No. 127

### SECURITY AGREEMENT

Agreement dated December 20, 2000 between DISC GRAPHICS, INC., a
CORPORATION under the laws of the State of DELAWARE (herein called "Debtor") and
PINNACLE CAPITAL CORPORATION having its principal place of business at 411
Hackensack Avenue, Hackensack, New Jersey 07601 as the Secured Party, (herein
called "Secured Party").

FOR VALUABLE CONSIDERATION and to secure an indebtedness of the Debtor
to Secured Party in the principal amount of $2,989,600.00 plus interest thereon
(the "Loan") as evidence by an Installment Promissory Note of even date herewith
(herein called the "Note") and any renewal, extensions or replacements thereof
and, further, to secure the obligations of the Debtor under this Agreement and
any other obligation of the Debtor to Secured Party which is now in existence or
may hereafter come into existence, the Debtor hereby grants to Secured Party a
security interest in the property listed on the annexed Equipment Schedule A,
together with all equipment parts, attachments, present and future accessions,
accessories, additions, substitution and all replacements thereto or thereof or
hereafter attached to, placed upon, or used in connection with, the said
property and all proceeds of the foregoing, including insurance proceeds (all
herein collectively called the "Collateral").

1.   DEBTOR'S WARRANTIES, REPRESENTATIONS AND COVENANTS: Debtor hereby
warrants, represents and agrees (a) that the Collateral is lawfully owned by
Debtor, free and clear of all other liens, encumbrances and security interests,
and Debtor, will warrant and defend title to the same against the claims and
demands of all persons; (b) that Debtor has not granted, and will not grant, to
anyone other than Secured Party any security interest in the Collateral and,
except for Financing Statements in favor of Secured Party, no Financing
Statements or other instrument affecting the Collateral, or rights therein is on
file in any public filling office; (c) that the Collateral is and shall be
retained in Debtor's possession at 10 Gilpin Avenue, Hauppauge, New York 11788;
(d) that the Collateral is and will be used only for business or commercial
purposes; (e) that the Collateral is and will remain personal property; (f) that
if the Collateral is attached to real estate or if the Collateral is or may
become subject to a prior interest in favor of any party having an interest in
the real estate, Debtor, on demand of Secured Party, will furnish Secured Party
with a writing by which any and all parties having such prior interest
subordinate or disclaim their rights and priorities in favor of Secured Party's
security interest provided herein; (g) that the Debtor is duly organized and
validly existing in good standing under the laws of the state of its
incorporation or organization and has full power to own its assets and to carry
on its business as now being conducted; (h) that this Agreement and the Note
have been validly authorized, duly executed and delivered and constitute the
valid and legally binding obligations of the Debtor, enforceable in accordance
with their respective terms and are not violative of, or create a default under,
its Articles or Organization, Charter, By-laws, or under any order, writ,
injunction or decree of any court or governmental instrumentality or agreement
to which Debtor is a party.

2.     NO WARRANTY AND UNCONDITIONAL OBLIGATION: DEBTOR ACKNOWLEDGES THAT
THE SECURED PARTY HAS MADE NO WARRANTIES OR REPRESENTATIONS WITH RESPECT TO THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ITS MERCHANTABILITY, SUITABILITY,
DESIGN, CAPACITY OR ITS FITNESS FOR ANY PARTICULAR PURPOSE. All payments due
under the Note shall be made without notice and demand and Debtor's obligation
to make any payment thereunder or hereunder shall be absolute and unconditional.
Debtor shall not be entitled to any reduction or set-off against such payment,
nor, except as otherwise expressly provided herein, shall this Security
Agreement terminate, or the obligations of Debtor be otherwise affected by
reason of any defect in, lack of fitness for use of, damage to, loss of
possession or use of the Collateral, or for any other cause, it being the
intention of the parties hereto that all amounts payable by Debtor hereunder and
under the Note shall continue to be payable in all events in the manner and at
the times provided in the Note and hereunder.

