraph (A) above will be free from slowdown, interruption or stoppage
pursuant to voluntary agreement by and between Landlord and governmental bodies
and regulatory agencies, or caused by the maintenance, repair, substitution,
renewal, replacement or improvements of any of the equipment, involved in the
furnishing of any such services or facilities, or caused by changes of services,
alterations,

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<PAGE> 3
strikes, lockouts, labor controversies, fuel shortages, accidents, acts of God
or the elements or any other cause beyond the reasonable control of Landlord;
and specifically, no such slowdown, interruption or stoppage will cause any
abatement of Rent or Additional Rent payable hereunder or in any manner or for
any purpose relieves Tenant from any of its obligations hereunder, and in no
event will Landlord be liable for damage to persons or property or be in default
hereunder as a result of such slowdown, interruption or stoppage. Landlord
agrees to use reasonable diligence to resume the affected service upon any
cessation of such slowdowns, interruption or stoppage.

(C) Except to the extent Landlord is obligated to undertake repairs as provided
hereinabove, Tenant will keep the Leased Premises and the fixtures contained
therein in good, neat and orderly condition, reasonable wear and tear excepted.

(D) Landlord will not be liable by reason of any injury to or interference with
Tenant's business arising from the making of any repairs, alterations, additions
or improvements to the Leased Premises or the Building or to any appurtenances
or equipment therein. It being understood, though, Landlord will cooperate with
Tenant and interfere as little as reasonably practicable with the conduct of
Tenant's business. There will be no abatement of Rent because of such repairs,
alterations, additions or improvements, until after the completion of fourteen
(14) business days from the original problem.

6. ALTERATIONS AFTER COMMENCEMENT OF LEASE. Tenant will not make or permit to be
made any alterations, improvements or additions to the Leased Premises without,
on each occasion, first presenting to Landlord plans and specifications therefor
and obtaining Landlord's prior written consent thereto, which consent will not
be unreasonably withheld. If Landlord will consent to such proposed alterations,
improvements and additions, Tenant will make the proposed alterations,
improvements and additions at Tenant's sole cost and expense; provided, however:
(i) all such alterations will be performed in a good and workmanlike manner, in
accordance with all applicable laws, ordinances, codes, rules and regulations,
including but not limited to the ADA Code; (ii) such alterations, improvements,
and additions will not impair the structural integrity of the Building or any
other improvements or reduce the value of the Leased Premises; (iii) Tenant will
take or cause to be taken all steps as required or permitted by law in order to
avoid the impositions of any mechanic's, laborer's or materialman's lien(s) upon
the Leased Premises or Building; and, (iv) the occupants of the Building and of
any adjoining real estate owned by Landlord will not be disturbed in any respect
with their use and occupancy by reason thereof. All alterations, improvements
and additions to the Leased Premises which are constructed, installed or
otherwise made by Tenant will be the property of Tenant until the expiration or
sooner termination of this Lease, at which time all such alterations,
improvements and additions will remain on the Leased Premises and become the
property of Landlord without payment therefor by Landlord, unless prior to the
termination of this Lease, Landlord will give notice to Tenant to remove the
same; in which event Tenant will remove such alterations, improvements and
additions, and repair and restore any damage to the Leased Premises caused by
the installation and removal thereof.

7. COMPLIANCE WITH LAWS; PERMITTED ACTIVITIES. Tenant, at its sole cost and
expense, will comply with all laws, ordinances and regulations of federal, state
and local authorities and with any direction of any public officer or officers,
which will impose any violation, order or duty upon Tenant with respect to the
Leased Premises or the use and occupancy thereof, including, but not limited to,
obtaining any and all licenses and permits required for the conduct of its
business within the terms and conditions of this Lease.

Tenant will not do or permit anything to be done in or about the Leased Premises
nor bring or keep anything therein which will in any way increase the existing
rate of fire or other insurance policy covering the Leased Premises or any part
thereof. In the event of any such increase of an existing rate of insurance, or
cancellation of any insurance policy, Tenant will bear the full cost of said
increase upon presentation by Landlord.

