Exhibit 10.19

                           FOURTH AMENDMENT AGREEMENT

         This Fourth Amendment Agreement (this "Agreement") dated as of December
31, 2001, is by and between ARK CLO 2000-1,  Limited (the "Lender") (as assignee
of Fleet National Bank,  formerly  known as BankBoston,  N.A.) and  Scan-Optics,
Inc. (the  "Borrower"),  as parties to that certain  Second Amended and Restated
Loan  Agreement,  dated as of May 10, 1999 (the "Original Loan  Agreement"),  as
amended  pursuant to that certain  Amendment and Waiver  Agreement,  dated as of
January  29,  2001 (the  "First  Amendment"),  the Second  Amendment  and Waiver
Agreement,  dated as of July 1,  2001  (the  "Second  Amendment")  and the Third
Amendment  and  Waiver  Agreement,  dated as of  September  1, 2001 (the  "Third
Amendment";  together with the Original Loan Agreement, the First Amendment, the
Second Amendment and the Third Amendment, collectively, the "Loan Agreement").

                              W I T N E S S E T H :

         WHEREAS,  Lender has provided  Borrower with (a) that certain revolving
credit  loan  in  the  original  principal  amount  of up to  $10,000,000.00  as
evidenced by, inter alia, (i) that certain Fourth Amended and Restated Revolving
Credit Note from the Borrower to the Lender in the original  principal amount of
up to  $10,000,000.00  dated as of May 10, 1999 (the "Revolving Credit Note" (as
such term is amended as set forth below)),  (ii) the Loan  Agreement,  and (iii)
those  certain  Unlimited  Guaranties  in  favor  of the  Lender  from  each  of
Scan-Optics  Limited and  Scan-Optics  (Canada)  Ltd.  both dated as of April 7,
1993,  as  reaffirmed by a  Reaffirmation  of Guaranties  dated May 10, 1999 (as
amended and reaffirmed from time, to time, collectively, the "Guaranties"),  and
(b) that certain term loan in the original principal amount of $10,000,000.00 as
evidenced  by,  inter alia,  (i) that certain Term Note from the Borrower to the
Lender in the original  principal amount of  $10,000,000.00  dated as of May 10,
1999 (the "Term Note" (as such term is amended as set forth  below) and together
with the  Revolving  Credit  Note,  collectively,  the  "Notes"),  (ii) the Loan
Agreement  and  (iii)  the  Guaranties.  The  Notes,  the  Loan  Agreement,  the
Guaranties,  this Agreement and all other instruments,  agreements and documents
executed and/or delivered in connection  therewith are collectively  referred to
herein as the "Loan Documents";

         WHEREAS,  each of the  Borrower,  Scan-Optics  Limited and  Scan-Optics
(Canada) Ltd., (collectively,  the "Obligors") entered into the First Amendment,
the Second  Amendment  and the Third  Amendment  with the Lender to, inter alia,
waive certain Events of Default (as defined in the First  Amendment,  the Second
Amendment and the Third Amendment) arising as a result of the Borrower's failure
to comply with certain terms and conditions of the Original Loan Agreement until
the Waiver  Termination  Date (as defined in the First Amendment) and the Second
Waiver  Termination  Date (as  defined  in the Second  Amendment)  and the Third
Waiver  Termination  Date (as  defined  in the  Third  Amendment)  as set  forth
therein;

         WHEREAS,  each of the  Obligors  acknowledges  and agrees  that (a) the
Third Waiver  Termination  Date has occurred and that said Events of Default are
continuing and (b) as a result thereof, the Lender may, if it so elects, proceed




                                      -1-
<PAGE>

to enforce its rights and remedies  under the Loan  Documents and to collect the
Obligors' indebtedness to the Lender under the Loan Documents;

         WHEREAS, prior to giving effect to this Agreement, the Revolving Credit
Commitment is $10,000,000,  the outstanding principal amount of Revolving Credit
Loans is $9,891,555.91 (the "Current Revolving Loan Balance");

         WHEREAS,  prior to giving  effect to this  Agreement,  the  outstanding
principal  amount  of the Term Loan is  $8,495,100.00  (the  "Current  Term Loan
Balance");

         WHEREAS,  the Borrower has failed to comply with certain  provisions of
the Loan  Documents  set  forth on  Schedule  1 hereto,  and each  such  failure
constitutes an Event of Default under the Loan Agreement; and

         WHEREAS, the Obligors and the Lender wish to restructure the Loans (the
"Restructuring")  and amend certain terms and  conditions of the Loan  Agreement
all on the terms and conditions set forth herein.

         NOW, THEREFORE,  for good and valuable  consideration,  the receipt and
sufficiency  of which are  hereby  acknowledged,  the  parties  hereto  agree as
follows:

Section 1. Definitions.  Capitalized  terms used herein without  definition that
are  defined  in the Loan  Agreement  shall  have the same  meanings  herein  as
therein.

Section 2. Condition  Precedent.  The effectiveness of the amendments  contained
herein  shall  be  subject  to  the  satisfaction  of the  following  conditions
precedent, on or before January 11, 2002:

         (a) the receipt by the Lender of financial projections and reports in
form and substance satisfactory to Lender (in Lender's sole and absolute
discretion);

         (b) Lender's approval (in Lender's sole and absolute discretion) of the
form and substance of all the documents, agreements and instruments (including,
without limitation, this Agreement and the Warrant (defined below)) executed in
connection with this Agreement and the Restructuring;

         (c) no material adverse change having occurred with respect to the
business or operations of any Obligor since September 1, 2001;

         (d) Borrower's execution and delivery to Lender of a revised Revolving
Credit Note (as described in Section 3(c) below) (in the form attached hereto as
Exhibit A), revised Term Note (as described in Section 3(d) below) (in the form
attached hereto as Exhibit B), the Warrant (in the form attached hereto as
Exhibit C (the "Warrant")) and 3,800,000 shares of Series A Redeemable Preferred
Stock having the terms set forth in the Certificate of Designations set forth as
Exhibit D (the "Preferred Shares"); and




                                      -2-
<PAGE>

         (e) Lender's receipt of a legal opinion from Day, Berry & Howard LLP,
counsel to Borrower, in form and substance acceptable to Lender (in Lender's
sole and absolute discretion); provided, that if the above-referenced conditions
have been met or satisfied as of January 11, 2002, the parties hereto agree that
transactions set forth herein shall be deemed to be effective as of December 31,
2001.

Section 3.  Covenants  and  Amendments.  Without  any  prejudice  or  impairment
whatsoever to any of the rights and remedies of the Lender contained in the Loan
Agreement or in any other Loan  Documents,  each of the Obligors  covenants  and
agrees with the Lender as follows:

         (a) Effective as of the date hereof, the defined terms "Revolving
Credit Commitment", "Revolving Credit Maturity Date", "Term Loan" and "Term Loan
Maturity Date", each as set forth in Section 1 of the Loan Agreement, are hereby
amended in their entirety to read as follows:

         "Revolving  Credit  Commitment:  The  obligation  of the  Bank  to make
         Revolving  Credit Loans to the Borrower up to an aggregate  outstanding
         principal  amount not to exceed (i) for the period from the date of the
         Fourth Amendment  through June 30, 2002,  $10,750,000.00,  and (ii) for
         the period from July 1, 2002  through  the  Revolving  Credit  Maturity
         Date,  $10,000,000.00,  in each case as such amount may be reduced from
         time to time or terminated hereunder."

         "Revolving Credit Maturity Date: December 31, 2004."

         "Term  Loan:  The  term  loan  that  shall  continue  to be made to the
         Borrower  pursuant  to  Section  3 hereof  in the  principal  amount of
         $2,000,000.00 (after giving effect to the Fourth Amendment)."

         "Term Loan Maturity Date: December 31, 2004."

         (b) Effective as of the date hereof, the following terms "Fourth
Amendment" and "Excess Cash Flow" are hereby added to Section 1 of the Loan
Agreement.

         "Fourth Amendment: That certain Fourth Amendment Agreement, dated as of
         December 31, 2001),  between the Borrower and the Lender." "Excess Cash
         Flow:  For any period the amount equal to  Consolidated  Operating Cash
         Flow for  such  period  minus  the  aggregate  amount  of  Consolidated
         Financial Obligations payable during such period."

         (c) Effective as of the date hereof, the last sentence of Section 2(a)
of the Loan Agreement is hereby amended in its entirety to read as follows:

         "Notwithstanding  anything else contained  herein to the contrary,  the
         Borrower shall not maintain any Revolving  Credit Loans, or request any
         Revolving  Credit Loans that would  result in the Borrower  maintaining
         Revolving  Credit  Loans,  in excess of the then  applicable  Revolving
         Credit Commitment.  The obligation of the Borrower to repay to the Bank
         the  principal  of the  Revolving  Credit  Loans and  interest  accrued
         thereon shall be evidenced by a fifth  amended and restated  promissory




                                      -3-
<PAGE>

         note,  dated as of the date of the Fourth  Amendment,  in the aggregate
         principal  amount  of  $10,750,000.00  executed  and  delivered  by the
         Borrower  and  payable  to the  order  of the  Bank,  in the  form  and
         substance satisfactory to the Bank (the "Revolving Credit Note")."

         (d) Effective as of the date hereof, Section 3(a) and Section 3(b) of
the Loan Agreement are hereby amended in their entirety to read as follows:

         "ss.3.     The Term Loan.

                    (a)  Subject to the terms and conditions set forth in the
                         Fourth Amendment, the Bank agrees to forgive all
                         accrued and unpaid interest on the Term Loan through
                         December 31, 2001, forgive the aggregate outstanding
                         principal balance of the Term Loan above $2,000,000.00,
                         and to continue to extend the remaining balance of the
                         Term Loan (i.e., $2,000,000.00). The Term Loan shall be
                         evidenced by an amended and restated promissory note of
                         the Borrower in the aggregate principal amount of
                         $2,000,000.00 in form and substance satisfactory to the
                         Bank (the "Term Note"), dated as of the date of the
                         Fourth Amendment and payable to the order of the Bank.

                    (b)  Subject to the terms and conditions set forth in this
                         Agreement, the Borrower shall pay the outstanding
                         principal amount of the Term Loan on the Term Loan
                         Maturity Date. In addition, within thirty days of the
                         last day of each calendar quarter beginning on March
                         31, 2002, the Borrower shall prepay the Term Loan in an
                         amount equal to 50% of the Excess Cash Flow during such
                         calendar quarter."

         (e) The Bank agrees to forgive  all accrued and unpaid  interest on the
Revolving  Credit Loans and all commitment  fees on the unfunded  portion of the
Revolving Credit Commitment, in each case through December 31, 2001.

         (f) Effective as of the date hereof, the first sentence of Section 7(c)
of the Loan Agreement is hereby amended in it entirety to read as follows:

         "All payments to be made by the Borrower  hereunder or under any of the
         other  Loan  Documents  shall be made in U.S.  dollars  in  immediately
         available  funds to Ark CLO 2000-1,  Limited,  c/o JPMorgan Chase Bank,
         600 Travis Street, 50th Floor, Houston, Texas 77002, without set-off or
         counterclaim and without any withholding or deduction whatsoever."

         (g) Effective as of the date hereof,  all Loans hereunder shall be Base
Rate Loans.  The first  Interest  Payment  Date after the date  hereof  shall be




                                      -4-
<PAGE>

February 1, 2002 (which shall cover the first Interest  Period ending on January
31, 2002).  For the avoidance of doubt,  each Interest  Payment Date  thereafter
shall be the first day of such calendar month.

         (h)  Effective  as of the  date  hereof,  Section  10(c)  of  the  Loan
Agreement is hereby amended in its entirety to read as follows:

         "(c)  The  Borrower  agrees  that  as  long  as any  Loan  or  Note  is
         outstanding  and  until  the   termination  of  the  Revolving   Credit
         Commitment  and  the  payment  and  satisfaction  in full of all of the
         Obligations, the Borrower will not:

                  (i) make any Capital Expenditures in any fiscal quarter ending
                  on or after March 31, 2002 in excess of $50,000.00; or

                  (ii) permit  Consolidated  Earnings Before Interest and Taxes,
                  Depreciation  and  Amortization  for (A) the fiscal quarter of
                  the  Borrower  ending  on  March  31,  2002  to be  less  than
                  $640,000.00, (B) the period of two consecutive fiscal quarters
                  of the  Borrower  ending  on June  30,  2002  to be less  than
                  $1,775,000.00,  (C) the  period  of three  consecutive  fiscal
                  quarters of the Borrower  ending on  September  30, 2002 to be
                  less than  $2,380,000.00 and (D) any period consisting of four
                  (4)  consecutive  fiscal quarters of the Borrower ending on or
                  after December 31, 2002 to be less than $3,570,000.00; or

                  (iii)  permit  the  Borrower's  backlog  (as  defined  in  the
                  Borrower's  most  recent  10K filed  with the  Securities  and
                  Exchange  Commission) to be less than  $13,000,000.00  for any
                  fiscal  quarter of the  Borrower  ending on or after March 31,
                  2002."

