ACCOUNTS RECEIVABLE AND INVENTORY LOAN AGREEMENT


           This Agreement ("Agreement") is entered into as of August 30, 2001,
by and between ALGER MANUFACTURING COMPANY, INC., a California corporation
("Borrower"), and CITY NATIONAL BANK, a national banking association ("CNB").

1.       DEFINITIONS. As used in this Agreement, these terms have the following
         meanings:

         1.1 "ACCOUNT" or "ACCOUNTS" has the meaning given in the Code, and
includes, but is not limited to, any right to payment for goods sold or leased
or for services rendered which is not evidenced by an instrument or chattel
paper from any Person, whether now existing or hereafter arising or acquired,
whether or not it has been earned by performance.

         1.2 "ACCOUNT DEBTOR" means the Person obligated on an Account.

         1.3 "AFFILIATE" means any Person directly or indirectly controlling,
controlled by, or under common control with Borrower, and includes any employee
stock ownership plan of Borrower or an Affiliate. "Control" (including with
correlative meaning, the terms "controlling," "controlled by" and "under common
control with"), as applied to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of that Person, whether through the ownership of voting securities, by
contract or otherwise.

         1.4 "AUDIT FEE" is $2,700.00 on an annual basis for field examination
and audit of Borrower's operations, books and records and the Collateral.

         1.5 "BORROWER'S LOAN ACCOUNT" means the statement of daily balances on
the books of CNB in which will be recorded Revolving Credit Loans made by CNB to
Borrower, payments made on such loans, and other appropriate debits and credits
as provided by this Agreement. CNB will provide a statement of account for
Borrower's Loan Account at least once each month on a date established by CNB,
which statement will be accepted by and conclusively binding upon Borrower
unless it notifies CNB in writing to the contrary, within five (5) days of
receipt of such statement, or ten (10) days after sending of such statement if
Borrower does not notify CNB of its non-receipt of the statement. Statements
regarding other credit extended to Borrower will be provided separately.

         1.6 "BORROWING BASE" will be in an amount, determined by CNB, equal to
the sum of:

             1.6.1 Eighty percent (80%) of the Eligible Accounts ("Accounts
Borrowing Base"); and

             1.6.2 Forty percent (40%) of the Eligible Inventory ("Inventory
Borrowing Base");

             In no event will (a) the Inventory Borrowing Base exceed the lesser
of (i) $1,000,000.00 or (ii) the Accounts Borrowing Base or (b) the Borrowing
Base exceed the Revolving Credit Commitment.

         1.7 "BORROWING BASE CERTIFICATE" means the certificate, in form and
satisfactory to CNB, executed by Borrower to evidence the Borrowing Base.

         1.8 "BUSINESS DAY" means a day that CNB's Head Office is open and
conducts a substantial portion of its business.

         1.9 "CASH FLOW FROM OPERATIONS" will be determined on a consolidated
basis for Borrower and the Subsidiaries and means the sum of (a) net income
after taxes and before extraordinary items in accordance with GAAP, plus (b)
amortization of intangible assets, plus (c) interest expense, plus (d)
depreciation, each of such items computed on an annualized basis.


<PAGE>


         1.10 "CODE" means the Uniform Commercial Code of California, as
currently in effect and as amended and replaced from time to time, except where
the Uniform Commercial Code of another state governs the perfection of a
security interest in Collateral located in that state.

         1.11 "COLLATERAL" means all property securing the Obligations, as
described in Section 8.

         1.12 "COMMITMENT" means CNB's commitment to make the Loans in the
aggregate principal amount outstanding at any one time of up to FOUR MILLION
SEVEN HUNDRED THOUSAND DOLLARS ($4,700,000.00).

         1.13 "CURRENT ASSETS" will be determined on a consolidated basis for
Borrower and the Subsidiaries in accordance with GAAP excluding, however, loans
to stockholders, management or employees, amounts due from Subsidiaries or
Affiliates, deferred costs and other intangible assets.

         1.14 "CURRENT LIABILITIES" will be determined on a consolidated basis
for Borrower and the Subsidiaries in accordance with GAAP and will include,
without limitation: (a) all payments on Subordinated Debt required to be made
within one (1) year after the date on which the determination is made, and (b)
all indebtedness payable to stockholders, Affiliates, Subsidiaries or officers
regardless of maturity, unless such indebtedness has been subordinated, on terms
satisfactory to CNB, to the Obligations.

         1.15 "DEBT" means, at any date, the aggregate amount of, without
duplication, (a) all obligations of Borrower or any Subsidiary for borrowed
money, or reimbursement for open letters of credit and banker's acceptances, (b)
all obligations of Borrower or any Subsidiary evidenced by bonds, debentures,
notes or other similar instruments, (c) all obligations of Borrower or any
Subsidiary to pay the deferred purchase price of property or services, (d) all
capitalized lease obligations of Borrower or any Subsidiary, (e) all obligations
or liabilities of others secured by a lien on any asset of Borrower or any
Subsidiary, whether or not such obligation or liability is assumed, (f) all
obligations guaranteed by Borrower or any Subsidiary, (g) all obligations,
direct or indirect, for letters of credit, and (h) any other obligations or
liabilities which are required by GAAP to be shown as liabilities on the balance
sheet of Borrower or any Subsidiary.

         1.16 "DEMAND DEPOSIT ACCOUNT" means Borrower's demand deposit account
No. 075-189729 maintained with CNB.

         1.17 "DILUTION" will be determined at the end of each month by CNB for
the preceding three-month period by dividing total reductions, excluding cash
collections of Accounts, by gross sales which gave rise to the Accounts for such
three-month period.

         1.18 "ELIGIBLE ACCOUNT" means an Account of Borrower:

         1.18.1 Upon which Borrower's right to receive payment is absolute and
not contingent upon the fulfillment of any condition;

         1.18.2 Against which is asserted no defense, counterclaim, discount or
set-off, whether well-founded or otherwise;

         1.18.3 That is a true and correct statement of a bona fide indebtedness
incurred in the amount of the Account with respect to a money obligation owed by
the Account Debtor, including but not limited to obligations arising, for goods
sold or leased and delivered to, or for services rendered to and accepted by,
the Account Debtor;

         1.18.4 That is owned by Borrower free and clear of all liens,
encumbrances, charges, interests and rights of others, except the security
interests granted to CNB;

         1.18.5 That does not arise from a sale or lease to or for services
rendered to an employee, stockholder, director, Subsidiary or Affiliate of
Borrower or any entity in which any employee, stockholder, director, Subsidiary
or Affiliate of Borrower has any interest;



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         1.18.6 That is not the obligation of an Account Debtor that is the
federal government unless perfected under the Federal Assignment of Claims Act
of 1940, as amended;

         1.18.7 That is not the obligation of an Account Debtor located in a
foreign country, except Canada, unless the obligation is insured by foreign
credit insurance satisfactory to CNB or through a letter of credit negotiated
through CNB with drawing documents in order;

         1.18.8 That is due and payable not more than thirty (30) days from the
original invoice date unless otherwise agreed to in writing by CNB;

         1.18.9 As to which not more than ninety (90) days has elapsed since the
original invoice date;

         1.18.10 As to which the Account Debtor has not:

         (a) died, suspended business, made a general assignment for the benefit
of creditors, become the subject of a petition under the Bankruptcy Code or
consented to or applied for the appointment of a receiver, trustee, custodian or
liquidator for itself or any of its property;

         (b) become more than sixty (60) days past due, under the original terms
of sale, with respect to 20% or more of the amounts owed by such Account Debtor
to Borrower;

         (c) had its check in payment of an Account returned unpaid; or

         (d) become or appear to have become unable, in the opinion of CNB, to
pay the Account in accord with its terms;

         1.18.11 That does not, when added to all other Accounts that are
obligations of the Account Debtor to Borrower, result in a total sum that
exceeds twenty percent (20%) of the total balance then due on all Accounts;
provided, however, with respect to Account Debtors Goodyear Tire, Rubber
Company, Price Pfister and Amphenol, Inc., the foregoing will be thirty percent
(30%); and

         1.18.12 That is not an obligation owed by the Account Debtor which is
evidenced by chattel paper or an instrument as those terms are defined in the
Code.

         1.19 "ELIGIBLE INVENTORY" means Inventory, excluding work-in-process,
raw materials, packing materials and supplies, which (a) is owned by Borrower
free and clear of all liens, encumbrances and rights of others, except the
security interests granted to CNB; (b) is permanently located in the United
States of America and in the physical possession of Borrower, or in the physical
possession of Goodyear Tire & Rubber pursuant to the Goodyear Bailment Agreement
dated December 1, 1994; and (c) is not, in CNB's opinion, obsolete, unsalable,
damaged, unfit for further processing or otherwise unacceptable to CNB. Eligible
Inventory will be valued, in the case of finished goods, at the lower of cost or
market in accordance with GAAP.

