Document:

Exhibit 4.2

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                          CREDIT AND SECURITY AGREEMENT

                                 BY AND BETWEEN

                            RMED INTERNATIONAL, INC.

                                       AND

                        WELLS FARGO BUSINESS CREDIT, INC.

                          Dated as of: December 3, 1999

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                                Table of Contents

ARTICLE I DEFINITIONS .....................................................    1
     Section 1.1 Definitions ..............................................    1
     Section 1.2 Cross References .........................................    9

ARTICLE II AMOUNT AND TERMS OF THE CREDIT FACILITY ........................    9
     Section 2.1 Revolving Advances .......................................    9
     Section 2.2 Interest; Minimum Interest Charge; Default
       Interest; Usury ....................................................   10
     Section 2.3 Fees .....................................................   11
     Section 2.4 Computation of Interest and Fees; When Interest
       Due and Payable ....................................................   11
     Section 2.5 Capital Adequacy; Increased Costs and Reduced Return .....   11
     Section 2.6 Discretionary Nature of this Facility; Termination by
       the Lender; Automatic Renewal ......................................   12
     Section 2.7 Voluntary Prepayment; Termination of the Credit
       Facility by the Borrower ...........................................   13
     Section 2.8 Termination Fees .........................................   13
     Section 2.9 Mandatory Prepayment .....................................   13
     Section 2.10 Payment .................................................   13
     Section 2.11 Payment on Non-Banking Days .............................   13
     Section 2.12 Use of Proceeds .........................................   13
     Section 2.13 Liability Records .......................................   14

ARTICLE III SECURITY INTEREST; OCCUPANCY; SETOFF ..........................   14
     Section 3.1 Grant of Security Interest ...............................   14
     Section 3.2 Notification of Account Debtors and Other Obligors .......   14
     Section 3.3 Assignment of Insurance ..................................   14
     Section 3.4 Occupancy ................................................   15
     Section 3.5 License ..................................................   15
     Section 3.6 Financing Statement ......................................   15
     Section 3.7 Setoff ...................................................   16

ARTICLE IV CONDITIONS OF WILLINGNESS TO CONSIDER LENDING ..................   16
     Section 4.1 Conditions Precedent to Lender's Willingness to Consider
       Making the Initial Revolving Advance and the Term Advance ..........   16
     Section 4.2 Conditions Precedent to All Advances .....................   18

ARTICLE V REPRESENTATIONS AND WARRANTIES ..................................   19
     Section 5.1 Corporate Existence and Power; Name; Chief Executive
       Office; Inventory and Equipment Locations; Tax Identification
       Number .............................................................   19
     Section 5.2 Authorization of Borrowing; No Conflict as to
       Law or Agreements ..................................................   19
     Section 5.3 Legal Agreements .........................................   19

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     Section 5.4 Subsidiaries .............................................   20
     Section 5.5 Financial Condition; No Adverse Change ...................   20
     Section 5.6 Litigation ...............................................   20
     Section 5.7 Regulation U .............................................   20
     Section 5.8 Taxes ....................................................   20
     Section 5.9 Titles and Liens .........................................   20
     Section 5.10 Plans ...................................................   20
     Section 5.11 Default .................................................   21
     Section 5.12 Environmental Matters ...................................   21
     Section 5.13 Submissions to Lender ...................................   22
     Section 5.14 Financing Statements ....................................   22
     Section 5.15 Rights to Payment .......................................   22

ARTICLE VI BORROWER'S AFFIRMATIVE COVENANTS ...............................   23
     Section 6.1 Reporting Requirements ...................................   23
     Section 6.2 Books and Records; Inspection and Examination ............   25
     Section 6.3 Account Verification .....................................   26
     Section 6.4 Compliance with Laws .....................................   26
     Section 6.5 Payment of Taxes and Other Claims ........................   26
     Section 6.6 Maintenance of Properties ................................   26
     Section 6.7 Insurance ................................................   27
     Section 6.8 Preservation of Existence ................................   27
     Section 6.9 Delivery of Instruments, etc .............................   27
     Section 6.10 Collateral Account ......................................   27
     Section 6.11 Performance by the Lender ...............................   28
     Section 6.12 Minimum Book Net Worth ..................................   29
     Section 6.13 Minimum Net Earnings ....................................   30

ARTICLE VII NEGATIVE COVENANTS ............................................   30
     Section 7.1 Liens ....................................................   30
     Section 7.2 Indebtedness .............................................   31
     Section 7.3 Guaranties ...............................................   31
     Section 7.4 Investments and Subsidiaries .............................   31
     Section 7.5 Dividends ................................................   32
     Section 7.6 Sale or Transfer of Assets; Suspension of
       Business Operations ................................................   32
     Section 7.7 Consolidation and Merger; Asset Acquisitions .............   32
     Section 7.8 Sale and Leaseback .......................................   32
     Section 7.9 Restrictions on Nature of Business .......................   32
     Section 7.10 Capital Expenditures ....................................   32
     Section 7.11 Accounting ..............................................   33
     Section 7.12 Discounts, etc ..........................................   33
     Section 7.13 Defined Benefit Pension Plans ...........................   33

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     Section 7.14 Other Defaults ..........................................   33
     Section 7.15 Place of Business; Name .................................   33
     Section 7.16 Organizational Documents ................................   33
     Section 7.17 Salaries; Management Fees ...............................   33
     Section 7.18 Change in Ownership .....................................   33

ARTICLE VIII EVENTS OF DEFAULT, RIGHTS AND REMEDIES .......................   34
     Section 8.1 Events of Default ........................................   34
     Section 8.2 Rights and Remedies ......................................   36
     Section 8.3 Certain Notices ..........................................   37

ARTICLE IX MISCELLANEOUS ..................................................   37
     Section 9.1 No Waiver; Cumulative Remedies ...........................   37
     Section 9.2 Amendments, Etc ..........................................   37
     Section 9.3 Addresses for Notices, Etc ...............................   37
     Section 9.4 Further Documents ........................................   38
     Section 9.5 Collateral ...............................................   38
     Section 9.6 Costs and Expenses .......................................   39
     Section 9.7 Indemnity ................................................   39
     Section 9.8 Participants .............................................   40
     Section 9.9 Execution in Counterparts ................................   40
     Section 9.10 Binding Effect; Assignment; Complete Agreement;
       Exchanging Information .............................................   40
     Section 9.11 Severability of Provisions ..............................   40
     Section 9.12 Headings ................................................   40
     Section 9.13 Governing Law; Jurisdiction, Venue; Waiver of
       Jury Trial .........................................................   41

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                          CREDIT AND SECURITY AGREEMENT

                          Dated as of December 3, 1999

      RMED INTERNATIONAL, INC., a Colorado 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, and 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.

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

            "Book Net Worth" means as of any date of determination the aggregate
      of the common and preferred stockholders' equity in the Borrower,
      determined in

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accordance with GAAP, plus any loss on the sale of equipment recorded by the
Borrower prior to such date and minus any gain on the sale of equipment recorded
by the Borrower prior to such date.

      "Borrowing Base" means, at any time and subject to change from time to
time in the Lender's sole discretion, the lesser of

            (a) the Maximum Line; or

            (b) the sum of

                  (i)   the lesser of (A) the sum of (1) 85% of Eligible
                        Accounts other than Accounts of Drypers Corporation plus
                        (2) the lesser of 85% of Eligible Accounts of Drypers
                        Corporation or $750,000, or (B) $5,000,000; minus

                  (ii)  the lesser of (A) the sum of (1) 50% of Eligible
                        Inventory consisting of raw materials, plus (2) 65% of
                        Eligible Inventory consisting of finished goods plus (3)
                        the lesser of 25% of Eligible Inventory consisting of
                        packaging or $100,000, or (B) $1,000,000; plus

                  (iii) the outstanding amount of the Special Accommodation.

      "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,
Inventory, Receivables, Investment Property, all sums on deposit in any
Collateral 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.

      "Collateral Account" has the meaning given in the Collateral Account
Agreement.

      "Collateral Account Agreement" means the Collateral Account Agreement of
even date herewith by and among the Borrower, Norwest Bank Wisconsin and the
Lender.

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

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      "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.

      "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 unpaid ninety (90) days or more after
      the 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, 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 of America and Canada 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;

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            (vii) Accounts owed by a shareholder, 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 including, without limitation, any payment or performance bond in
      favor of any Person other than the Lender;

            (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;

            (xi) Accounts owed by an account debtor, regardless of whether
      otherwise eligible, if twenty five percent (25%) or more of the total
      amount due under Accounts from such debtor is ineligible under clauses
      (i), (ii) or (ix) above;

            (xii) That portion of Accounts which is subject to reserves for
      credits arising from advertising billbacks and coupons in an amount
      determined on a monthly basis by the Lender in its sole discretion; and

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

      "Eligible Inventory" means all Inventory of the Borrower, at the lower of
cost or market value as determined on a first-in-first-out basis in accordance
with GAAP; provided, however, that the following shall not in any event be
deemed Eligible Inventory:

            (i) Inventory that is: in-transit; located at any warehouse, job
      site or other premises not approved by the Lender in writing; located
      outside of the states, or localities, as applicable, in which the Lender
      has filed financing statements to perfect a first priority security
      interest in such Inventory; covered by any negotiable or non-negotiable
      warehouse receipt, bill of lading or other document of title; on
      consignment from any Person; on consignment to any Person or subject to
      any bailment unless such consignee or bailee has executed an agreement
      with the Lender;

            (ii) Supplies, parts or sample Inventory;

            (iii) Work-in-process Inventory;

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            (iv) Inventory that is damaged, obsolete, slow moving or not
      currently saleable in the normal course of the Borrower's operations;

            (v) Inventory that the Borrower has returned, has attempted to
      return, is in the process of returning or intends to return to the vendor
      thereof;

            (vi) Inventory that is perishable or live;

            (vii) Inventory manufactured by the Borrower pursuant to a license
      unless the applicable licensor has agreed in writing to permit the Lender
      to exercise its rights and remedies against such Inventory;

            (viii) Inventory that is subject to a security interest in favor of
      any Person other than the Lender; and

            (ix) Inventory otherwise deemed ineligible by the Lender in its sole
      discretion.