         (i) Effective as of the date hereof,  the following  clause is added to
the end of the  first  paragraph  of  Section  11  (Events  of  Default),  as an
additional Event of Default:

         "; (j) or more than ten percent (10%) of those  accounts  receivable of
         the  Borrower  created  or  arising  in  connection  with any  contract
         disclosed in the Borrower's  backlog report to the Lender are not valid
         and legally  enforceable  obligations of the applicable account debtors
         or are  subject  to any  present or  contingent  offset,  deduction  or
         counterclaim,  dispute  or other  defense  on the part of such  account
         debtors."

         (j)  Effective as of the date hereof,  Section 4(b) and Section 4(d) of
the Third Amendment are hereby deleted in their entirety.

         (k) In addition to any of the following required to be delivered by the
Borrower in accordance with and/or pursuant to the First  Amendment,  the Second
Amendment and/or the Third  Amendment,  the Borrower shall, on or before January
15, 2002, provide Lender with the following:  (i) fully executed UCC-1 financing
statements  for all  jurisdictions  requested by Lender;  (ii) a fully  executed
perfection certificate in form and detail reasonably satisfactory to the Lender;
(iii)  fully  executed  lessor's  agreements  in form and  substance  reasonably
satisfactory  to the Lender for all leased  property as reasonably  requested by
Lender;  and (iv) first priority properly  perfected  security  interests in all
property,  including  without  limitation  intellectual  property,  owned by the
Borrower  and any of its  Subsidiaries  pursuant  to  documentation  in form and



                                      -5-
<PAGE>

substance reasonably  satisfactory to the Lender that may reasonably be required
by Lender to properly perfect  security  interests in all such property owned by
the Borrower and any of its Subsidiaries.

         (l) The  Obligors  shall  comply with all of the terms,  covenants  and
provisions  contained  in the  Loan  Agreement  and  the  other  Loan  Documents
(including for the avoidance of doubt, the First Amendment, Second Amendment and
Third Amendment),  except as such terms,  covenants and provisions are expressly
modified by this Agreement.

         (m) The  Obligors  shall at any time and from time to time  execute and
deliver such further  instruments  (including without limitation UCC-1 and other
security/perfection  documents),  and take such further action as the Lender may
reasonably  request,  in each  case  further  to  effect  the  purposes  of this
Agreement, the Loan Agreement and the other Loan Documents. Without limiting the
generality of the immediately preceding sentence,  the Obligors shall permit the
Lender and/or its designated  representatives,  upon reasonable notice, to visit
and inspect any of the Obligors' properties or any of its affiliates, to examine
the books of account of the  Obligors and their  affiliates  (and to make copies
thereof and  extracts  therefrom),  and to discuss  the,  affairs,  finances and
accounts of the Obligors and their  affiliates with, and to be advised as to the
same by, its and their officers, all during normal business hours.

         Section 4. Section  Waivers  under the Loan  Agreement.  Subject to the
satisfaction of the conditions set forth herein (including  without  limitations
in Section 2 hereof and the accuracy of the representations set forth in Section
5 hereof),  the Lender waives those Events of Default that have  occurred  under
the Loan Agreement as a result of the  Borrower's  failure on or before the date
hereof  to comply  with the  provisions  of the  Credit  Agreement  set forth on
Schedule 1 attached hereto (the "Current Events of Default").

         Section 5. Section Representations and Warranties. Each of the Obligors
hereby represents and warrants to the Lender that (i) all of the representations
and  warranties  made by such Obligors in the Loan  Agreement and the other Loan
Documents  are true and  correct on the date  hereof as if made on and as of the
date  hereof,  except  to the  extent  that  any  of  such  representations  and
warranties expressly relate by their terms to a prior date and (ii) there are no
defaults under the Loan Agreement except the Current Events of Default.

         Section 6. Section  Ratification  of Existing  Agreements.  Each of the
Obligors agrees that the obligations of such Obligors to the Lender as evidenced
by or otherwise  arising under the Loan Agreement and the other Loan  Documents,
except as  otherwise  expressly  modified in this  Agreement  upon the terms set
forth herein, are, by each Obligor's  execution of this Agreement,  ratified and
confirmed in all respects,  including (without  limitation) the Guaranties which
are hereby reaffirmed and the Security Agreements. In addition, by the execution
of this Agreement,  each of the Obligors  represents and warrants that it has no
claim, counterclaim,  right of set-off or defense of any kind against Lender (or
its  predecessors-in-interest)  with respect to the  obligations  under the Loan
Documents or otherwise.




                                      -6-
<PAGE>

         Section 7. Section  Release.  The Obligors,  on their own behalf and on
behalf of their successors and assigns,  hereby waive, release and discharge the
Lender,  Patriarch  Partners,  LLC  and  all  affiliates  of the  Lender  and/or
Patriarch  Partners,  LLC,  and all of  their  directors,  officers,  employees,
attorneys  and agents,  from any and all claims,  demands,  actions or causes of
action  whether known or unknown,  arising out of or in any way relating to this
Agreement,  the  Loan  Agreement,  the  Loan  Documents  and/or  any  documents,
agreements,  dealings or other matters  connected with the Loan  Agreement,  the
Loan Documents or the administration thereof.

         Section 8. Section  Expenses.  The Obligors  agree to pay to the Lender
(a) on or before the date hereof, Lender's legal fees and disbursements incurred
through the date hereof in connection  with the  negotiation  and preparation of
this Agreement and related  matters,  (b) on or before the date hereof  Lender's
examiner and audit fees and disbursements  incurred through the date hereof, and
(c) upon demand from time to time any and all reasonable  out-of-pocket costs or
expenses (including  consultants' fees, commercial examiner fees, audit fees and
reasonable  legal fees and  disbursements)  hereafter  incurred by the Lender in
connection  with the  administration  of credit  extended  by the  Lender to the
Obligors or the  preservation  of or  enforcement  of its rights  under the Loan
Agreement,  the Notes  and/or the other Loan  Documents  or in respect of any of
each Obligor's other obligations to the Lender.

         Section 9.  Section  Marshalling.  The Lender  shall not be required to
marshal any present or future collateral security for the Obligors'  obligations
to the Lender under the Loan Documents or to resort to such collateral  security
or other assurances of payment in any particular order, and all of its rights in
respect of such  collateral  security shall be cumulative and in addition to all
other rights,  however existing or arising.  To the extent that it lawfully may,
each of the Obligors hereby agrees that each will not invoke any law relating to
the marshalling of collateral  which might cause delay in or impede the Lender's
rights under any document, agreement or instrument evidencing or securing any of
the Obligors'  obligations  to the Lender under the Loan  Documents  and, to the
extent that it lawfully may, each of the Obligors hereby  irrevocably waives the
benefits of all such laws.

         Section 10. Section No Waiver.  Except as otherwise  expressly provided
for in this  Agreement,  nothing in this Agreement  shall extend to or affect in
any way any of the rights or  obligations of the Obligors or any of the Lender's
obligations,  rights and  remedies  arising  under the Loan  Documents,  and the
Lender  shall not be deemed to have  waived any or all of its rights or remedies
with  respect to any default and which upon the  execution  and delivery of this
Agreement might otherwise exist or which might hereafter occur.

         Section 11.  Section  Lien and  Set-off.  Each of the  Obligors  hereby
grants to the Lender, a lien, security interest and right of set-off as security
for all of the  Obligors'  liabilities  and  obligations  to the  Lender  or the
Lender's affiliates, whether now existing or hereafter arising, upon and against
all  deposits,  credits,  collateral  and property of the  Obligors  (other than
Borrower's  payroll  accounts),  now or  hereafter in the  possession,  custody,
safekeeping  or control of the  Lender or any  entity  under the  control of the
Lender,  or in transit to any of them.  At any time on or after the date hereof,
without  demand or notice,  the Lender may set-off the same or any part  thereof
and apply the same to any  liability or  obligation  of any of the Obligors even
though unmatured and regardless of the adequacy of any other collateral securing
the Obligations. ANY AND ALL RIGHTS OF THE OBLIGORS TO REQUIRE THE LENDER TO




                                      -7-
<PAGE>

EXERCISE  ITS RIGHTS OR  REMEDIES  WITH  RESPECT TO ANY OTHER  COLLATERAL  WHICH
SECURES THE  OBLIGATIONS,  PRIOR TO EXERCISING ITS RIGHT OF SET-OFF WITH RESPECT
TO SUCH  DEPOSITS,  CREDITS  OR  OTHER  PROPERTY  OF THE  OBLIGORS,  ARE  HEREBY
KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

         Section 12. Section  Governing Law This Agreement  shall be governed by
and construed in accordance with the laws of the State of Connecticut.

         Section  13.  Section  Consent to  Jurisdiction,  Counsel.  Each of the
Obligors agrees that the following courts:  (i) state court - any state or local
court  located in the City of Hartford,  State of  Connecticut  and (ii) federal
court - any United States District Court located in Hartford, Connecticut, or at
the option of the Lender,  any court in which the Lender shall initiate legal or
equitable  proceedings and which has subject matter jurisdiction over the matter
in  controversy,  shall have  exclusive  jurisdiction  to hear and determine any
claims or disputes  between any  Obligor and the Lender  pertaining  directly or
indirectly to this Agreement  and/or the Loan Documents or to any matter arising
therefrom.  Each of the  Obligors  expressly  submits and consents in advance to
such jurisdiction in any action or proceeding  commenced in such courts. Each of
the Obligors  acknowledges that it has carefully read this Agreement and that it
has had an opportunity  to consult with an attorney of its own selection  before
signing it and each of the Obligors  understands  the effects of this  Agreement
and is signing it voluntarily.

         Section 14. Section Waiver of Jury Trial.

         EACH OF THE  OBLIGORS  HEREBY  WAIVES  ITS RIGHT TO A JURY  TRIAL  WITH
RESPECT TO ANY ACTION OR CLAIM  ARISING  OUT OF ANY DISPUTE IN  CONNECTION  WITH
THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY OF THE OBLIGORS' OBLIGATIONS HEREUNDER
OR THEREUNDER OR THE PERFORMANCE OF SUCH OBLIGATIONS.

         Section 15. Section Entitlement to Relief from Stay.

         Each  of the  Obligors  hereby  acknowledges  and  agrees,  in  further
consideration  for the Lender  entering into this  Agreement  with the Obligors,
that, in the event that any Obligor shall make application for or seek relief or
protection under any of the sections or chapters of the federal Bankruptcy Code,
or in the event that any involuntary petition is filed against any Obligor under
the  federal  Bankruptcy  Code and an order for  relief is  entered  as a result
thereof,  then the Lender shall  thereupon be entitled  (upon notice to Borrower
and a hearing  thereon) to immediate  relief from any automatic  stay imposed by
Section 362 of the federal  Bankruptcy  Code,  or  otherwise,  on or against the
exercise of the Lender's  rights and remedies under this Agreement or any of the
other Loan Documents. The Lender in turn acknowledges that this Section 15 shall
not be construed as a restriction or prohibition on the Obligors'  right to make
application for or seek relief or protection under the federal Bankruptcy Code.




                                      -8-
<PAGE>

         Section 16. Section Miscellaneous Provisions.

         (a) Except as otherwise  expressly  provided by this Agreement,  all of
the terms,  conditions  and  provisions of the Loan  Agreement  shall remain the
same.  It is declared and agreed by each of the parties  hereto and thereto that
the Loan Agreement,  as amended hereby, shall continue in full force and effect,
and that this  Agreement and the Loan  Agreement  shall be read and construed as
one instrument.

         (b) This Agreement may be executed in any number of  counterparts,  but
all such counterparts  shall together  constitute but one instrument.  In making
proof of this Agreement it shall not be necessary to produce or account for more
than  one  counterpart  signed  by  each  party  hereto  by  and  against  which
enforcement hereof is sought. TIME IS OF THE ESSENCE AS TO ALL OF THE PROVISIONS
HEREIN.




                                      -9-
<PAGE>

         IN  WITNESS  WHEREOF,  each of the  parties  hereto  have  caused  this
Agreement to be executed in its name and behalf by its duly  authorized  officer
as of the date first written above,

                               SCAN-OPTICS, INC.


                               By : _/s/ Michael J. Villano____________
                                    -----------------------
                                      Name: Michael J. Villano
                                      Title:  Chief Financial Officer

                               SCAN-OPTICS LIMITED


                               By : _/s/ Michael J. Villano____________
                                    -----------------------
                                      Name: Michael J. Villano
                                      Title:  Chief Financial Officer



                               SCAN-OPTICS (CANADA) LTD.


                               By : _/s/ Michael J. Villano____________
                                    -----------------------
                                      Name: Michael J. Villano
                                      Title:  Chief Financial Officer




                               ARK CLO 2000-1, LIMITED, as
                               Assignee of Fleet  National
                               Bank  (formerly   known  as
                               BankBoston, N.A.)