         1.20 "EQUIPMENT ACQUISITION COMMITMENT" is $700,000.00.

         1.21 "EUROCURRENCY RESERVE REQUIREMENT" means the aggregate (without
duplication) of the rates (expressed as a decimal) of reserves (including,
without limitation, any basic, marginal, supplemental, or emergency reserves)
that are required to be maintained by banks during the Interest Period under any
regulations of the Board of Governors of the Federal Reserve System, or any
other governmental authority having jurisdiction with respect thereto,
applicable to funding based on so-called "Eurocurrency Liabilities", including
Regulation D (12 CFR 224).

         1.22 "GAAP" means generally accepted accounting principles,
consistently applied.

         1.23 "GUARANTOR(S)" is ATHANOR GROUP, INC., a California corporation.

         1.24 "INVENTORY" means goods held for sale or lease in the ordinary
course of business, work in process and any and all raw materials used in
connection with the foregoing.



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         1.25 "INTEREST PERIOD" means the period commencing on the date the
LIBOR Loan is made (including the date a Prime Loan is converted to a LIBOR
Loan, or a LIBOR Loan is renewed as a LIBOR Loan, which, in the latter case,
will be the last day of the expiring Interest Period) and ending on the first
day of the month occurring prior to or on the date which is one (1), two (2),
three (3) or six (6) months thereafter, as selected by the Borrower; provided,
however, no Interest Period may extend beyond the Termination Date.

         1.26 "LIBOR BASE RATE" means the British Banker's Association
definition of the London InterBank Offered Rates as made available by Bloomberg
LP, or such other information service available to CNB, for the applicable
monthly period upon which the Interest Period is based for the LIBOR Loan
selected by Borrower and as quoted by CNB on the Business Day Borrower requests
a LIBOR Loan or on the last Business Day of an expiring Interest Period.

         1.27 "LIBOR INTEREST RATE" means the rate per year (rounded upward to
the next one-sixteenth (1/16th) of one percent (0.0625%), if necessary)
determined by CNB to be the quotient of (a) the LIBOR Base Rate divided by (b)
one minus the Eurocurrency Reserve Requirement for the Interest Period; which is
expressed by the following formula:

                                 LIBOR BASE RATE
        ----------------------------------------------------------------
                      1 - EUROCURRENCY RESERVE REQUIREMENT


         1.28 "LIBOR LOAN" means any Loan tied to the LIBOR Interest Rate.

         1.29 "LOAN" or "LOANS" means the loans extended by CNB to Borrower
pursuant to Section 2.

         1.30 "LOAN DOCUMENTS" means, individually and collectively, this
Agreement, any note, guaranty, security or pledge agreement, financing statement
and all other contracts, instruments, addenda and documents executed in
connection with or related to extensions of credit under this Agreement.

         1.31 "OBLIGATIONS" means all present and future liabilities and
obligations of Borrower to CNB hereunder and all other liabilities and
obligations of Borrower to CNB of every kind, now existing or hereafter owing,
matured or unmatured, direct or indirect, absolute or contingent, joint or
several, including any extensions and renewals thereof and substitutions
therefor.

         1.32 "PERSON" means any individual or entity.

         1.33 "POTENTIAL EVENT OF DEFAULT" means any condition that with the
giving of notice or passage of time or both would, unless cured or waived,
become an Event of Default.

         1.34 "PRIME LOAN" means any Loan tied to the Prime Rate.

         1.35 "PRIME RATE" means the rate most recently announced by CNB at its
principal office in Beverly Hills, California as its "Prime Rate." Any change in
the interest rate resulting from a change in the Prime Rate will become
effective on the day on which each change in the Prime Rate is announced by CNB.

         1.36 "REVOLVING CREDIT COMMITMENT" means CNB's commitment to make the
Revolving Credit Loans in the aggregate principal amount at any one time of up
to THREE MILLION DOLLARS ($3,000,000.00).


         1.37 "SUBORDINATED DEBT" means Debt of Borrower or any Subsidiary, the
repayment of which is subordinated, on terms satisfactory to CNB, to the
Obligations.

         1.38 "SUBSIDIARY" means any corporation, the majority of whose voting
shares are at any time owned, directly or indirectly, by Borrower and/or by one
or more Subsidiaries.


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         1.39 "TANGIBLE NET WORTH" means the total of all assets appearing on a
balance sheet prepared in accordance with GAAP for Borrower and the Subsidiaries
on a consolidated basis, minus (a) all intangible assets, including, without
limitation, unamortized debt discount, Affiliate, employee, officer and
stockholder receivables or advances, goodwill, research and development costs,
patents, trademarks, the excess of purchase price over underlying values of
acquired companies, any covenants not to compete, deferred charges, copyrights,
franchises and appraisal surplus; minus (b) the amount, if any, at which shares
of stock of a non-wholly owned Subsidiary appear on the asset side of Borrower's
consolidated balance sheet, as determined in accordance with GAAP; minus (c) all
obligations which are required by GAAP to be classified as a liability on the
consolidated balance sheet of Borrower and the Subsidiaries; minus (d) minority
interests; and minus (e) deferred income and reserves not otherwise classified
as a liability on the consolidated balance sheet of Borrower and the
Subsidiaries.

         1.40 "TERM LOAN COMMITMENT" is $1,000,000.00.

         1.41 "TERMINATION DATE" means March 31, 2003, unless the term of this
Agreement is renewed by CNB for an additional period under Section 3, or such
earlier termination date under Section 9.3 upon the occurrence of an Event of
Default. Upon any renewal, the Termination Date will be the renewed maturity
date determined by CNB.

         1.42 "TOTAL SENIOR LIABILITIES" means, as of any date of determination,
the amount of all liabilities that should be reflected as a liability on a
consolidated balance sheet of Borrower and the Subsidiaries prepared in
accordance with GAAP, less Subordinated Debt.

2.         THE CREDIT.

         2.1 REVOLVING CREDIT LOAN. Subject to the terms of this Agreement, CNB
agrees to make loans ("Revolving Credit Loans") to Borrower, from the date of
this Agreement up to but not including the Termination Date, at such times as
Borrower may request, up to the amount of the Borrowing Base. The Revolving
Credit Loans may be repaid and reborrowed at any time up to the Termination
Date; provided, however, that the aggregate unpaid principal amount of
outstanding Revolving Credit Loans will at no time exceed the Borrowing Base.

         2.1.1 INTEREST. The Revolving Credit Loans will bear interest from
disbursement until due (whether at stated maturity, by acceleration or
otherwise) at a rate equal to, at Borrower's option, either (a) for a LIBOR
Revolving Loan, the LIBOR Interest Rate plus two and one quarter of one percent
(2.25%) per year, or (b) for a Prime Revolving Loan, the fluctuating Prime Rate
per year. Interest on the Revolving Credit Loans and other charges incurred
under this Agreement will accrue daily and be payable (a) monthly in arrears, on
the first day of the next month, commencing on the first such date following
disbursement; (b) if a LIBOR Revolving Loan, upon any prepayment of any LIBOR
Revolving Loan (to the extent accrued on the amount prepaid); and (c) at the
Termination Date. A Revolving Credit Loan tied to the LIBOR Interest Rate is
called a "LIBOR Revolving Loan," and a Revolving Credit Loan tied to the Prime
Rate is called a "Prime Revolving Loan." A Revolving Credit Loan will be a Prime
Revolving Loan any time it is not a LIBOR Revolving Loan.

         2.1.2 MINIMUM MONTHLY PAYMENTS. Borrower will pay CNB a monthly fee
from the date hereof until the next Termination Date, whether or not the
Obligations have been repaid, equal to $1,000.00 less the amount of interest
paid by Borrower for Revolving Credit Loans for such month.

         2.1.3 PAYMENT FOR AMOUNTS EXCEEDING BORROWING BASE. Borrower will,
immediately upon demand, repay the amount by which the unpaid principal amount
of Borrower's Loan Account exceeds the amount CNB has agreed to lend under
Section 2.1. The portion of the Revolving Credit Loans exceeding the Borrowing
Base will bear additional interest of three percent (3.0%) per year over the
rate set forth in Section 2.1.1 for Prime Loans.

         2.1.4 APPLICATION TO BORROWER'S LOAN ACCOUNT. Borrower agrees that CNB
may make a charge equal to two (2) days' collection time at the interest rate
set forth in Section 2.1.1 for Prime Loans, payable monthly in arrears on the
first day of each month for the previous month for all uncollected funds as to
which immediate credit is given by application to Borrower's Loan Account.