8. LANDLORD'S RIGHT TO ENTRY Landlord and persons authorized by Landlord may
enter the Leased Premises at all reasonable times for the purpose of making such
inspections, repairs, alterations to adjoining space, appraisals as Landlord may
require or for other reasonable purposes including, but not limited to,
exhibiting the Leased Premises to prospective purchasers, tenants and/or
mortgagees and enforcement of Landlord's rights under this Lease. Landlord will
not be liable for inconvenience to, or disturbance of Tenant by reason of any
such entry. Notwithstanding the foregoing, Landlord will use reasonable efforts,
during such entry to not unreasonably interfere with Tenant's use of the Leased
Premises, and will provide Tenant with advance notice, whenever possible.

9. DAMAGE BY FIRE OR OTHER CASUALTY. In the event of any damage or loss to
the Leased Premises by reason of fire or other casualty, Tenant will give
immediate

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<PAGE> 4
notice thereof to Landlord. If the Leased Premises are partially damaged or
destroyed by fire or other casualty, Landlord will notify Tenant within thirty
(30) days after the fire or casualty, whether or not the Leased Premises can be
restored within one hundred twenty (120) days from such notice. In the
Landlord's sole judgment, if the Leased Premises can be restored within one
hundred twenty (120) days, Landlord will restore the same at Landlord's expense
and will use its best efforts to complete restoration within said time period.
In the event the damage cannot be restored within one hundred twenty (120) days,
either party, by written notice to the other within five (5) days after receipt
of such notice, to be effective thirty (30) days after receipt of such notice,
may terminate this Lease and all obligations hereunder. Notwithstanding the
foregoing, in no event will Landlord be obligated to expend for any repairs or
restoration an amount in excess of the insurance proceeds recovered by Landlord
on account of such damage or destruction.

In the event of repair or restoration as herein provided, Minimum Rent and
Additional Rent will be abated equitably, in a manner proportionate with the
degree in which Tenant's use of the Leased Premises is impaired commencing from
the date of destruction and continuing during the period of such restoration.
Tenant will continue operation of its business in the Leased Premises during any
such period to the extent commercially reasonably practicable and the obligation
of Tenant hereunder to pay all other charges set forth herein will remain in
full force and effect. Tenant will not be entitled to any actual or
consequential damages or other compensation or damages from Landlord for loss of
the use of the whole or any part of the Leased Premises, or the Building which
forms a part of the Leased Premises, Tenant's personal property or any
inconvenience or annoyance occasioned by such damage or reconstruction.

Notwithstanding the foregoing to the contrary, if any such fire or other
casualty is as a result of the negligence or willful acts of Tenant, Tenant will
not have the right to terminate this Lease as aforesaid, and Tenant will, at
Tenant's sole cost and expense, promptly repair and restore the Leased Premises,
and any portion of the Building so damaged as a result of Tenant's conduct.

10. INDEMNIFICATION. Tenant will defend, indemnify and hold Landlord harmless
from and against any and all loss, cost, liabilities, penalties, damages,
expenses (including reasonable attorneys' fees) and judgments, which may be
imposed upon, incurred by, or asserted against Landlord by reason of any
violation by Tenant of the provisions of this Lease, or any injury to persons or
property of any nature and however caused, arising out of the use, occupancy and
control of the Leased Premises at any time during the Term of this Lease or any
extension thereof, unless caused by the willful act or gross negligence of
Landlord.

Landlord will defend, indemnify and hold Tenant harmless from and against any
and all loss, cost, liabilities, penalties, damages, expenses (including
reasonable attorneys' fees) and judgments, which may be imposed upon, incurred
by, or asserted against Tenant by reason of any violation by Landlord of the
provisions of this Lease, or any injury to persons or property of any nature and
however caused, arising out of the use, occupancy and control of the Leased
Premises at any time during the Term of this Lease or any extension thereof,
unless caused by the willful act or gross negligence of Tenant.