                               By:      PATRIARCH PARTNERS, LLC,
                                        its Collateral Manager


                               By : _/s/ Dennis Dolan_________________
                                    -----------------
                                      Name:  Dennis Dolan
                                      Title:  Manager





                                      -10-
<PAGE>


                                                                       Exhibit A


                             [Revolving Credit Note]





                                      -11-
<PAGE>


                                                                       Exhibit B


                                   [Term Note]





                                      -12-
<PAGE>


                                                                       Exhibit C


                                    [Warrant]





                                      -13-
<PAGE>


                                                                       Exhibit D


                [Certificate of Designation for Preferred Stock]



                                      -14-
<PAGE>


                            Current Events of Default

                                   Schedule 1
                                       to
                           Fourth Amendment Agreement
                         dated as of December 31, 20011



     1.   The  Borrower's  failure to pay the December 31, 2000  installment  of
          principal on the Term Loan, as required under Section 3(b) of the Loan
          Agreement.

     2.   The  Borrower's  failure  to  furnish  the  Lender  monthly  unaudited
          consolidated  Financials,  as set forth in Section  10(a)(i)(c) of the
          Loan Agreement.

     3.   The   Borrower's   failure  to  maintain   interest  rate   protection
          arrangements, as set forth in Section 10(a)(vi) of the Loan Agreement.

     4.   The Borrower's failure to satisfy each of the financial  covenants set
          forth in Section 10(c) of the Loan Agreement.

     5.   The Borrower's failure to pay the required  quarterly  installments of
          principal on the Term Loan that became due and payable on December 31,
          2000 and the last day of each  calendar  quarter in 2001,  as required
          under Section 3(b) of the Loan Agreement.

     6.   The Borrower's  failure to comply with the covenants in Sections 4(a),
          4(d), 4(g) and 4(h) of the Third Amendment and Waiver Agreement.

     7.   The Borrower's failure to pay interest accrued on the principal amount
          of the Loans during the period beginning  September 1, 2001 and ending
          on  December  31,  2001 in  accordance  with  the  terms  of the  Loan
          Agreement.

     8.   The Borrower's failure to pay lease payments on the outstanding leases
          with Patriarch Partners, LLC through the period ending on December 31,
          2001.


---------------
          1    For the  avoidance  of  doubt,  the  Lender  is not  waiving  any
               Defaults  or  Events of  Default  under  the Loan  Agreement  (as
               amended)  that exist on or after  January 1, 2002  (after  giving
               effect to the Fourth Amendment Agreement).


                                      -15-
<PAGE>












                           SECOND AMENDED AND RESTATED
                                 LOAN AGREEMENT


                                 by and between

                                SCAN-OPTICS, INC.

                                (the "Borrower")

                                       and

                                BANKBOSTON, N.A.

                                  (the "Bank")

                                   dated as of

                                  May 10, 1999



                                      -16-
<PAGE>




                                TABLE OF CONTENTS


ss.1.  Definitions:..........................................................1
ss.2.  Revolving Credit Facility.............................................11
ss.3.  The Term Loan.........................................................13
ss.4.  Interest..............................................................14
ss.5.  Additional Costs, Etc.................................................16
ss.6.  Changes in Circumstances..............................................17
ss.7.  Fees and Payments.....................................................18
ss.8.  Representations and Warranties........................................20
ss.9.  Conditions Precedent..................................................21
ss.10.  Covenants............................................................21
ss.11.  Events of Default; Acceleration......................................27
ss.12.  Setoff...............................................................28
ss.13.  Miscellaneous........................................................28
ss.14.  Prejudgment Remedy Waiver............................................29
ss.15.  Effective Date.......................................................30
ss.16.  Amendment and Restatement............................................30


SCHEDULES:

Schedule 10(b)(i):         Permitted Indebtedness
Schedule 10(b)(ii):        Existing Liens





                                      -17-
<PAGE>


                   SECOND AMENDED AND RESTATED LOAN AGREEMENT

         This SECOND AMENDED AND RESTATED LOAN AGREEMENT (this "Loan  Agreement"
or this  "Agreement")  is made as of May 10, 1999,  by and between  SCAN-OPTICS,
INC. (the  "Borrower"),  a Delaware  corporation  having its principal  place of
business at 169 Progress Drive,  Manchester,  Connecticut 06040, and BANKBOSTON,
N.A. (the "Bank"),  a national  banking  association with an office at 100 Pearl
Street,  Hartford,  Connecticut  06103 and successor by merger to Bank of Boston
Connecticut.

         WHEREAS,  the  Borrower  entered  into a certain  Amended and  Restated
Revolving Loan Agreement  dated as of June 12, 1998 between the Borrower and the
Bank, as previously amended by an Amendment  Agreement dated as of July 30, 1998
and by a Second  Amendment and Waiver  Agreement  dated as of September 28, 1998
(as heretofore amended, the "Prior Loan Agreement"); and

         WHEREAS,  the  Borrower  and the Bank  desire to amend and  restate the
Prior Loan Agreement in its entirety as set forth herein.

         NOW,  THEREFORE,  in consideration of the foregoing  premises and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged,  the Borrower  and the Bank hereby agree that as of the  Effective
Date (as  hereinafter  defined),  the Prior Loan Agreement  shall be amended and
restated in its entirety as set forth herein:

       ss.1.  Definitions:  Certain capitalized terms are defined below:

         Base Rate: The higher of (i) the annual rate of interest announced from
time to time by the Bank at its head  office in  Boston,  Massachusetts,  as its
"base  rate" and (ii)  one-half of one percent  (1/2%)  above the Federal  Funds
Effective  Rate. For the purposes of this  definition,  "Federal Funds Effective
Rate" shall mean for any day, the rate per annum equal to the  weighted  average
of the rates on overnight federal funds transactions with members of the Federal
Reserve System arranged by federal funds brokers, as published for such day (or,
if such day is not a Business Day, for the next  preceding  Business Day) by the
Federal  Reserve Bank of New York,  or, if such rate is not so published for any
day that is a Business Day, the average of the  quotations  for such day on such
transactions  received  by the Bank  from  three  funds  brokers  of  recognized
standing selected by the Bank.

         Base Rate Loans:  Revolving  Credit Loans and all or any portion of the
Term Loan bearing interest calculated by reference to the Base Rate.

         Business Day: Any day on which banks in Hartford,  Connecticut are open
for business generally.

         Capital  Expenditures:  Amounts  paid or  indebtedness  incurred by the
Borrower or any of its  Subsidiaries in connection with the purchase or lease by




                                      -18-
<PAGE>

the Borrower or any of its  Subsidiaries  of assets that would be required to be
capitalized  and shown on the balance  sheet of such Person in  accordance  with
GAAP.

         Charter  Documents:  With  respect to any Person,  the  certificate  or
articles of  incorporation  or organization  and the by-laws of such Person,  or
other constitutive documents of such entity.

         Collateral:  All of the property,  rights and interests of the Borrower
and its  Subsidiaries  that are or are  intended  to be subject to the  security
interests created by the Security Documents.

         Consent:  In respect of any Person,  any permit,  license or  exemption
from,  approval,  consent of,  registration  or filing with any local,  state or
federal   governmental  or  regulatory  agency  or  authority,   required  under
applicable law.

         Consolidated  Current  Assets:  All  assets  of the  Borrower  and  its
Subsidiaries on a consolidated basis that, in accordance with GAAP, are properly
classified as current assets,  provided that notes and accounts receivable shall
be  included  only if good and  collectible  as  determined  by the  Borrower in
accordance with established  practice  consistently applied and, with respect to
any such  notes,  only if payable on demand or within one (1) year from the date
as of which Consolidated Current Assets are to be determined and if not directly
or indirectly renewable or extendible at the option of the debtor(s) thereunder,
by their terms, or by the terms of any instrument or agreement relating thereto,
beyond such year, and, with respect to such accounts receivable, only if payable
and outstanding not more than ninety (90) days after the date of the shipment of
goods or other  transaction out of which any such account  receivable arose; and
such  notes and  accounts  receivable  shall be taken at their  face  value less
reserves determined to be sufficient in accordance with GAAP.

         Consolidated Current  Liabilities:  All liabilities of the Borrower and
its  Subsidiaries  on a consolidated  basis maturing on demand or within one (1)
year  from the  date as of  which  Consolidated  Current  Liabilities  are to be
determined,  and such other liabilities as may properly be classified as current
liabilities in accordance with GAAP.

         Consolidated  Earnings  Before Interest and Taxes:  For any period,  an
amount equal to the  consolidated  earnings (or loss) from the operations of the
Borrower  and its  Subsidiaries  for such  period,  after all expenses and other
proper charges, but before payment or provision for any income taxes or interest
expense for such period, determined in accordance with GAAP.

         Consolidated  Earnings  Before  Interest  and Taxes,  Depreciation  and
Amortization: For any period, an amount equal to the sum of (i) the consolidated
earnings (or loss) from the operations of the Borrower and its  Subsidiaries for
such period,  after all expenses and other proper charges, but before payment or




                                      -19-
<PAGE>

provision  for any income taxes or interest  expense for such period,  plus (ii)
depreciation  and  amortization  for such period,  determined in accordance with
GAAP.

         Consolidated Financial Obligations:  For any period, an amount equal to
the sum of all payments on Indebtedness  that become due and payable or that are
to become due and  payable  during  such period  pursuant  to any  agreement  or
instrument to which the Borrower or any of its  Subsidiaries is a party relating
to  the  borrowing  of  money  or the  obtaining  of  credit  or in  respect  of
capitalized  leases.  Demand obligations shall, as of any date of determination,
be deemed to be due and payable during any period during which such  obligations
are outstanding.

         Consolidated  Net Income (or Deficit):  The consolidated net income (or
deficit) of the Borrower and its Subsidiaries,  after deduction of all expenses,
taxes, and other proper charges, determined in accordance with GAAP.

         Consolidated  Operating Cash Flow:  For any period,  an amount equal to
(a) the sum of (i) the  earnings (or loss) from the  operations  of the Borrower
and its  Subsidiaries  for such  period,  after  payment  or  provision  for all
expenses  and other proper  charges,  but before  payment or  provision  for any
income taxes or interest  expense,  plus (ii)  depreciation and amortization for
such  period,  minus (b) cash  payments  for all taxes paid during such  period,
minus (c) Capital  Expenditures  made during such period to the extent permitted
hereunder.

         Consolidated  Tangible  Net Worth:  The excess of (a) all assets of the
Borrower  determined in accordance  with GAAP,  over (b) all  liabilities of the
Borrower  determined in accordance with GAAP,  minus (c) the sum of (i) the book
value of all  intangibles  of the Borrower  determined in accordance  with GAAP,
including  good will and  intellectual  property,  (ii) any write-up in the book
value of assets of the  Borrower  since the most recent  audited  Financials  in
existence on the date hereof, and (iii) without  duplication,  any subscriptions
receivable of the Borrower.

         Consolidated Total Funded Debt: As to the Borrower and its Subsidiaries
and whether recourse is secured by or is otherwise available against all or only
a portion of the assets of the Borrower or any of its  Subsidiaries  and whether
or not contingent, but without duplication:

                  (a)  every   obligation   of  the   Borrower  or  any  of  its
         Subsidiaries for money borrowed;

                  (b)  every   obligation   of  the   Borrower  or  any  of  its
         Subsidiaries  evidenced by bonds,  debentures,  notes or other  similar
         instruments,  including  obligations  incurred in  connection  with the
         acquisition of property, assets or businesses and the principal portion
         of rental obligations under any capitalized lease;



                                      -20-
<PAGE>

                  (c) every  reimbursement  obligation of the Borrower or any of
         its   Subsidiaries   with  respect  to  letters  of  credit,   bankers'
         acceptances  or  similar  facilities  issued  for  the  account  of the
         Borrower or any of its Subsidiaries; and

                  (d)  every   obligation   of  the   Borrower  or  any  of  its
         Subsidiaries  issued  or  assumed  as the  deferred  purchase  price of
         property or services (including  securities  repurchase  agreements but
         excluding trade accounts payable or accrued  liabilities arising in the
         ordinary  course of  business  which are not overdue or which are being
         contested in good faith).

         Consolidated  Total  Interest  Expense:  For any period,  the aggregate
amount of  interest  required  to be paid or  accrued  by the  Borrower  and its
Subsidiaries  during such period on all  Indebtedness  of the  Borrower  and its
Subsidiaries  outstanding  during all or any part of such  period,  whether such
interest  was  or is  required  to  be  reflected  as  an  item  of  expense  or
capitalized, including payments consisting of interest in respect of capitalized
leases and  including  commitment  fees,  agency fees,  facility  fees,  balance
deficiency  fees and similar fees or expenses  incurred in  connection  with the
borrowing of money.

         Consolidated Total Liabilities: All liabilities of the Borrower and its
Subsidiaries   that  in  accordance   with  GAAP  are  properly   classified  as
liabilities.

         Default:  An event or act which  with the  giving of notice  and/or the
lapse of time, would become an Event of Default.

         Dollars  or $:  Dollars  in lawful  currency  of the  United  States of
America.

         Drawdown Date: The date on which any Revolving  Credit Loan or the Term
Loan is made or is to be made,  and the date on which any Revolving  Credit Loan
or the Term Loan is converted or continued.

         Effective Date: May 10, 1999.

         Environmental  Laws:  All laws  pertaining  to  environmental  matters,
including without  limitation,  the Resource  Conservation and Recovery Act, the
Comprehensive Environmental Response Compensation and Liability Act of 1980, the
Superfund  Amendments and  Reauthorization  Act of 1986, the Federal Clean Water
Act, the Federal Clean Air Act, the Toxic  Substances  Control Act, in each case
as amended, and all rules, regulations,  judgments, decrees, orders and licenses
arising under all such laws.