         2.2 TERM LOAN FACILITY. CNB agrees to make a term loan ("Term Loan") to
Borrower, on or before September 17, 2001, in the amount of the Term Loan
Commitment. The Term Loan will be evidenced by a promissory note ("Term Note")
consistent with the terms of this Agreement.



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         2.3 INTEREST ON TERM LOAN. The Term Loan will bear interest on the
unpaid principal amount thereof at a fluctuating annual rate equal to the Prime
Rate of CNB per annum computed on the basis of a 360-day year and actual days
elapsed. Interest on the Term Loan will be payable monthly on the first day of
each month, commencing on the first such date after the date hereof and on the
date the Term Loan is paid in full.

         2.4 PAYMENT OF TERM LOAN. The principal amount of the Term Loan will be
repaid by Borrower to CNB in sixty (60) equal consecutive monthly installments,
payable on the first day of each month commencing on October 1, 2001. All unpaid
principal and interest will be due and payable sixty (60) months after the
funding of the Term Loan, or on the Termination Date, whichever first occurs.

         2.5 EQUIPMENT ACQUISITION FACILITY. Prior to the Termination Date, and
provided that no Event of Default or Potential Event of Default exists at the
time of Borrower's request, CNB agrees to make loans ("Equipment Acquisition
Loans") to Borrower up to the amount of the Equipment Acquisition Commitment,
for the acquisition of new fixed assets consisting of new or used equipment.
Each Equipment Acquisition Loan will be made (a) in an amount equal to ninety
percent (90%) of the invoice purchase price for new assets or eighty percent
(80%) for used machinery and equipment, excluding sales taxes, delivery and
set-up charges, and (b) when Borrower submits an appropriate purchase invoice
and executes and delivers to CNB its promissory note, in form and substance
satisfactory to CNB (the "Equipment Acquisition Note"). The Equipment
Acquisition Note will provide for (i) interest payable monthly at a fluctuating
annual rate equal to, at Borrower's option, either (a) at the Prime Rate per
annum, or (b) at a fixed rate equal to the market yield to maturity with respect
to five-year U.S. Treasury Notes maturing closest to each Equipment Acquisition
Loan, plus two and three quarters of one percent (2.75%) per annum computed on
the basis of a 360-day year and actual days elapsed, commencing on the first
month after the initial Equipment Acquisition Loan, and (ii) principal payable
at the same time as interest in sixty (60) substantially equal monthly payments,
commencing the thirteenth (13th) month after the date of the Equipment
Acquisition Note. Borrower will submit such further documents as are required to
perfect a first lien in the purchased assets in favor of CNB. All unpaid
principal and interest will be due and payable seventy two (72) months after the
funding of the Equipment Acquisition Loan or on the Termination Date, whichever
first occurs.

         2.6 LIBOR LOAN TERMS AND CONDITIONS.

         2.6.1 PROCEDURE FOR LIBOR LOANS. Borrower may request that a Revolving
Credit Loan be a LIBOR Loan (including conversion of a Prime Revolving Loan to a
LIBOR Revolving Loan, or continuation of a LIBOR Revolving Loan as a LIBOR
Revolving Loan upon the expiration of the Interest Period). Borrower's request
will be irrevocable, will be made to CNB using the "Notice of Borrowing" form
attached hereto as Exhibit "A," no earlier than two (2) Business Days before and
no later than 1:00 p.m. Pacific Time on the day the LIBOR Loan is to be made. If
Borrower fails to select a LIBOR Loan in accordance herewith, the Loan will be a
Prime Loan, and any outstanding LIBOR Loan will be deemed a Prime Loan upon
expiration of the Interest Period.

         2.6.2 AVAILABILITY OF LIBOR LOANS. Notwithstanding anything herein to
the contrary, each LIBOR Loan must be in the minimum amount of $500,000.00 and
increments of $100,000.00. Borrower may not have more than five (5) LIBOR Loans
outstanding at any one time under this Agreement. Borrower may have Prime Loans
and LIBOR Loans outstanding simultaneously.

         2.6.3 PREPAYMENT OF PRINCIPAL. Borrower may not make a partial
principal prepayment on a LIBOR Loan. Borrower may prepay the full outstanding
principal balance on a LIBOR Loan prior to the end of the Interest Period,
provided, however, that such prepayment is accompanied by a fee ("LIBOR
Prepayment Fee") equal to the amount, if any, by which (a) the additional
interest which would have been earned by CNB had the LIBOR Loan not been prepaid
exceeds (b) the interest which would have been recoverable by CNB by placing the
amount of the LIBOR Loan on deposit in the LIBOR market for a period starting on
the date on which it was prepaid and ending on the last day of the applicable
Interest Period. CNB's calculation of the LIBOR Prepayment Fee will be deemed
conclusive absent manifest error.

         2.6.4 SUSPENSION OF LIBOR LOANS. If CNB, on any Business Day, is unable
to determine the LIBOR Base Rate applicable for a new, continued, or converted
LIBOR Loan for any reason, or any law, regulation, or governmental order, rule
or determination, makes it unlawful for CNB to make a LIBOR Loan, Borrower's
right to select LIBOR Loans will be suspended until CNB is again able to
determine the LIBOR Base Rate or make LIBOR Loans, as the case may be. During
such suspension, new Loans, outstanding Prime Loans, and LIBOR Loans whose
Interest Periods terminate may only be Prime Loans.



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         2.7 OPTIONAL PREPAYMENTS. Subject to the provisions of Section 2.6.3,
Borrower will have the right to prepay any Term Loan or Equipment Acquisition
Loan provided that (a) each partial payment will be in an amount equal to the
amount of the normal monthly payment or an integral multiple thereof, (b) on
each prepayment, Borrower will pay the accrued interest on the prepaid
principal, to the date of such prepayment, and (c) all prepayments will be
applied to principal installments in the inverse order of their maturities.

         2.8 DEFAULT INTEREST RATE. From and after written notice by CNB to
Borrower of the occurrence of an Event of Default (and without constituting a
waiver of such Event of Default), the Loans and any other amounts due CNB
hereunder (and interest to the extent permitted by law) will bear additional
interest at a fluctuating rate equal to five percent (5.0%) per year higher than
the interest rate as determined in Sections 2.1.1 and 2.1.3, until the Event of
Default has been cured; provided, however, for purposes of this Section, a LIBOR
Loan will be treated as a Prime Loan upon the termination of the Interest
Period. All interest provided for in this Section will be compounded monthly and
payable on demand.

         2.9 PAYMENTS. All payments will be in United States Dollars and in
immediately available funds. Interest will accrue daily and will be computed on
the basis of a 360-day year, actual days elapsed. All payments of principal,
interest, fees and other charges incurred under this Agreement will be made by
charging, and Borrower hereby authorizes CNB to charge, Borrower's Demand
Deposit Account or Borrower's Loan Account. All loan disbursements made pursuant
to this Agreement shall be made by direct deposit to Borrower's Demand Deposit
Account. Borrower also authorizes CNB to charge to Borrower's Demand Deposit
Account or Borrower's Loan Account any payment credited against the Obligations
which is dishonored by the drawee or maker thereof.

         2.10 AUDIT FEE. Borrower will pay the Audit Fee equal to $2,700.00 on
an annual basis. Borrower hereby authorizes CNB to charge Borrower's demand
deposit account or Borrower's Loan Account for the amount of each such fee.

3.         TERM AND TERMINATION.

         3.1 ESTABLISHMENT OF TERMINATION DATE. The term of this Agreement will
begin as of the date hereof and continue until CNB gives thirty (30) days notice
of non-renewal. Notwithstanding the foregoing, CNB may, at its option, terminate
this Agreement pursuant to Section 9.3; the date of any such termination will
become the Termination Date as that term is used in this Agreement. Upon
renewal, Borrower authorizes CNB to charge Borrower's Loan Account with the
amount of any applicable Audit Fee.

         3.2 OBLIGATIONS UPON THE TERMINATION DATE. Borrower will, upon the
Termination Date:

         3.2.1 Repay the amount of the balance due as set forth in Borrower's
Loan Account plus any accrued interest, fees and charges; and

         3.2.2 Pay the amounts due on all other Obligations owing to CNB. In
this connection and notwithstanding anything to the contrary contained in the
instruments evidencing such Obligations, the Termination Date hereunder will
constitute the maturity date of such other Obligations.

