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TBCC

                           Loan and Security Agreement

Borrower:    BEI Medical Systems Company, Inc.,
             a Delaware Corporation

Address:     100 Hollister Road
             Teterboro, New Jersey  07608

Date:        May 6, 1999

THIS LOAN AND SECURITY  AGREEMENT is entered into as of the above date,  between
the above  borrower  (the  "Borrower"),  having its chief  executive  office and
principal  place of  business  at the  address  shown  above,  and  TRANSAMERICA
BUSINESS  CREDIT  CORPORATION,  a  Delaware  corporation  ("TBCC"),  having  its
principal office at 9399 West Higgins Road, Suite 600, Rosemont,  Illinois 60018
and having an office at 15260 Ventura Boulevard, Sherman Oaks, California 91403.
The Schedule to this Agreement (the "Schedule") being signed  concurrently is an
integral  part of this  Agreement.  (Definitions  of certain  terms used in this
Agreement are set forth in Section 9 below.) The parties agree as follows:

1.   LOANS.

     1.1 Loans.  TBCC,  subject to the terms and  conditions of this  Agreement,
agrees to make loans (the  "Loans")  to  Borrower,  from time to time during the
period from the date of this  Agreement  to the  Maturity  Date set forth in the
Schedule,  at Borrower's  request,  in an aggregate  principal amount at any one
time outstanding not to exceed the Credit Limit shown on the Schedule. If at any
time the total  outstanding  Loans and other  monetary  Obligations  exceed said
limit,  Borrower shall repay the excess  immediately  without  demand.  Borrower
shall use the proceeds of all Loans solely for lawful general business purposes.

     1.2 Due Date.  The  Loans,  all  accrued  interest  and all other  monetary
Obligations shall be payable in full on the Maturity Date.  Borrower may borrow,
repay and reborrow  Loans (other than any Term Loans),  in whole or in part,  in
accordance with the terms of this Agreement.

     1.3 Loan Account.  TBCC shall  maintain an account on its books in the name
of  Borrower  (the  "Loan  Account").  All  Loans and  advances  made by TBCC to
Borrower or for Borrower's  account and all other monetary  Obligations  will be
charged to the Loan Account.  All amounts  received by TBCC from Borrower or for
Borrower's account will be credited to the Loan Account. TBCC will send Borrower
a monthly statement  reflecting the activity in the Loan Account,  and each such
monthly statement shall be an account stated between Borrower and TBCC and shall
be final conclusive and binding absent manifest error.

     1.4 Collection of Receivables. Borrower shall remit to TBCC all Collections
including  all checks,  drafts and other  documents and  instruments  evidencing
remittances in payment  (collectively  referred to as "Items of Payment") within
one Business Day after receipt, in the same form as received, with any necessary
indorsements.  For purposes of calculating  interest due to TBCC, credit will be
given for Collections and all other proceeds of Collateral and other payments to
TBCC three  Business  Days after receipt of cleared  funds.  For all purposes of
this  Agreement  any  cleared  funds  received  by TBCC  later  than  10:00 a.m.
(California  time) on any Business Day shall be deemed to have been  received on
the following Business Day and any applicable  interest or fee shall continue to
accrue.  Borrower's  Loan  Account  will be  credited  only with the net amounts
actually received in payment of Receivables, and such payments shall be credited
to the  Obligations  in such order as TBCC shall  determine  in its  discretion.
Pending delivery to TBCC,  Borrower will not commingle any Items of Payment with
any of its  other  funds or  property,  but will  segregate  them from the other
assets of  Borrower  and will hold them in trust and for the  account and as the
property of TBCC.  Borrower  hereby  agrees to endorse any Items of Payment upon
the request of TBCC.

     1.5  Reserves.  TBCC may,  from time to time,  in its Good  Faith  business
judgment*:  (i) establish and modify reserves against  Eligible  Receivables and
Eligible  Inventory,   (ii)  modify  advance  rates  with  respect  to  Eligible
Receivables  and Eligible  Inventory,  (iii) modify the standards of eligibility
set forth in the definitions of Eligible Receivables and Eligible Inventory, and
(iv) establish reserves against available Loans.

     * upon reasonable prior notice to Borrower

     1.6 Term.

     (a) The term of this Agreement  shall be from the date of this Agreement to
the  Maturity  Date set  forth in the  Schedule,  unless  sooner  terminated  in
accordance  with the terms of this  Agreement,  provided  that the Maturity Date
shall  automatically  be extended,  and this Agreement shall  automatically  and
continuously renew, for successive additional terms of one year each, unless one
party gives written  notice to the other,  not less than sixty days prior to the
next Maturity Date, that such party elects to terminate this



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TBCC                                                 Loan and Security Agreement
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Agreement  effective on the next  Maturity  Date. On the Maturity Date or on any
earlier   termination  of  this  Agreement   Borrower  shall  pay  in  full  all
Obligations, and notwithstanding any termination of this Agreement all of TBCC's
security interests and all of TBCC's other rights and remedies shall continue in
full force and effect until payment and performance in full of all Obligations.

     (b) This Agreement may be terminated prior to the Maturity Date as follows:
(i)  by  Borrower,  effective  three  business  days  after  written  notice  of
termination  is given to TBCC; or (ii) by TBCC at any time after the  occurrence
of an Event of Default, without notice, effective immediately. If this Agreement
is terminated by Borrower or by TBCC under this Section  1.6(b),  Borrower shall
pay to TBCC a termination fee (the "Termination Fee") in the amount shown on the
Schedule.  The Termination Fee shall be due and payable on the effective date of
termination.  Notwithstanding  the  foregoing,  Borrower  shall have no right to
terminate  this  Agreement at any time that any principal of, or interest on any
of the Loans or any other  monetary  Obligations  are  outstanding,  except upon
prepayment of all Obligations and the  satisfaction of all other  conditions set
forth in the Loan Documents.

     1.7 Payment Procedures.  Borrower hereby authorizes TBCC to charge the Loan
Account with the amount of all interest, fees, expenses and other payments to be
made  hereunder and under the other Loan  Documents.  TBCC may, but shall not be
obligated to, discharge Borrower's payment obligations  hereunder by so charging
the Loan Account. Whenever any payment to be made hereunder is due on a day that
is not a Business Day, the payment may be made on the next  succeeding  Business
Day and such  extension  of time shall be  included  in the  computation  of the
amount of interest due.

     1.8  Conditions to Initial Loan. The obligation of TBCC to make the initial
Loan is subject to the  satisfaction  of the  following  conditions  prior to or
concurrent  with such initial Loan, and Borrower shall cause all such conditions
to be satisfied by the Closing Deadline set forth in the Schedule:

          (a) Except for the filing of termination  statements under the Uniform
     Commercial  Code by the existing  lender to Borrower  whose loans are being
     repaid with the Loan proceeds and the documents and actions relating to the
     Liens of TBCC created  hereunder,  as provided for in Section 1.8(c) below,
     no consent or  authorization  of, filing with or other act by or in respect
     of any Governmental Authority or any other Person is required in connection
     with the execution,  delivery,  performance,  validity or enforceability of
     this  Agreement,  or the other Loan  Documents or the  consummation  of the
     transactions contemplated hereby or thereby or the continuing operations of
     the Borrower following the consummation of such transactions.

          (b)  TBCC  and  its  counsel   shall  have   performed  (i)  a  review
     satisfactory  to TBCC of all of the Material  Contracts and other assets of
     the Borrower, the financial condition of the Borrower, including all of its
     tax, litigation,  environmental and other potential contingent liabilities,
     and  the  corporate  and  capital  structure  of the  Borrower  and  (ii) a
     pre-closing  audit  and  collateral  review,  in  each  case  with  results
     satisfactory to TBCC.

          (c) TBCC shall have received the following, each dated the date of the
     initial Loan or as of an earlier date acceptable to TBCC, in form and
     substance satisfactory to TBCC and its counsel: (i) a Blocked Account
     Agreement , duly executed by the Borrower and its bank on TBCC's standard
     form; (ii) acknowledgment copies of Uniform Commercial Code financing
     statements (naming TBCC as secured party and the Borrower as debtor), duly
     filed in all jurisdictions that TBCC deems necessary or desirable to
     perfect and protect the Liens created hereunder, and evidence that all
     other filings, registrations and recordings have been made in the
     appropriate governmental offices, and all other action has been taken,
     which shall be necessary to create, in favor of TBCC, a perfected first
     priority Lien on the Collateral*; (iii) the opinion of counsel for the
     Borrower covering such matters incident to the transactions contemplated by
     this Agreement as TBCC may specify in its discretion; (iv) certified copies
     of all policies of insurance required by this Agreement and the other Loan
     Documents, together with loss payee endorsements for all such policies
     naming TBCC as lender loss payee and an additional insured; (v) copies of
     the Borrower's articles or certificate of incorporation, certified as true,
     correct and complete by the secretary of state of Borrower's state of
     incorporation within 45 days of the date hereof; (vi) copies of the bylaws
     of the Borrower and a copy of the resolutions of the Board of Directors of
     the Borrower authorizing the execution, delivery and performance of this
     Agreement, the other Loan Documents, and the transactions contemplated
     hereby and thereby, attached to which is a certificate of the Secretary or
     an Assistant Secretary of the Borrower certifying (A) that such copies of
     the bylaws and resolutions are true, complete and accurate copies thereof,
     have not been amended or modified since the date of such certificate and
     are in full force and effect and (B) the incumbency, names and true
     signatures of the officers of the Borrower**; (vii) a good standing
     certificate from the Secretary of State of Borrower's state of
     incorporation and each state in which the Borrower is qualified as a
     foreign corporation, each dated within ten days of the date hereof; (viii)
     the additional documents and agreements, if any, listed in the Schedule;
     and (ix) such other agreements and instruments as TBCC deems necessary in
     its*** discretion in connection with the transactions contemplated hereby.

     *  (except  for  Excluded  Collateral).   For  purposes  hereof,  "Excluded
Collateral"  shall mean (i) any  deposit  account  held by the  Borrower  or any
Guarantor at a depository  institution  office located in a  jurisdiction  where
TBCC's  security  interest  in such  deposit  account  cannot  be  perfected  by
providing notice thereof to such depository institution (provided, however, that
with respect to any such deposit  account  Borrower  shall,  at TBCC's  request,
provide TBCC with duly  executed  agreements  and  instruments  (all in form and
substance  satisfactory to TBCC) necessary or, in the opinion of TBCC, desirable
to perfect and maintain in favor of TBCC a first priority  security  interest in
such deposit account),  and (ii) specialized  molds and demonstration  equipment
owned by Xylog  Corporation and located in  jurisdictions  other than California
and New Jersey  (provided that (a) the aggregate book value of such



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TBCC                                                 Loan and Security Agreement
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specialized molds and  demonstration  equipment at all such locations other than
California  and New Jersey  shall not at any time exceed  $350,000,  and (b) the
aggregate book value of such specialized  molds and  demonstration  equipment at
any single  location  outside of  California or New Jersey shall not at any time
exceed $50,000).

    ** who are authorized to sign the Loan Documents

    *** reasonable

     1.9  Conditions  to  Lending.  The  obligation  of TBCC to make any Loan is
subject to the satisfaction of the following conditions precedent:

          (a) There shall be no pending or, to the  knowledge of Borrower  after
     due inquiry,  threatened  litigation,  proceeding,  inquiry or other action
     relating to this  Agreement,  or any other Loan  Document,  which could* be
     expected to have a Material Adverse Effect in the judgment of TBCC;

     * reasonably

          (b) Borrower shall be in compliance  with all  Requirements of Law and
     Material  Contracts,  other than such  noncompliance that could not* have a
     Material Adverse Effect;

     * reasonably be expected to

          (c) The Liens in favor of TBCC  shall  have been  duly  perfected  and
     shall constitute first priority Liens, except for Permitted Liens*;

     * and except  with  respect to Excluded  Collateral  (as defined in Section
1.8(c) above)

          (d) All representations and warranties contained in this Agreement and
     the other Loan Documents shall be true and correct on and as of the date of
     such Loan as if then made, other than  representations  and warranties that
     expressly  relate  solely to an earlier date, in which case they shall have
     been true and correct as of such earlier date;

          (e) No  Default  or  Event  of  Default  shall  have  occurred  and be
     continuing or would result from the making of the requested  Loan as of the
     date of such request; and

          (f) No Material Adverse Effect shall have occurred.

2. INTEREST AND FEES.

     2.1 Interest. Borrower shall pay TBCC interest on all outstanding Loans and
other  monetary  Obligations,  at the interest rate set forth in the  Schedule*.
Interest  shall be payable  monthly in arrears on the first Business Day of each
month,  and on the  Maturity  Date.  Following  the  occurrence  and  during the
continuance of any Event of Default,  the interest rate  applicable to each Loan
shall be increased to the extent  provided for in the Note evidencing such Loan,
and the interest rate applicable to all other  Obligations shall be increased by
two percent per annum.

     * with respect to such Loans and other monetary Obligations

     2.2 Fees. Borrower shall pay TBCC the fees set forth in the Schedule.

     2.3  Calculations.  All  interest  and fees under this  Agreement  shall be
calculated  on the  basis of a year of 360 days for the  actual  number  of days
elapsed in the period for which such interest or fees are payable.