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

      "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.

      "Floating Rate" means (i) with respect to all Advances, other than the
Special Accommodation, (a) up to and including Five Hundred Thousand Dollars
($500,000) of Advances outstanding, an annual rate equal to the sum of the Prime
Rate plus three percent (3.0%), and (b) in excess of Five Hundred Thousand
Dollars ($500,000) of Advances outstanding, an annual rate equal to the sum of
the Prime Rate plus one and one half percent (1.5%),which annual rates shall
change when and as the Prime Rate changes; and (ii) with respect to the Special
Accommodation, an annual rate equal to the sum of the Prime Rate plus five
percent (5.0%), 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.

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      "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 present and future patents, patent
applications, 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.

      "Investment Property" means all of the Borrower's investment property, as
such term is defined in the UCC, whether now owned or hereafter acquired,
including, but not limited to all securities, security entitlements, securities
accounts, commodity contracts, commodity accounts, stocks, bonds, mutual fund
shares, money market shares and United States Government securities.

      "Intercreditor Agreement" means the Intercreditor Agreement executed on
behalf of International Financial Services Corporation and the Lender and
acknowledged by the Borrower.

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

      "Lockbox" has the meaning given in the Lockbox Agreement.

      "Lockbox Agreement" means the Lockbox Agreement by and among the Borrower,
Norwest Bank Wisconsin, and the Lender, of even date herewith.

      "Maturity Date" has the meaning given in Section 2.6.

      "Maximum Line" means Five Million Dollars ($5,000,000).

      "Minimum Interest Charge" has the meaning given in Section 2.2(b).

      "Net Earnings" means, for any fiscal period, Borrower's after tax net
income, decreased by the sum of any extraordinary or non-operating income or any
gain on the sale of equipment recorded by the Borrower and increased by any
extraordinary or non-operating expense or loss or any loss on the sale of
equipment recorded by the Borrower, as determined in accordance with GAAP.

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      "Norwest Bank Wisconsin" means Norwest Bank Wisconsin, National
Association, a national banking association with an office located in Eau
Claire, Wisconsin.

      "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.

      "Original Maturity Date" means December 3, 2001.

      "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.

      "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

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(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 and any
note or notes issued in substitution therefor, as the same may hereafter be
amended, supplemented or restated from time to time.

      "Security Documents" means this Agreement, the Collateral 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.

      "Special Accommodation" has the meaning given in Section 2.1(c).

      "Subordination Agreements" means the Subordination Agreements of even date
herewith, executed by each of John O. Harry and Thomas A. Biebel in the Lender's
favor and acknowledged by the Borrower.

      "Subsidiary" means any corporation of which more than fifty percent (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.

      "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.

      "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

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      Agreement, or in any other state whose laws are held to govern this
      Agreement or any portion hereof

            "Validity Guarantor" means Todd L. Nelson.

      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 may, in its sole discretion,
make advances to the Borrower under this Section 2.1 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 not consider any
request for a Revolving Advance if, after giving effect to such requested
Revolving Advance, the sum of the outstanding and unpaid Revolving Advances
under this Section 2.1 or otherwise 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 request
Revolving Advances, prepay pursuant to Section 2.7 and request additional
Revolving Advances. 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. (Milwaukee time) of the day 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 Norwest Bank Wisconsin 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 a Revolving Advance by executing and delivering an appropriate
      confirmation certificate to the Lender. The Borrower shall repay all
      Revolving Advances even if the Lender does not receive such confirmation
      and even if the person requesting a Revolving Advance was not in fact
      authorized to do so.

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      Any request for a Revolving 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.

            (c) The Lender may, in its sole discretion, make a Special
      Accommodation (the "Special Accommodation") of up to Two Hundred Thousand
      Dollars ($200,000), which Special Accommodation shall be secured by the
      Collateral as provided in Article III hereof. The principal of the Special
      Accommodation, if any, shall be payable as follows: equal monthly
      installments of Sixteen Thousand Six Hundred Sixty Seven Dollars ($16,667)
      each due on January 1, 2000 and on the first day of each successive month
      thereafter, plus a final payment of unpaid principal of the Special
      Accommodation due on December 1, 2000.

      Section 2.2. Interest; Minimum Interest Charge; Default Interest; Usury.
Interest accruing on the Note shall be due and payable in arrears on the first
day of each month.

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

            (b) Minimum Interest Charge. Notwithstanding the interest payable
      pursuant to Section 2.2(a), the Borrower shall pay to the Lender interest
      of not less than Five Thousand Dollars ($5,000) per calendar month (the
      "Minimum Interest Charge") during the term of this Agreement, and the
      Borrower shall pay any deficiency between the Minimum Interest Charge and
      the amount of interest otherwise calculated under Sections 2.2(a) and
      2.2(d) on the date and in the manner provided in Section 2.4.

            (c) Default Interest Rate. At any time during any Default Period, 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.

            (d) Usury. 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 any applicable usury laws. 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 limits imposed by any
      applicable usury laws, 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

                                       10
<PAGE>

      that the total liability for payments in the nature of interest,
      additional interest and other charges shall not exceed the applicable
      limits imposed by any applicable usury laws, 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.

      Section 2.3. Fees.

            (a) Closing Fee. The Borrower hereby agrees to pay the Lender on the
      Funding Date, a closing fee of Eight Thousand Seven Hundred Fifty Dollars
      ($8,750).

            (b) 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 One Thousand Two Hundred Fifty Dollars ($1,250)
      per quarter) beginning January 1, 2000, plus out-of-pocket costs and
      expenses, and during Default Periods all out-of-pocket costs and expenses
      incurred in conducting any such audit or inspection.

            (c) Miscellaneous Fees. The Borrower hereby agrees to (i) reimburse
      the Lender for all wire transfer charges and automated clearing house
      charges and to (ii) pay overadvance charges of Two Hundred Dollars ($200)
      per day; provided, however, that from the first day of any month during
      which any Default Period commences or exists at any time, the daily
      overadvance charge (if an overadvance exists) shall be Four Hundred
      Dollars ($400).

      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 three hundred sixty (360) days.
Interest shall be payable in arrears on the first day of each month and on the
Termination Date.

      Section 2.5. Capital Adequacy: Increased Costs and Reduced Return. If any
Related Lender determines at any time that its Return has been reduced as a
result of any Rule Change, such Related Lender may require the Borrower to pay
it the amount necessary to restore its Return to what it would have been had
there been no Rule Change. For purposes of this Section 2.5:

            (a) "Capital Adequacy Rule" means any law, rule, regulation,
      guideline, directive, requirement or request regarding capital adequacy,
      or the interpretation or administration thereof by any governmental or
      regulatory authority, central bank or comparable agency, whether or not
      having the force of law, that applies to any Related Lender. Such rules
      include rules requiring financial institutions to maintain

                                       11
<PAGE>

      total capital in amounts based upon percentages of outstanding loans,
      binding loan commitments and letters of credit.

            (b) "Return" for any period, means the return as determined by such
      Related Lender on the Advances based upon its total capital requirements
      and a reasonable attribution formula that takes account of the Capital
      Adequacy Rules then in effect. Return may be calculated for each calendar
      quarter and for the shorter period between the end of a calendar quarter
      and the date of termination in whole of this Agreement.

            (c) "Rule Change" means any change in any Capital Adequacy Rule
      occurring after the date of this Agreement, but the term does not include
      any changes in applicable requirements that at the Closing Date are
      scheduled to take place under the existing Capital Adequacy Rules or any
      increases in the capital that any Related Lender is required to maintain
      to the extent that the increases are required due to a regulatory
      authority's assessment of the financial condition of such Related Lender.

            (d) "Related Lender" includes, but is not limited to, the Lender,
      any parent corporation of the Lender or the Issuer and any assignee of any
      interest of the Lender hereunder and any participant in the loans made
      hereunder.

Certificates of any Related Lender sent to the Borrower from time to time
claiming compensation under this Section 2.5, stating the reason therefor and
setting forth in reasonable detail the calculation of the additional amount or
amounts to be paid to the Related Lender hereunder to restore its Return shall
be conclusive absent manifest error. In determining such amounts, the Related
Lender may use any reasonable averaging and attribution methods.

      Section 2.6. Discretionary Nature of this Facility; Termination by the
Lender; Automatic Renewal. This Agreement contains the terms and conditions upon
which the Lender presently expects to make Advances, including the Special
Accommodation, to the Borrower. Each Advance by the Lender to the Borrower,
including the Special Accommodation, shall be in the Lender's sole discretion,
and the Lender need not show that an adverse change has occurred in the
Borrower's condition, financial or otherwise, or that any of the conditions of
Article IV have not been met, in order to refuse to make any requested Advance
or to demand payment of the Obligations. The Lender may at any time terminate
the Credit Facility whereupon the Lender shall no longer consider requests for
Advances under this Agreement. Unless terminated by the Lender at any time or by
the Borrower pursuant to Section 2.7, the Credit Facility shall remain in effect
until the Original Maturity Date and, thereafter, shall automatically renew for
successive one year periods (the Original Maturity Date and each anniversary
date thereof which is at the end of any year in which the Credit Facility has
been automatically renewed, is herein referred to as a "Maturity Date").