         3.3 SURVIVAL OF RIGHTS. Any termination of this Agreement will not
affect the rights, liabilities and obligations of the parties with respect to
any Obligations outstanding on the date of such termination. Until all
Obligations have been fully repaid, CNB will retain its security interest in all
existing Collateral and Collateral arising thereafter, and Borrower will
continue to assign all Accounts to CNB and to immediately turn over to CNB, in
kind, all collections received on the Accounts.



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4.         CONDITIONS PRECEDENT.

         4.1 EXTENSION OF CREDIT. The obligation of CNB to make any Loan or
other extension of credit hereunder is subject to CNB's receipt of each of the
following, in form and substance satisfactory to CNB, and duly executed as
required by CNB:

         4.1.1 All Loan Documents required by CNB, including but not limited to
this Agreement and any guaranties required hereunder;

         4.1.2 (a) a copy of Borrower's Articles of Incorporation; (b) a
Resolution of Borrower's Board of Directors approving and authorizing the
execution, delivery and performance of this Agreement and any other documents
required pursuant to this Agreement, certified by Borrower's corporate
secretary; and, (c) a copy of the last certificate filed on behalf of Borrower
containing the information required by California Corporations Code Section
1502(a) or Section 2117(a), as applicable;

         4.1.3 (a) a copy of the Articles of Incorporation of Athanor Group,
Inc., a California corporation; (b) a Resolution of the Board of Directors of
Athanor Group, Inc., a California corporation approving and authorizing the
execution, delivery and performance of its continuing guaranty, certified by its
corporate secretary; and, (c) a copy of the last certificate filed on behalf of
Athanor Group, Inc., a California corporation containing the information
required by California Corporations Code Section 1502(a) or Section 2117(a), as
applicable;

         4.1.4 (a) copies (and acknowledgement copies to the extent reasonably
available) of financing statements (Form UCC-1) duly filed under the Code in all
such jurisdictions as may be necessary or, in CNB's opinion, desirable to
perfect CNB's security interests created under this Agreement; and (b) evidence
that all filings, recordings and other actions that are necessary or advisable,
in CNB's opinion, to establish, preserve and perfect CNB's security interests
and liens as legal, valid and enforceable first security interests and liens in
the Collateral have been effected;

         4.1.5 Evidence that the insurance required by Section 6.6 hereof is in
effect;

         4.1.6 A complete list of claims made against Borrower together with an
opinion of Borrower's counsel with respect to such claims, that the
representations contained in Section 5.5 are true and correct as of the date of
this Agreement; and

         4.1.7 The Documentation Fee equal to $1,000.00.

         4.2 CONDITIONS TO EACH EXTENSION OF CREDIT. The obligation of CNB to
make any Loan or other extension of credit hereunder will be subject to the
fulfillment of each of the following conditions to CNB's satisfaction:

         4.2.1 The representations and warranties of Borrower set forth in
Section 5 will be true and correct on the date of the making of each Loan or
other extension of credit with the same effect as though such representations
and warranties had been made on and as of such date;

         4.2.2 No Guarantor will have revoked his, her or its guaranty and no
such guaranty will have become otherwise unenforceable with respect to future
advances;

         4.2.3 No holder of Subordinated Debt will be in violation of his, her
or its Subordination Agreement executed in favor of CNB, and such Subordination
Agreement is enforceable with respect to future advances;

         4.2.4 There will be in full force and effect in favor of CNB a legal,
valid and enforceable first security interest in, and a valid and binding first
lien on the Collateral; and CNB will have received evidence, in form and
substance acceptable to CNB, that all filings, recordings and other actions that
are necessary or advisable, in the opinion of CNB, in order to establish,
protect, preserve and perfect CNB's security interests and liens as legal, valid
and enforceable first security interests and liens in the Collateral have been
effected;



                                      -8-
<PAGE>


         4.2.5 There will have occurred no Event of Default or Potential Event
of Default; and

         4.2.6 All other documents and legal matters in connection with the
transactions described in this Agreement will be satisfactory in form and
substance to CNB.

5. REPRESENTATIONS AND WARRANTIES. Borrower makes the following
representations and warranties, which will survive the making and repayment of
the Loans and other extensions of credit:

         5.1 CORPORATE EXISTENCE, POWER AND AUTHORIZATION. Borrower and each
Subsidiary is duly organized, validly existing and in good standing under the
laws of the state its organization, and is duly qualified to conduct business in
each jurisdiction in which its business is conducted. The execution, delivery
and performance of all Loan Documents executed by Borrower are within Borrower's
powers and have been duly authorized by the Board of Directors of Borrower and
do not require any consent or approval of the stockholders of Borrower.

         5.2 BINDING AGREEMENT. The Loan Documents constitute the valid and
legally binding obligations of Borrower, enforceable against Borrower in
accordance with their terms.

         5.3 ANCILLARY DOCUMENTS. To the extent that any security agreement,
subordination agreement or guaranty is required to be executed by a Subsidiary
or Affiliate, the representations and warranties set forth in Sections 5.1 and
5.2 are also true and correct with respect to such Subsidiary and Affiliate and
such document.

         5.4 OTHER AGREEMENTS. The execution and performance of the Loan
Documents will not violate any provision of law or regulation (including,
without limitation, Regulations X and U of the Federal Reserve Board) or any
order of any governmental authority, court or arbitration board or the Articles
of Incorporation or Bylaws of Borrower, or result in the breach of or a default
under any provisions of any agreement to which Borrower is a party.

         5.5 LITIGATION. There is no litigation, tax claim, investigation or
proceeding pending, threatened against or affecting Borrower, any Subsidiary or
Guarantor, or any of their respective properties which, if adversely determined,
would have a material adverse effect on the business, operation or condition,
financial or otherwise, of Borrower or any Subsidiary or Guarantor.

         5.6 FINANCIAL CONDITION. The most recent financial statements of
Borrower and each Guarantor, if any, copies of which have been delivered to CNB,
have been prepared in accordance with GAAP and are true, complete and correct
and fairly present the financial condition of Borrower, its Subsidiaries and
each Guarantor, including operating results, as of the accounting period
referenced therein. There has been no material adverse change in the financial
condition or business of Borrower or any Subsidiary or Guarantor since the date
of such financial statements. Neither Borrower nor any Subsidiary or Guarantor
has any material liabilities for taxes or long-term leases or commitments,
except as disclosed in the financial statements.

         5.7 NO VIOLATIONS. Borrower is not, nor is any Subsidiary, in violation
of any law, ordinance, rule or regulation to which it or any of its properties
is subject.

         5.8 COLLATERAL. Borrower owns and has possession of and has the right
and power to grant a security interest in the Collateral, and the Collateral is
genuine and free from liens, adverse claims, set-offs, defaults, prepayments,
defenses and encumbrances except those in favor of CNB. No bills of lading,
warehouse receipts or other documents or instruments of title are outstanding
with respect to the Collateral or any portion of the Collateral, in favor of a
Person other than Borrower. The office where Borrower keeps its records
concerning all Accounts and where it keeps the bulk of its Inventory is 724
South Bon View Avenue, Ontario, California 91761-1998.

         5.9 ERISA. Borrower is in compliance in all material respects with all
applicable provisions of the Employee Retirement Income Security Act of 1974
("ERISA"). No "Reportable Event" (as defined in ERISA and the regulations issued
thereunder [other than a "Reportable Event" not subject to the provision for
thirty (30) day notice to the Pension Benefit Guaranty Corporation ("PBGC")
under such regulations]) has occurred with respect to any benefit plan of
Borrower nor are there any unfunded vested liabilities under any benefit plan of
Borrower. Borrower has met its minimum funding requirements under ERISA with
respect to each of its plans and has not incurred any material liability to the
PBGC in connection with any such plan.



                                      -9-
<PAGE>


         5.10 CONSENTS. No consent, license, permit, or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority or agency is required in connection with the
execution, delivery and performance by Borrower of this Agreement or the
transactions contemplated hereby.

         5.11 USE OF PROCEEDS. The proceeds of the Revolving Credit Loans will
be used by Borrower to payoff outstanding loans Borrower owes Fleet Business
Credit Corp. and thereafter solely for working capital purposes in the normal
course of business. The proceeds of the Term Loan will be used by Borrower
solely to payoff outstanding loans Borrower owes Fleet Business Credit Corp.

         5.12 REGULATION U. Borrower is not engaged principally, or as one of
its principal activities, in the business of extending credit for the purpose of
purchasing or carrying margin stock (within the meaning of Regulations U or X of
the Federal Reserve Board). No part of the proceeds of the Loans will be used by
Borrower to purchase or carry any such margin stock or to extend credit to
others for the purpose of purchasing or carrying such margin stock.

