LOAN AND SECURITY AGREEMENT


                                   by and between


                                MULTIGRAPHICS, INC.,


                                  formerly known as


                               AM INTERNATIONAL, INC.


                                         and


                            FOOTHILL CAPITAL CORPORATION


                              DATED AS OF MAY 30, 1997





                                  TABLE OF CONTENTS


                                                                       Page


          1. DEFINITIONS AND CONSTRUCTION.................................4
               1.1. Definitions...........................................4
               1.2. Accounting Terms.....................................17
               1.3. Code.................................................17
               1.4. Construction.........................................17
               1.5. Schedules and Exhibits...............................18

          2. LOAN AND TERMS OF PAYMENT.................................  18 
               2.1. Revolving Advances.................................  18 
               2.2. Letters of Credit.................................   19 
               2.3. Intentionally Omitted................................21
               2.4. Intentionally Omitted................................21
               2.5. Overadvances.........................................21
               2.6. Interest  and  Letter  of  Credit  Fees:    Rates,
                    Payments, and Calculations...........................21
               2.7. Collection of Accounts...............................23
               2.8. Crediting Payments; Application of Collections.......23
               2.9. Designated Account.................................  24   
               2.10.  Maintenance  of  Loan  Account;  Statements   of
                    Obligations..........................................24
               2.11. Fees................................................24

                                         





          3. CONDITIONS; TERM OF AGREEMENT...............................25
               3.1. Conditions Precedent  to the  Initial Advance  and
                    Letter of Credit.....................................25
               3.2. Conditions  Precedent  to  all  Advances  and  all
                    Letters of Credit....................................26
               3.3. Condition Subsequent.................................27
               3.4. Term.................................................27
               3.5. Effect of Termination................................27
               3.6. Early Termination by Borrower........................27
               3.7. Termination Upon Event of Default....................28

          4. CREATION OF SECURITY INTEREST...............................28
               4.1. Grant of Security Interest...........................28
               4.2. Negotiable Collateral................................28
               4.3. Collection of  Accounts, General Intangibles,  and
                    Negotiable Collateral................................28
               4.4. Delivery of Additional Documentation Required........29
               4.5. Power of Attorney....................................29
               4.6. Right to Inspect.....................................29

          5. REPRESENTATIONS AND WARRANTIES..............................30
               5.1. No Encumbrances......................................30
               5.2. Eligible Accounts....................................30
               5.3. Eligible Inventory...................................30
               5.4. Equipment............................................30
               5.5. Location of Inventory and Equipment..................30
               5.6. Inventory Records....................................30
               5.7. Location of Chief Executive Office; FEIN.............31
               5.8. Due Organization and Qualification; Subsidiaries.....31
               5.9. Due Authorization; No Conflict.......................31
               5.10. Litigation..........................................32
               5.11. No Material Adverse Change..........................32
               5.12. Solvency............................................32
               5.13. Employee Benefits...................................32
               5.14. Environmental Condition.............................33
               5.15. Subsidiary Activities...............................33
               5.16. Patents and Trademarks..............................33

          6. AFFIRMATIVE COVENANTS.......................................33
               6.1. Accounting System....................................33
               6.2. Collateral Reporting.................................33
               6.3. Financial Statements, Reports, Certificates..........34
               6.4. Tax Returns..........................................35
               6.5. Guarantor Reports....................................35
               6.6. Returns..............................................36
               6.7. Intentionally Omitted................................36
               6.8. Maintenance of Equipment.............................36
               6.9. Taxes................................................36
               6.10. Insurance...........................................36
               6.11. No Setoffs or Counterclaims.........................38
               6.12. Location of Inventory and Equipment.................38
               6.13. Compliance with Laws................................38
               6.14. Employee Benefits...................................38
               6.15. Leases..............................................39
               6.16. Notice of Initial Advance...........................39
               6.17. Change Name.........................................39





          7. NEGATIVE COVENANTS..........................................39
               7.1. Indebtedness.........................................40
               7.2. Liens................................................40
               7.3. Restrictions on Fundamental Changes..................40
               7.4. Disposal of Assets...................................40
               7.5. Change Corporate Structure...........................41
               7.6. Guarantee............................................41
               7.7. Nature of Business...................................41
               7.8. Prepayments and Amendments...........................41
               7.9. Change of Control....................................41
               7.10. Consignments........................................41
               7.11. Distributions.......................................41
               7.12. Accounting Methods..................................41
               7.13. Investments.........................................42
               7.14. Transactions with Affiliates........................42
               7.15. Suspension..........................................42
               7.16. Intentionally Omitted...............................42
               7.17. Use of Proceeds.....................................42
               7.18. Change in Location of Chief Executive Office........42
               7.19. No Prohibited Transactions Under ERISA..............42
               7.20. Financial Covenants.................................43
               7.21. Capital Expenditures................................44
               7.22. Subsidiary Activities...............................44

          8. EVENTS OF DEFAULT...........................................44

          9. FOOTHILL'S RIGHTS AND REMEDIES..............................46
               9.1. Rights and Remedies..................................46
               9.2. Remedies Cumulative..................................48

          10. TAXES AND EXPENSES.........................................48

          11. WAIVERS; INDEMNIFICATION...................................48
               11.1. Demand; Protest; etc................................48
               11.2. Foothill's Liability for Collateral.................48
               11.3. Indemnification.....................................48

          12. NOTICES....................................................49

          13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.................50

          14. DESTRUCTION OF BORROWER'S DOCUMENTS........................50

          15. GENERAL PROVISIONS.........................................50
               15.1. Effectiveness.......................................50
               15.2. Successors and Assigns..............................50
               15.3. Section Headings....................................51
               15.4. Interpretation......................................51
               15.5. Severability of Provisions..........................51
               15.6. Amendments in Writing...............................51
               15.7. Counterparts; Telefacsimile Execution...............51
               15.8. Revival and Reinstatement of Obligations............52
               15.9. Integration.........................................52
               15.10. Confidentiality....................................52
                               
                               SCHEDULES AND EXHIBITS



          Schedule E-1   Eligible Inventory Locations

          Schedule P-1   Permitted Liens

          Schedule 2.6   Business Plan

          Schedule 5.8   Subsidiaries

          Schedule 5.13  ERISA Benefit Plans

          Schedule 5.14  Environmental Matters

          Schedule 6.12  Location of Inventory and Equipment

          Schedule 7.1        Indebtedness

          Schedule 7.3        Stock Split

          Schedule 7.17       Existing Letters of Credit



          Exhibit C-1    Form of Compliance Certificate

                             LOAN AND SECURITY AGREEMENT


                    THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), is
          entered into  as  of  May  30,  1997,  between  FOOTHILL  CAPITAL
          CORPORATION, a California corporation ("Foothill"), with a  place
          of business located at 11111 Santa Monica Boulevard, Suite  1500,
          Los  Angeles,  California  90025-3333  and  MULTIGRAPHICS,  INC.,
          formerly known as AM INTERNATIONAL, INC., a Delaware  corporation
          ("Borrower"), with  its chief  executive  office located  at  431
          Lakeview Court, Mount Prospect, Illinois 60056.

                    The parties agree as follows:

          1.   DEFINITIONS AND CONSTRUCTION.

               1.1. Definitions.

                    As used in  this Agreement, the  following terms  shall
          have the following definitions:

                    "Account Debtor" means  any Person  who is  or who  may
          become obligated under,  with respect to,  or on  account of,  an
          Account.

                    "Accounts" means all  currently existing and  hereafter
          arising  accounts,  contract  rights,  and  all  other  forms  of
          obligations owing to Borrower arising out of the sale or lease of
          goods or the rendition of  services by Borrower, irrespective  of
          whether earned by performance, and any and all credit  insurance,
          guaranties, or security therefor.

                    "Advances" has the meaning set forth in Section 2.1(a).
                                                                          
                    "Affiliate" means, as applied to any Person, any  other
          Person who directly or indirectly controls, is controlled by,  is
          under common control  with or is  a director or  officer of  such
          Person.  For  purposes of  this definition,  "control" means  the
          possession, directly or indirectly, of the  power to vote 10%  or
          more of  the  securities having  ordinary  voting power  for  the
          election of directors or the direct  or indirect power to  direct
          the management and policies of a Person.

                    "Agreement" has the meaning  set forth in the  preamble
          hereto.

                    "Authorized Person" means any officer or other employee
          of Borrower.

                    "Average Unused  Portion of  Maximum Revolving  Amount"
          means, as of any date of determination, (a) the Maximum Revolving
          Amount, less (b)  the sum  of (i)  the average  Daily Balance  of
          Advances that were outstanding  during the immediately  preceding
          month, plus (ii) the average Daily Balance of the undrawn Letters
          of Credit that were outstanding during the immediately  preceding
          month.

                    "Bankruptcy Code"  means the  United States  Bankruptcy
          Code (11 U.S.C.  S 101 et seq.), as  amended, and  any successor
          statute.

                    "Benefit Plan"  means  a  "defined  benefit  plan"  (as
          defined in  Section 3(35) of  ERISA)  for  which  Borrower,  any
          Subsidiary of  Borrower,  or  any ERISA  Affiliate  has  been  an
          "employer" (as defined in Section 3(5) of ERISA) within the past
          six years.

                    "Borrower" has the meaning set forth in the preamble to
          this Agreement.

                    "Borrower's Books" means  all of  Borrower's books  and
          records including:  ledgers; records indicating, summarizing,  or
          evidencing  Borrower's  properties   or  assets  (including   the
          Collateral)  or   liabilities;   all  information   relating   to
          Borrower's business operations  or financial  condition; and  all
          computer programs, disk or tape files, printouts, runs, or  other
          computer prepared information.

                    "Borrowing Base" has the  meaning set forth in  Section
          2.1(a).

                    "Business Day" means  any day that  is not a  Saturday,
          Sunday, or other day  on which national  banks are authorized  or
          required to close.

                    "Change of Control" shall be deemed to have occurred at
          such time  as  a  "person" or  "group"  (within  the  meaning  of
          Sections 13(d) and  14(d)(2) of  the Securities  Exchange Act  of
          1934), other than  any of Apollo  Advisors, L.P.; Lion  Advisors,
          L.P.; AIF II,  L.P.; or any  of its  Affiliates; BEA  Associates;
          State  of  Wisconsin  Investment  Board;  Fidelity  Bankers  Life
          Insurance Company; Hellmold Associates,  Inc.; and Trust  Company
          of the West; or  any of the Affiliates  of any of the  foregoing,
          becomes the "beneficial  owner" (as defined  in Rule 13d-3  under
          the Securities Exchange Act of 1934), directly or indirectly,  of
          more than 20% of the total  voting power of all classes of  stock
          then outstanding of Borrower entitled to vote in the election  of
          directors.

                    "Closing Date" means the date of this Agreement.

                    "Code" means the California Uniform Commercial Code.

                    "Collateral" means each of the following:

                    (a)  the Accounts,

                    (b)  Borrower's Books,

                    (c)  the Equipment, other than leased Equipment to  the
          extent  that  the  applicable  lease  prohibits  Liens  on   such
          property,

                    (d)  the General Intangibles,

                    (e)  the Inventory,

                    (f)  the Negotiable Collateral,

                    (g)  the Real Property Collateral,

                    (h)  any money, or other assets of Borrower that now or
          hereafter come  into  the  possession,  custody,  or  control  of
          Foothill, and

                    (i)  the proceeds  and  products, whether  tangible  or
          intangible, of  any  of  the  foregoing,  including  proceeds  of
          insurance covering any or all of the Collateral, and any and  all
          Accounts,  Borrower's  Books,  Equipment,  General   Intangibles,
          Inventory, Negotiable  Collateral,  money, deposit  accounts,  or
          other tangible or  intangible property resulting  from the  sale,
          exchange,  collection,  or  other  disposition  of  any  of   the
          foregoing, or any  portion thereof or  interest therein, and  the
          proceeds thereof.

                    "Collateral Access Agreement" means a landlord  waiver,
          mortgagee waiver, bailee letter,  or acknowledgment agreement  of
          any warehouseman, processor, lessor,  consignee, or other  Person
          in possession  of,  having  a Lien  upon,  or  having  rights  or
          interests in the Equipment  or Inventory, in  each case, in  form
          and substance reasonably satisfactory to Foothill.

                    "Collections"   means   all   cash,   checks,    notes,
          instruments, and  other items  of payment  (including,  insurance
          proceeds, proceeds  of  cash  sales,  rental  proceeds,  and  tax
          refunds).
                                                                           

                    "Compliance   Certificate"    means    a    certificate
          substantially in the  form of Exhibit  C-1 and  delivered by  the
          chief accounting officer of Borrower to Foothill.

                    "Consolidated Current Assets" means, as of any date  of
          determination, the  aggregate amount  of  all current  assets  of
          Borrower that would, in accordance with GAAP, be classified on  a
          balance sheet as current assets.

                    "Consolidated Current  Liabilities"  means, as  of  any
          date of  determination,  the  aggregate  amount  of  all  current
          liabilities of Borrower that would,  in accordance with GAAP,  be
          classified on  a  balance  sheet as  current  liabilities.    For
          purposes of this definition, all Advances outstanding under  this
          Agreement shall  be  deemed  to be  current  liabilities  without
          regard to whether they would be deemed to be so under GAAP.

                    "Daily Balance" means the amount of an Obligation  owed
          at the end of a given day.

                    "deems itself  insecure" means  that the  Person  deems
          itself insecure in accordance with the provisions of Section 1208
          of the Code.

                    "Default" means an event,  condition, or default  that,
          with the giving of notice, the passage of time, or both, would be
          an Event of Default.

                    "Designated Account" means  account number 00193498  of
          Borrower maintained with Borrower's  Designated Account Bank,  or
          such other deposit account of Borrower (located within the United
          States) which has been  designated, in writing  and from time  to
          time, by Borrower to Foothill.

                    "Designated Account Bank" means Bankers Trust  Company,
          whose office is located at One Bankers Trust Plaza, New York, New
          York 10006, and whose ABA number is 021001033.

                    "Dilution"  means,  in   each  case   based  upon   the
          experience of  the  immediately prior  3  months, the  result  of
          dividing  the  Dollar  amount   of  (a)  bad  debt   write-downs,
          discounts, advertising allowances, returns, promotions,  credits,
          or other dilution with respect to the Accounts, by (b) Borrower's
          Collections  (excluding  extraordinary  items)  plus  the  Dollar
          amount of clause (a).

                    "Dilution  Reserve"   means,   as  of   any   date   of
          determination, an amount sufficient to reduce Foothill's  advance
          rate against Eligible Accounts by  one percentage point for  each
          percentage point by which Dilution is in excess of 5%.

                    "Dividend" means the cash  dividend of $2.00 per  share
          declared and  paid  by Borrower  prior  to the  Closing  Date  in
          respect of its capital stock.

                    "Dollars or $" means United States dollars.
                    
                    "Early Termination Premium" has  the meaning set  forth
          in Section 3.6.

                    "Eligible Accounts" means the Eligible Service Accounts
          and the Eligible Trade Accounts.

                    "Eligible  Inventory"  means  Inventory  consisting  of
          first quality finished goods held for sale in the ordinary course
          of Borrower's business, raw materials for such finished goods and
          demonstration units, that  strictly comply with  each and all  of
          the representations and warranties  respecting Inventory made  by
          Borrower to Foothill in the Loan  Documents, and that are and  at
          all times continue to be acceptable  to Foothill in all  respects
          in its  reasonable credit  judgment, consistent  with  Foothill's
          standard credit policies;  provided, however,  that standards  of
          eligibility may  be  fixed  and revised  from  time  to  time  by
          Foothill in  Foothill's  reasonable credit  judgment,  consistent
          with Foothill's  standard credit  policies.   In determining  the
          amount to be so included, Inventory shall be valued at the  lower
          of cost or market on a  basis consistent with Borrower's  current
          and historical accounting practices.  An item of Inventory  shall
          not be included in Eligible Inventory if:

                    (a)  it is  not owned  solely by  Borrower or  Borrower
          does not have good, valid, and marketable title thereto;

                    (b)  it is  not located  at one  of the  locations  set
          forth on Schedule E-1 or another location of  which Foothill has
          been notified in accordance with Section 6.12;

                    (c)  it is not located on  property owned or leased  by
          Borrower or in a contract warehouse,  in each case, subject to  a
          Collateral Access Agreement  executed by  the mortgagee,  lessor,
          the warehouseman, or other third party,  as the case may be,  and
          segregated or  otherwise separately  identifiable from  goods  of
          others, if any, stored on the premises;

                    (d)  it is not subject to  a valid and perfected  first
          priority security interest in  favor of Foothill,  and, if it  is
          located outside of the State of  Illinois, as evidenced by  post-
          filing UCC searches;

                    (e)  it consists  of  goods  returned  or  rejected  by
          Borrower's customers that  are not otherwise  in compliance  with
          the other provisions of the definition of "Eligible Inventory" or
          it consists of goods in transit;

                    (f)  it is  slow-moving  (as  determined  on  a  manner
          consistent with  Borrower's  historical practices),  obsolete,  a
          restrictive  or  custom   item,  work-in-process,  packaging   or
          shipping materials,  trunk  kit  Inventory,  Inventory  held  for
          return, Inventory subject to a Lien in favor of any third Person,
          Inventory located  with the  vendor thereof  unless Foothill  has
          received documentation  satisfactory  to  Foothill  with  respect
          thereto, bill  and hold  goods,  defective or  unsaleable  goods,
          "seconds"  or   used   Inventory,  or   Inventory   acquired   on
          consignment;
                                                                            
                    (g)  it  consists  of  new  machines  manufactured   by
          Borrower and held for sale by Borrower; and

                    (h)  if it is located  on property leased by  Borrower,
          Foothill has not received a copy of the lease relating thereto.

                    "Eligible Service Accounts"  means those Accounts  that
          do not qualify  as Eligible  Trade Accounts  solely because  they
          arise out of the rendition of services by Borrower pursuant to  a
          service contract (other than a service contract that provides for
          invoicing on a time and materials basis), but such Accounts arise
          pursuant to a  service contract that  is currently in  existence,
          under which no breach or default exists, that is not prepaid more
          than a  year in  advance, and,  with  respect to  annual  renewal
          billings,  the   Account  Debtor   thereunder  has   executed   a
          confirmation of renewal.

