Document:

Exhibit 10.15a

                             FIRST AMENDMENT TO THE
                                  TRUST FOR THE
                       PINNACLE WEST CAPITAL CORPORATION,
                       ARIZONA PUBLIC SERVICE COMPANY AND
                           SUNCOR DEVELOPMENT COMPANY
                           DEFERRED COMPENSATION PLANS

     Effective August 1, 1996, Pinnacle West Capital Corporation (the "Company")
established the Trust for the Pinnacle West Capital Corporation,  Arizona Public
Service Company and Suncor Development Company Deferred  Compensation Plans (the
"Trust"),  with Wells Fargo Bank of Arizona,  N.A.,  acting as Trustee,  for the
purpose of holding the assets of certain plans and  arrangements  established by
the Company and its affiliates.

     By this  instrument,  the Company intends to amend the Trust to clarify the
definition of "Change of Control."

     1. This Amendment shall amend only those sections of the Trust as set forth
herein and those  sections  not  expressly  amended  hereby shall remain in full
force and effect.

     2. Sections 13(d) of the Trust is hereby amended to read as follows:

     (d) "Change of Control"  shall have the same meaning as "Change in Control"
in the Pinnacle West Capital Corporation, Arizona Public Service Company, SunCor
Development Company and El Dorado Investment Company Deferred Compensation Plan,
as the same may be amended from time to time.

     3. This Amendment shall be effective as of January 1, 2000.

     IN WITNESS  WHEREOF,  the Company and Trustee have caused this Amendment to
be executed by their duly authorized officers this 7 day of December, 1999.
<PAGE>

                                         PINNACE WEST CAPITAL CORPORATION

                                         By Armando Flores
                                            ------------------------------------
                                         Its Vice President
                                            ------------------------------------

                                        WELLS FARGO BANK OF ARIZONA, N.A.

                                        By Vanessa Fulton
                                           -------------------------------------
                                        Its Assistant Vice President
                                           -------------------------------------

                                       2Exhibit 10.16a

                                       APS
                         Arizona Public Service Company
                  P.O. Box 53999 o PHOENIX, ARIZONA 85072-3999

July 28, 1995

Armando B. Flores
400 North 5th Street
Phoenix, AZ  85004

Dear Armando,

During your years of employment, you have developed an intimate knowledge of the
Company and its operations which, together with your skills and experience,  has
proven  to  be   invaluable.   We  recognize   that  there  are  other  business
opportunities  available to you and that your departure  would be detrimental to
the Company.

Therefore,  the  Company  agrees  to  provide  you,  in  consideration  for your
continued employment,  deferred compensation in excess of that which is provided
for  under  the  Supplemental  Excess  Benefit  Retirement  Plan  (SEBRP).   The
additional  deferred  compensation  is equal to the amount  which you would have
been  entitled  under the terms of the SEBRP  with  eight  additional  "years of
service".

Except as otherwise provided below, the deferred compensation payable under this
agreement  shall be paid  over the same  period  and in the same  form and shall
commence on the same date as the benefit actually payable to you under the SEBRP
as a result of your  status as an  officer  of the  Company.  The  Company  will
withhold all  required  federal and state taxes from such  payments.  You should
also be aware  that you will  incur  additional  FICA  costs as a result of this
increase in benefits.  The deferred  compensation  payable to you as a result of
this letter will be payable from the Company's general assets.

While you are an "at-will"  employee this  additional  deferred  compensation is
subject to  revocation in the event your  employment is terminated  for "cause".
For "cause" to be  determined  in the sole and  absolute  discretion  of the APS
Board of Directors.

With the assurances  provided by this letter,  we trust that we can look forward
to your continuing efforts on behalf of the Company.

Very truly yours,

William J. Post

William J. Post
Chief Operating Officer and Senior Vice PresidentExhibit 10.17a

[LETTERHEAD OF APS]

     William J. Post                                Mail Station 9038
     President and              Tel. 602/250-2588   PO Box 53999
     Chief Executive Officer    Fax 602/250-3002    Phoenix, Arizona  85072-3999

October 3, 1997

Mr. James M. Levine
4817 North Greentree Drive East
Litchfield Park, AZ 85340

RE: Compensation Adjustments

Dear Jim:

Your  contribution  to the  success  of the Palo  Verde  Nuclear  Plant has been
significant and greatly appreciated.  The success of the plant is exemplified by
the specific achievement of Level I SALP and INPO ratings. It is now critical to
maintain a Level I rating through the remainder of this year and beyond. To that
end, I am providing you with an additional compensation opportunity which allows
for a $50,000  cash  payout  for the  achievement  of a Level I rating  for each
target. As a point of clarification  the $50,000 incentive  opportunity for each
target is effective immediately, and totals to maximum of $100,000.

I appreciate your continued contribution and leadership to the Company.

Sincerely,

William J. PostCREDIT AND SECURITY AGREEMENT

                          Dated as of February 28, 2000

     ORTHOLOGIC CORP., a Delaware corporation (the "Borrower"),  and WELLS FARGO
BUSINESS CREDIT, INC., a Minnesota  corporation (the "Lender"),  hereby agree as
follows:

                                    ARTICLE I
                                   DEFINITIONS

     SECTION 1.1  DEFINITIONS.  For all  purposes of this  Agreement,  except as
otherwise expressly provided or unless the context otherwise requires:

          (a) the terms  defined in this Article  have the meanings  assigned to
them in this Article, and include the plural as well as the singular; and

          (b) all  accounting  terms  not  otherwise  defined  herein  have  the
meanings assigned to them in accordance with GAAP.

          "Accounts"  means  all of the  Borrower's  accounts,  as such  term is
defined  in  the  UCC,   including  without   limitation  the  aggregate  unpaid
obligations of customers and other account  debtors to the Borrower  arising out
of the sale or lease of goods or  rendition  of services  by the  Borrower on an
open account or deferred payment basis.

          "Advance" means a Revolving Advance.

          "Affiliate"   or   "Affiliates"   means  any  Person   controlled  by,
controlling  or under  common  control  with the  Borrower,  including  (without
limitation)  any  Subsidiary of the Borrower.  For purposes of this  definition,
"control,"  when used with respect to any specified  Person,  means the power to
direct the  management  and  policies of such  Person,  directly or  indirectly,
whether through the ownership of voting securities, by contract or otherwise.

          "Agreement"  means this  Credit and  Security  Agreement,  as amended,
supplemented or restated from time to time.

          "Allowed  Investments"  means Borrower's  Co-Promotion  Agreement with
Sanofi  Pharmaceuticals,  Inc. and Borrower's  Minority  Equity  Investment with
Chrysalis Biotechnology, Inc.

          "Availability" means the positive difference,  if any, between (i) the
Borrowing  Base,  and (ii) the  outstanding  principal  balance of the Revolving
Note.

          "Banking  Day" means a day other than a Saturday,  Sunday or other day
on which banks are generally not open for business in Phoenix, Arizona.

                                       1
<PAGE>
          "Borrowing Base" means, at any time the lesser of:

               (a) the Maximum Line; or

               (b)  subject  to change  from time to time in the  Lender's  sole
     discretion  if  the  nature  of the  Collateral  changes,  75% of  Eligible
     Accounts.

          "Capital Expenditures" for a period means any expenditure of money for
the lease,  purchase or other acquisition of any capital asset, or for the lease
of any other asset whether payable currently or in the future.

          "Collateral"   means  all  of  the   Borrower's   Equipment,   General
Intangibles  (except  Patents  unless  and until the  occurrence  of an Event of
Default),  Inventory,  Accounts,   Receivables,  all  sums  on  deposit  in  any
Collection  Account,  and  any  items  in any  lockbox;  together  with  (i) all
substitutions  and replacements  for and products of any of the foregoing;  (ii)
proceeds  of any and all of the  foregoing;  (iii) in the  case of all  tangible
goods, all accessions; (iv) all accessories,  attachments,  parts, equipment and
repairs now or hereafter  attached or affixed to or used in connection  with any
tangible  goods;  and (v) all  warehouse  receipts,  bills of  lading  and other
documents of title now or hereafter covering such goods.

          "Collection Account" has the meaning given in Section 4.3.

          "Commitment" means the Lender's  commitment to make Advances to or for
the Borrower's account pursuant to Article II.

          "Credit  Facility"  means the credit  facility being made available to
the Borrower by the Lender pursuant to Article II.

          "Debt" of any  Person  means all items of  indebtedness  or  liability
which in accordance with GAAP would be included in determining total liabilities
as shown on the  liabilities  side of a balance  sheet of that  Person as of the
date as of  which  Debt is to be  determined.  For  purposes  of  determining  a
Person's  aggregate  Debt at any time,  "Debt" shall also include the  aggregate
payments  required to be made by such Person at any time under any lease that is
considered a capitalized lease under GAAP.

          "Debt to Tangible  Net Worth Ratio" as of a given date means the ratio
of the Borrower's Debt to the Borrower's Tangible Net Worth.

          "Default"  means an event  that,  with  giving of notice or passage of
time or both, would constitute an Event of Default.

          "Default  Period" means any period of time  beginning on the first day
of any month  during which a Default or Event of Default has occurred and ending
on the date the Lender  notifies  the  Borrower in writing  that such Default or
Event of Default has been cured or waived.

          "Default  Rate" means an annual rate equal to three  percent (3%) over
the  Floating  Rate,  which  rate shall  change  when and as the  Floating  Rate
changes.

                                       2
<PAGE>
          "ERISA" means the Employee  Retirement Income Security Act of 1974, as
amended.

          "Eligible  Accounts"  means all unpaid  Accounts,  net of any credits,
except the following shall not in any event be deemed Eligible Accounts:

               (i) That portion of Accounts over 120 days past invoice date;

               (ii) That  portion of  Accounts  that is disputed or subject to a
claim of offset or a contra account;

               (iii)  That  portion  of  Accounts  not yet  earned  by the final
delivery of goods or rendition of services,  as  applicable,  by the Borrower to
the customer;

               (iv) Accounts owed by any unit of government  (including  without
limitation through the Medicare/Medicaid  programs), whether foreign or domestic
(provided,  however,  that there shall be included  in  Eligible  Accounts  that
portion of Accounts owed by such units of government  for which the Borrower has
provided  evidence  satisfactory  to the Lender  that (A) the Lender has a first
priority  perfected  security  interest and (B) such Accounts may be enforced by
the Lender directly against such unit of government under all applicable laws);

               (v) Accounts owed by an account debtor located outside the United
States which are not (A) backed by a bank letter of credit  naming the Lender as
beneficiary or assigned to the Lender, in the Lender's possession and acceptable
to the  Lender in all  respects,  in its sole  discretion,  or (B)  covered by a
foreign  receivables  insurance  policy  acceptable  to the  Lender  in its sole
discretion;

               (vi)  Accounts owed by an account  debtor that is insolvent,  the
subject of bankruptcy proceedings or has gone out of business;

               (vii)  Accounts  owed  by a  Subsidiary,  Affiliate,  officer  or
employee of the Borrower;

               (viii) Accounts not subject to a duly perfected security interest
in the  Lender's  favor or which are subject to any lien,  security  interest or
claim in favor of any Person other than the Lender including without  limitation
any payment or performance bond;

               (ix)  That  portion  of  Accounts  that  has  been  restructured,
extended, amended or modified;

               (x)  That  portion  of  Accounts  that  constitutes  advertising,
finance charges, service charges or sales or excise taxes; and

               (xi) Accounts,  or portions thereof,  otherwise deemed ineligible
by the Lender in its sole discretion.

          "Environmental Laws" has the meaning specified in Section 5.12.

                                       3
<PAGE>
          "Equipment"  means all of the  Borrower's  equipment,  as such term is
defined in the UCC, whether now owned or hereafter  acquired,  including but not
limited to all  present and future  machinery,  vehicles,  furniture,  fixtures,
manufacturing  equipment,  shop equipment,  office and recordkeeping  equipment,
parts, tools,  supplies,  and including  specifically  (without  limitation) the
goods  described  in any  equipment  schedule  or  list  herewith  or  hereafter
furnished to the Lender by the Borrower.

          "Event of Default" has the meaning specified in Section 8.1.

          "Existing  Lockbox  Agreement"  has the meaning  specified  in Section
6.10.

          "Floating  Rate" means an annual  rate equal to the Prime Rate,  which
annual rate shall change when and as the Prime Rate changes.

          "Funding Date" has the meaning given in Section 2.1.

          "GAAP" means generally accepted  accounting  principles,  applied on a
basis  consistent  with  the  accounting  practices  applied  in  the  financial
statements  described  in  Section  5.5,  except  for any  change in  accounting
practices to the extent that, due to a promulgation of the Financial  Accounting
Standards  Board  changing or  implementing  any new  accounting  standard,  the
Borrower  either (i) is required to implement  such  change,  or (ii) for future
periods will be required to and for the current  period may in  accordance  with
generally  accepted  accounting   principles  implement  such  change,  for  its
financial  statements to be in conformity  with  generally  accepted  accounting
principles  (any such change is herein referred to as a "Required GAAP Change"),
provided that (1) the Borrower shall fully disclose in such financial statements
any such Required GAAP Change and the effects of the Required GAAP Change on the
Borrower's income,  retained earnings or other accounts, as applicable,  and (2)
the Borrower's  financial covenants set forth in Sections 6.12 through 6.13, and
7.10 shall be adjusted as necessary to reflect the effects of such Required GAAP
Change.

          "General Intangibles" means all of the Borrower's general intangibles,
as such term is defined in the UCC,  whether  now owned or  hereafter  acquired,
including (without limitation) all Patents, copyrights, trademarks, trade names,
trade  secrets,  customer or supplier lists and  contracts,  manuals,  operating
instructions, permits, franchises, the right to use the Borrower's name, and the
goodwill of the Borrower's business.

          "Hazardous Substance" has the meaning given in Section 5.12.

          "Inventory"  means all of the  Borrower's  inventory,  as such term is
defined in the UCC, whether now owned or hereafter acquired,  whether consisting
of whole  goods,  spare  parts or  components,  supplies or  materials,  whether
acquired,  held or furnished for sale,  for lease or under service  contracts or
for manufacture or processing, and wherever located.

          "Loan  Documents"  means  this  Agreement,  the Note and the  Security
Documents.

