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                                                          Exhibit 10.42

                                   January 27, 1997


Philip C. Kantz
c/o TAB Products Co.
1400 Page Mill Road
Palo Alto, California 94304

    RE:  EMPLOYMENT AGREEMENT

Dear Phil:

    Pursuant to our recent discussions, this letter sets forth the terms of
your employment with TAB Products Co. (the "Company").

    1.   POSITION:   You will be employed by the Company as its President and
Chief Executive Officer, reporting to the Company's Board of Directors (the
"Board").  The Company will undertake reasonable efforts to have you elected to
the Board during your employment, and you agree that upon the termination of
your employment for any reason you shall promptly resign from the Board.  You
accept employment with the Company on the terms and conditions set forth in this
Agreement, and you agree to devote your full business time, energy and skill to
your duties at the Company. However, you shall be entitled to engage in other
professional activities, including, but not limited to, participating on other
boards of directors (provided that you give advance written notice to the Board
of your participation on such other boards), which activities do not materially
interfere with the performance of your duties for the Company.  Your duties
shall include, but not be limited to, the overall general management of the
Company, as well as any other reasonable duties that may be assigned to you from
time to time by the Board.

    2.   TERM OF EMPLOYMENT:   Your employment with the Company will start on
January 27, 1997, will be for no specified term, and may be terminated by you or
the Company at any time, with or without cause, subject to Paragraphs 4 and 5
below.

    3.   COMPENSATION:   You will be compensated by the Company for your
services as set forth below.  All amounts paid to you by the Company will be
subject to applicable withholding.

         (a)  SALARY:   During your employment you will be paid an annual base
salary of $300,000.00 in accordance with the Company's normal payroll
procedures.

         (b)  INCENTIVE BONUS:  Within 30 days following May 31, 1997, you will
be paid an incentive bonus for the Company's current fiscal year of $50,000.00.
Thereafter, you will be eligible to receive annual bonuses based upon the
Company's achievement of various financial and/or other goals established by you
and the Board.  In each Company fiscal year (other than the current fiscal
year), you will be eligible for a bonus of up to 100% of your then-current
annual base salary, with a target bonus equal to 50% of your then-current annual
base salary.  The goals that govern your bonus eligibility will be agreed upon
by you and the Board and confirmed in writing prior to (or within 30 days
following the start of) any Company fiscal year.  To the extent earned, bonuses
will be paid to you on the later of 45 days after (i) the end of the applicable
fiscal year, or (ii) the date on which the financial or other data necessary to
determine your entitlement to the bonus becomes available.

         (c)  BENEFITS:   You will have the right, on the same basis as other
executive employees of the Company, to participate in and to receive benefits
under the Company's executive medical program and other group

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insurance plans, as well as under the Company's 401(k) plan and business expense
reimbursement policy.  You will also receive a car allowance of $500.00 per
month.

         (d)  VACATION:  You will accrue four weeks' vacation per year during
your employment.  Provided, however, that you shall schedule all of your
vacations at times that are mutually convenient and reasonable for both you and
the Company.

         (e)  STOCK OPTIONS:  You will be granted options to purchase 250,000
shares of the Company's common stock (the "Options") at a price of $9.25 per
share.  The Options will expire ten years after their grant date.  During your
first three years of employment with the Company, you will become vested in
12,500 shares of stock subject to the Options at the end of each three month
period of employment (150,000 shares total), with the first shares vesting on
April 26, 1997.  The remaining 100,000 shares of stock subject to the Options
will vest as follows:

              (i)  in the event that you are still employed by the Company,
50,000 shares will vest on the earlier of (1) the end of the first fiscal year
in which the Company's sales are $190,000,000.00 or more and its earnings per
share are $1.20 or more, or (2) January 27, 2001; and

              (ii) in the event that you are still employed by the Company,
50,000 shares will vest on the earlier of (1) the end of the first fiscal year
in which the Company's sales are $240,000,000.00 or more and its earnings per
share are $1.50 or more, or (2) January 27, 2002.

Notwithstanding the foregoing, in the event that you are still employed by the
Company, the Options will become fully vested and exercisable as of the date
that is ten (10) days prior to the consummation of a "Transfer of Control"
(which term, as used in this Agreement, is defined in the Company's 1991 Stock
Option Plan).  Except as provided herein, the Options shall be governed by and
subject to the terms and conditions of the Company's standard form of stock
option agreement (which you will be required to sign as a condition of the
issuance of the Options).