                    "Eligible Trade Accounts" means those Accounts  created
          by Borrower in the ordinary course of business, that arise out of
          Borrower's sale of goods or rendition of services, that  strictly
          comply with each  and all of  the representations and  warranties
          respecting Accounts  made by  Borrower to  Foothill in  the  Loan
          Documents,  and  that  are  and  at  all  times  continue  to  be
          acceptable in all material respects to Foothill in its reasonable
          credit  judgment,  consistent  with  Foothill's  standard  credit
          policies; provided, however, that standards of eligibility may be
          fixed and revised  from time to  time by  Foothill in  Foothill's
          reasonable credit judgment,  consistent with Foothill's  standard
          credit policies.  Eligible Trade  Accounts shall not include  the
          following:

                    (a)  Accounts that the Account Debtor has failed to pay
          within 90 days of invoice date or Accounts with selling terms  of
          more than 60 days;

                    (b)  Accounts  owed  by  an   Account  Debtor  or   its
          Affiliates where 50% or more of all Accounts owed by that Account
          Debtor (or its Affiliates) are deemed ineligible under clause (a)
          above;

                    (c)  Accounts with respect to which the Account  Debtor
          is an employee or Affiliate of Borrower;

                    (d)  Accounts with respect to which goods are placed on
          consignment, guaranteed sale, sale  or return, sale on  approval,
          bill and hold, or other terms  by reason of which the payment  by
          the Account Debtor may be conditional;

                    (e)  Accounts that are not  payable in Dollars or  with
          respect to which the  Account Debtor: (i)  does not maintain  its
          chief executive office in the United States or Canada, or (ii) is
          not organized under the  laws of the United  States or Canada  or
          any State  or Province  thereof, respectively,  or (iii)  is  the
          government of any foreign country or sovereign state (other  than
          Canada), or  of  any  state,  province,  municipality,  or  other
          political subdivision  thereof,  or of  any  department,  agency,
          public corporation, or other instrumentality thereof, unless  (y)
          the Account  is  supported by  an  irrevocable letter  of  credit
          reasonably satisfactory to Foothill  (as to form, substance,  and
          issuer or domestic  confirming bank) that  has been delivered  to
          Foothill and is directly drawable by Foothill, or (z) the Account
          is covered by  credit insurance  in form  and amount,  and by  an
          insurer, reasonably satisfactory to Foothill;

                    (f)  Accounts with respect to which the Account  Debtor
          is either (i)  the United States  or any  department, agency,  or
          instrumentality of  the  United States  (exclusive,  however,  of
          Accounts with  respect to  which Borrower  has complied,  to  the
          reasonable satisfaction  of  Foothill,  with  the  Assignment  of
          Claims Act, 31 U.S.C.  S 3727), or (ii)  any State of the  United
          States (exclusive, however,  of Accounts  (y) owed  by any  State
          that does not have a statutory  counterpart to the Assignment  of
          Claims Act) or (z) with respect  to which Borrower has  complied,
          to the reasonable  satisfaction of Foothill,  with an  applicable
          statutory counterpart to the Assignment of Claims Act);

                    (g)  Accounts with respect to which the Account  Debtor
          is a creditor of Borrower, has or has asserted a right of setoff,
          has disputed its liability, or has made any claim with respect to
          the Account, in each case to the extent of the applicable offset,
          dispute or claim; Accounts subject to  a contra to the extent  of
          such contra; and Accounts subject  to offset because the  Account
          Debtor has prepaid all or any portion of its obligations under  a
          service contract with Borrower (which payments are classified  by
          Borrower as "deferred revenues"), to the extent of such offset;

                    (h)  Accounts with respect to  an Account Debtor  whose
          total obligations owing  to Borrower exceed  10% of all  Eligible
          Accounts, to the extent of the obligations owing by such  Account
          Debtor in excess of such percentage;

                    (i)  Accounts with respect to which the Account  Debtor
          is subject to any Insolvency Proceeding, or becomes insolvent, or
          goes out of business;

                    (j)  Accounts the collection of which Foothill, in  its
          reasonable credit judgment, believes to be doubtful by reason  of
          the Account Debtor's financial condition;

                    (k)  Accounts with respect  to which  the goods  giving
          rise to such  Account have  not been  shipped and  billed to  the
          Account Debtor, the services giving rise to such Account have not
          been performed and accepted by the Account Debtor, or the Account
          otherwise does not represent a final sale;

                    (l)  Accounts with respect to which the Account  Debtor
          is located  in  the  states of  New  Jersey,  Minnesota  or  West
          Virginia (or any other state that  requires a creditor to file  a
          Business Activity Report  or similar document  in order to  bring
          suit or  otherwise  enforce  its remedies  against  such  Account
          Debtor in  the courts  or through  any judicial  process of  such
          state), unless  Borrower  has qualified  to  do business  in  New
          Jersey, Minnesota, West  Virginia, or such  other states, or  has
          filed a Notice of Business Activities Report with the  applicable
          division of taxation,  the department  of revenue,  or with  such
          other state offices, as  appropriate, for the then-current  year,
          or is exempt from such filing requirement;

                    (m)  Accounts that represent progress payments or other
          advance  billings  that  are  due  prior  to  the  completion  of
          performance by  Borrower of  the subject  contract for  goods  or
          services;

                    (n)  Accounts payable to Borrower on a COD basis; and

                    (o)  Accounts  that  arise  out  of  the  rendition  of
          services by Borrower pursuant to a service contract (other than a
          service contract  that  provides  for invoicing  on  a  time  and
          materials basis), or the lease of goods by Borrower.

                    "Equipment"  means  all   of  Borrower's  present   and
          hereafter acquired machinery,  machine tools, motors,  equipment,
          furniture,  furnishings,  fixtures,  vehicles  (including   motor
          vehicles and trailers), tools, parts, goods (other than  consumer
          goods, farm products, or Inventory), wherever located, including,
          (a) any interest of Borrower in any of the foregoing, and (b) all
          attachments,     accessories,      accessions,      replacements,
          substitutions,  additions,  and  improvements   to  any  of   the
          foregoing.

                    "ERISA" means the  Employee Retirement Income  Security
          Act of  1974, 29  U.S.C. SS  1000  et seq.,  amendments  thereto,
          successor  statutes,  and  regulations  or  guidance  promulgated
          thereunder.

                    "ERISA Affiliate" means (a) any corporation subject  to
          ERISA whose  employees  are  treated  as  employed  by  the  same
          employer as the employees of  Borrower under IRC Section  414(b),
          (b) any trade or  business subject to  ERISA whose employees  are
          treated as  employed by  the same  employer as  the employees  of
          Borrower under IRC  Section 414(c),  (c) solely  for purposes  of
          Section 302 of ERISA and Section 412 of the IRC, any organization
          subject to ERISA that is a member of an affiliated service  group
          of which Borrower is  a member under IRC  Section 414(m), or  (d)
          solely for purposes of  Section 302 of ERISA  and Section 412  of
          the IRC,  any  party subject  to  ERISA that  is  a party  to  an
          arrangement with Borrower and whose employees are aggregated with
          the employees of Borrower under IRC Section 414(o).

                    "ERISA Event" means (a) a Reportable Event with respect
          to any Benefit Plan or Multiemployer Plan, (b) the withdrawal of
          Borrower, any  of its  Subsidiaries or  ERISA Affiliates  from  a
          Benefit Plan during a  plan year in which  it was a  "substantial
          employer" (as defined  in Section 4001(a)(2) of ERISA),  (c)  the
          providing of notice of  intent to terminate a  Benefit Plan in  a
          distress termination (as described in Section 4041(c) of ERISA),
          (d) the institution by  the PBGC  of proceedings  to terminate a
          Benefit Plan or  Multiemployer Plan, (e) any event or  condition
          (i) that provides a basis  under Section 4042(a)(1), (2), or (3)
          of ERISA for the termination of, or the appointment of a  trustee
          to  administer,  any  Benefit  Plan  or  Multiemployer  Plan,  or
          (ii) that may  result  in  termination of  a  Multiemployer  Plan
          pursuant to Section 4041A of ERISA, (f)  the partial or complete
          withdrawal within the meaning of Sections 4203 and 4205 of ERISA,
          of Borrower, any of its Subsidiaries  or ERISA Affiliates from  a
          Multiemployer Plan, or  (g) providing  any security  to any  Plan
          under  Section  401(a)(29)  of  the   IRC  by  Borrower  or   its
          Subsidiaries or any of their ERISA Affiliates.

                    "Event of Default" has the meaning set forth in Section
          8.

                    "Excess  Availability"  means,  as   of  any  date   of
          determination, (a) the Maximum Revolving Amount, less (b) the sum
          of (i) the Daily Balance of Advances that are outstanding on such
          date plus (ii) the Daily Balance of the undrawn Letters of Credit
          that are outstanding on such date  plus (c) the aggregate  amount
          of unrestricted cash  balances maintained  in Borrower's  deposit
          accounts.

                    "FEIN" means Federal Employer Identification Number.

                    "Foothill" has the meaning set forth in the preamble to
          this Agreement.

                    "Foothill Account" has the meaning set forth in Section
          2.7.

                    "Foothill Expenses"  means  all:    costs  or  expenses
          (including taxes, and insurance premiums) required to be paid  by
          Borrower under any of the Loan Documents that are reasonably paid
          or incurred  by  Foothill; fees  or  charges reasonably  paid  or
          incurred by Foothill in  connection with Foothill's  transactions
          with  Borrower,  including  fees  or  charges  for  photocopying,
          notarization, couriers and messengers, telecommunication,  public
          record searches (including tax lien, litigation, and UCC searches
          and including searches with the patent and trademark office,  the
          copyright office, or the  department of motor vehicles),  filing,
          recording, publication,  appraisal (including  periodic  Personal
          Property Collateral or Real Property Collateral appraisals), real
          estate surveys, real estate title policies and endorsements, and,
          after the occurrence and  during the continuance  of an Event  of
          Default, or  if Foothill  at any  time  has a  Lien on  any  Real
          Property Collateral of Borrower, environmental audits; costs  and
          expenses incurred by  Foothill in  the disbursement  of funds  to
          Borrower  (by  wire  transfer  or  otherwise);  charges  paid  or
          incurred by Foothill resulting from the dishonor of checks; costs
          and expenses paid or incurred by Foothill to correct any  default
          or enforce any  provision of the  Loan Documents,  or in  gaining
          possession  of,  maintaining,   handling,  preserving,   storing,
          shipping, selling, preparing for sale, or advertising to sell the
          Personal Property Collateral or the Real Property Collateral,  or
          any  portion  thereof,   irrespective  of  whether   a  sale   is
          consummated; costs and  expenses reasonably paid  or incurred  by
          Foothill in  examining Borrower's  Books; costs  and expenses  of
          third party claims or any other suit reasonably paid or  incurred
          by Foothill in enforcing  or defending the  Loan Documents or  in
          connection  with  the  transactions  contemplated  by  the   Loan
          Documents  or  Foothill's  relationship  with  Borrower  or   any
          guarantor; and Foothill's reasonable attorneys fees and  expenses
          incurred   in   advising,   structuring,   drafting,   reviewing,
          administering,  amending,   terminating,   enforcing   (including
          attorneys  fees  and  expenses  incurred  in  connection  with  a
          "workout,"  a  "restructuring,"   or  an  Insolvency   Proceeding
          concerning  Borrower  or  any  guarantor  of  the   Obligations),
          defending, or  concerning  the Loan  Documents,  irrespective  of
          whether suit is brought.

                    "Funding Date" means the date of the first to occur  of
          the making of the initial Advance or the issuance of the  initial
          Letter of Credit.

                    "GAAP" means generally  accepted accounting  principles
          as in effect from time to time in the United States, consistently
          applied by Borrower.

                    "General Intangibles" means  all of Borrower's  present
          and  future  general  intangibles  and  other  personal  property
          (including contract  rights,  rights arising  under  common  law,
          statutes, or regulations, choses  or things in action,  goodwill,
          patents,  trade  names,  trademarks,  servicemarks,   copyrights,
          blueprints, drawings, purchase orders, customer lists, monies due
          or recoverable from pension funds, route lists, rights to payment
          and other  rights  under  any royalty  or  licensing  agreements,
          infringement claims, computer programs, information contained  on
          computer disks or tapes,  literature, reports, catalogs,  deposit
          accounts, insurance premium rebates, tax refunds, and tax  refund
          claims), other than  goods, Accounts,  and Negotiable  Collateral
          and other than BT Institutional Cash Management Fund 497, Account
          Number 47912087 and related  property pledged under the  Security
          Agreement (Hypothecation Agreement) dated April 11, 1997 made  by
          Debtor in  favor  of Bankers  Trust  Company to  secure  Debtor's
          reimbursement obligations  with  respect to  certain  letters  of
          credit issued by Bankers Trust Company for the account of Debtor,
          as such Security Agreement existed on April 11, 1997.

                    "Governing Documents" means the certificate or articles
          of incorporation, by-laws, or  other organizational or  governing
          documents of any Person.

                    "Hazardous Materials"  means  (a) substances that  are
          defined or listed  in, or otherwise  classified pursuant to,  any
          applicable  laws  or   regulations  as  "hazardous   substances,"
          "hazardous materials," "hazardous wastes," "toxic substances," or
          any other  formulation  intended  to define,  list,  or  classify
          substances  by   reason  of   deleterious  properties   such   as
          ignitability,    corrosivity,    reactivity,     carcinogenicity,
          reproductive toxicity, or "EP  toxicity", (b) oil, petroleum,  or
          petroleum derived substances, natural  gas, natural gas  liquids,
          synthetic gas, drilling fluids, produced waters, and other wastes
          associated with the  exploration, development,  or production  of
          crude  oil,  natural  gas,   or  geothermal  resources,   (c) any
          flammable substances or explosives or any radioactive  materials,
          and (d)  asbestos  in  any  form  or  electrical  equipment  that
          contains  any  oil  or  dielectric  fluid  containing  levels  of
          polychlorinated biphenyls in excess of 50 parts per million.

                    "Indebtedness" means: (a)  all obligations of  Borrower
          for borrowed money, (b) all obligations of Borrower evidenced  by
          bonds, debentures, notes,  or other similar  instruments and  all
          reimbursement or  other obligations  of  Borrower in  respect  of
          letters of credit, bankers  acceptances, interest rate swaps,  or
          other financial products, (c)  all obligations of Borrower  under
          capital leases,  (d) all  obligations  or liabilities  of  others
          secured  by  a  Lien  on  any  property  or  asset  of  Borrower,
          irrespective of whether such obligation or liability is  assumed,
          and (e) any  obligation of Borrower  guaranteeing or intended  to
          guarantee (whether guaranteed, endorsed, co-made, discounted,  or
          sold  with  recourse  to   Borrower)  any  indebtedness,   lease,
          dividend, letter  of credit,  or other  obligation of  any  other
          Person.

                    "Insolvency Proceeding" means any proceeding  commenced
          by or against any  Person under any  provision of the  Bankruptcy
          Code or under any other bankruptcy or insolvency law, assignments
          for  the   benefit   of   creditors,   or   proceedings   seeking
          reorganization, arrangement, or other similar relief.

                    "Inventory" means all present  and future inventory  in
          which Borrower has any interest, including goods held for sale or
          lease or to be furnished under  a contract of service and all  of
          Borrower's present  and future  raw materials,  work in  process,
          finished goods,  and  packing and  shipping  materials,  wherever
          located.

                    "Inventory Letter of Credit" means a documentary Letter
          of Credit issued to support the purchase by Borrower of Inventory
          prior to transit  of such Inventory  to a location  set forth  on
          Schedule E-1  or  another location  of  which Foothill  has  been
          notified pursuant  to  Section 6.12  and  with respect  to  which
          Foothill  has  filed  all  financing  statements,  amendments  to
          financing statements and fixture  filings reasonably required  by
          Foothill, that provides  that all draws  thereunder must  require
          presentation   of   customary   documentation   (including,    if
          applicable, commercial  invoices,  packing list,  certificate  of
          origin,  bill  of  lading  or  airway  bill,  customs   clearance
          documents, quota statement, inspection certificate, beneficiaries
          statement, and bill of exchange, bills of lading, dock  warrants,
          dock receipts, warehouse receipts,  or other documents of  title)
          in form and substance satisfactory to Foothill and reflecting the
          passage  to  Borrower  of   title  to  first  quality   Inventory
          conforming to Borrower's contract with  the seller thereof.   Any
          such Letter of Credit shall cease  to be an "Inventory Letter  of
          Credit" at such time, if any,  as the goods purchased  thereunder
          become Eligible Inventory.

                    "Inventory Reserves"  means reserves  (determined  from
          time to time by  Foothill in its  reasonable discretion) for  (a)
          the  estimated  costs   relating  to   unpaid  freight   charges,
          warehousing or storage charges, taxes, duties, and other  similar
          unpaid costs  associated with  the  acquisition of  Inventory  by
          Borrower pursuant to an Inventory Letter of Credit, plus  (b) the
          estimated amount  of  outstanding reclamation  claims  of  unpaid
          sellers of Inventory sold to Borrower.

                    "IRC" means  the  Internal  Revenue Code  of  1986,  as
          amended, and the regulations thereunder.

                    "L/C" has the meaning set forth in Section 2.2(a).

                    "L/C Guaranty"  has the  meaning set  forth in  Section
          2.2(a).

                    "Letter of Credit" means an L/C or an L/C Guaranty,  as
          the context requires.

                    "Lien" means  any  interest  in  property  securing  an
          obligation owed to,  or a  claim by,  any Person  other than  the
          owner of the property,  whether such interest  shall be based  on
          the common law, statute, or contract, whether such interest shall
          be recorded  or perfected,  and whether  such interest  shall  be
          contingent upon the occurrence of some future event or events  or
          the existence  of  some  future  circumstance  or  circumstances,
          including the lien or security interest arising from a  mortgage,
          deed of  trust, encumbrance,  pledge, hypothecation,  assignment,
          deposit arrangement, security agreement, adverse claim or charge,
          conditional sale or trust receipt, or from a lease,  consignment,
          or  bailment   for   security   purposes   and   also   including
          reservations, exceptions,  encroachments,  easements,  rights-of-
          way, covenants, conditions, restrictions, leases, and other title
          exceptions and encumbrances affecting Real Property.

                    "Loan Account"  has the  meaning set  forth in  Section
          2.10.

                    "Loan Documents" means this  Agreement, the Letters  of
          Credit, the Lockbox Agreements, the Mortgages, any note or  notes
          executed by  Borrower  and payable  to  Foothill, and  any  other
          agreement entered into, now or in the future, in connection  with
          this Agreement.

                    "Lockbox  Account"  shall  mean  a  depository  account
          established pursuant to one of the Lockbox Agreements.

                    "Lockbox  Agreements"  means   those  certain   Lockbox
          Operating Procedural  Agreements  and  those  certain  Depository
          Account  Agreements,  in  form  and  substance  satisfactory   to
          Foothill, each of which is among  Borrower, Foothill, and one  of
          the Lockbox Banks.

                    "Lockbox Banks" means LaSalle National Bank, PNC  Bank,
          N.A. and any  other bank  from time to  time party  to a  Lockbox
          Agreement.

                    "Lockboxes" has the meaning set forth in Section 2.7.

                    "Material Adverse Change" means (a) a material  adverse
          change  in  the  business,  prospects,  operations,  results   of
          operations,  assets,  liabilities  or  condition  (financial   or
          otherwise) of Borrower, (b) the material impairment of Borrower's
          ability to perform  its obligations under  the Loan Documents  to
          which it is a party or of Foothill to enforce the Obligations  or
          realize upon the Collateral, (c) a material adverse effect on the
          value of  the Collateral  or the  amount that  Foothill would  be
          likely to  receive  (after  giving  consideration  to  delays  in
          payment and  costs of  enforcement) in  the liquidation  of  such
          Collateral, or  (d)  a material  impairment  of the  priority  of
          Foothill's Liens with respect to the Collateral.

                    "Maximum Revolving Amount" means $10,000,000.

                    "Mortgages" means  one  or  more  mortgages,  deeds  of
          trust, or deeds to secure debt, executed by Borrower in favor  of
          Foothill after the date hereof, the format and substance of which
          shall  be  satisfactory  to  Foothill,  that  encumber  the  Real
          Property Collateral and the related improvements thereto.

                    "Multiemployer Plan" means  a "multiemployer plan"  (as
          defined in Section 4001(a)(3) of ERISA) to which Borrower, any of
          its Subsidiaries, or any ERISA Affiliate has contributed, or  was
          obligated to contribute, within the past six years.

                    "Negotiable Collateral" means all of Borrower's present
          and  future  letters  of  credit,  notes,  drafts,   instruments,
          investment property, security entitlements, securities (including
          the shares  of stock  of  Subsidiaries of  Borrower),  documents,
          personal  property  leases  (wherein  Borrower  is  the  lessor),
          chattel paper,  and  Borrower's  Books relating  to  any  of  the
          foregoing.

                    "Net Worth"  means, as  of any  date of  determination,
          Borrower's total shareholders' equity as determined in accordance
          with GAAP.

                    "Obligations"  means   all  loans,   Advances,   debts,
          principal, interest  (including any  interest that,  but for  the
          provisions  of  the   Bankruptcy  Code,   would  have   accrued),
          contingent  reimbursement  obligations   under  any   outstanding
          Letters  of   Credit,  premiums   (including  Early   Termination
          Premiums),  liabilities   (including  all   amounts  charged   to
          Borrower's Loan  Account  pursuant  hereto),  obligations,  fees,
          charges, costs,  or  Foothill  Expenses (including  any  fees  or
          expenses that, but  for the  provisions of  the Bankruptcy  Code,
          would have accrued), lease  payments, guaranties, covenants,  and
          duties owing by Borrower to Foothill of any kind and  description
          (whether pursuant  to  or  evidenced by  the  Loan  Documents  or
          pursuant to any  other agreement between  Foothill and  Borrower,
          and irrespective of  whether for the  payment of money),  whether
          direct or indirect, absolute or contingent, due or to become due,
          now existing  or  hereafter  arising,  and  including  any  debt,
          liability, or  obligation  owing  from Borrower  to  others  that
          Foothill may  have  obtained  by  assignment  or  otherwise,  and
          further including all interest not paid when due and all Foothill
          Expenses that Borrower  is required to  pay or  reimburse by  the
          Loan Documents, by law, or otherwise.

                    "Overadvance" has the meaning set forth in Section 2.5.

                    "PBGC" means the  Pension Benefit Guaranty  Corporation
          as defined in Title IV of ERISA, or any successor thereto.