11. CONDEMNATION.

(A) If more than twenty-five percent (25%) of the floor area of the Leased
Premises is taken or condemned for a public or quasi-public use (a sale in lieu
of condemnation to be deemed a taking or condemnation for purposes of this
Lease), this Lease will at either party's option, upon written notice to the
other within fifteen (15) days of the date of such taking or condemnation,
terminate as of the date the right of possession in the Leased Premises or
portion thereof terminates, and the Minimum Rent and Additional Rent herein
reserved will be apportioned and paid in full by Tenant to Landlord to that date
and all Minimum Rent and Additional Rent prepaid for periods beyond that date
will forthwith be repaid by Landlord to Tenant and neither party will thereafter
have any liability hereunder.

(B) If less than twenty-five percent (25%) of the floor area of the Leased
Premises is taken, or if neither Landlord nor Tenant has elected to terminate
this Lease pursuant to subparagraph (A), Minimum Rent and Additional Rent will
be equitably reduced in proportion to the area of the Leased Premises which has
been taken for the balance of the Term.

(C) If all or part of the Leased Premises are taken or condemned, Landlord will
be entitled to all compensation awarded upon such condemnation or taking, and
Tenant will have no claim thereto, and Tenant hereby expressly waives,
relinquishes and releases to Landlord any claim for damages or other
compensation to which Tenant might otherwise be entitled because of any such
taking or limitation of the leasehold estate hereby created, and irrevocably
assigns and transfers to Landlord

-4-
<PAGE> 5
any right to compensation or damages to which Tenant may be entitled by reason
of the condemnation of all or a part of the Leased Premises, or the leasehold
estate. Notwithstanding the foregoing, Tenant will have the right to make a
claim for removal and moving expenses and business dislocation damages which may
be separately payable to tenants in general under New Jersey law, provided such
payment does not reduce the award otherwise payable to Landlord.

12. MECHANICS LIENS. Tenant will promptly pay all contractors and materialmen
for work ordered by Tenant or performed for Tenant's account, so as to minimize
the possibility of a lien attaching to the Leased Premises. In the event of any
such lien is created or filed, Tenant will bond against or discharge the same
within ten (10) days after written request by Landlord. Nothing herein contained
will be construed as a consent on the part of the Landlord to subject the fee or
the estate of Landlord to liability under the Mechanics Lien Law of New Jersey
for work ordered other than by Landlord, it being expressly understood that
Landlord has not consented to any such work and Landlord's estate will not be
subject to such liability.

13. LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS. If Tenant will any time fail
to pay any charge or imposition or perform any other act on its part to be
performed, then Landlord, after ten (10) days' written notice to Tenant and
without waiving or releasing Tenant from any obligations hereunder, may pay such
charge or sum of money or make any other payment or perform any other act on
Tenant's part to be made or performed, and may enter upon the Leased Premises
for any such purpose, and take all such action thereon as may be necessary
therefor. All sums so paid by Landlord and all costs and expenses incurred by
Landlord in connection with the performance of any such act, together with
interest thereon at a rate which is one percent (1%) per annum higher than "New
York Prime" as announced from time to time in the Wall Street Journal or similar
publication, from the respective dates of Landlord's making of each such payment
or incurring of each such cost and expense, will constitute Additional Rent
payable by Tenant thereof or otherwise as in the case of default in the payment
of Minimum Rent or Additional Rent reserved in this Lease.

14. SUBORDINATION: RIGHTS OF MORTGAGEE. This Lease will be subject and
subordinate at all times to the lien of any mortgages and/or ground leases now
or hereafter placed upon the Leased Premises or Building which forms a part of
the Leased Premises, without the necessity of any further instrument or act on
the part of Tenant to effectuate such subordination. Tenant agrees to execute
and deliver, upon demand, such further instrument or instruments evidencing such
subordination of this Lease to the lien of any such mortgage and/or ground lease
and such further instrument or instruments of attornment as will be desired by
any mortgagee or proposed mortgagee or by any other person.

