LOAN AND SECURITY AGREEMENT

1.   DEFINITIONS AND CONSTRUCTION.    1
  (a)   Definitions.      1
  (b)   Matters of Construction.      14
2.   LOANS.   15
  (a)   Revolving Loans. 15
  (b)   Repayments.       16
  (c)   Notes.      16
  (d)   Bank Products.    16
  (e)   Increase of the Maximum Revolving Loan Limit   17
3.   LETTERS OF CREDIT.   17
  (a)   General Terms:    17
  (b)   Requests for Letters of Credit.     18
  (c)   Obligations Absolute.   18
  (d)   Expiration Dates of Letters of Credit.    19
4.   INTEREST, FEES AND CHARGES.      19
  (a)   Interest Rate.    19
  (b)   Other LIBOR Provisions.       19
  (c)   Fees And Charges.       21
  (d)   Maximum Interest.       23
5.   COLLATERAL.    24
  (a)   Grant of Security Interest to Lender.     24
  (b)   Other Security.   24
  (c)   Possessory Collateral. 25
  (d)   Electronic Chattel Paper.     25
  (e)   Key Man Life Insurance 25
6.   PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN.       25
7.   POSSESSION OF COLLATERAL AND RELATED MATTERS.   26
8.   COLLECTIONS.   26
9.   COLLATERAL, AVAILABILITY AND FINANCIAL REPORTS AND
SCHEDULES.   28
  (a)   Borrowing Base Certificates   28
  (b)   Monthly Reports. 29
  (c)   Financial Statements.   29
  (d)   Annual Projections.     29
  (e)   Explanation of Budgets and Projections.   30
  (f)   Public Reporting.       30
  (g)   Other Information.      30
10.   TERMINATION. 30
11.   REPRESENTATIONS AND WARRANTIES.       31
  (a)   Financial Statements and Other Information.     31
  (b)   Locations. 31
  (c)   Loans by Borrower.      32
  (d)   Accounts.   32
  (e)   Liens.      32
  (f)   Organization, Authority and No Conflict. 32
  (g)   Litigation.       33
  (h)   Compliance with Laws and Maintenance of Permits.      33
  (i)   Affiliate Transactions.       33
  (j)   Names and Tradenames.   33
  (k)   Equipment. 33
  (l)   Enforceability.   34
  (m)   Solvency.   34
  (n)   Other Indebtedness.     34
  (o)   Margin Security and Use of Proceeds.      34
  (p)   Parent, Subsidiaries and Affiliates.      34
  (q)   No Defaults.      34
  (r)   Employee Matters.       34
  (s)   Intellectual Property. 35
  (t)   Environmental Matters. 35
  (u)   ERISA Matters.    35
  (v)   Regulation O.     36
  (w)   Equity.     36
  (x)   Investment Company.     37
  (y)   Consents.   37
  (z)   Licenses.   37
  (aa)   Subordinated Debt.     37
  (bb)   Information; No Untrue Statement. 37
  (cc)   Other Agreements.      38
  (dd)   Taxes.     38
  (ee)   Significant Contracts.       38
  (ff)   Insurance.       38
  (gg)   Tax Identification and Organizational Numbers.       38
  (hh)   Foreign Assets Control Regulations, Etc.       39
12.   AFFIRMATIVE COVENANTS.    39
  (a)   Maintenance of Records.       40
  (b)   Notices.    40
  (c)   Compliance with Laws and Maintenance of Permits.      41
  (d)   Inspection and Audits. 42
  (e)   Insurance. 42
  (f)   Collateral.       43
  (g)   Use of Proceeds. 44
  (h)   Taxes.      44
  (i)   Intellectual Property. 44
  (j)   Checking Accounts and Cash Management Services.       44
  (k)   Commercial Tort Claim. 45
  (l)   Maintenance of Licenses.      45
  (m)   Landlord Consents.      45
  (n)   Payment Obligations.    45
  (o)   Management.       45
  (p)   Corporate Existence.    45
  (q)   Key Man Life Insurance.       46
  (r)   Subordinated Debt.      46
13.   NEGATIVE COVENANTS.       46
  (a)   Pension Plans.    46
  (b)   Guaranties.       46
  (c)   Indebtedness.     47
  (d)   Liens.      47
  (e)   Mergers, Sales, Acquisitions, Subsidiaries and Other
Transactions Outside the Ordinary Course of Business. 47
  (f)   Dividends and Distributions. 48
  (g)   Investments; Loans.     48
  (h)   Fundamental Changes, Line of Business.    49
  (i)   Equipment. 49
  (j)   Affiliate Transactions.       49
  (k)   Settling of Accounts.   49
  (l)   Purposely Omitted.      49
  (m)   Subordinated Debt.      49
  (n)   Use of Proceeds. 50
  (o)   Patriot Act, Bank Secrecy Act and Office of
Foreign Assets Control. 50
  (p)   Other Agreements.       51
  (q)   Contingent Acquisition or Other Liabilities.    51
14.   FINANCIAL COVENANTS.      51
  (a)   Fixed Charge Coverage Ratio   51
  (b)   Senior Debt Ratio       51
  (c)   EBITDA      52
  (d)   Capital Expenditures    52
15.   DEFAULT.      52
  (a)   Payment.    52
  (b)   Breach of this Agreement and the Other
Agreements. 52
  (c)   Breaches of Other Obligations.      52
  (d)   Breach of Representations and Warranties.       53
  (e)   Loss of Collateral.     53
  (f)   Levy, Seizure or Attachment. 53
  (g)   Bankruptcy or Similar Proceedings. 53
  (h)   Appointment of Receiver.      53
  (i)   Judgment.   53
  (j)   Dissolution of Borrower.      54
  (k)   Criminal Proceedings.   54
  (l)   Change of Control.      54
  (m)   Change of Management.   54
  (n)   Material Adverse Change.      54
  (o)   Mandatory Prepayments. 54
  (p)   Default or Revocation of Subordination
Agreements. 54
  (q)   Licenses.   54
  (r)   Significant Contracts. 55
  (s)   Contingent Acquisition or Other Liabilities.    55
  (t)   Cessation of Business Activities.   55
  (u)   Assignment of Debt.     55
16.   REMEDIES UPON AN EVENT OF DEFAULT.    55
17.   CONDITIONS PRECEDENT.     57
18.   INDEMNIFICATION.    58
19.   NOTICE.       58
20.   CHOICE OF GOVERNING LAW; CONSTRUCTION;
FORUM SELECTION.   59
21.   MODIFICATION AND BENEFIT OF AGREEMENT.      59
22.   HEADINGS OF SUBDIVISIONS.       60
23.   POWER OF ATTORNEY. 60
24.   CONFIDENTIALITY.    60
25.   COUNTERPARTS.       61
26.   ELECTRONIC SUBMISSIONS.   61
27.   WAIVER OF JURY TRIAL; OTHER WAIVERS. 61
28.   TIME.   62
29.   SIGNATORIES. 62
30.   THIRD PARTIES.      62
31.   DISCHARGE OF LIENS.       62
32.   MONETARY DESIGNATIONS.    63
33.   PATRIOT ACT. 63
34.   JOINT AND SEVERAL LIABILITY OF BORROWERS.   63
35.   COMMON ENTERPRISE. 65
36.   PURPOSELY OMITTED. 66
37.   SAVINGS CLAUSE.     66
38.   ZANETT AS AGENT FOR THE BORROWERS     66