         4.   TERMINATION RESULTING FROM RESIGNATION, DEATH, OR DISABILITY:
In the event that you voluntarily resign from your employment with the Company,
or in the event that your employment terminates as a result of your death or
disability (meaning that you are unable to perform your duties for any 90 days
in any one year period as a result of a physical and/or mental impairment), you
will be entitled to no compensation or benefits from the Company other than
those earned under Paragraph 3 through the date of your termination (you will
not be entitled to any pro rated portion of your incentive bonus for that fiscal
year).  You agree that in the event you voluntarily terminate your employment
with the Company for any reason, you will provide the Company with thirty days'
written notice of your resignation.  The Company may, in its sole discretion,
elect to waive all or any part of such notice period and accept your resignation
at an earlier date.

    5.   TERMINATION BY THE COMPANY:

         (a)  TERMINATION FOR CAUSE:  Your employment may be terminated by the
Company for cause as defined below.  If your employment is terminated by the
Company for cause, you will be entitled to no compensation or benefits from the
Company other than those earned under Paragraph 3 through the date of your
termination for cause (you will not be entitled to any pro rated portion of your
incentive bonus for that fiscal year).

    For purposes of this Agreement, a termination "for cause" occurs if you are
terminated for any of the following reasons:  (i) theft, dishonesty, misconduct
or intentional falsification of any employment or Company records; (ii)
intentional and improper disclosure of the Company's confidential or proprietary
information; (iii) any action by you that has a material detrimental effect on
the Company's reputation or business; (iv) your failure or inability to perform
any assigned duties reasonably expected of a president or chief executive
officer after written

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notice from the Board to you of, and a reasonable opportunity to cure, such
failure or inability; or (v) your conviction (including any plea of guilty or
nolo contendere) for any criminal act that impairs your ability to perform your
duties for the Company.

         (b)  TERMINATION WITHOUT CAUSE:  If your employment is terminated by
the Company without cause (and not as a result of your death or disability), or
in the event that you resign for Good Reason as defined below, you shall receive
severance payments at your final base salary and target bonus rate, less
applicable withholding, for a period of two years following the date of your
termination without cause.  Severance payments will be made in accordance with
the Company's normal payroll procedures.  (The bonus portion of your severance
will be paid in equal installments over the entire severance period.)  You shall
also be entitled to receive any compensation and benefits that you earn under
Paragraph 3 through the date of your termination without cause (you will be
entitled to a pro rated portion of your target incentive bonus for that fiscal
year).  Provided, however, that your right to receive the severance payments
described above shall be conditioned upon your execution and delivery of a
general release of claims in form satisfactory to the Company, and substantially
in the form attached as EXHIBIT A.  This subparagraph shall not apply in the
event of your termination for cause, your resignation other than for Good
Reason, or the termination of your employment as a result of your death or
disability.

         (c)  TERMINATION WITHOUT CAUSE FOLLOWING TRANSFER OF CONTROL:  If
within one year following any Transfer of Control, your employment is terminated
without cause, or you resign for a Good Reason as defined below, you shall
receive severance payments at your final base salary and target bonus rate, less
applicable withholding, for a period of two years following the date of your
termination without cause.  Severance payments will be made in accordance with
the Company's normal payroll procedures.  (The bonus portion of your severance
will be paid in equal installments over the entire severance period.)  You shall
also be entitled to receive any compensation and benefits that you earn under
Paragraph 3 through the date of your termination without cause (you will be
entitled to a pro rated portion of your target incentive bonus for that fiscal
year).  Provided, however, that your right to receive the severance payments
described above shall be conditioned upon your execution and delivery of a
general release of claims in form satisfactory to the Company, and substantially
in the form attached as EXHIBIT A.  This subparagraph shall not apply in the
event of your termination for cause, your resignation other than for Good
Reason, or the termination of your employment as a result of your death or
disability.

         (d)  "GOOD REASON":    For purposes of this Agreement, "Good Reason"
means any of the following conditions, which condition(s) remain(s) in effect 10
days after written notice to the Board from you of such condition(s):

              (i)  a decrease in your base salary and/or a material decrease in
your incentive bonus plan or employee benefits;

              (ii) a material, adverse change in your title, authority,
responsibilities or duties, as measured against your title, authority,
responsibilities or duties immediately prior to such change; or

              (iii)     the relocation of your work place for the Company to a
location that is more than 50 miles from its location immediately prior to such
relocation.