                                       12
<PAGE>

      Section 2.7. Voluntary Prepayment: Termination of the Credit Facility by
the Borrower. Except as otherwise provided herein, the Borrower may prepay the
Revolving Advances from time to time in part. The Borrower may prepay the
Revolving Advances in whole at any time and terminate the Credit Facility at any
time if it (i) gives the Lender at least thirty (30) days prior written notice
and (ii) pays the Lender termination fees in accordance with Section 2.8. Upon
termination of the Credit Facility and payment and performance of all
Obligations, the Lender shall release or terminate the Security Interest and the
Security Documents to which the Borrower is entitled by law.

      Section 2.8. Termination Fees. If that portion of the Credit Facility
provided under Section 2.1 is terminated (i) for any reason as of a date other
than a Maturity Date, or (ii) by the Borrower as of a Maturity Date but without
the Lender having received written notice of such termination from the Borrower
at least ninety (90) days before such Maturity Date, the Borrower shall pay to
the Lender a fee in an amount equal to Five Thousand Dollars ($5,000) times the
number of calendar months remaining until the Original Maturity Date; provided,
however, that no termination fee will be due if the Credit Facility is
terminated after the first anniversary of the Funding Date in connection with
the refinance of the Credit Facility by a Norwest Bank or Wells Fargo Bank.

      Section 2.9. Mandatory Prepayment. Without notice or demand, if the sum of
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 2.9 or under Section 2.7 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.

      Section 2.10. Payment. All payments to the Lender shall be made in
immediately available funds and shall be applied to the Obligations one (1)
Banking Day after receipt by the Lender. The Lender may hold all payments not
constituting immediately available funds for three (3) Banking Days before
applying them to the Obligations. 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 2.11. 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 maybe.

      Section 2.12. Use of Proceeds. The Borrower shall use the proceeds of
Advances in accordance with Schedule 2.12, and thereafter the proceeds of
Advances, if any, shall be used for ordinary working capital purposes.

                                       13
<PAGE>

      Section 2.13. 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 thirty (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 a Default Period exists 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 and open 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.

      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, whether or not 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,

                                       14
<PAGE>

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 a 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 (ii) final sale or disposition of all goods constituting
      Collateral and delivery of all such goods to purchasers.

            (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:

                                       15
<PAGE>

               Name and address of Debtor:

               RMED International, Inc.
               3925 North Hastings Way
               Eau Claire, Wisconsin 54702-0188
               Federal Tax Identification No. 84-0898302

               Name and address of Secured Party:

               Wells Fargo Business Credit, Inc.
               100 East Wisconsin Avenue, Suite 1400
               MAC N9811-143
               Milwaukee, Wisconsin 53202
               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 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 Willingness to Consider Lending

      Section 4.1. Conditions Precedent to Lender's Willingness to Consider
Making the Initial Advances. The Lender's willingness to consider making the
initial Advances hereunder shall be subject to the condition precedent that 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 any of the Premises, together with a landlord's
      disclaimer and consent with respect to each such lease.

            (d) A true and correct copy of any and all mortgages or other title
      retention agreements pursuant to which the Borrower has mortgaged or any
      other party retains

                                       16
<PAGE>

      title to any of the Premises, together with a disclaimer and consent with
      respect to each such property.

            (e) The Collateral Account Agreement, properly executed by the
      Borrower and Norwest Bank Wisconsin.

            (f) The Lockbox Agreement, properly executed by the Borrower and
      Norwest Bank Wisconsin.

            (g) The Patent and Trademark Security Agreement, properly executed
      by the Borrower.

            (h) The Intercreditor Agreement properly executed on behalf of
      International Financial Services Corporation and acknowledged by the
      Borrower.

            (i) The Subordination Agreements properly executed by each of John
      0. Harry and Thomas A. Biebel and acknowledged by the Borrower.

            (j) 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, except if such tax liens will be paid on the Funding Date,
      (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.

            (k) 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.

            (l) A letter from an officer of the Borrower identifying those
      individuals who are authorized to initiate and confirm payment orders and
      to sign collateral reports.

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

                                       17
<PAGE>

            (n) Evidence that the Borrower is duly licensed or qualified to
      transact business and in good standing 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.

            (o) A certificate of an officer of the Borrower confirming, in his
      or her personal capacity, the representations and warranties set forth in
      Article V.

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

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

            (r) A Validity Guaranty properly executed by the Validity Guarantor.

            (s) Payment of the expenses incurred by the Lender through the
      Funding Date and required to be paid by the Borrower under Section 9.6,
      including legal expenses incurred through the date of this Agreement.

            (t) Written authorization from the Borrower to pay proceeds of the
      Advances to third parties.

            (u) A payoff letter from Bank One, Wisconsin and any other party
      holding a loan or capitalized lease of the Borrower which will be paid
      with the proceeds of the initial Advances.

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

      Section 4.2. Conditions Precedent to All Advances. The Lender will not
consider any request for an Advance unless on such date:

            (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.

                                       18
<PAGE>

                                    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 Colorado 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
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

                                       19
<PAGE>

obligations of the Borrower, enforceable against the Borrower in accordance with
their respective terms.

      Section 5.4. Subsidiaries. The Borrower has no Subsidiaries.

      Section 5.5. Financial Condition: No Adverse Change. The Borrower has
heretofore furnished to the Lender audited financial statements of the Borrower
for its fiscal year ended December 31, 1998 and internally prepared financial
statements of the Borrower for the fiscal period ended September 30, 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. 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.

      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 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.

                                       20
<PAGE>

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.

                  (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 no Hazardous Substances have ever been stored, buried, spilled,
      leaked, discharged, emitted or released in, on or under 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) To the Borrower's best knowledge, there are not and there never
      have been any requests, claims, notices, investigations, demands,
      administrative

                                       21
<PAGE>

      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 twelve (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 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.
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

                                       22
<PAGE>

other obligor named therein or in the Borrower's records pertaining thereto as
being obligated to pay such obligation.

                                   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:

            (a) as soon as available, and in any event within ninety (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 at 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, 6.13 and 7.10; and (iii) a certificate of an officer of the
      Borrower, substantially in the form of Exhibit B, stating (A) that such
      financial statements have been prepared in accordance with GAAP, (B)
      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
      (c) all relevant facts in reasonable detail to evidence, and the
      computations as to, whether the Borrower is in compliance with the
      requirements set forth in Sections 6.12, 6.13 and 7.10;

            (b) as soon as available and in any event within twenty (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

                                       23
<PAGE>

      year, all prepared in accordance with GAAP, subject to year end audit
      adjustments; and accompanied by a certificate of an officer of the
      Borrower, 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 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 the
      Borrower is in compliance with the requirements set forth in Sections
      6.12, 6.13 and 7.10;

            (c) within ten (10) 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, Inventory
      and Eligible Inventory as at the end of such month or shorter time period;

            (d) at least thirty (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;

            (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
      Ten Thousand Dollars ($10,000);

            (f) as promptly as practicable, and in any event not later than five
      (5) business days after an officer of the Borrower obtains knowledge of
      the occurrence of any breach, default or event of default under any
      Security Document or 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 breach, default or event;

            (g) as soon as possible and in any event within thirty (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;

                                       24
<PAGE>

            (h) as soon as possible, and in any event within ten (10) 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) promptly upon knowledge thereof, notice of (i) any disputes or
      claims by the Borrower's customers exceeding Ten Thousand Dollars
      ($10,000) individually; (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 any Collateral or other collateral covered by the
      Security Documents or of any substantial adverse change in any 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;

            (in) annually by no later than the anniversary of the previous
      statement provided to the Lender an updated personal financial statement
      of the Validity Guarantor and, upon request by the Lender, copies of the
      state and federal tax returns and all schedules thereto of the Validity
      Guarantor;

            (n) 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

            (o) from time to time, with reasonable promptness, any and all
      receivables schedules, collection reports, deposit records, equipment
      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,

                                       25
<PAGE>

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, (i) 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, (ii) all
      federal, state and local taxes required to be withheld by it, and (iii)
      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.

      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

                                       26
<PAGE>

      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) 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. Collateral Account.

            (a) If, notwithstanding the instructions to debtors to make payments
      to the Lockbox, the Borrower receives any payments on Receivables or other
      proceeds of the Collateral, the Borrower shall deposit such payments or
      proceeds into the Collateral Account. Until so deposited, the Borrower
      shall hold all such payments

                                       27
<PAGE>

      and proceeds in trust for and as the property of the Lender and shall not
      commingle such payments with any of its other funds or property.

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

            (c) All deposits in the Collateral Account shall constitute proceeds
      of Collateral and shall not constitute payment of the Obligations. The
      Lender from time to time at its discretion may, after allowing two (2)
      Banking Days, apply deposited funds in the Collateral 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.

            (d) All items deposited in the Collateral 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 Collateral
      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 Collateral Account,
      whether or not in fact endorsed by the Borrower.

      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
(10) 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 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

                                       28
<PAGE>

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
6.11.