                    "Permitted Investment" means:

                    (a)  investments in  short-term obligations  backed  by
          the full faith and credit of the United States Government;

                    (b)  investments  in  certificates  of  deposit,   time
          deposits, money market funds or bankers acceptances issued by any
          prime commercial bank or  investment bank (which commercial  bank
          or investment bank  shall have capital  and surplus  of at  least
          $500,000,000 in the aggregate at all times, and a short term debt
          rating of at least A-1 from Standard & Poor's Corporation and  at
          least P-1 from  Moody's Investors Services,  Inc. at all  times),
          with a remaining maturity not in  excess of one year, payable  to
          the order of  Borrower or  to bearer,  and repurchase  agreements
          secured by investments of the type described in clause (a)  above
          and this clause (b); and

                    (c)  investments in commercial paper having a rating of
          at least A-1 from Standard & Poor's Corporation and at least  P-1
          from Moody's Investors Services, Inc. at all times.

                    "Permitted Liens"  means (a)  Liens held  by  Foothill,
          (b) Liens for unpaid taxes  that either (i) are not yet  due and
          payable or (ii) are the subject of Permitted Protests, (c) Liens
          set forth on Schedule P-1 or securing capital leases and purchase
          money financing set forth on Schedule  7.1, (d) the interests  of
          lessors under  operating  leases  and  purchase  money  Liens  of
          lessors under capital leases to  the extent that the  acquisition
          or lease of the underlying asset is permitted under Section  7.21
          and so long as the Lien  only attaches to the asset purchased  or
          acquired and only secures  the purchase price  of, or lease  cost
          with respect to, the asset, interest with respect thereto and all
          related fees and charges, (e) Liens  arising by operation of  law
          in  favor  of   warehousemen,  landlords,  carriers,   mechanics,
          materialmen, laborers,  or suppliers,  incurred in  the  ordinary
          course of business  of Borrower and  not in  connection with  the
          borrowing of money, and which Liens  either (i) are for sums not
          yet due  and  payable,  or  (ii) are the  subject  of  Permitted
          Protests, (f) Liens arising from deposits made in connection with
          obtaining worker's compensation or other unemployment  insurance,
          (g) Liens or deposits to secure performance of bids, tenders,  or
          leases (to the extent  permitted under this Agreement),  incurred
          in the  ordinary  course  of business  of  Borrower  and  not  in
          connection with  the borrowing  of money,  (h) Liens  arising  by
          reason of security  for surety or  appeal bonds  in the  ordinary
          course of business of  Borrower, (i) Liens  of or resulting  from
          any judgment or  award that would  not cause  a Material  Adverse
          Change and as to  which the time for  the appeal or petition  for
          rehearing of which has  not yet expired, or  in respect of  which
          Borrower is in good faith prosecuting an appeal or proceeding for
          a review, and  in respect of  which a stay  of execution  pending
          such appeal or proceeding for review has been secured, (j)  Liens
          with respect to the Real Property Collateral that are  exceptions
          to the commitments for title insurance issued in connection  with
          the Mortgages, as accepted by Foothill,  (k) with respect to  any
          Real Property that is not part  of the Real Property  Collateral,
          easements, rights  of  way,  zoning  and  similar  covenants  and
          restrictions, and similar encumbrances that customarily exist  on
          properties of Persons engaged in similar activities and similarly
          situated and that in any event  do not materially interfere  with
          or impair the use or operation  of the Collateral by Borrower  or
          the value of  Foothill's Lien thereon  or therein, or  materially
          interfere with the ordinary conduct  of the business of  Borrower
          and (l) BT Institutional Cash Management Fund 497, Account Number
          47912087  and  related  property   pledged  under  the   Security
          Agreement (Hypothecation Agreement) dated April 11, 1997 made  by
          Debtor in  favor  of Bankers  Trust  Company to  secure  Debtor's
          reimbursement obligations  with  respect to  certain  letters  of
          credit issued by Bankers Trust Company for the account of Debtor,
          as such Security Agreement existed on April 11, 1997.

                    "Permitted Protest"  means  the right  of  Borrower  to
          protest any  Lien (other  than any  such  Lien that  secures  the
          Obligations), tax (other than payroll taxes), or rental  payment,
          provided that (a) a reserve with  respect to such  obligation is
          established on  the  books  of Borrower  in  an  amount  that  is
          reasonably satisfactory  to  Foothill, (b) any such  protest  is
          instituted and diligently prosecuted  by Borrower in good  faith,
          and (c) Foothill is satisfied  that, while  any such  protest is
          pending, there  will  be  no impairment  of  the  enforceability,
          validity, or  priority  (except  in a  case  where  Foothill  has
          established a reserve  in respect  of such  Lien) of  any of  the
          Liens of Foothill in and to the Collateral.

                    "Person"   means   and   includes   natural    persons,
          corporations, limited liability companies, limited  partnerships,
          general  partnerships,  limited  liability  partnerships,   joint
          ventures,  trusts,  land  trusts,   business  trusts,  or   other
          organizations, irrespective of whether  they are legal  entities,
          and governments and agencies and political subdivisions thereof.

                    "Personal Property  Collateral"  means  all  Collateral
          other than the Real Property Collateral.

                    "Plan" means  any employee  benefit plan,  program,  or
          arrangement maintained  or contributed  to  by Borrower  or  with
          respect to which it may incur liability.

                    "Real Property" means any estates or interests in  real
          property now owned or hereafter acquired by Borrower.

                    "Real Property  Collateral"  means  any  Real  Property
          hereafter acquired by Borrower (other than Real Property in which
          Borrower has a leasehold interest).

                    "Reference Rate" means the  variable rate of  interest,
          per annum,  most recently  announced by  Norwest Bank  Minnesota,
          National Association,  or any  successor  thereto, as  its  "base
          rate," irrespective of  whether such announced  rate is the  best
          rate available from such financial institution.

                    "Reportable Event" means any of the events described in
          Section 4043(c) of ERISA or the regulations thereunder other than
          a Reportable Event as to which the provision of 30 days notice to
          the PBGC is waived under applicable regulations.

                    "Retiree  Health  Plan"  means  an  "employee   welfare
          benefit plan" within  the meaning of  Section 3(1) of ERISA  that
          provides benefits  to  individuals  after  termination  of  their
          employment, other than as required by Section 601 of ERISA.

                    "Solvent" means,  with  respect  to  any  Person  on  a
          particular date, that on such date (a) at fair valuations, all of
          the properties and assets of such Person are greater than the sum
          of the debts, including  contingent liabilities, of such  Person,
          (b) the present fair salable value  of the properties and  assets
          of such Person is not less than the amount that will be  required
          to pay the probable liability of such Person on its debts as they
          become absolute and matured, (c) such Person is able  to realize
          upon its  properties  and assets  and  pay its  debts  and  other
          liabilities, contingent obligations and other commitments as they
          mature in the normal course of business, (d) such Person does not
          intend to, and does not believe that it will, incur debts  beyond
          such Person's ability to pay as  such debts mature, and  (e) such
          Person is not engaged  in business or a  transaction, and is  not
          about to  engage in  business or  a transaction,  for which  such
          Person's properties  and  assets  would  constitute  unreasonably
          small capital after  giving due consideration  to the  prevailing
          practices in the industry  in which such Person  is engaged.   In
          computing the amount of contingent liabilities at any time, it is
          intended that such  liabilities will  be computed  at the  amount
          that, in light  of all the  facts and  circumstances existing  at
          such time, represents the amount that reasonably can be  expected
          to become an actual or matured liability.

                    "Subsidiary"  of   a   Person  means   a   corporation,
          partnership, limited liability company, or other entity in  which
          that Person directly or indirectly owns or controls the shares of
          stock or other ownership  interests having ordinary voting  power
          to elect a majority of the  board of directors (or appoint  other
          comparable managers)  of such  corporation, partnership,  limited
          liability company, or other entity.

                    "Termination Date" has the meaning set forth in Section
          3.4.

                    "Voidable  Transfer"  has  the  meaning  set  forth  in
          Section 15.8.

                    "Working  Capital"   means,   as   of   any   date   of
          determination, Consolidated  Current  Assets  minus  Consolidated
          Current Liabilities.


               1.2. Accounting Terms.

                    All accounting  terms not  specifically defined  herein
          shall be construed in  accordance with GAAP.   When used  herein,
          the term  "financial  statements"  shall include  the  notes  and
          schedules thereto.    Whenever the  term  "Borrower" is  used  in
          respect of a financial covenant or a related definition, it shall
          be understood to mean Borrower on a consolidated basis unless the
          context clearly requires otherwise.

               1.3. Code.

                    Any terms used  in this Agreement  that are defined  in
          the Code shall be construed and defined as set forth in the  Code
          unless otherwise defined herein.

               1.4. Construction.

                    Unless the context of  this Agreement clearly  requires
          otherwise,  references  to  the  plural  include  the   singular,
          references  to  the  singular   include  the  plural,  the   term
          "including" is not limiting, and the term "or" has, except  where
          otherwise indicated,  the inclusive  meaning represented  by  the
          phrase  "and/or."    The  words  "hereof,"  "herein,"   "hereby,"
          "hereunder," and similar  terms in this  Agreement refer to  this
          Agreement as a whole and not to any particular provision of  this
          Agreement.    An  Event  of   Default  shall  "continue"  or   be
          "continuing" until  such  Event of  Default  has been  waived  in
          writing by Foothill.  Section, subsection, clause, schedule,  and
          exhibit  references  are  to  this  Agreement  unless   otherwise
          specified.   Any  reference in  this  Agreement or  in  the  Loan
          Documents to this Agreement  or any of  the Loan Documents  shall
          include  all   alterations,  amendments,   changes,   extensions,
          modifications,   renewals,   replacements,   substitutions,   and
          supplements, thereto and thereof, as applicable.

               1.5. Schedules and Exhibits.

                    All of  the schedules  and  exhibits attached  to  this
          Agreement shall be deemed incorporated herein by reference.

          2.   LOAN AND TERMS OF PAYMENT.

               2.1. Revolving Advances.

                    (a)  Subject  to  the  terms  and  conditions  of  this
          Agreement, Foothill  agrees  to  make  advances  ("Advances")  to
          Borrower in an amount outstanding not  to exceed at any one  time
          the  lesser  of  (i)  the  Maximum  Revolving  Amount  less   the
          outstanding balance  of all  undrawn or  unreimbursed Letters  of
          Credit, or (ii) the Borrowing Base less (A) the aggregate  amount
          of all  undrawn or  unreimbursed Letters  of Credit  (other  than
          Inventory Letters  of  Credit), less  (B)  50% of  the  aggregate
          amount of all undrawn or unreimbursed Inventory Letters of Credit
          issued in  connection  with the  purchase  of finished  goods  or
          supplies less (C) 70% of the  aggregate amount of all undrawn  or
          unreimbursed Inventory  Letters of  Credit issued  in  connection
          with the purchase of parts less  (D) 70% of the aggregate  amount
          of all undrawn or unreimbursed Inventory Letters of Credit issued
          in connection with the purchase  of demonstration units less  (E)
          the aggregate amount of the Inventory Reserves.  For purposes  of
          this  Agreement,   "Borrowing   Base",   as  of   any   date   of
          determination, shall mean the result of:

                         (x)  the lesser of (i) the sum of  (A) up to
                    85% of Eligible Trade  Accounts, less the  amount,
                    if any, of  the Dilution Reserve,  plus (B) up  to
                    50% of  Eligible  Service Accounts,  and  (ii)  an
                    amount  equal  to   Borrower's  Collections   with
                    respect to Accounts for the immediately  preceding
                    60 day period, plus

                         (y)  the least  of (i)  $5,000,000, (ii)  the
                    sum of  (A) up  to 50%  of the  value of  Eligible
                    Inventory  consisting   of  finished   goods   and
                    supplies, (B) up to 30%  of the value of  Eligible
                    Inventory consisting of parts  and (C) the  lesser
                    of  (I)  up  to  30%  of  the  value  of  Eligible
                    Inventory consisting  of demonstration  units  and
                    (II) $500,000 less 30% of the aggregate amount  of
                    all undrawn or  unreimbursed Inventory Letters  of
                    Credit issued in connection  with the purchase  of
                    demonstration units, and (iii) 175% of the  amount
                    of  credit  availability  created  by  clause  (x)
                    above, minus

                         (z)  the aggregate  amount  of  reserves,  if
                    any, established by Foothill under Section 2.1(b).

                    (b)  Anything to the contrary  in Section 2.1(a)  above
          notwithstanding, Foothill, in its reasonable judgment, may create
          reserves against the Borrowing Base  or reduce its advance  rates
          based  upon  Eligible  Accounts  or  Eligible  Inventory  without
          declaring an Event of Default (i)  for amounts owing by  Borrower
          to landlords, warehouseman, processors  and similar Persons  that
          could assert  a  statutory or  common  law  Lien in  any  of  the
          Collateral that is senior to Foothill's Lien on such  Collateral,
          (ii) for any  amount subject to  a Permitted  Protest, (iii)  for
          such matters as are determined by Lender in its reasonable credit
          judgment in accordance with its standard credit policies or  (iv)
          if it  determines  that there  has  occurred a  Material  Adverse
          Change.   Without limiting  Lender's ability  to create  reserves
          after the Closing Date pursuant to this Section 2.1(b), as of the
          Closing Date,  Lender  has  established  reserves  for  potential
          warranty claims, Inventory shrinkage, Inventory obsolescence  and
          average Inventory variance.

                    (c)  Foothill shall have no obligation to make Advances
          hereunder  to  the  extent  they  would  cause  the   outstanding
          Obligations to exceed the Maximum Revolving Amount.

                    (d)  Amounts borrowed pursuant to this Section 2.1  may
          be repaid  and,  subject to  the  terms and  conditions  of  this
          Agreement, reborrowed  at  any  time  during  the  term  of  this
          Agreement.

               2.2. Letters of Credit.

                    (a)  Subject  to  the  terms  and  conditions  of  this
          Agreement, Foothill agrees  to issue  letters of  credit for  the
          account of Borrower (each,  an "L/C") or  to issue guarantees  of
          payment (each such guaranty, an  "L/C Guaranty") with respect  to
          letters of credit issued  by an issuing bank  for the account  of
          Borrower.  Foothill shall have no obligation to issue a Letter of
          Credit if any of the following would result:

                         (i)  the sum of 50%  of the aggregate  amount
                    of all undrawn and unreimbursed Inventory  Letters
                    of Credit issued in  connection with the  purchase
                    of finished  goods or  supplies  plus 70%  of  the
                    aggregate amount of  all undrawn and  unreimbursed
                    Inventory Letters of  Credit issued in  connection
                    with the purchase of parts or demonstration units,
                    plus 100%  of the  aggregate amount  of all  other
                    types  of  undrawn  and  unreimbursed  Letters  of
                    Credit, would exceed the  Borrowing Base less  the
                    amount of outstanding Advances less the  aggregate
                    amount of Inventory Reserves; or

                         (ii) the aggregate amount  of all undrawn  or
                    unreimbursed   Letters   of   Credit    (including
                    Inventory Letters  of  Credit)  would  exceed  the
                    lower of: (x)  the Maximum  Revolving Amount  less
                    the  amount  of   outstanding  Advances;  or   (y)
                    $5,000,000; or

                         (iii) the outstanding Obligations would exceed
                    the Maximum Revolving Amount; or

                         (iv) 30%  of  the  aggregate  amount  of  all
                    undrawn  or  unreimbursed  Inventory  Letters   of
                    Credit issued in connection  with the purchase  of
                    demonstration units would exceed $500,000 less the
                    aggregate  amount  of  Advances  than  outstanding
                    against the value of Eligible Inventory consisting
                    of demonstration units.

          Borrower expressly  understands and  agrees that  Foothill  shall
          have no obligation to arrange for  the issuance by issuing  banks
          of the  letters of  credit that  are  to be  the subject  of  L/C
          Guarantees.  Each Letter of Credit  shall have an expiry date  no
          later than 30 days prior to  the date on which this Agreement  is
          scheduled to terminate under Section  3.4 (without regard to  any
          potential renewal term) and all such  Letters of Credit shall  be
          in  form  and  substance  acceptable  to  Foothill  in  its  sole
          discretion.  If Foothill  is obligated to  advance funds under  a
          Letter of  Credit,  Borrower  immediately  shall  reimburse  such
          amount to Foothill and, in the absence of such reimbursement, the
          amount so advanced immediately and automatically shall be  deemed
          to be an Advance hereunder  and, thereafter, shall bear  interest
          at the rate then applicable to Advances under Section 2.6.

                    (b)  Borrower hereby agrees to indemnify, save, defend,
          and hold  Foothill  harmless from  any  loss, cost,  expense,  or
          liability, including  payments made  by Foothill,  expenses,  and
          reasonable attorneys fees incurred by Foothill arising out of  or
          in connection with any Letter of  Credit.  Borrower agrees to  be
          bound by the  issuing bank's regulations  and interpretations  of
          any Letters of Credit guarantied by Foothill and opened to or for
          Borrower's account or  by Foothill's interpretations  of any  L/C
          issued by Foothill to or for Borrower's account, even though this
          reasonable interpretation may be  different from Borrower's  own,
          and Borrower understands  and agrees that  Foothill shall not  be
          liable for any error, negligence, or mistake, whether of omission
          or commission,  in  following Borrower's  instructions  or  those
          contained  in  the  Letter   of  Credit  or  any   modifications,
          amendments, or supplements  thereto.   Borrower understands  that
          the L/C Guarantees may require Foothill to indemnify the  issuing
          bank for certain costs  or liabilities arising  out of claims  by
          Borrower against such  issuing bank.   Borrower hereby agrees  to
          indemnify, save, defend, and hold Foothill harmless with  respect
          to any loss, cost, expense (including reasonable attorneys fees),
          or liability incurred  by Foothill under  any L/C  Guaranty as  a
          result of Foothill's  indemnification of any  such issuing  bank,
          other than any  such loss,  cost, expense  or liability  incurred
          because of Foothill's gross negligence or willful misconduct.

                    (c)  Borrower hereby  authorizes and  directs any  bank
          that issues a letter of credit guaranteed by Foothill to  deliver
          to Foothill all  instruments, documents, and  other writings  and
          property received by the issuing bank pursuant to such letter  of
          credit, and to accept and  rely upon Foothill's instructions  and
          agreements with respect to all matters arising in connection with
          such letter of credit and the related application.  Borrower  may
          or may not be the "applicant" or "account party" with respect  to
          such letter of credit.

                    (d)  Any and all charges, commissions, fees, and  costs
          incurred by Foothill relating to the letters of credit guaranteed
          by Foothill shall be considered Foothill Expenses for purposes of
          this Agreement and immediately shall be reimbursable by  Borrower
          to Foothill.

                    (e)  Immediately   upon   the   termination   of   this
          Agreement, Borrower agrees to either (i) provide cash  collateral
          to be held by Foothill in an amount equal to 102% of the  maximum
          amount of Foothill's  obligations under Letters  of Credit,  (ii)
          cause to be delivered to Foothill  releases of all of  Foothill's
          obligations under outstanding Letters of Credit or (iii) cause to
          be delivered  to Foothill  one or  more back-to-back  letters  of
          credit,  in  form  and  substance,  and  issued  by  an   issuer,
          reasonably acceptable to Foothill,  in an aggregate amount  equal
          to 102% of  the maximum  amount of  Foothill's obligations  under
          outstanding Letters  of Credit.   At  Foothill's discretion,  any
          proceeds of Collateral received by Foothill after the  occurrence
          and during the continuation of an Event of Default may be held as
          the cash collateral required by this Section 2.2(e).