          "Lockbox Agreement" has the meaning specified in Section 6.10.

          "Maturity Date" means February 28, 2003.

                                       4
<PAGE>
          "Maximum   Line"   means  on  any   given   day  the   lesser  of  (i)
$10,000,000.00,  or (ii) an amount  equal to 1.25  multiplied  by the total cash
(resulting  from  continuing  operations)  received by the  Borrower  during the
immediately  preceding  60 days.  The  Maximum  Line may be reduced  pursuant to
Section 2.6, in which event "Maximum Line" means the amount to which said amount
is reduced.

          "Net  Income"  means  fiscal  year-to-date  after-tax  net income from
continuing operations as determined in accordance with GAAP.

          "Net  Loss"  means  fiscal   year-to-date   after-tax  net  loss  from
continuing operations as determined in accordance with GAAP.

          "Note" means the Revolving Note.

          "Obligations" means the Note and each and every other debt,  liability
and  obligation of every type and  description  which the Borrower may now or at
any time hereafter owe to the Lender, whether such debt, liability or obligation
now  exists  or is  hereafter  created  or  incurred,  whether  it  arises  in a
transaction  involving  the Lender  alone or in a  transaction  involving  other
creditors  of the  Borrower,  and  whether it is direct or  indirect,  due or to
become  due,  absolute  or  contingent,  primary  or  secondary,  liquidated  or
unliquidated,  or sole,  joint,  several  or joint and  several,  and  including
specifically, but not limited to, all indebtedness of the Borrower arising under
this  Agreement,  the Note or any other  loan or credit  agreement  or  guaranty
between the Borrower and the Lender,  whether now in effect or hereafter entered
into.

          "Patents"   means  all   present   and  future   patents   and  patent
applications.

          "Permitted Lien" has the meaning given in Section 7.1.

          "Person"  means  any  individual,   corporation,   partnership,  joint
venture,  limited liability company,  association,  joint-stock company,  trust,
unincorporated organization or government or any agency or political subdivision
thereof.

          "Plan" means an employee benefit plan or other plan maintained for the
Borrower's employees and covered by Title IV of ERISA.

          "Premises" means all premises where the Borrower conducts its business
and has any rights of possession,  including  (without  limitation) the premises
legally described in Exhibit C attached hereto.

          "Prime Rate" means the rate of interest  publicly  announced from time
to time by Wells Fargo Bank, N.A. as its "prime rate" or, if such bank ceases to
announce a rate so  designated,  any similar  successor  rate  designated by the
Lender.

          "Principal Premises" means Borrower's Premises in Phoenix, Arizona and
Toronto, Ontario, Canada.

          "Quick  Assets"  means,  on any  date,  the  Borrower's  consolidated,
unrestricted  cash,  cash  equivalents,   net  billed  accounts  receivable  and
investments  with  maturities  of fewer than 12 months  determined  according to
GAAP.

                                       5
<PAGE>
          "Quick Ratio" means as of a given date the ratio of  Borrower's  Quick
Assets divided by Borrower's  current  liabilities,  as determined in accordance
with GAAP.

          "Receivables"  means  each  and  every  right of the  Borrower  to the
payment of money,  whether such right to payment now exists or hereafter arises,
whether such right to payment arises out of a sale,  lease or other  disposition
of goods or other property,  out of a rendering of services,  out of a loan, out
of the overpayment of taxes or other liabilities,  or otherwise arises under any
contract or  agreement,  whether such right to payment is created,  generated or
earned by the Borrower or by some other person who  subsequently  transfers such
person's  interest to the  Borrower,  whether such right to payment is or is not
already  earned by  performance,  and  howsoever  such right to  payment  may be
evidenced, together with all other rights and interests (including all liens and
security  interests) which the Borrower may at any time have by law or agreement
against any account  debtor or other obligor  obligated to make any such payment
or against any property of such account debtor or other  obligor;  all including
but not limited to all present and future accounts,  contract rights,  loans and
obligations receivable, chattel papers, bonds, notes and other debt instruments,
tax refunds and rights to payment in the nature of general intangibles.

          "Reportable  Event"  shall have the  meaning  assigned to that term in
Title IV of ERISA.

          "Revolving Advance" has the meaning given in Section 2.1.

          "Revolving  Note"  means the  Borrower's  revolving  promissory  note,
payable  to the  order of the  Lender  in  substantially  the form of  Exhibit A
hereto, as the same may hereafter be amended, supplemented or restated from time
to time, and any note or notes issued in substitution  therefor, as the same may
hereafter be amended, supplemented or restated from time to time and any note or
notes issued in substitution therefor.

          "Security  Documents"  means this  Agreement,  the Collection  Account
Agreement, the Lockbox Agreement, and any other document delivered to the Lender
from  time to time to  secure  the  Obligations,  as the same may  hereafter  be
amended, supplemented or restated from time to time.

          "Security Interest" has the meaning given in Section 3.1.

          "Subordinated  Debt" is debt  incurred  by  Borrower  subordinated  to
Borrower's  debt to Lender (and  identified  as  subordinated  by  Borrower  and
Lender).

          "Subsidiary"  means  any  corporation  of which  more  than 50% of the
outstanding  shares of capital stock having  general voting power under ordinary
circumstances to elect a majority of the board of directors of such corporation,
irrespective  of whether or not at the time stock of any other  class or classes
shall  have or  might  have  voting  power by  reason  of the  happening  of any
contingency, is at the time directly or indirectly owned by the Borrower, by the
Borrower  and  one  or  more  other  Subsidiaries,  or  by  one  or  more  other
Subsidiaries.

          "Tangible Net Worth" means, on any date, the consolidated total assets
of Borrower and its  Subsidiaries  MINUS,  (i) any amounts  attributable  to (a)
goodwill,  (b) intangible  items such as unamortized  debt discount and expense,
Patents,  trade and  service  marks  and  names,  copyrights  and  research  and
development  expenses  except  prepaid  expenses,  and (c)  reserves not already
deducted from assets, AND (ii) Total Liabilities plus Subordinated Debt.

                                       6
<PAGE>
          "Termination  Date" means the earliest of (i) the Maturity Date,  (ii)
the date the  Borrower  terminates  the Credit  Facility,  or (iii) the date the
Lender demands payment of the Obligations  after an Event of Default pursuant to
Section 8.2.

          "Threshold Amount" means the lesser of (i)  $2,000,000.00,  or (ii) an
amount  equal to the value of 20% of Eligible  Accounts as set forth in the most
recent  collateral  reporting  complying  with the  requirements  of Section 6.1
below.

          "Threshold Event" means the earlier to occur of (i) Borrower's request
for an Advance  which  Lender has been  informed  by  Borrower  shall  cause the
Threshold  Amount to be  outstanding  for thirty days or more,  or (ii) the date
when outstanding Revolving Advances shall have exceeded the Threshold Amount for
thirty consecutive days.

          "Total  Liabilities"  is on any day,  obligations  that should,  under
GAAP, be classified as  liabilities  on Borrower's  consolidated  balance sheet,
including all indebtedness,  and current portion Subordinated Debt allowed to be
paid, but excluding all other Subordinated Debt.

          "UCC" means the Uniform Commercial Code as in effect from time to time
in the state  designated  in Section  9.13 as the state whose laws shall  govern
this  Agreement,  or in any  other  state  whose  laws are held to  govern  this
Agreement or any portion hereof.

          "Wells Fargo Bank, N.A." means Wells Fargo Bank, National Association.

     SECTION 1.2 CROSS REFERENCES. All references in this Agreement to Articles,
Sections and subsections, shall be to Articles, Sections and subsections of this
Agreement unless otherwise explicitly specified.

                                   ARTICLE II
                     Amount and Terms of the Credit Facility

     SECTION 2.1 REVOLVING ADVANCES. The Lender agrees, on the terms and subject
to the conditions  herein set forth,  to make advances to the Borrower from time
to time  from the date  all of the  conditions  set  forth  in  Section  4.1 are
satisfied (the "Funding Date") to the Termination Date, on the terms and subject
to the conditions herein set forth (the "Revolving Advances").  The Lender shall
have no obligation  to make a Revolving  Advance if, after giving effect to such
requested  Revolving  Advance,  the sum of the outstanding and unpaid  Revolving
Advances would exceed the Borrowing  Base. The Borrower's  obligation to pay the
Revolving Advances shall be evidenced by the Revolving Note and shall be secured
by the  Collateral  as provided in Article  III.  Within the limits set forth in
this Section 2.1,  the Borrower may borrow,  prepay  pursuant to Section 2.6 and
reborrow.  The  Borrower  agrees  to comply  with the  following  procedures  in
requesting Revolving Advances under this Section 2.1:

          (a) The Borrower  shall make each  request for a Revolving  Advance to
the  Lender  before  11:00  a.m.  (Phoenix  time)  of the  day of the  requested
Revolving  Advance,  provided  however,  that in the  event  that the  requested
Revolving  Advance shall cause a Threshold  Event,  the Borrower shall make such
request for a Revolving  Advance to the Lender before 11:00 a.m.  (Phoenix time)

                                       7
<PAGE>
on that date which is thirty (30) days prior to the date of the  disbursement of
the  requested  Revolving  Advance.  Requests  may  be  made  in  writing  or by
telephone, specifying the date of the requested Revolving Advance and the amount
thereof.  Each request shall be by (i) any officer of the Borrower;  or (ii) any
person  designated as the  Borrower's  agent by any officer of the Borrower in a
writing  delivered to the Lender; or (iii) any person whom the Lender reasonably
believes to be an officer of the Borrower or such a designated agent.

          (b) Upon fulfillment of the applicable conditions set forth in Article
IV, the Lender shall disburse the proceeds of the requested Revolving Advance by
crediting the same to the Borrower's  demand  deposit  account  maintained  with
Wells Fargo Bank, N.A. unless the Lender and the Borrower shall agree in writing
to another manner of disbursement. Upon the Lender's request, the Borrower shall
promptly  confirm  each  telephonic  request  for an  Advance by  executing  and
delivering an appropriate  confirmation  certificate to the Lender. The Borrower
shall repay all Advances  even if the Lender does not receive such  confirmation
and even if the person  requesting  an Advance was not in fact  authorized to do
so. Any request for an Advance,  whether written or telephonic,  shall be deemed
to be a representation  by the Borrower that the conditions set forth in Section
4.2 have been satisfied as of the time of the request.

     SECTION 2.2 INTEREST;  DEFAULT INTEREST;  PARTICIPATIONS;  USURY.  Interest
accruing  on the Note  shall be due and  payable  in arrears on the first day of
each month.

          (a) REVOLVING NOTE. Except as set forth in Sections 2.2(b) and 2.2(d),
the outstanding  principal  balance of the Revolving Note shall bear interest at
the Floating Rate.

          (b) DEFAULT  INTEREST  RATE.  At any time  during any Default  Period,
commencing with the first day of the first month  following the Default,  in the
Lender's  sole  discretion  and  without  waiving  any of its other  rights  and
remedies, the principal of the Advances outstanding from time to time shall bear
interest at the Default Rate, effective for any periods designated by the Lender
from time to time during that Default Period.

          (c) PARTICIPATIONS. If any Person shall acquire a participation in the
Advances under this Agreement,  the Borrower shall be obligated to the Lender to
pay the full amount of all interest calculated under Section 2.2(a),  along with
all other fees,  charges and other amounts due under this Agreement,  regardless
if such Person elects to accept interest with respect to its  participation at a
lower rate than the Floating  Rate, or otherwise  elects to accept less than its
pro rata share of such fees, charges and other amounts due under this Agreement.

          (d) USURY.  In any event no rate change shall be put into effect which
would  result  in a rate  greater  than  the  highest  rate  permitted  by  law.
Notwithstanding  anything to the contrary  contained in any Loan  Document,  all
agreements  which  either now are or which shall become  agreements  between the
Borrower and the Lender are hereby  limited so that in no  contingency  or event
whatsoever  shall the total  liability  for  payments in the nature of interest,
additional  interest and other charges exceed the  applicable  limits imposed by
the usury  laws of the State of  California.  If any  payments  in the nature of
interest, additional interest and other charges made under any Loan Document are
held to be in excess of the  applicable  limits imposed by the usury laws of the
State of  California,  it is agreed  that any such  amount  held to be in excess
shall  be  considered  payment  of  principal  hereunder,  and the  indebtedness
evidenced hereby shall be reduced by such amount so that the total liability for

                                       8
<PAGE>
payments in the nature of interest,  additional interest and other charges shall
not  exceed  the  applicable  limits  imposed  by the usury laws of the State of
California,  in compliance with the desires of the Borrower and the Lender. This
provision  shall never be  superseded  or waived and shall  control  every other
provision of the Loan Documents and all agreements  between the Borrower and the
Lender, or their successors and assigns.

          (e)  SAVINGS  CLAUSE.  The  Borrower  agrees  that the  interest  rate
contracted  for  includes  the  interest  rate set forth  herein  plus any other
charges  or fees set  forth  herein  and  costs and  expenses  incident  to this
transaction paid by the Borrower to the extent that the same are deemed interest
under applicable law.

     SECTION 2.3 FEES.

          (a)  ORIGINATION  FEE. The Borrower  hereby agrees to pay the Lender a
fully earned and  non-refundable  origination  fee of $50,000.00 due and payable
upon the execution of this Agreement.

          (b) UNUSED LINE FEE. For the purposes of this Section 2.3(b),  "Unused
Amount" means the Maximum Line reduced by outstanding  Revolving  Advances.  The
Borrower  agrees  to pay  to the  Lender  an  unused  line  fee at the  rate  of
one-quarter of one percent  (0.25%) per annum on the average daily Unused Amount
from the date of this Agreement to and including the  Termination  Date, due and
payable  monthly in arrears on the first day of the month and on the Termination
Date.

          (c)  COMMITMENT  FEE. The Borrower  hereby agrees to pay the Lender an
annual commitment fee in the amount of $50,000.00 due and payable  commencing on
the first  anniversary of the Funding Date,  and  continuing on each  subsequent
anniversary of the Funding Date.

          (d)  ADMINISTRATION  FEE. The Borrower hereby agrees to pay the Lender
an  administration  fee in the amount of $1,000.00  per month  commencing on the
first day of the first calendar month after the initial Revolving Advance and on
the first day of each month thereafter.