         5.13 ENVIRONMENTAL MATTERS.

         5.13.1 The operations of Borrower and each Subsidiary comply in all
material respects with all applicable federal, state and local environmental,
health and safety statutes, regulations and ordinances and fully comply with all
terms of all required permits and licenses.

         5.13.2 Except with respect to the property located at 724 South Bon
View Avenue, Ontario, California 91761-1998, Borrower and each Subsidiary have
received no notices of threatened or pending governmental or private civil,
criminal or administrative proceeding regarding any environmental or health and
safety statute, regulation or ordinance and have not been subject to any
federal, state or local investigations, inspections or orders regarding any
environmental or health and safety statute, regulation or ordinance.

         5.13.3 Except with respect to the property located at 724 South Bon
View Avenue, Ontario, California 91761-1998, neither Borrower nor any Subsidiary
knows of any facts or conditions which may exist which may subject Borrower or
any Subsidiary to liability or contingent liability and neither Borrower nor any
Subsidiary is presently liable or contingently liable for any removal, remedial,
response or other costs or damages in connection with any release into the
environment of toxic or hazardous substances or waste included on any federal,
state or local hazardous chemical or substance lists under any federal, state or
local statute, regulation or ordinance.

         5.13.4 Borrower will, at all times, indemnify and hold CNB (which for
purposes of this Section and Section 10.8 includes CNB's parent company and
subsidiaries and all of their respective shareholders, directors, officers,
employees, agents, representatives, successors, attorneys and assigns) harmless
from and against any liabilities, claims, demands, causes of action, losses,
damages, expenses (including without limitation reasonable attorneys' fees
[which attorneys may be employees of CNB, or may be outside counsel]), costs,
settlements, judgments or recoveries directly or indirectly arising out of or
attributable to the use, generation, manufacture, production, storage, release,
threatened release, discharge, disposal or presence of a hazardous substance on,
under, or about Borrower's property or operations or property leased to or used
by Borrower. For these purposes, the term "hazardous substances" means any
substance which is or becomes designated as "hazardous" or "toxic" under any
Federal, state, or local law. This indemnity will survive the Termination Date
and the repayment of all Obligations of Borrower to CNB.

6. AFFIRMATIVE COVENANTS. Borrower agrees that until payment in full of
all Obligations, Borrower will comply with the following covenants:



                                      -10-
<PAGE>


6.1        COLLATERAL.

         6.1.1 Borrower will, on demand of CNB, make available to CNB, shipping
and delivery receipts evidencing the shipment of the goods which gave rise to an
Account; completion certificates or other proof of the satisfactory performance
of services which gave rise to an Account; a copy of the invoice for each
Account; and Borrower's copy of any written contract or order from which an
Account arose. Unless previously requested by Borrower in writing to return such
documents, CNB will be authorized to destroy any such documentation six (6)
months after its receipt by CNB;

         6.1.2 Borrower will advise CNB within ten (10) days whenever an Account
Debtor refuses to retain, or returns, any goods from the sale of which an
Account arose, and will comply with any instructions which CNB may give
regarding the sale or other disposition of such returns;

         6.1.3 Borrower will give CNB, upon request, specific assignments of
Accounts after they come into existence, and schedules of Accounts, the form and
content of such assignments and schedules to be satisfactory to CNB; but,
despite this provision for express assignments to CNB, CNB will have a
continuing security interest in all Accounts irrespective of whether some
Accounts are omitted from such assignments or whether any assignments are ever
given; and Borrower will execute and deliver to CNB any instrument, document,
financing statement, assignment or other writing which CNB may deem necessary or
desirable to carry out on the terms of this Agreement, to perfect CNB's security
interest in the Accounts, and any other Collateral for the Obligations, or to
enable CNB to enforce its security interest in any of the foregoing;

         6.1.4 Borrower will maintain, in accord with sound accounting
practices, accurate records and books of account showing, among other things,
all Inventory and Accounts, the proceeds of the sale or other disposition
thereof and the collections therefrom. Borrower will not change the accounting
method used to determine Borrower's Inventory cost without CNB's prior written
approval. Borrower will permit representative(s) of CNB, at any reasonable time,
to inspect, audit, examine and make extracts or copies from all books, records
and other data relating to the Collateral, to inspect any of Borrower's
properties and to confirm balances due on Accounts by direct inquiry to Account
Debtors, and will give CNB, promptly upon request, all information regarding the
business or finances of Borrower;

         6.1.5 Borrower will, if requested by CNB, mark its records concerning
its Inventory and Accounts in a manner satisfactory to CNB to show CNB's
security interest therein;

         6.1.6 Borrower will, if requested by CNB, provide CNB with a current
physical count of its Inventory in the manner specified by CNB;

         6.1.7 Borrower will endorse to the order of and deliver to CNB any
negotiable instrument accepted by Borrower in lieu of payment in accord with the
original terms of sale;

         6.1.8 Borrower will pay CNB, upon demand, the cost, including, but not
limited to reasonable attorneys' fees and expenses (which counsel may be CNB
employees) expended or incurred by CNB (or allocable to CNB's in-house counsel)
in the collection or enforcement of any Accounts or other Collateral if CNB
itself undertakes such collection or enforcement, together with all taxes,
charges and expenses of every kind or description paid or incurred by CNB under
or with respect to loans hereunder or any Collateral therefor and Borrower
authorizes CNB to charge the same to any deposit account of Borrower or
Borrower's Loan Account maintained with CNB;

         6.1.9 Borrower will promptly notify CNB of any occurrence or discovery
of any event which would cause or has caused a previously Eligible Account to
become ineligible;

         6.1.10 Borrower will maintain the tangible Collateral in good condition
and promptly notify CNB of any event causing loss or reduction of value of
Collateral and the amount of such loss or reduction; and

         6.1.11 Borrower will, upon request by CNB, but in no event less than
once every six (6) months, supply CNB with a current list of the names and
addresses of all Account Debtors.



                                      -11-
<PAGE>


6.2        FINANCIAL STATEMENTS.  Borrower will furnish to CNB on a continuing
           basis:

         6.2.1 Within forty-five (45) days after the end of each quarterly
accounting period of each fiscal year, a financial statement consisting of not
less than a balance sheet and income statement, prepared in accordance with GAAP
and accompanied by the following: (a) supporting schedules of costs of goods
sold, operating expenses and other income and expense items, and (b) Borrower's
certification as to whether any event has occurred which constitutes an Event of
Default or Potential Event of Default, and if so, stating the facts with respect
thereto, which financial statement may be internally prepared;

         6.2.2 Within one hundred twenty (120) days after the close of
Borrower's fiscal year, a copy of the annual audit report for Borrower and the
Subsidiaries, including therein a balance sheet, income statement,
reconciliation of net worth and statement of cash flows, with notes thereto, the
balance sheet, income statement and statement of cash flows to be audited by a
certified public accountant acceptable to CNB, certified by such accountant to
have been prepared in accordance with GAAP and accompanied by the following: (a)
supporting schedules of costs of goods sold, operating expenses and other income
and expense items, and (b) Borrower's certification as to whether any event has
occurred which constitutes an Event of Default or Potential Event of Default,
and if so, stating the facts with respect thereto;

         6.2.3 Upon request by CNB, a copy of the Federal Income Tax Return of
Borrower; and

         6.2.4 Upon request by CNB, a copy of the Federal Income Tax Return of
each Guarantor, if any.

         6.3 COLLATERAL REPORTS. Borrower will supply the following collateral
reports, together with such additional information, reports and/or statements as
CNB may reasonably request, within twenty (20) days after the end of each month:

         6.3.1 A listing and aging by invoice date of all accounts receivable
and accounts payable (together with sales and payment terms, and detail of
outstanding balances due by invoice date from all Account Debtors);

         6.3.2 A reconciliation of such aging with the previous aging delivered
to CNB and CNB account records;

         6.3.3 A listing of all Inventory, setting out types, locations and
dollar value, which dollar value is in conformity with GAAP, in form acceptable
to CNB; and

         6.3.4 A Borrowing Base Certificate.

         6.4 FINANCIAL STATEMENTS OF GUARANTORS. No later than one hundred
twenty (120) days after Borrower's fiscal year end of each year, Borrower will
provide CNB with the financial statement, in form and substance satisfactory to
CNB, of each Guarantor certified by such Guarantor to be true and correct.

         6.5 TAXES AND PREMIUMS. Borrower will, and will cause each Subsidiary
to, pay and discharge all taxes, assessments, governmental charges, and real and
personal taxes including, but not limited to, federal and state income taxes,
employee withholding taxes and payroll taxes, and all premiums for insurance
required hereunder, prior to the date upon which penalties are attached thereto.
CNB may pay, for the account of Borrower, any of the foregoing which Borrower
fails to pay; any such amounts will be debited to Borrower's Loan Account and
will be paid by Borrower to CNB, with interest thereon at the rate stated in
Section 2.1.1 (exclusive of LIBOR Loans), upon demand.