     2.4 Taxes.  Any and all  payments by Borrower  under this  Agreement or any
other Loan  Document  shall be made free and clear of and without  deduction for
any and all present or future taxes,  levies,  imposts,  deductions,  charges or
withholdings  and  penalties,  interest and all other  liabilities  with respect
thereto,  excluding  in the case of TBCC,  taxes  imposed  on its net income and
franchise taxes imposed on it by the  jurisdiction  under the laws of which TBCC
is organized or any political subdivision thereof.

3. SECURITY.

     3.1 Grant of Security Interest.  To secure the payment and performance when
due of all of  the  Obligations,  Borrower  hereby  grants  to  TBCC a  security
interest  in all of its  present and future  Receivables,  Investment  Property,
Inventory, Equipment, Other Property, and other Collateral, wherever located.*

     *  Notwithstanding  the  foregoing,  the grant of a  security  interest  as
provided  herein  shall  not  extend  to,  and the term  "Collateral"  shall not
include,  any  Receivables  or  general  intangibles  (whether  owned or held as
licensee or lessee,  or otherwise),  to the extent that (i) such  Receivables or
general  intangibles  are not  assignable  or capable of being  encumbered  as a
matter of law or under the terms of the license or lease applicable thereto (but
solely  to the  extent  that any such  restriction  shall be  enforceable  under
applicable  law against an  assignee),  without  the consent of the  licensor or
lessor thereof and (ii) such consent has not been obtained;  provided,  however,
that the  foregoing  grant of security  interest  shall  extend to, and the term
"Collateral"  shall  include,  (A) any and all  proceeds of any  Receivables  or
general  intangibles  which  are  otherwise  excluded  to the  extent  that  the
assignment or encumbrance of such proceeds is not so restricted, including under
Section 9-318 of the Uniform Commercial Code, and (B) upon obtaining the consent
of any such licensor,  lessor or other applicable party with respect to any such
otherwise  excluded  Receivables  or general  intangibles,  such  Receivables or
general intangibles as well as any and all proceeds thereof that might have been
excluded from such grant of security interest and the term "Collateral."

     3.2 Other Liens; Location of Collateral.  Borrower represents, warrants and
covenants  that all of the  Collateral



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TBCC                                                 Loan and Security Agreement
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is, and will at all times  continue  to be,  free and clear of all Liens,  other
than  Permitted  Liens and Liens in favor of TBCC.  All  Collateral  is and will
continue to be maintained at the locations shown on the Schedule.

3.3 Receivables.

     (a) Schedules and Other  Actions.  As often as requested by TBCC,  Borrower
shall execute and deliver to TBCC written  schedules of Receivables and Eligible
Receivables (but the failure to execute or deliver any schedule shall not affect
or limit  TBCC's  security  interest  in all  Receivables).  On TBCC's  request,
Borrower shall also furnish to TBCC copies of invoices to customers and shipping
and  delivery  receipts.  Borrower  shall  deliver to TBCC the  originals of all
letters of credit,  notes, and instruments in its favor and such endorsements or
assignments  as TBCC may  reasonably  request  and,  upon the  request  of TBCC,
Borrower shall deliver to TBCC all  certificated  securities with respect to any
Investment Property,  with all necessary  indorsements,  and obtain such account
control  agreements  with securities  intermediaries  and take such other action
with respect to any  Investment  Property,  as TBCC shall  request,  in form and
substance satisfactory to TBCC. Upon request of TBCC Borrower additionally shall
obtain consents from any letter of credit issuers with respect to the assignment
to TBCC of any letter of credit proceeds.

     (b) Records,  Collections.  Borrower  shall report all customer  credits to
TBCC, on the regular  reports to TBCC in the form from time to time specified by
TBCC.  Borrower  shall notify TBCC of all returns and  recoveries of merchandise
and of all claims asserted with respect to  merchandise,  on its regular reports
to TBCC.  Borrower shall not settle or adjust any dispute or claim, or grant any
discount, credit or allowance or accept any return of merchandise, except in the
ordinary course of its business, without TBCC's prior written consent.

     (c)  Representations.  Borrower  represents  and warrants to TBCC that each
Receivable  with respect to which Loans are requested by Borrower  shall, on the
date each Loan is  requested  and made,  represent  an  undisputed,  bona  fide,
existing,  unconditional  obligation of the account  debtor created by the sale,
delivery, and acceptance of goods, the licensing of software or the rendition of
services,  in the ordinary course of Borrower's  business,  and meet the Minimum
Eligibility Requirements set forth in Section 9.1(n) below.

     3.4 Inventory.  Borrower shall maintain full, accurate and complete records
respecting the Inventory describing the kind, type and quantity of the Inventory
and  Borrower's  cost  therefor,  withdrawals  therefrom and additions  thereto,
including a perpetual inventory for work in process and finished goods.

     3.5  Equipment.  Borrower  shall at all times  keep  correct  and  accurate
records itemizing and describing the location,  kind, type, age and condition of
the Equipment, Borrower's cost therefor and accumulated depreciation thereof and
retirements,  sales, or other dispositions  thereof.  Borrower shall keep all of
its  Equipment  in a  satisfactory  state of repair and  satisfactory  operating
condition  in  accordance  with  industry  standards,  ordinary  wear  and  tear
excepted.  No  Equipment  shall be annexed  or affixed to or become  part of any
realty,  unless the owner of the realty has  executed  and  delivered a Landlord
Waiver in such form as TBCC  shall  specify.  Where  Borrower  is  permitted  to
dispose  of  any  Equipment  under  this  Agreement  or by any  consent  thereto
hereafter given by TBCC, Borrower shall do so at arm's length, in good faith and
by obtaining  the maximum  amount of recovery  practicable  therefor and without
impairing the operating integrity or value of the remaining Equipment.

     3.6  Investment  Property.  Borrower  shall  have the right to  retain  all
Investment Property payments and distributions, unless and until a Default or an
Event of Default  has  occurred.  If a Default  or an Event of  Default  exists,
Borrower  shall hold all payments on, and  proceeds of, and  distributions  with
respect to,  Investment  Property in trust for TBCC,  and Borrower shall deliver
all such payments, proceeds and distributions to TBCC, immediately upon receipt,
in their original form, duly endorsed,  to be applied to the Obligations in such
order as TBCC shall determine.  Upon the request of TBCC, any such distributions
and payments  with respect to any  Investment  Property  held in any  securities
account  shall be held and  retained in such  securities  account as part of the
Collateral.

     3.7 Further  Assurances.  Borrower will perform any and all steps that TBCC
may reasonably  request to perfect TBCC's security  interests in the Collateral,
including,  without limitation,  executing and filing financing and continuation
statements in form and substance satisfactory to TBCC. TBCC is hereby authorized
by Borrower to sign Borrower's name or file any financing  statements or similar
documents or  instruments  covering  the  Collateral  whether or not  Borrower's
signature  appears  thereon.  Borrower  agrees,  from  time to time,  at  TBCC's
request, to file notices of Liens,  financing  statements,  similar documents or
instruments,  and amendments,  renewals and continuations thereof, and cooperate
with TBCC, in connection  with the continued  perfection  and  protection of the
Collateral.  If any  Collateral  is in the  possession  or control of any Person
other than a public  warehouseman  where the warehouse receipt is in the name of
or held by TBCC,  Borrower shall notify such Person of TBCC's security  interest
therein  and,  upon  request,  instruct  such Person or Persons to hold all such
Collateral  for the  account of TBCC and subject to TBCC's  instructions.  If so
requested by TBCC, Borrower will deliver to TBCC warehouse receipts covering any
Collateral  located in warehouses  showing TBCC as the  beneficiary  thereof and
will also cause the  warehouseman to execute and deliver such agreements as TBCC
may request relating to waivers of liens by such warehouseman and the release of
the  Inventory  to TBCC on its  demand.  Borrower  shall  defend the  Collateral
against all claims and demands of all Persons.

     3.8 Power of Attorney.  Borrower hereby  appoints and  constitutes  TBCC as
Borrower's  attorney-in-fact  (i) to  request at any time from  account  debtors
verification of information concerning Receivables and the amount owing thereon,
(ii) upon the occurrence and during the  continuance of an Event of Default,  to
convey any item of Collateral to any  purchaser  thereof,  (iii) to give or sign
Borrower's name to any notices or statements necessary or desirable to create or
continue  the Lien on any  Collateral  granted  hereunder,  (iv) to execute  and
deliver to any securities intermediary or other Person any entitlement



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TBCC                                                 Loan and Security Agreement
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order,  account control  agreement or other notice,  document or instrument with
respect to any Investment Property,  and (v) to make any payment or take any act
necessary or desirable to protect or preserve any Collateral.  TBCC's  authority
hereunder shall include,  without limitation,  the authority to execute and give
receipt for any certificate of ownership or any document,  transfer title to any
item of Collateral  and take any other  actions  arising from or incident to the
powers granted to TBCC under this  Agreement.  This power of attorney is coupled
with an interest and is irrevocable.

4. Representations and Warranties of Borrower.  Borrower represents and warrants
as follows:

     4.1  Organization,  Good  Standing  and  Qualification.  Borrower  (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the State set forth above,  (ii) has the corporate power and authority to own
its  properties and assets and to transact the businesses in which it is engaged
and (iii) is duly  qualified,  authorized to do business and in good standing in
each jurisdiction where it is engaged in business, except to the extent that the
failure to so qualify or be in good standing  would not have a Material  Adverse
Effect.

     4.2  Locations  of  Offices,  Records  and  Collateral.  The address of the
principal place of business and chief  executive  office of Borrower is, and the
books and records of Borrower and all of its chattel paper and records  relating
to Collateral are  maintained  exclusively in the possession of Borrower at, the
address of Borrower  specified  in the heading of this  Agreement.  Borrower has
places of business,  and Collateral is located,  only at such address and at the
addresses set forth in the Schedule and at any additional  locations reported to
TBCC as provided in Section 5.8(c) as to which*

     * Borrower has provided TBCC (i) 7 days prior written notice  thereof,  and
(ii) duly executed  financing  statements and other  agreements and  instruments
(all in form and substance satisfactory to TBCC) necessary or, in the opinion of
TBCC,  desirable  to  perfect  and  maintain  in favor of TBCC a first  priority
security interest in the Collateral (other than Excluded Collateral,  as defined
in Section 1.8(c) above) located at such additional locations

     4.3 Authority.  Borrower has the requisite corporate power and authority to
execute,  deliver and perform its obligations  under each of the Loan Documents.
All corporate  action  necessary for the execution,  delivery and performance by
Borrower of the Loan Documents has been taken.

     4.4  Enforceability.  This  Agreement is, and, when executed and delivered,
each other Loan  Document  will be, the legal,  valid and binding  obligation of
Borrower  enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency or similar laws affecting creditors' rights
generally and general principles of equity.

     4.5 No  Conflict.  The  execution,  delivery and  performance  of each Loan
Document by Borrower does not and will not  contravene  (i) any of the Governing
Documents,  (ii) any Requirement of Law or (iii) any Material  Contract and will
not result in the imposition of any Liens other than in favor of TBCC.

     4.6  Consents  and Filings.  No consent,  authorization  or approval of, or
filing with or other act by, any  shareholders  of Borrower or any  Governmental
Authority  or other  Person  is  required  in  connection  with  the  execution,
delivery, performance, validity or enforceability of this Agreement or any other
Loan Document,  the  consummation  of the  transactions  contemplated  hereby or
thereby or the continuing  operations of Borrower  following such  consummation,
except (i) those that have been  obtained or made,  (ii) the filing of financing
statements  under the Uniform  Commercial  Code and (iii) any necessary  filings
with U.S. Copyright Office and the U.S. Patent and Trademark Office.

     4.7 Solvency.  Borrower is Solvent and will be Solvent upon the  completion
of all  transactions  contemplated  to  occur  on or  before  the  date  of this
Agreement  (including,  without limitation,  the Loans to be made on the date of
this Agreement).

     4.8  Financial  Data.  Borrower has provided to TBCC  complete and accurate
Financial  Statements,   which  have  been  prepared  in  accordance  with  GAAP
consistently  applied  throughout  the periods  involved and fairly  present the
financial position and results of operations of Borrower for each of the periods
covered,  subject, in the case of any quarterly financial statements,  to normal
year-end  adjustments  and the  absence  of notes.  Borrower  has no  Contingent
Obligation  or  liability  for  taxes,  unrealized  losses,  unusual  forward or
long-term  commitments  or  long-term  leases,  which is not  reflected  in such
Financial  Statements or the footnotes  thereto.  Since the last date covered by
such  Financial   Statements,*  there  has  been  no  sale,  transfer  or  other
disposition  by Borrower of any material part of its business or property and no
purchase or other acquisition of any business or property (including any capital
stock of any other Person)  material in relation to the  financial  condition of
Borrower  at said  date.  Since  said  date,  (i)  there  has  been  no  change,
occurrence,  development or event which has had or could  reasonably be expected
to have a Material Adverse Effect and (ii) none of the capital stock of Borrower
has been  redeemed,  retired,  purchased  or  otherwise  acquired  for  value by
Borrower.