      Section 6.12. Minimum Book Net Worth. While any part of the Obligations
remains unpaid, the Borrower shall, unless waived in writing by Lender,
continuously maintain:

            (a) as of the Funding Date, a minimum Book Net Worth of not less
      than Fifty Thousand Dollars ($50,000);

            (b) thereafter, through December 30, 1999, a minimum Book Net Worth
      of not less than the Book Net Worth as of the Funding Date;

            (c) as of December 31, 1999 and each December 31 thereafter, a
      minimum Book Net Worth of not less than the Book Net Worth as of the
      immediately preceding September 30 plus One Hundred Thousand Dollars
      ($100,000);

            (d) thereafter, for each period from January 1 through March 30, a
      minimum Book Net Worth of not less than the Book Net Worth as of the
      immediately preceding fiscal year end;

            (e) as of March 31, 2000 and each March 31 thereafter, a minimum
      Book Net Worth of not less than the Book Net Worth as of the end of the
      immediately preceding December 31 plus One Hundred Thousand Dollars
      ($100,000);

            (f) thereafter, for each period from April 1 through June 29, a
      minimum Book Net Worth of not less than the Book Net Worth as of the
      immediately preceding March 31;

            (g) as of June 30, 2000 and each June 30 thereafter, a minimum Book
      Net Worth of not less than the Book Net Worth as of the end of the
      immediately preceding March 31 plus One Hundred Thousand Dollars
      ($100,000);

            (h) thereafter, for each period from July 1 through September 29, a
      minimum Book Net Worth of not less than the Book Net Worth as of the
      immediately preceding June 30;

            (i) as of September 30, 2000 and each September 30 thereafter, a
      minimum Book Net Worth of not less than the Book Net Worth as of the end
      of the immediately preceding June 30 plus One Hundred Thousand Dollars
      ($100,000);

            (i) thereafter, for each period from October 1 through December 30,
      a minimum Book Net Worth of not less than the Book Net Worth as of the
      immediately preceding September 30; and

                                       29
<PAGE>

            (k) as of December 31, 2000 and each December 31 thereafter, a
      minimum Book Net Worth of not less than both (i) the Book Net Worth as of
      the immediately preceding September 30 plus One Hundred Thousand Dollars
      ($100,000) and (ii) the Book Net Worth as of the prior fiscal year end
      plus Five Hundred Thousand Dollars ($500,000).

      Section 6.13. Minimum Net Earnings. The Borrower will achieve (a) during
the fiscal year ended December 31, 2000 and each fiscal year thereafter Net
Earnings of not less than Five Hundred Thousand Dollars ($500,000), as
demonstrated on the audited year end financial statements of Borrower, and (b)
during each three (3) month fiscal period ending on each March 31, June 30,
September 30 and December 31 during the term hereof; Net Earnings of not less
than One Hundred Thousand Dollars ($100,000).

                                   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, 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;

            (b) mortgages, deeds of trust, pledges, liens, security interests
      and assignments in existence on the date hereof and 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;

            (d) purchase money security interests relating to the acquisition of
      machinery and equipment of the Borrower not exceeding the lesser of 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; and

                                       30
<PAGE>

            (e) liens and security interests in favor of International Financial
      Services Corporation to the extent such liens remain subject to the
      provisions of the Intercreditor Agreement.

      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;

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

            (d) indebtedness to John 0. Harry and Thomas A. Biebel so long as
      such indebtedness remains subordinate to the Obligations in accordance
      with the provisions of the Subordination Agreements.

      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 United States of America corporations rated "A-1" or
            "A-2" by Standard & Poor's Corporation or "P-1"

                                       31
<PAGE>

            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 having deposits in excess of
            One Hundred Million Dollars ($100,000,000) (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 not exceeding at any one time an aggregate of Ten Thousand
            Dollars ($10,000).

            (b) The Borrower will not create or permit to exist any Subsidiary.

      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 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.

      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 (a) Capital Expenditures of more than Three Million Three
Hundred Thousand Dollars ($3,300,000) in the aggregate for the period from the
Funding Date through December 31, 2000; provided, however, that during such
period not more than Two Hundred Fifty

                                       32
<PAGE>

Thousand Dollars ($250,000) of such expenditures may be made out of the
Borrower's working capital, and (b) Capital Expenditures of more than One
Hundred Thousand Dollars ($100,000) in the aggregate during any fiscal year
ending on or after December 31, 2001.

      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
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,
default 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. The Borrower will not amend its
certificate of incorporation, articles of incorporation or bylaws.

      Section 7.17. Salaries: Management Fees. The Borrower will not pay
excessive or unreasonable salaries, bonuses, commissions, consultant fees or
other compensation; or increase the salary, bonus, commissions, consultant fees
or other compensation of any director, officer or consultant, or any member of
their families, by more than ten percent (10%) in any one year, either
individually or for all such persons in the aggregate, or pay any such increase
from any source other than profits earned in the year of payment.

      Section 7.18. Change in Ownership. The Borrower will not issue or sell any
stock of the Borrower or permit or suffer to occur the sale, transfer,
assignment, pledge or other disposition of any or all of the issued and
outstanding shares of stock of the Borrower to the extent any such issuance,
sale or other transfer would result in (i) Edward Reissue owning less than five
percent (5%) of the voting stock of the Borrower, (ii) Brenda Scenic owning less

                                       33
<PAGE>

than twenty percent (20%) of the voting stock of the Borrower, or (iii) any
other party owning more than fifteen percent (15%) of the voting stock of the
Borrower. The Lender agrees to review and consider changes to this Section 7.18
upon request of the Borrower in connection with any renewal of the Credit
Facility beyond the Original Maturity Date.

                                  ARTICLE VIII

                     Events of Default, Rights and Remedies

      Section 8.1. Events of Default. Notwithstanding that the Lender may demand
immediate payment of the Obligations at any time, whether or not a Default
Period then exists, and without waiving or limiting in any respect the Lender's
right to so demand payment of the Obligations at any time, this Agreement sets
forth a non-exclusive list of certain critical events after the occurrence of
which the Lender expects that it would demand immediate payment of the
Obligations and exercise its remedies. "Event of Default," wherever used herein,
means any one of the following events:

            (a) Default in the payment of the Obligations on demand or on any
      portion of the Obligations that otherwise becomes 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;

            (d) The Borrower or the Validity Guarantor shall be or become
      insolvent, or admit in writing its or his inability to pay its or his
      debts as they mature, or make an assignment for the benefit of creditors;
      or the Borrower or the Validity Guarantor shall apply for or consent to
      the appointment of any receiver, trustee, or similar officer for it or him
      or for all or any substantial part of its or his property; or such
      receiver, trustee or similar officer shall be appointed without the
      application or consent of the Borrower or the Validity Guarantor, as the
      case may be; or the Borrower or the Validity Guarantor 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 or him under
      the laws of any jurisdiction; or any such proceeding shall be instituted
      (by petition, application or otherwise) against the Borrower or the
      Validity Guarantor; 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 or the Validity
      Guarantor;

            (e) A petition shall be filed by or against the Borrower or the
      Validity Guarantor under the United States Bankruptcy Code naming the
      Borrower or the Validity Guarantor as debtor;

                                       34
<PAGE>

            (f) Any representation or warranty made by the Borrower in this
      Agreement, by the Validity Guarantor in any guaranty delivered to the
      Lender, or by the Borrower (or any of its officers) or the Validity
      Guarantor 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 Ten Thousand Dollars
      ($10,000) and the continuance of such judgment, decree or order
      unsatisfied and in effect for any period of thirty (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 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 thirty (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 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;

            (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;

                                       35
<PAGE>

            (l) The Borrower shall fail to pay, withhold, collect or remit any
      tax or tax deficiency 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) The Borrower shall take or participate in any action which would
      be prohibited under the provisions of any of the Subordination Agreements.

            (o) The Validity Guarantor shall repudiate, purport to revoke or
      fail to perform his obligations under his guaranty in favor of the Lender,
      or shall die;

            (p) Any event or circumstance with respect to the Borrower shall
      occur such that the Lender shall believe in good faith that the prospect
      of payment of all or any part of the Obligations or the performance by the
      Borrower under the Loan Documents is impaired or any material adverse
      change in the business or financial condition of the Borrower shall occur;
      or

            (q) 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. As provided in Section 2.6, the Lender
may, at any time, refuse to make any requested Advance, demand payment of the
Advances or terminate the Credit Facility, whether or not a Default Period then
exists. In addition, 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
      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;

            (b) 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;

            (c) 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

                                       36
<PAGE>

      Lender at a place to be designated by the Lender which is reasonably
      convenient to both parties;

            (d) the Lender may exercise and enforce its rights and remedies
      under the Loan Documents; and

            (e) 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. 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 (10)
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 facsimile, in
each case addressed or facsimiled to the party to whom notice is being given at
its address or facsimile number as set forth below:

                                       37
<PAGE>

      If to the Borrower:                           With a copy to:

      RMED International, Inc.                      Edward Reiss
      3925 North Hastings Way                       Brenda Schenk
      Eau Claire, Wisconsin 54702-0188              14 Evergreen Avenue
      Facsimile: 715/831-0291                       Westport, Connecticut 06881
      Attention: Todd L. Nelson                     Facsimile: 203/221-7905

      If to the Lender:

      Wells Fargo Business Credit, Inc.
      100 East Wisconsin Avenue, Suite 1400
      MAC N9811-143
      Milwaukee, Wisconsin 53202
      Facsimile: 414/224/7439
      Attention: John M. Stewart

or, as to each party, at such other address or facsimile 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 facsimile, 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
otherwise preserve,

                                       38
<PAGE>

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, reasonable attorney's fees,
periodic UCC, tax and judgment lien searches, incurred by the Lender in
connection with the Obligations, this Agreement, the Loan Documents and any
other 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"):

            (i) 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;

            (ii) 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

            (iii) 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.