                                      -12-
<PAGE>


         6.6 INSURANCE.

         6.6.1 Borrower will, and will cause each Subsidiary to, (a) keep its
Inventory, equipment and any other tangible personal property which is
Collateral insured for the benefit of CNB under a standard mortgagee protection
clause (to whom any loss will be payable) in such amounts, by such companies and
against such risks as may be satisfactory to CNB; (b) pay the cost of all such
insurance; and (c) deliver certificates evidencing such insurance to CNB (and
copies of policies if requested); and Borrower hereby assigns to CNB all right
to receive proceeds of such insurance, and agrees to direct any insurer to pay
all proceeds directly to CNB, and authorizes CNB to endorse Borrower's name to
any draft or check for such proceeds;

         6.6.2 In addition to the insurance required above, Borrower will, and
will cause each Subsidiary to, maintain insurance of the types and in amounts
customarily carried in its lines of business, including, but not limited to,
fire, public liability, property damage, business interruption and worker's
compensation, such insurance to be carried with companies and in amounts
satisfactory to CNB, and deliver to CNB, upon request, schedules setting forth
all insurance then in effect; and

         6.6.3 If Borrower fails to provide and maintain the policies of
insurance required hereunder, CNB may, but is not obligated to, procure such
insurance, and Borrower will pay all premiums thereon promptly upon demand by
CNB, together with interest thereon at the rate set forth in Section 2.1.1
hereof (exclusive of LIBOR Loans) from the date of expenditure until
reimbursement by Borrower.

         6.7 NOTICE. Borrower will promptly advise CNB in writing of (a) the
opening of any new, or the closing of any existing, places of business, each
location at which Inventory or equipment is or will be kept, and any change of
Borrower's name, trade name or other name under which it does business or of any
such new or additional name; (b) the occurrence of any Event of Default or
Potential Event of Default; (c) any litigation pending or threatened where the
amount or amounts in controversy exceed $100,000.00; (d) any unpaid taxes which
are more than fifteen (15) days delinquent; and (e) any other matter which might
materially or adversely affect Borrower's or any Subsidiary's or Guarantor's
financial condition, property or business.

         6.8 FAIR LABOR STANDARDS ACT. Borrower will, and will cause each
Subsidiary to, comply with the requirements of, and all regulations promulgated
under, the Fair Labor Standards Act.

         6.9 CORPORATE EXISTENCE. Borrower will, and will cause each Subsidiary
to, maintain its corporate existence and all of its rights, privileges and
franchises necessary or desirable in the normal course of its business.

         6.10 COMPLIANCE WITH LAW. Borrower will, and will cause each Subsidiary
to, comply with all requirements of all applicable laws, rules, regulations
(including, but not limited to, ERISA with respect to each of their benefit
plans, and all environmental and hazardous materials laws), orders of any
governmental agency and all material agreements to which they are a party.

         6.11 FINANCIAL TESTS. Borrower will maintain at all times:

         6.11.1 Tangible Net Worth plus Subordinated Debt of not less than
$3,500,000.00;

         6.11.2 A ratio of Total Senior Liabilities to Tangible Net Worth plus
Subordinated Debt of not more than 2.00 to 1;

         6.11.3 A ratio of Current Assets to Current Liabilities of not less
than 1.25 to 1;

         6.11.4 Net profits after taxes of greater than Zero for each fiscal
year; and

         6.11.5 Net profits after taxes of greater than Zero for each fiscal
quarter following any fiscal quarter having Net Profits after taxes of less than
Zero.

7. NEGATIVE COVENANTS. Borrower agrees that until payment in full of
all the Obligations, Borrower will not, nor will it permit any Subsidiary to, do
any of the following, without CNB's prior written consent:

         7.1 BORROWING. Create, incur, assume or permit to exist any Debt except
(a) Debt to CNB, (b) trade Debt in the ordinary course of Borrower's business
and (c) purchase money debt in an aggregate amount not to exceed $750,000.00 per
Borrower's fiscal year incurred in connection with the acquisition of capital
assets (including capitalized lease expenditures).



                                      -13-
<PAGE>


         7.2 SALE OF ASSETS. Sell, lease or otherwise dispose of any of
Borrower's or any Subsidiary's assets, other than merchandise Inventory and of
Equipment, up to $75,000.00 on an annual basis, in the ordinary course of
business.

         7.3 LOANS. Make loans or advances to any Person, except credit extended
to employees or to customers in the ordinary course of business.

         7.4 CONTINGENT LIABILITIES. Assume, guarantee, endorse, contingently
agree to purchase or otherwise become liable for the obligation of any Person,
including Borrower, a Subsidiary or Affiliate, except (a) by the endorsement of
negotiable instruments for deposit or collection or similar transactions in the
ordinary course of business, and (b) contingent liabilities in favor of CNB.

         7.5 INVESTMENTS. Purchase or acquire the obligations or stock of, or
any other interest in, any partnership, joint venture or corporation, except (a)
direct obligations of the United States of America; or (b) investments in
certificates of deposit issued by, and other deposits with, commercial banks
organized under the United States or a State thereof having capital of at least
One Hundred Million Dollars ($100,000,000.00).

         7.6 MORTGAGES, LIENS, ETC. Mortgage, pledge, hypothecate, grant or
contract to grant any security interest of any kind in any property or assets,
to anyone except CNB.

         7.7 INVOLUNTARY LIENS. Permit any involuntary liens to arise with
respect to any property or assets including but not limited to those arising
from the levy of a writ of attachment or execution, or the levy of any state or
federal tax lien which lien will not be removed within a period of thirty (30)
days.

         7.8 SALE AND LEASEBACK. Enter into any sale-leaseback transaction.

         7.9 MERGERS AND ACQUISITIONS. Enter into any merger or consolidation,
or acquire all or substantially all the assets of any Person, except a
Subsidiary may be merged into or consolidated with another Subsidiary or with
Borrower.

         7.10 DIVIDENDS AND PURCHASE OF STOCK. Redeem or repurchase stock or
partnership interests, declare or pay any dividends or make any distribution,
whether of capital, income or otherwise, and whether in cash or other property,
except (i) dividends consisting solely of Borrower's stock and (ii) any
Subsidiary may declare distributions to Borrower; provided, however, if Borrower
for any tax year elects to file as a Sub-Chapter S corporation under the federal
or state income tax laws, distributions may be made to Borrower's shareholders
during any current or subsequent tax year in proportion to their holdings, in an
aggregate amount equal to that payable by an individual in the highest tax
bracket upon Borrower's taxable income computed as if Borrower were a taxpaying
entity.

         7.11 EVENT OF DEFAULT. Permit a default to occur under any document or
instrument evidencing Debt incurred under any indenture, agreement or other
instrument under which such Debt may be issued, or any event to occur under any
of the foregoing which would permit any holder of the Debt outstanding
thereunder to declare the same due and payable before its stated maturity,
whether or not such acceleration occurs or such default be waived.

8.         SECURITY AGREEMENT.

         8.1 GRANT OF SECURITY INTEREST. To secure all Obligations hereunder as
well as all other Obligations to CNB, Borrower hereby grants and transfers to
CNB a continuing security interest in the following property whether now owned
or hereafter acquired:

         8.1.1 All of Borrower's Inventory;

         8.1.2 All of Borrower's Accounts;

         8.1.3 All of Borrower's general intangibles as that term is defined in
the Code;



                                      -14-
<PAGE>


         8.1.4 All of Borrower's equipment, as that term is defined in the Code;

         8.1.5 All of Borrower's interest in any patents (now existing or
pending), copyrights, trade names, trademarks and service marks useful to the
operation of Borrower's business;

         8.1.6 All notes, drafts, acceptances, instruments, documents of title,
policies and certificates of insurance, chattel paper, guaranties and securities
now or hereafter received by Borrower or in which Borrower has or acquires an
interest;

         8.1.7 All cash and noncash proceeds of the foregoing property,
including, without limitation, proceeds of policies of fire, credit or other
insurance;

         8.1.8 All of Borrower's books and records pertaining to any of the
Collateral described in this Section 8.1; and

         8.1.9 Any other Collateral which CNB and Borrower may designate as
additional security from time to time by separate instruments.