          (e) AUDIT FEES.  The  Borrower  hereby  agrees to pay the  Lender,  on
demand, audit fees in connection with any audits or inspections conducted by the
Lender of any Collateral or the  Borrower's  operations or business at the rates
established  from time to time by the Lender as its audit fees  (which  fees are
currently $75.00 per hour per auditor),  together with all actual  out-of-pocket
costs  and  expenses  incurred  in  conducting  any such  audit  or  inspection;
PROVIDED,  HOWEVER,  that Lender will not perform such audits until either (i) a
Default, or (ii) the occurrence of the first Threshold Event.

     SECTION  2.4  COMPUTATION  OF  INTEREST  AND FEES;  WHEN  INTEREST  DUE AND
PAYABLE.  Interest accruing on the outstanding principal balance of the Advances
and fees hereunder  outstanding from time to time shall be computed on the basis
of  actual  number of days  elapsed  in a year of 360  days.  Interest  shall be
payable in arrears on the first day of each month and on the Termination Date.

     SECTION 2.5 [INTENTIONALLY OMITTED]

                                       9
<PAGE>
     SECTION 2.6 VOLUNTARY  PREPAYMENT;  TERMINATION  OF CREDIT  FACILITY BY THE
BORROWER;  PERMANENT  REDUCTION OF THE MAXIMUM  LINE;  WAIVER OF  REDUCTION  AND
TERMINATION  FEES.  Except  as  otherwise  provided  herein,  the  Borrower  may
terminate  the Credit  Facility  or prepay the  Advances in whole at any time or
from time to time in part,  and,  subject  to  payment  and  performance  of all
Obligations and termination of the Credit Facility,  the Lender shall release or
terminate the Security Interest and the Security Documents to which the Borrower
is entitled by law.

          (a)  TERMINATION  BY BORROWER.  The Borrower may  terminate the Credit
Facility at any time by (i) giving at least 30 days' prior written notice to the
Lender of the Borrower's  intention to terminate the Credit  Facility;  and (ii)
paying  the  Lender  fees in  accordance  with  Subsection  (b) if the  Borrower
terminates  the Credit  Facility  effective as of any date other than a Maturity
Date.

          (b) PERMANENT  REDUCTION OF MAXIMUM LINE. The Borrower may at any time
and from  time to time,  upon at least 30  days'  prior  written  notice  to the
Lender,  permanently  reduce in part or completely the Maximum Line or terminate
the Credit Facility in accordance with the following provisions:

               (i) The  Borrower  may not reduce the  Maximum  Line to an amount
less than the then-aggregate outstanding balance of the Revolving Advances.

               (ii) If a reduction  of the Maximum Line occurs at any time other
than the Maturity  Date,  the  Borrower  shall pay to the Lender a premium in an
amount equal to one-half of one percent (0.5%) of the reduction.

               (iii) Any  reduction in the Maximum Line must be in an amount not
less than $1,000,000.00 or an integral multiple thereof.

               (iv) If the  Borrower  reduces  the  Maximum  Line to  zero,  all
Obligations shall be immediately due and payable.

          (c) WAIVER OF REDUCTION FEES. The Borrower will not be required to pay
the fees  otherwise due under  Subsection  (b) if such reduction is requested is
made because of increased cash flow generated from the Borrower's  operations or
refinancing by an affiliate of the Lender.

     SECTION  2.7  MANDATORY  PREPAYMENT.  Without  notice  or  demand,  if  the
outstanding principal balance of the Revolving Advances shall at any time exceed
the Borrowing Base, the Borrower shall immediately prepay the Revolving Advances
to the extent  necessary to eliminate such excess.  Any payment  received by the
Lender  under  this  Section  2.7 or under  Section  2.6 may be  applied  to the
Obligations, in such order and in such amounts as the Lender, in its discretion,
may  from  time to time  determine.  For each day or  portion  thereof  that the
Revolving  Advances  shall exceed the Borrowing  Base, the Borrower shall pay to
the Lender an  overadvance  charge (which charge shall be in addition to and not
in lieu of any other interest,  fees, or charges payable by Borrower  hereunder)
in the amount of $100.00;  provided,  however,  that if such day occurs during a
Default Period, the overadvance charge for such day shall be $200.00.

                                       10
<PAGE>
     SECTION  2.8  PAYMENT.  All  payments  to  the  Lender  shall  be  made  in
immediately available funds and shall be applied to the Obligations upon receipt
by the Lender.  Notwithstanding  anything in Section 2.1,  the  Borrower  hereby
authorizes  the  Lender,  in its  discretion  at any  time or from  time to time
without the  Borrower's  request and even if the conditions set forth in Section
4.2 would not be  satisfied,  to make a Revolving  Advance in an amount equal to
the portion of the Obligations from time to time due and payable.

     SECTION 2.9 PAYMENT ON  NON-BANKING  DAYS.  Whenever any payment to be made
hereunder  shall be stated to be due on a day which is not a Banking  Day,  such
payment may be made on the next  succeeding  Banking Day, and such  extension of
time  shall in such case be  included  in the  computation  of  interest  on the
Advances or the fees hereunder, as the case may be.

     SECTION  2.10 USE OF  PROCEEDS.  The  Borrower  shall use the  proceeds  of
Advances  for ordinary  working  capital  purposes and to repay all  outstanding
indebtedness of the Borrower owed to Silicon Valley Bank.

     SECTION 2.11 LIABILITY RECORDS.  The Lender may maintain from time to time,
at its discretion,  liability records as to the Obligations. All entries made on
any such record shall be presumed  correct  until the Borrower  establishes  the
contrary.  Upon the  Lender's  demand,  the  Borrower  will admit and certify in
writing the exact principal  balance of the  Obligations  that the Borrower then
asserts to be outstanding.  Any billing statement or accounting  rendered by the
Lender shall be conclusive and fully binding on the Borrower unless the Borrower
gives the  Lender  specific  written  notice of  exception  within 30 days after
receipt.

                                   ARTICLE III
                      SECURITY INTEREST; OCCUPANCY; SETOFF

     SECTION  3.1 GRANT OF  SECURITY  INTEREST.  The  Borrower  hereby  pledges,
assigns and grants to the Lender a security interest  (collectively  referred to
as the "Security  Interest") in the Collateral,  as security for the payment and
performance of the Obligations.

     SECTION 3.2 NOTIFICATION OF ACCOUNT DEBTORS AND OTHER OBLIGORS.  The Lender
may at any time (upon a Default or the  occurrence of a Threshold  Event) notify
any account  debtor or other  person  obligated  to pay the amount due that such
right to payment has been assigned or transferred to the Lender for security and
shall be paid  directly to the  Lender.  The  Borrower  will join in giving such
notice if the Lender so  requests.  At any time after the Borrower or the Lender
gives such notice to an account  debtor or other  obligor,  the Lender may,  but
need not, in the Lender's name or in the Borrower's  name, (a) demand,  sue for,
collect or receive any money or property at any time  payable or  receivable  on
account of, or securing,  any such right to payment,  or grant any extension to,
make any  compromise or  settlement  with or otherwise  agree to waive,  modify,
amend or change the obligations  (including collateral  obligations) of any such
account  debtor  or  other  obligor;   and  (b)  as  the  Borrower's  agent  and
attorney-in-fact,  notify the United States Postal Service to change the address
for delivery of the  Borrower's  mail to any address  designated  by the Lender,
otherwise  intercept the Borrower's  mail, and receive,  open and dispose of the
Borrower's  mail,  applying all Collateral as permitted under this Agreement and
holding all other mail for the Borrower's account or forwarding such mail to the
Borrower's last known address.

                                       11
<PAGE>
          SECTION 3.3  ASSIGNMENT OF INSURANCE.  As additional  security for the
payment and performance of the  Obligations,  the Borrower hereby assigns to the
Lender any and all monies (including, without limitation,  proceeds of insurance
and  refunds of  unearned  premiums)  due or to become due under,  and all other
rights of the Borrower with respect to, any and all policies of insurance now or
at any time  hereafter  covering the  Collateral or any evidence  thereof or any
business records or valuable papers pertaining thereto,  and the Borrower hereby
directs  the issuer of any such  policy to pay all such  monies  directly to the
Lender.  At any time, if a Default Period then exists,  the Lender may (but need
not), in the Lender's name or in the Borrower's name,  execute and deliver proof
of  claim,  receive  all such  monies,  endorse  checks  and  other  instruments
representing payment of such monies, and adjust, litigate, compromise or release
any claim against the issuer of any such policy.

     SECTION 3.4 OCCUPANCY.

          (a) The Borrower hereby  irrevocably grants to the Lender the right to
take possession of the Premises at any time during each Default Period.

          (b)  The  Lender  may  use  the  Premises   only  to  hold,   process,
manufacture,  sell, use, store, liquidate,  realize upon or otherwise dispose of
goods that are  Collateral  and for other  purposes  that the Lender may in good
faith deem to be related or incidental purposes.

          (c) The Lender's  right to hold the Premises shall cease and terminate
upon the earlier of (i) payment in full and  discharge  of all  Obligations  and
termination  of the  Commitment,  (ii)  final sale or  disposition  of all goods
constituting  Collateral and delivery of all such goods to purchasers,  or (iii)
the end of the applicable Default Period.

          (d) The Lender  shall not be  obligated to pay or account for any rent
or  other  compensation  for  the  possession,  occupancy  or  use of any of the
Premises; provided, however, that if the Lender does pay or account for any rent
or  other  compensation  for  the  possession,  occupancy  or  use of any of the
Premises,  the Borrower shall  reimburse the Lender promptly for the full amount
thereof.  In addition,  the Borrower  will pay, or reimburse the Lender for, all
taxes,  fees, duties,  imposts,  charges and expenses at any time incurred by or
imposed  upon the  Lender  by  reason  of the  execution,  delivery,  existence,
recordation,  performance  or enforcement of this Agreement or the provisions of
this Section 3.4.

     SECTION  3.5  LICENSE.   The  Borrower   hereby  grants  to  the  Lender  a
non-exclusive,  worldwide and royalty-free  license to use or otherwise  exploit
all trademarks,  franchises, trade names, copyrights and patents of the Borrower
for the  purpose  of  selling,  leasing  or  otherwise  disposing  of any or all
Collateral during any Default Period.

     SECTION  3.6  FINANCING   STATEMENT.   A  carbon,   photographic  or  other
reproduction  of this  Agreement or of any  financing  statements  signed by the
Borrower is sufficient as a financing  statement and may be filed as a financing
statement in any state to perfect the security  interests  granted  hereby.  For
this purpose, the following information is set forth:

                                       12
<PAGE>
     Name and address of Debtor:
     OrthoLogic Corp.
     1275 West Washington Street
     Tempe, AZ  85281

     Federal Tax Identification No. 86-0585310

     Name and address of Secured Party:
     Wells Fargo Business Credit, Inc.
     100 West Washington Street, 7th Floor
     MAC S4101-076
     Phoenix, AZ  85003

     Federal Tax Identification No. 41-1237652

     SECTION 3.7 SETOFF.  The Borrower agrees that the Lender may at any time or
from time to time, at its sole  discretion and without demand and without notice
to anyone,  setoff any liability owed to the Borrower by the Lender,  whether or
not due,  against any  Obligation,  whether or not due. In addition,  each other
Person holding a participating  interest in any Obligations (so long as Borrower
has been made aware of such  participation)  shall have the right to appropriate
or  setoff  any  deposit  or other  liability  then  owed by such  Person to the
Borrower,  whether  or not  due,  and  apply  the  same to the  payment  of said
participating  interest,  as fully as if such  Person had lent  directly  to the
Borrower the amount of such participating interest.

                                   ARTICLE IV
                              CONDITIONS OF LENDING

     SECTION 4.1  CONDITIONS  PRECEDENT TO THE INITIAL  REVOLVING  ADVANCE.  The
Lender's  obligation to make the initial  Revolving  Advance  hereunder shall be
subject to the conditions  precedent that (i) after giving effect to the initial
Revolving Advance there is not less than  $1,500,000.00 in excess  Availability,
and (ii) the Lender shall have received all of the  following,  each in form and
substance satisfactory to the Lender:

          (a) This Agreement, properly executed by the Borrower.

          (b) The Note, properly executed by the Borrower.

          (c) A true and  correct  copy of any and all leases  pursuant to which
the  Borrower is leasing the  Principal  Premises,  together  with a  landlord's
disclaimer  and consent with respect to the lease for the principal  premises in
Phoenix, Arizona.

          (d) A true and  correct  copy of any and all  agreements  pursuant  to
which the Borrower's  property at its Principal Premises is in the possession of
any Person other than the Borrower,  together  with, (i) an  acknowledgment  and
waiver of liens from each  subcontractor  who has  possession of the  Borrower's
goods from time to time, (ii) UCC financing statements sufficient to protect the
Borrower's  and the  Lender's  interests  in such goods,  and (iii) UCC searches
showing that no other  secured  party has filed a financing  statement  covering
such  Person's  property  other than the  Borrower,  or if there exists any such
secured  party,  evidence that each such secured party has received  notice from
the  Borrower  and the Lender  sufficient  to  protect  the  Borrower's  and the
Lender's interests in the Borrower's goods from any claim by such secured party.

                                       13
<PAGE>
          (e) Current searches of appropriate filing offices showing that (i) no
state or federal  tax liens have been  filed and  remain in effect  against  the
Borrower, (ii) no financing statements or assignments of patents,  trademarks or
copyrights  have been filed and remain in effect  against  the  Borrower  except
those financing statements and assignments of patents,  trademarks or copyrights
relating  to  Permitted  Liens or to liens  held by Persons  who have  agreed in
writing  that upon  receipt of proceeds of the  Advances,  they will deliver UCC
releases  and/or  terminations  and  releases  of such  assignments  of patents,
trademarks or copyrights  satisfactory  to the Lender,  and (iii) the Lender has
duly filed all financing  statements necessary to perfect the Security Interest,
to the extent the Security Interest is capable of being perfected by filing.