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

                                       39
<PAGE>

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.

      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 & Company, and all direct and indirect
subsidiaries of Wells Fargo & Company, 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.

                                       40
<PAGE>

      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 Wisconsin. This
Agreement shall be governed by and construed in accordance with the substantive
laws (other than conflict laws) of the State of Wisconsin. The parties hereto
hereby (i) consents to the personal jurisdiction of the state and federal courts
located in the State of Wisconsin 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 Circuit Court of Milwaukee County, Wisconsin, or the United
States District Court, Eastern District of Wisconsin; 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.

      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.

RMED INTERNATIONAL, INC.                       WELLS FARGO BUSINESS CREDIT, INC.

By:                                            By: /s/ John W. Stewart
     --------------------------                    ---------------------------

Its: President                                 Its: Vice-President

                                       41Exhibit 10.1

                                                                  Execution Copy

                     EXCLUSIVE SALES AND MARKETING AGREEMENT

      This AGREEMENT made the 5th day of October, 2000 (the "Effective Date") by
HOSPITAL  SPECIALTY  COMPANY,  (hereinafter  "HSC"), a Division of The Tranzonic
Companies,  an Ohio  corporation  with  principal  offices  at 670 Alpha  Drive,
Highland  Heights,  Ohio  44143  and  RMED  International,   Inc.,  (hereinafter
"Contractor"),  a  Colorado  corporation,  with  principal  offices  at  3925 N.
Hastings Way, Eau Claire, WI 54703.

                                    RECITALS:

      WHEREAS, HSC desires to purchase certain designated  quantities of private
label  (product  packaged  in  packages  containing  the  name  provided  by the
customer) and control label (brand name used by the manufacturer/marketer as its
own  product  name) baby  diapers  as  described  in  Exhibit 1 attached  hereto
(hereinafter   the  "Products"  or  "Units"),   from  a  manufacturer  who  will
manufacture said Units in accordance with the agreed upon specifications;

      WHEREAS,  Contractor is in the business of  manufacturing  baby diapers as
well as other items for its  customers and desires to  manufacture  and assemble
Units for HSC, as per the terms and conditions hereinafter set forth.

      NOW THEREFORE, the parties agree as follows:

1. MANUFACTURE AND SUPPLY.

      Contractor  shall  sell  the  Products  to  HSC  in  accordance  with  the
specifications  provided  herein and in the  specifications  attached  hereto as
Exhibit  I  (the  "Specifications")  (including,   without  limitation,  Product
description,   manufacturing   specification,   any   packaging   and   labeling
specifications and shipping  instructions)  agreed upon by the parties from time
to time. The Units shall be  manufactured by Contractor in its own facilities in
Eau Claire,  WI pursuant to the terms and conditions set forth herein and in the
Specifications.  Hereafter,  from time to time,  HSC may  request and may order,
through formal purchase  orders,  various  quantities of the Products.  Upon its
acceptance  of each  such  purchase  order,  Contractor  shall be  obligated  to
manufacture  and ship the  Products  described  therein in  accordance  with the
terms, conditions,  schedules for delivery and purchase prices reflected therein
and as set forth in this Agreement.

      Contractor  will maintain  sufficient  inventory  quantities to meet HSC's
customer delivery  requirements  pursuant to instructions  from HSC.  Contractor
will be liable for any penalties associated with shipping delays to HSC or HSC's
customers  unless  such  delay  can be  attributed  to  untimely  or  incomplete
instructions from HSC.

2. SALES AND MARKETING.

      HSC  shall  use  reasonable  commercial  efforts  to  market  and sell the
Products in North America (USA,  Canada,  Mexico).  HSC will provide  Contractor
with a written  marketing  plan  outlining  HSC's efforts to market and sell the
Products. The parties will review together such

                                                                               1
<PAGE>

marketing plan at least quarterly in order to determine the acceptability of the
marketing   plan  and  to  provide   information  to  Contractor  for  the  most
cost-effective  manufacture  of the  Products  at levels  necessary  to meet the
demand of HSC and its customers.  HSC shall be responsible for all costs related
to sales and marketing efforts.

      Contractor  will  have no  direct  contact  with  HSC's  customers  unless
instructed to do so by HSC and then only to the extent  expressly  authorized by
HSC.

3. EXCLUSIVITY.

      It is agreed to by the parties that HSC shall have the exclusive  right to
market  and sell  private  label baby  diapers  and its own  control  label baby
diapers  (e.g.,  "Precious")  in North America (USA,  Canada,  Mexico) which are
manufactured  by  Contractor.  In addition,  Contractor  agrees to offer HSC the
right of first  refusal  to  market  or sell any new  products  that  Contractor
manufactures  during term of this Agreement for the private label market.  Terms
of sale of the new products to be  negotiated  and subject to the  conditions of
this agreement.

      Provided that  Contractor  is able to supply the Products  pursuant to the
Specifications  contained  herein and at the  quantities  required  by HSC,  HSC
agrees to purchase  baby diapers  exclusively  from  Contractor.  If and only if
Contractor is unable to supply all of HSC's requirements for Products,  then HSC
and Contractor will seek and agree on the manufacturer to cover such shortfall.

      Contractor  maintains  the right to  manufacture  baby  diapers for diaper
manufacturers provided that such baby diapers are brand name and not for private
label retail.  In addition,  this Agreement  shall not preclude  Contractor from
manufacturing and selling its "TenderCare", "Tushies", "Rock-A-Bye" or "Bumpies"
brand baby diapers. Notwithstanding the foregoing, HSC's production requirements
will  take  precedence  over   Contractor's   manufacturing   for  other  diaper
manufacturers.

      If both  parties  agree to terminate  the  exclusive  sales and  marketing
provisions  of this  Agreement,  but  continue  the  supply  relationship,  then
Contractor  agrees not to compete against HSC for a period of three (3) years in
those baby diapers  accounts that HSC has sold baby diapers during the 12 months
prior to termination of this exclusivity. An HSC customer is defined as whomever
HSC invoices.

4. DESIGN AND SPECIFICATION.

            (a)  Contractor   shall  be  responsible  for  the  engineering  and
            manufacture  in  compliance  with  the  National  Brand   Equivalent
            Specifications  as agreed to and  attached  hereto and as may change
            from time to time.

            (b) Contractor  shall provide samples of the Products to HSC and HSC
            shall approve or (disapprove) such samples in writing upon execution
            of this  agreement  and in the  future  when both  parties  agree to
            change specifications.

            (c) Contractor  shall also submit any and all drawings and component
            specifications,  and any subsequent  changes thereto,  to be used in
            manufacturing

                                                                               2
<PAGE>

            Products  for HSC.  HSC shall  approve in writing any changes to the
            drawings or component or other  specifications or any changes to the
            Specifications  prior  to  the  commencement  of  production  of any
            Product  incorporating  such changes.  Contractor agrees not to make
            any  changes  to  the  Specifications   without  the  prior  written
            authorization  from HSC and agreed upon  samples  will be  provided.
            Contractor owns the  specifications but HSC has the right to use the
            specifications  after  termination.  HSC is not precluded from using
            the specifications  with other contractors when we need to use other
            contractors under this agreement.

5. PURCHASE PRICES AND PAYMENT TERMS

      The  prices  to be  paid by HSC to  Contractor  for  the  Units  purchased
pursuant to this Agreement shall be as set forth in the  Specifications  for all
relevant SKU's, and pursuant to the specific purchase orders to be issued during
the term of the Agreement. Contractor will determine base-line costs immediately
upon  execution of this  Agreement and provide such  information  to HSC at such
time.  The  prices of Units  will be fixed for a six (6) month  period  from the
Effective  Date of this  Agreement  and  cannot  be  changed  thereafter  unless
Contractor provides HSC with sixty (60) days notice of production cost increases
of at least five percent (5%) and only to the extent of actual increases in such
costs. Contractor shall provide reasonable  documentation to HSC supporting such
production cost increases. Subsequent price adjustments shall be fixed for a six
month  period from the date of price  adjustment.  Contractor  will use its best
efforts to provide pricing that allows HSC to compete  effectively in the retail
baby diaper market and make a reasonable  margin of profit.  In  furtherance  of
this obligation, Contractor agrees to notify HSC of production cost decreases of
five percent (5%) or more and will decrease its prices  immediately  upon and to
the extent of such actual cost decreases.

      Payment  terms shall be net thirty (30) days from date of receipt at HSC's
plant or shipping  date to the  customer,  with a 2% discount  for payment  made
within  fifteen  (15) days of receipt  at HSC's  plant or  shipping  date to the
customer.

      Such prices  shall  represent  the total cost of the  Products to HSC from
Contractor,  including,  but not  limited  to,  the price of the  Products,  the
packaging, warehousing,  literature, any applicable taxes or assessments and all
delivery  costs up to the time that HSC  takes  title to the  goods.  Contractor
agrees to warehouse and drop ship the Products for HSC at no additional  cost to
HSC. Upon instruction from HSC, the Products shall be delivered by Contractor to
the carrier chosen by HSC. All outbound shipments to HSC customers will indicate
HSC as the shipper. Freight will be billed third party to HSC.

      Contractor  shall,  at  its  own  cost,  inventory  and  transport  to its
production  facility all raw materials and component  parts (if  applicable) for
the completed assembly of the Units.