         8.2 NOTIFICATION OF ACCOUNT DEBTORS. CNB will have the right to notify
any Account Debtor to make payments directly to CNB, take control of the cash
and noncash proceeds of any Account, and settle any Account, which right CNB may
exercise at any time whether or not an Event of Default has occurred or whether
Borrower was theretofore making collections thereon. Until CNB elects to
exercise such right, Borrower is authorized on behalf of CNB to collect and
enforce the Accounts. Immediately upon CNB's request, Borrower will deliver to
CNB for application in accord with this Agreement, all checks, drafts, cash and
other remittances in payment or on account of payment of its Accounts on the
banking day following the receipt thereof, and in precisely the form received,
except for the endorsement of Borrower where necessary to permit collection of
the items, which endorsement Borrower hereby agrees to make. Pending such
delivery, Borrower will not commingle any such checks, cash, drafts and other
remittances with any of its other funds or property, but will hold them separate
and apart therefrom expressly in trust for CNB. All such remittances will be
accompanied by such statements and reports of collections and adjustments as CNB
may specify.

         8.3 ATTORNEY-IN-FACT. CNB or any of its officers is hereby irrevocably
made the true and lawful attorney for Borrower with full power of substitution
to do the following: (a) endorse the name of Borrower upon any and all checks,
drafts, money orders and other instruments for the payment of moneys which are
payable to Borrower and constitute collections on Accounts; (b) execute in the
name of Borrower any schedules, assignments, instruments, documents and
statements which Borrower is obligated to give CNB hereunder; (c) receive, open
and dispose of all mail addressed to Borrower; (d) notify the Post Office
authorities to change the address for delivery of mail addressed to Borrower to
such address as CNB will designate; and (e) do such other acts in the name of
Borrower which CNB may deem necessary or desirable to enforce any Account or
other Collateral. The powers granted CNB hereunder are solely to protect its
interests in the Collateral and will not impose any duty upon CNB to exercise
any such powers.

9.         EVENTS OF DEFAULT AND PROCEEDINGS UPON DEFAULT.

         9.1 EVENTS OF DEFAULT. After expiration of any applicable cure period
set forth in Section 9.2, the following will constitute Events of Default under
this Agreement:

         9.1.1 Borrower fails to pay when due any installment of principal or
interest or any other amount payable under this Agreement, including but not
limited to amounts payable under Section 2.1.3;

         9.1.2 Any Person, or any Subsidiary of any Person, which is a party to
any Loan Document fails to perform or observe any of the terms, provisions,
covenants, agreements or obligations;

         9.1.3 Any financial statement, representation or warranty made or
furnished by Borrower or any Subsidiary or Guarantor in connection with the Loan
Documents proves to be in any material respect incorrect;


                                      -15-
<PAGE>


         9.1.4 The entry of an order for relief or the filing of an involuntary
petition with respect to Borrower or any Subsidiary or Guarantor under the
United States Bankruptcy Code; the appointment of a receiver, trustee, custodian
or liquidator of or for any part of the assets or property of Borrower or any
Subsidiary or Guarantor; or Borrower or any Subsidiary or Guarantor makes a
general assignment for the benefit of creditors;

         9.1.5 CNB's security interest in or lien on any portion of the
Collateral becomes impaired or otherwise unenforceable;

         9.1.6 Any Person obtains an order or decree in any court of competent
jurisdiction enjoining or prohibiting Borrower or CNB from performing this
Agreement, and such proceedings are not dismissed or such decree is not vacated
within ten (10) days after the granting thereof;

         9.1.7 Borrower or any Subsidiary neglects, fails or refuses to keep in
full force and effect any governmental permit, license or approval which is
necessary to the operation of its business;

         9.1.8 All or substantially all of the property of Borrower or any
Guarantor or Subsidiary is condemned, seized or otherwise appropriated;

         9.1.9 The occurrence of (a) a Reportable Event (as defined in ERISA)
which CNB determines in good faith constitutes grounds for the institution of
proceedings to terminate any pension plan by the PBGC, (b) an appointment of a
trustee to administer any pension plan of Borrower, or (c) any other event or
condition which might constitute grounds under ERISA for the involuntary
termination of any pension plan of Borrower, where such event set forth in (a),
(b) or (c) results in a significant monetary liability to Borrower;

         9.1.10 Dilution exceeds five percent (5.00%);

         9.1.11 ATHANOR GROUP, INC., a California corporation no longer controls
one hundred percent (100%) of the stock of Borrower;

         9.1.12 Any obligee of Subordinated Debt fails to comply with the
provisions of the documents evidencing such Subordinated Debt or any
Subordination Agreement;

         9.1.13 Any Guarantor dies, becomes incapacitated, or revokes his or its
Guaranty, or such Guaranty becomes otherwise unenforceable with respect to
future advances; or

         9.1.14 The Termination Date is not extended.

         9.2 NOTICE OF DEFAULT AND CURE OF POTENTIAL EVENTS OF DEFAULT. Except
with respect to the Events of Default specified in Sections 9.1.1, 9.1.4 or
9.1.5 above, and subject to the provisions of Section 9.4, CNB will give
Borrower at least ten (10) days' written notice of any event which constitutes,
or with the lapse of time would become, an Event of Default, during which time
Borrower will be entitled to cure same.

         9.3 CNB'S REMEDIES. Upon the occurrence of an Event of Default, at the
sole and exclusive option of CNB, and upon written notice to Borrower, CNB may
(a) declare the principal of and accrued interest on the Loans immediately due
and payable in full, whereupon the same will immediately become due and payable;
(b) terminate this Agreement as to any future liability or obligation of CNB,
but without affecting CNB's rights and security interest in the Collateral and
without affecting the Obligations owing by Borrower to CNB; and/or (c) exercise
its rights and remedies under the Loan Documents and all rights and remedies of
a secured party under the Code and other applicable laws with respect to the
Collateral.

         9.4 ADDITIONAL REMEDIES. Notwithstanding any other provision of this
Agreement, upon the occurrence of any event, action or inaction by Borrower, or
if any action or inaction is threatened which CNB reasonably believes will
materially affect the value of the Collateral, CNB may take such legal actions
as it deems necessary to protect the Collateral, including, but not limited to,
seeking injunctive relief and the appointment of a receiver, whether an Event of
Default or Potential Event of Default has occurred under this Agreement.



                                      -16-
<PAGE>


10.        MISCELLANEOUS.

         10.1 REIMBURSEMENT OF COSTS AND EXPENSES. After the effective date of
this Agreement, Borrower will reimburse CNB for all costs and expenses relating
to this Agreement including, but not limited to, filing, recording or search
fees, audit or verification fees, appraisals of the Collateral and other
out-of-pocket expenses, and reasonable attorneys' fees and expenses expended or
incurred by CNB (or allocable to CNB's in-house counsel) in documenting or
administering the Loan Documents or collecting any sum which becomes due CNB
under the Loan Documents, irrespective of whether suit is filed, or in the
protection, perfection, preservation or enforcement of any and all rights of CNB
in connection with the Loan Documents, including, without limitation, the fees
and costs incurred in any out-of-court work-out or a bankruptcy or
reorganization proceeding.

10.2       DISPUTE RESOLUTION.

         10.2.1 MANDATORY ARBITRATION. At the request of CNB or Borrower, any
dispute, claim or controversy of any kind (whether in contract or tort,
statutory or common law, legal or equitable) now existing or hereafter arising
between CNB and Borrower and in any way arising out of, pertaining to or in
connection with: (1) this Agreement, and/or any renewals, extensions, or
amendments thereto; (2) any of the Loan Documents; (3) any violation of this
Agreement or the Loan Documents; (4) all past, present and future loans; (5) any
incidents, omissions, acts, practices or occurrences arising out of or related
to this Agreement or the Loan Documents causing injury to either party whereby
the other party or its agents, employees or representatives may be liable, in
whole or in part, or (6) any aspect of the present or future relationships of
the parties, will be resolved through final and binding arbitration conducted at
a location determined by the arbitrator in Los Angeles, California, and
administered by the American Arbitration Association ("AAA") in accordance with
the California Arbitration Act (Title 9, California Code of Civil Procedure
Section 1280 et. seq.) and the then existing Commercial Rules of the AAA.
Judgment upon any award rendered by the arbitrator(s) may be entered in any
state or federal courts having jurisdiction thereof.

         10.2.2 REAL PROPERTY COLLATERAL. Notwithstanding the provisions of
Section 10.2.1, no controversy or claim will be submitted to arbitration without
the consent of all the parties if, at the time of the proposed submission, such
controversy or claim arises from or relates to an obligation owed to CNB which
is secured in whole or in part by real property collateral. If all parties do
not consent to submission of such a controversy or claim to arbitration, the
controversy or claim will be determined as provided in Section 10.2.3.