          (f) A certificate of the Borrower's  Secretary or Assistant  Secretary
certifying  as to (i)  the  resolutions  of the  Borrower's  directors  and,  if
required,  shareholders,  authorizing the execution, delivery and performance of
the Loan Documents,  (ii) the Borrower's  articles of incorporation  and bylaws,
and (iii) the  signatures  of the  Borrower's  officers or agents  authorized to
execute and deliver the Loan  Documents and other  instruments,  agreements  and
certificates, including Advance requests, on the Borrower's behalf.

          (g) A  current  certificate  issued  by  the  Secretary  of  State  of
Delaware,  certifying  that the Borrower is in  compliance  with all  applicable
organizational requirements of the State of Delaware.

          (h)  Evidence  that the  Borrower  is duly  licensed or  qualified  to
transact business in Arizona and Ontario, Canada.

          (i) A  certificate  of an officer of the Borrower  confirming,  in his
corporate capacity, the representations and warranties set forth in Article V.

          (j) An opinion of counsel to the Borrower, addressed to the Lender.

          (k) Certificates of the insurance required hereunder,  with all hazard
insurance  containing a lender's loss payable  endorsement in the Lender's favor
and with all liability insurance naming the Lender as an additional insured.

          (l)  Payment of the fees and  commissions  due through the date of the
initial  Advance under Section 2.3 and expenses  incurred by the Lender  through
such date and required to be paid by the Borrower  under Section 9.6,  including
all legal expenses incurred through the date of this Agreement.

          (m) Such  other  documents  as the Lender in its sole  discretion  may
require.

     SECTION 4.2 CONDITIONS  PRECEDENT TO ALL ADVANCES.  The Lender's obligation
to make each Advance shall be subject to the further  conditions  precedent that
on such date:

                                       14
<PAGE>
          (a) the  representations  and  warranties  contained  in Article V are
correct on and as of the date of such  Advance as though  made on and as of such
date,  except to the extent  that such  representations  and  warranties  relate
solely to an earlier date; and

          (b) no event has occurred and is continuing, or would result from such
Advance which constitutes a Default or an Event of Default.

     SECTION 4.3 CONDITIONS  PRECEDENT TO AN ADVANCE CREATING A THRESHOLD EVENT.
The Lender's  obligation to make any Advance which shall  constitute a Threshold
Event shall be subject to the further conditions precedent that on such date:

          (a) The Borrower  shall have entered into an agreement with Lender and
Wells Fargo Bank,  N.A. or such other bank  (including  Silicon  Valley Bank) as
Borrower and Lender shall agree,  establishing  a collection  account into which
all  payments on  Receivables  shall be  deposited  (the  "Collection  Account")
pursuant to terms  satisfactory  to Lender and Wells  Fargo  Bank,  N.A. or such
other bank.

          (b)  Borrower  shall have  directed  all  account  debtors to make all
payments on Receivables to the lockbox  established  under the Lockbox Agreement
and/or the Existing Lockbox Agreement, as set forth in Section 6.10.

          (c) If the Existing Lockbox Agreement shall then still exist, Borrower
shall have  obtained  either an  acknowledgment  from the bank  maintaining  the
Existing  Lockbox  Agreement  that all  Receivables  deposited  into the lockbox
maintained  thereunder shall be directed to the Collection  Account, or Borrower
shall have  cooperated  with Lender in  submitting a change of address to all of
Borrower's  account  debtors to direct the  payment  of all  Receivables  to the
lockbox established under the Lockbox Agreement.

          (d) Lender  shall  have  completed  a  Collateral  examination  at the
expense of Borrower, the results of which shall be satisfactory to Lender.

          (e) Lender shall have  received an  acknowledgment  and  agreement (in
form and  substance  satisfactory  to Lender) from each licensor in favor of the
Lender,  together  with a  true,  correct  and  complete  copy  of  all  license
agreements.

                                    ARTICLE V
                         REPRESENTATIONS AND WARRANTIES

     The Borrower represents and warrants to the Lender as follows:

     SECTION 5.1 CORPORATE  EXISTENCE AND POWER;  NAME; CHIEF EXECUTIVE  OFFICE;
INVENTORY AND EQUIPMENT LOCATIONS;  TAX IDENTIFICATION NUMBER. The Borrower is a
corporation,  duly  organized,  validly  existing and in good standing under the
laws of the State of  Delaware  and is duly  licensed or  qualified  to transact
business in all  jurisdictions  where the  character  of the  property  owned or
leased or the nature of the business  transacted  by it makes such  licensing or
qualification  necessary.  The Borrower has all requisite  power and  authority,
corporate or otherwise,  to conduct its business,  to own its  properties and to
execute and  deliver,  and to perform  all of its  obligations  under,  the Loan
Documents. During its existence, the Borrower has done business solely under the
names set forth in Schedule 5.1 hereto.  The Borrower's  chief executive  office
and principal  place of business is located at the address set forth in Schedule
5.1 hereto,  and all of the Borrower's  records  relating to its business or the

                                       15
<PAGE>
Collateral are kept at that location.  All Inventory and Equipment is located at
that location or at one of the other locations set forth in Schedule 5.1 hereto.
The Borrower's tax  identification  number is correctly set forth in Section 3.6
hereto.

     SECTION  5.2  AUTHORIZATION  OF  BORROWING;   NO  CONFLICT  AS  TO  LAW  OR
AGREEMENTS. The execution,  delivery and performance by the Borrower of the Loan
Documents  and the  borrowings  from  time  to time  hereunder  have  been  duly
authorized by all necessary corporate action and do not and will not (i) require
any  consent or  approval  of the  Borrower's  stockholders;  (ii)  require  any
authorization,  consent or approval by, or  registration,  declaration or filing
with, or notice to, any  governmental  department,  commission,  board,  bureau,
agency or instrumentality,  domestic or foreign, or any third party, except such
authorization, consent, approval, registration, declaration, filing or notice as
has been obtained, accomplished or given prior to the date hereof; (iii) violate
any  provision of any law, rule or regulation  (including,  without  limitation,
Regulation X of the Board of Governors of the Federal  Reserve System) or of any
order,  writ,  injunction or decree presently in effect having  applicability to
the Borrower or of the  Borrower's  articles of  incorporation  or bylaws;  (iv)
result in a breach of or  constitute  a default  under any  indenture or loan or
credit agreement or any other material  agreement,  lease or instrument to which
the  Borrower  is a party  or by  which  it or its  properties  may be  bound or
affected;  or (v) result in, or  require,  the  creation  or  imposition  of any
mortgage,  deed of trust,  pledge,  lien,  security  interest or other charge or
encumbrance  of any  nature  (other  than the  Security  Interest)  upon or with
respect  to any  of the  properties  now  owned  or  hereafter  acquired  by the
Borrower.

     SECTION 5.3 LEGAL  AGREEMENTS.  This  Agreement  constitutes  and, upon due
execution by the Borrower,  the other Loan Documents will  constitute the legal,
valid and binding obligations of the Borrower,  enforceable against the Borrower
in accordance with their respective terms.

     SECTION 5.4 SUBSIDIARIES. Except as set forth in Schedule 5.4, the Borrower
has no Subsidiaries.

     SECTION 5.5  FINANCIAL  CONDITION;  NO ADVERSE  CHANGE.  The  Borrower  has
heretofore  furnished  to  the  Lender  unaudited  financial  statements  of the
Borrower  for the fiscal year ended  December  31,  1999,  and those  statements
fairly present the Borrower's  financial  condition on the dates thereof and the
results of its  operations  and cash flows for the  periods  then ended and were
prepared in accordance with generally accepted accounting principles.  Since the
date of the most recent financial statements, there has been no material adverse
change  in the  Borrower's  business,  properties  or  condition  (financial  or
otherwise).

     SECTION 5.6  LITIGATION.  Except as disclosed on Schedule 5.6, there are no
actions,   suits  or  proceedings  pending  or,  to  the  Borrower's  knowledge,
threatened  against or affecting  the Borrower or any of its  Affiliates  or the
properties  of the  Borrower  or  any of its  Affiliates  before  any  court  or
governmental department,  commission,  board, bureau, agency or instrumentality,
domestic or foreign,  which,  if determined  adversely to the Borrower or any of
its Affiliates, would have a material adverse effect on the financial condition,
properties or operations of the Borrower or any of its Affiliates.

                                       16
<PAGE>
     SECTION 5.7  REGULATION  U. The  Borrower is not engaged in the business of
extending  credit for the purpose of purchasing or carrying margin stock (within
the meaning of  Regulation U of the Board of  Governors  of the Federal  Reserve
System),  and no part of the proceeds of any Advance will be used to purchase or
carry  any  margin  stock or to  extend  credit to  others  for the  purpose  of
purchasing or carrying any margin stock.

     SECTION 5.8 TAXES.  The Borrower and its Affiliates  have paid or caused to
be paid to the proper  authorities  when due all federal,  state and local taxes
required to be withheld by each of them.  The Borrower and its  Affiliates  have
filed all  federal,  state and local tax returns  which to the  knowledge of the
officers of the Borrower or any  Affiliate,  as the case may be, are required to
be filed,  and the Borrower and its Affiliates have paid or caused to be paid to
the respective  taxing  authorities all taxes as shown on said returns or on any
assessment received by any of them to the extent such taxes have become due.

     SECTION 5.9 TITLES AND LIENS.  The Borrower has good and absolute  title to
all Collateral  described in the collateral  reports  provided to the Lender and
all other  Collateral,  properties and assets  reflected in the latest financial
statements  referred to in Section 5.5 and all proceeds thereof,  free and clear
of all  mortgages,  security  interests,  liens  and  encumbrances,  except  for
Permitted Liens. No financing statement naming the Borrower as debtor is on file
in any office except to perfect only Permitted Liens.

     SECTION 5.10 PLANS.  Except as disclosed to the Lender in writing  prior to
the date hereof, neither the Borrower nor any of its Affiliates maintains or has
maintained  any Plan.  Neither the Borrower nor any  Affiliate  has received any
notice or has any knowledge to the effect that it is not in full compliance with
any of the  requirements  of  ERISA.  No  Reportable  Event  or  other  fact  or
circumstance which may have an adverse effect on the Plan's tax qualified status
exists  in  connection  with  any  Plan.  Neither  the  Borrower  nor any of its
Affiliates has:

          (a) Any accumulated funding deficiency within the meaning of ERISA; or

          (b) Any  liability or knows of any fact or  circumstances  which could
result  in any  liability  to the  Pension  Benefit  Guaranty  Corporation,  the
Internal  Revenue  Service,  the  Department  of  Labor  or any  participant  in
connection with any Plan (other than accrued  benefits which or which may become
payable to participants or beneficiaries of any such Plan).

     SECTION 5.11 DEFAULT.  The Borrower is in compliance with all provisions of
all  agreements,  instruments,  decrees  and orders to which it is a party or by
which it or its  property is bound or  affected,  the breach or default of which
could have a material  adverse  effect on the  Borrower's  financial  condition,
properties or operations.

     SECTION 5.12 ENVIRONMENTAL MATTERS.

          (a) DEFINITIONS.  As used in this Agreement, the following terms shall
have the following meanings:

               (i) "Environmental Law" means any federal,  state, local or other
governmental statute,  regulation,  law or ordinance dealing with the protection
of human health and the environment.

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<PAGE>
               (ii)  "Hazardous  Substances"  means  pollutants,   contaminants,
hazardous substances, hazardous wastes, petroleum and fractions thereof, and all
other  chemicals,  wastes,  substances and materials  listed in, regulated by or
identified in any Environmental Law.

          (b) To the Borrower's best knowledge,  there are not present in, on or
under the  Premises  any  Hazardous  Substances  in such form or  quantity as to
create any liability or  obligation  for either the Borrower or the Lender under
common law of any jurisdiction or under any  Environmental  Law, and to the best
of  Borrower's  knowledge no  Hazardous  Substances  have been  stored,  buried,
spilled,  leaked,  discharged,  emitted or released in, on or under the Premises
during Borrower's  occupancy of the Premises in such a way as to create any such
liability.

          (c) To the Borrower's best knowledge, the Borrower has not disposed of
Hazardous  Substances  in such a manner as to  create  any  liability  under any
Environmental Law.

          (d)  There  are not and  there  never  have  been,  during  Borrower's
occupancy of the Premises to the best of  Borrower's  knowledge,  any  requests,
claims, notices, investigations,  demands, administrative proceedings,  hearings
or  litigation,  relating in any way to the Premises or the  Borrower,  alleging
liability under,  violation of, or noncompliance  with any  Environmental Law or
any license,  permit or other  authorization  issued  pursuant  thereto.  To the
Borrower's best knowledge, no such matter is threatened or impending.

          (e) To the Borrower's  best knowledge,  the Borrower's  businesses are
and have in the past always been conducted in accordance with all  Environmental
Laws and all licenses, permits and other authorizations required pursuant to any
Environmental  Law and necessary for the lawful and efficient  operation of such
businesses are in the Borrower's possession and are in full force and effect. No
permit  required  under any  Environmental  Law is scheduled to expire within 12
months  and  there  is no  threat  that  any  such  permit  will  be  withdrawn,
terminated, limited or materially changed.

          (f) To the Borrower's best  knowledge,  the Premises are not and never
have been, during Borrower's  occupancy of the Premises,  listed on the National
Priorities  List, the  Comprehensive  Environmental  Response,  Compensation and
Liability  Information  System  or any  similar  federal,  state or local  list,
schedule, log, inventory or database.

          (g)  The   Borrower  has   delivered   to  Lender  all   environmental
assessments,  audits, reports,  permits, licenses and other documents describing
or relating in any way to the Premises or Borrower's businesses.

     SECTION 5.13  SUBMISSIONS  TO LENDER.  All financial and other  information
provided to the Lender by or on behalf of the  Borrower in  connection  with the
Borrower's  request for the credit  facilities  contemplated  hereby is true and
correct in all material respects and, as to projections,  valuations or proforma
financial  statements,  present a good  faith  opinion  as to such  projections,
valuations and proforma condition and results.

     SECTION 5.14 FINANCING STATEMENTS.  The Borrower has provided to the Lender
signed  financing  statements  sufficient  when  filed to perfect  the  Security
Interest and the other  security  interests  created by the Security  Documents.