         ERISA: The Employee Retirement Income Security Act of 1974, as amended,
and all rules, regulations, judgments, decrees, and orders arising thereunder.

         Eurocurrency  Reserve  Rate:  For any day  with  respect  to all or any
portion of a Eurodollar  Rate Loan, the maximum rate (expressed as a decimal) at
which the Bank would be required to maintain  reserves under Regulation D of the
Board of Governors of the Federal  Reserve  System (or any  successor or similar




                                      -21-
<PAGE>

regulations  relating  to  such  reserve   requirements)  against  "Eurocurrency
Liabilities"  (as that term is used in Regulation D), if such  liabilities  were
outstanding.  The Eurocurrency  Reserve Rate shall be adjusted  automatically on
and as of the effective date of any change in the Eurocurrency Reserve Rate.

         Eurodollar Business Day: Any day on which commercial banks are open for
international  business  (including  dealings in Dollar  deposits) in the London
interbank market.

         Eurodollar Lending Office:  Initially,  the office of the Bank, if any,
that shall be making or maintaining Eurodollar Rate Loans.

         Eurodollar  Rate:  For any  Interest  Period with respect to all or any
portion of any Loan bearing  interest at a rate  determined  by reference to the
Eurodollar Rate, the rate of interest equal to (i) the arithmetic average of the
rates  per  annum  for the Bank  (rounded  upwards  to the  nearest  1/16 of one
percent) of the rate at which the Bank's  eurodollar  lending  office is offered
Dollar  deposits two  Eurodollar  Business  Days prior to the  beginning of such
Interest  Period in the interbank  eurodollar  market where the  eurodollar  and
foreign currency and exchange  operations of such eurodollar  lending office are
customarily  conducted at or about 10:00 a.m.,  Boston time, for delivery on the
first day of such Interest  Period for the number of days comprised  therein and
in an amount  comparable to the amount of all or any portion of any Loan bearing
interest at a rate determined by reference to the Eurodollar Rate of the Bank to
which such Interest Period applies, divided by (ii) a number equal to 1.00 minus
the Eurocurrency Reserve Rate, if applicable.

         Eurodollar Rate Loans:  Loans bearing interest  calculated by reference
to the Eurodollar Rate.

         Event of Default:  Any of the events listed inss.11 hereof.

         Financials:  With  respect to any Person for any  period,  the  balance
sheet of such Person as at the end of such period,  and the related statement of
income and expense and  statement  of cash flow of such Person for such  period,
each setting forth in comparative  form the figures for the previous  comparable
fiscal period, all in reasonable detail and prepared in accordance with GAAP.

         GAAP:  Generally accepted accounting  principles  consistent with those
adopted by the Financial  Accounting  Standards Board and its  predecessor,  (a)
generally,  as in effect from time to time,  and (b) for purposes of determining
compliance by the Borrower with the financial  covenants set forth herein, as in
effect for the fiscal year ended December 31, 1998.

         Guaranties:   Collectively,  the  Unlimited  Guaranties  from  each  of
Scan-Optics  Canada and  Scan-Optics  England to the Bank,  each as amended  and
reaffirmed from time to time.



                                      -22-
<PAGE>

         Indebtedness:  With  respect to any  Person,  all  obligations  of such
Person,  contingent  and  otherwise,  that in  accordance  with  GAAP  should be
classified  as   liabilities,   including   without   limitation  (a)  all  debt
obligations,  (b) all liabilities  secured by Liens,  (c) all guarantees and (d)
all liabilities in respect of bankers' acceptances or letters of credit.

         Interest  Payment Date:  (a) As to any Base Rate Loan, the first day of
the calendar  month;  and (b) as to any Eurodollar Rate Loan in respect of which
the  Interest  Period  is (i) 3 months  or less,  the last day of such  Interest
Period and (ii) more than 3 months, the date that is 3 months from the first day
of such Interest Period and, in addition, the last day of such Interest Period.

         Interest Period:  With respect to each Loan, (a) initially,  the period
commencing  on the Drawdown  Date of such Loan and ending on the last day of one
of the periods set forth  below,  as selected by the Borrower in a request for a
Loan (i) for any Base Rate Loan,  the last day of the calendar  month,  and (ii)
for any Eurodollar Rate Loan, 1, 2 or 3 months; and (b) thereafter,  each period
commencing on the last day of the next preceding  Interest Period  applicable to
such Loan and ending on the last day of one of the  periods  set forth  above as
selected by the  Borrower in a request to convert a Loan;  provided  that all of
the  foregoing  provisions  relating  to  Interest  Periods  are  subject to the
following:

                  (i) if any Interest  Period with respect to a Eurodollar  Rate
         Loan would  otherwise  end on a day that is not a  Eurodollar  Business
         Day,  that  Interest  Period  shall be extended to the next  succeeding
         Eurodollar Business Day unless the result of such extension would be to
         carry such Interest Period into another  calendar month, in which event
         such Interest Period shall end on the immediately  preceding Eurodollar
         Business Day;

                  (ii) if any  Interest  Period with respect to a Base Rate Loan
         would end on a day that is not a Business  Day,  that  Interest  Period
         shall end on the next succeeding Business Day;

                  (iii) if the Borrower shall fail to give notice as provided in
         ss.2(d), the Borrower shall be deemed to have requested a conversion of
         the  affected  interest  rate from one  determined  by reference to the
         Eurodollar  Rate to one determined by reference to the Base Rate on the
         last day of the then current Interest Period with respect thereto;

                  (iv) any Interest Period relating to all or any portion of the
         Loan  bearing  interest  at a  rate  determined  by  reference  to  the
         Eurodollar  Rate that begins on the last  Eurodollar  Business Day of a
         calendar  month  (or  on a  day  for  which  there  is  no  numerically
         corresponding  day in the  calendar  month at the end of such  Interest
         Period)  shall end on the last  Eurodollar  Business  Day of a calendar
         month; and




                                      -23-
<PAGE>

                  (v) any Interest Period that would otherwise extend beyond the
         Revolving Credit Maturity Date (if a Revolving Credit Loan) or the Term
         Loan Maturity Date (if the Term Loan) shall end on the Revolving Credit
         Maturity Date or (as the case may be) the Term Loan Maturity Date.

         Leverage Ratio:  Seess.10(c)(v) hereof.

         Liens:  Any  encumbrance,  mortgage,  pledge,  hypothecation,   charge,
restriction  or other  security  interest of any kind securing any obligation of
any Person.

         Loans:  Collectively, the Revolving Credit Loans and the Term Loan.

         Loan Documents:  This Agreement,  the Notes, the Security Documents and
any other  documents,  instruments or agreements  executed  and/or  delivered in
connection  with this  Agreement,  in each  case as from  time to time  amended,
reaffirmed or supplemented.

         Lockbox Agreement:  That certain Lockbox Agreement dated as of November
9, 1995  executed and  delivered by the Borrower to the Bank,  together with any
and all UCC-1  financing  statements  executed in connection  therewith,  all as
amended from time to time.

         Materially  Adverse  Effect:  Any  materially  adverse  effect  on  the
financial  condition  or  business  operations  of the  Borrower  and any of its
Subsidiaries  taken as a whole or  material  impairment  of the  ability  of the
Borrower to perform  its  obligations  hereunder  or under any of the other Loan
Documents.

         Notes:  Collectively, the Revolving Credit Note and the Term Note.

         Obligations:  All  indebtedness,  obligations  and  liabilities  of the
Borrower  to the  Bank,  existing  on the  date of  this  Agreement  or  arising
thereafter,  direct or  indirect,  joint or  several,  absolute  or  contingent,
matured or unmatured, liquidated or unliquidated,  secured or unsecured, arising
by  contract,  operation  of law or  otherwise,  arising or incurred  under this
Agreement  or any other Loan  Document  or in  respect of any of the Loans,  the
Notes or any other instruments at any time evidencing any thereof.

         Patent  Security  Agreement:   The  Patent  Collateral  Assignment  and
Security  Agreement  dated April 7, 1993 between the Bank and the  Borrower,  as
amended from time to time.

         Permitted   Acquisition:   Shall  mean  any   acquisition   of  all  or
substantially  all the  assets  of,  or  shares or other  equity  interests  in,
Photomatrix  Imaging   Corporation,   a  Nevada   corporation,   and/or  Agissar
Corporation,  a  Connecticut  corporation,  if  immediately  after giving effect
thereto:  (a) no  Default  or  Event  of  Default  shall  have  occurred  and be
continuing or would result therefrom, (b) all transactions related thereto shall
be consummated in accordance in all material  respects with applicable laws, (c)
the Bank shall have received  evidence that the Bank has a fully perfected first
priority  security  interest  in all of  the  assets,  shares  or  other  equity
interests acquired (except for liens permitted under ss.10(b)(ii)), (d) any such
acquisition  shall have been fully  consummated on or before  December 31, 1999,
(e) solely with respect to the  acquisition  of Agissar  Corporation,  the total





                                      -24-
<PAGE>

purchase price  (including,  without  limitation,  any  Indebtedness  assumed in
connection  therewith) shall not exceed $2,200,000,  and (f)(x) the Borrower and
its  Subsidiaries  shall be in  compliance,  on a pro forma basis  after  giving
effect to such acquisition,  with the covenants contained in ss.10 recomputed as
at the last day of each  relevant  period for testing such  compliance,  and the
Borrower  shall have  delivered  to the Bank an  officer's  certificate  to such
effect,  together with all relevant financial information for such subsidiary or
assets,  and (y) any acquired or newly formed subsidiary shall not be liable for
any Indebtedness (except for Indebtedness permitted by ss.10(b)(i) hereof).

         Person:  Any  individual,  corporation,   partnership,  trust,  limited
liability company, unincorporated association,  business, or other legal entity,
any government or any governmental agency or political subdivision thereof.

         Requirement of Law: With respect to any Person, any law, treaty,  rule,
regulation or  determination  of an  arbitrator,  court,  or other  governmental
authority,  in each case  applicable to or binding upon such Person or affecting
any of its property.

         Revenue  Amount:  With  respect to any fiscal  quarter of the  Borrower
ending on or after March 31, 2000, an amount equal to the  consolidated  revenue
of the Borrower and its Subsidiaries for the immediately  preceding fiscal year,
divided by four (4), determined in accordance with GAAP.

         Revolving  Credit  Commitment:  The  obligation  of the  Bank  to  make
Revolving Credit Loans to the Borrower up to an aggregate  outstanding principal
amount not to exceed  $10,000,000,  as such  amount may be reduced  from time to
time or terminated hereunder.

         Revolving Credit Eurodollar Rate Applicable Margin: With respect to any
Revolving  Credit Loan bearing  interest by reference to the Eurodollar Rate and
any  fiscal  quarter of the  Borrower,  the  Revolving  Credit  Eurodollar  Rate
Applicable  Margin will be  calculated  by the Bank after review of the Leverage
Ratio of the Borrower and its  Subsidiaries  for the  immediately  preceding two
fiscal quarters of the Borrower as at the last day of the immediately  preceding
fiscal quarter, all as follows:

--------------------------------------------------------------------------------
                                              Revolving Credit Eurodollar Rate
        Leverage Ratio                            Applicable Margin
--------------------------------------------------------------------------------
Greater than or equal to 2.75 to 1.0                   2.25%
--------------------------------------------------------------------------------
Less than 2.75 to 1.0 but
greater than or equal to 2.5 to 1                      2.00%
--------------------------------------------------------------------------------
Less than 2.5 to 1.0                                   1.75%
--------------------------------------------------------------------------------



                                      -25-
<PAGE>

         Notwithstanding  the foregoing,  for Revolving Credit Loans outstanding
and  bearing  interest by  reference  to the  Eurodollar  Rate during the period
beginning on the Effective Date through the Bank's receipt of the Financials for
the fiscal quarter ending June 30, 1999, the Revolving  Credit  Eurodollar  Rate
Applicable  Margin shall be 2.25%. The Bank shall calculate the Revolving Credit
Eurodollar Rate Applicable Margin for each fiscal quarter on the sixtieth (60th)
day  following  the last day of the  immediately  preceding  fiscal  quarter  by
reference  to the  Leverage  Ratio  for the  immediately  preceding  two  fiscal
quarters as at the end of such immediately preceding fiscal quarter as set forth
in the financial statements delivered to the Bank by the Borrower.  Any downward
adjustment in the Revolving Credit Eurodollar Rate Applicable Margin shall occur
only if the applicable  Leverage Ratio of the Borrower and its  Subsidiaries has
been achieved for each of such two consecutive fiscal quarters of the Borrower.

         Revolving  Credit  Loans:  Any loan made or to be made to the  Borrower
pursuant toss.2 hereof.

         Revolving Credit Maturity Date:  May 1, 2002.

         Revolving Credit Note:  Seess.2(a).

         Scan-Optics  Canada:  Scan-Optics  (Canada),  Ltd., a limited liability
company organized under the laws of Canada and a wholly-owned  Subsidiary of the
Borrower with its principal  place of business at 7100  Woodbine  Avenue,  Suite
303, Markham, Ontario L3R 5J2 Canada.