LOAN AND SECURITY AGREEMENT

DATED AS OF DECEMBER 21, 2006

AMONG

LASALLE BANK NATIONAL ASSOCIATION,

THE LENDER,

AND

ZANETT, INC.

ZANETT COMMERCIAL SOLUTIONS, INC.

PARAGON DYNAMICS, INC.,

THE BORROWERS


LOAN AND SECURITY AGREEMENT

       THIS LOAN AND SECURITY AGREEMENT (as amended, modified, restated or
supplemented from time to time, this "Agreement") made effective as of
December 21, 2006 by and among LASALLE BANK NATIONAL ASSOCIATION ("Lender")
and ZANETT, INC., a Delaware corporation ("Zanett"), ZANETT COMMERCIAL
SOLUTIONS, INC., a Delaware corporation ("ZCS") and PARAGON DYNAMICS, INC.,
a Delaware corporation ("Paragon") (Zanett, ZCS and Paragon are each
individually, a "Borrower" and collectively, the "Borrowers"), having their
principal place of business at 635 Madison Avenue, 15th Floor, New York,
New York 10022.

WITNESSETH:

       WHEREAS, Borrowers may, from time to time, request Loans from Lender,
and the parties wish to provide for the terms and conditions upon which such
Loans or other financial accommodations, if made by Lender, shall be made;

       NOW, THEREFORE, in consideration of any Loan (including any Loan by
renewal or extension) hereafter made to Borrowers by Lender, and for other
good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged by Borrowers, the parties agree as follows:

    1.    DEFINITIONS AND CONSTRUCTION.

       (a)    Definitions.