      It is further agreed and understood as follows:  (i) any  modifications to
purchase orders,  including,  but not limited to,  modifications to the purchase
price set forth in the Specifications, issued pursuant to this Agreement must be
in writing and executed by authorized officers of both HSC and Contractor;  (ii)
the  specifications  and purchase  price for any  additional  items added to the
Products,  which items are added after the date of this Agreement ("New Items"),
shall be  established  by written  agreement  of the  parties  and (iii) all New
Items, the specifications

                                                                               3
<PAGE>

therefor  and the agreed upon  purchase  price  therefor  shall be added to this
Agreement as an exhibit,  amendment or  supplement  and upon the addition of New
Items to this Agreement, (a) the New Items shall become "Products" or "Units" as
defined in this Agreement, (b) the specifications for the New Items shall become
"Specifications"  as  defined  in this  Agreement  and (c) such  "Products"  and
"Specifications"  shall  thereafter be subject to all of the  provisions of this
Agreement  and all of the rights and remedies of the parties  conferred  hereby.
Prices are FOB Contractor's plant.

6. TERM.

            a. The term of this Agreement (the "Term") shall begin on October 5,
            2000 and shall  extend  through  October 4, 2003 unless such Term is
            terminated  prior to such date in accordance  with the terms of this
            Agreement.

            b.  The  term  of  this  Agreement  will  automatically   renew  for
            additional  one year terms  unless  either  party gives at least one
            year's  prior notice of its  intention to not renew this  Agreement.
            Neither  Notice of  termination  nor  expiration  of the Term  shall
            affect the  obligations  of the parties  under this  Agreement  with
            respect to any pending  purchase  orders  which have been issued and
            accepted  prior to the effective  date of  termination or expiration
            date of this Agreement and the terms of this Agreement  shall remain
            effective  until all such purchase  orders shall have been satisfied
            or terminated in writing by the parties.

            c.  Notwithstanding  the  termination of this Agreement by any party
            hereto  (including  termination  under  this  Section  or any  other
            Section) or the expiration of this Agreement  pursuant to its terms,
            the   obligations   of   Contractor    pursuant   to   Sections   12
            (indemnification),  9 (warranty),  and 13 (patents,  trademarks  and
            other  conditions  relating to intellectual  property  rights) shall
            survive.

            d. After  notice and at HSC's  request  and  directions,  Contractor
            shall ship all HSC property,  including, but not limited to, any and
            all materials bearing Proprietary Marks (as defined in Section 13 of
            this  Agreement)  and all materials  constituting  Trade Secrets and
            Confidential  Information  of HSC,  directly  to HSC or to any other
            location as may be  designated at such time by HSC. HSC will pay for
            such materials  provided that they had not been  previously paid and
            shipping cost will be paid by HSC.

7. PACKAGING.

      All  Products  shall be packaged at  Contractor's  sole  expense in strict
accordance with the following:

            a. Specifications annexed hereto as Exhibit "1".

            b. HSC shall  supply,  at no charge,  all color  separations,  films
            and/or camera ready art necessary to produce all packaging.

                                                                               4
<PAGE>

            c. Contractor  shall not commence  production or reproduction of any
            packaging  without  supplying HSC with samples of all such materials
            and receiving  written  approval from HSC prior to production.  Once
            any such material is approved,  Contractor  shall make no changes in
            such material without the prior written approval of HSC.

            d.  Contractor   shall  be  responsible  for  all  reasonable  costs
            associated   with  printing,   production  or  fabrication  of  such
            packaging.

            e. All separations,  films, camera ready art and other packaging and
            literature provided by HSC shall at all times remain the property of
            HSC and  shall  be  subject  to the  provisions  of this  Agreement,
            including  Section 13 hereof.  Use of any materials  provided by HSC
            for the production of any packaging or Product  literature  pursuant
            to this Agreement for any other purpose is expressly prohibited.

      HSC  and  Contractor  will  agree  to  the  minimum   monthly/yearly  case
requirement for a private label. HSC will use commercially reasonable efforts to
execute private label packaging  agreements with all customers.  Contractor will
bear the risk of loss on all private label  packaging in inventory  greater than
an amount equal to ninety (90) days sales if HSC has a private  label  packaging
agreement or Contractor  and HSC have otherwise  agreed in writing.  HSC will be
responsible  for  inventory in amounts up to the  equivalent of ninety (90) days
private label sales.

8. INSPECTION AND ACCEPTANCE OF FINISHED PRODUCT.

      HSC reserves the right to sample,  inspect, and test Products delivered to
its  plant  or its  customers'  location,  as well as the  packaging,  labeling,
product   literature  and   enclosures   therefore,   in  accordance   with  the
Specifications  set forth in Exhibit 1, and in  accordance  with the  inspection
procedures  adopted by HSC and agreed to in writing by  Contractor.  HSC may, at
its  option,  reject any  production  run,  lot or part  thereof  which does not
reasonably satisfy such Specifications and inspection procedures.  HSC shall not
be deemed to have accepted any  individual  shipment of Products if it specifies
in writing to Contractor  that the relevant  production run or lot has failed to
meet the  Specifications  or  inspection  standards of HSC.  Upon such  failure,
Contractor  shall have the right to promptly cure the defect.  If such defect is
due to Contractor's failure and is not cured within a reasonable period of time,
HSC shall be entitled to terminate all or part of the purchase order pursuant to
which such defective  Product was produced and be reimbursed for the cost of any
rejected  Products and other costs directly related to the return (i.e.  freight
to and from,  and/or charges or penalties that may be levied by the customer) or
other nonconforming product. Contractor shall follow good manufacturing practice
at all times and will provide HSC with comparative independent lab tests of each
of its products at minimum every six (6) months or as may be required by private
label proposals at Contractor's cost.

      The  acceptance  of any part of a shipment of Units  shall not  constitute
acceptance of the whole shipment, nor does acceptance of one shipment constitute
acceptance of any subsequent shipment. The acceptance of any shipment or portion
thereof does not limit any warranty,

                                                                               5
<PAGE>

indemnification  or other  obligations of Contractor  hereunder.  Payment of any
amount under any purchase order shall not constitute  acceptance of any Products
delivered pursuant to such purchase order.

9. WARRANTY.

            a.  Contractor   hereby  warrants  that  the  Units,   any  and  all
            replacements  thereof and  replacement  parts or components  thereof
            will be of good and  merchantable  quality,  fit for their  intended
            purpose,  free of defects in  material  and  workmanship,  and shall
            strictly  conform  to  all   Specifications  as  contained  in  this
            Agreement or in any Exhibit or purchase order delivered  pursuant to
            this Agreement.

                  The  provisions  of  this  Section  9 and the  obligations  of
            Contractor  hereunder shall survive the termination or expiration of
            this Agreement.

10. FORCE MAJEURE.

      No party hereto,  however,  shall be responsible for delays caused by Acts
of  God,  labor  disputes,   governmental  action,  civil  disturbances  or  War
(collectively  "force  majeure").  HSC  agrees to  negotiate  modified  shipping
schedules with Contractor in the event of a force majeure,  but it is the intent
of this  paragraph to identify the  importance  of adhering to schedules  agreed
upon between HSC and  Contractor.  Notwithstanding  the foregoing,  in the event
that a force  majeure  shall  cause or be  likely  to cause a delay of more than
ninety (90) days, HSC shall have the right,  in its sole discretion to terminate
any purchase order or to terminate this Agreement.

11. CONFORMANCE WITH LAWS.

      It is agreed  between  the  parties  that the  Units  and their  packaging
purchased  pursuant to this  Agreement and subsequent  purchase  orders shall be
marked  with the  "Country  of Origin"  in  accordance  with the laws  governing
importation into the United States and shall be produced, packaged and delivered
in  accordance  with  all  applicable  laws  including,   but  not  limited  to,
environmental  laws,  intellectual  property laws,  employee  safety and welfare
laws,  consumer protection laws and any other laws,  regulations,  of the United
States or any state,  local laws or regulations  and any and all applicable laws
of any other jurisdiction, domestic or foreign.

12. INDEMNIFICATION.

      Contractor and all its  wholly-owned or controlled  subsidiaries  agree to
protect,  hold harmless,  defend and  indemnify,  at its own expense HSC and its
customers from and against all liability, costs and expenses (including the fees
and expenses of attorneys and other experts or  consultants)  arising out of (1)
the breach of any provision of this Agreement,  including those resulting from a
breach of any  agreement or warranty set forth in Section 13 or (2) the death or
injury to any person, or damage to property,  by whosoever suffered,  resulting,
or claimed to have  resulted from any  purchase,  sale,  use or operation of any
Unit furnished  hereunder,  solely due to defects and/or negligence in the total
design and  manufacturing  process  including but not limited to the components,
materials and  workmanship.  HSC shall  promptly  notify  Contractor of any such
claim or lawsuit. HSC shall have the right, at its expense, to retain counsel to
participate in

                                                                               6
<PAGE>

the  defense  of any suit.  Contractor  may not settle or admit  liability  with
respect to any such claim without the prior written consent of HSC.

      Pursuant  to  this  indemnification,  Contractor  shall  purchase  product
liability  insurance with limits of not less than  $2,000,000.  HSC shall be "an
additional named insured" under  Contractor's  product  liability  insurance for
products  manufactured  for HSC.  Contractor  shall  provide  a  Certificate  of
Insurance showing proof of such product  liability  insurance and proof that HSC
is name "an additional named insured" thereunder.

      HSC agrees to  indemnify  Contractor  against any claims  related to sales
promotion or warranties in excess of  Contractor's  warranties to HSC related to
the Products and such Products' performance.