     * and other than transactions in the ordinary course of business,

     4.9  Accuracy  and  Completeness  of  Information.  All data,  reports  and
information  previously,  now or hereafter furnished by or on behalf of Borrower
to  TBCC or the  Auditors  are or will be  true  and  accurate  in all  material
respects on the date as of which such data, reports and information are dated or
certified,  and not  incomplete by omitting to state any material fact necessary
to make such data,  reports and  information  not materially  misleading at such
time.  There are no facts now known to  Borrower  which  individually  or in the
aggregate  would  reasonably be expected to have a Material  Adverse  Effect and
which have not been disclosed in writing to TBCC.



                                      -5-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

     4.10 No Joint  Ventures,  Partnerships  or  Subsidiaries.  Borrower  is not
engaged in any joint venture or partnership with any other Person. *Borrower has
no Subsidiaries.

     *Except as disclosed in the Schedule,

     4.11 Corporate and Trade Name. During the past five years, Borrower has not
been known by or used any other  corporate,  trade or fictitious name except for
its name as set  forth on the  signature  page of this  Agreement  and the other
names specified in the Schedule.

     4.12 No Actual or Pending Material  Modification of Business.  There exists
no actual or, to the best of Borrower's knowledge after due inquiry,  threatened
termination, cancellation or limitation of, or any modification or change in the
business  relationship of Borrower with any customer or group of customers whose
purchases  individually  or in the  aggregate  are material to the  operation of
Borrower's business or with any material supplier.

     4.13 No Broker's or Finder's  Fees. No broker or finder  brought about this
Agreement  or the Loans.  No broker's or finder's  fees or  commissions  will be
payable  by  Borrower  to  any  Person  in  connection  with  the   transactions
contemplated by this Agreement.

     4.14 Taxes and Tax  Returns.  Borrower has  properly  completed  and timely
filed all income tax returns it is required to file.  The  information  filed is
complete and accurate in all material  respects.  All  deductions  taken in such
income tax returns are  appropriate  and in accordance  with applicable laws and
regulations,  except  deductions  that may have  been  disallowed  but are being
challenged  in good  faith and for  which  adequate  reserves  have been made in
accordance  with  GAAP.  All  taxes,  assessments,  fees and other  governmental
charges  for periods  beginning  prior to the date of this  Agreement  have been
timely  paid  (or,  if  not  yet  due,  adequate  reserves  therefor  have  been
established in accordance  with GAAP) and Borrower has no liability for taxes in
excess of the amounts so paid or reserves so established.  No  deficiencies  for
taxes  have  been  claimed,   proposed  or  assessed  by  any  taxing  or  other
Governmental  Authority  against Borrower and no notice of any tax Lien has been
filed. There are no pending or threatened  audits,  investigations or claims for
or relating to any liability for taxes and there are no matters under discussion
with any  Governmental  Authority which could result in an additional  liability
for  taxes.  No  extension  of a  statute  of  limitations  relating  to  taxes,
assessments,  fees or other  governmental  charges is in effect with  respect to
Borrower. Borrower is not a party to and does not have any obligations under any
written tax sharing agreement or agreement regarding payments in lieu of taxes.

     4.15 No Judgments or  Litigation.  Except as set forth in the Schedule,  no
judgments,  orders,  writs or decrees are outstanding  against Borrower,  nor is
there now pending or, to the knowledge of Borrower after due inquiry, threatened
litigation,   contested  claim,  investigation,   arbitration,  or  governmental
proceeding  by or  against  Borrower  that  (i)  could  individually  or in  the
aggregate  be  likely  in the  reasonable  business  judgment  of TBCC to have a
Material  Adverse  Effect or (ii) purports to affect the  legality,  validity or
enforceability of this Agreement, any other Loan Document or the consummation of
the transactions contemplated hereby or thereby.

     4.16  Investments;  Contracts.  Borrower (i) has not  committed to make any
Investment;  (ii)  is  not  a  party  to  any  indenture,  agreement,  contract,
instrument  or  lease or  subject  to any  charter,  by-law  or other  corporate
restriction  or any  injunction,  order,  restriction  or  decree,  which  would
materially and adversely  affect its business,  operations,  assets or financial
condition;  (iii) is not a party to any "take or pay" contract as to which it is
the  purchaser;  or (iv) has no  material  contingent  or  long-term  liability,
including  management  contracts  (excluding  employment  contracts of full-time
individual officers or employees), which could* have a Material Adverse Effect.

     * reasonably be expected to

     4.17 No Defaults;  Legal  Compliance.  Borrower is not in default under any
term of any Material  Contract or in violation of any Requirement of Law, nor is
Borrower subject to any investigation with respect to a claimed violation of any
Requirement of Law.

     4.18 Rights in  Collateral;  Priority of Liens.  All Collateral is owned or
leased  by  Borrower,  free  and  clear  of any and all  Liens in favor of third
parties,  other than Permitted  Liens. The Liens granted to TBCC pursuant to the
Loan Documents constitute valid,  enforceable and perfected first-priority Liens
on the Collateral, except for Permitted Liens.

     4.19 Intellectual  Property.  Set forth in the written  Representations and
Warranties of Borrower  previously  delivered to TBCC is a complete and accurate
list of all patents,  trademarks,  trade  names,  service  marks and  copyrights
(registered  and  unregistered),  and all  applications  therefor  and  licenses
thereof,   of  Borrower.   Borrower  owns  or  licenses  all  material  patents,
trademarks,   service-marks,   logos,  tradenames,   trade  secrets,   know-how,
copyrights,  or licenses and other rights with respect to any of the  foregoing,
which are  necessary or advisable for the operation of its business as presently
conducted or proposed to be conducted.  To the best of its  knowledge  after due
inquiry,  Borrower  has  not  infringed  any  patent,  trademark,  service-mark,
tradename,  copyright,  license or other right owned by any other  Person by the
sale or use of any product,  process, method,  substance, part or other material
presently  contemplated  to be sold  or  used,  where  such  sale  or use  would
reasonably  be  expected  to have a  Material  Adverse  Effect  and no  claim or
litigation  is  pending,  or to the  best of  Borrower's  knowledge,  threatened
against or affecting  Borrower  that  contests its right to sell or use any such
product, process, method, substance, part or other material.

     4.20 Labor Matters.  There are no existing or threatened strikes,  lockouts
or other disputes relating to any collective  bargaining or similar agreement to
which  Borrower is a party which would,  individually  or in the  aggregate,  be
reasonably likely to have a Material Adverse Effect.

     4.21  Licenses and  Permits.  Borrower has obtained and holds in full force
and  effect,   all  franchises,   licenses,   leases,   permits,   certificates,
authorizations, qualifications,



                                      -6-
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TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

easements,  rights of way and other rights and approvals  which are necessary or
advisable  for the  operation  of its  business as  presently  conducted  and as
proposed  to be  conducted,  except  where the  failure  to  possess  any of the
foregoing  (individually  or in the aggregate) would not have a Material Adverse
Effect.

     4.22 Government Regulation. Borrower is not subject to regulation under the
Public  Utility  Holding  Company  Act of  1935,  the  Federal  Power  Act,  the
Interstate  Commerce  Act,  the  Investment  Company  Act of 1940,  or any other
Requirement of Law that limits its ability to incur  indebtedness or its ability
to consummate the transactions contemplated by this Agreement and the other Loan
Documents.

     4.23 Business and  Properties.  The business of Borrower is not affected by
any fire, explosion,  accident, strike, lockout or other labor dispute, drought,
storm,  hail,  earthquake,  embargo,  act of God or of the public enemy or other
casualty (whether or not covered by insurance) that could reasonably be expected
to have a Material Adverse Effect.

     4.24 Status of Certain Subsidiaries.  Calculus Instruments Company, Inc., a
New Jersey  corporation  and an  indirect  wholly-owned  subsidiary  of Borrower
("Calculus"),  is a dormant  company with no material  assets of any kind and no
Indebtedness  or  Obligations  whatsoever,  whether  to  Borrower,  to any other
Affiliate of Calculus or to any third party.  Ovamed  Corporation,  a California
corporation and an indirect wholly-owned subsidiary of Borrower ("Ovamed"), is a
dormant  company  with no  material  assets of any kind and no  Indebtedness  or
Obligations whatsoever, whether to Borrower, to any other Affiliate of Ovamed or
to any third party.  Borrower  has no plans to transfer  assets to, or otherwise
alter the dormant status of, either Calculus or Ovamed.

     4.25  Affiliate  Transactions.  Borrower  is not a party to or bound by any
agreement or  arrangement  (whether  oral or written) to which any  Affiliate of
Borrower is a party  except (i) in the  ordinary  course of and  pursuant to the
reasonable  requirements  of the  business  of  Borrower  and (ii) upon fair and
reasonable  terms  no less  favorable  to  Borrower  than it could  obtain  in a
comparable arm's-length transaction with an unaffiliated Person.

     4.26 Survival of Representations.  All representations  made by Borrower in
this  Agreement and in any other Loan  Document  executed and delivered by it in
connection  herewith shall survive the execution and delivery hereof and thereof
and the closing of the transactions contemplated hereby and thereby.

5. AFFIRMATIVE  COVENANTS OF THE BORROWER.  Until  termination of this Agreement
and payment and satisfaction of all Obligations:

     5.1  Corporate  Existence.   Borrower  shall  (i)  maintain  its  corporate
existence,  (ii) maintain in full force and effect all material licenses, bonds,
franchises,   leases,  trademarks,   qualifications  and  authorizations  to  do
business,  and all material  patents,  contracts  and other rights  necessary or
advisable to the profitable conduct of its business,  and (iii) continue in, and
limit its  operations  to, the same lines of business as presently  conducted by
it*.

     * or lines of business closely related or ancillary thereto

     5.2  Maintenance of Property.  Borrower shall keep all property  useful and
necessary to its business in good working order and condition (ordinary wear and
tear excepted).

     5.3 Affiliate Transactions. Borrower shall conduct transactions with any of
its  Affiliates  on an  arm's-length  basis or other basis no less  favorable to
Borrower and which are approved by the board of directors of Borrower.

     5.4 Taxes.  Borrower shall pay when due (i) all tax assessments,  and other
governmental  charges and levies  imposed  against it or any of its property and
(ii) all lawful  claims  that,  if  unpaid,  might by law become a Lien upon its
property;  provided, however, that, unless such tax assessment,  charge, levy or
claim has become a Lien on any of the property of Borrower,  it need not be paid
if it is being  contested in good faith, by appropriate  proceedings  diligently
conducted and an adequate reserve or other appropriate provision shall have been
made therefor as required in accordance with GAAP.

     5.5 Requirements of Law. Borrower shall comply with all Requirements of Law
applicable to it, including,  without limitation, all applicable Federal, State,
local or foreign laws and  regulations,  including,  without  limitation,  those
relating to environmental  matters,  employee matters,  the Employee  Retirement
Income  Security  Act of  1974,  and the  collection,  payment  and  deposit  of
employees'  income,  unemployment  and  social  security  taxes,  provided  that
Borrower shall not be deemed in violation hereof if Borrower's failure to comply
with any of the foregoing would not require more than* $50,000 to cure the same.

     * $100,000

     5.6 Insurance. Borrower shall maintain public liability insurance, business
interruption  insurance,  third party property damage  insurance and replacement
value insurance on its assets  (including the Collateral) under such policies of
insurance,  with such  insurance  companies,  in such amounts and covering  such
risks as are at all times  satisfactory to TBCC in its  commercially  reasonable
judgment,  all of which policies  covering the Collateral  shall name TBCC as an
additional  insured  and lender loss payee in case of loss,  and  contain  other
provisions as TBCC may  reasonably  require to protect fully TBCC's  interest in
the Collateral and any payments to be made under such policies.

     5.7 Books and Records;  Inspections.  Borrower shall (i) maintain books and
records  (including  computer  records)  pertaining  to the  Collateral  in such
detail,  form and scope as is consistent  with good  business  practice and (ii)
provide  TBCC and its agents  access to the premises of Borrower at any time and
from time to time, during normal business hours and upon reasonable notice under
the  circumstances,  and at any time on and after the occurrence of a Default or
Event  of  Default,  for  the  purposes  of (A)  inspecting  and  verifying  the
Collateral, (B) inspecting



                                      -7-
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TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

and copying (at Borrower's expense) any and all records pertaining thereto,  and
(C) discussing the affairs,  finances and business of Borrower with any officer,
employee or director of Borrower or with the Auditors.  Borrower shall reimburse
TBCC for the reasonable  travel and related  expenses of TBCC's employees or, at
TBCC's  option,  of such outside  accountants or examiners as may be retained by
TBCC to verify or inspect  Collateral,  records or  documents  of  Borrower on a
regular basis or for a special inspection if TBCC deems the same appropriate. If
TBCC's own employees are used,  Borrower shall also pay therefor $600 per person
per day (or such other amount as shall  represent  TBCC's then current  standard
charge for the same), or, if outside examiners or accountants are used, Borrower
shall  also  pay  TBCC  such*  sum as  TBCC  may  be  obligated  to pay as  fees
therefor**.