3.   INSURANCE: Debtor agrees that from the date hereof it will, at its
sole cost and expense, keep the Collateral insured against all risks of physical
loss or damage including loss by fire, theft, wind and explosion with extended
coverage for not less than the greater of the indebtedness or the Collateral's
full replacement cost and that it will carry personal injury liability and
property damage liability insurance in such amounts and covering such risks as
Secured Party may reasonably require. All said insurance shall be in form and
with companies satisfactory to Secured Party. The loss under all such policies
against physical loss or damage shall be payable to Secured Party or its
assignee and the Debtor as their interests may appear and Secured Party or its
assignee shall be named as an additional insured under all liability insurance
policies. Such policies shall provide that no less than thirty (30) days notice
shall be given by the insurance company to Secured Party or its assignee prior
to any cancellation or alteration of the policies and that the coverage afforded
shall not be impaired or invalidated against Secured Party or its assignee on
account of any breach of condition or warranty contained in any policy or
application therefor by the Debtor or any reason of any action or inaction of
the Debtor. The insurance policies and all renewals thereof, or Certificates in
lieu thereof, shall be promptly delivered by the Debtor to Secured Party and
shall be held by Secured Party until the indebtedness secured hereby is paid.
Debtor hereby assigns to Secured Party all monies, not in excess of the
indebtedness secured hereby and the obligations contained herein, which may
become payable under such insurance including the return of any unearned
premiums, and directs any insurer to make payment directly to Secured Party and
authorizes Secured Party to apply such monies in payment against the
indebtedness secured hereby and the obligations contained herein and to remit
any excess to the Debtor. If the Collateral is damaged, other than being totally
destroyed, and such damage is repairable and covered by insurance, all loss
proceeds payable by the insurance company or companies shall be made available
by Secured Party to be applied to the repair and/or replacement of such damage
to the Collateral provided Debtor is not in default of its obligations under
this Agreement or in the payment of any of the indebtedness secured hereby and
provided further than Security Party receives such assurances as it may in its
sole discretion require that (i) such proceeds will be utilized for such repair
or replacement and that the Debtor has advanced such sums as may be required for
the repair or replacement to the extent that the insurance proceeds are
insufficient therefor; (ii) all replacements shall be of the same or a later
model than the item replaced and all repairs will be of first class workmanship
and (iii) the Collateral will be free of mechanics' liens and title to
replacements will vest in Debtor free of liens and encumbrances except for the
first security interest of Secured Party therein. Any excess insurance proceeds
shall be applied against the indebtedness secured hereby and the obligations
contained herein. The Debtor appoints Secured Party as its attorney-in-fact to
endorse any draft, make any claim under such insurance and execute any proof of
claim and to do all other things necessary and required to effect a settlement
under any insurance policies. In the event of a failure by Debtor to procure and
maintain such insurance, Secured Party is hereby authorized and empowered (but
not obligated) to do so and the premiums paid for same shall be a lien against
the Collateral, added to the amount of the indebtedness secured hereby and
payable on demand with interest at the lessor of 2% per month or the maximum
legal rate.

4.   RISK OF LOSS AND MAINTENANCE OF COLLATERAL: All risks of loss, theft
or destruction of the Collateral shall be borne by the Debtor. Debtor agrees to
keep the Collateral in first class operating condition and appearance at all
times. Upon any failure of the Debtor to comply with the foregoing, Secured
Party, in addition to its other rights and remedies hereunder, may, but shall
not be obligated to, cause repairs to be made to the Collateral, the cost of
which shall be a lien against the Collateral, added to the amount of the
indebtedness secured hereby and payable on demand with interest at the lessor of
2% per month or the maximum legal rate.