13. PATENTS,  TRADEMARKS AND OTHER CONDITIONS RELAT1NG TO INTELLECTUAL  PROPERTY
    RIGHTS; CONFIDENTIALITY.

            a. In the event that HSC and Contractor jointly develop a patentable
            item,  in   consideration   of  HSC's  agreement  to  purchase  from
            Contractor  hereunder  Contractor  agrees to irrevocably  assign all
            patent rights to HSC unless  otherwise  agreed to in writing by HSC,
            except for Contractor's own branded names,  patents,  trademarks and
            improvements,   new  patents,   new  trademarks  re:  those  brands.
            Contractor is prohibited from applying for any patents without prior
            written consent from HSC.

            b.  Contractor  shall affix to the Units  trademarks,  trade  names,
            copyrighted names and other  identifying  symbols of HSC, whether in
            existence as of the execution of this Agreement or arising,  created
            or implemented  after the date hereof (the "HSC Proprietary  Marks")
            strictly  in  accordance  with  HSC's  instructions  and in no other
            manner.  All such  Proprietary  Marks relating to the Units shall at
            all times remain the property of HSC,  and  Contractor  shall not at
            any time acquire any rights  thereto.  Contractor  shall not use any
            such  Proprietary   Marks  in  connection  with  any  other  party's
            trademark,  trade  name,  symbol,  copyrighted  name or  copyrighted
            material or take any other action which might dilute any Proprietary
            Mark. It is understood that this Agreement is not to be construed as
            a license to  Contractor to use the  Proprietary  Marks as described
            herein and the same shall not be used in  connection  with any goods
            other than those  produced for and sold to HSC pursuant to the terms
            of this  Agreement.  Contractor  shall  maintain and  implement  the
            Quality Control  Standards  established by HSC.  Contractor will not
            sell any  Product  using any HSC  Proprietary  Marks or any marks of
            HSC's   customers   if  such  Product  does  not  conform  with  the
            Specifications  or is otherwise  non-conforming as determined by HSC
            in accordance  with Section 8. HSC retains right of first refusal to
            sell non-conforming goods as "seconds".  In any event non-conforming
            goods cannot be sold in original packaging without the permission of
            HSC,  which will not be  unreasonably  withheld.  HSC's customer may
            preclude any such disposition.

                                                                               7
<PAGE>

            c. In addition,  each party  acknowledges that, in the course of its
            performance pursuant to this Agreement, it will be made aware of, be
            exposed  to or  otherwise  receive  Trade  Secrets  or  Confidential
            Information  (as  defined  below) of the other  party and such Trade
            Secrets  or  Confidential  Information  may  not be the  subject  of
            trademark or copyright protection. Accordingly, unless the receiving
            party shall have been notified by the other party in writing that an
            item  is  not  a  Trade  Secret  or  Confidential  Information,  the
            receiving party shall treat all information  received from the other
            party  as a  Trade  Secret  or  Confidential  Information.  For  the
            purposes   hereof,   the  phrase  "Trade  Secrets  or   Confidential
            Information"  shall have the  meaning  generally  ascribed  to these
            words in common business usage,  including,  but not limited to, all
            or any  portion  of  (1)  any  business,  scientific,  technical  or
            manufacturing   information,   (2)  any  product  design,   process,
            procedure,  formula  or  improvement,  (3) any  marketing  material,
            Production  information,  or system, (4) any Product defect,  design
            defect,  pending  recall or similar  information or (5) any business
            plan,  marketing  strategy,  new product line, product  improvement,
            financial information, cost information, profit information, listing
            of names, addresses or customers.

                  Each  party  agrees  that it shall use the Trade  Secrets  and
            Confidential  information  strictly in conformance with the terms of
            this Agreement,  and shall not, without the prior written consent of
            the other  party,  disclose  or use any time,  any Trade  Secrets or
            Confidential  Information,  except  (1) to the extent  necessary  to
            fulfill  its  obligations  hereunder,  (2) to the  extent  any  such
            information  shall  become  generally  available  in  writing to the
            general  public  (other than  through  the actions of the  receiving
            party)  or  (3) to the  extent  required  by a  court  of  competent
            jurisdiction  or  necessary  to  comply  with  any  applicable  law,
            regulation or order.

            d. In the event of a termination of commercial relations between the
            parties  hereto and/or  cancellation,  expiration or  termination of
            this  Agreement  for any  reason  whatsoever,  Contractor  shall not
            thereafter   make,  use,   exercise  or  sell  any  product  bearing
            Proprietary  Mark or any  colorable  imitation  thereof,  and  shall
            promptly return to HSC all design drawings, tool drawings,  tooling,
            and other property belonging to HSC.

            e.  Contractor  warrants  that  neither the Products nor any process
            related to the Product  violates  or  infringes  any other  patents,
            existing  or  pending  and  that  Contractor  possesses  any and all
            licenses  or other  permits to use the  proprietary  information  of
            third parties incorporated in the Products or any process related to
            the Products.  Pursuant to this warranty,  Contractor agrees to hold
            and save HSC, its successors,  assigns, customers and users harmless
            from loss and/or  liability  of any nature of kind arising out of or
            existing because of the infringement or alleged  infringement of any
            patent or the  violation  of any  license  of permit of  proprietary
            information for or on account of the manufacture, sale or use of any
            Products furnished hereunder. HSC shall notify Contractor in writing
            of any suit  filed  against it or its  customers,  on account of any
            such  infringement  or  alleged  infringement,  and at  Contractor's
            request shall give Contractor control of the

                                                                               8
<PAGE>

            defense of such suit, insofar as HSC has the authority to do so, and
            information  and  assistance  for  the  same,  all  at  Contractor's
            expense.  HSC and the party  against  whom suit is brought,  may, at
            their own expense,  be  represented by their own counsel in any such
            suit. Furthermore,  in the event that HSC or its customers should be
            enjoined  in such  suit or  proceeding  from  using  any part of the
            Products delivered  hereunder,  Contractor,  at HSC's option,  shall
            promptly  either:  (a)  secure  termination  of  the  injunction  or
            liability; or (b) replace said Products with non-infringing Products
            or  modify  them  to  become  non-infringing,  all  at  Contractor's
            expense.  Contractor  is  responsible  for all  product  related due
            diligence and all technical and production issues.

                  Similarly HSC warrants to Contractor that HSC or its customers
            owns or has authorization to use all of the intellectual property in
            the  artwork  and  slogans  that  it  provides  to  Contractor   for
            packaging.

            f. The  provisions of this Section 13 shall survive the  termination
            or expiration of this Agreement indefinitely.

14. RISK OF LOSS.

      Unless  otherwise  specified  herein  or  in  any  purchase  order  issued
hereunder,  risk of loss shall  remain  with  Contractor  until the title of the
Units passes to HSC upon delivery to freight carriers. Passing does not restrict
HSC rights to non-conforming product per paragraph 8 herein.

15. SUBCONTRACTING.

      It is  understood  between the parties  that  Contractor  may  subcontract
manufacture   of  the  Units  provided  that  said   subcontractor   is  a  U.S.
manufacturer.  It is agreed  that any such  subcontracting  arrangement  between
Contractor and subcontractor shall in no way affect or relieve Contractor of its
obligations,  representations  and warranties to HSC pursuant to this Agreement;
nor shall any of HSC's rights pursuant to this Agreement be affected thereby.

16. WAIVERS.

      No action taken pursuant to this Agreement,  shall be deemed to constitute
a waiver by the party taking such action of the  obligations  to comply with any
representation,  warranty, covenant or agreement contained herein. The waiver by
any party hereto of any condition or provision,  or of a breach of any condition
or provision, of this Agreement shall not operate or be construed as a waiver of
any other condition or provision, or of any subsequent breach. The waiver by any
party of any of the conditions precedent to its obligations under this Agreement
shall not preclude it from seeking  redress for breach of this  Agreement  other
than with respect to the condition so waived.

17. DEFAULT; REMEDIES; TERMINATION.

            a. If any of the "events of default"  listed in (i) through  (vi) of
            this subsection  shall occur, the  non-defaulting  party may, at its
            option,  with not less  than six (6)  months  notice to the party in
            default and provided that an agreed upon corrective

                                                                               9
<PAGE>

            action  has not  been  taken  within  30  days  notice  of  default,
            terminate  this  Agreement  and  all   prospective   rights  of  the
            defaulting party hereunder. The "events of default" are as follows:

                  i.    Non-conforming Products;

                  ii.   Inability   to   provide   National   Brand   Equivalent
                        Specifications;

                  iii.  Inability to meet shipping requirements;

                  iv.   Insolvency or bankruptcy;

                  v.    Predatory marketing practices; or

                  vi.   Non-competitive pricing.

                  In the event of termination  due to an event of default on the
            part of Contractor,  Contractor  agrees not to compete at those baby
            diaper  accounts  sold by HSC for a  period  of  three  years  after
            expiration of this Agreement.

            b. The termination of this Agreement for any reason whatsoever shall
            not relieve  either party of any  obligation  due to the other party
            on, or accrued as of, the date of such termination.  Notwithstanding
            the   termination   of  this  Agreement  by  any  party  hereto  the
            obligations of Contractor pursuant to Sections 12 (indemnification),
            9  (warranty),  and 13  (patents,  trademarks  and other  conditions
            relating to intellectual  property  rights;  confidentiality)  shall
            survive.

            c. In the event  Contractor  shall, at any time, act with respect to
            the Products in any manner other than as expressly permitted hereby,
            HSC shall be entitled to immediate  injunctive relief to prevent the
            continuation or recurrence of such use.

            d. All remedies  specified  herein or otherwise  available  shall be
            cumulative  and in addition to any and every other  remedy  provided
            hereunder or now or hereafter available under applicable law.

            e. HSC shall have no liability to Contractor for any costs, expenses
            or  damages,   including,  but  not  limited  to,  consequential  or
            incidental  damages,  arising  out  of or  in  connection  with  any
            exercise by HSC of any of its rights hereunder,  including,  but not
            limited to, any actions of HSC pursuant to Sections 6, 8, or 9.

            f.  Contractor  has the right to terminate  for  non-payment  by HSC
            provided  that  HSC  does  not  cure  within  30 days of  notice  of
            delinquency.