     * reasonable

     **,  provided,  however,  that  unless a Default  or Event of  Default  has
occurred and is continuing, Borrower's obligation to reimburse TBCC for expenses
incurred  pursuant to this  Section 5.7 shall be limited to a maximum of $10,000
during any period of 12 consecutive months

     5.8  Notification  Requirements.  Borrower  shall  give TBCC the  following
notices and other documents:

          (a) Notice of Defaults. Borrower shall give TBCC written notice of any
     Default or Event of Default  within two Business Days after  becoming aware
     of the same.

          (b) Proceedings or Adverse  Changes.  Borrower shall give TBCC written
     notice of any of the  following,  promptly,  and in any event  within  five
     Business Days after Borrower becomes aware of any of the following: (i) any
     proceeding  being instituted or threatened by or against it in any federal,
     state,  local or foreign court or before any commission or other regulatory
     body  involving a sum,  together with the sum involved in all other similar
     proceedings,  in excess of* in the aggregate,  (ii) any order,  judgment or
     decree being entered  against  Borrower or any of its  properties or assets
     involving a sum,  together with the sum of all other  orders,  judgments or
     decrees,  in  excess  of**  in the  aggregate,  and  (iii)  any  actual  or
     prospective change,  development or event which has had or could reasonably
     be expected to have a Material Adverse Effect.

     * $100,000

     ** $75,000

          (c)  Change  of Name or Chief  Executive  Office;  Opening  Additional
     Places of Business.  Borrower  shall give TBCC at least* days prior written
     notice of any change of Borrower's  corporate  name or its chief  executive
     office or of the opening of any additional place of business**.

     * 7

     ** where  Inventory  or  Equipment  with an  aggregate  value of more  than
$50,000 will be located.

          (d) Casualty Loss.  Borrower shall (i) provide written notice to TBCC,
     within ten Business Days, of any material  damage to, the destruction of or
     any other  material loss to any asset or property owned or used by Borrower
     other than any such asset or property  with a net book value  (individually
     or in the aggregate) less than* or any condemnation,  confiscation or other
     taking,  in whole or in part, or any event that otherwise  diminishes so as
     to render  impracticable  or unreasonable the use of such asset or property
     owned  or  used  by  Borrower  together  with  the  amount  of the  damage,
     destruction,  loss or  diminution  in value  and (ii)  diligently  file and
     prosecute its claim or claims for any award or payment in  connection  with
     any of the foregoing.

     * $50,000

          (e) Intellectual  Property.  Borrower shall promptly give TBCC written
     notice of any copyright  registration  made by it, any rights  Borrower may
     obtain to any  copyrightable  works,  new  trademarks or any new patentable
     inventions,  and of any renewal or extension of any trademark registration,
     or if it shall  otherwise  become  entitled to the benefit of any patent or
     patent application or trademark or trademark application.

          (f) Deposit  Accounts and Security  Accounts.  Borrower shall promptly
     give TBCC  written  notice of the opening of any new bank  account or other
     deposit account, and any new securities account.

     5.9  Qualify to  Transact  Business.  Borrower  shall  qualify to  transact
business  as a foreign  corporation  in each  jurisdiction  where the  nature or
extent of its business or the  ownership  of its  property  requires it to be so
qualified or authorized and where failure to qualify or be authorized would have
a Material Adverse Effect.

     5.10  Financial  Reporting.  Borrower  shall  timely  deliver  to TBCC  the
following financial information: the information set forth in the Schedule, and,
when  requested  by TBCC in its  good-faith  judgment,  any further  information
respecting  Borrower or any Collateral.  Borrower authorizes TBCC to communicate
directly  with its  officers,  employees  and  Auditors  and to examine and make
abstracts  from its books and  records.  Borrower  authorizes  its  Auditors  to
disclose  to TBCC  any and all  financial  statements,  work  papers  and  other
information  of any kind that they may have with  respect  to  Borrower  and its
business  and  financial  and other  affairs.  Borrower  shall  deliver a letter
addressed to the Auditors  requesting them to comply with the provisions of this
paragraph when requested by TBCC.

     5.11  Payment of  Liabilities.  Borrower  shall pay and  discharge,  in the
ordinary  course of  business,  all  Indebtedness,  except where the same may be
contested in good faith by appropriate  proceedings  and adequate  reserves with
respect  thereto  have been  provided  on the books and  records of  Borrower in
accordance with GAAP.

     5.12 Patents,  Trademarks,  Etc. Borrower shall do and cause to be done all
things necessary to preserve,  maintain and keep in full force and effect all of
its



                                      -8-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

registrations  of  trademarks,  service  marks and other marks,  trade names and
other trade  rights,  patents,  copyrights  and other  intellectual  property in
accordance with prudent business practices.

     5.13  Proceeds of  Collateral.  Without  limiting any of the other terms of
this Agreement,  and without  implying any consent to any sale or other transfer
of Collateral in violation of any provision of this  Agreement,  Borrower  shall
deliver to TBCC all proceeds of any sale or other transfer or disposition of any
Collateral*,**  upon  receipt of the same***  and in the same form as  received,
with any  necessary  endorsements,  and  Borrower  will not  commingle  any such
proceeds with any of its other funds or property,  but will  segregate them from
the other assets of Borrower and will hold them in trust and for the account and
as the property of TBCC.

     * (other than  (provided no Default or Event of Default has occurred and is
continuing)  proceeds  deriving  from  transactions  in the  ordinary  course of
business)

     ** promptly

     *** (and in any event within one Business Day of such receipt)

     5.14 Solvency. Borrower shall be Solvent at all times.

6.  Negative  Covenants.  Until  termination  of this  Agreement and payment and
satisfaction of all Obligations:

     6.1  Contingent  Obligations.  Borrower will not,  directly or  indirectly,
incur,  assume,  or  suffer  to  exist  any  Contingent  Obligation,   excluding
indemnities  given in connection with this Agreement or the other Loan Documents
in favor of TBCC or in  connection  with the sale of  Inventory  or other  asset
dispositions permitted hereunder.

     6.2 Corporate Changes. Borrower will not, directly or indirectly,  merge or
consolidate with any Person, or liquidate or dissolve (or suffer any liquidation
or dissolution).

     6.3 Change in Nature of  Business.  Borrower  will not at any time make any
material  change in the lines of its  business as carried on at the date of this
Agreement or enter into any new line of business*.

     * not closely  related or ancillary to the lines of Business of Borrower on
the date hereof

     6.4 Sales of Assets.  Borrower  will not,  directly or  indirectly,  in any
fiscal year,  sell,  transfer or otherwise  dispose of any assets,  or grant any
option or other right to purchase or otherwise acquire any assets other than (i)
Equipment  with an  aggregate  value of less than  $25,000 the proceeds of which
shall be paid to TBCC and applied to the  Obligations*,  (ii) sales of Inventory
in the  ordinary  course of  business  and (iii)  licenses or  sublicenses  on a
non-exclusive  basis  of  intellectual   property  in  the  ordinary  course  of
Borrower's business.

     * (provided, however, that the foregoing limit shall be $50,000 in the case
of Equipment that is obsolete or no longer useful in Borrower's business)

     6.5  Cancellation of Debt.  Borrower will not cancel any claim or debt owed
to it, except in the ordinary course of business.

     6.6 Loans to Other  Persons.  Borrower  will not at any time make  loans or
advance any credit (except to trade debtors in the ordinary  course of business)
to any Person in excess of* in the aggregate at any time for all such loans.

     * $50,000

     6.7 Liens.  Borrower will not, directly or indirectly,  at any time create,
incur,  assume  or suffer  to exist  any Lien on or with  respect  to any of the
Collateral,  other than: Liens created hereunder and by any other Loan Document;
and Permitted Liens.

     6.8  Dividends,   Stock   Redemptions.   Borrower  will  not,  directly  or
indirectly,  pay any dividends or distributions  on, purchase,  redeem or retire
any shares of any class of its capital stock or any warrants,  options or rights
to  purchase  any such  capital  stock,  whether  now or  hereafter  outstanding
("Stock"),  or make any payment on account of or set apart  assets for a sinking
or other analogous fund for, the purchase, redemption, defeasance, retirement or
other  acquisition  of its  Stock,  or make any other  distribution  in  respect
thereof,  either  directly  or  indirectly,  whether in cash or  property  or in
obligations  of  Borrower,  except  for  dividends  paid  solely in stock of the
Borrower.

     6.9  Investments  in  Other  Persons.   *Borrower  will  not,  directly  or
indirectly,  at any time make or hold any  Investment in any Person  (whether in
cash,  securities or other property of any kind) other than  Investments in Cash
Equivalents.

     *Except as permitted by Section 6.6 hereof,

     6.10  Partnerships;  Subsidiaries;  Joint Ventures;  Management  Contracts.
Borrower  will not at any time create any direct or indirect  Subsidiary,  enter
into any joint venture or similar arrangement or become a partner in any general
or limited  partnership  or enter into any  management  contract  (other than an
employment contract for the employment of an officer or employee entered into in
the regular course of Borrower's  business)  permitting  third party  management
rights with respect to Borrower's business.

     6.11 Fiscal Year. Borrower will not change its fiscal year.

     6.12 Accounting  Changes.  Borrower will not at any time make or permit any
change in  accounting  policies or  reporting  practices,  except as required by
GAAP.

     6.13 Broker's or Finder's Fees. Borrower will not pay or incur any broker's
or  finder's  fees  in  connection  with  this  Agreement  or  the  transactions
contemplated hereby.

     6.14 (Reserved.)



                                      -9-
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TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

     6.15  Amendments of Material  Contracts.  Borrower will not amend,  modify,
cancel or terminate,  or permit the  amendment,  modification,  cancellation  or
termination  of,  any  Material  Contract,  if  such  amendment,   modification,
cancellation or termination* have a Material Adverse Effect.

     * would be reasonably likely to

     6.16 Sale and Leaseback Obligations.  Borrower will not at any time create,
incur or assume any  obligations  as lessee  for the rental of real or  personal
property in connection with any sale and leaseback transaction.

     6.17 Acquisition of Stock or Assets. Borrower will not acquire or commit or
agree to acquire  all or any  stock,  securities  or assets of any other  Person
other than Inventory and Equipment acquired in the ordinary course of business.

7. EVENTS OF DEFAULT.

     7.1 Events of Default.  The occurrence of any of the following events shall
constitute an "Event of Default":

          (a) Borrower shall fail to pay any principal, interest, fees, expenses
     or  other  Obligations  when  payable,   whether  at  stated  maturity,  by
     acceleration, or otherwise; or

          (b) Borrower  shall  default in the  performance  or observance of any
     agreement, covenant, condition, provision or term contained in Section 1.1,
     1.2, 1.4, 3.3, 5.7, 5.13, 6 (and its Sections and  subsections),  or 8.1 of
     this  Agreement,  or  Borrower  shall  fail  to  perform  any  non-monetary
     Obligation which by its nature cannot be cured; or

          (c) Borrower  shall  default in the  performance  or observance of any
     other agreement,  covenant, condition,  provision or term of this Agreement
     (other than those  referred to in Section  7.1(a)  above or Section  7.1(b)
     above) or any other Loan Document, and such failure continues uncured for a
     period of* Business Days after the date it occurs; or

     * seven

          (d) Borrower or any  Guarantor  shall  dissolve,  wind up or otherwise
     cease to conduct its business; or

          (e)  Borrower  or any  Guarantor  shall  become the  subject of (i) an
     Insolvency  Event  except as set forth in clause (e) of the  definition  of
     Insolvency  Event or (ii) an Insolvency Event as set forth in clause (e) of
     the definition of Insolvency Event that is not dismissed within sixty days;
     or

          (f) any representation or warranty made by or on behalf of Borrower or
     any  Guarantor  to  TBCC,  under  this  Agreement  or  otherwise,  shall be
     incorrect or misleading  in any material  respect when made or deemed made;
     or

          (g) A change  in the  ownership  or  control  of more  than 20% of the
     voting stock of the Borrower compared to such ownership on the date of this
     Agreement;

          (h) any  judgment  or order for the payment of money shall be rendered
     against  Borrower* and shall not be stayed,  vacated,  bonded or discharged
     within thirty days; or

     * in an amount in excess of $100,000

          (i) any defined  "Event of  Default"  shall occur under any other Loan
     Document;  or  Borrower  or any  Guarantor  shall  deny  or  disaffirm  its
     obligations  under  any of the  Loan  Documents  or any  Liens  granted  in
     connection  therewith or shall  otherwise  challenge any of its obligations
     under  any of  the  Loan  Documents;  or any  Liens  granted  in any of the
     Collateral  shall  be  determined  to be void,  voidable  or  invalid,  are
     subordinated or are not given the priority  contemplated by this Agreement;
     or

          (j) any Loan Document shall for any reason cease to create a valid and
     perfected Lien on the Collateral  purported to be covered thereby, of first
     priority (except for Permitted Liens*); or

     * and except  with  respect to Excluded  Collateral,  as defined in Section
1.8(c) above

          (k) the Auditors for Borrower shall deliver a Qualified opinion on any
     Financial Statement; or

          (l) Borrower or any Guarantor  (i) shall fail to pay any  Indebtedness
     owing to TBCC under any other  agreement with TBCC or note or instrument in
     favor of TBCC,  when due  (whether  at  scheduled  maturity  or by required
     prepayment,  acceleration, demand or otherwise), or (ii) shall otherwise be
     in breach of or default in any of its obligations under any such agreement,
     note or instrument with respect to any such Indebtedness; or

          (m) Borrower or any Guarantor  (i) shall fail to pay any  Indebtedness
     in excess  of* owing to any  Person  other  than  TBCC or any  interest  or
     premium  thereon,  when due (whether at  scheduled  maturity or by required
     prepayment,  acceleration, demand or otherwise), or (ii) shall otherwise be
     in breach or default in any of its  obligations  under any  agreement  with
     respect to any such Indebtedness,  if the effect of such breach, default or
     failure to pay is to cause such  Indebtedness  to become due or redeemed or
     permit the holder or holders of such Indebtedness (or a trustee or agent on
     behalf of such  holder or  holders)  to declare  such  Indebtedness  due or
     require such Indebtedness to be redeemed prior to its stated maturity; or

     * $75,000

          (n) the occurrence of any event or condition that, in TBCC's judgment,
     could reasonably be expected to have a Material Adverse Effect.