15. TENANT'S CERTIFICATE. Tenant agrees at any time and from time-to-time,
within five (5) days after Landlord's written request, to execute, acknowledge
and deliver to Landlord a written instrument in recordable form certifying the
Lease is unmodified and in full force and effect (or if there have been
modifications, it is in full force and effect as modified and stating the
modifications); the dates to which Minimum Rent, Additional Rent, or other
charges have been paid in advance, if any; whether or not, to the best knowledge
of the signer of such certificate, Landlord is in default in the performance of
any covenant, agreement or condition contained in the Lease and, if so,
specifying each such default of which the signer may have knowledge, and such
other information as Landlord may request. It is intended that any such
certification and statement delivered pursuant to this Paragraph 15 may be
relied upon by any prospective purchaser or any mortgagee of the Leased Premises
or Building or any part thereof or interest thereon or any assignee of
Landlord's interest in this Lease.

16. DEFAULTS BY Landlord will provide Tenant advance written notice in the event
of any default. Tenant will have ten (10) days to cure in the event of a
monetary default, and thirty (30) days to cure in the event of a non-monetary
default. Any one or more of the following will constitute a default by Tenant
hereunder, if Tenant during the original Term of this Lease, or any renewal or
extension thereof:

(A) Does not pay in full within ten (10) days after notice is given of all
Minimum Rent, Additional Rent, expenses and charges under this Lease; or,

(B) Violates, fails to perform, or otherwise breaches any term, covenant or
condition of this Lease and same is not cured after notice thereof; or,

(C) Permits leasehold estate or any property of Tenant to be exposed for sale or
judgment or execution process by sheriff, marshall, or constable; or,

(D) Becomes insolvent, makes an assignment for the benefit of creditors, is
adjudicated, files a bill in equity, otherwise initiates proceedings for the

-5-
<PAGE> 6
appointment of a receiver of its assets, files a voluntary petition under the
provisions of the United States Bankruptcy Court or under the insolvency laws of
any state, which involuntary petition is not discharged within sixty (60) days
of filing. In such instances, Landlord may immediately have the rights set forth
in Section 17 below, without any further notice; or,

(E) Records or attempts to record this Lease in any office of public
recording; or,

(F) Assigns or sublets this Lease, except as permitted herein; or,

(G) Fails to move into or take possession of the Leased Premises upon
commencement of the Term.

17. REMEDIES OF LANDLORD. This Lease and term of the estate hereby granted are
subject to the conditional limitation that in the event of a default by Tenant,
then, at the sole option of Landlord, Landlord may in addition to all other
rights and remedies available to it by law or equity or by any other provision
of this Lease, at any time pursue once or more often any or all of the following
remedies:

(A) Acceleration of Rent: Minimum Rent for the entire balance of the Term hereof
and any Additional Rent, expenses and charges payable under the Lease, together
with all costs and expenses, will become immediately due and payable as if by
the terms and provisions of this Lease said balance of Minimum Rent, Additional
Rent and other expense and charges and every part thereof were on that date
payable in advance; and,

(B) Termination: Whether or not Landlord has accelerated Minimum Rent and
Additional Rent, this Lease and the Term hereby created will, at the sole option
of Landlord and without waiver of any other rights of Landlord contained herein,
terminate and become absolutely void without any right on the part of Tenant to
save the forfeiture by payment of any sum due or by the performance of any
provisions of this Lease and Tenant will thereupon quit and surrender possession
of the Leased Premises to Landlord in the condition required herein and Tenant
will remain liable to Landlord as herein required; and,

