CONSENT AND SECOND AMENDMENT TO
                                 LOAN AGREEMENT


      THIS CONSENT AND SECOND AMENDMENT (this "Amendment") is entered into as of
August __, 1998, among Effective  Management Systems,  Inc. ("EMS"), a Wisconsin
corporation, EMS-East, Inc. ("EMS-East"), a Massachusetts corporation, Effective
Management Systems of Illinois, Inc.  ("EMS-Illinois"),  an Illinois corporation
(EMS,  EMS-East  and  EMS-Illinois  are  each  individually  a  "Borrower",  and
collectively "Borrowers"), and Foothill Capital Corporation ("Lender").

      WHEREAS, Borrowers and Lender are parties to a Loan and Security Agreement
dated as of December 30, 1997 (the "Loan Agreement");

      WHEREAS,  Borrowers  have requested that Lender consent to the issuance by
EMS of up to $5,000,000  of  convertible  preferred  equity  securities  and the
issuance of warrants,  each in accordance  with terms of the  engagement  letter
dated as of  August  14,  1998  (the  "Engagement  Letter")  issued  by  Taglich
Brothers, D'Amadeo, Wagner & Company, Incorporated; and

      WHEREAS,  Borrowers have  requested that Lender amend the Loan  Agreement,
and Lender has  agreed to do so  subject to the terms and  conditions  contained
herein;

      NOW  THEREFORE,  in  consideration  of the premises and mutual  agreements
herein contained, the parties hereto agree as follows:

      1. Defined Terms. Unless otherwise defined herein,  capitalized terms used
herein shall have the meanings ascribed to such terms in the Loan Agreement.

      2. Consent.  Subject to the  satisfaction  of the  conditions set forth in
Section  5  hereof,  Lender  hereby  consents  to the  issuance  by EMS of up to
$5,000,000  of  convertible  preferred  equity  securities  and the  issuance of
warrants,  each in accordance with the terms of the Engagement Letter;  provided
that EMS  acknowledges  and agrees that it will not  repurchase or redeem any of
the preferred equity securities or warrants without the prior written consent of
Lender.

      3.  Amendments  to Loan  Agreement.  Subject  to the  satisfaction  of the
conditions  set forth in  Section 5 hereof,  the Loan  Agreement  is  amended as
follows:

      (a) Section  1.1 of the  Loan  Agreement  is  hereby  amended  to add  the
following definitions in appropriate alphabetical order:

            "Excess  Availability"  means, as of any date of determination,  the
      amount by which the lesser of (a) the Maximum Revolving Amount and (b) the
      Borrowing  Base,  exceeds  the  sum  of  the  Obligations  (excluding  the

<PAGE>

      principal balance of the Term Loan) and the amount of deterioration in the
      payables over 60 days past due since the date of Foothill's  last audit of
      Borrowers.

            "Permitted  Preferred Equity Securities Offering" means the issuance
      by EMS of convertible  preferred equity securities of up to $5,000,000 and
      the issuance by EMS of warrants,  each in accordance with the terms of the
      Engagement Letter attached hereto as Schedule P-2.

      (b) Section 7.3 of the Loan  Agreement  is hereby  amended and restated in
its entirety, as follows:

                  7.3      Restrictions on Fundamental Changes.

            Enter   into   any   merger,   consolidation,   reorganization,   or
      recapitalization,  or reclassify its capital stock, or liquidate, wind up,
      or dissolve itself (or suffer any liquidation or dissolution),  or convey,
      sell, assign, lease, transfer, or otherwise dispose of, in one transaction
      or a series of  transactions,  all or any substantial part of its property
      or assets;  provided,  that EMS may issue preferred equity  securities and
      warrants pursuant to the Permitted Preferred Equity Securities Offering.

      (c) Section 7.9 of the Loan  Agreement  is hereby  amended and restated in
its entirety, as follows:

                  7.9      Change of Control.

            Cause,  permit,  or suffer,  directly or  indirectly,  any Change of
      Control;  provided, that EMS may consummate the Permitted Preferred Equity
      Securities  Offering,  and issue  common  stock upon  conversion  and upon
      exercise of the warrants provided therein.

      (d) Section 7.11 of the Loan  Agreement is hereby  amended and restated in
its entirety, as follows:

                  7.11     Distributions.

            Make any  distribution  or declare or pay any  dividends (in cash or
      other  property,  other  than  capital  stock) on, or  purchase,  acquire,
      redeem,  or retire  any of any  Borrower's  capital  stock,  of any class,
      whether now or hereafter outstanding, except that (a) each of EMS-East and
      EMS-Illinois  may pay  dividends  to EMS,  and (b) so long as no  Event of
      Default exists or would be caused thereby and Excess Availability  exceeds
      $200,000 after giving effect to the payment thereof, EMS may pay regularly
      scheduled  quarterly dividends at a per annum rate of 8% in respect of its
      convertible  preferred equity  securities  issued upon consummation of the
      Permitted Preferred Equity Securities Offering.

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<PAGE>


      (e) The Loan  Agreement is amended to add Exhibit A hereto as Schedule P-2
to the Loan Agreement.