                    (f)  If by reason of (i)  any change in any  applicable
          law,  treaty,  rule,   or  regulation  or   any  change  in   the
          interpretation or application  by any  governmental authority  of
          any such applicable  law, treaty,  rule, or  regulation, or  (ii)
          compliance by the  issuing bank or  Foothill with any  direction,
          request, or requirement (irrespective of whether having the force
          of law)  of  any  governmental authority  or  monetary  authority
          including, without  limitation,  Regulation  D of  the  Board  of
          Governors of the Federal Reserve System  as from time to time  in
          effect (and any successor thereto):

                              (A)  any reserve,  deposit,  or  similar
                         requirement  is  or   shall  be  imposed   or
                         modified in respect of any Letters of  Credit
                         issued hereunder, or

                              (B)  there  shall  be  imposed  on   the
                         issuing bank or Foothill any other  condition
                         regarding any letter of credit, or Letter  of
                         Credit,  as   applicable,   issued   pursuant
                         hereto;

          and the  result of  the foregoing  is  to increase,  directly  or
          indirectly, the cost to the issuing bank or Foothill of  issuing,
          making, guaranteeing,  or maintaining  any letter  of credit,  or
          Letter  of  Credit,  as  applicable,  or  to  reduce  the  amount
          receivable in respect thereof by  such issuing bank or  Foothill,
          then, and in any  such case, Foothill may,  at any time within  a
          reasonable period after  the additional cost  is incurred or  the
          amount received is reduced,  notify Borrower, and Borrower  shall
          pay on demand such  amounts as the issuing  bank or Foothill  may
          specify to  be  necessary  to  compensate  the  issuing  bank  or
          Foothill for such  additional cost or  reduced receipt,  together
          with interest on such amount from  the date of such demand  until
          payment in  full  thereof  at  the  rate  set  forth  in  Section
          2.6(a)(i) or (c)(i),  as applicable.   The  determination by  the
          issuing bank or Foothill, as the  case may be, of any amount  due
          pursuant to this Section  2.2(f), as set  forth in a  certificate
          setting forth  the  calculation  thereof  in  reasonable  detail,
          shall, in the absence of manifest or demonstrable error, be final
          and conclusive and binding on all of the parties hereto.

               2.3. Intentionally Omitted.

               2.4. Intentionally Omitted.

               2.5. Overadvances.

                    If, at  any  time or  for  any reason,  the  amount  of
          Obligations owed by Borrower to Foothill pursuant to Sections 2.1
          or  2.2  is  greater  than   either  the  Dollar  or   percentage
          limitations set forth in Sections 2.1 or 2.2 (an  "Overadvance"),
          Borrower immediately shall pay to  Foothill, in cash, the  amount
          of such excess to  be used by Foothill  first, to repay  Advances
          outstanding under  Section 2.1  and, thereafter,  to be  held  by
          Foothill as cash  collateral to secure  Borrower's obligation  to
          repay Foothill  for  all  amounts paid  pursuant  to  Letters  of
          Credit.

               2.6. Interest and Letter of  Credit Fees:  Rates,  Payments,
                    and Calculations.

                    (a)  Interest Rate.  Except  as provided in clause  (b)
          below, all  Obligations (except  for undrawn  Letters of  Credit)
          shall bear interest commencing on the Closing Date at a per annum
          rate of 1.00  percentage point  above the  Reference Rate,  which
          rate shall be prospectively reduced by one-half percentage  point
          one day after receipt by Lender of Borrower's unqualified  annual
          audited financial statements for  the 1998 fiscal year  delivered
          pursuant to Section 6.3(b) and one-half percentage point one  day
          after receipt by Lender of Borrower's unqualified annual  audited
          financial statements for the 1999 fiscal year delivered  pursuant
          to Section 6.3(b), respectively, if  Borrower (i) has net  income
          for such fiscal year, determined in  accordance with GAAP, of  at
          least $1 and (ii)  has met or exceeded  the projected levels  for
          each of  gross  margin  dollars; net  income;  operating  income;
          stockholders equity;  and  working capital  (defined  as  current
          assets  less  current  liabilities),  set  forth  in   Borrower's
          business plan for, or as of the last day of, such fiscal year, as
          applicable, a copy of which business  plan is attached hereto  as
          Schedule 2.6.  If the interest rate is so reduced with respect to
          Borrower's financial  performance for  its 1998  fiscal year  and
          Borrower fails to  satisfy either of  the foregoing criteria  for
          its 1999 fiscal  year, the interest  rate shall be  prospectively
          increased by one-half percentage point  one day after receipt  of
          Borrower's financial statements for its 1999 fiscal year.  Except
          as provided  in  Section 2.6(c)  below,  in no  event  shall  the
          applicable interest  rate  be less  than  the Reference  Rate  or
          greater than 1.00 percentage point above the Reference Rate.

                    (b)  Letter of Credit Fee.  Borrower shall pay Foothill
          a fee (in addition to the  charges, commissions, fees, and  costs
          set forth in Section 2.2(d)) equal to 1.50% per  annum times the
          aggregate undrawn amount of all outstanding Letters of Credit.

                    (c)  Default Rate.  Upon the occurrence and during  the
          continuation of an Event  of Default, and commencing  immediately
          following  notice  thereof  by  Foothill  to  Borrower,  (i)  all
          Obligations  (except  for  undrawn   Letters  of  Credit)   shall
          prospectively bear interest  at a per  annum rate  equal to  4.00
          percentage points above  the otherwise  applicable interest  rate
          provided in Section  2.6(a), and (ii)  the Letter  of Credit  fee
          provided in Section  2.6(b) shall be  prospectively increased  to
          3.50% per  annum  times the  amount  of the  undrawn  Letters  of
          Credit.

                    (d)  Minimum Interest.  In no  event shall the rate  of
          interest chargeable hereunder for any day be less than 7.00%  per
          annum.  To the extent that interest accrued hereunder at the rate
          set forth herein would be less  than the foregoing minimum  daily
          rate,  the  interest  rate  chargeable  hereunder  for  such  day
          automatically shall be deemed increased to the minimum rate.

                    (e)  Payments.   Interest  and Letter  of  Credit  fees
          payable hereunder shall be  due and payable,  in arrears, on  the
          first day of each month during the term hereof.  Borrower  hereby
          authorizes Foothill,  at  its  option, without  prior  notice  to
          Borrower, to charge such interest and Letter of Credit fees,  all
          Foothill  Expenses   (as  and   when  incurred),   the   charges,
          commissions, fees, and costs provided  for in Section 2.2(d)  (as
          and when accrued or incurred), the fees and charges provided  for
          in Section  2.11  (as and  when  accrued or  incurred),  and  all
          installments or other  payments due  under any  Loan Document  to
          Borrower's Loan Account,  which amounts  thereafter shall  accrue
          interest at the rate then applicable to Advances hereunder.   Any
          interest  not  paid  when  due  shall  be  compounded  and  shall
          thereafter  accrue  interest  at  the  rate  then  applicable  to
          Advances hereunder.

                    (f)  Computation.  The Reference Rate as of the date of
          this Agreement is 8.50%  per annum.  In  the event the  Reference
          Rate is changed from time to time hereafter, the applicable  rate
          of interest  hereunder  automatically and  immediately  shall  be
          increased or decreased by an amount  equal to such change in  the
          Reference Rate.  All interest and fees chargeable under the  Loan
          Documents shall be computed  on the basis of  a 360 day year  for
          the actual number of days elapsed.

                    (g)  Intent to Limit  Charges to  Maximum Lawful  Rate.
          In no event shall the interest  rate or rates payable under  this
          Agreement, plus any  other amounts paid  in connection  herewith,
          exceed the highest rate permissible under any law that a court of
          competent jurisdiction  shall,  in a  final  determination,  deem
          applicable.  Borrower and  Foothill, in executing and  delivering
          this Agreement, intend legally to agree upon the rate or rates of
          interest and  manner  of  payment  stated  within  it;  provided,
          however,  that,  anything  contained   herein  to  the   contrary
          notwithstanding, if said rate or rates  of interest or manner  of
          payment exceeds the maximum allowable under applicable law, then,
          ipso facto as  of the  date of  this Agreement,  Borrower is  and
          shall be liable only for the  payment of such maximum as  allowed
          by law,  and payment  received from  Borrower in  excess of  such
          legal maximum, whenever received, shall be applied to reduce  the
          principal balance  of  the  Obligations to  the  extent  of  such
          excess.

               2.7. Collection of Accounts.

                    Borrower shall  at all  times maintain  lockboxes  (the
          "Lockboxes") and,  immediately  after  the  Closing  Date,  shall
          instruct all  Account  Debtors  with  respect  to  the  Accounts,
          General Intangibles,  and Negotiable  Collateral of  Borrower  to
          remit all  Collections  in  respect thereof  to  such  Lockboxes.
          Borrower, Foothill, and  the Lockbox Banks  shall enter into  the
          Lockbox Agreements, which  among other things  shall provide  for
          the opening of a Lockbox Account  for the deposit of  Collections
          at a  Lockbox Bank.   Borrower  agrees that  all Collections  and
          other amounts received by Borrower from any Account Debtor or any
          other source immediately upon receipt  shall be deposited into  a
          Lockbox  Account.      No  Lockbox   Agreement   or   arrangement
          contemplated thereby shall  be modified by  Borrower without  the
          prior written consent of Foothill.  Upon the terms and subject to
          the conditions set forth in  the Lockbox Agreements, all  amounts
          received in each Lockbox Account shall be transferred by  federal
          funds transfer or ACH transfer each Business Day into an  account
          (the "Borrower Account") maintained  by Borrower at a  depository
          selected by  Borrower  and  shall be  available  to  Borrower  at
          Borrower's instruction; provided, that if (a) an Event of Default
          has occurred  and is  continuing, (b)  Foothill reasonably  deems
          itself  insecure  or  (c)   Excess  Availability  is  less   than
          $2,000,000, Foothill shall have the right, in its discretion,  to
          direct each  Lockbox Bank  to wire  all amounts  received in  the
          applicable Lockbox Account each Business Day into an account (the
          "Foothill  Account")  maintained  by  Foothill  at  a  depository
          selected by Foothill.

               2.8. Crediting Payments; Application of Collections.

                    The receipt  of any  Collections by  Foothill  (whether
          from transfers to Foothill by the  Lockbox Banks pursuant to  the
          Lockbox Agreements  or otherwise)  immediately shall  be  applied
          provisionally to reduce the Obligations outstanding under Section
          2.1, but shall not be considered a payment on account unless such
          Collection item  is  a  wire transfer  of  immediately  available
          federal funds and is made to  the Foothill Account or unless  and
          until such Collection item is honored when presented for payment.
          From and after the  Closing Date, Foothill  shall be entitled  to
          charge Borrower for 1 Business Day  of `clearance' or `float'  at
          the rate set forth in Section 2.6(a)(i) or Section 2.6(c)(i), as
          applicable, on all Collections  (regardless of whether  forwarded
          by the Lockbox Banks  to Foothill, whether provisionally  applied
          to reduce the Obligations under Section 2.1, or otherwise).  This
          across-the-board 1 Business Day clearance or float charge on  all
          Collections is  acknowledged  by  the parties  to  constitute  an
          integral  aspect  of  the  pricing  of  Foothill's  financing  of
          Borrower, and shall apply irrespective of the characterization of
          whether receipts are owned by  Borrower or Foothill, and  whether
          or not there  are any outstanding  Advances, the  effect of  such
          clearance or  float charge  being the  equivalent of  charging  1
          Business Day  of  interest  on  such  Collections.    Should  any
          Collection item not be honored  when presented for payment,  then
          Borrower shall  be deemed  not to  have  made such  payment,  and
          interest shall  be recalculated  accordingly.   Anything  to  the
          contrary contained  herein notwithstanding,  any Collection  item
          shall be deemed received by Foothill only if it is received  into
          the Foothill Account on  a Business Day on  or before 11:00  a.m.
          California time.   If any Collection  item is  received into  the
          Foothill Account  on  a  non-Business Day  or  after  11:00  a.m.
          California time on  a Business Day,  it shall be  deemed to  have
          been received by Foothill  as of the opening  of business on  the
          immediately following Business Day.

               2.9. Designated Account.

                    Foothill is  authorized to  make the  Advances and  the
          Letters of Credit under this  Agreement based upon telephonic  or
          other instructions  received  from  anyone purporting  to  be  an
          Authorized Person, or without instructions if pursuant to Section
          2.6(e).  Borrower agrees to establish and maintain the Designated
          Account with  the  Designated Account  Bank  for the  purpose  of
          receiving the proceeds of the Advances requested by Borrower  and
          made by Foothill hereunder.  Unless otherwise agreed by  Foothill
          and Borrower,  any  Advance requested  by  Borrower and  made  by
          Foothill hereunder shall be made to the Designated Account.

               2.10. Maintenance of Loan Account; Statements of Obligations.

                    Foothill shall maintain an account on its books in  the
          name of Borrower (the "Loan Account")  on which Borrower will  be
          charged with all  Advances made by  Foothill to  Borrower or  for
          Borrower's  account,   including,  accrued   interest,   Foothill
          Expenses, and  any other  payment Obligations  of Borrower.    In
          accordance with Section  2.8, the Loan  Account will be  credited
          with all  payments  received by  Foothill  from Borrower  or  for
          Borrower's  account,  including  all  amounts  received  in   the
          Foothill Account from  any Lockbox Bank.   Foothill shall  render
          statements regarding  the  Loan Account  to  Borrower,  including
          principal, interest, fees,  and including an  itemization of  all
          charges and expenses  constituting Foothill  Expenses owing,  and
          such statements shall be conclusively presumed to be correct  and
          accurate and constitute  an account stated  between Borrower  and
          Foothill  unless,  within  30  days  after  receipt  thereof   by
          Borrower, Borrower shall  deliver to  Foothill written  objection
          thereto describing  the error  or errors  contained in  any  such
          statements.

               2.11.                     Fees.

                    Borrower shall pay to Foothill the following fees:

                    (a)  Closing Fee.  On the  Closing Date, a closing  fee
          of $75,000;

                    (b)  Unused Line Fee.  On the  first day of each  month
          during the  term of  this Agreement,  commencing on  the  Closing
          Date, an unused line  fee in an amount  equal to 0.25% per  annum
          times the Average Unused Portion of the Maximum Revolving Amount;

                    (c)  Intentionally Omitted;

                    (d)  Financial    Examination,    Documentation,    and
          Appraisal Fees.   Foothill's customary fee  of $650  per day  per
          examiner, plus out-of-pocket expenses for each financial analysis
          and examination (i.e., audits) of Borrower performed by personnel
          employed by Foothill, payable  as incurred; Foothill's  customary
          appraisal fee of $1,500 per day per appraiser, plus out-of-pocket
          expenses for  each  appraisal  of  the  Collateral  performed  by
          personnel employed by Foothill,  payable as incurred; the  actual
          charges paid or incurred by Foothill  if it elects to employ  the
          services of one or more third  Persons to perform such  financial
          analyses and examinations (i.e., audits) of Borrower, to appraise
          the Collateral or to verify Accounts or other Collateral, payable
          as incurred; and, on each anniversary  of the Closing Date  prior
          to the Termination Date, Foothill's  customary fee of $1,000  per
          year for its loan documentation review; and

                    (e)  Servicing Fee.   On the  first day  of each  month
          (for the  prior month)  during the  term of  this Agreement,  and
          thereafter  so  long  as  any  Obligations  are  outstanding,   a
          servicing fee in an amount equal to $1,500.

          3.   CONDITIONS; TERM OF AGREEMENT.

               3.1. Conditions Precedent to the Initial Advance and  Letter
                    of Credit.

                    The obligation of Foothill to make the initial  Advance
          or to  issue the  initial  Letter of  Credit  is subject  to  the
          fulfillment, to the satisfaction of Foothill and its counsel,  of
          each of the following conditions on or before the Funding Date:

                    (a)  Foothill shall have received evidence satisfactory
          to Foothill of the filing of all financing statements and fixture
          filings required by  Foothill to be  filed prior  to the  Funding
          Date;

                    (b)  Foothill shall have received each of the following
          documents, duly executed, and each such document shall be in full
          force and effect:

                         (i)  the Lockbox Agreements;

                         (ii) UCC  termination  statements  and  other
                    documentation evidencing  the termination  of  all
                    existing Liens in and to the properties and assets
                    of  Borrower  located   in  Illinois  other   than
                    Permitted Liens;

                         (iii) the trademark and  license mortgage,  in
                    form  and  substance  satisfactory  to   Foothill,
                    executed by Borrower;

                         (iv) the solvency  certificate, in  form  and
                    substance satisfactory  to Foothill,  executed  by
                    Borrower's chief financial officer; and

                         (v)  such UCC-3  amendments relating  to  the
                    change  of  Borrower's  name  to   "Multigraphics,
                    Inc.", and  such additional  financing  statements
                    and fixture filings showing Multigraphics, Inc. as
                    debtor, as Foothill shall reasonably require, each
                    in form and substance satisfactory to Foothill.

                    (c)  Foothill shall  have received  a certificate  from
          the  Secretary  of  Borrower  attesting  to  the  resolutions  of
          Borrower's  Board   of  Directors   authorizing  its   execution,
          delivery, and performance  of this Agreement  and the other  Loan
          Documents to which Borrower is  a party and authorizing  specific
          officers of Borrower to execute the same;

                    (d)  Foothill shall have received copies of  Borrower's
          Governing Documents, as amended, modified, or supplemented to the
          Closing Date, certified by the Secretary of Borrower;

                    (e)  Foothill shall  have  received  a  certificate  of
          status with  respect to  Borrower, dated  within 10  days of  the
          Closing Date, such  certificate to be  issued by the  appropriate
          officer of the  jurisdiction of organization  of Borrower,  which
          certificate shall indicate that Borrower  is in good standing  in
          such jurisdiction;

                    (f)  Foothill  shall  have  received  certificates   of
          status with respect to Borrower, each dated within 15 days of the
          Closing Date, such certificates to  be issued by the  appropriate
          officer of  the jurisdictions  in which  its failure  to be  duly
          qualified or licensed would constitute a Material Adverse Change,
          which certificates  shall  indicate  that  Borrower  is  in  good
          standing in such jurisdictions;

                    (g)  Foothill shall  have  received  a  certificate  of
          insurance,  together  with  the  endorsements  thereto,  as   are
          required by Section 6.10, the form  and substance of which  shall
          be satisfactory to Foothill and its counsel;

                    (h)  Foothill shall  have  received  Collateral  Access
          Agreements from  the  lessors of  Borrower's  Arlington  Heights,
          Illinois facility;

                    (i)  Foothill  shall  have   received  an  opinion   of
          Borrower's counsel in form and substance satisfactory to Foothill
          in its sole discretion;

                    (j)  Foothill shall have received satisfactory evidence
          that all tax returns required to  be filed by Borrower have  been
          timely filed  and  all taxes  upon  Borrower or  its  properties,
          assets, income, and franchises (including real property taxes and
          payroll taxes) have been paid  prior to delinquency, except  such
          taxes that are the subject of a Permitted Protest;

                    (k)  Foothill  shall  have   received  an  opinion   of
          Borrower's counsel to the effect that Borrower's declaration  and
          payment of the  Dividend did  not violate  or breach  any of  the
          terms of Borrower's Plan  of Reorganization confirmed on  October
          13, 1993;

                    (l)  Foothill shall have received a letter satisfactory
          in form and substance  to Foothill from  Houlihan Lokey Howard  &
          Zukin authorizing Foothill to  rely on its  Opinion dated May  1,
          1997;

                    (m)  no material  adverse  change shall  have  occurred
          with respect to  the financial  condition, business,  operations,
          performance, properties or assets of Borrower or the value of the
          Collateral after the date hereto, exclusive of the Dividend;

                    (n)  no Event of Default shall be in existence; and

                    (o)  Foothill's counsel shall have completed its  legal
          due diligence with respect to Borrower, with results satisfactory
          to Foothill in its sole discretion.

               3.2. Conditions Precedent to all Advances and all Letters of
                    Credit.

                    The following  shall  be conditions  precedent  to  all
          Advances and all Letters of Credit hereunder:

                    (a)  the representations  and warranties  contained  in
          this Agreement and  the other Loan  Documents shall  be true  and
          correct in all material  respects on and as  of the date of  such
          extension of  credit, as  though  made on  and  as of  such  date
          (except to the  extent that such  representations and  warranties
          relate solely to an earlier date);

                    (b)  no Default or Event of Default shall have occurred
          and be continuing on  the date of such  extension of credit,  nor
          shall either result from the making thereof; and

                    (c)  no injunction, writ,  restraining order, or  other
          order of  any nature  prohibiting,  directly or  indirectly,  the
          extending of such  credit shall have  been issued  and remain  in
          force by any governmental  authority against Borrower,  Foothill,
          or any of their Affiliates.