(C) Suit for Possession/Reletting of Leased Premises: In any case in which this
Lease will have been terminated, or in any case in which Landlord will have
elected to accelerate the Minimum Rent and/or Additional Rent and any portion of
such sums will remain unpaid, Landlord may, without further notice, enter upon
and repossess the Leased Premises, by due process of law, by summary
proceedings, ejectment or otherwise, and may dispossess Tenant and remove Tenant
and all other persons and property from the Leased Premises and may have, hold
and enjoy the Leased Premises and rents and profits therefrom. Landlord may, in
its own name, as agent for Tenant, if this Lease has not been terminated, or in
its own behalf, if this Lease has been terminated, relet the Leased Premises, or
any part thereof, for such term or terms (which may be greater or less than the
period which would otherwise have constituted the balance of the Term) and on
such terms (which may include concessions or free Minimum Rent) as Landlord in
its sole discretion and good faith may determine. Landlord may, in connection
with any such reletting, cause the Leased Premises to be decorated, altered,
divided, consolidated with other space or otherwise changed or prepared for
reletting. No reletting will be deemed a surrender and acceptance of the Leased
Premises.

(D) Measure of Damages: Tenant will, with respect to all periods of time up to
and including the 'expiration of the Term (or what would have been the
expiration date in the absence of default or breach) remain liable to Landlord
as follows:

(1) In the event of termination of this Lease on account of Tenant's
default or breach, Tenant will remain liable to Landlord as agreed for
liquidated damages (and not as a penalty) an amount equal to the Minimum Rent,
Additional Rent and other charges payable under this Lease by Tenant as if this
Lease were still in effect, less the net proceeds of any reletting actually
collected, after deducting all costs incident thereto (including, without
limitation, all repossession costs, brokerage and management commissions,
operating and legal expenses and fees, alteration costs and expenses of
preparation for reletting), and to the extent such liquidated damages will not
have been recovered by Landlord by virtue of payment by Tenant of any
accelerated Minimum Rent and/or Additional Rent (but without prejudice to the
right of Landlord to demand and receive such Minimum Rent and/or Additional
Rent), such liquidated damages will be payable to Landlord monthly upon
presentation to Tenant of a bill for the amount due.

(2) In the event and so long as this Lease will not have been terminated
after default or breach by Tenant, Minimum Rent, Additional Rent and all other
charges payable under this Lease will be reduced by the net proceeds of any
reletting by Landlord (after deducting all costs incident thereto as above set
forth) and by any portion of the accelerated Minimum Rent, Additional Rent and
other

-6-
<PAGE> 7
charges paid by Tenant to Landlord, and any amount due to Landlord will be
payable monthly upon presentation to Tenant of a bill for the amount due.

(E) No Responsibility to Relet: Landlord will in no event be responsible or
liable for any failure to relet the Leased Premises, or any part thereof, or for
any failure to collect any Minimum Rent, Additional Rent or other sum due upon a
reletting. However, Landlord agrees to use best efforts to relet the Leased
Premises, and to mitigate any losses.

(F) Remedies Cumulative: All of the remedies herein given to Landlord and all
rights and remedies given to Landlord by law and equity will be cumulative and
concurrent. It is understood and agreed that termination of this Lease or the
taking or recovering of the Leased Premises will not deprive Landlord of any of
Landlord's remedies or actions against Tenant for Minimum Rent and Additional
Rent due at the time or which, under terms hereof, would in the future become
due as if there had been no termination, nor will the bringing of any action for
Minimum Rent, Additional Rent, or other charges, or breach of covenant, or
resorting to any other remedy herein provided the recovery of Minimum Rent or
Additional Rent be construed as a waiver of the right to obtain possession of
the Leased Premises.

18. LIMITED LIABILITY OF LANDLORD. Tenant agrees the obligations of Landlord
under and with respect to this Lease do not constitute personal obligations of
Landlord, or any of its principals, and shall not create or involve any claim
against, or personal liability on the part of any of them, and Tenant shall look
solely to Landlord's interest in the Leased Premises for satisfaction of any
liability of Landlord in respect to this Lease.