         Scan-Optics  England:  Scan-Optics Limited, a limited liability company
organized under the laws of the United Kingdom and a wholly-owned  Subsidiary of
the Borrower with its principal  place of business at Dolphin  Estate,  Windmill
Road, Unit C2, Sunbury-on-Thames, Middlesex TW16 7HE, United Kingdom.

         Scan-Optics  Germany:  Scan-Optics GmbH, a corporation  organized under
the laws of Germany  and a  wholly-owned  Subsidiary  of the  Borrower  with its
principal place of business at Gervinusstrassee 17, 60322 Frankfurt, Germany

         Scan-Optics  International:  Scan-Optics  International Ltd., a limited
liability  company  organized  under  the laws of  Barbados  and a  wholly-owned
Subsidiary of the Borrower  with its principal  place of business at c/o Ernst &
Young Services Ltd, P.O. Box 261 Bay Street, Bridgetown, Barbados, West Indies.

         Security Agreements:  Collectively, the Security Agreements dated April
7, 1993 between the Bank and each of the Borrower and Scan-Optics  Canada,  each
dated as of April 7, 1993 and each as amended and reaffirmed from time to time.

         Security  Documents:  Collectively,  the  Guaranties,  the Stock Pledge
Agreement,  the Patent Security Agreement, the Trademark Security Agreement, the
Lockbox Agreement, and the Security Agreements.




                                      -26-
<PAGE>

         Stock Pledge Agreement: The Stock Pledge Agreement between the Bank and
the Borrower dated as of April 7, 1993, as amended from time to time.

         Subsidiary:  Any Person with  respect to which the Borrower at any time
owns or controls,  directly or indirectly,  more than fifty percent (50%) of the
outstanding  shares of stock or other  equity  securities  or  interests  having
voting  power,  regardless  of  whether  such  right  to vote  depends  upon the
occurrence of a contingency.

         Term Loan:  The term loan made to the  Borrower on the  Effective  Date
pursuant toss.3 hereof in the principal amount of $10,000,000.

         Term Loan Eurodollar Rate Applicable Margin: With respect to all or any
portion of the Term Loan bearing  interest by reference to the  Eurodollar  Rate
and any fiscal quarter of the Borrower, the Term Loan Eurodollar Rate Applicable
Margin will be calculated by the Bank after review of the Leverage  Ratio of the
Borrower and its Subsidiaries for the immediately  preceding two fiscal quarters
of the Borrower as at the last day of the immediately  preceding fiscal quarter,
all as follows:

--------------------------------------------------------------------------------
                                                Term Loan Eurodollar
       Leverage Ratio                           Rate Applicable Margin
--------------------------------------------------------------------------------
Greater than or equal to 2.75 to 1.0                   2.50%
--------------------------------------------------------------------------------
Less than 2.75 to 1.0 but greater
than or equal to 2.5 to 1                              2.25%
--------------------------------------------------------------------------------
Less than 2.5 to 1.0                                   2.00%
--------------------------------------------------------------------------------

         Notwithstanding the foregoing,  for all or any portion of the Term Loan
outstanding and bearing  interest by reference to the Eurodollar Rate during the
period  beginning  on the  Effective  Date  through  the  Bank's  receipt of the
Financials for the fiscal quarter ending June 30, 1999, the Term Loan Eurodollar
Rate  Applicable  Margin shall be 2.50%.  The Bank shall calculate the Term Loan
Eurodollar Rate Applicable Margin for each fiscal quarter on the sixtieth (60th)
day  following  the last day of the  immediately  preceding  fiscal  quarter  by
reference  to the  Leverage  Ratio  for the  immediately  preceding  two  fiscal
quarters as at the end of such immediately preceding fiscal quarter as set forth
in the financial statements delivered to the Bank by the Borrower.  Any downward
adjustment in the Term Loan Eurodollar  Rate Applicable  Margin shall occur only
if the applicable  Leverage Ratio of the Borrower and its  Subsidiaries has been
achieved for each of such two consecutive fiscal quarters of the Borrower.

         Term Loan Maturity Date:  May 1, 2004.





                                      -27-
<PAGE>

         Term Note:  Seess.3(a).

         Trademark Security Agreement:  The Trademark Collateral  Assignment and
Security  Agreement  dated April 7, 1993 between the Bank and the  Borrower,  as
amended from time to time.

         Type: As to any Revolving Credit Loan or all or any portion of the Term
Loan, its nature as a Base Rate Loan or Eurodollar Rate Loan.

         ss.2. Revolving Credit Facility.  (a) Upon the terms and subject to the
conditions of this Agreement,  the Bank agrees to lend to the Borrower such sums
that the Borrower may request,  from the date hereof until but not including the
Revolving  Credit  Maturity  Date;  provided  that  the  sum of the  outstanding
principal  amount of all  Revolving  Credit  Loans (after  giving  effect to all
amounts requested) shall not exceed the Revolving Credit  Commitment.  Revolving
Credit Loans shall be in the minimum  aggregate amount of $25,000 or an integral
multiple   thereof.   The   Borrower   shall  notify  the  Bank  in  writing  or
telephonically  (i) not  later  than  2:00 p.m.  Hartford  time on the  proposed
Drawdown  Date of any Base Rate Loan and (ii) no less than three (3)  Eurodollar
Business Days prior to the proposed  Drawdown Date of any Eurodollar  Rate Loan.
Each such notice shall specify (i) the principal  amount of the Revolving Credit
Loan requested,  (ii) the proposed  Drawdown Date of such Revolving Credit Loan,
(iii) the Interest  Period for such  Revolving  Credit Loan and (iv) the Type of
such  Revolving  Credit Loan.  Each request for a Revolving  Credit Loan bearing
interest by reference to the Eurodollar Rate shall be irrevocable and binding on
the Borrower and shall obligate the Borrower to accept the Revolving Credit Loan
requested from the Bank on the proposed Drawdown Date. Subject to the foregoing,
so long as the Revolving Credit  Commitment is then in effect and the conditions
set forth in ss.9  hereof  have been met,  the Bank  shall  advance  the  amount
requested to the Borrower's  bank account at the Bank in  immediately  available
funds not later than the close of business on such Drawdown Date. The obligation
of the Borrower to repay to the Bank the principal of the Revolving Credit Loans
and interest accrued thereon shall be evidenced by a fourth amended and restated
promissory note in the aggregate  principal  amount of $10,000,000  executed and
delivered  by the  Borrower  and  payable to the order of the Bank,  in form and
substance satisfactory to the Bank (the "Revolving Credit Note").

                  (b)  The  Borrower  hereby  agrees  to  pay  the  Bank  on the
Revolving  Credit  Maturity Date the entire unpaid  principal of and interest on
all  Revolving  Credit Loans.  The Borrower may elect to prepay the  outstanding
principal of all or any part of any Revolving  Credit Loan,  without  premium or
penalty,  provided that any full or partial prepayment of the outstanding amount
of any Eurodollar  Rate Loans pursuant to this ss.2 may be made only on the last
day of the Interest Period relating  thereto.  The Borrower shall give the Bank,
no later than 10:00 a.m.,  Hartford  time, at least one (1) Business Day's prior
written  notice of any  proposed  prepayment  pursuant to this ss.2 of Base Rate
Loans, and two (2) Eurodollar  Business Days' notice of any proposed  prepayment




                                      -28-
<PAGE>

pursuant to this ss.2 of  Eurodollar  Rate Loans,  in each case  specifying  the
proposed date of prepayment of Revolving  Credit Loans and the principal  amount
to be prepaid.  Each such partial prepayment of the Revolving Credit Loans shall
be in an integral  multiple of $25,000,  shall be  accompanied by the payment of
accrued interest on the principal prepaid to the date of prepayment and shall be
applied,  in the absence of instruction by the Borrower,  first to the principal
of Base Rate Loans and then to the principal of Eurodollar Rate Loans.

                  (c) If at any time the  outstanding  principal  amount  of the
Revolving  Credit Loans exceeds the Revolving  Credit  Commitment,  the Borrower
shall pay  immediately  the amount of such excess to the Bank for application to
the Revolving  Credit  Loans.  The Borrower may elect to reduce or terminate the
Revolving  Credit  Commitment  by a minimum  principal  amount of  $50,000 or an
integral  multiple  thereof,  upon written notice to the Bank given by 2:00 p.m.
Hartford  time on the  proposed  date  of such  reduction  or  termination.  The
Borrower  shall not be entitled to reinstate  the  Revolving  Credit  Commitment
following such reduction or termination

                  (d) The  Borrower  may elect from time to time to convert  any
outstanding  Revolving  Credit Loan to a Revolving  Credit Loan of another Type,
provided that (i) with respect to any such conversion of a Revolving Credit Loan
to a Base Rate Loan,  the Borrower shall give the Bank at least one (1) Business
Day's  prior  written  notice of such  election;  (ii) with  respect to any such
conversion  of a Base Rate Loan to a Eurodollar  Rate Loan,  the Borrower  shall
give the Bank at least three (3) Eurodollar  Business Days' prior written notice
of such election; (iii) with respect to any such conversion of a Eurodollar Rate
Loan into a Revolving Credit Loan of another Type, such conversion shall only be
made on the last day of the Interest  Period with respect  thereto;  and (iv) no
Loan may be converted  into a Eurodollar  Rate Loan when any Default or Event of
Default has occurred and is continuing. All or any part of outstanding Revolving
Credit  Loans of any Type  may be  converted  into a  Revolving  Credit  Loan of
another Type as provided herein,  provided that (i) any partial conversion shall
be in an aggregate  principal amount of (A) $100,000 or a whole multiple thereof
with respect to a conversion  of a Base Rate Loan to a Eurodollar  Rate Loan and
(B)  $100,000  or whole  multiple  thereof  with  respect to a  conversion  of a
Revolving  Credit Loan to a Base Rate Loan and (ii) with  respect to  Eurodollar
Rate Loans,  there shall be no more than five (5) separate  Interest  Periods in
effect at one time.  Each  request  relating  to the  conversion  of a Revolving
Credit Loan to a Eurodollar Rate Loan shall be irrevocable by the Borrower.

                  (e) Any Revolving  Credit Loan of any Type may be continued as
a  Revolving  Credit  Loan of the same Type upon the  expiration  of an Interest
Period  with  respect  thereto by  compliance  by the  Borrower  with the notice
provisions  contained in ss.2(d);  provided that no Eurodollar  Rate Loan may be




                                      -29-
<PAGE>

continued  as such when any  Default or Event of  Default  has  occurred  and is
continuing, but shall be automatically converted to a Base Rate Loan on the last
day of the first Interest Period relating  thereto ending during the continuance
of any Default or Event of Default of which officers of the Bank active upon the
Borrower's account have actual knowledge.

                  (f) Any conversion to or from  Eurodollar  Rate Loans shall be
in such amounts and be made  pursuant to such  elections  so that,  after giving
effect  thereto,  the aggregate  principal  amount of all Eurodollar  Rate Loans
having  the same  Interest  Period  shall not be less than  $100,000  or a whole
multiple of $100,000 in excess thereof.

         ss.3.  The Term Loan. (a) Subject to the terms and conditions set forth
in this Agreement,  the Bank agrees to make the Term Loan to the Borrower on the
Effective  Date.  The Term Loan  shall be in the  original  principal  amount of
$10,000,000.  The Term  Loan  shall be  evidenced  by a  promissory  note of the
Borrower in form and substance satisfactory to the Bank (the "Term Note"), dated
the Effective Date and payable to the order of the Bank.

                  (b) The Borrower shall pay the outstanding principal amount of
the Term Loan in twenty (20) consecutive  quarterly  installments in the amounts
and during the periods set forth in the table below, such installments to be due
and payable on the last day of each calendar quarter ending during such periods,
commencing on June 30, 1999, with a final payment on the Term Loan Maturity Date
in an amount equal to the unpaid  principal  amount of the Term Loan, if any, on
such date:

<TABLE>
<CAPTION>

                                              Quarterly                             Annual
                   Period                  Payment Amount                       Payment Amount
<S>                                          <C>                                <C>
   May 10, 1999 through March 31, 2000          $250,000                             $1,000,000

   April 1, 2000 through March 31, 2000         $500,000                             $2,000,000

   April 1, 2001 through March 31, 2002         $500,000                             $2,000,000

   April 1, 2002 through March 31, 2003         $500,000                             $2,000,000

   April 1, 2003 through March 31, 2004         $500,000                             $2,000,000

   Term Loan Maturity Date                   The outstanding  principal amount of the
                                             Term Loan,  together  with all  interest
                                             accrued thereon.
</TABLE>

                                             -30-
<PAGE>

                  (c) The  Borrower  shall  have the right at any time to prepay
the Term Note on or before the Term Loan Maturity Date, as a whole,  or in part,
upon not less than three (3) Business  Days' prior  written  notice to the Bank,
without premium or penalty,  provided that (i) each partial  prepayment shall be
in the minimum  principal  amount of (A) $100,000 and (B) no portion of the Term
Loan bearing  interest at the  Eurodollar  Rate may be prepaid  pursuant to this
ss.3(c)  except on the last day of the Interest  Period  relating  thereto.  Any
prepayment of principal of the Term Loan shall  include all interest  accrued to
the date of prepayment and shall be applied  against the scheduled  installments
of principal  due on the Term Loan in the inverse  order of maturity.  No amount
repaid with respect to the Term Loan may be reborrowed. Any voluntary prepayment
of principal  of the Term Loan shall also  include all interest  accrued on such
principal to the date of prepayment.

         ss.4. Interest.  (a) So long as no Event of Default is continuing,  the
Borrower shall pay interest on the Revolving Credit Loans as follows:

                           (i) Each Base Rate Loan shall bear  interest  for the
         period commencing with the Drawdown Date thereof and ending on the last
         day of each  Interest  Period with  respect  thereto at the rate of the
         Base Rate from time to time in effect.