               3.3. Condition Subsequent.

                    As conditions subsequent to initial closing  hereunder,
          Borrower shall (a) within 60 days of the Closing Date, deliver to
          Foothill the  certified  copies  of the  policies  of  insurance,
          together with  the  endorsements  thereto,  as  are  required  by
          Section  6.10,  the  form  and   substance  of  which  shall   be
          satisfactory to  Foothill and  its counsel  (and the  failure  by
          Borrower to so perform shall constitute an Event of Default)  and
          (b) within 30 days of the  Closing Date, deliver to Foothill  UCC
          termination statements  and  other documentation  evidencing  the
          termination of all  existing Liens in  and to  the properties  of
          Borrower located outside of Illinois, other than Permitted Liens,
          the form and substance of which shall be satisfactory to Foothill
          and its counsel (and the failure by Borrower to so perform  shall
          constitute an Event of Default).

               3.4. Term.

                    This  Agreement   shall  become   effective  upon   the
          execution and delivery hereof by Borrower and Foothill and  shall
          continue in full force and effect  for a term ending on the  date
          (the "Termination Date")  that is  three years  from the  Closing
          Date, unless sooner terminated pursuant to the terms hereof.  The
          foregoing notwithstanding,  Foothill  shall  have  the  right  to
          terminate its obligations  under this  Agreement immediately  and
          without notice upon the occurrence and during the continuation of
          an Event of Default.

               3.5. Effect of Termination.

                    On the  date  of  termination of  this  Agreement,  all
          Obligations (including  contingent reimbursement  obligations  of
          Borrower with  respect  to  any outstanding  Letters  of  Credit)
          immediately shall  become  due  and  payable  without  notice  or
          demand;  provided,   that  any   such  contingent   reimbursement
          obligations with respect to Letters of Credit shall be  satisfied
          in the manner  set forth in  Section 2.2(e).   No termination  of
          this Agreement, however, shall  relieve or discharge Borrower  of
          Borrower's  duties,  Obligations,  or  covenants  hereunder,  and
          Foothill's continuing  Liens in  the Collateral  shall remain  in
          effect  until  all  Obligations  have  been  fully  and   finally
          discharged and Foothill's obligation to provide additional credit
          hereunder is terminated.

               3.6. Early Termination by Borrower.

                    The provisions of Section 3.4 that allow termination of
          this Agreement  by  Borrower only  on  the Termination  Date  and
          certain anniversaries thereof  notwithstanding, Borrower has  the
          option, at  any  time  upon  30  days  prior  written  notice  to
          Foothill, to terminate this Agreement  by paying to Foothill,  in
          cash, the  Obligations, in  full (provided,  that any  contingent
          reimbursement obligations of Borrower with respect to outstanding
          Letters of Credit shall be satisfied  in the manner set forth  in
          Section 2.2(e)), together with a premium (the "Early  Termination
          Premium") equal to (a) 3% of the Maximum Revolving Amount if such
          termination occurs on or before the first anniversary of the date
          hereof,  (b)  2%  of  the   Maximum  Revolving  Amount  if   such
          termination occurs after the first anniversary of the date hereof
          but on or before  the second anniversary of  the date hereof  and
          (c) 1% of the Maximum Revolving Amount if such termination occurs
          after the second anniversary  of the date  hereof but before  the
          third anniversary of the date hereof; provided, that if  Borrower
          terminates this Agreement due to Foothill's refusal to consent to
          a proposed  acquisition by  Borrower that  would violate  Section
          7.13(a) or (c) below, the applicable Termination Prepayment shall
          be reduced by one-half of the Early Termination Premium otherwise
          payable hereunder.

               3.7. Termination Upon Event of Default.

                    If  Foothill   terminates  this   Agreement  upon   the
          occurrence of an  Event of  Default caused  by a  breach of  this
          Agreement  that   Borrower   has   intentionally   committed   or
          intentionally permitted to occur, in view of the impracticability
          and extreme  difficulty of  ascertaining  actual damages  and  by
          mutual agreement of the parties as to a reasonable calculation of
          Foothill's lost profits as a  result thereof, Borrower shall  pay
          to Foothill  upon  the  effective date  of  such  termination,  a
          premium in an amount equal to the Early Termination Premium.  The
          Early Termination Premium shall be presumed  to be the amount  of
          damages sustained  by Foothill  as the  result of  such an  early
          termination and Borrower agrees that  it is reasonable under  the
          circumstances currently existing.  The Early Termination  Premium
          provided for in this Section 3.7 shall be deemed included in  the
          Obligations.

          4.   CREATION OF SECURITY INTEREST.

               4.1. Grant of Security Interest.

                    Borrower  hereby  grants   to  Foothill  a   continuing
          security  interest  in  all  currently  existing  and   hereafter
          acquired or  arising Personal  Property  Collateral in  order  to
          secure prompt repayment of any and  all Obligations and in  order
          to secure prompt performance by Borrower of each of its covenants
          and  duties  under  the  Loan  Documents.    Foothill's  security
          interests in the Personal Property Collateral shall attach to all
          Personal Property Collateral without further  act on the part  of
          Foothill or Borrower.   Anything contained  in this Agreement  or
          any other Loan Document  to the contrary notwithstanding,  except
          for the sale  of Inventory to  buyers in the  ordinary course  of
          business  and  other  sales   of  Personal  Property   Collateral
          permitted under Section 7.4,  Borrower has no authority,  express
          or implied, to  dispose of any  item or portion  of the  Personal
          Property Collateral or the Real Property Collateral.

               4.2. Negotiable Collateral.

                    In the event that  any Collateral, including  proceeds,
          is evidenced by or  consists of Negotiable Collateral,  Borrower,
          immediately upon  the  request  of Foothill,  shall  endorse  and
          deliver physical  possession  of such  Negotiable  Collateral  to
          Foothill.

               4.3. Collection  of  Accounts,   General  Intangibles,   and
                    Negotiable Collateral.

                    At  any  time  after  the  occurrence  and  during  the
          continuance of  an  Event  of  Default,  Foothill  or  Foothill's
          designee may (a) notify customers or Account Debtors of  Borrower
          that the Accounts, General Intangibles, or Negotiable  Collateral
          have been assigned to  Foothill or that  Foothill has a  security
          interest  therein,  and   (b)  collect   the  Accounts,   General
          Intangibles, and Negotiable  Collateral directly  and charge  the
          collection costs  and expenses  to the  Loan Account.    Borrower
          agrees that at any time that Foothill (i) has notified  customers
          or Account  Debtors  under clause  (a)  above, (ii)  is  directly
          collecting   Accounts,   General   Intangibles   and   Negotiable
          Collateral under  clause  (b) above  or  (iii) has  directed  any
          Lockbox Bank to wire funds into the Foothill Account pursuant  to
          Section 2.7, it will  hold in trust  for Foothill, as  Foothill's
          trustee, any Collections  that it receives  and immediately  will
          deliver said Collections  to Foothill in  their original form  as
          received by Borrower.

               4.4. Delivery of Additional Documentation Required.

                    At any  time upon  the  request of  Foothill,  Borrower
          shall execute and deliver  to Foothill all financing  statements,
          continuation  financing  statements,  fixture  filings,  security
          agreements, pledges, assignments, endorsements of certificates of
          title, applications  for  title,  affidavits,  reports,  notices,
          schedules of  accounts,  letters  of  authority,  and  all  other
          documents  that  Foothill   reasonably  may   request,  in   form
          satisfactory to  Foothill,  to  perfect  and  continue  perfected
          Foothill's security interests in the Collateral, and in order  to
          fully consummate all of the transactions contemplated hereby  and
          under the other the Loan Documents.

               4.5. Power of Attorney.

                    Borrower hereby  irrevocably  makes,  constitutes,  and
          appoints Foothill (and any of Foothill's officers, employees,  or
          agents designated  by Foothill)  as  Borrower's true  and  lawful
          attorney, with  power to  (a) if  Borrower refuses  to, or  fails
          timely to execute and deliver any  of the documents described  in
          Section 4.4, sign the  name of Borrower on  any of the  documents
          described in  Section 4.4,  (b)  at any  time  that an  Event  of
          Default has occurred and is  continuing or Foothill deems  itself
          insecure, sign Borrower's name on any  invoice or bill of  lading
          relating  to  any  Account,   drafts  against  Account   Debtors,
          schedules and assignments of Accounts, verifications of Accounts,
          and  notices   to  Account   Debtors,  (c)   send  requests   for
          verification of  Accounts, (d)  endorse  Borrower's name  on  any
          Collection item that may come into Foothill's possession, (e)  at
          any time that an Event of Default has occurred and is  continuing
          or  Foothill  deems  itself  insecure,  notify  the  post  office
          authorities to change the address for delivery of Borrower's mail
          to an address  designated by Foothill,  to receive  and open  all
          mail addressed to Borrower,  and to retain  all mail relating  to
          the Collateral and forward all other mail to Borrower, (f) at any
          time that an Event of Default  has occurred and is continuing  or
          Foothill deems  itself insecure,  make,  settle, and  adjust  all
          claims under  Borrower's  policies  of  insurance  and  make  all
          determinations and  decisions with  respect to  such policies  of
          insurance, and  (g) at  any time  that an  Event of  Default  has
          occurred and  is continuing  or Foothill  deems itself  insecure,
          settle and  adjust disputes  and claims  respecting the  Accounts
          directly with Account  Debtors, for amounts  and upon terms  that
          Foothill determines to be reasonable,  and Foothill may cause  to
          be  executed  and  delivered  any  documents  and  releases  that
          Foothill determines to be necessary.  The appointment of Foothill
          as Borrower's  attorney, and  each and  every one  of  Foothill's
          rights and powers, being coupled with an interest, is irrevocable
          until all of the Obligations have  been fully and finally  repaid
          and  performed  and  Foothill's   obligation  to  extend   credit
          hereunder is terminated.

               4.6. Right to Inspect.

                    Foothill (through any  of its  officers, employees,  or
          agents) shall  have the  right, from  time to  time hereafter  to
          inspect Borrower's Books  and to  check, test,  and appraise  the
          Collateral in order to  verify Borrower's financial condition  or
          the amount, quality,  value, condition  of, or  any other  matter
          relating to, the  Collateral; provided, that  unless an Event  of
          Default  has  occurred  and  is  continuing,  (a)  all  of   such
          inspections shall take place during normal business hours and (b)
          Foothill will  conduct such  inspections no  more than  once  per
          calendar quarter.

          5.   REPRESENTATIONS AND WARRANTIES.

                    In  order  to  induce  Foothill  to  enter  into   this
          Agreement,  Borrower  makes  the  following  representations  and
          warranties which  shall be  true, correct,  and complete  in  all
          material respects as of the Closing Date, as of the Funding Date,
          and at and as of the date of the making of each Advance or Letter
          of Credit, as though made on and  as of the date of such  Advance
          or  Letter   of  Credit   (except  to   the  extent   that   such
          representations and warranties relate solely to an earlier  date)
          and  such  representations  and  warranties  shall  survive   the
          execution and delivery of this Agreement:

               5.1. No Encumbrances.

                    Borrower  has  good  and  indefeasible  title  to   the
          Collateral, free and clear of Liens except for Permitted Liens.

               5.2. Eligible Accounts.

                    The  Eligible   Accounts   are   bona   fide   existing
          obligations created by the sale and delivery of Inventory or  the
          rendition of services to Account  Debtors in the ordinary  course
          of Borrower's business, unconditionally owed to Borrower  without
          defenses, disputes, offsets, counterclaims,  or rights of  return
          or cancellation.  The property giving rise to such Eligible Trade
          Account has  been delivered  to the  Account  Debtor, or  to  the
          Account  Debtor's   agent   for   immediate   shipment   to   and
          unconditional acceptance by the Account Debtor.  Borrower has not
          received notice of actual or imminent bankruptcy, insolvency,  or
          material impairment  of the  financial condition  of any  Account
          Debtor regarding any Eligible Account.

               5.3. Eligible Inventory.

                    All Eligible  Inventory  is of  good  and  merchantable
          quality, free from defects.

               5.4. Equipment.

                    All of  the  Equipment  is used  or  held  for  use  in
          Borrower's business and is fit for such purposes.

               5.5. Location of Inventory and Equipment.

                    The Inventory  and Equipment  are located  only at  the
          locations identified on Schedule  6.12 or otherwise permitted  by
          Section 6.12.

               5.6. Inventory Records.

                    Borrower keeps records that are correct and accurate in
          all material respects, itemizing  and describing the kind,  type,
          quality, and  quantity  of  the Inventory,  and  Borrower's  cost
          therefor.

               5.7. Location of Chief Executive Office; FEIN.

                    The chief executive  office of Borrower  is located  at
          the address  indicated  in the  preamble  to this  Agreement  and
          Borrower's FEIN is 34-0054940.

               5.8. Due Organization and Qualification; Subsidiaries.

                    (a)  Borrower is  duly organized  and existing  and  in
          good  standing  under  the  laws  of  the  jurisdiction  of   its
          incorporation and qualified and licensed  to do business in,  and
          in good  standing  in, any  state  where  the failure  to  be  so
          licensed or  qualified reasonably  could be  expected to  have  a
          Material Adverse Change.

                    (b)  Set forth  on  Schedule  5.8  is  a  complete  and
          accurate list  of Borrower's  direct and  indirect  Subsidiaries,
          showing the jurisdiction of their incorporation.

                    (c)  Except as set  forth on Schedule  5.8, no  capital
          stock  (or  any   securities,  instruments,  warrants,   options,
          purchase  rights,   conversion   or   exchange   rights,   calls,
          commitments or  claims  of  any  character  convertible  into  or
          exercisable  for  capital  stock)  of  any  direct  or   indirect
          Subsidiary  of  Borrower  is  subject  to  the  issuance  of  any
          security, instrument, warrant, option, purchase right, conversion
          or exchange right, call, commitment or claim of any right, title,
          or interest therein or thereto.

               5.9. Due Authorization; No Conflict.

                    (a)  The  execution,  delivery,   and  performance   by
          Borrower of this Agreement and the Loan Documents to which it  is
          a party  have been  duly authorized  by all  necessary  corporate
          action.

                    (b)  The  execution,  delivery,   and  performance   by
          Borrower of this Agreement and the Loan Documents to which it  is
          a party do not and will not (i) violate any provision of federal,
          state, or local law or regulation (including Regulations G, T, U,
          and X of the Federal Reserve  Board) applicable to Borrower,  the
          Governing Documents  of  Borrower,  or any  order,  judgment,  or
          decree of any  court or other  governmental authority binding  on
          Borrower,  (ii) conflict  with,  result  in   a  breach  of,  or
          constitute (with due notice or lapse  of time or both) a  default
          under any material  contractual obligation or  material lease  of
          Borrower, (iii) result in or require  the creation or imposition
          of any  Lien of  any nature  whatsoever  upon any  properties  or
          assets of Borrower, other  than Permitted Liens, or  (iv) require
          any approval of stockholders  or any approval  or consent of  any
          Person under any material contractual obligation of Borrower.

                    (c)  Other than  the  filing of  appropriate  financing
          statements,  fixture  filings,  and  mortgages,  the   execution,
          delivery, and performance by Borrower  of this Agreement and  the
          Loan Documents to which Borrower is  a party do not and will  not
          require any registration with, consent, or approval of, or notice
          to, or other action with or  by, any federal, state, foreign,  or
          other governmental authority or other Person.

                    (d)  This Agreement  and the  Loan Documents  to  which
          Borrower is a party, and all other documents contemplated  hereby
          and thereby, when executed and delivered by Borrower will be  the
          legally valid and  binding obligations  of Borrower,  enforceable
          against Borrower  in  accordance  with  their  respective  terms,
          except as enforcement may be  limited by equitable principles  or
          by bankruptcy, insolvency, reorganization, moratorium, or similar
          laws relating to or limiting creditors' rights generally.

                    (e)  The Liens granted by  Borrower to Foothill in  and
          to its properties and assets pursuant  to this Agreement and  the
          other Loan Documents  are validly created,  perfected, and  first
          priority Liens, subject only to Permitted Liens.

               5.10.                     Litigation.

                    There are  no  actions  or proceedings  pending  by  or
          against Borrower before  any court or  administrative agency  and
          Borrower does  not  have  knowledge or  belief  of  any  pending,
          threatened, or imminent litigation, governmental  investigations,
          or  claims,  complaints,   actions,  or  prosecutions   involving
          Borrower or any guarantor  of the Obligations,  except for:   (a)
          ongoing collection matters  in which Borrower  is the  plaintiff;
          (b) matters existing on the date hereof that would not reasonably
          be expected to cause a Material  Adverse Change; and (c)  matters
          arising after  the  date  hereof that  would  not  reasonably  be
          expected to cause a Material Adverse Change.

               5.11.                     No Material Adverse Change.

                    All financial statements relating  to Borrower  or  any
          guarantor of the Obligations  (other than projections) that  have
          been delivered  by Borrower  to Foothill  have been  prepared  in
          accordance with GAAP (except, in the case of unaudited  financial
          statements, for  the  lack  of footnotes  and  being  subject  to
          quarterly adjustments and year-end audit adjustments) and  fairly
          present Borrower's (or such guarantor's, as applicable) financial
          condition as  of  the  date thereof  and  Borrower's  results  of
          operations for  the period  then ended.   There  has not  been  a
          Material  Adverse  Change  with  respect  to  Borrower  (or  such
          guarantor, as applicable) since the date of the latest  financial
          statements submitted to Foothill on  or before the Closing  Date,
          exclusive of the declaration and payment of the Dividend.<PAGE>





               5.12.                     Solvency.

                    Borrower is Solvent.  No transfer of property is  being
          made by Borrower and no obligation is being incurred by  Borrower
          in  connection  with  the   transactions  contemplated  by   this
          Agreement or the other Loan Documents with the intent to  hinder,
          delay, or defraud either present or future creditors of Borrower.

               5.13.                     Employee Benefits.

                    None of Borrower,  any of its  Subsidiaries, or any  of
          their ERISA Affiliates  maintains or contributes  to any  Benefit
          Plan, other than those listed  on Schedule 5.13.  Borrower, each
          of its Subsidiaries and each  ERISA Affiliate have satisfied  the
          minimum funding standards of  ERISA and the  IRC with respect  to
          each Benefit Plan  to which it  is obligated to  contribute.   No
          ERISA Event has occurred  nor has any  other event occurred  that
          may result in an ERISA Event that reasonably could be expected to
          result in a  Material Adverse Change.   None of  Borrower or  its
          Subsidiaries, any ERISA Affiliate, or  any fiduciary of any  Plan
          is subject  to any  direct or  indirect material  liability  with
          respect to any  Plan as a  result of any  noncompliance with  any
          applicable law, treaty, rule, regulation, or agreement.  None  of
          Borrower or its Subsidiaries or  any ERISA Affiliate is  required
          to provide security to any Plan  under Section 401(a)(29) of  the
          IRC.

               5.14.                     Environmental Condition.

                    Except as  set  forth in  Schedule  5.14, (a)  none  of
          Borrower's properties or  assets has ever  been used by  Borrower
          or, to the best  of Borrower's knowledge,  by previous owners  or
          operators in  the  disposal of,  or  to produce,  store,  handle,
          treat, release, or transport,  any Hazardous Materials; (b)  none
          of Borrower's properties  or assets has  ever been designated  or
          identified in any manner pursuant to any environmental protection
          statute as a  Hazardous Materials disposal  site, or a  candidate
          for closure pursuant to any environmental protection statute; (c)
          no Lien arising  under any environmental  protection statute  has
          attached to  any revenues  or to  any real  or personal  property
          owned or operated by Borrower; and (d) Borrower has not  received
          a summons, citation, notice, or directive from the  Environmental
          Protection Agency  or any  other  federal or  state  governmental
          agency concerning any action or omission by Borrower resulting in
          the releasing  or  disposing  of  Hazardous  Materials  into  the
          environment, except  for any  of the  foregoing which  would  not
          reasonably be expected to cause a Material Adverse Change.

               5.15.                     Subsidiary Activities.

                    None of Borrower's Subsidiaries has any material assets
          or conducts any material business operations.

               5.16.                     Patents and Trademarks.

                    The loss by Borrower or any of its Subsidiaries of  all
          of its respective rights with respect to (a) all U.S. patents and
          patent applications owned by Borrower or such Subsidiary and  (b)
          all   U.S.   trademarks,   trademark   registrations,   trademark
          applications, trade names and tradestyles, service marks, service
          mark registrations,  service mark  applications and  brand  names
          owned by  Borrower or  such Subsidiary,  other  than any  of  the
          foregoing listed  on  Exhibit  A to  the  trademark  and  license
          mortgage  described  in   Section  3.1(b)(iii),   would  not   be
          reasonably expected to cause a Material Adverse Change.