19. SECURITY DEPOSIT. Tenant will pay Landlord a sum as indicated on the first
page of Lease as collateral security for payment of Minimum Rent and Additional
Rent and for the faithful performance by Tenant of all other terms, covenants
and conditions of this Lease. The amount of said deposit (less such portion
thereof as Landlord will have retained to make good any default by Tenant with
respect to any of Tenant's aforesaid obligations) will be repaid to Tenant,
without, interest, within sixty (60) days after Tenant provides landlord with
written request to return said Security Deposit and Landlord has inspected the
Leased premises after Tenant has vacated same; provided, however, Tenant will
have made all such payments and performed all such terms, covenants and
conditions of this Lease. Upon any default by Tenant hereunder, all or part of
said deposit may, at any time and in Landlord's sole discretion and without
prejudice to any rights Landlord has hereunder, be applied on account of such
default, and thereafter Tenant will restore the resulting deficiency in said
deposit within ten (10) days notice of Landlord's application. Tenant's failure
to restore said deficiency will constitute a default hereunder. In the event of
any sale or transfer of Landlord's interest in the Building, Landlord will have
the right to transfer the security deposit to the purchaser or transferee and
upon such transfer Tenant will look only to the new landlord for the return of
the security deposit and Landlord will thereupon be released from all liability
for the return of the security deposit.

20. ASSIGNMENT OR SUBLEASE BY TENANT. Tenant will not assign this Lease or
sublease all or any part of the Leased Premises without Landlord's prior written
consent, excluding wholly owned subsidiaries of the Tenant, which will not be
unreasonably withheld, it being understood and agreed however it will not be
unreasonable for Landlord to withhold its consent if the reputation, financial
responsibility, or business of a proposed assignee or subtenant is
unsatisfactory to Landlord. Any sum received by Tenant as a result of such
subletting or assignment which exceeds the total sums Tenant is obligated to pay
Landlord under this Lease will be payable to Landlord as additional rent. The
consent by Landlord to sublet or assignment will not constitute consent to any
further sublease or assignment. Any subleassee or assignee must agree to be
bound by all of the terms and provisions of this Lease. In addition, any
permitted assignment or subleasing will not relieve Tenant from its liability
under the terms and conditions of this Lease. Tenant will give Landlord a copy
of the sublease, both prior to, and upon execution thereof.

21. SUCCESSORS. Except as otherwise provided, all rights and liabilities
herein given to or imposed upon the respective parties will extend to and be
binding upon their heirs, legal representatives, successors and assigns, if
permitted under Section 20.

22. WAIVER. Failure of Landlord to insist upon strict performance of any
of the covenants or conditions of this Lease or to exercise any option herein
conferred in any one or more instances. will not be construed as a waiver or
relinquishment for the future of any such covenants, conditions or options
but the same will be and remain in full force and effect.

23. ENTIRE AGREEMENT. This Lease sets forth all the terms, covenants and
conditions between Landlord and Tenant concerning the Leased Premises and
there are no terms, covenants and conditions, either oral or written, between
the parties

-7-
<PAGE> 8
other than herein set forth. Except as otherwise provided1 no subsequent
alteration, amendment, change or addition to this Lease will be binding upon
Landlord or Tenant unless reduced to writing and signed by them.

24. LANDLORD'S COVENANT OF OUIET ENJOYMENT. Landlord covenants and agrees that,
upon Tenant's payment of Minimum Rent and any Additional Rent and observing and
performing all of the terms, covenants and conditions on Tenant's part to be
observed and performed, Tenant may peaceably and quietly enjoy the Leased
Premises for the Term of this Lease, without hindrance or molestation by anyone
claiming by or though Landlord; subject, nevertheless to the terms, covenants
and conditions of this Lease.

26. NO RECORDATION. Tenant will not record or attempt to record this Lease or
any memorandum thereof in any office of public recording.

27. ENVIRONMENTAL CONCERNS.

(A) Other than normal office storage, Tenant will not store, handle, spill or
discharge any hazardous or toxic substances or wastes at, on or about the Leased
Premises or the Building, and will indemnify, defend and save harmless the
Landlord from all fines, suits, procedures, claims, actions, damages and
liability of any kind (including attorneys' fees) arising out of or in any way
connected with the storage or handling by the Tenant of, or any spills or
discharges by the Tenant of, hazardous or toxic substances or wastes at, on or
about the Leased Premises or the Building during the term of this Lease.
Landlord to be responsible for any preexisting conditions within the Building,
and, to the best of Landlord's knowledge, assures Tenant there are no known
hazardous materials, including asbestos, within the Building.