         10.2.3 JUDICIAL REFERENCE. At the request of any party, a controversy
or claim which is not submitted to arbitration as provided and limited in
Sections 10.2.1 and 10.2.2 will be determined by a reference in accordance with
California Code of Civil Procedure Sections 638 et. seq. If such an election is
made, the parties will designate to the court a referee or referees selected
under the auspices of the AAA in the same manner as arbitrators are selected in
AAA-sponsored proceedings. The presiding referee of the panel, or the referee if
there is a single referee, will be an active attorney or retired judge. Judgment
upon the award rendered by such referee or referees will be entered in the court
in which such proceeding was commenced in accordance with California Code of
Civil Procedure Sections 644 and 645.

         10.2.4 PROVISIONAL REMEDIES, SELF HELP AND FORECLOSURE. No provision of
this Agreement will limit the right of any party to: (1) foreclose against any
real property collateral by the exercise of a power of sale under a deed of
trust, mortgage or other security agreement or instrument, or applicable law,
(2) exercise any rights or remedies as a secured party against any personal
property collateral pursuant to the terms of a security agreement or pledge
agreement, or applicable law, (3) exercise self help remedies such as setoff, or
(4) obtain provisional or ancillary remedies such as injunctive relief or the
appointment of a receiver from a court having jurisdiction before, during or
after the pendency of any arbitration or referral. The institution and
maintenance of an action for judicial relief or pursuit of provisional or
ancillary remedies, or exercise of self help remedies will not constitute a
waiver of the right of any party, including the plaintiff, to submit any dispute
to arbitration or judicial reference.

         10.2.5 POWERS AND QUALIFICATIONS OF ARBITRATORS. The arbitrator(s) will
give effect to statutes of limitation, waiver and estoppel and other affirmative
defenses in determining any claim. Any controversy concerning whether an issue
is arbitratable will be determined by the arbitrator(s). The laws of the State
of California will govern. The arbitration award may include equitable and
declaratory relief. All arbitrator(s) selected will be required to be a
practicing attorney or retired judge licensed to practice law in the State of
California and will be required to be experienced and knowledgeable in the
substantive laws applicable to the subject matter of the controversy or claim at
issue.



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<PAGE>


         10.2.6 DISCOVERY. The provisions of California Code of Civil Procedure
Section 1283.05 or its successor section(s) are incorporated herein and made a
part of this Agreement. Depositions may be taken and discovery may be obtained
in any arbitration under this Agreement in accordance with said section(s).

         10.2.7 MISCELLANEOUS. The arbitrator(s) will determine which is the
prevailing party and will include in the award that party's reasonable
attorneys' fees and costs (including allocated costs of in-house legal counsel).
Each party agrees to keep all controversies and claims and the arbitration
proceedings strictly confidential, except for disclosures of information
required in the ordinary course of business of the parties or by applicable law
or regulation.

         10.3 CUMULATIVE RIGHTS AND NO WAIVER. All rights and remedies granted
to CNB under the Loan Documents are cumulative and no one such right or remedy
is exclusive of any other. No failure or delay on the part of CNB in exercising
any right or remedy will operate as a waiver thereof, and no single or partial
exercise or waiver by CNB of any such right or remedy will preclude any further
exercise thereof or the exercise of any other right or remedy.

         10.4 APPLICABLE LAW. This Agreement will be governed by California law.

         10.5 LIEN AND RIGHT OF SET-OFF. Borrower grants to CNB a continuing
lien for all Obligations of Borrower to CNB upon any and all moneys, securities
and other property of Borrower and the proceeds thereof, now or hereafter held
or received by or in transit to CNB from or for Borrower, whether for
safekeeping, custody, pledge, transmission, collection or otherwise, and also
upon any and all deposits (general or special) and credits of Borrower with, and
any and all claims of Borrower against, CNB at any time existing. Upon the
occurrence of any Event of Default, CNB is hereby authorized at any time and
from time to time, without notice to Borrower or any other Person to setoff,
appropriate and apply any or all items hereinabove referred to against all
Obligations of Borrower whether under this Agreement or otherwise, and whether
now existing or hereafter arising.

         10.6 NOTICES. Any notice required or permitted under any Loan Document
will be given in writing and will be deemed to have been given when personally
delivered or when sent by the U.S. mail, postage prepaid, certified, return
receipt requested, properly addressed. For the purposes hereof, the addresses of
the parties will, until further notice given as herein provided, be as follows:

                             CNB:  CITY NATIONAL BANK
                                   3633 Inland Empire Blvd., Suite 145
                                   Ontario, California 91764-4910
                                   Attention:  Account Manager

                    with copy to:  CITY NATIONAL BANK, Legal Department
                                   400 North Roxbury Drive
                                   Beverly Hills, California 90210-5021
                                   Attention:  Managing Counsel, Credit Unit

                        Borrower:  ALGER MANUFACTURING COMPANY, INC.,
                                   a California corporation
                                   724 South Bon View Avenue
                                   Ontario, California 91761-1998
                                   Attention:  Duane L. Femrite, COB/CEO

         10.7 ASSIGNMENTS. The provisions of this Agreement are hereby made
applicable to and will inure to the benefit of CNB's successors and assigns and
Borrower's successors and assigns; provided, however, that Borrower may not
assign or transfer its rights or obligations under this Agreement without the
prior written consent of CNB. CNB may assign this Agreement and its rights and
duties hereunder. CNB reserves the right to sell, assign, transfer, negotiate,
or grant participations in all or any part of, or any interest in CNB's rights
and benefits hereunder. In connection therewith, CNB may disclose all documents
and information which CNB now or hereafter may have relating to Borrower or
Borrower's business.



                                      -18-
<PAGE>


         10.8 INDEMNIFICATION. Borrower will, at all times, defend and indemnify
and hold CNB harmless from and against any and all liabilities, claims, demands,
causes of action, losses, damages, expenses (including without limitation
reasonable attorneys' fees [which attorneys may be employees of CNB, or may be
outside counsel]), costs, settlements, judgments or recoveries arising out of or
resulting from (a) any breach of the representations, warranties, agreements or
covenants made by Borrower herein; (b) any suit or proceeding of any kind or
nature whatsoever against CNB arising from or connected with the transactions
contemplated by this Agreement, the Loan Documents or any of the rights and
properties assigned to CNB hereunder; and/or (c) any suit or proceeding that CNB
may deem necessary or advisable to institute, in the name of CNB, Borrower or
both, against any other Person, for any reason whatsoever to protect the rights
of CNB hereunder or under any of the documents, instruments or agreements
executed or to be executed pursuant hereto, including attorneys' fees and court
costs and all other costs and expenses incurred by CNB (or allocable to CNB's
in-house counsel), all of which will be charged to and paid by Borrower and will
be secured by the Collateral. Any obligation or liability of Borrower to CNB
under this Section will survive the Termination Date and the repayment of all
Loans and other extensions of credit and the payment or performance of all other
Obligations of Borrower to CNB.

         10.9 COMPLETE AGREEMENT. This Agreement, together with other Loan
Documents, constitutes the entire agreement of the parties and supersedes any
prior or contemporaneous oral or written agreements or understandings, if any,
which are merged into this Agreement. This Agreement may be amended only in a
writing signed by Borrower and CNB.

         10.10 HEADINGS. Section headings in this Agreement are included for
convenience of reference only and do not constitute a part of the Agreement for
any purpose.

         10.11 ACCOUNTING TERMS. Except as otherwise stated in this Agreement,
all accounting terms and financial covenants and information will be construed
in conformity with, and all financial data required to be submitted will be
prepared in conformity with, GAAP as in effect on the date hereof.

         10.12 SEVERABILITY. Any provision of the Loan Documents which is
prohibited or unenforceable in any jurisdiction, will be, only as to such
jurisdiction, ineffective to the extent of such prohibition or unenforceability,
but all the remaining provisions of the Loan Documents will remain valid.

         10.13 COUNTERPARTS. This Agreement may be signed in any number of
counterparts which, when taken together, will constitute but one agreement.




                                      -19-
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         10.14 JOINT AND SEVERAL. Should more than one Person sign this
Agreement, the obligations of each signer will be joint and several.

           IN WITNESS WHEREOF, CNB and Borrower have caused this Agreement to be
executed as of the date first specified at the beginning of this Agreement.

                                          ALGER MANUFACTURING COMPANY, INC., a
                                          California corporation

                                          By: /s/  Duane L. Femrite
                                              ----------------------------------
                                              Duane L. Femrite, COB/CEO



                                          CITY NATIONAL BANK, a national
                                          banking association

                                          By: /s/  Terrance C. Trudo
                                              ----------------------------------
                                              Terrence C. Trudo, Vice President



                                      -20-
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