                           (ii) Each  Eurodollar  Rate Loan shall bear  interest
         for the period  commencing with the Drawdown Date thereof and ending on
         the last day of each Interest  Period with respect  thereto at the rate
         of the Eurodollar  Rate  determined  for such Interest  Period plus the
         Revolving Credit Eurodollar Rate Applicable Margin.

                           (iii) The  Borrower  promises to pay interest on each
         Revolving  Credit Loan in arrears on each  Interest  Payment  Date with
         respect thereto.

                  (b) So long as no Event of Default is continuing, the Borrower
shall pay interest on the Term Loan as follows:

                           (i) To the extent that all or any portion of the Term
         Loan bears interest  during such Interest  Period at the Base Rate, the
         Term Loan or such  portion  thereof  shall bear  interest  during  such
         Interest  Period  at the rate of the  Base  Rate  from  time to time in
         effect.

                           (ii) To the  extent  that all or any  portion  of the
         Term Loan bears interest  during such Interest Period at the Eurodollar
         Rate,  the Term Loan or such portion  shall bear  interest  during such
         Interest  Period at the rate of the Eurodollar Rate determined for such
         Interest Period plus the Term Loan Eurodollar Rate Applicable Margin.

                           (iii) The  Borrower  promises to pay  interest on the
         Term Loan or any  portion  thereof  outstanding  during  each  Interest
         Period in arrears on each  Interest  Payment  Date  applicable  to such
         Interest Period.



                                      -32-
<PAGE>

                           (iv) The Borrower shall notify the Bank,  such notice
         to be irrevocable, at least two (2) Business Days prior to the Drawdown
         Date of the Term Loan if all or any portion of the Term Loan is to bear
         interest at the Eurodollar Rate. After the Term Loan has been made, the
         provisions of ss.2(d) shall apply mutatis  mutandis with respect to all
         or any portion of the Term Loan so that the  Borrower may have the same
         interest  rate  options  with respect to all or any portion of the Term
         Loan as it would be entitled to with  respect to the  Revolving  Credit
         Loans.

                           (v) Any portion of the Term Loan bearing  interest at
         the  Eurodollar  Rate  relating to any Interest  Period shall be in the
         amount of $100,000 or an integral multiple thereof.  No Interest Period
         relating to the Term Loan or any portion  thereof  bearing  interest at
         the  Eurodollar  Rate shall extend beyond the date on which a regularly
         scheduled  installment  payment of the principal of the Term Loan is to
         be made  unless  a  portion  of the Term  Loan at  least  equal to such
         installment  payment has an Interest  Period  ending on such date or is
         then bearing interest at the Base Rate.

                  (c) While an Event of Default is continuing,  amounts  payable
with respect to any Loans shall bear interest (compounded monthly and payable on
demand in respect of overdue  amounts) at a rate per annum which is equal to the
sum of (i) the Base Rate and (ii) five percent  (5.0%) until such amount is paid
in full or (as the case may be) such Event of  Default  has been cured or waived
in writing by the Bank (after as well as before judgment).

         ss.5.  Additional  Costs, Etc. If any present or future applicable law,
which  expression,  as used herein,  includes  statutes,  rules and  regulations
thereunder  and  interpretations  thereof  by  any  competent  court  or by  any
governmental   or  other   regulatory   body  or  official   charged   with  the
administration  or  the   interpretation   thereof  and  requests,   directives,
instructions and notices at any time or from time to time hereafter made upon or
otherwise  issued to the Bank by any central bank or other  fiscal,  monetary or
other authority (whether or not having the force of law), shall:

                  (a) subject the Bank to any tax, levy,  impost,  duty, charge,
fee, deduction or withholding of any nature with respect to this Agreement,  the
other Loan Documents,  the Revolving Credit  Commitment or the Loans (other than
taxes based upon or measured by the income or profits of the Bank), or

                  (b)  materially  change  the  basis of  taxation  (except  for
changes in taxes on income or profits) of payments to the Bank of the  principal
of or the interest on any Loans or any other amounts  payable to any Bank or the
Bank under this Agreement or any of the other Loan Documents, or

                  (c) impose or increase or render applicable (other than to the
extent  specifically  provided  for  elsewhere  in this  Agreement)  any special
deposit,  reserve,  assessment,  liquidity,  capital  adequacy or other  similar




                                      -33-
<PAGE>

requirements (whether or not having the force of law) against assets held by, or
deposits in or for the account of, or loans by, or letters of credit  issued by,
or commitments of an office of the Bank, or

                  (d) impose on the Bank any other  conditions  or  requirements
with  respect to this  Agreement,  the other  Loan  Documents,  the  Loans,  the
Revolving Credit  Commitment,  or any class of loans or commitments of which any
of the Loans or such Revolving Credit Commitment forms a part, and the result of
any of the foregoing is

                           (i) to  increase  the  cost to the  Bank  of  making,
         funding, issuing,  renewing,  extending or maintaining any of the Loans
         or such Revolving Credit Commitment, or

                           (ii) to reduce the amount of  principal,  interest or
         other amount  payable to the Bank hereunder on account of the Revolving
         Credit Commitment or any of the Loans, or

                           (iii) to require  the Bank to make any  payment or to
         forego any interest or other sum payable hereunder, the amount of which
         payment or foregone interest or other sum is calculated by reference to
         the gross amount of any sum  receivable or deemed  received by the Bank
         from the Borrower hereunder,

then, and in each such case, the Borrower will,  upon demand made by the Bank at
any time and from time to time and as often as the occasion  therefor may arise,
pay to the Bank such additional  amounts as will be sufficient to compensate the
Bank for such additional cost, reduction,  payment or foregone interest or other
sum.

         ss.6.  Changes  in  Circumstances.  If any  change  in  banking  law or
regulation  or the  administration  thereof  (whether or not having the force of
law) affects the amount of capital  required or expected to be maintained by the
Bank or any entity controlling it, and such amount is increased by reason of the
Revolving  Credit  Commitment  or the Loans,  the Bank may  notify the  Borrower
thereof.  The Borrower and the Bank shall negotiate an adjustment payable to the
Bank to compensate for such  increase.  If no agreement is reached within thirty
(30)  days,  the Bank may  increase  the fees  payable  hereunder  by the amount
determined by the Bank to be necessary to provide such compensation.

         ss.7.  Fees and  Payments.  (a)  Contemporaneously  with  execution and
delivery of this Agreement,  the Borrower shall pay to the Bank a non-refundable
closing fee in the amount of $15,000.

                  (b) The Borrower  shall also pay to the Bank a commitment  fee
calculated at the rate of  one-quarter  of one percent  (0.25%) per annum of the
average daily amount during each  calendar  quarter or portion  thereof from the
Effective  Date to the  Revolving  Credit  Maturity  Date by which the Revolving
Credit Commitment  exceeds the aggregate amount  outstanding under the Revolving
Credit Loans during such calendar  quarter.  The commitment fee shall be payable
quarterly  in  arrears  on the  first  day of  each  calendar  quarter  for  the
immediately  preceding  calendar  quarter  commencing  on the  first  such  date
following the  Effective  Date,  with a final  payment on the  Revolving  Credit
Maturity Date or any earlier date on which the Revolving Credit Commitment shall
terminate.


                                      -34-
<PAGE>

                  (c) All payments to be made by the Borrower hereunder or under
any of the other Loan  Documents  shall be made in U.S.  dollars in  immediately
available funds at the Bank's office at 100 Pearl Street, Hartford,  Connecticut
06103,  without set-off or counterclaim and without any withholding or deduction
whatsoever.  The Bank shall be entitled  (but shall not be  obligated) to charge
any  account of the  Borrower  with the Bank for any sum due and  payable by the
Borrower to the Bank hereunder or under any of the other Loan Documents.  If any
payment  hereunder is required to be made on a day which is not a Business  Day,
it shall be paid on the immediately  preceding Business Day. All computations of
interest or of the closing or commitment fees payable hereunder shall be made by
the Bank on the basis of actual days elapsed and on a 360-day year.

                  (d) In the event,  prior to the  commencement  of any Interest
Period  relating to any  Eurodollar  Rate Loan,  the Bank shall  determine  that
adequate and  reasonable  methods do not exist for  ascertaining  the Eurodollar
Rate that would otherwise determine the rate of interest to be applicable to any
Eurodollar Rate Loan during any Interest  Period,  the Bank shall forthwith give
notice of such  determination  (which  shall be  conclusive  and  binding on the
Borrower) to the  Borrower.  In such event (i) any request for a Loan or request
to convert a Loan with respect to Eurodollar  Rate Loans shall be  automatically
withdrawn  and  shall be  deemed  a  request  for Base  Rate  Loans,  (ii)  each
Eurodollar  Rate Loan will  automatically,  on the last day of the then  current
Interest  Period  relating  thereto,  become a Base  Rate  Loan,  and  (iii) the
obligations of the Bank to make  Eurodollar  Rate Loans shall be suspended until
the Bank  determines  that the  circumstances  giving rise to such suspension no
longer exist, whereupon the Bank shall so notify the Borrower.

                  (e)  Notwithstanding  any  other  provisions  herein,  if  any
present or future law, regulation,  treaty or directive or in the interpretation
or  application  thereof shall make it unlawful for the Bank to make or maintain
Eurodollar   Rate  Loans,   the  Bank  shall   forthwith  give  notice  of  such
circumstances  to the Borrower and thereupon  (i) the  commitment of the Bank to
make  Eurodollar  Rate Loans or convert Loans of another Type to Eurodollar Rate
Loans shall  forthwith be suspended and (ii) the Bank's  Revolving  Credit Loans
then   outstanding  as  Eurodollar  Rate  Loans,  if  any,  shall  be  converted
automatically  to Base  Rate  Loans  on the  last  day of each  Interest  Period




                                      -35-
<PAGE>

applicable to such Eurodollar Rate Loans or within such earlier period as may be
required by law.  The  Borrower  hereby  agrees  promptly to pay the Bank,  upon
demand by Bank, any additional  amounts necessary to compensate the Bank for any
costs  incurred by the Bank in making any  conversion  in  accordance  with this
ss.7(e),  including any interest or fees payable by the Bank to lenders of funds
obtained by it in order to make or maintain its Eurodollar Rate Loans hereunder.

                  (f) The Borrower  agrees to indemnify  the Bank and to hold it
harmless  from  and  against  any  loss,  cost  or  expense  (including  loss of
anticipated  profits)  that Bank may  sustain or incur as a  consequence  of (i)
default by the Borrower in payment of the principal amount of or any interest on
any Eurodollar  Rate Loans as and when due and payable,  including any such loss
or expense arising from interest or fees payable by the Bank to lenders of funds
obtained by it in order to maintain its Eurodollar  Rate Loans,  (ii) default by
the  Borrower in making a borrowing or  conversion  after the Borrower has given
(or is deemed to have given) a request for a Loan, notice (in the case of all or
any portion of the Term Loan pursuant to  ss.4(b)(iv)  or a request to convert a
Loan relating  thereto in accordance with ss.2(d) or  ss.4(b)(iv),  or (iii) the
making of any payment of a Eurodollar  Rate Loan or the making of any conversion
of any such  Loan to a Base  Rate  Loan on a day that is not the last day of the
applicable  Interest  Period with respect  thereto,  including  interest or fees
payable by such Bank to lenders of funds obtained by it in order to maintain any
such Loans.

         ss.8.  Representations  and  Warranties.  The Borrower  represents  and
warrants  to the Bank on the date  hereof,  on the date of any  request  for any
Loan,  and on  each  Drawdown  Date  that:  (a)  the  Borrower  and  each of its
Subsidiaries is duly organized, validly existing, and in good standing under the
laws of its  jurisdiction  of  incorporation  and is duly  qualified and in good
standing in every other jurisdiction where it is doing business except where the
failure to so qualify does not have a Materially  Adverse Effect on the Borrower
or any of its Subsidiaries,  and the execution,  delivery and performance by the
Borrower  and its  Subsidiaries  of the  Loan  Documents  (i) are  within  their
respective  corporate  authority,  (ii) have been duly authorized,  (iii) do not
conflict  with or  contravene  their  respective  Charter  Documents;  (b)  upon
execution and delivery  thereof,  each Loan Document shall constitute the legal,
valid and binding  obligation of the Borrower and each Subsidiary party thereto,
enforceable in accordance  with its terms;  (c) the Borrower and each Subsidiary
have good and  marketable  title to all their  respective  material  properties,
subject only to Liens  permitted  hereunder,  and possess all assets,  including
intellectual  properties,  franchises and Consents,  adequate for the conduct of
their  respective  businesses as now conducted,  without known conflict with any
rights  of  others;  (d) the  Borrower  has  provided  to the Bank  its  audited
Financials  as at  December  31,  1998 and for the  period  then  ended  and its
unaudited  management prepared Financials as at March 31, 1999 for the period of
three (3) months then ended,  and such  Financials  are complete and correct and
fairly  present the  position of the Borrower  and its  Subsidiaries  as at such
dates and for such periods in accordance  with GAAP  consistently  applied;  (e)
except as  previously  disclosed  by the  Borrower to the Bank in writing  since
December 31, 1998,  there has been no materially  adverse  change of any kind in
the Borrower or any of its  Subsidiaries  which would have a Materially  Adverse