    6.   ADDITIONAL PAYMENT.

         (a)  In the event that any payment or benefit received or to be
received by Employee pursuant to this Agreement (collectively, the "Payments")
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any similar or successor
provision (the "Excise Tax"), the Company shall pay to Employee within ninety
(90) days of the date Employee becomes subject to the Excise Tax, an additional
amount (the "Gross-Up Payment") such that the net amount retained by Employee,
after

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deduction of (1) any Excise Tax on the Payments and (2) any federal, state and
local income tax and Excise Tax upon the payment provided for by this Section,
shall be equal to the Payments.

         (b)  For purposes of determining whether any of the Payments will be
subject to the Excise Tax and the amount of such Excise Tax:

              (i)  Any other payments or benefits received or to be received by
Employee in connection with transactions contemplated by a Change in Control
event or Employee's termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the Company),
shall be treated as "parachute payments" within the meaning of Section 280G of
the Code or any similar or successor provision, and all "excess parachute
payments" within the meaning of Section 280G or any similar or successor
provision shall be treated as subject to the Excise Tax, unless in the opinion
of tax counsel selected by the Company such other payments or benefits (in whole
or in part) do not constitute parachute payments, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered within the meaning of Section 280G (or any similar or
successor provision of the Code) in excess of the base amount within the meaning
of Section 280G (or any similar or successor provision of the Code), or are
otherwise not subject to the Excise Tax.

              (ii) The amount of the Payments which shall be treated as subject
to the Excise Tax shall be equal to the lesser of (i) the total amount of the
Payments or (ii) the amount of the excess parachute payments within the meaning
of Section 280G (after applying paragraph (b)(1) above).

              (iii)     The value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G of the Code.

         (c)  For purposes of determining the amount of the Gross-Up Payment,
Employee shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the Gross-Up
Payment is to be made and state and local income taxes at the highest marginal
rate of taxation in the state and locality of your residence on the date the
Gross-Up Payment is to be made, net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.

         (d)  In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder, Employee shall repay to the
Company at the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such reduction
(plus the portion of the Gross-Up Payment attributable to the Excise Tax and
federal, state and local income tax imposed on the Gross-Up Payment being repaid
by Employee if such repayment results in a reduction in Excise Tax and/or a
federal, state or local) income tax deduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the Code.

         (e)  In the event that the Excise Tax is determined to exceed the
amount taken into account hereunder (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional gross-up payment in respect of
such excess (plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined.

    7.   CONFIDENTIAL AND PROPRIETARY INFORMATION:   As a condition of your
employment, you agree to sign the Company's standard form of employee
confidentiality and assignment of inventions agreement.

    8.   DISPUTE RESOLUTION:   In the event of any dispute or claim relating to
or arising out of your employment relationship with the Company, this Agreement,
or the termination of your employment with the

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Company for any reason (including, but not limited to, any claims of breach of
contract, wrongful termination or age, disability or other discrimination), you
and the Company agree that all such disputes shall be fully, finally and
exclusively resolved by binding arbitration conducted by the American
Arbitration Association in Santa Clara County, California.  You and the Company
hereby knowingly and willingly waive your respective rights to have any such
disputes or claims tried to a judge or jury.  Provided, however, that this
arbitration provision shall not apply to any disputes or claims relating to or
arising out of the actual or alleged misuse or misappropriation of the Company's
property, including, but not limited to, its trade secrets or proprietary
information.

    9.   INTERPRETATION:   This Agreement shall be interpreted in accordance
with and governed by the laws of the State of California.

    10.  ASSIGNMENT:   In view of the personal nature of the services to be
performed under this Agreement by you, you cannot assign or transfer any of your
rights or obligations under this Agreement.

    11.  ENTIRE AGREEMENT:   This Agreement and the agreements referred to
above constitute the entire agreement between you and the Company regarding the
terms and conditions of your employment, and they supersede all prior
negotiations, representations or agreements between you and the Company
regarding your employment, whether written or oral.

    12.  MODIFICATION:   This Agreement may only be modified or amended by a
supplemental written agreement signed by you and an authorized officer of the
Board.

    Phil, we look forward to working with you at TAB Products Co.  Please sign
and date this letter on the spaces provided below to acknowledge your acceptance
of the terms of this Agreement.


                             Sincerely,

                             TAB Products Co.


                             By:  /s/ Hans A. Wolf
                                ----------------------------------------
                                  Hans A. Wolf,
                                  Chairman of the Board



    I agree to and accept employment with TAB Products Co. on the terms and
conditions set forth in this Agreement.


    Date:  January 27, 1997       /s/ Philip C. Kantz
                                  --------------------------------------
                                  Philip C. Kantz