                                       18
<PAGE>
When such  financing  statements  are filed in the offices  noted  therein,  the
Lender will have a valid and perfected  security  interest in all Collateral and
all other  collateral  described in the Security  Documents  which is capable of
being perfected by filing financing statements.  None of the Collateral or other
collateral covered by the Security Documents is or will become a fixture on real
estate, unless a sufficient fixture filing is in effect with respect thereto.

     SECTION 5.15 RIGHTS TO PAYMENT.  Each right to payment and each instrument,
document,   chattel  paper  and  other  agreement   constituting  or  evidencing
Collateral or other collateral  covered by the Security Documents is (or, in the
case of all future Collateral or such other collateral,  will be when arising or
issued) the valid,  genuine and legally  enforceable  obligation,  subject to no
defense,  setoff or  counterclaim,  of the account debtor or other obligor named
therein or in the Borrower's  records  pertaining  thereto as being obligated to
pay such obligation.

     SECTION 5.16 FINANCIAL SOLVENCY. Both before and after giving effect to the
transactions  contemplated  in the Loan  Documents,  none of the Borrower or its
Affiliates:

          (a) was or will be  insolvent,  as that  term is used and  defined  in
Section  101(32)  of the  United  States  Bankruptcy  Code and  Section 2 of the
Uniform Fraudulent Transfer Act;

          (b) has unreasonably small capital or is engaged or about to engage in
a business or a transaction  for which any  remaining  assets of the Borrower or
such Affiliate are unreasonably small;

          (c) by executing,  delivering or performing its obligations  under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto,  intends to, nor believes that it will, incur debts beyond
its ability to pay them as they mature;

          (d) by executing,  delivering or performing its obligations  under the
Loan Documents or other documents to which it is a party or by taking any action
with respect thereto,  intends to hinder, delay or defraud either its present or
future creditors; and

          (e) at this time  contemplates  filing a petition in bankruptcy or for
an  arrangement  or  reorganization  or  similar  proceeding  under  any law any
jurisdiction,  nor, to the best knowledge of the Borrower, is the subject of any
actual,  pending or threatened  bankruptcy,  insolvency  or similar  proceedings
under any law of any jurisdiction.

                                   ARTICLE VI
                        BORROWER'S AFFIRMATIVE COVENANTS

     So long as the  Obligations  shall remain  unpaid,  or the Credit  Facility
shall  remain   outstanding,   the  Borrower  will  comply  with  the  following
requirements, unless the Lender shall otherwise consent in writing:

     SECTION 6.1 REPORTING REQUIREMENTS.  The Borrower will deliver, or cause to
be delivered,  to the Lender each of the  following,  which shall be in form and
detail  acceptable to the Lender  (provided that in the case of matters due on a
date  certain  pursuant  to the  terms of this  Section  6.1,  it shall not be a
Default so long as the  reporting  requirement  shall be  satisfied  by Borrower
within 10 days after such due date):

                                       19
<PAGE>
          (a) as soon as  available,  and in any event  within 90 days after the
end of each  fiscal  year of the  Borrower,  the  Borrower's  audited  financial
statements  with  the  unqualified  opinion  of  independent   certified  public
accountants  selected by the Borrower and acceptable to the Lender, which annual
financial statements shall include the Borrower's balance sheet as of the end of
such fiscal year and the related statements of the Borrower's  income,  retained
earnings and cash flows for the fiscal year then ended,  prepared, if the Lender
so  requests,   on  a  consolidating  and  consolidated  basis  to  include  any
Affiliates,  all in  reasonable  detail and  prepared in  accordance  with GAAP,
together with (i) copies of all management letters prepared by such accountants;
(ii)  a  report  signed  by  such   accountants   stating  that  in  making  the
investigations necessary for said opinion they obtained no knowledge,  except as
specifically  stated,  of any  Default  or Event of  Default  hereunder  and all
relevant facts in reasonable  detail to evidence,  and the  computations  as to,
whether or not the Borrower is in compliance with the  requirements set forth in
Sections 6.12 through 6.14,  and 7.10; and (iii) a certificate of the Borrower's
chief  financial  officer  stating  that  such  financial  statements  have been
prepared in  accordance  with GAAP and whether or not such officer has knowledge
of the  occurrence  of any  Default or Event of Default  hereunder  and,  if so,
stating in reasonable detail the facts with respect thereto;

          (b) as soon as available and in any event within 20 days after the end
of each month, an unaudited/internal  balance sheet and statements of income and
retained  earnings  of the  Borrower as at the end of and for such month and for
the year to date period then ended,  prepared,  if the Lender so requests,  on a
consolidating  and consolidated  basis to include any Affiliates,  in reasonable
detail and stating in comparative  form the figures for the  corresponding  date
and periods in the previous year, all prepared in accordance with GAAP,  subject
to  year-end  audit  adjustments;  and  accompanied  by  a  certificate  of  the
Borrower's  chief  financial  officer,  substantially  in the form of  Exhibit B
hereto  stating  (i) that  such  financial  statements  have  been  prepared  in
accordance with GAAP, subject to year-end audit adjustments, (ii) whether or not
such officer has knowledge of the  occurrence of any Default or Event of Default
hereunder  not  theretofore  reported  and  remedied  and,  if  so,  stating  in
reasonable  detail the facts with respect thereto,  and (iii) all relevant facts
in reasonable detail to evidence, and the computations as to, whether or not the
Borrower is in  compliance  with the  requirements  set forth in  Sections  6.12
through 6.14, and 7.10;

          (c) within 20 days after the end of each month or more  frequently  if
the Lender so requires,  agings of the  Borrower's  accounts  receivable and its
accounts payable,  an inventory  certification  report, and a calculation of the
Borrower's  Accounts,  Eligible  Accounts,  and  Inventory as at the end of such
month or shorter time period;

          (d) at least 30 days before the  beginning  of each fiscal year of the
Borrower,  the projected  balance sheets and income statements for each month of
such year,  each in reasonable  detail,  representing  the Borrower's good faith
projections and certified by the Borrower's chief financial officer as being the
most accurate projections available and identical to the projections used by the
Borrower for internal planning purposes, together with such supporting schedules
and information as the Lender may in its discretion require;

                                       20
<PAGE>
          (e) immediately after the commencement  thereof,  notice in writing of
all  litigation and of all  proceedings  before any  governmental  or regulatory
agency  affecting  the  Borrower of the type  described in Section 5.12 or which
seek a monetary recovery against the Borrower in excess of $500,000.00;

          (f) as promptly as  practicable  (but in any event not later than five
business  days)  after an  officer  of the  Borrower  obtains  knowledge  of the
occurrence  of any  event  which  constitutes  a  Default  or Event  of  Default
hereunder,  notice of such occurrence,  together with a detailed  statement by a
responsible  officer of the Borrower of the steps being taken by the Borrower to
cure the effect of such Default or Event of Default;

          (g) as soon as  possible  and in any event  within  30 days  after the
Borrower knows or has reason to know that any  Reportable  Event with respect to
any Plan has occurred,  the statement of the Borrower's chief financial  officer
setting  forth  details as to such  Reportable  Event and the  action  which the
Borrower  proposes to take with  respect  thereto,  together  with a copy of the
notice of such Reportable Event to the Pension Benefit Guaranty Corporation;

          (h) as soon as  possible,  and in any event  within 20 days  after the
Borrower fails to make any quarterly  contribution  required with respect to any
Plan under Section 412(m) of the Internal Revenue Code of 1986, as amended,  the
statement of the Borrower's chief financial  officer setting forth details as to
such  failure and the action  which the  Borrower  proposes to take with respect
thereto,  together  with a copy of any  notice of such  failure  required  to be
provided to the Pension Benefit Guaranty Corporation;

          (i) on and after the  earlier to occur of (i) a  Threshold  Event,  or
(ii) a Default,  promptly upon knowledge  thereof,  notice of (i) any dispute or
claim by the Borrower's  customers which exceeds $25,000.00;  (ii) credit memos;
(iii) any goods returned to or recovered by the Borrower; and (iv) any change in
the persons constituting the Borrower's officers and directors;

          (j) promptly upon knowledge thereof, notice of any loss of or material
damage to the Collateral or other collateral  covered by the Security  Documents
or of any substantial  adverse change in the Collateral or such other collateral
or the prospect of payment thereof;

          (k)  promptly  upon  their  distribution,   copies  of  all  financial
statements,  reports and proxy  statements which the Borrower shall have sent to
its stockholders;

          (l)  promptly  after  the  sending  or filing  thereof,  copies of all
regular and periodic  reports which the Borrower  shall file with the Securities
and Exchange Commission or any national securities exchange;

          (m)  promptly  upon  knowledge  thereof,   notice  of  the  Borrower's
violation of any law, rule or regulation,  the  non-compliance  with which could
materially  and  adversely  affect  the  Borrower's  business  or its  financial
condition; and

          (n) within 20 days  after the end of each  month  until such time as a
Threshold  Event  shall  occur and then  thereafter  from time to time with such
frequency as shall be required by Lender,  with reasonable  promptness,  any and
all  receivables  schedules,  collection  reports,  deposit  records,  equipment

                                       21
<PAGE>
schedules,  copies of  invoices  to  account  debtors,  shipment  documents  and
delivery receipts for goods sold, and such other material,  reports,  records or
information as the Lender may request.

     SECTION 6.2 BOOKS AND RECORDS;  INSPECTION  AND  EXAMINATION.  The Borrower
will keep  accurate  books of record and  account for itself  pertaining  to the
Collateral and pertaining to the Borrower's business and financial condition and
such other matters as the Lender may from time to time request in which true and
complete  entries will be made in  accordance  with GAAP and,  upon the Lender's
request,  will permit any  officer,  employee,  attorney or  accountant  for the
Lender to audit,  review,  make  extracts from or copy any and all corporate and
financial  books  and  records  of the  Borrower  at all times  during  ordinary
business  hours,  to send and discuss  with account  debtors and other  obligors
requests for  verification  of amounts owed to the Borrower,  and to discuss the
Borrower's affairs with any of its directors, officers, employees or agents. The
Borrower will permit the Lender,  or its  employees,  accountants,  attorneys or
agents, to examine and inspect any Collateral,  other collateral  covered by the
Security  Documents  or any other  property  of the  Borrower at any time during
ordinary business hours.

     SECTION 6.3 ACCOUNT VERIFICATION.  The Lender may at any time and from time
to time send or require  the  Borrower  to send  requests  for  verification  of
accounts or notices of assignment  to account  debtors and other  obligors.  The
Lender may also at any time and from time to time telephone  account debtors and
other obligors to verify accounts.

     SECTION 6.4 COMPLIANCE WITH LAWS.

          (a) The Borrower will (i) comply with the  requirements  of applicable
laws and  regulations,  the  non-compliance  with  which  would  materially  and
adversely  affect its business or its financial  condition and (ii) use and keep
the Collateral,  and require that others use and keep the  Collateral,  only for
lawful purposes,  without violation of any federal,  state or local law, statute
or ordinance.

          (b)  Without  limiting  the  foregoing   undertakings,   the  Borrower
specifically  agrees that it will comply with all applicable  Environmental Laws
and obtain and comply with all permits,  licenses and similar approvals required
by any Environmental Laws, and will not generate,  use, transport,  treat, store
or  dispose  of any  Hazardous  Substances  in such a manner  as to  create  any
liability  or  obligation  under  the  common  law  of any  jurisdiction  or any
Environmental Law.

     SECTION 6.5 PAYMENT OF TAXES AND OTHER  CLAIMS.  The  Borrower  will pay or
discharge,  when due, (a) all taxes, assessments and governmental charges levied
or imposed upon it or upon its income or profits,  upon any properties belonging
to it (including,  without  limitation,  the  Collateral) or upon or against the
creation,  perfection or continuance of the Security Interest, prior to the date
on which  penalties  attach  thereto,  (b) all  federal,  state and local  taxes
required to be withheld  by it, and (c) all lawful  claims for labor,  materials
and  supplies  which,  if unpaid,  might by law become a lien or charge upon any
properties of the Borrower; provided, that the Borrower shall not be required to
pay any such tax,  assessment,  charge or claim whose amount,  applicability  or
validity is being  contested in good faith by  appropriate  proceedings  and for
which proper reserves have been made.

                                       22
<PAGE>
     SECTION 6.6 MAINTENANCE OF PROPERTIES.

          (a) The  Borrower  will keep and maintain  the  Collateral,  the other
collateral  covered by the Security  Documents  and all of its other  properties
necessary or useful in its business in good condition,  repair and working order
(normal wear and tear excepted) and will from time to time replace or repair any
worn, defective or broken parts; provided, however, that nothing in this Section
6.6 shall prevent the Borrower from  discontinuing the operation and maintenance
of any of its properties if such  discontinuance  is, in the Lender's  judgment,
desirable in the conduct of the Borrower's  business and not  disadvantageous in
any material respect to the Lender.

          (b) The  Borrower  will  defend the  Collateral  against all claims or
demands of all persons (other than the Lender and Permitted  Liens) claiming the
Collateral or any interest therein.

          (c) The Borrower will keep all Collateral and other collateral covered
by the Security  Documents free and clear of all security  interests,  liens and
encumbrances  except Permitted Liens.  SECTION 6.7 INSURANCE.  The Borrower will
obtain  and at all  times  maintain  insurance  with  insurers  believed  by the
Borrower to be responsible and reputable, in such amounts and against such risks
as may from time to time be required  by the  Lender,  but in all events in such
amounts and against  such risks as is usually  carried by  companies  engaged in
similar  business and owning  similar  properties  in the same general  areas in
which the Borrower  operates.  Without limiting the generality of the foregoing,
the  Borrower  will  at  all  times  maintain  business  interruption  insurance
including  coverage for force majeure and keep all tangible  Collateral  insured
against risks of fire (including so-called extended coverage),  theft, collision
(for  Collateral  consisting of motor vehicles) and such other risks and in such
amounts as the  Lender  may  reasonably  request,  with any loss  payable to the
Lender to the extent of its interest,  and all policies of such insurance  shall
contain a lender's loss payable  endorsement for the Lender's benefit acceptable
to the Lender. All policies of liability insurance required hereunder shall name
the Lender as an additional insured.