          6.   AFFIRMATIVE COVENANTS.

                    Borrower covenants  and agrees  that,  so long  as  any
          credit hereunder  shall be  available and  until full  and  final
          payment of the Obligations,  and unless Foothill shall  otherwise
          consent in writing, Borrower shall do all of the following:

               6.1. Accounting System.

                    Maintain a  standard and  modern system  of  accounting
          that  enables  Borrower  to   produce  financial  statements   in
          accordance with  GAAP, and  maintain  records pertaining  to  the
          Collateral that contain information as from  time to time may  be
          reasonably requested by  Foothill.   Borrower also  shall keep  a
          modern inventory  reporting  system  that  shows  all  additions,
          sales, claims,  returns,  and  allowances  with  respect  to  the
          Inventory.

               6.2. Collateral Reporting.

                    Provide Foothill with  the following  documents at  the
          following times  in form  satisfactory  to Foothill:  (a)  unless
          Foothill otherwise  requests, on  a monthly  basis, and,  in  any
          event, by no  later than the  16th day of  each month during  the
          term of this Agreement, a sales journal, collection journal,  and
          credit register since the last such schedule and a calculation of
          the Borrowing Base as of such date, (b) unless Foothill otherwise
          requests, on a monthly basis and, in any event, by no later  than
          the 16th day of each month during the term of this Agreement, (i)
          a detailed calculation of the Borrowing Base, and (ii) a detailed
          aging, by total, of the Accounts, together with a  reconciliation
          to the  detailed calculation  of  the Borrowing  Base  previously
          provided to  Foothill; provided,  that commencing  no later  than
          August 31 (with respect to July, 1997) and continuing on the 16th
          of each month thereafter,  Borrower will provide separate  agings
          for Accounts arising from the  provision of services by  Borrower
          and  for  all  other  Accounts,  (c)  unless  Foothill  otherwise
          requests, on a monthly basis and, in any event, by no later  than
          the 16th day of each month  during the term of this Agreement,  a
          summary aging, by vendor, of Borrower's accounts payable and  any
          book overdraft,  (d) unless  Foothill  otherwise requests,  on  a
          monthly basis, and, in any event,  by no later than the 16th  day
          of each  month  during  the term  of  this  Agreement,  Inventory
          reports specifying Borrower's  cost and the  market value of  its
          Inventory by category, with  additional detail showing  additions
          to  and  deletions  from  the  Inventory,  (e)  unless   Foothill
          otherwise requests, on a monthly basis, and, in any event, by  no
          later than the  16th day of  each month during  the term of  this
          Agreement, notice of all  returns, disputes, or claims,  (f) upon
          request, copies  of invoices  in  connection with  the  Accounts,
          customer  statements,  credit   memos,  remittance  advices   and
          reports,  deposit  slips,  shipping  and  delivery  documents  in
          connection with  the Accounts  and  for Inventory  and  Equipment
          acquired by  Borrower, purchase  orders  and invoices,  (g) on a
          quarterly  basis,  a  detailed  list  of  Borrower's   customers,
          (h) unless Foothill otherwise requests, on a monthly basis, and,
          in any event, by no later than the 16th day of each month  during
          the term of this Agreement, a calculation of the Dilution for the
          prior month; and (i) such other reports as to  the Collateral or
          the financial condition  of Borrower as  Foothill may  reasonably
          request from time  to time.   Original sales invoices  evidencing
          daily sales shall be  mailed by Borrower  to each Account  Debtor
          and, after the occurrence and during the continuance of an  Event
          of Default, at Foothill's direction, the invoices shall  indicate
          on their face that the Account has been assigned to Foothill  and
          that all payments  are to  be made  directly to  Foothill.   With
          respect to  any of  the foregoing  documents to  be delivered  no
          later than the  16th day of  a month, if  in any  month the  16th
          falls on a day  that is not a  Business Day, than such  documents
          shall be delivered no later than the next Business Day after  the
          16th of such month.

               6.3. Financial Statements, Reports, Certificates.

                    Deliver to Foothill:  (a) as soon as available, but  in
          any event within 90 days after the end of the last month of  each
          of Borrower's fiscal years, within 45  days after the end of  the
          last month of each of Borrower's fiscal quarters (other than  the
          last quarter in any fiscal year) and within 30 days after the end
          of each month during each of Borrower's fiscal years (other  than
          the last month of any fiscal quarter), a company prepared balance
          sheet, income  statement, and  statement  of cash  flow  covering
          Borrower's operations  during such  period; and  (b) as  soon  as
          available, but in any event within 90 days after the end of  each
          of Borrower's fiscal years, financial statements of Borrower  for
          each such fiscal  year, audited by  independent certified  public
          accountants reasonably  acceptable  to  Foothill  and  certified,
          without any  qualifications, by  such  accountants to  have  been
          prepared in accordance with GAAP, together with a certificate  of
          such  accountants  addressed  to   Foothill  stating  that   such
          accountants do not have knowledge of the existence of any Default
          or Event of  Default.   Such audited  financial statements  shall
          include a balance sheet, profit and loss statement, and statement
          of cash  flow  and,  if prepared,  such  accountants'  letter  to
          management.   If Borrower  is a  parent company  of one  or  more
          Subsidiaries, or Affiliates, or is  a Subsidiary or Affiliate  of
          another company, then,  in addition to  the financial  statements
          referred  to  above,   Borrower  agrees   to  deliver   financial
          statements prepared on  a consolidating  basis so  as to  present
          Borrower and  each  such  related entity  separately,  and  on  a
          consolidated basis.

                    Together with the above, Borrower also shall deliver to
          Foothill Borrower's Form 10-Q Quarterly Reports, Form 10-K Annual
          Reports, and Form 8-K Current Reports, and any other filings made
          by Borrower with the Securities and Exchange Commission, if  any,
          promptly following the filing  thereof, or any other  information
          that is provided by Borrower to  its shareholders, and any  other
          report previously prepared by  Borrower and reasonably  requested
          by Foothill relating to the financial condition of Borrower.

                    Each month,  together  with  the  financial  statements
          provided pursuant to  Section 6.3(a), Borrower  shall deliver  to
          Foothill a certificate signed by  its chief financial officer  to
          the effect  that:   (i)  all  financial statements  delivered  or
          caused to be delivered to  Foothill hereunder have been  prepared
          in accordance  with  GAAP  (except,  in  the  case  of  unaudited
          financial statements, for the lack of footnotes and being subject
          to quarterly  adjustments  and year-end  audit  adjustments)  and
          fairly present  the financial  condition  of Borrower,  (ii)  the
          representations and  warranties  of Borrower  contained  in  this
          Agreement and the other  Loan Documents are  true and correct  in
          all material respects on and as of the date of such  certificate,
          as though made on and as of such date (except to the extent  that
          such representations and warranties  relate solely to an  earlier
          date), (iii) for each month that also contains the date on which
          a  financial  covenant  in  Section  7.20  is  to  be  tested,  a
          Compliance  Certificate   demonstrating  in   reasonable   detail
          compliance  at  the  end  of  such  period  with  the  applicable
          financial covenants contained  in Section 7.20, and (iv)  on the
          date of delivery of such certificate  to Foothill there does  not
          exist any condition or event that constitutes a Default or  Event
          of Default (or, in  the case of clauses  (i), (ii), or (iii),  to
          the extent of any non-compliance, describing such  non-compliance
          as to which he or she may have knowledge and what action Borrower
          has taken, is taking, or proposes to take with respect thereto).

                    Borrower shall have issued written instructions to  its
          independent certified  public  accountants  authorizing  them  to
          communicate with  Foothill and  to release  to Foothill  whatever
          financial  information  concerning  Borrower  that  Foothill  may
          request.  Borrower hereby irrevocably authorizes and directs  all
          auditors or accountants,  to deliver to  Foothill, at  Borrower's
          expense,  copies  of  Borrower's  financial  statements,   papers
          related thereto, and  other accounting records  of any nature  in
          their possession,  and to  disclose to  Foothill any  information
          they may have regarding Borrower's business affairs and financial
          conditions.  Foothill shall  concurrently notify Borrower of  any
          such request for information made to Borrower's accountants.

               6.4. Tax Returns.

                    Deliver to Foothill copies of each of Borrower's future
          federal income tax returns, and any amendments thereto, within 30
          days of the filing thereof with the Internal Revenue Service.

               6.5. Guarantor Reports.

                    Cause any  guarantor  of  any  of  the  Obligations  to
          deliver its annual financial statements at the time when Borrower
          provides its audited financial statements to Foothill and  copies
          of all  federal  income tax  returns  as  soon as  the  same  are
          available and in any event no  later than 30 days after the  same
          are required to be filed by law.

               6.6. Returns.

                    Cause  returns  and  allowances,  if  any,  as  between
          Borrower and its Account Debtors to  be on the same basis and  in
          accordance with  the usual  customary practices  of Borrower,  as
          they exist at  the time  of the  execution and  delivery of  this
          Agreement.  If, at a time  when no Event of Default has  occurred
          and is continuing,  any Account Debtor  returns any Inventory  to
          Borrower, Borrower promptly shall  determine the reason for  such
          return and,  if  Borrower accepts  such  return, issue  a  credit
          memorandum (with a copy  to be sent  to Foothill upon  Foothill's
          request) in the appropriate amount to  such Account Debtor.   If,
          at  a  time  when  an  Event  of  Default  has  occurred  and  is
          continuing, any Account Debtor returns any Inventory to Borrower,
          Borrower promptly shall determine the reason for such return and,
          if Foothill  consents (which  consent shall  not be  unreasonably
          withheld), issue a credit memorandum (with  a copy to be sent  to
          Foothill) in the appropriate amount to such Account Debtor.

               6.7. Intentionally Omitted.

               6.8. Maintenance of Equipment.

                    Maintain the Equipment in good operating condition  and
          repair (ordinary wear and tear excepted), and make all  necessary
          replacements thereto so that  the value and operating  efficiency
          thereof shall at all  times be maintained  and preserved.   Other
          than those items  of Equipment  that constitute  fixtures on  the
          Closing Date, Borrower shall use its  best efforts not to  permit
          any item of Equipment  to become a fixture  to real estate or  an
          accession to other property.

               6.9. Taxes.

                    Cause  all   assessments  and   taxes,  whether   real,
          personal, or otherwise, due or payable by, or imposed, levied, or
          assessed against Borrower or  any of its property  to be paid  in
          full,  before  delinquency  or  before  the  expiration  of   any
          extension period, except to the extent that the validity of  such
          assessment or tax shall  be the subject  of a Permitted  Protest.
          Borrower shall make due and timely payment or deposit of all such
          federal, state, and  local taxes,  assessments, or  contributions
          required of it by law, except to the extent that the validity  of
          such assessment  or  tax shall  be  the subject  of  a  Permitted
          Protest, and will  execute and  deliver to  Foothill, on  demand,
          appropriate certificates  attesting  to the  payment  thereof  or
          deposit with respect thereto.  Borrower will make timely  payment
          or deposit of all tax payments and withholding taxes required  of
          it by applicable laws, including those laws concerning  F.I.C.A.,
          F.U.T.A., state disability, and local, state, and federal  income
          taxes, except to the extent that the validity of such  assessment
          or tax shall  be the subject  of a Permitted  Protest, and  will,
          upon  request,  furnish  Foothill  with  proof  satisfactory   to
          Foothill indicating  that  Borrower  has made  such  payments  or
          deposits.

               6.10.                     Insurance.

                    (a)  At  its  expense,   keep  the  Personal   Property
          Collateral  insured  against  loss  or  damage  by  fire,  theft,
          explosion, sprinklers, and  all other hazards  and risks, and  in
          such amounts, as are ordinarily  insured against by other  owners
          in similar  businesses.   Borrower also  shall maintain  business
          interruption, public liability,  product liability, and  property
          damage insurance relating to Borrower's ownership and use of  the
          Personal  Property  Collateral,  as  well  as  insurance  against
          larceny, embezzlement, and criminal misappropriation.

                    (b)  At its expense, obtain and maintain  (i) insurance
          of  the  type  necessary  to  insure  Collateral  for  the   full
          replacement cost thereof,  against any loss  by fire,  lightning,
          windstorm,  hail,  explosion,  aircraft,  smoke  damage,  vehicle
          damage, earthquakes,  elevator collision,  and other  risks  from
          time to time included under "extended coverage" policies, in such
          amounts as Foothill may reasonably require,  but in any event  in
          amounts sufficient to prevent Borrower from becoming a co-insurer
          under such  policies (except  to the  extent of  deductibles  and
          self-insurance retentions standard for companies operating in the
          same line of  business as Borrower)  and (ii) insurance for such
          other risks  as Foothill  may  reasonably require.    Replacement
          costs, at Foothill's option, may be redetermined by an  insurance
          appraiser,  reasonably   satisfactory  to   Foothill,  not   more
          frequently than once every 12 months at Borrower's cost.

                    (c)  Intentionally Omitted.

                    (d)  All such policies  of insurance shall  be in  such
          form, with  such  companies,  and  in  such  amounts  as  may  be
          reasonably satisfactory  to  Foothill.   All  insurance  required
          herein shall be written by companies  which are authorized to  do
          insurance business  in  the  State of  California.    All  hazard
          insurance and  such other  insurance as  Foothill shall  specify,
          shall   contain   a   California   Form   438BFU   (NS) mortgagee
          endorsement,  or  an   equivalent  endorsement  satisfactory   to
          Foothill, showing Foothill as sole loss payee thereof, and  shall
          contain a  waiver  of  warranties.   Every  policy  of  insurance
          referred to in this  Section 6.10 shall  contain an agreement  by
          the insurer that it will not  cancel such policy except after  30
          days prior written notice to Foothill  and that any loss  payable
          thereunder shall be payable notwithstanding any act or negligence
          of Borrower  or  Foothill  which might,  absent  such  agreement,
          result in a forfeiture of all or a part of such insurance payment
          and notwithstanding (i) occupancy or use of any real property for
          purposes more  hazardous  than permitted  by  the terms  of  such
          policy, (ii) any foreclosure or other action or proceeding  taken
          by Foothill pursuant to  the Mortgages upon  the happening of  an
          Event of Default, or  (iii) any change in  title or ownership  of
          any real property.  Borrower shall deliver to Foothill  certified
          copies of such policies of insurance and evidence of the  payment
          of all premiums therefor.

                    (e)  Original   policies   or   certificates    thereof
          satisfactory to  Foothill  evidencing  such  insurance  shall  be
          delivered to Foothill at least 30 days prior to the expiration of
          the existing or preceding policies.  Borrower shall give Foothill
          prompt notice of any  loss covered by  such insurance, and  after
          the occurrence and during the continuance of an Event of Default,
          Foothill shall have the exclusive right (subject to the rights of
          holders of  Permitted  Liens) to  adjust  any loss,  without  any
          liability to Borrower whatsoever in respect of such  adjustments.
          Any monies received as payment for  any loss under any  insurance
          policy including the insurance policies mentioned above, shall be
          paid over  to  Foothill (subject  to  the rights  of  holders  of
          Permitted Liens) to be applied at  the option of Foothill  either
          to the prepayment  of the  Obligations without  premium, in  such
          order or manner as Foothill may  elect, or shall be disbursed  to
          Borrower under stage payment  terms satisfactory to Foothill  for
          application  to   the   cost   of   repairs,   replacements,   or
          restorations.  All repairs,  replacements, or restorations  shall
          be effected with reasonable promptness and shall be of a value at
          least equal to the value of the items or property destroyed prior
          to such damage or  destruction.  Upon  the occurrence and  during
          the continuance of an Event of  Default, Foothill shall have  the
          right to  apply  all  prepaid premiums  to  the  payment  of  the
          Obligations in such order or form as Foothill shall determine.

                    (f)  Borrower shall  not  take out  separate  insurance
          concurrent in form or contributing in the event of loss with that
          required  to  be  maintained  under  this  Section  6.10,  unless
          Foothill is  included  thereon as  named  insured with  the  loss
          payable  to   Foothill  under   a  standard   California   438BFU
          (NS) Mortgagee endorsement, or  its local  equivalent.   Borrower
          immediately  shall   notify  Foothill   whenever  such   separate
          insurance is  taken out,  specifying the  insurer thereunder  and
          full particulars  as to  the policies  evidencing the  same,  and
          originals of  such  policies  immediately shall  be  provided  to
          Foothill.

               6.11.                     No Setoffs or Counterclaims.

                    Make  payments  hereunder  and  under  the  other  Loan
          Documents  by  or  on  behalf  of  Borrower  without  setoff   or
          counterclaim and  free and  clear of,  and without  deduction  or
          withholding for or on  account of, any  federal, state, or  local
          taxes.

               6.12.                     Location of Inventory and Equipment.

                    Keep the Inventory and Equipment only at the  locations
          identified on Schedule 6.12; provided, however, that Borrower may
          amend Schedule  6.12  to add  a  new  location so  long  as  such
          amendment occurs by written notice to Foothill prior to the  date
          on which  the  Inventory  or  Equipment  is  moved  to  such  new
          location, so long as such new location is within the  continental
          United States,  and so  long  as, at  the  time of  such  written
          notification,  Borrower  provides  any  financing  statements  or
          fixture filings  necessary  to  perfect  and  continue  perfected
          Foothill's security interests in such assets.

               6.13.                     Compliance with Laws.

                    Comply with the  requirements of  all applicable  laws,
          rules, regulations,  and orders  of any  governmental  authority,
          including the Fair  Labor Standards  Act and  the Americans  With
          Disabilities Act, other than laws, rules, regulations, and orders
          the non-compliance with which, individually or in the  aggregate,
          would not have  and could not  reasonably be expected  to have  a
          Material Adverse Change.

               6.14.                     Employee Benefits.

                    (a)  Promptly, and in any event within 10 Business Days
          after Borrower or any of its Subsidiaries knows or has reason  to
          know that an ERISA  Event has occurred  that reasonably could  be
          expected to  result  in  a Material  Adverse  Change,  a  written
          statement of the chief  financial officer of Borrower  describing
          such ERISA Event and any action that is being taking with respect
          thereto by Borrower, any such Subsidiary or ERISA Affiliate,  and
          any action taken or threatened by  the IRS, Department of  Labor,
          or PBGC.  Borrower  or such Subsidiary,  as applicable, shall  be
          deemed to  know  all facts  known  by the  administrator  of  any
          Benefit Plan of which it is the plan sponsor, (ii) promptly,  and
          in any event within 3 Business Days after the filing thereof with
          the IRS, a copy of each funding waiver request filed with respect
          to any Benefit Plan and all communications received by  Borrower,
          any of its  Subsidiaries or, to  the knowledge  of Borrower,  any
          ERISA Affiliate with respect to such request, and (iii) promptly,
          and in  any  event  within  3  Business  Days  after  receipt  by
          Borrower, any  of  its  Subsidiaries  or,  to  the  knowledge  of
          Borrower,  any  ERISA  Affiliate,  of  the  PBGC's  intention  to
          terminate a  Benefit  Plan or  to  have a  trustee  appointed  to
          administer a Benefit Plan, copies of each such notice.

                    (b)  Cause to be delivered to Foothill, upon Foothill's
          request, each of  the following:   (i) a copy of  each Plan  (or,
          where any  such  plan is  not  in writing,  complete  description
          thereof) (and if  applicable, related trust  agreements or  other
          funding instruments)  and  all amendments  thereto,  all  written
          interpretations thereof  and  written descriptions  thereof  that
          have  been  distributed  to  employees  or  former  employees  of
          Borrower or its Subsidiaries; (ii) the most recent determination
          letter issued  by the  IRS with  respect  to each  Benefit  Plan;
          (iii) for the three  most recent  plan years,  annual reports  on
          Form 5500  Series  required to  be  filed with  any  governmental
          agency for each Benefit Plan; (iv) all actuarial reports prepared
          for the  last  three plan  years  for each  Benefit  Plan;  (v) a
          listing of all Multiemployer Plans, with the aggregate amount  of
          the most  recent  annual contributions  required  to be  made  by
          Borrower or any ERISA Affiliate to  each such plan and copies  of
          the   collective    bargaining    agreements    requiring    such
          contributions; (vi) any information  that has  been provided  to
          Borrower or any  ERISA Affiliate  regarding withdrawal  liability
          under any Multiemployer Plan;  and (vii) the aggregate amount of
          the most  recent  annual payments  made  to former  employees  of
          Borrower or its Subsidiaries under any Retiree Health Plan.