5.   USE OF COLLATERAL AND OTHER DEBTOR OBLIGATIONS: Debtor agrees that
it will not use the Collateral in violation of any statute or ordinance or
applicable insurance policy and will promptly pay all taxes, assessments,
license fees and other public or private charges levied or assessed against the
Collateral and this obligation shall survive the termination of this Agreement;
that Debtor will not permit any lien, charge, encumbrance or security interest
of any kind whatsoever (other than Secured Party's security interest) to accrue
upon or attach to the Collateral; that Debtor will not remove the Collateral
from its location as above set forth without the prior written consent of
Secured Party which shall not be unreasonably withheld; that if any part of the
Collateral is subject to a certificate of title law, Debtor will cause Secured
Party's security interest to be noted thereon and promptly deliver such
certificate of title to Secured Party, that Debtor will not secrete, sell,
transfer, dispose of, attempt to dispose of, substantially modify or abandon the
Collateral or any part thereof; that Debtor will sign and deliver to Secured
Party such Financing Statements and Continuation Statements, in form acceptable
to Secured Party, as Secured Party may, from time to time, reasonably request,
or as are reasonably necessary in the opinion of Secured Party, to establish and
maintain a valid security interest in the Collateral and Debtor will pay any
relative filing fees or costs with respect thereto and for prior lien searches;
and that Debtor hereby constitutes and appoints Secured Party its true and
lawful attorney-in-fact to execute and deliver any financing statement or other
document which may be required to establish and/or maintain Secured Party's
security interest in the Collateral and/or the additional collateral security
covered by the provisions of paragraph 7 below. Debtor shall, at its own cost
and expense, protect and defend its title to the Collateral and defend all
actions and claims which may be asserted against the Collateral and its use
thereof. In the event of a failure by Debtor to pay any taxes, assessments,
license fees and other public or private changes levied or assessed against the
Collateral, Secured Party, in addition to its other rights and remedies
hereunder, may, but shall not be obligated to, make such payments, and the
amounts so paid shall be a lien against the Collateral added to the amount of
the indebtedness secured hereby and payable on demand with interest at the
lesser of 2% per month or the maximum legal rate. Debtor will allow Secured
Party and its representatives free access to the Collateral at all times for
purposes of inspection or repair. Debtor will furnish to Secured Party unaudited
quarterly financial statements within thirty (30) days after the end of its
first three quarters in each fiscal year and its Form 10K or a certified
Financial Statement prepared by an independent certified public accountant
reasonably acceptable to Secured Party within ninety (90) days after the close
of its fiscal year, all of which shall be true and correct in all respects,
shall be prepared in accordance with generally accepted accounting principles
and shall be supplied until the indebtedness secured hereby is paid in full.

6.   DEFAULT: Debtor shall be in default under the terms of this
Agreement and the Note upon the occurrence of any of the following: (a) if the
Debtor shall fail to make any payment under the Note or this Agreement when due;
(b) if the Debtor fails to maintain in force the required insurance or removes,
sells, transfers, encumbers, sublets or parts with possession of the Collateral
or any part thereof or attempts to do any of the foregoing; (c) if the Debtor
shall fail to perform or comply with any of the other terms, covenants, or
conditions of this Agreement of the Note and any such failure shall continue for
a period ten (10) days after written notice to Debtor; (d) if the Collateral or
any part hereof be seized or levied upon under legal process; (e) if the Debtor
defaults under or breaches any of the terms, covenants or condition of any other
Security Agreement, Conditional Sales Contract, Lease, Note or Agreement it may
now have or hereafter make with Secured Party; (f) if Debtor ceases doing
business as a going concern or makes or sends notice of an intended Bulk Sale or
makes an assignment for the benefit of creditors; (g) if any proceedings are
commenced by Debtor or are commenced against Debtor and are not dismissed within
sixty (60) days under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, receivership, liquidation or dissolution law or statute of
any jurisdiction, whether now or hereafter in effect; (h) if a receiver, trustee
or conservator be appointed for any of Debtor's property, or (i) if any
quarterly representation or statement made herein by Debtor or contained in any
separate statement in writing in connection herewith, including, without
limitation, any financial statements furnished to Secured Party by or on behalf
of Debtor, is untrue or incomplete in any material respect.

Upon the occurrence of any default, the indebtedness secured hereby and
all other obligations then owing by the Debtor to Secured Party shall, if
Secured Party so elects, become immediately due and payable and Secured Party
shall have the rights and remedies of a secured party under the Uniform
Commercial Code and any other applicable laws, and it shall then be lawful for,
and Secured Party is hereby authorized and empowered, with the aid and
assistance of any person or persons, to enter any premises were the Collateral
or any part thereof is, or may be placed, and to assemble and/or remove same
and/or to render if unusable and sell and dispose of such Collateral at one or
more public or private sales upon at least five business (5) days written notice
to Debtor of such sale. The proceeds of each such sale shall be applied by
Secured Party toward the payment of expenses of retaking, including
transportation, storage, refurbishing, preparing for such sale, advertising,
selling and all related charges and disbursements in connection therewith and
the indebtedness and interest secured hereby. Should the proceeds of any such
sale be insufficient to fully pay all the items above mentioned, Debtor hereby
covenants and agrees to pay any deficiency to Secured Party and if Secured Party
employs counsel for the purpose of effecting collection of any monies due
hereunder (whether or not Secured Party has retaken the Collateral or any part
thereof) or for the purpose of recovering the Collateral or for the purpose of
protecting Secured Party's interest because of any default of Debtor, Debtor
agrees to pay reasonable attorneys' fees and such attorneys' fees shall be a
lien on the Collateral herein and the proceeds thereof. Secured Party may
require Debtor to assemble the Collateral and make it available to Secured Party
at a price to be designated by Security Party which is reasonably convenient to
both parties. All rights and remedies hereunder are cumulative and not exclusive
and a waiver by Secured Part of any breach by Debtor of the terms, covenants,
and conditions hereof shall not constitute a waiver of future breaches or
defaults and no failure or delay on the part of Secured Party in exercising any
of its options, powers, rights or remedies or partial or single exercise
thereof, shall constitute a waiver thereof.