                                                                              10
<PAGE>

18. NOTICES.

      Any notices and other  communications  provided for hereunder or in any of
the Ancillary  Agreements shall be in writing (including  telegraphic,  telex or
cable communication) and shall become effective (i) when manually delivered on a
business day during normal  business  hours at the place of receipt to the party
to be given such notice,  (ii) on the third  business day following the day when
deposited,  if mailed by  certified  or  registered  mail  with  return  receipt
requested and postage thereon fully prepaid, (iii) on the business day following
the day when deposited,  if sent by overnight courier, fully prepaid, or (iv) on
the business day such notice shall have been sent by telex, telegram,  telecopy,
cable or similar electronic device, fully prepaid. The addresses for such notice
shall be:

To HSC:                       Hospital Specialty Company
                              670 Alpha Drive
                              Highland Heights, Ohio 44143
                              Attn: Bill Hemann

To Contractor:                Rmed International, Inc.
                              3926 N. Hastings Way
                              Eau Claire, WI 54703
                              Attn: Ed Reiss

19.  ASSIGNMENT.

      a. This Agreement is assignable by HSC in the event that HSC or its parent
company is sold or the retail  business of HSC's  parent  company is sold unless
the sale is to another baby diaper manufacturer.  In the event that such sale is
to another baby diaper  manufacturer,  then the successor company shall have the
right to continue this Agreement or to terminate with one year's notice.  During
this one year period,  the successor  company must honor all  provisions of this
Agreement. Should the successor company terminate this Agreement pursuant to its
terms,  then the  Contractor  is relieved  of all  non-compete  provisions  upon
termination  and will pay Contractor a three percent (3%) commission on any baby
diaper  business  previously  performed  by  Contractor  to HSC at the  time  of
acquisition and transferred to the successor company upon termination.

      b. In the event that Contractor is sold or sells its baby diaper business,
this  Agreement  and all  obligations  contained  herein must be assigned to the
acquiring party.

20. CONTRACTOR OBLIGATIONS UPON TERMINATION.

      Should  Contractor or Contractor's  successors and assigns  terminate this
Agreement  without cause,  then Contractor or its successors or assigns,  as the
case may be,  shall pay HSC an amount equal to four times HSC's gross profit for
its private label baby diaper business during the preceding  twelve (12) months.
At the sole discretion of HSC, Contractor or Contractor's

                                                                              11
<PAGE>

successors or assigns, as the case may be, shall supply HSC's control label baby
diapers on a non-exclusive  basis under the same pricing terms contained in this
Agreement for a period of at least twelve (12) months. In addition, HSC or HSC's
successors or assigns,  as the case may be, agrees not to compete in the private
label baby diaper  business  for a period of two (2) years unless HSC is sold to
another baby diaper manufacturer.

21. HSC OBLIGATIONS UPON TERMINATION.

      Should  HSC or HSC's  successors  and  assigns  terminate  this  Agreement
without cause, then HSC or its successors or assigns,  as the case may be, shall
provide six (6) months  notice and shall  assist  Contractor  to  transition  or
assign its private label baby diaper  business to Contractor.  Contractor  shall
pay HSC or its  successors  or assigns a  commission  of two percent (2%) of net
sales of  private  label  baby  diaper  business  that HSC has  transitioned  or
assigned to Contractor for a period of two (2) years from the expiration of this
Agreement.  If HSC or its  successors  or  assigns  wish to  terminate  only the
exclusivity  provision of this Agreement,  then Contractor agrees not to compete
against HSC for those private label accounts maintained by HSC.

22. HSC'S RIGHT OF FIRST REFUSAL.

      Should  Contractor  decide to sell its baby diaper business then HSC shall
be given a first option to buy at a negotiated  price of not more than the price
Contractor  could sell to a bona-fide third party  purchaser.  Contractor has no
obligation  to sell if it  decides  that such  third  party  purchaser's  bid is
inadequate.

23. CONFIDENTIALITY.

      During or after the term of this  Agreement  and for a period of three (3)
years after its termination,  neither party shall communicate,  divulge,  or use
for the benefit of another  person or entity,  any  confidential  or proprietary
information  or  knowledge  disclosed  by the other  party,  including,  without
limitation:   (i)  present  or  prospective   customer  lists,  (ii)  management
information reports, (iii) details of contracts, (iv) acquisition plans, (v) new
personnel  acquisition plans, (vi) trade secrets,  (vii) financial  information,
(viii)  product  designs,   details  or  specifications,   and  (ix)  any  other
information or materials of any kind which the disclosing party may designate as
confidential or proprietary ("confidential information").  Each party shall only
divulge  confidential  information  to  its  employees  to  the  limited  extent
necessary for such party to comply with its  obligations  under this  Agreement.
Each party shall require all persons to whom such  confidential  information  is
disclosed  to agree,  to the same  extent as each  party has  agreed  under this
Agreement, to maintain the confidentiality of such confidential  information and
not disclose it to others. The receiving party shall be liable to the disclosing
party for all damages of any kind caused by any breach of this  Section 23 or by
any unauthorized  disclosure of the disclosing party's confidential  information
by the receiving party or its employee(s),  representative(s) or other person to
whom the receiving party has disclosed such information.  In addition,  both HSC
and Contractor  must agree in writing to any public  disclosure or press release
of financial or other  business  information  to the public or to the  financial
community.

                                                                              12
<PAGE>

24. MISCELLANEOUS.

      a.  During the term of this  Agreement  and any  renewal  period and for a
period of two (2) years after the expiration or termination  hereof, the parties
agree not to solicit or hire each  other's  employees.  Each party  acknowledges
that such soliciting or hiring employees under contract to the other party could
constitute  tortuous  interference  with  business  relations.  (E.g.,  All  HSC
non-union employees are employed pursuant to an employment  agreement containing
a non-compete provision.)

      b. This Agreement  shall inure to the benefit of and shall be binding upon
the parties hereto and their respective heirs, legal representatives, successors
and permitted assigns.

      c. The Section and other  headings  contained  in this  Agreement  are for
reference  purposes only and shall not affect the meaning or  interpretation  of
this Agreement.

      d. This Agreement may be executed in any number of  counterparts,  each of
which,  when  executed,  shall  be  deemed  to be an  original  and all of which
together shall be deemed to be one and the same instrument.

      e. In this Agreement,  unless the context otherwise requires, words in the
singular or in the plural shall each  include the  singular and the plural,  and
words of the masculine  gender shall  include the feminine and the neuter,  and,
when the sense so indicates, words of the neuter gender may refer to any gender.

      f. This Agreement  shall be governed by the laws of the State of Ohio. The
rights and obligations of the parties under this Agreement shall not be governed
by the provisions of the 1980 U.N. Convention on Contracts for the International
Sales of Goods;  rather,  these rights and obligations  shall be governed by the
laws of the State of Ohio, United States of America, including the provisions of
the Uniform Commercial Code as enacted in the State of Ohio.

      g.  Any  term  or  provision  of  this  Agreement   which  is  invalid  or
unenforceable  shall  be  ineffective  to  the  extent  of  such  invalidity  or
unenforceability  without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement.

      h. This Agreement embodies the entire agreement between the parties hereto
with respect to the subject matter hereof and  supersedes  all prior  agreements
and understandings,  oral or written,  with respect thereof.  This Agreement may
not be changed  orally,  but may be amended,  superseded,  canceled,  renewed or
extended,  and the terms hereof may be waived,  only by an instrument in writing
signed by each of the parties, or, in the case of a waiver,  signed by the party
against whom  enforcement of such waiver is being sought.  In the event that any
terms and conditions of the Specifications or any other invoice,  acknowledgment
or other  purchase  document  conflict with the terms and  conditions  contained
herein, the terms and conditions of this Agreement shall govern.

      IN WITNESS  WHEREOF,  the parties have executed this  Agreement on the day
and year first above written.

                                                                              13
<PAGE>

                                  HOSPITAL SPECIALTY COMPANY, a
                                  Division of The Tranzonic Companies

/s/ Kenneth R. Kramer             /s/ William E. Hemann
---------------------             ------------------------
Witness                           By:    William E. Hemann
                                      --------------------
                                  Its:   Vice-President
                                      --------------------

                                  RMED INTERNATIONAL, INC.

/s/ Stephen Brajdic               /s/ Todd L. Nelson
-------------------               ------------------------
Witness                           By: Todd L. Nelson
                                      --------------------
                                  Its: Vice-President
                                      --------------------

                                                                              14
<PAGE>

                                  HOSPITAL SPECIALTY COMPANY, a
                                  Division of The Tranzonic Companies

                                  /s/ William E. Hemann
---------------------             ------------------------------------------
Witness                           By:    William E. Hemann
                                      --------------------------------------
                                  Its:   Vice-President
                                      --------------------------------------

                                  RMED INTERNATIONAL, INC.

                                  /s/ Edward Reiss
-------------------               ------------------------------------------
Witness                           By: Edward Reiss
                                      --------------------------------------
                                  Its: Chairman of the Board; V.P. Sales CEO
                                      --------------------------------------

                                                                              15

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