      4. Ratification. This Amendment, subject to satisfaction of the conditions
provided below, shall constitute amendments to the Loan Agreement and all of the
Loan Documents as appropriate to express the agreements contained herein. In all
other respects, the Loan Agreement and the Loan Documents shall remain unchanged
and in full force and effect in accordance with their original terms.

      5. Conditions to Effectiveness. Subject to Section 6 below, the amendments
to the Loan Agreement set forth in this Amendment  shall become  effective as of
the date of this Amendment and upon the satisfaction of the following conditions
precedent in form and  substance  satisfactory  to Lender:

      (a) Consummation of Permitted  Preferred Equity Securities  Offering.  EMS
shall have consummated the Permitted Preferred Equity Securities Offering.

      (b) No  Default.  No Event of Default or event  which,  with the giving of
notice or the passage of time, or both, would become an Event of Default,  shall
have occurred and be  continuing,  and,  after giving  effect to the  amendments
contained  herein, no Event of Default or event which, with the giving of notice
or the passage of time,  or both,  would become an Event of Default,  shall have
occurred and be continuing.

      6. Miscellaneous.

      (a) Warranties and Absence of Defaults. In order to induce Lender to enter
into this Amendment,  each Borrower  hereby  warrants to Lender,  as of the date
hereof, that:

            (i) The warranties of such Borrower contained in the Loan Agreement,
      as herein  amended,  are true and correct as of the date hereof as if made
      on the date hereof.

            (ii) All  information,  reports and other papers and data heretofore
      furnished to Lender by such  Borrower in connection  with this  Amendment,
      the Loan  Agreement and the other Loan  Documents are accurate and correct
      in all material  respects and complete insofar as may be necessary to give
      Lender true and accurate  knowledge of the subject  matter  thereof.  Such
      Borrower  has  disclosed  to Lender  every fact of which it is aware which
      would  reasonably  be  expected to  materially  and  adversely  affect the
      business,  operations  or  financial  condition  of such  Borrower  or the
      ability of such Borrower to perform its obligations  under this Amendment,
      the Loan Agreement or under any of the other Loan  Documents.  None of the
      information furnished to Lender by or on behalf of such Borrower contained
      any material  misstatement  of fact or omitted to state a material fact or
      any fact necessary to make the statements  contained herein or therein not
      materially misleading.

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<PAGE>

            (iii) No Event of Default or event  which,  with giving of notice or
      the passage of time,  or both would become an Event of Default,  exists as
      of the date  hereof. 

      (b) Expenses.  Borrowers  agree to pay on demand all costs and expenses of
Lender  (including  the  reasonable  fees and  expenses  of outside  counsel for
Lender) in connection with the preparation, negotiation, execution, delivery and
administration of this Amendment and all other instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection  herewith.
In addition, Borrowers agree to pay, and save Lender harmless from all liability
for,  any stamp or other  taxes  which may be  payable  in  connection  with the
execution  or  delivery  of this  Amendment  or the Loan  Agreement,  as amended
hereby,  and the execution and delivery of any instruments or documents provided
for herein or delivered or to be delivered hereunder or in connection  herewith.
All obligations  provided in this Section 6 (b) shall survive any termination of
this Amendment and the Loan Agreement as amended hereby.

      (c)  Governing  Law.  This  Amendment  shall be a contract  made under and
governed by the internal laws of the State of California.

      (d)  Counterparts.  This  Amendment  may  be  executed  in any  number  of
counterparts,  and by the parties  hereto on the same or separate  counterparts,
and each such counterpart, when executed and delivered, shall be deemed to be an
original,  but all such counterparts  shall together  constitute but one and the
same Amendment.

      (e) Reference to Loan  Agreement.  On and after the  effectiveness  of the
amendment to the Loan Agreement  accomplished hereby, each reference in the Loan
Agreement to "this Agreement,"  "hereunder," "hereof," "herein" or words of like
import, and each reference to the Loan Agreement in any Loan Documents, or other
agreements,  documents or other instruments  executed and delivered  pursuant to
the Loan  Agreement,  shall mean and be a reference  to the Loan  Agreement,  as
amended by this Amendment.

      (f) Successors. This Amendment shall be binding upon Borrowers, Lender and
their  respective  successors  and  assigns,  and shall  inure to the benefit of
Borrowers, Lender and their respective successors and assigns.

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<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Amendment to be
executed by their respective officers thereunto duly authorized and delivered as
of the date first above written.



                                    EFFECTIVE MANAGEMENT SYSTEMS, INC.,
                                    a Wisconsin corporation


                                    By  /S/
                                    Title 

                                    EMS-EAST, INC., a Massachusetts corporation


                                    By  /S/
                                    Title 


                                    EFFECTIVE MANAGEMENT SYSTEMS OF ILLINOIS,
                                      INC., an Illinois corporation


                                    By  /S/
                                    Title  


                                    FOOTHILL CAPITAL CORPORATION,
                                    a California corporation


                                    By  /S/
                                    Title