(B) Tenant's obligations and liabilities under this paragraph will survive the
term of this Lease, and will continue so long as Landlord may remain responsible
for any spills or discharges of hazardous substances or wastes at the Leased
Premises which occur during the term of this Lease. Tenant's failure to abide by
the terms of this paragraph will be restrainable by injunction.

28. SIGNS. Landlord will obtain all door and directory signs for Tenant after
Tenant has indicated in writing to Landlord how each sign should read. Landlord
will bill Tenant for all signage Tenant so desires once it has been received and
installed. All signs will conform with all applicable municipal ordinances and
regulations. Should Tenant request further signage over and above the customary
signage at said location, Landlord agrees to assist Tenant with any applications
of any municipal filings, etc., to be born by Tenant herein. No sign will be
installed by Tenant without prior approval of Landlord herein.

29. NOTICE OF TERMINATION. It is hereby mutually agreed that either party hereto
may terminate this Lease at the end of said term or option term or any extension
by giving the other party written notice thereof at least ninety (90) days prior
thereto. If such written notice is not given by either party, this Lease will
continue upon the same terms and conditions in force except that Minimum Rent
will be increased in the manner set forth below for a period of one (1) year and
so on from year to year unless or until terminated by either party hereto,
giving the other party a ninety (90) day written notice for the vacation of the
Leased Premises before the expiration of the then current term.

In the event Tenant will give notice, as stipulated above, of its intention to
reuse the Leased Premises at the end of the present term or any renewal or
extension thereof, and will fail or refuse so to vacate the same on the date
designated by such notice, Landlord, at its option, may treat Tenant as a
holdover tenant, in which event Tenant will pay Landlord (I) as agreed
liquidation damages (and not as a penalty) for such wrongful retention, an
amount equal to twice the Minimum Rent and twice the Additional Rent then in
effect for the time Tenant thus remains in possession, and (II) all other
damages, costs and expenses sustained by Landlord by reason of Tenant's wrongful
retention. If Tenant remains in possession with the consent of Landlord all the
terms and conditions of this Lease will continue thereafter with full force
precisely as if such notice had not been given, and Minimum Rent will be
adjusted as set forth in this Section.

30. UTILITIES & SERVICES. Tenant herein will be solely responsible for payment
of all utilities used within the Leased Premises with the exception of water and
sewer and will make all arrangements for activating same.

31. TENANT IMPROVEMENTS. Landlord to construct suite per floorplan attached
hereto, paint interior walls, clean and/or replace existing carpet as agreed,
and present Tenant with a clean, fully functioning business office.

32. OPTION TO RENEW. Tenant shall have the right, at its option, to renew the
Term for one (1) additional period of three (3) years (the "Renewal Term"), on
all of the same conditions as are in force immediately prior to the expiration
of the Term, except that the Minimum Rent payable during the Renewal Term shall
be:

-8-
<PAGE> 9
9/1/00 - 8/31/03 --- $22,380.00 per annum --- $1,865.00 per month

Tenant shall only have such option to renew the Term if Tenant at the time
of Tenant's Notice (as hereinafter defined) and at the end of the Term is not in
default under any of the terms, covenants, provisions, agreements and conditions
of this Lease. Tenant shall exercise its option of renewal by giving Landlord
notice of such notice of such exercise ("Tenant's Notice") at least ninety (90)
days prior to the expiration of the Term. Tenant understands and agrees that
time, whenever mentioned is of the essence.

33. EARLY TERMINATION. Tenant shall have the right, at its option, to terminate
this Lease upon completion of the second year, by providing the Landlord with
ninety (90) days written notice in advance of 8/31/00, and with a penalty equal
to 50% of the costs of the Tenant Improvements notes in Paragraph 31. Tenant may
relocate to larger space within any building managed by Needleman Management
Company, Inc. at any time during the Lease Term, at no penalty or obligation to
this Lease.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands and
seals the day and year first above written.