TBCC may cease making any Loans hereunder  during any of the above cure periods,
and thereafter if any Event of Default has occurred and is continuing.

          7.2 Remedies.  Upon the  occurrence  and during the  continuance of an
     Event of Default,  TBCC shall have all rights and remedies under applicable
     law and the Loan Documents, and TBCC may do any or all of the following:

               (a) Declare all  Obligations  to be  immediately  due and payable
          (except  with respect to any Event of Default with respect to Borrower
          set forth in  Section  7.1(e),  in which  case all  Obligations  shall
          automatically become

                                      -10-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

          immediately due and payable) without presentment,  demand,  protest or
          any other action or obligation of TBCC;

               (b)  Cease  making  any  Loans or other  extensions  of credit to
          Borrower of any kind;

               (c) Take  possession  of all  documents,  instruments,  files and
          records  (including the copying of any computer  records)  relating to
          the  Receivables  or  other  Collateral  and use (at  the  expense  of
          Borrower)  such supplies or space of Borrower at Borrower's  places of
          business necessary to administer and collect the Receivables and other
          Collateral;

               (d) Accelerate or extend the time of payment,  compromise,  issue
          credits, or bring suit on the Receivables and other Collateral (in the
          name of Borrower  or TBCC) and  otherwise  administer  and collect the
          Receivables and other Collateral;

               (e) Collect,  receive, dispose of and realize upon any Investment
          Property,   including  withdrawal  of  any  and  all  funds  from  any
          securities accounts;

               (f)  Sell,   assign  and  deliver  the   Receivables   and  other
          Collateral, with or without advertisement,  at public or private sale,
          for cash, on credit or otherwise, subject to applicable law; and

               (g) Foreclose on the security  interests  created pursuant to the
          Loan Documents by any available  procedure,  take possession of any or
          all of the Collateral,  with or without judicial process and enter any
          premises where any Collateral may be located for the purpose of taking
          possession of or removing the same.

               (h) TBCC may bid or become a purchaser at any sale, free from any
          right of redemption,  which right is expressly waived by Borrower,  if
          permitted under  applicable law. If notice of intended  disposition of
          any  Collateral is required by law, it is agreed that ten days' notice
          shall constitute reasonable  notification.  Borrower will assemble the
          Collateral  and  make it  available  at  such  locations  as TBCC  may
          specify,  whether at the premises of Borrower or  elsewhere,  and will
          make available to TBCC the premises and facilities of Borrower for the
          purpose of TBCC's taking  possession of or removing the  Collateral or
          putting the Collateral in salable form.

               (i) Borrower  recognizes that TBCC may be unable to make a public
          sale  of  any  or  all  of  the  Investment  Property,  by  reason  of
          prohibitions contained in applicable securities laws or otherwise, and
          expressly  agrees  that  a  private  sale  to a  restricted  group  of
          purchasers  for  investment  and not  with a view to any  distribution
          thereof shall be considered a commercially reasonable sale.

     7.3 Receivables. Upon the occurrence and during the continuance of an Event
of  Default,  or at any time that TBCC  believes  in good  faith  that fraud has
occurred or that Borrower has failed to deliver the proceeds of  Receivables  or
other  Collateral  to TBCC as  required  by this  Agreement  or any  other  Loan
Document, TBCC may (i) settle or adjust disputes or claims directly with account
debtors for amounts and upon terms which it considers advisable, and (ii) notify
account debtors on the Receivables and other Collateral that the Receivables and
Collateral  have been  assigned to TBCC,  and that  payments in respect  thereof
shall be made  directly  to TBCC.  If an Event of Default  has  occurred  and is
continuing or TBCC reasonably believes in good faith that fraud has occurred, or
that  Borrower  has failed to  deliver  the  proceeds  of  Receivables  or other
Collateral  to TBCC as required by this  Agreement  or any other Loan  Document,
Borrower hereby irrevocably authorizes and appoints TBCC, or any Person TBCC may
designate,  as its  attorney-in-fact,  at Borrower's  sole cost and expense,  to
exercise,  all of the following  powers,  which are coupled with an interest and
are irrevocable,  until all of the Obligations have been  indefeasibly  paid and
satisfied  in full in cash:  (A) to receive,  take,  endorse,  sign,  assign and
deliver, all in the name of TBCC or Borrower, any and all checks, notes, drafts,
and other documents or instruments  relating to the Collateral;  (B) to receive,
open  and  dispose  of all mail  addressed  to  Borrower  and to  notify  postal
authorities  to change the address for delivery  thereof to such address as TBCC
may designate;  and (C) to take or bring,  in the name of TBCC or Borrower,  all
steps,  actions,  suits or proceedings  deemed by TBCC necessary or desirable to
enforce or effect  collection of  Receivables  and other  Collateral or file and
sign  Borrower's  name on a proof of claim in  bankruptcy  or  similar  document
against any obligor of Borrower.

     7.4 Right of Setoff. In addition to all rights of offset that TBCC may have
under  applicable  law, upon the  occurrence  and during the  continuance of any
Event of Default, and whether or not TBCC has made any demand or the Obligations
of Borrower have matured,  TBCC shall have the right to appropriate and apply to
the payment of the  Obligations  of Borrower all deposits and other  obligations
then  or  thereafter  owing  by  TBCC to or for the  credit  or the  account  of
Borrower. In the event that TBCC exercises any of its rights under this Section,
TBCC shall  provide  notice to  Borrower  of such  exercise,  provided  that the
failure to give such notice  shall not affect the  validity  of the  exercise of
such rights.

     7.5 License for Use of Software and Other Intellectual Property.  After the
occurrence and during the continuance of an Event of Default,  unless  expressly
prohibited by any licensor thereof,  TBCC is hereby granted a license to use all
computer software programs,  data bases, processes,  trademarks,  tradenames and
materials  used by Borrower in connection  with its  businesses or in connection
with the Collateral.

     7.6  No  Marshalling;  Deficiencies;  Remedies  Cumulative.  The  net  cash
proceeds  resulting  from TBCC's  exercise of any of its rights with  respect to
Collateral,  including any and all  Collections  (after  deducting all of TBCC's
reasonable  expenses related  thereto),  shall be applied by TBCC to such of the
Obligations  in  such  order  as TBCC  shall  elect  in its  sole  and  absolute
discretion,  whether due or to become due.  Borrower shall remain liable to TBCC
for any  deficiencies  and TBCC shall  remit to  Borrower  or its  successor  or
assign,  any  surplus  resulting  therefrom.  The  remedies  specified  in  this
Agreement  are  cumulative,  may be  exercised in such order and with respect to
such Collateral as TBCC may deem desirable and are not intended to be exclusive,
and the full or partial  exercise of any of them shall not  preclude the full or
partial exercise of any other available  remedy under this Agreement,  under any
other Loan Document, at equity or at law.



                                      -11-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

     7.7  Waivers.  Borrower  hereby  waives any  bonds,  security  or  sureties
required by any  statute,  rule or any other law as an incident to any taking of
possession by TBCC of any Collateral.  Borrower also waives any damages (direct,
consequential or otherwise) occasioned by the enforcement of TBCC's rights under
this Agreement or any other Loan Document  including the taking of possession of
any  Collateral or the giving of notice to any account  debtor or the collection
of any Receivable or other Collateral (other than damages that are the result of
acts or omissions  constituting gross negligence or willful misconduct of TBCC).
These waivers and all other waivers provided for in this Agreement and the other
Loan  Documents  have been  negotiated by the parties and Borrower  acknowledges
that it has been represented by counsel of its own choice and has consulted such
counsel with respect to its rights hereunder.

     7.8  Right to Make  Payments.  In the event  that  Borrower  shall  fail to
purchase  or  maintain  insurance  required  hereunder,   or  to  pay  any  tax,
assessment,  government  charge  or levy,  except  as the same may be  otherwise
permitted  hereunder,  or in the event that any Lien prohibited hereby shall not
be paid in full or  discharged,  or in the event  that  Borrower  shall  fail to
perform  or comply  with any  other  covenant,  promise  or  obligation  to TBCC
hereunder or under any other Loan Document,  TBCC may (but shall not be required
to)  perform,  pay,  satisfy,  discharge  or bond the same  for the  account  of
Borrower,  and all amounts so paid by TBCC shall be treated as a Loan  hereunder
to Borrower and shall constitute part of the Obligations.

8. ASSIGNMENTS AND PARTICIPATIONS.

     8.1  Assignments.  Borrower shall not assign this Agreement or any right or
obligation  hereunder without the prior written consent of TBCC. TBCC may assign
(without the consent of Borrower) to one or more Persons all or a portion of its
rights and obligations under this Agreement and the other Loan Documents*.

     * provided, however, that unless a Default or Event of Default has occurred
and is continuing,  TBCC shall not assign any of its rights or obligations under
this  Agreement to a competitor of Borrower or to any subsidiary or affiliate of
any such competitor

     8.2 Participations.  TBCC may sell participations in or to all or a portion
of  its  rights  and  obligations  under  this  Agreement  (including,   without
limitation,  all or a portion of the  Loans);  provided,  however,  that  TBCC's
obligations under this Agreement shall remain unchanged.

     8.3 Disclosure.  TBCC may, in connection  with any permitted  assignment or
participation  or  proposed   assignment  or  participation   pursuant  to  this
Agreement,  disclose to the  assignee  or  participant  or proposed  assignee or
participant  any  information  relating to Borrower  furnished  to TBCC by or on
behalf of Borrower.

9. DEFINITIONS.

     9.1 General Definitions. As used herein, the following terms shall have the
meanings  herein  specified  (to be equally  applicable to both the singular and
plural forms of the terms defined):

          (a) "Affiliate" means as to any Person,  any other Person who directly
     or indirectly  controls,  is under common control with, is controlled by or
     is a  director  or  officer  of such  Person.  As used in this  definition,
     "control" (including its correlative  meanings,  "controlled by" and "under
     common control  with") means  possession,  directly or  indirectly,  of the
     power to direct or cause the direction of  management or policies  (whether
     through  ownership of voting  securities or partnership or other  ownership
     interests,  by contract or  otherwise),  provided  that, in any event,  any
     Person who owns directly or indirectly  twenty percent (20%) or more of the
     securities  having ordinary voting power for the election of the members of
     the board of directors or other  governing  body of a corporation or twenty
     percent (20%) or more of the  partnership or other  ownership  interests of
     any other  Person  (other than as a limited  partner of such other  Person)
     will be deemed to control such corporation, partnership or other Person.

          (b) "Agreement"  means this Loan and Security  Agreement,  as amended,
     supplemented or otherwise modified from time to time.

          (c)  "Auditors"  means a  nationally  recognized  firm of  independent
     public  accountants  selected by Borrower and  reasonably  satisfactory  to
     TBCC*.

     *, provided that Ernst & Young LLP is deemed to be reasonably  satisfactory
to TBCC

          (d)  "Bankruptcy  Code"  means  Title  11 of the  United  States  Code
     entitled  "Bankruptcy,"  as that title may be amended from time to time, or
     any successor statute.

          (e) "Borrowing" means a borrowing of Loans.

          (f) "Business Day" means any day other than a Saturday,  Sunday or any
     other day on which  commercial  banks in Chicago,  Illinois are required or
     permitted by law to close.

          (g) "Cash  Equivalents"  means (i)  securities  issued,  guaranteed or
     insured by the United States or any of its agencies with  maturities of not
     more than one year from the date  acquired;  (ii)  certificates  of deposit
     with maturities of not more than one year from the date acquired, issued by
     any U.S. federal or state chartered  commercial bank of recognized standing
     which has capital and unimpaired  surplus in excess of $100,000,000;  (iii)
     investments in money market funds registered  under the Investment  Company
     Act of 1940; and (iv) other  instruments,  commercial  paper or investments
     acceptable to TBCC in its sole discretion.