7.   ADDITIONAL SECURITY: As additional collateral security for the
Debtor's obligations under the Loan and any other obligation of the Debtor to
Secured Party, Debtor hereby grants to Secured Party a security interest in all
machinery and equipment covered by any other lease, security agreement or
conditional sales contract (collectively the "agreement") between the Debtor and
Secured Party whether such agreement is now in existence or may hereafter come
into existence and Debtor hereby assigns to Secured Party all of its right,
title and interest in and to any surplus money to which Debtor may be entitled
upon the sale of any machinery and equipment covered by such agreement.

Notwithstanding anything above to the contrary, the benefit of the
foregoing additional security provision shall apply to Secured Party and its
assignee holding the Note and this Agreement only to the extent that Secured
Party or such assignee is also the holder of such other agreement(s).

8.   WAIVER OF JURY TRIAL:  Debtor  hereby  waives the right of a jury trial in any action or  proceeding  by either  party,  or
assigns, arising out of the matter of this Agreement, the Collateral, or the Notice or other obligations secured hereby.

9.   CHANGES AND MODIFICATIONS: This Agreement may not be changed,
modified or discharged, in whole or in part, and no right or remedy of Secured
Party hereunder or under the Note or as a secured party under the Uniform
Commercial Code may be waived by Secured Party unless such change, modification,
discharge or waiver is in writing and signed on behalf of Secured Party by one
of its duly authorized officers. All prior representations and agreements are
merged in this Agreement.

10.     AUTHORIZATION TO SECURED PARTY: Secured Party is hereby authorized and empowered to date this Agreement and to fill in
blank spaces in accordance with the actual terms of the related transaction.

11.   ASSIGNMENT: Secured Party may assign this Agreement and the Note or
grant a security interest therein and in the event of any such assignment, the
right of the assignee to receive all payments due hereunder and under the Note,
as well as any other rights of the assignee, shall not be subject to any
defense, set-off or counterclaim which Debtor may have against Secured Party. On
receipt of notice of such assignment, the Debtor shall promptly acknowledge its
obligations hereunder and under the Note to the assignee and shall make all
payments due thereunder as such assignee may direct. Following any such
assignment, the term "Secured Party" shall be deemed to include or refer to such
assignee and any successor assignee.*

12.   MISCELLANEOUS: Notices or other communications hereunder shall be
given in writing and mailed to the other party at the address specified herein
or to such changed address as either party may give the other notice of in
writing. Forbearance or indulgence by Secured Party in any regard shall not
constitute a waiver of the applicable covenant or condition. Any provision of
this Agreement which is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. The
paragraph headings are for convenience of reference only and not a part of this
Agreement.**

13.    GOVERNING LAW: This  Agreement and the rights and  obligations  of Secured Party and Debtor  hereunder  shall be governed
by and construed in accordance with the laws of the State of New York.

IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed and
delivered as of the day and year first above written.

| |                     |                           
| | ------------------- | --------------------------
| | DISC GRAPHICS, INC.
| |                     | (Debtor)                  
| | By:                 | __________________________
| | Title:              | President &CEO            
| | Address:            | 10 Gilpin Avenue          
| |                     | Hauppauge, NY 11788       
| |                     |                           

ACCEPTED:

Secured Party:   PINNACLE CAPITAL CORPORATION

By:             __________________________________________

Title:       ___________________________________________

* Debtor has the right to assign the Agreement to a person or entity which
acquires all or substantially all of Debtor's assets, with the consent of the
Secured Party, which consent shall not be unreasonably delayed, conditioned or
withheld, yet will be subject to credit approval at Secured Party's sole
discretion.

** Any notices required under this Agreement must be sent by certified mail
return receipt requested or by reputable overnight courier, and are effective
upon the earlier of actual receipt or three (3) business days if mailed or the
next business day if sent via courier.