     SECTION 6.8  PRESERVATION  OF  EXISTENCE.  The Borrower  will  preserve and
maintain  its  existence  and  all  of its  rights,  privileges  and  franchises
necessary or desirable in the normal  conduct of its business and shall  conduct
its business in an orderly, efficient and regular manner.

     SECTION 6.9 DELIVERY OF INSTRUMENTS,  ETC. Upon request by the Lender,  the
Borrower  will  promptly  deliver  to the  Lender  in  pledge  all  instruments,
documents and chattel papers constituting Collateral,  duly endorsed or assigned
by the Borrower.

     SECTION 6.10 LOCKBOX AGREEMENTS AND COLLECTION ACCOUNT.

          (a) As of the date of this Agreement, the Borrower maintains a lockbox
under the "Existing Lockbox Agreement" with Silicon Valley Bank. At such time as
a Threshold Event may occur,  Borrower shall irrevocably and permanently  ensure
that all  Receivables  deposited  in the  lockbox  under  the  Existing  Lockbox
Agreement shall be deposited directly to the Collection Account.

                                       23
<PAGE>
          (b) After the date of this Agreement,  but in any event not later than
the earlier to occur of, (i) a Threshold  Event, or (ii) 18 months from the date
of this Agreement,  Borrower shall have entered into the Lockbox  Agreement with
Lender,  Wells Fargo Bank,  N.A. and Regulus West,  LLC pursuant to an agreement
with terms and conditions  satisfactory to Lender (the "Lockbox Agreement").  As
each  account  debtor's  contract is  renewed,  Borrower  shall  direct that all
Receivables  thereafter be directed to the lockbox established under the Lockbox
Agreement. The following provisions shall apply to the Lockbox Agreement:

               (i)  The  Lockbox   Agreement   will   require  all  payments  on
Receivables to be deposited in the  Collection  Account so long as any Revolving
Advance remains  outstanding  after the occurrence of a Threshold  Event. If the
Borrower  receives  any  payments  on  Receivables  after  the  occurrence  of a
Threshold  Event and while any Revolving  Advance is  outstanding,  the Borrower
shall deposit such payments into the Collection Account. Until so deposited, the
Borrower  shall hold all such  payments in trust for and as the  property of the
Lender and shall not  commingle  such  payments  with any of its other  funds or
property.

               (ii) Amounts  deposited in the Collection  Account shall not bear
interest and shall not be subject to withdrawal  by the  Borrower,  except after
full payment and discharge of all Obligations.

               (iii) All deposits in the  Collection  Account  shall  constitute
proceeds of Collateral and shall not constitute payment of the Obligations.  The
Lender from time to time at its  discretion  may, apply  deposited  funds in the
Collection Account to the payment of the Obligations,  in any order or manner of
application  satisfactory  to the  Lender,  by  transferring  such  funds to the
Lender's general account.

               (iv) All  items  deposited  in the  Collection  Account  shall be
subject to final payment. If any such item is returned uncollected, the Borrower
will  immediately  pay the Lender,  or, for items  deposited  in the  Collection
Account,  the bank  maintaining  such account,  the amount of that item, or such
bank at its  discretion  may  charge  any  uncollected  item  to the  Borrower's
commercial account or other account. The Borrower shall be liable as an endorser
on all  items  deposited  in the  Collection  Account,  whether  or not in  fact
endorsed by the Borrower.

          (c) Until the  earlier to occur of (i) a Default,  or (ii) a Threshold
Event,  Borrower  may have  monies  deposited  in any lockbox  deposited  to its
operating account rather than to the Collection Account.

     SECTION 6.11  PERFORMANCE BY THE LENDER.  If the Borrower at any time fails
to perform or observe any of the foregoing  covenants  contained in this Article
VI or elsewhere  herein,  and if such failure shall continue for a period of ten
calendar days after the Lender gives the Borrower  written notice thereof (or in
the case of the agreements contained in Sections 6.5, 6.7 and 6.10,  immediately
upon the  occurrence  of such  failure,  without  notice or lapse of time),  the
Lender may, but need not,  perform or observe such covenant on behalf and in the
name,  place and stead of the  Borrower  (or,  at the  Lender's  option,  in the
Lender's  name) and may, but need not,  take any and all other actions which the
Lender may reasonably deem necessary to cure or correct such failure (including,
without  limitation,   the  payment  of  taxes,  the  satisfaction  of  security
interests, liens or encumbrances, the performance of obligations owed to account
debtors or other obligors,  the  procurement  and maintenance of insurance,  the
execution of assignments,  security agreements and financing statements, and the

                                       24
<PAGE>
endorsement of instruments);  and the Borrower shall thereupon pay to the Lender
on  demand  the  amount  of all  monies  expended  and all  costs  and  expenses
(including reasonable attorneys' fees and legal expenses) incurred by the Lender
in  connection  with or as a result of the  performance  or  observance  of such
agreements  or the taking of such action by the Lender,  together  with interest
thereon from the date  expended or incurred at the Floating  Rate. To facilitate
the Lender's  performance or observance of such  covenants of the Borrower,  the
Borrower  hereby  irrevocably  appoints the Lender,  or the  Lender's  delegate,
acting alone, as the Borrower's  attorney in fact (which  appointment is coupled
with an interest) with the right (but not the duty) from time to time to create,
prepare,  complete,  execute, deliver, endorse or file in the name and on behalf
of the  Borrower  any  and all  instruments,  documents,  assignments,  security
agreements,   financing   statements,   applications  for  insurance  and  other
agreements and writings required to be obtained, executed, delivered or endorsed
by the Borrower under this Section 6.12.

     SECTION 6.12 TANGIBLE NET WORTH. The Borrower covenants that as of the date
of this  Agreement,  the  Borrower  has a  Tangible  Net  Worth of not less than
$43,000,000.00.  The Borrower  covenants that  commencing  with the month ending
January 31, 2000 and continuing each month thereafter,  the Borrower's  Tangible
Net  Worth  as  of  the  last  day  of  each  month   shall  be  not  less  than
$43,000,000.00.

     SECTION 6.13 QUICK RATIO.  The Borrower  covenants that commencing with the
month ending January 31, 2000 and continuing each month thereafter, the Borrower
will  maintain  during  each month a Quick  Ratio of not less than 2.0 to 1.0 as
determined at the end of each month.

     SECTION  6.14 DEBT TO  TANGIBLE  NET WORTH.  The  Borrower  covenants  that
commencing  with the month  ending  January 31, 2000 and  continuing  each month
thereafter,  the Borrower will maintain during each month a Debt to Tangible Net
Worth  Ratio  of not less  than  0.50 to 1.00 as  determined  at the end of each
month.

                                   ARTICLE VII
                               NEGATIVE COVENANTS

     So long as the  Obligations  shall remain  unpaid,  or the Credit  Facility
shall remain  outstanding,  the Borrower agrees that, without the Lender's prior
written consent:

     SECTION 7.1 LIENS.  The Borrower will not create,  incur or suffer to exist
any mortgage,  deed of trust,  pledge,  lien,  security interest,  assignment or
transfer  upon  or of any of its  assets  (including,  without  limitation,  the
Patents),   now  owned  or  hereafter  acquired,  to  secure  any  indebtedness;
EXCLUDING,   HOWEVER,  from  the  operation  of  the  foregoing,  the  following
(collectively, "Permitted Liens"):

          (a)  in the  case  of any of  the  Borrower's  property  which  is not
Collateral or other collateral  described in the Security Documents,  covenants,
restrictions,  rights,  easements and minor irregularities in title which do not
materially  interfere  with the  Borrower's  business or operations as presently
conducted;

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<PAGE>
          (b) mortgages,  deeds of trust,  pledges,  liens,  security interests,
capital  leases  and  assignments  listed  in  Schedule  7.1  hereto,   securing
indebtedness for borrowed money permitted under Section 7.2;

          (c) the Security Interest and liens and security  interests created by
the Security Documents; and

          (d) purchase money security  interests  relating to the acquisition of
machinery  and  equipment of the Borrower not  exceeding the cost or fair market
value  thereof and so long as no Default  Period is then in  existence  and none
would exist immediately after such acquisition.

     SECTION 7.2 INDEBTEDNESS.  The Borrower will not incur,  create,  assume or
permit to exist any indebtedness or liability on account of deposits or advances
or any  indebtedness  for  borrowed  money or  letters  of credit  issued on the
Borrower's  behalf, or any other  indebtedness or liability  evidenced by notes,
bonds, debentures or similar obligations, except:

          (a) indebtedness arising hereunder;

          (b)  indebtedness  of the Borrower in existence on the date hereof and
listed in Schedule 7.2 hereto; and

          (c)  indebtedness  relating  to liens  permitted  in  accordance  with
Section 7.1.

     SECTION 7.3 GUARANTIES. The Borrower will not assume, guarantee, endorse or
otherwise  become  directly  or  contingently  liable  in  connection  with  any
obligations of any other Person, except:

          (a) the  endorsement  of  negotiable  instruments  by the Borrower for
deposit  or  collection  or  similar  transactions  in the  ordinary  course  of
business; and

          (b)   guaranties,   endorsements   and  other  direct  or   contingent
liabilities in connection with the obligations of other Persons, in existence on
the date hereof and listed in Schedule 7.2 hereto.

     SECTION 7.4 INVESTMENTS AND SUBSIDIARIES.

          (a) The Borrower will not purchase or hold  beneficially  any stock or
other  securities or evidences of  indebtedness  of, make or permit to exist any
loans or advances to, or make any investment or acquire any interest  whatsoever
in,  any  other  Person,  including  specifically  but  without  limitation  any
partnership or joint venture, except:

               (i)  investments  in direct  obligations  of the United States of
America or any agency or  instrumentality  thereof whose obligations  constitute
full  faith and credit  obligations  of the  United  States of America  having a
maturity of one year or less, commercial paper issued by U.S. corporations rated
"A-1" or "A-2" by  Standard  & Poors  Corporation  or "P-1" or "P-2" by  Moody's
Investors  Service or certificates of deposit or bankers'  acceptances  having a
maturity  of one year or less issued by members of the  Federal  Reserve  System

                                       26
<PAGE>
having deposits in excess of $100,000,000.00  (which  certificates of deposit or
bankers'  acceptances  are  fully  insured  by  the  Federal  Deposit  Insurance
Corporation); and

               (ii) travel  advances  or loans to the  Borrower's  officers  and
employees; and

               (iii) advances in the form of progress payments, prepaid rent not
exceeding three (3) months or security deposits; and

               (iv) the Allowed Investments;

          (b) The  Borrower  will not  create or permit to exist any  Subsidiary
other than the Subsidiary shown on Schedule 5.4.

     SECTION 7.5  DIVIDENDS.  The Borrower will not declare or pay any dividends
(other than  dividends  payable solely in stock of the Borrower) on any class of
its common stock or make any payment on account of the  purchase,  redemption or
other retirement of any shares of such stock or make any distribution in respect
thereof,  either directly or indirectly  (provided that, except during a Default
Period,  Borrower may pay  dividends on its common  shares,  or redeem or retire
shares of such stock,  so long as all such  dividends or payments for redemption
or retirement in any fiscal year of Borrower shall not exceed, in the aggregate,
the lesser of (i) 10% of  Borrower's  total  assets,  or (ii) 10% of  Borrower's
total sales for such period.

     SECTION 7.6 SALE OR TRANSFER OF ASSETS;  SUSPENSION OF BUSINESS OPERATIONS.
The Borrower will not sell, lease, assign,  transfer or otherwise dispose of (i)
the stock of any Subsidiary,  (ii) all or a substantial  part of its assets,  or
(iii) any Collateral or any interest therein (whether in one transaction or in a
series of  transactions) to any other Person other than the sale of Inventory in
the  ordinary  course of business  and will not  liquidate,  dissolve or suspend
business  operations.  The Borrower will not in any manner transfer any property
without prior or present receipt of full and adequate consideration.

     SECTION 7.7 CONSOLIDATION AND MERGER; ASSET ACQUISITIONS. The Borrower will
not  consolidate  with or merge into any Person,  or permit any other  Person to
merge into it, or acquire (in a transaction  analogous in purpose or effect to a
consolidation  or  merger)  all or  substantially  all the  assets  of any other
Person.

     SECTION  7.8 SALE AND  LEASEBACK.  The  Borrower  will not  enter  into any
arrangement,  directly or indirectly, with any other Person whereby the Borrower
shall sell or  transfer  any real or  personal  property,  whether  now owned or
hereafter acquired, and then or thereafter rent or lease as lessee such property
or any part thereof or any other property which the Borrower  intends to use for
substantially  the same  purpose  or  purposes  as the  property  being  sold or
transferred.

     SECTION 7.9  RESTRICTIONS  ON NATURE OF  BUSINESS.  The  Borrower  will not
engage in any line of business materially  different from that presently engaged
in by the Borrower and will not purchase,  lease or otherwise acquire assets not
related to its business.

     SECTION 7.10 CAPITAL EXPENDITURES.  The Borrower will not incur or contract
to incur Capital  Expenditures of more than (i)  $4,000,000.00  in the aggregate
during any fiscal year applicable to Borrower's  rental fleet, or (ii) more than
$3,000,000.00  in the aggregate  during any fiscal year which are not applicable
to Borrower's rental fleet.

                                       27
<PAGE>
     SECTION 7.11 ACCOUNTING. The Borrower will not adopt any material change in
accounting  principles  other than as required by GAAP.  The  Borrower  will not
adopt, permit or consent to any change in its fiscal year.

     SECTION 7.12  DISCOUNTS,  ETC. The Borrower will not, after notice from the
Lender, grant any discount,  credit or allowance to any customer of the Borrower
outside the ordinary course of Borrower's business or accept any return of goods
sold,  or at any time (whether  before or after notice from the Lender)  modify,
amend, subordinate,  cancel or terminate the obligation of any account debtor or
other obligor of the Borrower.

     SECTION 7.13 DEFINED  BENEFIT  PENSION PLANS.  The Borrower will not adopt,
create,  assume or become a party to any defined  benefit  pension plan,  unless
disclosed to the Lender pursuant to Section 5.10.

     SECTION 7.14 OTHER  DEFAULTS.  The  Borrower  will not permit any breach or
default  (beyond any  applicable  notice and cure period) or event of default to
occur under any note, loan agreement,  indenture,  lease, mortgage, contract for
deed,  security  agreement  or other  contractual  obligation  binding  upon the
Borrower.