          (h) "Collateral" means Receivables,  Investment  Property,  Inventory,
     Equipment, and Other Property, and all additions and accessions thereto and
     substitutions and replacements  therefor and improvements  thereon, and all
     proceeds (whether cash or other property) and products thereof,  including,
     without  limitation,  all proceeds of  insurance  covering the same and all
     tort claims in  connection  therewith,  and all  records,  files,  computer
     programs and files,  data and writings  relating to the foregoing,  and all
     equipment containing the foregoing.*

     * Notwithstanding  the foregoing,  the term "Collateral"  shall not include
any Receivables or



                                      -12-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

     general  intangibles  (whether  owned or held as  licensee  or  lessee,  or
     otherwise),  to the extent that (i) such Receivables or general intangibles
     are not  assignable  or capable of being  encumbered  as a matter of law or
     under the terms of the license or lease  applicable  thereto (but solely to
     the extent that any such restriction  shall be enforceable under applicable
     law against an  assignee),  without  the consent of the  licensor or lessor
     thereof and (ii) such  consent has not been  obtained;  provided,  however,
     that the term  "Collateral"  shall  include (A) any and all proceeds of any
     Receivables  or general  intangibles  which are  otherwise  excluded to the
     extent  that the  assignment  or  encumbrance  of such  proceeds  is not so
     restricted,  including under Section 9-318 of the Uniform  Commercial Code,
     and (B) upon  obtaining the consent of any such  licensor,  lessor or other
     applicable party with respect to any such otherwise excluded Receivables or
     general intangibles, such Receivables or general intangibles as well as any
     and all  proceeds  thereof  that  might  have been  excluded  from the term
     "Collateral."

          (i) "Collections" means all cash, funds, checks,  notes,  instruments,
     any other form of  remittance  tendered  by  account  debtors in respect of
     payment of  Receivables  and any other  payments  received by Borrower with
     respect to any other Collateral.

          (j) "Compliance Certificate" means a certificate as to compliance with
     the Obligations, on TBCC's standard form (in effect from time to time).

          (k) "Contingent Obligation" means any direct, indirect,  contingent or
     non-contingent  guaranty  or  obligation  for the  Indebtedness  of another
     Person, except endorsements in the ordinary course of business.

          (l)  "Default"  means any of the  events  specified  in  Section  7.1,
     whether or not any of the requirements for the giving of notice,  the lapse
     of time, or both, or any other condition, has been satisfied.

          (m) "Eligible Inventory" means Inventory of Borrower which TBCC in its
     sole discretion deems eligible for borrowing,  based on such considerations
     as TBCC in its sole discretion may deem  appropriate  from time to time and
     less any such  reserves  as TBCC,  in its  sole  discretion,  may  require.
     Without  limiting  the fact that the  determination  of which  Inventory is
     eligible for borrowing is a matter of TBCC's sole discretion, the following
     are the minimum  requirements for Inventory to be Eligible  Inventory:  (i)
     the  Inventory  must consist of finished  goods,  in good,  new and salable
     condition which is not perishable,  not obsolete or unmerchantable,  and is
     not comprised of raw  materials,  work in process,  packaging  materials or
     supplies;  (iii)  the  Inventory  must  meet  all  applicable  governmental
     standards;  (iv) the Inventory  must have been  manufactured  in compliance
     with the Fair Labor  Standards  Act; (v) the Inventory  must conform in all
     respects to the warranties and representations set forth in this Agreement;
     (vi) the Inventory  must at all times be subject to TBCC's duly  perfected,
     first  priority  security  interest;  and  (vii) the  Inventory  must be in
     Borrower's  exclusive  possession,  separately  identifiable  from goods of
     others,  and situated at Borrower's chief executive office or at one of the
     other Borrower  locations set forth on the Schedule.  The value of Eligible
     Inventory  shall be computed at the lower of cost (computed on a "first in,
     first out" basis) or wholesale market value.

          (n) "Eligible  Receivables"  means and includes only those Receivables
     which TBCC in its sole  discretion  deems eligible for borrowing,  based on
     such  considerations  as TBCC in its sole  discretion may deem  appropriate
     from  time to time  and  less  any  such  reserves  as  TBCC,  in its  sole
     discretion,  may require.  Without limiting the fact that the determination
     of which  Receivables are eligible for borrowing is a matter of TBCC's sole
     discretion,  the following (the "Minimum Eligibility Requirements") are the
     minimum requirements for a Receivable to be an Eligible Receivable: (i) the
     Receivable  must not be outstanding  for more than 90 days from its invoice
     date, (ii) the Receivable must not represent progress  billings,  or be due
     under a fulfillment or requirements contract with the account debtor, (iii)
     the  Receivable  must  not  be  subject  to  any  contingencies  (including
     Receivables  arising from sales on  consignment,  guaranteed  sale or other
     terms pursuant to which payment by the account debtor may be  conditional),
     (iv) the Receivable  must not be owing from an account debtor with whom the
     Borrower  has  any  dispute  (whether  or not  relating  to the  particular
     Receivable),  (v) the  Receivable  must not be owing from an  Affiliate  of
     Borrower,  (vi) the  Receivable  must not be owing from an  account  debtor
     which is subject  to any  insolvency  or  bankruptcy  proceeding,  or whose
     financial  condition is not acceptable to TBCC, or which, fails or goes out
     of a material  portion of its business,  (vii) the  Receivable  must not be
     owing from the United States or any department,  agency or  instrumentality
     thereof (unless there has been compliance, to TBCC's satisfaction, with the
     United States  Assignment of Claims Act), (viii) the Receivable must not be
     owing from an account  debtor  located  outside the United States or Canada
     (unless  pre-approved by TBCC in its discretion in writing,  or backed by a
     letter of credit  satisfactory  to TBCC,  or FCIA insured  satisfactory  to
     TBCC), (ix) the Receivable must not be owing from an account debtor to whom
     Borrower is or may be liable for goods  purchased  from such account debtor
     or otherwise,  (x) the Receivable  must not violate any  representation  or
     warranty set forth in this  Agreement,  and (xi) the Receivable must not be
     one in which TBCC does not have a  first-priority,  valid,  perfected Lien.
     Without  limiting the  generality  of the  foregoing,  Borrower  must be in
     compliance  with  all   requirements   of  the  Loan  Documents   regarding
     registration with the U.S.  Copyright Office of any copyrightable  software
     in order for any Receivable  arising from any licensing of such software to
     constitute an Eligible  Receivable  hereunder.  Receivables  owing from one
     account debtor will not be deemed  Eligible  Receivables to the extent they
     exceed 30% of the total eligible Receivables  outstanding.  In addition, if
     more  than  50% of  the  Receivables  owing  from  an  account  debtor  are
     outstanding  more than 90 days from their invoice date  (without  regard to
     unapplied  credits) or are  otherwise  not eligible  Receivables,  then all
     Receivables  owing from that account  debtor will be deemed  ineligible for
     borrowing. TBCC may, from time to time, in its sole discretion,  revise the
     Minimum Eligibility Requirements, upon written notice to the Borrower.



                                      -13-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

          (o) "Equipment" means all machinery,  equipment,  furniture, fixtures,
     conveyors,  tools,  materials,  storage and handling  equipment,  hydraulic
     presses,  cutting  equipment,  computer  equipment and hardware,  including
     central  processing  units,  terminals,  drives,  memory  units,  printers,
     keyboards,  screens,  peripherals and input or output devices, molds, dies,
     stamps, vehicles, and other equipment of every kind and nature and wherever
     situated now or hereafter  owned by Borrower or in which  Borrower may have
     any  interest  as lessee or  otherwise  (to the  extent of such  interest),
     together with all additions and accessions  thereto,  all  replacements and
     all  accessories  and parts therefor,  all manuals,  blueprints,  know-how,
     warranties  and  records  in  connection  therewith,   all  rights  against
     suppliers,  warrantors,  manufacturers,  sellers  or others  in  connection
     therewith, and together with all substitutes for any of the foregoing.

          (p)  "Event of  Default"  means the  occurrence  of any of the  events
     specified in Section 7.1.

          (q) "Financial  Statements" means the balance sheets,  profit and loss
     statements,   statements  of  cash  flow,  and  statements  of  changes  in
     intercompany  accounts,  if any,  for the  period  specified,  prepared  in
     accordance with GAAP and consistent with prior practices.

          (r) "GAAP" means generally accepted accounting principles set forth in
     the opinions and  pronouncements of the Accounting  Principles Board of the
     American  Institute of Certified  Public  Accountants  and  statements  and
     pronouncements  of  the  Financial  Accounting  Standards  Board  that  are
     applicable to the circumstances as of the date of  determination.  Whenever
     any accounting term is used herein which is not otherwise defined, it shall
     be interpreted in accordance with GAAP.

          (s)  "Good  Faith"  means  "good  faith"  as  defined  in the  Uniform
     Commercial Code, from time to time in effect in the State of Illinois.

          (t)  "Governing  Documents"  means  the  articles  or  certificate  of
     incorporation and by-laws of Borrower.

          (u) "Governmental Authority" means any nation or government, any state
     or other political  subdivision thereof or any entity exercising executive,
     legislative,  judicial,  regulatory or administrative  functions thereof or
     pertaining thereto.

          (v) "Guarantor" means any present or future guarantor of any or all of
     the Obligations.

          (w)  "Indebtedness"  means, with respect to any Person, as of the date
     of determination any  indebtedness,  liability or obligation of such Person
     (including  without   limitation   obligations  under  capital  leases  and
     Contingent Obligations).

          (x)  "Insolvency  Event"  means,  with  respect  to  any  Person,  the
     occurrence of any of the  following:  (a) such Person shall be  adjudicated
     insolvent or bankrupt,  or shall  generally fail to pay or admit in writing
     its  inability  to pay its debts as they become due,  (b) such Person shall
     seek  dissolution  or  reorganization  or the  appointment  of a  receiver,
     trustee,  custodian or liquidator  for it or a  substantial  portion of its
     property,  assets or business or to effect a plan or other arrangement with
     its  creditors,  (c) such Person  shall make a general  assignment  for the
     benefit of its creditors,  or consent to or acquiesce in the appointment of
     a receiver,  trustee,  custodian or liquidator for a substantial portion of
     its  property,  assets or business,  (d) such Person shall file a voluntary
     petition  under  any  bankruptcy,  insolvency  or  similar  law or take any
     corporate or similar act in furtherance  thereof,  or (e) such Person, or a
     substantial  portion of its property,  assets or business  shall become the
     subject of an  involuntary  proceeding  or  petition  for its  dissolution,
     reorganization, and such proceeding is not dismissed or stayed within sixty
     days, or the appointment of a receiver,  trustee,  custodian or liquidator,
     and such receiver is not dismissed within sixty days.

          (y) "Inventory"  means all present and future goods intended for sale,
     lease or other disposition by Borrower* including,  without limitation, all
     raw materials,  work in process, finished goods and other retail inventory,
     goods in the possession of outside processors or other third parties, goods
     consigned to Borrower to the extent of its interest  therein as  consignee,
     materials  and  supplies of any kind,  nature or  description  which are or
     might  be used in  connection  with  the  manufacture,  packing,  shipping,
     advertising,  selling or finishing of any such goods,  and all documents of
     title or documents representing the same.

     * in the ordinary course of business

          (z)  "Investment" in any Person means, as of the date of determination
     thereof,  any payment or  contribution,  or commitment to make a payment or
     contribution,  by  any  Person  including,  without  limitation,   property
     contributed or committed to be  contributed  by any Person,  on its account
     for or in  connection  with its  acquisition  of any stock,  bonds,  notes,
     debentures,  partnership or other ownership  interest or any other security
     of  the  Person  in  whom  such  Investment  is  made  or any  evidence  of
     indebtedness by reason of a loan, advance, extension of credit, guaranty or
     other similar  obligation for any debt,  liability or  indebtedness of such
     Person in whom the Investment is made.

          (aa)  "Investment  Property" means any and all investment  property of
     Borrower, including all securities, whether certificated or uncertificated,
     security  entitlements,   securities  accounts,   commodity  contracts  and
     commodity accounts, and all financial assets held in any securities account
     or  otherwise,  wherever  located,  and whether now  existing or  hereafter
     acquired or arising.

          (bb) "Lien" means any lien, claim, charge, pledge,  security interest,
     assignment,  hypothecation,  deed of trust,  mortgage,  lease,  conditional
     sale,   retention  of  title  or  other  preferential   arrangement  having
     substantially  the same economic  effect as any of the  foregoing,  whether
     voluntary or imposed by law.

          (cc) "Loan Account" has the meaning specified in Section 1.3.

          (dd) "Loan  Documents" means this Agreement and all present and future
     documents and  instruments  delivered or to be delivered by Borrower or any
     of its Affiliates or any Guarantor under, in connection with or relating to
     this  Agreement,  or any other  present or future  instrument  or agreement
     between TBCC and Borrower, as



                                      -14-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

     each of the same may be amended,  supplemented  or otherwise  modified from
     time to time.

          (ee) "Loans" means the loans and financial accommodations made by TBCC
     hereunder.