               6.15.                     Leases.

                    Pay when due all rents and other amounts payable  under
          any leases to which  Borrower is a party  or by which  Borrower's
          properties and assets  are bound,  unless such  payments are  the
          subject of  a Permitted  Protest.   To the  extent that  Borrower
          fails timely  to make  payment of  such rents  and other  amounts
          payable when due under its leases, Foothill shall be entitled, in
          its discretion, to reserve an amount equal to such unpaid amounts
          against the Borrowing Base.

               6.16.                     Notice of Initial Advance.

                    Use its best efforts to provide Foothill with at  least
          15 days  prior  notice of  Borrower's  intention to  request  the
          initial Advance hereunder, provided, that Borrower shall have  no
          liability to Foothill for failure to provide such notice.

               6.17.                     Change Name.

                    Provide Foothill with 15  days prior written notice  of
          any change to Borrower's name, FEIN, identity, or the addition by
          Borrower of any  new fictitious  name; and  provide Foothill,  as
          soon as available  thereafter, with (a)  written evidence of  the
          effectiveness of the same,  including without limitation, in  the
          case of a name change, evidence that Borrower has amended each of
          its qualifications to  do business  as a  foreign corporation  to
          reflect such name change, all in form and substance  satisfactory
          to Foothill, except where  the failure to so  amend would not  be
          reasonably likely to cause a Material Adverse Change and (b)  any
          financing  statements  or  amendments  to  financing   statements
          necessary to  perfect and  continue perfect  Foothill's  security
          interests in the Collateral.

          7.   NEGATIVE COVENANTS.

                    Borrower covenants  and agrees  that,  so long  as  any
          credit hereunder  shall be  available and  until full  and  final
          payment of  the Obligations,  Borrower will  not  do any  of  the
          following without Foothill's prior written consent:

               7.1. Indebtedness.

                    Create, incur, assume, permit, guarantee, or  otherwise
          become or remain, directly or indirectly, liable with respect  to
          any Indebtedness, except:

                    (a)  Indebtedness evidenced by this Agreement, together
          with Indebtedness to issuers  of letters of  credit that are  the
          subject of L/C Guarantees;

                    (b)  Indebtedness set forth on Schedule 7.1;

                    (c)  Indebtedness secured by Permitted Liens; and

                    (d)  refinancings,   renewals,    or   extensions    of
          Indebtedness permitted under clauses (b) and (c) of this  Section
          7.1 (and continuance or renewal of any Permitted Liens associated
          therewith) so  long as:  (i) the  terms  and conditions  of  such
          refinancings, renewals, or  extensions do  not materially  impair
          the prospects of repayment of  the Obligations by Borrower,  (ii)
          the  net  cash  proceeds  of  such  refinancings,  renewals,   or
          extensions  do  not  result  in  an  increase  in  the  aggregate
          principal amount of the  Indebtedness so refinanced, renewed,  or
          extended,  (iii)  such  refinancings,  renewals,  refundings,  or
          extensions do not result in a shortening of the average  weighted
          maturity of the Indebtedness so refinanced, renewed, or extended,
          and (iv) to the extent that  Indebtedness that is refinanced  was
          subordinated in right  of payment  to the  Obligations, then  the
          subordination   terms   and   conditions   of   the   refinancing
          Indebtedness must be at least as  favorable to Foothill as  those
          applicable to the refinanced Indebtedness.

               7.2. Liens.

                    Create, incur, assume, or permit to exist, directly  or
          indirectly, any Lien on or with respect to any of its property or
          assets, of any kind, whether now owned or hereafter acquired,  or
          any income  or  profits  therefrom, except  for  Permitted  Liens
          (including Liens that are replacements of Permitted Liens to  the
          extent that the original Indebtedness is refinanced under Section
          7.1(d) and so long as the  replacement Liens only encumber  those
          assets or property that secured the original Indebtedness).

               7.3. Restrictions on Fundamental Changes.

                    Except  for  the  reverse  stock  split  described   on
          Schedule 7.3 and  except for transactions  to which Foothill  has
          consented  under   Section   7.13,   enter   into   any   merger,
          consolidation, reorganization, or recapitalization, or reclassify
          its capital stock, or liquidate, wind up, or dissolve itself  (or
          suffer any liquidation or dissolution), or convey, sell,  assign,
          lease, transfer, or otherwise dispose of, in one transaction or a
          series of  transactions,  all  or any  substantial  part  of  its
          property or assets.

               7.4. Disposal of Assets.

                    Sell, lease, assign, transfer, or otherwise dispose  of
          any of Borrower's properties  or assets other  than (a) sales  of
          Inventory to buyers in the ordinary course of Borrower's business
          as currently  conducted,  (b)  sales  or  other  dispositions  of
          obsolete  or   unuseful  Equipment   and  (c)   sales  or   other
          dispositions of other Equipment with an aggregate book value  not
          in excess of $50,000 in any fiscal year.

               7.5. Change Corporate Structure.

                    Change  Borrower's  corporate  structure  (within   the
          meaning of Section  9402(7) of  the Code),  except in  connection
          with a transaction to which Foothill has consented under  Section
          7.13.


               7.6. Guarantee.

                    Guarantee or otherwise  become in any  way liable  with
          respect  to  the  obligations  of  any  third  Person  except  by
          endorsement of instruments or items of payment for deposit to the
          account of Borrower or  which are transmitted  or turned over  to
          Foothill.

               7.7. Nature of Business.

                    Make any change in  the principal nature of  Borrower's
          business.

               7.8. Prepayments and Amendments.

                    (a)  Except in connection with a refinancing  permitted
          by Section 7.1(d), prepay, redeem, retire, defease, purchase,  or
          otherwise acquire  any Indebtedness  owing to  any third  Person,
          other than the Obligations in accordance with this Agreement, and

                    (b)  Directly  or  indirectly,  amend,  modify,  alter,
          increase, or  change  any  of the  terms  or  conditions  of  any
          agreement, instrument,  document,  indenture,  or  other  writing
          evidencing  or concerning  Indebtedness permitted under  Sections
          7.1(b), (c), or (d).

               7.9. Change of Control.

                    Cause, permit, or suffer,  directly or indirectly,  any
          Change of Control.

               7.10.                     Consignments.

                    Consign any Inventory in excess of an aggregate  amount
          equal to $1,000,000 at any time or sell any Inventory on bill and
          hold, sale  or return,  sale on  approval, or  other  conditional
          terms of sale.

               7.11.                     Distributions.

                    Except  for  the  reverse  stock  split  described   on
          Schedule 7.3,  make  any  distribution  or  declare  or  pay  any
          dividends (in cash or other  property, other than capital  stock)
          on, or purchase,  acquire, redeem,  or retire  any of  Borrower's
          capital  stock,   of  any   class,  whether   now  or   hereafter
          outstanding.

               7.12.                     Accounting Methods.

                    Modify or  change its  method  of accounting  or  enter
          into, modify, or terminate  any agreement currently existing,  or
          at  any  time  hereafter  entered  into  with  any  third   party
          accounting firm or service bureau for the preparation or  storage
          of Borrower's accounting records without said accounting firm  or
          service bureau agreeing to provide Foothill information regarding
          the Collateral  or  Borrower's  financial  condition.    Borrower
          waives the right to assert  a confidential relationship, if  any,
          it may  have  with  any accounting  firm  or  service  bureau  in
          connection with any information requested by Foothill pursuant to
          or in accordance  with this Agreement,  and agrees that  Foothill
          may contact directly any such  accounting firm or service  bureau
          in order to obtain such information.

               7.13.                     Investments.

                    Directly or  indirectly  make, acquire,  or  incur  any
          liabilities  (including   contingent  obligations)   for  or   in
          connection with (a)  the acquisition of  the securities  (whether
          debt or equity) of, or other  interests in, a Person, (b)  except
          in connection with a transaction to which Foothill has  consented
          under clause (a) or  (c) of this  Section 7.13, loans,  advances,
          capital contributions, or transfers of property to a Person,  (c)
          the acquisition of all or substantially all of the properties  or
          assets of a Person or (d) Permitted Investments.  Foothill  shall
          not unreasonably withhold its consent to a request by Borrower to
          take any action prohibited under clause (a) or (c) above.

               7.14.                     Transactions with Affiliates.

                    Directly or indirectly  enter into or  permit to  exist
          any material transaction  with any Affiliate  of Borrower  except
          for transactions that  are in the  ordinary course of  Borrower's
          business,  upon  fair  and  reasonable  terms,  that  are   fully
          disclosed to Foothill, and that are no less favorable to Borrower
          than would be obtained in an arm's length transaction with a non-
          Affiliate.

               7.15.                     Suspension.

                    Suspend or  go  out of  a  substantial portion  of  its
          business.

               7.16.                     Intentionally Omitted.

               7.17.                     Use of Proceeds.

                    Use the proceeds of the Advances and Letters of  Credit
          issued made hereunder for any purpose other than, consistent with
          the  terms  and  conditions  hereof,  its  lawful  and  permitted
          corporate purposes, including without  limitation to provide  for
          ongoing working capital  and letter of  credit needs of  Borrower
          and to finance acquisitions to which Foothill has consented under
          Section 7.13.

               7.18.  Change in Location of Chief Executive Office.

                    Relocate its chief executive  office to a new  location
          without providing 30 days  prior written notification thereof  to
          Foothill  and  so  long   as,  at  the   time  of  such   written
          notification,  Borrower  provides  any  financing  statements  or
          fixture filings  necessary  to  perfect  and  continue  perfected
          Foothill's security interests.


               7.19.     No Prohibited Transactions Under ERISA.

                    Directly or indirectly:

                    (a)  engage, or permit  any Subsidiary  of Borrower  to
          engage, in any prohibited transaction which is reasonably  likely
          to  result  in  a  civil  penalty  or  excise  tax  described  in
          Sections 406 of ERISA or 4975 of the IRC for which a statutory or
          class exemption is not available or  a private exemption has  not
          been previously obtained from the Department of Labor;

                    (b)  permit to exist with  respect to any Benefit  Plan
          any accumulated funding deficiency (as defined in Sections 302 of
          ERISA and 412 of the IRC), whether or not waived;

                    (c)  fail, or  permit  any Subsidiary  of  Borrower  to
          fail, to pay timely required contributions or annual installments
          due with respect to any waived funding deficiency to any  Benefit
          Plan;

                    (d)  terminate, or permit any Subsidiary of Borrower to
          terminate, any Benefit Plan where such event would result in  any
          liability of  Borrower,  any of  its  Subsidiaries or  any  ERISA
          Affiliate under Title IV of ERISA;

                    (e)  fail, or  permit  any Subsidiary  of  Borrower  to
          fail, to  make  any  required  contribution  or  payment  to  any
          Multiemployer Plan;

                    (f)  fail, or  permit  any Subsidiary  of  Borrower  to
          fail, to  pay  any  required installment  or  any  other  payment
          required under Section 412 of the IRC on or  before the due date
          for such installment or other payment;

                    (g)  amend, or  permit any  Subsidiary of  Borrower  to
          amend, a Plan resulting in an  increase in current liability  for
          the plan year  such that either  of Borrower,  any Subsidiary  of
          Borrower or any ERISA Affiliate  is required to provide  security
          to such Plan under Section 401(a)(29) of the IRC; or

                    (h)  withdraw, or permit any Subsidiary of Borrower  to
          withdraw, from any  Multiemployer Plan where  such withdrawal  is
          reasonably likely to result in any  liability of any such  entity
          under Title IV of ERISA;

          which, individually or in the aggregate, results in or reasonably
          would be expected to  result in a claim  against or liability  of
          Borrower, any  of  its Subsidiaries  or  any ERISA  Affiliate  in
          excess of $300,000.

               7.20.                     Financial Covenants.

                    Fail to maintain:


                    (a)  Net Worth.  Net Worth  of at least the  applicable
          amount set forth below as of each date set forth below:

                               Date                    Net Worth

                    The last day of the 1997        (-$14,000,000)
                    fiscal year

                    The last day of the first       (-$14,000,000)
                    quarter of the 1998 fiscal
                    year

                    The last day of the second      (-$14,000,000)
                    quarter of the 1998 fiscal
                    year

                    The last day of the third       (-$13,800,000)
                    quarter of the 1998 fiscal
                    year

                    The last day of the fourth      (-$13,500,000)
                    quarter of the 1998 fiscal
                    year

                    The last day of the first       (-$13,200,000)
                    quarter of the 1999 fiscal
                    year

                    The last day of the second      (-$12,900,000)
                    quarter of the 1999 fiscal
                    year

                    The last day of the third       (-$12,500,000)
                    quarter of the 1999 fiscal
                    year

                    The last day of the fourth      (-$12,000,000)
                    quarter of the 1999 fiscal
                    year and the last day of
                    each fiscal quarter
                    thereafter

                    (b)  Working Capital.  Working Capital of at least  (i)
          (-$11,500,000), measured  on  the last  day  of the  last  fiscal
          quarter of the  1997 fiscal year  and the last  day of the  first
          fiscal quarter of the 1998 fiscal year, and (ii)  (-$10,200,000),
          measured on the last day of  each fiscal quarter after the  first
          fiscal quarter of the 1998 fiscal year.

               7.21.                     Capital Expenditures.

                    Make capital expenditures in any fiscal year in  excess
          of $500,000.<PAGE>





               7.22.                     Subsidiary Activities.

                    Permit any of  Borrower's Subsidiaries  to conduct  any
          material business operations, own any material assets or have any
          material liabilities.

          8.   EVENTS OF DEFAULT.

                    Any  one  or  more   of  the  following  events   shall
          constitute an  event of  default (each,  an "Event  of  Default")
          under this Agreement:

               8.1. If Borrower fails to pay when  due and payable or  when
          declared due and  payable, any portion  of the Obligations  other
          than  principal  (including  any  interest  which,  but  for  the
          provisions of the  Bankruptcy Code,  would have  accrued on  such
          amounts), and such failure continues for 3 days thereafter; or if
          Borrower fails to pay when due and payable, or when declared  due
          and  payable,  any  portion  of  the  Obligations  consisting  of
          principal;

               8.2. If Borrower  fails to  perform,  keep, or  observe  any
          term, provision, condition, covenant,  or agreement contained  in
          (a) Section 6.2 of this Agreement and such failure continues  for
          5 days thereafter, (b) any of Section 6.4, 6.5, 6.9, 6.12,  6.13,
          6.14 or 6.15 of this Agreement and such failure continues for  15
          days thereafter or (c)  any other section  of this Agreement,  of
          any of the  Loan Documents,  or of  any other  present or  future
          agreement between Borrower and Foothill;

               8.3. If there is a Material Adverse Change;

               8.4. If any  material portion  of Borrower's  properties  or
          assets is  attached,  seized, subjected  to  a writ  or  distress
          warrant, or is levied upon, or  comes into the possession of  any
          third Person;

               8.5. If an Insolvency Proceeding is commenced by Borrower;

               8.6. If  an  Insolvency  Proceeding  is  commenced   against
          Borrower and any  of the  following events  occur:   (a) Borrower
          consents to the institution of the Insolvency Proceeding  against
          it; (b) the petition commencing the Insolvency Proceeding is not
          timely controverted; (c) the petition commencing  the Insolvency
          Proceeding is not dismissed within 45  calendar days of the  date
          of the  filing  thereof;  provided,  however,  that,  during  the
          pendency of  such  period,  Foothill shall  be  relieved  of  its
          obligation to extend credit hereunder; (d) an interim trustee is
          appointed to take possession of all  or a substantial portion  of
          the properties or assets of, or to operate all or any substantial
          portion of the business of, Borrower; or (e) an order for relief
          shall have been issued or entered therein;

               8.7. If Borrower  is enjoined,  restrained,  or in  any  way
          prevented by court order  from continuing to  conduct all or  any
          material part of its business affairs;

               8.8. If a notice of Lien, levy,  or assessment in an  amount
          in excess of $100,000 or in respect of payroll taxes is filed  of
          record with respect to any of Borrower's properties or assets  by
          the United  States  Government,  or any  department,  agency,  or
          instrumentality thereof, or by  any state, county, municipal,  or
          governmental agency, or if any taxes  or debts owing at any  time
          in an amount in excess of $100,000 or in respect of payroll taxes
          hereafter to any  one or more  of such entities  becomes a  Lien,
          whether choate or otherwise, upon any of Borrower's properties or
          assets and the same is not  paid on the payment date thereof,  in
          each case, whether or not the same is (a) subject to a  Permitted
          Protest, (b) constitutes a Permitted Lien  or (c) is the  subject
          of a reserve under Section 2.1(b).

               8.9. If a judgment or other claim in an amount in excess  of
          $1,000,000 becomes  a Lien  or encumbrance  upon any  portion  of
          Borrower's properties or assets, other than any such judgment  or
          claim that has been vacated,  stayed, discharged or fully  bonded
          pending appeal or is insured (and Foothill is satisfied that  the
          insurer will not challenge  its liability with respect  thereto),
          so  long  as  the  uninsured  portion  thereof  does  not  exceed
          $1,000,000, in each case whether or  not the same is (a)  subject
          to a Permitted Protest, (b) constitutes  a Permitted Lien or  (c)
          is the subject of a reserve under Section 2.1(b).

               8.10.If there  is a  default in  any material  agreement  to
          which Borrower is a party with one or more third Persons and that
          evidences or secures  Indebtedness in excess  of $1,000,000,  and
          such default (a) occurs at the final maturity of the  obligations
          thereunder, or (b) results  in a right  by such third  Person(s),
          irrespective of whether exercised, to accelerate the maturity  of
          Borrower's obligations thereunder;

               8.11. If  Borrower   makes   any  payment   on   account   of
          Indebtedness that has been contractually subordinated in right of
          payment to the payment of the  Obligations, except to the  extent
          such payment  is  permitted by  the  terms of  the  subordination
          provisions applicable to such Indebtedness;

               8.12. If  any  material  misstatement  or   misrepresentation
          exists  now  or  hereafter   in  any  warranty,   representation,
          statement, or report made to Foothill by Borrower or any officer,
          employee, agent, or director of Borrower, or if any such material
          warranty or representation is withdrawn; or

               8.13.  If the obligation of  any guarantor under its  guaranty
          or other Loan Document is limited  or terminated by operation  of
          law or by the guarantor thereunder or any such guarantor  becomes
          the subject of an Insolvency Proceeding.