     SECTION 7.15 PLACE OF BUSINESS;  NAME.  The Borrower  will not transfer its
chief executive office or principal place of business, or move, relocate,  close
or sell any  business  location.  The  Borrower  will not  permit  any  tangible
Collateral  or any records  pertaining  to the  Collateral  to be located in any
state or area in which,  in the event of such  location,  a financing  statement
covering  such  Collateral  would be  required  to be, but has not in fact been,
filed in order to perfect the Security  Interest.  The Borrower  will not change
its name.

     SECTION 7.16 ORGANIZATIONAL  DOCUMENTS;  S CORPORATION STATUS. The Borrower
will not amend its certificate of  incorporation,  articles of  incorporation or
bylaws in any  material  manner or in any  manner  adverse to the  interests  of
Lender hereunder. The Borrower will not become an S Corporation.

                                  ARTICLE VIII
                     EVENTS OF DEFAULT, RIGHTS AND REMEDIES

     SECTION 8.1 EVENTS OF DEFAULT.  "Event of Default",  wherever  used herein,
means any one of the following events:

          (a) Default in the payment of the Obligations when they become due and
payable;

          (b) Default in the payment of any fees, commissions, costs or expenses
required to be paid by the Borrower under this Agreement;

          (c)  Default  in  the  performance,  or  breach,  of any  covenant  or
agreement of the Borrower contained in this Agreement;

                                       28
<PAGE>
          (d) The Borrower shall be or become insolvent, or admit in writing its
inability to pay its debts as they mature, or make an assignment for the benefit
of creditors;  or the Borrower shall apply for or consent to the  appointment of
any receiver,  trustee,  or similar officer for it or for all or any substantial
part of its  property;  or such  receiver,  trustee or similar  officer shall be
appointed without the application or consent of the Borrower (and in the case of
such appointment  without the consent of Borrower,  such appointment order shall
not be  vacated or  reversed  within 60 days  after  such  appointment);  or the
Borrower  shall  institute  (by  petition,   application,   answer,  consent  or
otherwise) any bankruptcy, insolvency, reorganization, arrangement, readjustment
of debt, dissolution, liquidation or similar proceeding relating to it under the
laws of any  jurisdiction;  or any  such  proceeding  shall  be  instituted  (by
petition,  application or otherwise)  against the Borrower  (provided,  however,
that in the  case of such  proceeding  being  instituted  against  the  Borrower
without the Borrower's  consent,  such proceeding  shall not have been dismissed
within 60 days after the filing  thereof);  or any  judgment,  writ,  warrant of
attachment or execution or similar  process shall be issued or levied  against a
substantial part of the property of the Borrower;

          (e) A petition  shall be filed by or against  the  Borrower  under the
United States Bankruptcy Code naming the Borrower as debtor (provided,  however,
that in the event of an involuntary  filing Borrower shall fail to have the same
dismissed within 60 days after the filing thereof);

          (f)  Any  representation  or  warranty  made by the  Borrower  in this
Agreement,  or by  the  Borrower  (or  any of its  officers)  in any  agreement,
certificate,  instrument or financial statement or other statement  contemplated
by or made or delivered  pursuant to or in connection with this Agreement or any
such guaranty  shall prove to have been  incorrect in any material  respect when
deemed to be effective;

          (g) The rendering against the Borrower of a final judgment,  decree or
order for the payment of money in excess of $250,000.00  and the  continuance of
such judgment,  decree or order  unsatisfied  and in effect for any period of 30
consecutive days without a stay of execution;

          (h) A default  under any bond,  debenture,  note or other  evidence of
indebtedness of the Borrower owed to any Person other than the Lender,  or under
any indenture or other  instrument under which any such evidence of indebtedness
has been  issued  or by which it is  governed,  or under any lease of any of the
Principal  Premises,  and the expiration of the applicable  period of grace,  if
any, specified in such evidence of indebtedness,  indenture, other instrument or
lease;

          (i) Any Reportable  Event,  which the Lender  determines in good faith
might constitute  grounds for the termination of any Plan or for the appointment
by the  appropriate  United States District Court of a trustee to administer any
Plan, shall have occurred and be continuing 30 days after written notice to such
effect shall have been given to the Borrower by the Lender;  or a trustee  shall
have been appointed by an appropriate United States District Court to administer
any Plan; or the Pension  Benefit  Guaranty  Corporation  shall have  instituted
proceedings  to  terminate  any Plan or to appoint a trustee to  administer  any
Plan; or the Borrower  shall have filed for a distress  termination  of any Plan
under Title IV of ERISA; or the Borrower shall have failed to make any quarterly
contribution  required  with  respect  to any Plan under  Section  412(m) of the
Internal Revenue Code of 1986, as amended,  which the Lender  determines in good

                                       29
<PAGE>
faith may by itself,  or in  combination  with any such failures that the Lender
may determine are likely to occur in the future,  result in the  imposition of a
lien on the Borrower's assets in favor of the Plan;

          (j) An event of default  shall  occur under any  Security  Document or
under any other security agreement, mortgage, deed of trust, assignment or other
instrument or agreement  securing any  obligations of the Borrower  hereunder or
under any note evidencing any obligations of the Borrower hereunder;

          (k) The Borrower shall liquidate,  dissolve,  terminate or suspend its
business  operations  or otherwise  fail to operate its business in the ordinary
course,  or sell all or  substantially  all of its assets,  without the Lender's
prior written consent;

          (l) The Borrower shall fail to pay, withhold, collect or remit any tax
or tax deficiency in excess of $150,000.00  when assessed or due (other than any
tax deficiency which is being contested in good faith and by proper  proceedings
and for which it shall have set aside on its books adequate  reserves  therefor)
or notice of any state or federal tax liens shall be filed or issued;

          (m) Default in the  payment of any amount owed by the  Borrower to the
Lender other than any indebtedness arising hereunder;

          (n) Any breach,  default or event of default by or attributable to any
Affiliate under any agreement between such Affiliate and the Lender.

     SECTION 8.2 RIGHTS AND REMEDIES.  During any Default Period, the Lender may
exercise any or all of the following rights and remedies:

          (a) the Lender may, by notice to the Borrower,  declare the Commitment
to be terminated, whereupon the same shall forthwith terminate;

          (b) the Lender may, by notice to the Borrower, declare the Obligations
to be forthwith due and payable,  whereupon all Obligations  shall become and be
forthwith due and payable, without presentment,  notice of dishonor,  protest or
further notice of any kind, all of which the Borrower hereby expressly waives;

          (c) the Lender may, without notice to the Borrower and without further
action,  apply any and all money  owing by the  Lender  to the  Borrower  to the
payment of the Obligations;

          (d) the  Lender  may  exercise  and  enforce  any and all  rights  and
remedies  available  upon default to a secured  party under the UCC,  including,
without limitation,  the right to take possession of Collateral, or any evidence
thereof,  proceeding  without judicial process or by judicial process (without a
prior hearing or notice thereof, which the Borrower hereby expressly waives) and
the right to sell,  lease or otherwise  dispose of any or all of the Collateral,
and,  in  connection  therewith,  the  Borrower  will  on  demand  assemble  the
Collateral  and make it available to the Lender at a place to be  designated  by
the Lender which is reasonably convenient to both parties;

                                       30
<PAGE>
          (e) the Lender may exercise and enforce its rights and remedies  under
the Loan Documents; and

          (f) the Lender may exercise any other rights and remedies available to
it by law or agreement.

     Notwithstanding  the foregoing,  upon the occurrence of an Event of Default
described in  subsections  (d) or (e) of Section 8.1, the  Obligations  shall be
immediately due and payable automatically without presentment,  demand,  protest
or notice of any kind.

     SECTION 8.3 INTELLECTUAL  PROPERTY.  In addition to the rights and remedies
set forth in Section 8.2 above, upon the occurrence of an Event of Default,  the
Borrower shall, upon the request of Lender,  immediately  execute and deliver to
Lender  a  Patent  and  Trademark  Security  Agreement,  in form  and  substance
satisfactory  to  the  Lender,  covering  all  of the  Borrower's  Patents,  and
trademarks, and creating a first and prior lien thereon in favor of Lender.

     SECTION  8.4 CERTAIN  NOTICES.  If notice to the  Borrower of any  intended
disposition of Collateral or any other  intended  action is required by law in a
particular  instance,  such notice shall be deemed  commercially  reasonable  if
given (in the manner specified in Section 9.3) at least ten calendar days before
the date of intended disposition or other action.

                                   ARTICLE IX
                                  MISCELLANEOUS

     SECTION  9.1 NO  WAIVER;  CUMULATIVE  REMEDIES.  No failure or delay by the
Lender in exercising any right,  power or remedy under the Loan Documents  shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
such right,  power or remedy preclude any other or further  exercise  thereof or
the exercise of any other right,  power or remedy under the Loan Documents.  The
remedies  provided in the Loan Documents are cumulative and not exclusive of any
remedies provided by law.

     SECTION 9.2  AMENDMENTS,  ETC. No amendment,  modification,  termination or
waiver of any  provision of any Loan Document or consent to any departure by the
Borrower  therefrom  or any release of a Security  Interest  shall be  effective
unless  the same shall be in writing  and  signed by the  Lender,  and then such
waiver or consent shall be effective  only in the specific  instance and for the
specific  purpose for which given. No notice to or demand on the Borrower in any
case shall  entitle  the  Borrower  to any other or further  notice or demand in
similar or other circumstances.

     SECTION 9.3  ADDRESSES  FOR NOTICES,  ETC.  Except as  otherwise  expressly
provided  herein,  all  notices,  requests,  demands  and  other  communications
provided  for  under the Loan  Documents  shall be in  writing  and shall be (a)
personally  delivered,  (b) sent by first class United States mail,  (c) sent by
overnight  courier of national  reputation,  or (d) transmitted by telecopy,  in
each case  addressed or telecopied to the party to whom notice is being given at
its address or telecopier number as set forth below:

                                       31
<PAGE>
     If to the Borrower:

     OrthoLogic Corp.
     1275 West Washington Street
     Tempe, AZ  85281
     Telecopier: 602/937-5520
     Attention: Terry D. Meier

     With a copy to (provided such copy shall not be required to effect official
     notice to Borrower):

     Quarles & Brady LLP
     One East Camelback, Suite 400
     Phoenix, AZ  85012-1659
     Telecopier: 602/230-5598
     Attention: P. Robert Moya

     If to the Lender:

     Wells Fargo Business Credit, Inc.
     100 West Washington Street, 7th Floor
     MAC S4101-076
     Phoenix, AZ  85003
     Telecopier: 602/378-6215
     Attention: Sanat Amladi

or,  as to each  party,  at such  other  address  or  telecopier  number  as may
hereafter  be  designated  by such party in a written  notice to the other party
complying  as to  delivery  with the terms of this  Section.  All such  notices,
requests, demands and other communications shall be deemed to have been given on
(a) the date received if personally delivered, (b) when deposited in the mail if
delivered by mail,  (c) the date sent if sent by overnight  courier,  or (d) the
date of transmission  if delivered by telecopy,  except that notices or requests
to the  Lender  pursuant  to any of the  provisions  of  Article II shall not be
effective until received by the Lender.

     SECTION 9.4 FURTHER DOCUMENTS.  The Borrower will from time to time execute
and  deliver  or  endorse  any  and  all  instruments,  documents,  conveyances,
assignments,  security agreements, financing statements and other agreements and
writings  that the Lender may  reasonably  request in order to secure,  protect,
perfect or enforce the Security  Interest or the Lender's  rights under the Loan
Documents  (but any  failure to request or assure  that the  Borrower  executes,
delivers  or  endorses  any such item shall not  affect or impair the  validity,
sufficiency or enforceability  of the Loan Documents and the Security  Interest,
regardless  of  whether  any such  item was or was not  executed,  delivered  or
endorsed in a similar context or on a prior occasion).

     SECTION 9.5  COLLATERAL.  This  Agreement  does not  contemplate  a sale of
accounts,  contract  rights or chattel  paper,  and,  as  provided  by law,  the
Borrower is entitled to any surplus and shall remain liable for any  deficiency.
The  Lender's  duty of care with respect to  Collateral  in its  possession  (as
imposed by law) shall be deemed  fulfilled  if it exercises  reasonable  care in
physically keeping such Collateral,  or in the case of Collateral in the custody
or possession of a bailee or other third person,  exercises  reasonable  care in
the  selection  of the bailee or other  third  person,  and the Lender  need not

                                       32
<PAGE>
otherwise preserve, protect, insure or care for any Collateral. The Lender shall
not be obligated  to preserve  any rights the  Borrower  may have against  prior
parties,  to realize on the  Collateral  at all or in any  particular  manner or
order or to apply any cash proceeds of the Collateral in any particular order of
application.

     SECTION 9.6 COSTS AND  EXPENSES.  The Borrower  agrees to pay on demand all
costs and expenses,  including (without limitation) attorneys' fees, incurred by
the  Lender  in  connection  with  the  Obligations,  this  Agreement,  the Loan
Documents,  and any other document or agreement  related hereto or thereto,  and
the transactions  contemplated  hereby,  including  without  limitation all such
costs,   expenses  and  fees  incurred  in  connection  with  the   negotiation,
preparation, execution, amendment,  administration,  performance, collection and
enforcement  of the  Obligations  and all such  documents and agreements and the
creation, perfection,  protection,  satisfaction,  foreclosure or enforcement of
the Security Interest.