LANDLORD: TALL OAKS ASSOCIATES. LP

BY: _______________________________ DATE:________________

TENANT: AMERIQUEST SYSTEMS GROUP

BY: _______________________________ DATE:________________

-9-

<PAGE> 1
Exhibit 21.01

---------------------------------
AMERIQUEST TECHNOLOGIES, INC.
A DELAWARE CORPORATION
---------------------------------
|
---------------------------
| |
-------------------------- --------------------------
AMERIQUEST/KENFIL INC. AAG, INC.
A DELAWARE CORPORATION A CALIFORNIA CORPORATION
-------------------------- --------------------------

<PAGE> 1
EXHIBIT 23.01

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

As independent certified public accountants, we hereby consent to the
incorporation of our report dated December 16, 1997 (except with respect to the
matters discussed in Note 12, as to which the date is January 9, 1998),
included in this Form 10-K, into the Company's previously filed Registration
Statements File Nos. 33-23809, 33-85752, 33-74034 and 333-2745.

ARTHUR ANDERSEN LLP

Miami, Florida
January 12, 1998

<PAGE> 1
Exhibit 24.01

APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR

I hereby authorize, as a director of AmeriQuest Technologies, Inc.
(the "Corporation"), the filing with the Securities and Exchange Commission of
the Corporation's Annual Report on Form 10-K for the fiscal year ended September
30, 1997 (the "Annual Report"), and any and all amendments thereto as management
deems advisable in response to SEC comments or otherwise, inasmuch as the Annual
Report is deemed to be incorporated by reference in the Corporation's
Registration Statements on Forms S-3, S-4 and S-8.

I hereby consent to the filing by the Corporation of such Annual
Report, and to reference to my name in the Annual Report as a "Director" of the
Corporation. I hereby appoint Alexander C. Kramer, Jr. and Jon Jensen as my
attorneys-in-fact with power to either of them to sign any and all amendments or
documents required to complete any amendments to the Annual Report filed on
behalf of the Corporation.

DATED the 21st day of November, 1997.

/s/ Dr. Harry Krischik
----------------------------------
Dr. Harry Krischik
<PAGE> 2
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR

DATED the 21st day of November, 1997.

/s/ MANFRED H. GUENZEL
----------------------------------
Manfred H. Guenzel
<PAGE> 3
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR

DATED the 21st day of November, 1997.

/s/ Richard Obermaier
----------------------------------
Richard Obermaier
<PAGE> 4
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR

DATED the 21st day of November, 1997.

/s/ Anton Roedl
----------------------------------
Anton Roedl
<PAGE> 5
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR

DATED the 4th day of November, 1997.

/s/ Marc L. Werner
----------------------------------
Marc L. Werner
<PAGE> 6
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR

DATED the 1st day of November, 1997.

/s/ J. R. Dick Iverson
----------------------------------
J. R. Dick Iverson

<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the balance
sheet and income statement and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,680
<SECURITIES> 0
<RECEIVABLES> 9,006
<ALLOWANCES> 0
<INVENTORY> 7,066
<CURRENT-ASSETS> 24,687
<PP&E> 1,272
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,079
<CURRENT-LIABILITIES> 49,471
<BONDS> 0
0
30,000
<COMMON> 669
<OTHER-SE> 111,145
<TOTAL-LIABILITY-AND-EQUITY> 26,079
<SALES> 218,877
<TOTAL-REVENUES> 218,877
<CGS> 203,199
<TOTAL-COSTS> 203,199
<OTHER-EXPENSES> 53,534
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,455
<INCOME-PRETAX> (41,311)
<INCOME-TAX> 0
<INCOME-CONTINUING> (41,311)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,311
<EPS-PRIMARY> (0.63)
<EPS-DILUTED> (0.63)

</TABLE>