          (ff) "Material  Adverse Effect" means (i) a material adverse effect on
     the  business,  prospects,   operations,  results  of  operations,  assets,
     liabilities  or condition  (financial or otherwise) of Borrower*,  (ii) the
     impairment of Borrower's  ability to perform its obligations under the Loan
     Documents to which it is a party or of TBCC to enforce the  Obligations  or
     realize upon the Collateral or (iii) a material adverse effect on the value
     of the  Collateral  or the  amount  which  TBCC  would be likely to receive
     (after giving  consideration to delays in payment and costs of enforcement)
     in the liquidation of the Collateral.

     * alone, or of Borrower and its Subsidiaries on a consolidated basis

          (gg) "Material  Contract"  means any contract or other  arrangement to
     which Borrower is a party (other than the Loan Documents) for which breach,
     nonperformance,  cancellation  or failure to renew  could*  have a Material
     Adverse Effect.

     * reasonably be expected to

          (hh) "Obligations" means and includes all loans (including the Loans),
     advances,  debts, liabilities,  obligations,  covenants and duties owing by
     Borrower to TBCC of any kind or nature,  present or future,  whether or not
     evidenced by any note, guaranty or other instrument, whether or not arising
     under or in connection with this Agreement,  any other Loan Document or any
     other present or future  instrument  or  agreement,  whether or not for the
     payment  of money,  whether  arising by reason of an  extension  of credit,
     opening,  guaranteeing or confirming of a letter of credit, loan, guaranty,
     indemnification  or  in  any  other  manner,  whether  direct  or  indirect
     (including those acquired by assignment,  purchase, discount or otherwise),
     whether absolute or contingent,  due or to become due, now due or hereafter
     arising  and  however  acquired  (including  without  limitation  all loans
     previously  made  by  TBCC  to  Borrower).   The  term  includes,   without
     limitation,  all  interest  (including  interest  accruing  on or  after an
     Insolvency  Event,  whether or not an allowed  claim),  charges,  expenses,
     commitment,  facility,  closing and collateral  management fees,  letter of
     credit  fees,  reasonable  attorneys'  fees,  and any  other  sum  properly
     chargeable to Borrower  under this  Agreement,  the other Loan Documents or
     any other present or future agreement between TBCC and Borrower.

          (ii) "Other  Property"  means all  present  and  future:  instruments,
     documents,  documents of title, securities, bonds, notes, promissory notes,
     drafts,  acceptances,  letters of credit and rights to receive  proceeds of
     letters of credit, deposit accounts, chattel paper, certificates, insurance
     policies,  insurance  proceeds,  leases,  computer tapes, causes of action,
     judgments,  claims against third parties,  leasehold rights in any personal
     property, books, ledgers, files and records, general intangibles (including
     without limitation, all contract rights, tax refunds, rights to receive tax
     refunds,   patents,   patent  applications,   copyrights   (registered  and
     unregistered),    royalties,    licenses,    permits,   franchise   rights,
     authorizations, customer lists, rights of indemnification, contribution and
     subrogation, computer programs, discs and software, trade secrets, computer
     service contracts, trademarks, trade names, service marks and names, logos,
     goodwill, deposits, choses in action, designs, blueprints, plans, know-how,
     telephone numbers and rights thereto,  credits,  reserves, and all forms of
     obligations whatsoever now or hereafter owing to Borrower), all property at
     any time in the  possession or under the control of TBCC,  and all security
     given by Borrower to TBCC pursuant to any other Loan Document or agreement.

          (jj)  "Permitted  Liens"  means such of the  following  as to which no
     enforcement,  collection,  execution,  levy or foreclosure proceeding shall
     have been commenced and be continuing: (i) Liens for taxes, assessments and
     other governmental charges or levies or the claims or demands of landlords,
     carriers,  warehousemen,  mechanics,  laborers,  materialmen and other like
     Persons  arising by operation of law in the ordinary course of business for
     sums which are not yet due and payable,  (ii) deposits or pledges to secure
     the payment of  workmen's  compensation,  unemployment  insurance  or other
     social security benefits or obligations,  public or statutory  obligations,
     surety or appeal bonds, bid or performance bonds, or other obligations of a
     like nature  incurred in the  ordinary  course of business  (but nothing in
     this  clause  (ii)  shall  permit  the  creation  of Liens on  Receivables,
     Investment   Property,   Inventory   or  Other   Property),   (iii)  zoning
     restrictions, easements, encroachments, licenses, restrictions or covenants
     on the use of the Property which do not materially impair either the use of
     the  Property in the  operation of the business of Borrower or the value of
     the Property,  (iv) rights of general application  reserved to or vested in
     any  municipality or other  governmental,  statutory or public authority to
     control or regulate property, or to use property in a manner which does not
     materially  impair the use of the property for the purposes for which it is
     held by Borrower, (v) state and municipal Liens for personal property taxes
     which are not yet due and payable, (vi) Purchase Money Liens*.

     *,  (vii)  Liens on  personal  property  leased by  Borrower  or any of its
Subsidiaries pursuant to an operating or capital lease in the ordinary course of
business (including proceeds thereof and accessions thereto) incurred solely for
the purpose of financing  the lease of such  property;  (viii) Liens in favor of
customs and revenue authorities arising as a matter of law to secure payments of
customs  duties in  connection  with the  importation  of goods;  and (ix) Liens
(existing  and  disclosed  to TBCC on or prior to the date  hereof)  in favor of
depository  institutions and securities  intermediaries  constituting  rights of
set-off of a customary  nature or bankers'  or  brokers'  Liens with  respect to
amounts or investment  property on deposit,  whether arising by operation of law
or by contract,  in  connection  with  arrangements  entered into with banks and
securities intermediaries in the ordinary course of business



                                      -15-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

          (kk) "Person" means any individual, sole proprietorship,  partnership,
     joint   venture,   limited   liability   company,   trust,   unincorporated
     organization, joint stock company, association,  corporation,  institution,
     entity, party or government  (including any division,  agency or department
     thereof)  or any other  legal  entity,  whether  acting  in an  individual,
     fiduciary or other capacity, and, as applicable, the successors,  heirs and
     assigns of each.

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

          (mm)  "Purchase  Money  Lien"  means a Lien on any  item of  Equipment
     created substantially simultaneously with the acquisition of such Equipment
     for the purpose of  financing  such  acquisition,  provided  that such Lien
     shall attach only to the Equipment acquired.

          (nn)  "Qualification" or "Qualified" means, with respect to any report
     of Auditors covering Financial Statements, a material qualification to such
     report (i) resulting  from a limitation on the scope of examination of such
     Financial  Statements or the underlying  data, (ii) as to the capability of
     Borrower to continue  operations as a going concern or (iii) which could be
     eliminated by changes in Financial  Statements or notes thereto  covered by
     such  report  (such as by the  creation  of or  increase  in a reserve or a
     decrease in the carrying value of assets) and which if so eliminated by the
     making of any such change and after giving effect thereto would result in a
     Default or an Event of Default.

          (oo) "Receivables"  means all present and future accounts and accounts
     receivable,  together with all security therefor and guaranties thereof and
     all rights and remedies relating  thereto,  including any right of stoppage
     in transit.

          (pp) "Requirement of Law" means (a) the Governing  Documents,  (b) any
     law,  treaty,  rule,  regulation,  order or determination of an arbitrator,
     court or other Governmental Authority or (c) any franchise, license, lease,
     permit, certificate, authorization,  qualification, easement, right of way,
     right or approval binding on Borrower or any of its property.

          (qq)  "Schedule"  means the  Schedule to this  Agreement  being signed
     concurrently by Borrower and TBCC, as amended from time to time.

          (rr)  "Solvent"  means when used with respect to any Person that as of
     the date as to which such Person's solvency is to be measured: (a) the fair
     salable  value of its  assets  is in  excess  of the  total  amount  of its
     liabilities  (including contingent liabilities as valued in accordance with
     applicable law) as they become absolute and matured;  (b) it has sufficient
     capital to conduct  its  business;  and (c) it is able to meet its debts as
     they mature.

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

     9.2  Accounting  Terms and  Determinations.  Unless  otherwise  defined  or
specified herein, all accounting terms used in this Agreement shall be construed
in accordance with GAAP,  applied on a basis consistent in all material respects
with the  Financial  Statements  delivered to TBCC on or before the date of this
Agreement. All accounting  determinations for purposes of determining compliance
with this  Agreement  shall be made in accordance  with GAAP as in effect on the
date  of this  Agreement  and  applied  on a basis  consistent  in all  material
respects with the audited  Financial  Statements  delivered to TBCC on or before
the date of this Agreement.  The Financial  Statements  required to be delivered
hereunder,  and all financial  records,  shall be maintained in accordance  with
GAAP.  If GAAP  shall  change  from the  basis  used in  preparing  the  audited
Financial  Statements delivered to TBCC on or before the date of this Agreement,
the Compliance  Certificates required to be delivered pursuant to this Agreement
shall  include   calculations   setting  forth  the  adjustments   necessary  to
demonstrate how Borrower is in compliance with the Financial  Covenants (if any)
based upon GAAP as in effect on the date of this Agreement.

     9.3 Other Terms; Headings;  Construction.  Unless otherwise defined herein,
terms used herein that are defined in the Uniform  Commercial Code, from time to
time in effect in the  State of  Illinois,  shall  have the  meanings  set forth
therein.  Each of the words "hereof,"  "herein," and  "hereunder"  refer to this
Agreement as a whole.  The term  "including",  whenever used in this  Agreement,
shall  mean  "including  (but  not  limited  to)".  An Event  of  Default  shall
"continue"  or be  "continuing"  unless and until such Event of Default has been
waived or cured within the grace period  specified  therefor  under Section 7.1.
References to Articles,  Sections, Annexes, Schedules, and Exhibits are internal
references  to  this  Agreement,  and  to  its  attachments,   unless  otherwise
specified.  The headings and any Table of Contents are for convenience  only and
shall not affect the meaning or construction of any provision of this Agreement.
This Agreement has been fully reviewed and negotiated between the parties and no
uncertainty  or ambiguity in any term or  provision of this  Agreement  shall be
construed  strictly  against TBCC or Borrower under any rule of  construction or
otherwise.

10. GENERAL PROVISIONS.

     10.1 GOVERNING LAW. THE VALIDITY,  INTERPRETATION  AND  ENFORCEMENT OF THIS
AGREEMENT  AND THE OTHER LOAN  DOCUMENTS  AND ANY  DISPUTE  ARISING OUT OF OR IN
CONNECTION  WITH THIS  AGREEMENT  OR ANY OF THE OTHER  LOAN  DOCUMENTS,  WHETHER
SOUNDING  IN  CONTRACT,  TORT,  EQUITY OR  OTHERWISE,  SHALL BE  GOVERNED BY THE
INTERNAL LAWS AND DECISIONS OF THE STATE OF ILLINOIS.

     10.2  SUBMISSION  TO  JURISDICTION.  ALL DISPUTES  BETWEEN THE BORROWER AND
TBCC, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED
ONLY BY STATE AND FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, AND THE COURTS TO
WHICH AN APPEAL THEREFROM MAY BE TAKEN; PROVIDED,  HOWEVER, THAT TBCC SHALL HAVE
THE RIGHT,  TO THE EXTENT  PERMITTED BY APPLICABLE  LAW, TO PROCEED  AGAINST THE



                                      -16-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

BORROWER OR ITS  PROPERTY IN ANY  LOCATION  REASONABLY  SELECTED BY TBCC IN GOOD
FAITH TO ENABLE  TBCC TO REALIZE ON SUCH  PROPERTY,  OR TO ENFORCE A JUDGMENT OR
OTHER COURT ORDER IN FAVOR OF TBCC. THE BORROWER  AGREES THAT IT WILL NOT ASSERT
ANY PERMISSIVE COUNTERCLAIMS,  SETOFFS OR CROSS-CLAIMS IN ANY PROCEEDING BROUGHT
BY TBCC.  THE BORROWER  WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF
THE  COURT  IN  WHICH  TBCC  HAS  COMMENCED  A  PROCEEDING,  INCLUDING,  WITHOUT
LIMITATION,  ANY  OBJECTION  TO THE  LAYING  OF VENUE  OR  BASED  ON  FORUM  NON
CONVENIENS.