                                      -36-
<PAGE>

Effect; (f) there are no legal or other proceedings or investigations pending or
threatened  against the  Borrower or any of its  Subsidiaries  before any court,
tribunal or regulatory authority which would, if adversely determined,  alone or
together,  have a  Materially  Adverse  Effect;  (g)  the  execution,  delivery,
performance of their  respective  obligations,  and exercise of their respective
rights  under the Loan  Documents  by the  Borrower  and each  Subsidiary  party
thereto,  including  borrowing  under  this  Agreement  (i) do not  require  any
Consents;  and (ii) are not and will not be in conflict  with or  prohibited  or
prevented by (A) any Requirement of Law, or (B) any Charter Document,  corporate
minute or resolution,  instrument,  agreement or provision thereof, in each case
binding on any of them or  affecting  any of their  property;  (h)  neither  the
Borrower  nor any  Subsidiary  are in  violation  of (i) any  Charter  Document,
corporate minute or resolution,  (ii) any instrument or agreement,  in each case
binding on it or affecting its property,  or (iii) any  Requirement of Law, in a
manner  which  could  have  a  Materially  Adverse  Effect,  including,  without
limitation,  all applicable  federal and state tax laws, ERISA and Environmental
Laws; (i) upon  execution and delivery of the Security  Documents and the filing
of documents  thereby required,  the Bank shall have a first-priority  perfected
security  interest  in the  properties  and  assets  of  the  Borrower  and  its
Subsidiaries stated to constitute collateral  thereunder,  subject only to Liens
permitted  hereunder  and entitled to priority  under  applicable  law,  with no
financing  statements,  chattel  mortgages,  real  estate  mortgages  or similar
filings on record anywhere which conflict with such first-priority interest; (j)
the  Borrower  has  no  Subsidiaries   except  for  Scan-Optics   International,
Scan-Optics  England,  Scan-Optics  Canada and Scan-Optics  Germany and is not a
party to any partnership or joint venture;  (k) each fiscal year of the Borrower
begins  on  January  1 of each  calendar  year and ends on  December  31 of each
calendar  year;  (l) the Borrower and its  Subsidiaries  have reviewed the areas
within their businesses and operations which could be adversely affected by, and
have  developed or are  developing a program to address on a timely  basis,  the
"Year  2000  Problem"  (i.e.  the risk that  computer  applications  used by the
Borrower  or any of its  Subsidiaries  may be unable to  recognize  and  perform
properly date-sensitive  functions involving certain dates prior to and any date
after  December  31,  1999)  and that  based  upon  such  review,  the  Borrower
reasonably  believes that the "Year 2000  Problem" will not have any  materially
adverse effect on the business or financial  condition of the Borrower or any of
its  Subsidiaries;  and (m) any  information  delivered  by or on  behalf of the
Borrower  to the Bank in  connection  with the  Permitted  Acquisitions  or this
Agreement is accurate and complete in all material  respects and is not false or
misleading  in any  material  respect as at the time made or deemed to have been
made,  it being  understood  that no  representation  is made  with  respect  to
projections of future performance of the Borrower, including without limitation,
as a result of any Permitted Acquisition,  other than that such projections were
prepared  in  good  faith  and  on  assumptions  the  Borrower  believes  to  be
reasonable.

         ss.9. Conditions Precedent.  In addition to the making of the foregoing
representations  and  warranties and the delivery of the Loan Documents and such
other  documents  and the taking of such  actions as the Bank may  require at or
prior to the time of executing  this  Agreement,  the  obligation of the Bank to
make any Loan to the Borrower  hereunder is subject to the  satisfaction  of the




                                      -37-
<PAGE>

following further  conditions  precedent:  (a) each of the  representations  and
warranties of the Borrower to the Bank shall be true and correct in all material
respects  as of the time made or claimed  to have been  made;  (b) no Default or
Event of Default shall be continuing and (c) all  proceedings in connection with
the transactions contemplated hereby shall be in form and substance satisfactory
to the Bank, and the Bank shall have received all  information  and documents as
it may have reasonably requested.

         ss.10.  Covenants.

                  (a) The  Borrower  agrees  that as long as any Loan or Note is
outstanding and until the termination of the Revolving Credit Commitment and the
payment and satisfaction in full of the Loans and all of the other  Obligations,
the Borrower will, and where  applicable will cause each of its  Subsidiaries to
comply with its obligations as set forth throughout this Agreement and to:

                           (i) furnish the Bank: (A) as soon as available but in
         any event within  ninety (90) days after the close of each fiscal year,
         its audited consolidated  Financials for such fiscal year, certified by
         the Borrower's  accountants;  (B) as soon as available but in any event
         within  forty-five (45) days after the end of each fiscal quarter,  its
         unaudited  consolidated  Financials for such quarter,  certified by its
         chief  financial  officer;  (C) as soon as  available  but in any event
         within  fifteen (15)  Business  Days after the end of each fiscal month
         its unaudited consolidated  Financials for such month, certified by its
         chief financial officer;  and (D) together with the monthly,  quarterly
         and  annual  audited  consolidated  Financials,  a  certificate  of the
         Borrower setting forth computations  demonstrating  compliance with the
         Borrower's financial covenants set forth herein, and certifying that no
         Default or Event of Default has  occurred,  or if a Default or an Event
         of Default has occurred, the actions taken by the Borrower with respect
         thereto;

                           (ii)  keep  true and  accurate  books of  account  in
         accordance  with  GAAP  and  to  permit  the  Bank  or  its  designated
         representatives,  at  the  expense  of the  Borrower,  to  inspect  the
         Borrower's  premises  and to examine and be advised as to such or other
         business records upon the request of the Bank, provided,  that the Bank
         shall,  prior to the  occurrence  of an Event of  Default,  inspect the
         Borrower's premises not more than twice each calendar year;

                           (iii) maintain its corporate existence,  business and
         assets, to keep its business and assets adequately insured, to maintain
         its chief executive office in the United States,  to continue to engage
         in the same lines of business,  and to comply in all material  respects
         with all Requirements of Law, including ERISA and Environmental Laws;



                                      -38-
<PAGE>

                           (iv)  notify the Bank  promptly in writing (A) of the
         occurrence of any Default or Event of Default, (B) of any noncompliance
         with ERISA or any  Environmental  Law or proceeding in respect  thereof
         which  could have a  Materially  Adverse  Effect,  (C) of any change of
         address,  (D)  of any  threatened  or  pending  litigation  or  similar
         proceeding  affecting the Borrower or such Subsidiary  involving claims
         in excess of $100,000 in the  aggregate or any  material  change in any
         such litigation or proceeding  previously reported and (E) of claims in
         excess of $100,000 in the aggregate against any assets or properties of
         the Borrower or such Subsidiary encumbered in favor of the Bank;

                           (v) use the  proceeds  of the Loans  for  refinancing
         existing  indebtedness  of  the  Borrower  to the  Bank,  to  make  the
         Permitted Acquisitions and for general corporate and/or working capital
         purposes and not for the purchasing or carrying of "margin security" or
         "margin  stock" within the meaning of  Regulations U and X of the Board
         of Governors of the Federal  Reserve  System,  12 C.F.R.  Parts 221 and
         224;

                           (vi) within 90 days of the Effective Date, effect and
         maintain interest rate protection arrangements with respect to the Term
         Loan on terms and conditions satisfactory to the Bank;

                           (vii) on or before  March 1, 2000,  provide  the Bank
         with a fully executed  lessor's  agreement with respect to its business
         operations located in Birmingham,  Alabama,  such lessor's agreement to
         be in form and substance satisfactory to the Bank; and

                           (viii)  cooperate  with the Bank,  take such  action,
         execute such  documents,  and provide such  information as the Bank may
         from time to time  reasonably  request  in order  further to effect the
         transactions contemplated by and the purposes of the Loan Documents.

                  (b) The  Borrower  agrees  that as long as any Loan or Note is
outstanding and until the termination of the Revolving Credit Commitment and the
payment and  satisfaction in full of the Loans and all of the  Obligations,  the
Borrower will not:

                           (i) create,  incur or assume any  Indebtedness  other
         than (A) Indebtedness to the Bank arising under the Loan Documents, (B)
         Indebtedness  in respect of the  acquisition of property which does not
         exceed  $500,000 in aggregate  amount,  (C) current  liabilities of the
         Borrower not incurred  through the  borrowing of money or the obtaining
         of credit except credit on an open account  customarily  extended,  (D)
         Indebtedness  in  respect  of  taxes  or  other  governmental   charges
         contested in good faith by  appropriate  proceedings  and for which the
         Borrower  has  made  appropriate  reserves;  and (E)  Indebtedness  not
         included  in  clauses  A  through D  (inclusive)  above  and  listed on
         Schedule 10(b)(i) hereto;



                                      -39-
<PAGE>

                           (ii)   create   or   incur,   or  cause  any  of  its
         Subsidiaries  to create or incur,  any Liens on any of the  property or
         assets of the  Borrower  or any of its  Subsidiaries  except  (A) Liens
         securing  the   Obligations;   (B)  Liens   securing   taxes  or  other
         governmental  charges  not yet due;  (C)  deposits  or pledges  made in
         connection  with social  security  obligations;  (D) Liens of carriers,
         warehousemen,  mechanics and materialmen,  less than 120 days old as to
         obligations   not  yet  due;  (E)  easements,   rights-of-way,   zoning
         restrictions  and similar  minor Liens  which  individually  and in the
         aggregate do not have a Materially  Adverse Effect;  (F) purchase money
         security  interests in or purchase money  mortgages on real or personal
         property   securing   purchase   money   Indebtedness    permitted   by
         ss.10(b)(i)(B),  covering only the property so acquired;  and (G) other
         Liens  existing  on the date  hereof and listed on  Schedule  10(b)(ii)
         hereto;

                           (iii)  agree with any other  Person to  prohibit  the
         creation of any Liens on any of the  property or assets of the Borrower
         or any Subsidiary;

                           (iv) make any investments  other than  investments in
         (A) marketable obligations of the United States maturing within one (1)
         year, (B)  certificates of deposit,  bankers'  acceptances and time and
         demand deposits of United States banks having total assets in excess of
         $1,000,000,000 and otherwise  acceptable to the Bank in its discretion,
         (C)  Investments  constituting  the Permitted  Acquisitions or (D) such
         other investments as the Bank may from time to time approve in writing;

                           (v) make any  distributions  on or in  respect of its
         capital of any nature  whatsoever  without the prior written consent of
         the Bank;

                           (vi) (A) become  party to a merger or  consolidation,
         (B) effect any disposition of assets other than in the ordinary course,
         (C) purchase,  sell, lease or otherwise dispose of assets other than in
         the ordinary course or other than the Permitted Acquisitions,  (D) make
         any change in Borrower's  corporate  structure or identity  which has a
         Materially  Adverse Effect or (E) enter into any agreement to do any of
         the foregoing; provided, that, any Subsidiary of the Borrower may merge
         with and into the Borrower or any  Subsidiary  of the Borrower upon not
         less than  thirty  (30) days prior  written  notice to the Bank of such
         merger;

                           (vii)  change its or any of its  Subsidiaries  fiscal
         year without the prior written consent of the Bank; or

                           (viii) without the prior written consent of the Bank,
         transfer,  purchase or redeem,  or permit any subsidiary to transfer or
         purchase,  any  shares of the  Borrower's  capital  stock  unless  such
         transfer,  purchase or redemption is effected  solely from the proceeds
         of and within a reasonable  time after the issuance to third parties by




                                      -40-
<PAGE>

         the Borrower or its Subsidiary of capital stock which is in addition to
         the capital  stock of the Borrower or its  Subsidiary,  as the case may
         be, outstanding on the date of this Agreement.