          9.   FOOTHILL'S RIGHTS AND REMEDIES.

               9.1. Rights and Remedies.

                    Upon the occurrence, and during the continuation, of an
          Event of Default Foothill may, at its election, without notice of
          its election  and without  demand,  do any  one  or more  of  the
          following, all of which are authorized by Borrower:

                    (a)  Declare all Obligations, whether evidenced by this
          Agreement, by  any of  the other  Loan Documents,  or  otherwise,
          immediately due and payable;

                    (b)  Cease advancing money  or extending  credit to  or
          for the benefit of  Borrower under this  Agreement, under any  of
          the Loan Documents, or under any other agreement between Borrower
          and Foothill;

                    (c)  Terminate this Agreement and any of the other Loan
          Documents as to any future  liability or obligation of  Foothill,
          but without affecting Foothill's rights and security interests in
          the Personal Property Collateral or the Real Property  Collateral
          and without affecting the Obligations;

                    (d)  Settle or adjust disputes and claims directly with
          Account  Debtors  for  amounts  and  upon  terms  which  Foothill
          considers advisable,  and in  such  cases, Foothill  will  credit
          Borrower's Loan Account  with only  the net  amounts received  by
          Foothill in payment of such disputed Accounts after deducting all
          Foothill Expenses incurred or expended in connection therewith;

                    (e)  Cause Borrower to hold  all returned Inventory  in
          trust for  Foothill, segregate  all returned  Inventory from  all
          other property  of  Borrower  or  in  Borrower's  possession  and
          conspicuously label said  returned Inventory as  the property  of
          Foothill;

                    (f)  Without notice to or  demand upon Borrower or  any
          guarantor, make  such  payments  and do  such  acts  as  Foothill
          considers  necessary  or  reasonable  to  protect  its   security
          interests in the Personal  Property Collateral.  Borrower  agrees
          to assemble  the  Personal  Property Collateral  if  Foothill  so
          requires, and to make the Personal Property Collateral  available
          to Foothill  as  Foothill  may designate.    Borrower  authorizes
          Foothill to  enter  the  premises  where  the  Personal  Property
          Collateral is located,  to take  and maintain  possession of  the
          Personal Property  Collateral, or  any part  of it,  and to  pay,
          purchase, contest, or compromise any encumbrance, charge, or Lien
          that in  Foothill's determination  appears to  conflict with  its
          security interests and to pay all expenses incurred in connection
          therewith.  With  respect to any  of Borrower's  owned or  leased
          premises, Borrower hereby grants Foothill a license to enter into
          possession of  such  premises and  to  occupy the  same,  without
          charge, in order to exercise any of Foothill's rights or remedies
          provided herein, at law, in equity, or otherwise, but only to the
          extent not  prohibited  by  any applicable  lease  or  Collateral
          Access Agreement;

                    (g)  Without notice  to  Borrower  (such  notice  being
          expressly waived), and  without constituting a  retention of  any
          collateral in satisfaction of  an obligation (within the  meaning
          of  Section  9505  of  the  Code),  set  off  and  apply  to  the
          Obligations any and  all (i)  balances and  deposits of  Borrower
          held by Foothill (including any  amounts received in the  Lockbox
          Accounts), or (ii) indebtedness at any  time owing to or for  the
          credit or the account of Borrower held by Foothill;

                    (h)  Hold, as cash collateral, any and all balances and
          deposits of Borrower held by  Foothill, and any amounts  received
          in the Lockbox Accounts, to secure  the full and final  repayment
          of all of the Obligations;

                    (i)  Ship, reclaim, recover,  store, finish,  maintain,
          repair, prepare for sale,  advertise for sale,  and sell (in  the
          manner provided  for herein)  the Personal  Property  Collateral.
          Foothill is  hereby granted  a license  or  other right  to  use,
          without charge, Borrower's labels, patents, copyrights, rights of
          use of any name, trade secrets, trade names, trademarks,  service
          marks, and  advertising  matter, or  any  property of  a  similar
          nature, as it  pertains to the  Personal Property Collateral,  in
          completing production of, advertising  for sale, and selling  any
          Personal Property  Collateral  and Borrower's  rights  under  all
          licenses and all franchise  agreements shall inure to  Foothill's
          benefit;

                    (j)  Sell the Personal Property Collateral at either  a
          public or private sale, or both, by way of one or more  contracts
          or transactions, for cash or on terms, in such manner and at such
          places (including Borrower's premises) as Foothill determines  is
          commercially reasonable.  It is  not necessary that the  Personal
          Property Collateral be present at any such sale;

                    (k)  Foothill shall give notice  of the disposition  of
          the Personal Property Collateral as follows:

                         (i)  Foothill shall  give Borrower  and  each
                    holder of  a  security interest  in  the  Personal
                    Property Collateral who has filed with Foothill  a
                    written request for notice, a notice in writing of
                    the time and place of public sale, or, if the sale
                    is a private sale or some other disposition  other
                    than a public sale is to  be made of the  Personal
                    Property Collateral,  then the  time on  or  after
                    which the private sale or other disposition is  to
                    be made;

                         (ii) The notice shall be personally delivered
                    or  mailed,  postage   prepaid,  to  Borrower   as
                    provided in Section 12, at least 5 days before the
                    date fixed for the sale, or at least 5 days before
                    the date on  or after  which the  private sale  or
                    other disposition is to  be made; no notice  needs
                    to be  given  prior  to  the  disposition  of  any
                    portion of the  Personal Property Collateral  that
                    is perishable or threatens to decline speedily  in
                    value or that is of a  type customarily sold on  a
                    recognized market.  Notice  to Persons other  than
                    Borrower claiming  an  interest  in  the  Personal
                    Property  Collateral   shall  be   sent  to   such
                    addresses as they have furnished to Foothill;


                         (iii) If the  sale is  to  be a  public  sale,
                    Foothill also shall  give notice of  the time  and
                    place by publishing a notice  one time at least  5
                    days before the date of the sale in a newspaper of
                    general circulation  in the  county in  which  the
                    sale is to be held, or as is otherwise required by
                    the Code;

                    (l)  Foothill may credit bid and purchase at any public
          sale; and

                    (m)  Any deficiency  that exists  after disposition  of
          the Personal Property Collateral as  provided above will be  paid
          immediately by Borrower.   Any excess  will be returned,  without
          interest and subject to the rights of third Persons, by  Foothill
          to Borrower.

               9.2. Remedies Cumulative.

                    Foothill's rights  and remedies  under this  Agreement,
          the Loan Documents, and all other agreements shall be cumulative.
          Foothill  shall   have  all   other  rights   and  remedies   not
          inconsistent herewith as provided under the  Code, by law, or  in
          equity.  No exercise by Foothill of one right or remedy shall  be
          deemed an election,  and no waiver  by Foothill of  any Event  of
          Default shall  be  deemed  a continuing  waiver.    No  delay  by
          Foothill shall constitute a waiver, election, or acquiescence  by
          it.

          10.  TAXES AND EXPENSES.

                    If Borrower  fails to  pay any  monies (whether  taxes,
          assessments, insurance  premiums,  or,  in  the  case  of  leased
          properties or assets, rents or  other amounts payable under  such
          leases) due to third  Persons, or fails to  make any deposits  or
          furnish any required proof of payment or deposit, all as required
          under the  terms of  this Agreement,  then,  to the  extent  that
          Foothill reasonably  determines  that such  failure  by  Borrower
          could result in a Material Adverse Change, in its discretion  and
          without prior notice to Borrower, Foothill  may do any or all  of
          the following:  (a) make payment of the same or any part thereof;
          (b) set up such reserves under  Section 2.1(b) as Foothill  deems
          necessary to protect Foothill from  the exposure created by  such
          failure; or (c)  obtain and  maintain insurance  policies of  the
          type described in Section 6.10, and take any action with  respect
          to such policies  as Foothill deems  prudent.   Any such  amounts
          paid by Foothill  shall constitute Foothill  Expenses.   Foothill
          agrees to provide Borrower with prompt notice of any such  action
          taken by Foothill.  Any such payments made by Foothill shall  not
          constitute an agreement by Foothill  to make similar payments  in
          the future or a waiver by Foothill of any Event of Default  under
          this Agreement.  Foothill need not inquire as to, or contest  the
          validity of, any such  expense, tax, or Lien  and the receipt  of
          the usual  official  notice  for the  payment  thereof  shall  be
          conclusive evidence that the same was validly due and owing.


          11.  WAIVERS; INDEMNIFICATION.

               11.1.                     Demand; Protest; etc.

                    Borrower waives  demand,  protest, notice  of  protest,
          notice of default or dishonor, notice of payment and  nonpayment,
          nonpayment  at   maturity,   release,   compromise,   settlement,
          extension,  or  renewal  of  accounts,  documents,   instruments,
          chattel paper, and  guarantees at any  time held  by Foothill  on
          which Borrower may in any way be liable.

               11.2.                     Foothill's Liability for Collateral.

                    So long as Foothill  complies with its obligations,  if
          any, under Section 9207  of the Code, Foothill  shall not in  any
          way or manner be liable or responsible for:  (a) the  safekeeping
          of the Collateral; (b)  any loss or  damage thereto occurring  or
          arising in  any  manner  or  fashion  from  any  cause;  (c)  any
          diminution in the value thereof; or (d) any act or default of any
          carrier,  warehouseman,  bailee,  forwarding  agency,  or   other
          Person.   All  risk  of  loss,  damage,  or  destruction  of  the
          Collateral shall be borne by Borrower.

               11.3.                     Indemnification.

                    Borrower  shall  pay,   indemnify,  defend,  and   hold
          Foothill and its officers, directors, employees, counsel, agents,
          and attorneys-in-fact  (each, an  "Indemnified Person")  harmless
          (to the fullest extent permitted by law) from and against any and
          all claims, demands, suits, actions, investigations, proceedings,
          and damages, and all reasonable attorneys fees and  disbursements
          and other  costs and  expenses  actually incurred  in  connection
          therewith (as  and when  they are  incurred and  irrespective  of
          whether suit is brought), at  any time asserted against,  imposed
          upon, or  incurred by  any of  them in  connection with  or as  a
          result of  or related  to the  execution, delivery,  enforcement,
          performance, and administration of  this Agreement and any  other
          Loan Documents or the transactions contemplated herein, and  with
          respect to any investigation,  litigation, or proceeding  related
          to this Agreement,  any other Loan  Document, or the  use of  the
          proceeds  of  the  credit  provided  hereunder  (irrespective  of
          whether any Indemnified Person is a  party thereto), or any  act,
          omission, event  or circumstance  in any  manner related  thereto
          (all the foregoing, collectively, the "Indemnified Liabilities").
          Borrower shall have no obligation to any Indemnified Person under
          this Section 11.3 with respect to any Indemnified Liability  that
          a court  of competent  jurisdiction  finally determines  to  have
          resulted from the gross negligence or willful misconduct of  such
          Indemnified Person.  This provision shall survive the termination
          of this Agreement and the repayment of the Obligations.

          12.  NOTICES.

                    Unless  otherwise  provided  in  this  Agreement,   all
          notices or demands by any party relating to this Agreement or any
          other Loan Document shall be in writing and (except for financial
          statements and other informational documents which may be sent by
          first-class mail, postage prepaid) shall be personally  delivered
          or sent by registered or certified mail (postage prepaid,  return
          receipt  requested),  overnight  courier,  or  telefacsimile   to
          Borrower or to Foothill, as the  case may be, at its address  set
          forth below:

                    If to Borrower:       MULTIGRAPHICS, INC.
                                          431 Lakeview Court
                                          Mount Prospect, Illinois  60056
                                          Attn:  Chief Financial Officer
                                          Fax No.:  (847) 375-1810

                    with copies to:       SIDLEY & AUSTIN
                                          One First National Plaza
                                          Chicago, Illinois  60603
                                          Attn:  Bryan Krakauer, Esq.
                                          Fax No.:  (312) 853-7036

                    If to Foothill:       FOOTHILL CAPITAL CORPORATION
                                          11111 Santa Monica Boulevard
                                          Suite 1500
                                          Los Angeles, California  90025-
                                          3333
                                          Attn:  Business Finance Division
                                          Manager
                                          Fax No.:  (310) 478-9788

                    with copies to:       GOLDBERG, KOHN, BELL, BLACK,
                                            ROSENBLOOM & MORITZ, LTD.
                                          55 East Monroe Street
                                          Suite 3700
                                          Chicago, Illinois  60603
                                          Attn:  David L. Dranoff, Esq.
                                          Fax No.:  (312) 332-2196

                    The parties hereto may change the address at which they
          are to receive  notices hereunder, by  notice in  writing in  the
          foregoing manner given to the other.  All notices or demands sent
          in accordance  with  this  Section  12,  other  than  notices  by
          Foothill in connection with  Sections 9504 or  9505 of the  Code,
          shall be deemed  received on the  earlier of the  date of  actual
          receipt or  3  days  after  the  deposit  thereof  in  the  mail.
          Borrower acknowledges and agrees that notices sent by Foothill in
          connection with Sections 9504 or 9505 of the Code shall be deemed
          sent when  deposited in  the mail  or personally  delivered,  or,
          where  permitted  by  law,  transmitted  telefacsimile  or  other
          similar method set forth above.

          13.  CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

                    THE VALIDITY  OF  THIS  AGREEMENT AND  THE  OTHER  LOAN
          DOCUMENTS (UNLESS  EXPRESSLY  PROVIDED  TO  THE  CONTRARY  IN  AN
          ANOTHER LOAN  DOCUMENT),  THE CONSTRUCTION,  INTERPRETATION,  AND
          ENFORCEMENT HEREOF AND  THEREOF, AND  THE RIGHTS  OF THE  PARTIES
          HERETO AND THERETO WITH RESPECT TO ALL MATTERS ARISING  HEREUNDER
          OR THEREUNDER OR  RELATED HERETO OR  THERETO SHALL BE  DETERMINED
          UNDER, GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE LAWS  OF
          THE STATE OF CALIFORNIA.  THE  PARTIES AGREE THAT ALL ACTIONS  OR
          PROCEEDINGS ARISING  IN CONNECTION  WITH THIS  AGREEMENT AND  THE
          OTHER LOAN DOCUMENTS  SHALL BE TRIED  AND LITIGATED  ONLY IN  THE
          STATE AND FEDERAL COURTS  LOCATED IN THE  COUNTY OF LOS  ANGELES,
          STATE OF CALIFORNIA OR,  AT THE SOLE OPTION  OF FOOTHILL, IN  ANY
          OTHER COURT IN WHICH FOOTHILL  SHALL INITIATE LEGAL OR  EQUITABLE
          PROCEEDINGS AND WHICH  HAS SUBJECT MATTER  JURISDICTION OVER  THE
          MATTER IN CONTROVERSY.  EACH OF BORROWER AND FOOTHILL WAIVES,  TO
          THE EXTENT PERMITTED  UNDER APPLICABLE  LAW, ANY  RIGHT EACH  MAY
          HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO  OBJECT
          TO VENUE TO THE  EXTENT ANY PROCEEDING  IS BROUGHT IN  ACCORDANCE
          WITH THIS SECTION 13.  BORROWER  AND FOOTHILL HEREBY WAIVE  THEIR
          RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
          BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY  OF
          THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS,
          TORT CLAIMS, BREACH OF DUTY CLAIMS,  AND ALL OTHER COMMON LAW  OR
          STATUTORY CLAIMS.  EACH OF BORROWER AND FOOTHILL REPRESENTS  THAT
          IT HAS REVIEWED  THIS WAIVER AND  EACH KNOWINGLY AND  VOLUNTARILY
          WAIVES ITS JURY  TRIAL RIGHTS FOLLOWING  CONSULTATION WITH  LEGAL
          COUNSEL.  IN THE  EVENT OF LITIGATION, A  COPY OF THIS  AGREEMENT
          MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

          14.  DESTRUCTION OF BORROWER'S DOCUMENTS.

                    All documents,  schedules, invoices,  agings, or  other
          papers delivered  to  Foothill  may  be  destroyed  or  otherwise
          disposed of by Foothill 4 months  after they are delivered to  or
          received by Foothill, unless  Borrower requests, in writing,  the
          return of said  documents, schedules, or  other papers and  makes
          arrangements, at Borrower's expense, for their return.

          15.  GENERAL PROVISIONS.

               15.1.                     Effectiveness.

                    This Agreement shall  be binding  and deemed  effective
          when executed by Borrower and Foothill.

               15.2.                     Successors and Assigns.

                    This Agreement shall bind and  inure to the benefit  of
          the respective successors  and assigns  of each  of the  parties;
          provided, however, that Borrower may not assign this Agreement or
          any rights or duties  hereunder without Foothill's prior  written
          consent and any prohibited  assignment shall be absolutely  void.
          Foothill (a) may assign this Agreement and its rights and  duties
          hereunder and no consent or approval  by Borrower is required  in
          connection with any such assignment and (b) reserves the right to
          sell, assign, transfer, negotiate, or grant participations in all
          or any part of, or any interest in Foothill's rights and benefits
          hereunder; provided that without Borrower's prior consent  (which
          will not be  unreasonably withheld) (i)  Foothill will retain  at
          least $5,000,000 of the  commitments evidenced by this  Agreement
          and (ii) no more  than 3 Persons  (including Foothill) will  hold
          interests (either by way of assignment or participation), in this
          Agreement and  the  Obligations.   In  connection with  any  such
          assignment or participation, Foothill may disclose all  documents
          and information which Foothill now or hereafter may have relating
          to Borrower or Borrower's business.  To the extent that  Foothill
          assigns its rights and obligations hereunder to a third Person as
          provided in  this  Section  15.2, Foothill  thereafter  shall  be
          released from  such assigned  obligations  to Borrower  and  such
          assignment shall  effect a  novation  between Borrower  and  such
          third Person.

               15.3.                     Section Headings.

                    Headings and  numbers have  been set  forth herein  for
          convenience only.    Unless  the contrary  is  compelled  by  the
          context, everything contained in each section applies equally  to
          this entire Agreement.

               15.4.                     Interpretation.

                    Neither this Agreement nor any uncertainty or ambiguity
          herein  shall  be  construed  or  resolved  against  Foothill  or
          Borrower, whether under  any rule of  construction or  otherwise.
          On the contrary, this Agreement has been reviewed by all  parties
          and shall be construed and interpreted according to the  ordinary
          meaning of the words used so as to fairly accomplish the purposes
          and intentions of all parties hereto.

               15.5.                     Severability of Provisions.

                    Each provision  of this  Agreement shall  be  severable
          from every other provision of this  Agreement for the purpose  of
          determining the legal enforceability of any specific provision.

               15.6.                     Amendments in Writing.

                    This Agreement can only be amended by a writing  signed
          by both Foothill and Borrower.

               15.7.                 Counterparts; Telefacsimile Execution.

                    This  Agreement  may  be  executed  in  any  number  of
          counterparts and by different  parties on separate  counterparts,
          each of which, when executed and delivered, shall be deemed to be
          an original,  and  all  of  which,  when  taken  together,  shall
          constitute but  one  and the  same  Agreement.   Delivery  of  an
          executed counterpart of this Agreement by telefacsimile shall  be
          equally  as  effective  as  delivery  of  an  original   executed
          counterpart of this Agreement.  Any party delivering an  executed
          counterpart of this Agreement by telefacsimile also shall deliver
          an original  executed  counterpart  of  this  Agreement  but  the
          failure to  deliver an  original executed  counterpart shall  not
          affect the validity, enforceability,  and binding effect of  this
          Agreement.

               15.8.             Revival and Reinstatement of Obligations.

                    If the  incurrence or  payment  of the  Obligations  by
          Borrower or any guarantor of the  Obligations or the transfer  by
          either or both  of such parties  to Foothill of  any property  of
          either or both of such parties should for any reason subsequently
          be declared to be void or voidable under any state or federal law
          relating  to  creditors'  rights,  including  provisions  of  the
          Bankruptcy Code relating to fraudulent conveyances,  preferences,
          and other voidable or recoverable payments of money or  transfers
          of  property  (collectively,  a  "Voidable  Transfer"),  and   if
          Foothill is required to  repay or restore, in  whole or in  part,
          any  such  Voidable  Transfer,  or  elects  to  do  so  upon  the
          reasonable advice of its counsel, then,  as to any such  Voidable
          Transfer, or  the amount  thereof that  Foothill is  required  or
          elects to  repay or  restore, and  as  to all  reasonable  costs,
          expenses, and  attorneys fees  of Foothill  related thereto,  the
          liability of Borrower  or such guarantor  automatically shall  be
          revived, reinstated, and restored and shall exist as though  such
          Voidable Transfer had never been made.

               15.9.                     Integration.

                    This Agreement, together with the other Loan Documents,
          reflects the entire understanding of the parties with respect  to
          the  transactions   contemplated   hereby  and   shall   not   be
          contradicted  or  qualified  by  any  other  agreement,  oral  or
          written, before the date hereof.

               15.10.                      Confidentiality.

                    Foothill agrees that it  will not disclose without  the
          prior consent of Borrower (other than to its employees, auditors,
          counsel or other professional advisors or to its Affiliates)  any
          information with respect to Borrower which is furnished  pursuant
          to this Agreement; provided, that Foothill may disclose any  such
          information (a) as has become generally available to the  public,
          (b) as  may be  required in  any report,  statement or  testimony
          submitted to  any municipal,  state  or Federal  regulatory  body
          having or claiming to have jurisdiction  over Foothill or to  the
          Federal  Reserve   Board  or   the  Federal   Deposit   Insurance
          Corporation or  similar  organizations  (whether  in  the  United
          States or elsewhere) or their successors, (c) as may be  required
          in response to any summons or subpoena or in connection with  any
          litigation, to  the  extent  permitted  or  deemed  advisable  by
          counsel, (d) in order to comply  with any law, order,  regulation
          or ruling  applicable  to Foothill  and  (e) to  any  prospective
          permitted transferee in connection with any contemplated transfer
          by Foothill of all or a  portion of the commitments evidenced  by
          this  Agreement  (provided,   that  such  prospective   permitted
          transferee  executes  an   agreement  with  Foothill   containing
          provisions substantially  identical to  those contained  in  this
          Section 15.10).

                    IN WITNESS WHEREOF, the parties hereto have caused this
          Agreement to be executed.


                                     MULTIGRAPHICS, INC., formerly known
                                     as AM INTERNATIONAL, INC.,
                                     a Delaware corporation


                                     By   /s/ Gregory T. Knipp
                                     Title Vice President, Chief Financial
                                     Officer


                                     FOOTHILL CAPITAL CORPORATION,
                                     a California corporation


                                     By  /s/ Mike Sadilek
                                     Title Senior Vice President