     10.3 SERVICE OF PROCESS.  THE BORROWER  HEREBY  IRREVOCABLY  DESIGNATES  CT
CORPORATION  SYSTEM,  1209 ORANGE STREET,  WILMINGTON,  DELAWARE  19801,  AS THE
DESIGNEE  AND  AGENT  OF THE  BORROWER  TO  RECEIVE,  FOR AND ON  BEHALF  OF THE
BORROWER,  SERVICE OF PROCESS IN ANY LEGAL ACTION OR PROCEEDING  WITH RESPECT TO
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT.  IT IS UNDERSTOOD THAT A COPY OF SUCH
PROCESS  SERVED ON SUCH AGENT AT ITS ADDRESS WILL BE PROMPTLY  FORWARDED BY MAIL
TO THE BORROWER,  BUT THE FAILURE OF THE BORROWER TO RECEIVE SUCH COPY SHALL NOT
AFFECT IN ANY WAY THE SERVICE OF SUCH PROCESS.  NOTHING  HEREIN SHALL AFFECT THE
RIGHT OF TBCC TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

     10.4 LIMITATION OF LIABILITY.  TBCC SHALL HAVE NO LIABILITY TO THE BORROWER
(WHETHER  SOUNDING IN TORT,  CONTRACT,  OR OTHERWISE) FOR LOSSES SUFFERED BY THE
BORROWER  IN  CONNECTION  WITH,  ARISING  OUT OF, OR IN ANY WAY  RELATED  TO THE
TRANSACTIONS  OR  RELATIONSHIPS  CONTEMPLATED  BY THIS  AGREEMENT,  OR ANY  ACT,
OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,  UNLESS IT IS DETERMINED BY
A FINAL AND  NONAPPEALABLE  JUDGMENT  OR COURT  ORDER  BINDING  ON TBCC THAT THE
LOSSES WERE THE RESULT OF ACTS OR OMISSIONS  CONSTITUTING  GROSS  NEGLIGENCE  OR
WILLFUL MISCONDUCT OF TBCC. THE BORROWER HEREBY WAIVES ALL FUTURE CLAIMS AGAINST
TBCC FOR SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.

     10.5 Delays;  Partial Exercise of Remedies. No delay or omission of TBCC to
exercise any right or remedy hereunder shall impair any such right or operate as
a waiver thereof.  No single or partial  exercise by TBCC of any right or remedy
shall  preclude  any other or further  exercise  thereof,  or preclude any other
right or remedy.

     10.6  Notices.  Except  as  otherwise  provided  herein,  all  notices  and
correspondence hereunder shall be in writing and sent by certified or registered
mail, return receipt requested,  by overnight delivery service, with all charges
prepaid,  or by telecopier  followed by a hard copy sent by regular mail, to the
parties at their addresses set forth in the heading to this Agreement.  All such
notices and  correspondence  shall be deemed  given (i) if sent by  certified or
registered  mail,  three Business Days after being  postmarked,  (ii) if sent by
overnight delivery service,  when received at the above stated addresses or when
delivery is refused and (iii) if sent by telecopier  transmission,  when receipt
of such transmission is acknowledged.  Borrower's and TBCC's telecopier  numbers
for purpose of notice  hereunder  are set forth in the  Schedule;  each  party's
number may be changed by written notice to the other party.

     10.7  Indemnification;  Reimbursement  of Expenses of Collection.  Borrower
hereby  indemnifies  and  agrees,   whether  or  not  any  of  the  transactions
contemplated by this Agreement or the other Loan Documents are  consummated,  to
defend and hold  harmless  (on an  after-tax  basis) TBCC,  its  successors  and
assigns and their respective directors,  officers, agents, employees,  advisors,
shareholders,  attorneys and Affiliates (each, an "Indemnified  Party") from and
against  any  and  all  losses,  claims,  damages,  liabilities,   deficiencies,
obligations,   fines,  penalties,  actions  (whether  threatened  or  existing),
judgments,  suits  (whether  threatened  or  existing)  or expenses  (including,
without  limitation,  reasonable  fees and  disbursements  of counsel,  experts,
consultants  and other  professionals)  incurred  by any of them  (collectively,
"Claims") (except, in the case of each Indemnified Party, to the extent that any
Claim  is  determined  in a final  and  non-appealable  judgment  by a court  of
competent  jurisdiction to have directly resulted from such Indemnified  Party's
gross negligence or willful  misconduct)  arising out of or by reason of (i) any
litigation, investigation, claim or proceeding which arises out of or is related
to (A) Borrower, or this Agreement,  any other Loan Document or the transactions
contemplated  hereby or thereby,  (B) any actual or proposed  use by Borrower of
the proceeds of the Loans,  or (C) TBCC's  entering  into this  Agreement or any
other Loan  Document or any other  agreements  and  documents  relating  hereto,
including,  without limitation,  amounts paid in settlement, court costs and the
reasonable  fees and  disbursements  of counsel  incurred in connection with any
such litigation,  investigation, claim or proceeding, (ii) any remedial or other
action taken by Borrower in connection  with  compliance by Borrower,  or any of
its properties,  with any federal,  state or local  environmental laws, rules or
regulations,  and  (iii)  any  pending,  threatened  or  actual  action,  claim,
proceeding or suit by any  shareholder  or director of Borrower or any actual or
purported  violation of Borrower's  charter,  by-laws or any other  agreement or
instrument  to which  Borrower is a party or by which any of its  properties  is
bound.  In addition  and  without  limiting  the  generality  of the  foregoing,
Borrower  shall,  upon  demand,  pay to TBCC all  reasonable  costs and expenses
incurred by TBCC (including the reasonable fees and disbursements of counsel and
other  professionals) in connection with the preparation,  execution,  delivery,
administration,  modification  and amendment of the Loan  Documents,  and pay to
TBCC all  reasonable  costs and  expenses  (including  the  reasonable  fees and
disbursements  of counsel and other  professionals)  paid or incurred by TBCC in
order to  enforce  or  defend  any of its  rights  under or in  respect  of this
Agreement,  any other Loan Document or any other  document or instrument  now or
hereafter executed and delivered in connection herewith, collect the



                                      -17-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

Obligations  or  otherwise  administer  this  Agreement,  foreclose or otherwise
realize upon the Collateral or any part thereof,  prosecute actions against,  or
defend actions by, account debtors; commence, intervene in, or defend any action
or  proceeding;  initiate any complaint to be relieved of the automatic  stay in
bankruptcy;  file or prosecute any probate claim, bankruptcy claim,  third-party
claim, or other claim;  examine,  audit, copy, and inspect any of the Collateral
or any of Borrower's books and records;  protect,  obtain  possession of, lease,
dispose of, or otherwise  enforce TBCC's  security  interest in, the Collateral;
and otherwise  represent  TBCC in any litigation  relating to Borrower.  Without
limiting the  generality of the  foregoing,  Borrower  shall pay TBCC a fee with
respect to each wire  transfer in the amount of $15 plus all bank  charges and a
fee of $15 for all  returned  checks  plus all bank  charges.  If either TBCC or
Borrower  files any  lawsuit  against the other  predicated  on a breach of this
Agreement,  the prevailing party in such action shall be entitled to recover its
reasonable costs and attorneys' fees,  including (but not limited to) reasonable
attorneys'  fees and costs  incurred in the  enforcement  of,  execution upon or
defense of any order, decree,  award or judgment.  If and to the extent that the
Obligations of Borrower  hereunder are  unenforceable  for any reason,  Borrower
hereby agrees to make the maximum  contribution to the payment and  satisfaction
of the  Obligations  which  is  permissible  under  applicable  law.  Borrower's
obligations  under Section 2.4 and this Section shall survive any termination of
this  Agreement  and the other  Loan  Documents  and the  payment in full of the
Obligations,  and are in  addition  to, and not in  substitution  of, any of the
other Obligations.

     10.8  Amendments and Waivers.  Any provision of this Agreement or any other
Loan Document may be amended or waived if, but only if, such amendment or waiver
is in writing and signed by  Borrower  and TBCC and then any such  amendment  or
waiver shall be effective only to the extent set forth  therein.  The failure of
TBCC at any time or times to require Borrower to strictly comply with any of the
provisions of this  Agreement or any other present or future  agreement  between
Borrower  and TBCC shall not waive or diminish any right of TBCC later to demand
and receive  strict  compliance  therewith.  Any waiver of any default shall not
waive or affect any other default,  whether prior or subsequent,  and whether or
not similar. None of the provisions of this Agreement or any other agreement now
or in the future  executed by Borrower and  delivered to TBCC shall be deemed to
have been waived by any act or knowledge of TBCC or its agents or employees, but
only by a specific  written  waiver signed by an authorized  officer of TBCC and
delivered to Borrower.

     10.9 Counterparts;  Telecopied Signatures. This Agreement and any waiver or
amendment  hereto may be executed in  counterparts  and by the parties hereto in
separate counterparts,  each of which when so executed and delivered shall be an
original,  but  both of  which  shall  together  constitute  one  and  the  same
instrument.  This Agreement and each of the other Loan Documents and any notices
given in  connection  herewith or  therewith  may be executed  and  delivered by
telecopier or other facsimile transmission all with the same force and effect as
if the same was a fully executed and delivered original manual counterpart.

     10.10  Severability.  In case any  provision  in or  obligation  under this
Agreement or any other Loan Document shall be invalid,  illegal or unenforceable
in any jurisdiction,  the validity, legality and enforceability of the remaining
provisions  or  obligations,  or of such  provision or  obligation  in any other
jurisdiction, shall not in any way be affected or impaired thereby.

     10.11 Joint and Several  Liability.  If Borrower  consists of more than one
Person,  their liability  shall be joint and several,  and the compromise of any
claim with,  or the release of, any Borrower  shall not  constitute a compromise
with, or a release of, any other Borrower.

     10.12  Maximum  Rate.  Notwithstanding  anything to the contrary  contained
elsewhere in this  Agreement or in any other Loan  Document,  the parties hereto
hereby agree that all agreements between them under this Agreement and the other
Loan Documents, whether now existing or hereafter arising and whether written or
oral, are expressly  limited so that in no contingency or event whatsoever shall
the amount  paid,  or agreed to be paid,  to TBCC for the use,  forbearance,  or
detention of the money loaned to Borrower and evidenced hereby or thereby or for
the  performance  or payment of any covenant or obligation  contained  herein or
therein, exceed the maximum non-usurious interest rate, if any, that at any time
or from time to time may be contracted for, taken, reserved, charged or received
on the Obligations,  under the laws of the State of Illinois (or the laws of any
other  jurisdiction  whose laws may be  mandatorily  applicable  notwithstanding
other  provisions  of this  Agreement  and the other Loan  Documents),  or under
applicable  federal laws which may presently or hereafter be in effect and which
allow a higher  maximum  non-usurious  interest  rate than under the laws of the
State of Illinois  (or such other  jurisdiction),  in any case after taking into
account,  to the  extent  permitted  by  applicable  law,  any and all  relevant
payments or charges under this Agreement and the other Loan  Documents  executed
in connection herewith, and any available exemptions,  exceptions and exclusions
(the "Highest Lawful Rate"). If due to any circumstance whatsoever,  fulfillment
of any  provisions of this  Agreement or any of the other Loan  Documents at the
time  performance of such provision shall be due shall exceed the Highest Lawful
Rate, then,  automatically,  the obligation to be fulfilled shall be modified or
reduced to the extent  necessary  to limit such  interest to the Highest  Lawful
Rate,  and if from any such  circumstance  TBCC should ever receive  anything of
value deemed  interest by applicable  law which would exceed the Highest  Lawful
Rate, such excessive interest shall be applied to the reduction of the principal
amount then  outstanding  hereunder or on account of any other then  outstanding
Obligations  and not to the payment of interest,  or if such excessive  interest
exceeds the principal unpaid balance then  outstanding  hereunder and such other
then  outstanding  Obligations,  such excess shall be refunded to Borrower.  All
sums paid or agreed to be paid to TBCC for the use, forbearance, or detention of
the Obligations and other  indebtedness of Borrower to TBCC shall, to the extent
permitted  by  applicable  law, be  amortized,  prorated,  allocated  and spread
throughout the full term of such indebtedness, until payment in full thereof, so
that the actual rate of interest  on account of all such  indebtedness  does not
exceed the Highest Lawful Rate throughout the entire term of such  indebtedness.
The terms



                                      -18-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

and  provisions  of this Section  shall  control  every other  provision of this
Agreement, the other Loan Documents and all other agreements between the parties
hereto.

     10.13 Entire  Agreement;  Successors  and Assigns.  This  Agreement and the
other Loan  Documents  constitute  the entire  agreement  between  the  parties,
supersede any prior written and verbal  agreements  between them, and shall bind
and benefit the parties and their respective  successors and permitted  assigns.
There  are no oral  understandings,  oral  representations  or  oral  agreements
between  the  parties  which  are not set  forth in this  Agreement  or in other
written agreements signed by the parties in connection herewith.

     10.14 MUTUAL WAIVER OF JURY TRIAL.  TBCC and Borrower each hereby waive the
right to trial by jury in any action or proceeding  based upon,  arising out of,
or in any way  relating  to: (i) this  Agreement;  or (ii) any other  present or
future instrument or agreement between TBCC and Borrower;  or (iii) any conduct,
acts or  omissions  of TBCC or  Borrower  or any of their  directors,  officers,
employees,  agents,  attorneys  or any  other  persons  affiliated  with TBCC or
Borrower;  in each of the foregoing cases,  whether sounding in contract or tort
or otherwise.


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                                      -19-
<PAGE>


TBCC                                                 Loan and Security Agreement
--------------------------------------------------------------------------------

Borrower:

BEI MEDICAL SYSTEMS COMPANY, INC.



By: /s/ Richard W. Turner
   ----------------------------------
Title:  President
      -------------------------------


TBCC:

TRANSAMERICA BUSINESS CREDIT CORPORATION


By: /s/ Ian Schneider
   ----------------------------------
Title: Sr. Vice President & Gen. Mgr.
      -------------------------------


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