                  (c) The  Borrower  agrees  that as long as any Loan or Note is
outstanding and until the termination of the Revolving Credit Commitment and the
payment and  satisfaction in full of all of the  Obligations,  the Borrower will
not:

                           (i)   permit   the   ratio  of   Consolidated   Total
         Liabilities to  Consolidated  Tangible Net Worth for any fiscal quarter
         of the  Borrower  ending  during any period  described in the table set
         forth below to exceed the ratio set forth  opposite such period in such
         table:


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

                                       Period                 Ratio
         --------------------------------------------------------------------

         Effective Date - December 30, 2000                1.75 to 1.0
         --------------------------------------------------------------------

         December 31, 2000 and thereafter                  1.50 to 1.0
         --------------------------------------------------------------------

                           (ii) permit the ratio of Consolidated  Current Assets
         to  Consolidated  Current  Liabilities  for any  fiscal  quarter of the
         Borrower ending on or after March 31, 1999 to be less than 1.5 to 1.0;

                           (iii)  permit  Consolidated  Net  Income  for any two
         consecutive fiscal quarters to be less than $1.00;

                           (iv) permit the ratio of Consolidated  Operating Cash
         Flow to  Consolidated  Financial  Obligations  of the  Borrower and its
         Subsidiaries  to be  less  than  1.25 to 1.0  for  any  period  of four
         consecutive  fiscal  quarters of the Borrower  ending on or after March
         31, 1999;

                           (v) permit  the ratio of  Consolidated  Total  Funded
         Debt to Consolidated  Earnings Before Interest and Taxes,  Depreciation
         and Amortization  (the "Leverage  Ratio") for any period  consisting of
         four (4) consecutive  fiscal quarters of the Borrower ending during any
         period  described  in the table set forth below to exceed the ratio set
         forth opposite such period in such table:



                                      -41-
<PAGE>


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

                             Period                         Ratio
         -----------------------------------------------------------------------

                  Effective Date - March 31, 2000          3.0 to 1.0
         -----------------------------------------------------------------------

                  April 1, 2000 and thereafter             2.5 to 1.0
         -----------------------------------------------------------------------

                           (vi) permit  Consolidated  Net Deficit for any fiscal
         quarter of the Borrower ending on or after March 31, 1999 to be greater
         than  ten  percent  (10%) of  Consolidated  Tangible  Net  Worth of the
         Borrower on the last day of the immediately preceding fiscal quarter;

                           (vii)  permit  the  ratio  of  Consolidated  Earnings
         Before Interest and Taxes to Consolidated  Total Interest Expense to be
         less than 3.0 to 1.0 for any period of four consecutive fiscal quarters
         of the Borrower ending on or after March 31, 1999; or

                           (viii) permit the  Borrower's  backlog (as defined in
         the  Borrower's  most recent 10K filed with the Securities and Exchange
         Commission)  to be less  than (A)  $13,500,000  for each of the  fiscal
         quarters ending March 31, 1999,  June 30, 1999,  September 30, 1999 and
         December 31, 1999 and (B) the Revenue  Amount for any fiscal quarter of
         the Borrower ending on or after March 31, 2000.

         ss.11.   Events  of  Default;  Acceleration.  If any  of the  following
                  events  ("Events of Default")  shall  occur:  (a) the Borrower
                  shall fail to pay when due and  payable  any  principal  of or
                  interest on
the Loans or any other  sum due  under any of the Loan  Documents  when the same
becomes  due;  (b) the  Borrower  shall fail to perform  any term,  covenant  or
agreement  contained in ss.10; (c) the Borrower or any of its Subsidiaries shall
fail to perform any other  term,  covenant or  agreement  contained  in the Loan
Documents  within  thirty (30) days after the Bank has given  written  notice of
such failure to the Borrower; (d) any representation or warranty of the Borrower
or any of its Subsidiaries in the Loan Documents or in any certificate or notice
given in  connection  therewith  shall  have  been  false or  misleading  in any
material  respect at the time made or deemed to have been made; (e) the Borrower
or any of its Subsidiaries shall be in default under any agreement or agreements
evidencing  Indebtedness  owing to the Bank or any affiliates of the Bank or any
other Indebtedness for borrowed money to any other third party, or shall fail to
pay such  Indebtedness  when due, or within any applicable  period of grace; (f)
any of the Loan  Documents  shall cease to be in full force and effect;  (g) the
Borrower or any of its Subsidiaries (i) shall make an assignment for the benefit
of creditors, (ii) shall be adjudicated bankrupt or insolvent,  (iii) shall seek
the  appointment  of,  or be the  subject  of an order  appointing,  a  trustee,
liquidator  or receiver as to all or part of its  assets,  (iv) shall  commence,
approve  or  consent  to,  any  case  or   proceeding   under  any   bankruptcy,
reorganization  or  similar  law  and,  in the  case of an  involuntary  case or
proceeding, such case or proceeding is not dismissed within forty-five (45) days
following the commencement  thereof, or (v) shall be the subject of an order for




                                      -42-
<PAGE>

relief in an involuntary case under federal  bankruptcy law; (h) the Borrower or
any of its  Subsidiaries  shall be unable to pay  debts as they  mature;  or (i)
there  shall  remain  undischarged  for more  than  thirty  (30)  days any final
judgment or execution  action  against the  Borrower or any of its  Subsidiaries
that,  together with other outstanding  claims and execution actions against the
Borrower and its Subsidiaries, exceeds $250,000 in the aggregate;

         THEN, or at any time thereafter:

         (1) In the case of any Event of Default  under  clause (g) or (h),  the
Revolving Credit Commitment shall automatically terminate, and the entire unpaid
principal amount of the Loans, all interest accrued and unpaid thereon,  and all
other  amounts  payable  hereunder  and  under the other  Loan  Documents  shall
automatically  become forthwith due and payable,  without  presentment,  demand,
protest or notice of any kind, all of which are hereby  expressly  waived by the
Borrower; and

         (2) In the case of any Event of  Default  other  than (g) and (h),  the
Bank may, by written  notice to the Borrower,  terminate  the  Revolving  Credit
Commitment and/or declare the unpaid principal amount of the Loans, all interest
accrued and unpaid thereof,  and all other amounts  payable  hereunder and under
the other Loan Documents to be forthwith due and payable,  without  presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower.

         No remedy herein conferred upon the Bank is intended to be exclusive of
any other remedy and each and every remedy shall be  cumulative  and in addition
to every other remedy hereunder,  now or hereafter  existing at law or in equity
or otherwise.

         ss.12.  Setoff.  Regardless of the adequacy of any  collateral  for the
Obligations,  any deposits or other sums credited by or due from the Bank to the
Borrower  may be applied to or set off against any  principal,  interest and any
other  amounts due from the Borrower to the Bank at any time  without  notice to
the  Borrower,  or  compliance  with any other  procedure  imposed by statute or
otherwise, all of which are hereby expressly waived by the Borrower.

         ss.13.  Miscellaneous.  The  Borrower  agrees  to  indemnify  and  hold
harmless the Bank against all claims and losses of every kind arising out of the
Loan Documents,  including  without  limitation  against those in respect of the
application  of  Environmental  Laws  to  the  Borrower  and  its  Subsidiaries,
provided,  however,  Borrower  shall not be obligated to indemnify the Bank from
and hold it  harmless  against  such  claims or losses  arising out of the gross
negligence or willful misconduct of the Bank. The Borrower shall pay to the Bank
promptly on demand all  reasonable  costs and expenses  (including any taxes and
legal and other  professional fees and fees of its commercial  finance examiner)
incurred by the Bank in connection with the preparation, negotiation, execution,




                                      -43-
<PAGE>

amendment,  administration  or  enforcement  of any of the Loan  Documents.  Any
communication  to be made  hereunder  shall (i) be made in  writing,  but unless
otherwise stated,  may be made by telex,  facsimile  transmission or letter, and
(ii) be made or delivered to the address of the party receiving  notice which is
identified  with its  signature  below  (unless such party has by five (5) days'
written  notice  specified  another  address),  and  shall  be  deemed  made  or
delivered,  when dispatched,  left at that address, or five (5) days after being
mailed,  postage prepaid, to such address.  This Agreement shall be binding upon
and inure to the benefit of each party  hereto and its  successors  and assigns,
but the  Borrower  may not  assign  its rights or  obligations  hereunder.  This
Agreement may not be amended or waived except by a written  instrument signed by
the Borrower and the Bank,  and any such  amendment or waiver shall be effective
only for the specific purpose given. No failure or delay by the Bank to exercise
any right hereunder  shall operate as a waiver thereof,  nor shall any single or
partial  exercise of any right,  power or  privilege  preclude  any other right,
power or privilege.  The  provisions of this  Agreement are severable and if any
one provision  hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction,  such invalidity or unenforceability shall affect only such
provision in such jurisdiction.  This Agreement,  together with all Exhibits and
Schedules hereto, expresses the entire understanding of the parties with respect
to the transactions contemplated hereby. This Agreement and any amendment hereby
may be executed in several counterparts, each of which shall be an original, and
all of which shall constitute one agreement. In proving this Agreement, it shall
not be necessary to produce more than one such counterpart executed by the party
to be charged.  THIS AGREEMENT AND THE NOTES ARE CONTRACTS UNDER THE LAWS OF THE
STATE OF CONNECTICUT AND SHALL BE CONSTRUED IN ACCORDANCE THEREWITH AND GOVERNED
THEREBY.  THE BORROWER  AGREES THAT ANY SUIT FOR THE  ENFORCEMENT  OF ANY OF THE
LOAN  DOCUMENTS MAY BE BROUGHT IN THE COURTS OF THE STATE OF  CONNECTICUT OR ANY
FEDERAL COURT  SITTING  THEREIN.  The Borrower,  as an inducement to the Bank to
enter into this Agreement,  hereby waives its right to a jury trial with respect
to any action arising in connection with any Loan Document.

         ss.14.  Prejudgment Remedy Waiver.  THE BORROWER  ACKNOWLEDGES THAT THE
FINANCING  EVIDENCED  HEREBY IS A COMMERCIAL  TRANSACTION  WITHIN THE MEANING OF
CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES. THE BORROWER HEREBY WAIVES ITS
RIGHT TO NOTICE AND PRIOR COURT HEARING OR COURT ORDER UNDER CONNECTICUT GENERAL
STATUTES  SECTIONS  52-278a  ET.  SEQ.  AS AMENDED  OR UNDER ANY OTHER  STATE OR
FEDERAL LAW WITH RESPECT TO ANY AND ALL PREJUDGMENT REMEDIES THE BANK MAY EMPLOY
TO ENFORCE ITS RIGHTS AND REMEDIES  HEREUNDER.  MORE SPECIFICALLY,  THE BORROWER
ACKNOWLEDGES  THAT  THE  BANK'S  ATTORNEY  MAY,  PURSUANT  TO CONN.  GEN.  STAT.




                                      -44-
<PAGE>

ss.52-278F,  ISSUE A WRIT FOR A  PREJUDGMENT  REMEDY  WITHOUT  SECURING  A COURT
ORDER. THE BORROWER  ACKNOWLEDGES AND RESERVES ITS RIGHT TO NOTICE AND A HEARING
SUBSEQUENT TO THE ISSUANCE OF A WRIT FOR PREJUDGMENT REMEDY AS AFORESAID AND THE
BANK  ACKNOWLEDGES  THE  BORROWER'S  RIGHT  TO SAID  HEARING  SUBSEQUENT  TO THE
ISSUANCE OF SAID WRIT.  THE BORROWER  FURTHER  WAIVES ITS RIGHTS TO REQUEST THAT
BANK POST A BOND, WITH OR WITHOUT SURETY,  TO PROTECT  BORROWER  AGAINST DAMAGES
THAT MAY BE CAUSED BY ANY PREJUDGMENT REMEDY SOUGHT OR OBTAINED BY BANK.

         ss.15.  Effective Date. This Agreement shall become  effective  between
the parties hereto as of the Effective Date. Until the Effective Date, the terms
of the Prior Loan Agreement shall remain in full force and effect.

         ss.16. Amendment and Restatement. This Agreement amends and restates in
its  entirety  the Prior Loan  Agreement.  The  execution  and  delivery of this
Agreement  shall not  extinguish  the  indebtedness  evidenced by the Prior Loan
Agreement or any promissory  notes executed in connection  therewith nor will it
impair the lien of any security interest or pledge securing the Obligations, and
no part of such  indebtedness  shall be discharged or cancelled by the execution
of this  Agreement  or the  execution  and  delivery of any further  instruments
evidencing or securing the Obligations.

         IN WITNESS  WHEREOF,  the undersigned  have caused this Agreement to be
duly executed as of the date first above written.

                              SCAN-OPTICS, INC.



                              By: /s/Michael J. Villano
                                 ----------------------
                                   Its:  CFO

                                   169 Progress Drive
                                   Manchester, CT 06040
                                   Tel: (860) 645-7878
                                   Fax: (860) 645-7995

                              BANKBOSTON, N.A.



                              By:      /s/
                                 ----------------------

                                   Its: Vice President

                                   100 Pearl Street
                                   Hartford, Connecticut 06103
                                   Tel: (860) 547- 6570
                                   Fax: (860) 547-6575



                                      -45-
<PAGE>


                                SCHEDULE 10(b)(i)

                             Permitted Indebtedness

         Leases with BancBoston Leasing, Inc. of office furniture and fixtures.

         Leases with Longshore Systems, Inc. of laptop computers.



                               Schedule 10(b)(ii)

                                 Existing Liens

         Leases with BancBoston Leasing, Inc. of office furniture and fixtures.

         Leases with Longshore Systems, Inc. of laptop computers.