     SECTION 9.7 INDEMNITY.  In addition to the payment of expenses  pursuant to
Section 9.6,  the Borrower  agrees to  indemnify,  defend and hold  harmless the
Lender,   and  any  of  its  participants,   parent   corporations,   subsidiary
corporations,  affiliated corporations,  successor corporations, and all present
and future officers, directors, employees, attorneys and agents of the foregoing
(the  "Indemnitees")  from  and  against  any  of the  following  (collectively,
"Indemnified Liabilities"):

          (a) any and all transfer  taxes,  documentary  taxes,  assessments  or
charges  made by any  governmental  authority  by  reason of the  execution  and
delivery of the Loan Documents or the making of the Advances;

          (b)  any  claims,  loss or  damage  to  which  any  Indemnitee  may be
subjected if any  representation or warranty contained in Section 5.12 proves to
be  incorrect  in any respect or as a result of any  violation  of the  covenant
contained in Section 6.4(b); and

          (c)  any  and  all  other  liabilities,  losses,  damages,  penalties,
judgments,  suits,  claims,  costs and expenses of any kind or nature whatsoever
(including,  without  limitation,  the  reasonable  fees  and  disbursements  of
counsel)  in  connection  with  the  foregoing  and  any  other   investigative,
administrative or judicial proceedings,  whether or not such Indemnitee shall be
designated  a party  thereto,  which may be imposed on,  incurred by or asserted
against any such  Indemnitee,  in any manner  related to or arising out of or in
connection  with the making of the Advances and the Loan Documents or the use or
intended use of the proceeds of the Advances except to the extent the same arise
out of the gross negligence or willful misconduct of Indemnitees.

If any investigative,  judicial or administrative proceeding arising from any of
the foregoing is brought against any Indemnitee, upon such Indemnitee's request,
the  Borrower,  or counsel  designated by the Borrower and  satisfactory  to the
Indemnitee, will resist and defend such action, suit or proceeding to the extent
and in the manner directed by the  Indemnitee,  at the Borrower's sole costs and
expense.  Each  Indemnitee will use its best efforts to cooperate in the defense
of any  such  action,  suit  or  proceeding.  If the  foregoing  undertaking  to
indemnify,  defend and hold harmless may be held to be unenforceable  because it
violates any law or public  policy,  the Borrower  shall  nevertheless  make the
maximum  contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law. The Borrower's obligation
under this Section 9.7 shall survive the  termination  of this Agreement and the
discharge of the Borrower's other obligations hereunder.

                                       33
<PAGE>
     SECTION 9.8 PARTICIPANTS.  The Lender and its participants, if any, are not
partners or joint  venturers,  and the Lender  shall not have any  liability  or
responsibility  for any obligation,  act or omission of any of its participants.
All rights and powers specifically  conferred upon the Lender may be transferred
or delegated to any of the Lender's participants, successors or assigns.

     SECTION  9.9  EXECUTION  IN  COUNTERPARTS.  This  Agreement  and other Loan
Documents may be executed in any number of  counterparts,  each of which when so
executed  and  delivered  shall be  deemed  to be an  original  and all of which
counterparts, taken together, shall constitute but one and the same instrument.

     SECTION 9.10 BINDING EFFECT;  ASSIGNMENT;  COMPLETE  AGREEMENT;  EXCHANGING
INFORMATION.  The Loan Documents  shall be binding upon and inure to the benefit
of the  Borrower  and the Lender and their  respective  successors  and assigns,
except  that the  Borrower  shall  not  have the  right  to  assign  its  rights
thereunder or any interest  therein without the Lender's prior written  consent.
This  Agreement,  together with the Loan  Documents,  comprises the complete and
integrated  agreement of the parties on the subject matter hereof and supersedes
all prior  agreements,  written or oral, on the subject matter  hereof.  Without
limiting the Lender's right to share information  regarding the Borrower and its
Affiliates  with the  Lender's  participants,  accountants,  lawyers  and  other
advisors,  the Lender,  Wells Fargo Bank, N.A. or Norwest  Corporation,  and all
direct  and  indirect   subsidiaries  of  Wells  Fargo  Bank,  N.A.  or  Norwest
Corporation,  may  exchange  any and all  information  they  may  have in  their
possession  regarding the Borrower and its  Affiliates,  and the Borrower waives
any right of  confidentiality  it may have with respect to such exchange of such
information.

     SECTION 9.11  SEVERABILITY  OF PROVISIONS.  Any provision of this Agreement
which is prohibited or unenforceable  shall be ineffective to the extent of such
prohibition or unenforceability  without  invalidating the remaining  provisions
hereof.

     SECTION 9.12 HEADINGS.  Article and Section  headings in this Agreement are
included  herein for  convenience  of reference  only and shall not constitute a
part of this Agreement for any other purpose.

     SECTION 9.13 GOVERNING LAW; JURISDICTION;  VENUE; WAIVER OF JURY TRIAL. The
Loan  Documents  shall be  governed  by and  construed  in  accordance  with the
substantive  laws (other than  conflict  laws) of the State of  California.  The
parties hereto hereby (i) consents to the personal jurisdiction of the state and
federal  courts  located  in the  State of  California  in  connection  with any
controversy  related to this  Agreement;  (ii) waives any argument that venue in
any such forum is not convenient,  (iii) agrees that any litigation initiated by
the Lender or the Borrower in connection  with this  Agreement or the other Loan
Documents shall be venued in either the Superior Court of Los Angeles County, or
the Central District Court of California;  and (iv) agrees that a final judgment
in any such suit,  action or proceeding  shall be conclusive and may be enforced
in other  jurisdictions  by suit on the judgment or in any other manner provided
by law. THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
BASED ON OR PERTAINING TO THIS AGREEMENT.

                                       34
<PAGE>
     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by their respective  officers  thereunto duly authorized as of the date
first above written.

                                        ORTHOLOGIC CORP., a Delaware corporation

                                        By
                                           -------------------------------------

                                           Its
                                               ---------------------------------

                                        WELLS FARGO BUSINESS CREDIT, INC.

                                        By
                                           -------------------------------------

                                           Its
                                               ---------------------------------

                                       35
<PAGE>
                         Table of Exhibits and Schedules

     Exhibit A                    Form of Revolving Note

     Exhibit B                    Compliance Certificate

     Exhibit C                    Premises

     Schedule 5.1                 Trade Names, Chief Executive Office, Principal
                                  Place of Business, and Locations of Collateral

     Schedule 5.4                 Subsidiary

     Schedule 5.6                 Pending Litigation

     Schedule 7.1                 Permitted Liens

     Schedule 7.2                 Permitted Indebtedness and Guaranties

                                       36
<PAGE>
                                      Exhibit A to Credit and Security Agreement

                                 REVOLVING NOTE

$10,000,000.00                                           ____________, _________

                                                             _____________, 2000

     For  value  received,   the  undersigned,   OrthoLogic  Corp.,  a  Delaware
corporation  (the  "Borrower"),  hereby promises to pay on the Termination  Date
under the Credit Agreement (defined below), to the order of Wells Fargo Business
Credit,  Inc., a Minnesota  corporation  (the  "Lender"),  at its main office in
Phoenix,  Arizona,  or at any other place  designated  at any time by the holder
hereof,  in lawful  money of the  United  States of America  and in  immediately
available funds, the principal sum of TEN MILLION DOLLARS  ($10,000,000.00)  or,
if less, the aggregate unpaid principal amount of all Revolving Advances made by
the Lender to the Borrower under the Credit  Agreement  (defined below) together
with interest on the principal  amount  hereunder  remaining unpaid from time to
time,  computed on the basis of the actual  number of days elapsed and a 360-day
year,  from the date hereof  until this Note is fully paid at the rate from time
to time in effect under the Credit and Security  Agreement of even date herewith
(as the same may  hereafter be amended,  supplemented  or restated  from time to
time, the "Credit  Agreement")  by and between the Lender and the Borrower.  The
principal  hereof and  interest  accruing  thereon  shall be due and  payable as
provided in the Credit  Agreement.  This Note may be prepaid only in  accordance
with the Credit Agreement.

     This Note is issued  pursuant,  and is  subject,  to the Credit  Agreement,
which provides,  among other things, for acceleration  hereof.  This Note is the
Revolving Note referred to in the Credit Agreement.  This Note is secured, among
other things,  pursuant to the Credit  Agreement  and the Security  Documents as
therein  defined,  and may now or  hereafter  be  secured  by one or more  other
security agreements, mortgages, deeds of trust, assignments or other instruments
or agreements.

     The  Borrower  hereby  agrees  to pay all  costs of  collection,  including
attorneys'  fees and legal expenses in the event this Note is not paid when due,
whether or not legal proceedings are commenced.

     Presentment or other demand for payment, notice of dishonor and protest are
expressly waived.

                                        ORTHOLOGIC CORP., a Delaware corporation

                                        By
                                           -------------------------------------

                                           Its
                                               ---------------------------------

                                    EXHIBIT A
<PAGE>
                                      Exhibit B to Credit and Security Agreement

                             COMPLIANCE CERTIFICATE

To:       _________________________________

          Wells Fargo Business Credit, Inc.

Date:     _________________, _____

Subject:  OrthoLogic Corp.
          Financial Statements

          In  accordance  with our Credit  and  Security  Agreement  dated as of
_____________,  2000  (the  "Credit  Agreement"),  attached  are  the  financial
statements of OrthoLogic  Corp., a Delaware  corporation  (the "Borrower") as of
and for  ________________,  2000 (the  "Reporting  Date")  and the  year-to-date
period then ended (the "Current Financials"). All terms used in this certificate
have the meanings given in the Credit Agreement.

          I certify that the Current Financials have been prepared in accordance
with GAAP,  subject to  year-end  audit  adjustments,  and  fairly  present  the
Borrower's  financial condition and the results of its operations as of the date
thereof.

          EVENTS OF DEFAULT. (Check one):

          [ ]  The  undersigned  does not have  knowledge of the occurrence of a
               Default or Event of Default under the Credit Agreement.

          [ ]  The  undersigned  has knowledge of the occurrence of a Default or
               Event of Default under the Credit  Agreement and attached  hereto
               is a statement of the facts with respect to thereto.

          I hereby certify to the Lender as follows:

          [ ]  The Reporting Date does not mark the end of one of the Borrower's
               fiscal quarters, hence I am completing only paragraph __ below.

          [ ]  The Reporting Date marks the end of one of the Borrower's  fiscal
               quarters,  hence I am  completing  all  paragraphs  below  except
               paragraph __.

          [ ]  The Reporting Date marks the end of the  Borrower's  fiscal year,
               hence I am completing all paragraphs below.

                                    [TO COME]

                                    EXHIBIT B
<PAGE>
                                      Exhibit C to Credit and Security Agreement

                                    PREMISES

     The Premises  referred to in the Credit and Security  Agreement are legally
described as follows:

                             (See attached 3 pages)

                                    EXHIBIT C
<PAGE>
                                   Schedule 5.1 to Credit and Security Agreement

Trade Names, Chief Executive Office,  Principal Place of Business, and Locations
of Collateral

TRADE NAMES:

Iatromed  Inc., a Delaware  corporation,  which  changed its name to  OrthoLogic
Corp. on June 28, 1991.

CHIEF EXECUTIVE OFFICE/PRINCIPAL PLACE OF BUSINESS:

1275 West Washington Street
Tempe, AZ 85281

OTHER INVENTORY AND EQUIPMENT LOCATIONS:

Most of the collateral is located at the principal  place of business,  however,
the Company keeps some equipment at the various sales peoples' sites  throughout
the country.

                                  SCHEDULE 5.1
<PAGE>
                                   Schedule 5.4 to Credit and Security Agreement

                                   SUBSIDIARY

              OrthoLogic Canada (previously Toronto Medical Corp.)

                                  SCHEDULE 5.4
<PAGE>
                                   Schedule 5.6 to Credit and Security Agreement

                               Pending Litigation

Case Number:    Name:                                   Location:
------------    -----                                   ---------
96 CV 01514     Chan v. OrthoLogic Corp.                Arizona Dist. Ct.
96 CV 01520     Boren v. Weinstein                      Arizona Dist. Ct.
96 CV 01563     Silveira v. Weinstein                   Arizona Dist. Ct.
96 CV 01615     Cohen v. OrthoLogic Corp.               Arizona Dist. Ct.
96 CV 01643     Barton v. Weinstein                     Arizona Dist. Ct.
96 CV 01667     Draker v. Weinstein                     Arizona Dist. Ct.
96 CV 01678     Rutkin v. Weinstein                     Arizona Dist. Ct.
96 CV 01713     DeFelice v. OrthoLogic Corp.            Arizona Dist. Ct.
96 CV 01891     Longacre v. Weinstein                   Arizona Dist. Ct.
96 CV 01910     Bailey v. Weinstein                     Arizona Dist. Ct.
96 CV 01937     Kyser v. OrthoLogic Corp.               Arizona Dist. Ct.
96 CV 02451     Rapport v. Weinstein                    Arizona Dist. Ct.
98 CV 00621     OrthoLogic Corp. v. Freeman             Arizona Dist. Ct.
96 CV 01668     Katz, et al. v. OrthoLogic Corp.        Arizona Dist. Ct.
TJ97-01248      OrthoLogic Corp./Clemente Ranch HOA     Maricopa County Sup. Ct.
CV96-10799      Cooper v. Weinstein                     Maricopa County Sup. Ct.
CV99-12910      Elizabeth Worley v. Samaritan Health    Maricopa County Sup. Ct.
                System/OrthoLogic Corp.

                                  SCHEDULE 5.6
<PAGE>
                                   Schedule 7.1 to Credit and Security Agreement

                                 Permitted Liens

Creditor:                                                   Collateral:
---------                                                   -----------
CAPITAL LIENS:

Norstan Financial Services, Inc.                            Telephone Equipment
Associates Leasing, Inc.                                    Equipment
The CIT Group                                               Computer Equipment
The CIT Group                                               Computer Software
Pitney Bowes Credit                                         Equipment
The CIT Group                                               Equipment
The CIT Group                                               Equipment
T&W Funding Company II, LLC                                 Flooring Equipment

CURRENT CREDIT FACILITY:

Silicon Valley Bank

                                  SCHEDULE 7.1
<PAGE>
                                   Schedule 7.2 to Credit and Security Agreement

                      Permitted Indebtedness and Guaranties

Creditor:                                                   Collateral:
---------                                                   -----------
CAPITAL LIENS:

Norstan Financial Services, Inc.                            Telephone Equipment
Associates Leasing, Inc.                                    Equipment
The CIT Group                                               Computer Equipment
The CIT Group                                               Computer Software
Pitney Bowes Credit                                         Equipment
The CIT Group                                               Equipment
The CIT Group                                               Equipment
T&W Funding Company II, LLC                                 Flooring Equipment

CURRENT CREDIT FACILITY:

Silicon Valley Bank

                                  SCHEDULE 7.2

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