       When used in this Agreement, the following terms shall have the
following meanings (such meanings to be applicable equally both to the
singular and plural term defined):

       "AASI" shall have the meaning specified in Section 13(n).

       "Account", "Account Debtor", "Chattel Paper", "Commercial Tort
Claims","Deposit Accounts", "Documents", "Electronic Chattel Paper",
"Equipment", "Fixtures", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment Property", "Letter of Credit
Rights", "Proceeds" and "Tangible Chattel Paper" shall have
the respective meanings assigned to such terms
in the Uniform Commercial Code, as the same may be in effect in the
Commonwealth of Pennsylvania from time to time.

       "Administrative Borrower" shall have the meaning specified in
Section 38.

       "Affiliate" shall mean any Person (i) which directly or indirectly
through one or more intermediaries controls, is controlled by, or is
under
common control with, any Borrower, (ii) which beneficially owns or holds
five percent (5%) or more of the voting control or equity interests of
any
Borrower, or (iii) five percent (5%) or more of the voting control or
equity interests of which is beneficially owned or held by any Borrower.

       "Applicable Margin" shall mean the margin set forth below with
respectto LIBOR Rate Loans as in effect from time to time, as
applicable;
provided, that the initial Applicable Margin shall be set at Level
II until five (5) Business Days after receipt of
Borrowers' annual financial statements for the
fiscal year ending December 31, 2007.
 
     Level             Fixed Charge            Applicable Margin
                     Coverage Ratio            LIBOR Rate Loans
    -------         ----------------         -------------------
       I                                              225

      II                                              250
       
       "Approved Electronic Form", "Approved Electronic Form Notice" and
"Electronic Form" shall have the meanings specified in Section 26 hereof.

       "Authorized Officer" with respect to borrowing, shall mean any
officer or employee of the Administrative Borrower authorized by
Borrowers to request Loans set forth in an incumbency certificate
delivered in accordance with Section 17(a).

       "Bank Products" shall mean any service or facility extended to
any
Borrower by Lender or any Parent, Affiliate or Subsidiary of Lender in
connection with: (i) ACH transactions, (ii) cash management, including
controlled disbursement, accounts or services, or (iii) Hedge
Agreements.

       "Benefit Plan" shall mean a "defined benefit plan" (as defined in
Section 3(35) of ERISA) for which any Borrower, any Subsidiary of any
Borrower,or any ERISA Affiliate has been an "employer" (as defined in
Section 3(5) of ERISA) within the past six (6) years.

       "Board of Directors" shall mean the board of directors (or
comparable managers) of any Borrower or any committee thereof
duly authorized to act on behalf thereof.

       "Business Day" shall mean any day other than a Saturday, a
Sunday or any day that banks in Philadelphia, Pennsylvania or
Chicago, Illinois are required or permitted to close or, with
respect to all matters, determinations,fundings and payments in
connection with LIBOR Rate Loans, any day on which banks in London,
England, Philadelphia, Pennsylvania or Chicago, Illinois are
required or permitted to close.

       "Capital Adequacy Charge" shall have the meaning specified in
Section 4(c)(viii).

       "Capital Adequacy Demand" shall have the meaning specified in
Section 4(c)(viii).

       "Capital Expenditures" shall mean with respect to any period,
aggregate of all expenditures (whether paid in cash or accrued as
liabilitiesand including expenditures for capitalized lease
obligations) by Borrowers during such period that are required by
GAAP to be included in or reflected by the property, plant and
equipment or similar fixed asset accounts (or intangible accounts
subject to amortization) on the balance sheet of
Borrowers.

       "Capital Stock" shall mean, with respect to any Person, any
and all shares interests, participations or other equivalents
(however designated) of such Person's capital stock, partnership
interests or limited liability company interests at any time
outstanding, and any and all rights, warrants
or options exchangeable for or convertible into such capital stock
or other interests (but excluding any debt security that is
exchangeable for or convertible into such capital stock).

       "Change of Control" shall mean (a) any "person" or "group"
(within the meaning of Sections 13(d) and 14(d) of the Exchange
Act), other than David McCarthy, Claudio Guazzoni, their immediate
family members and heirs, and trusts controlled by David McCarthy
or Claudio Guazzoni, becomes the "beneficial owner" (as
defined in Rule 13(d)-3 under the Exchange Act), directly or
indirectly, of ten percent (10%) or more of the outstanding and
issued Voting Stock of Zanett having the right to vote for the
election of members of the Board of Directors of Zanett,
(b) Zanett ceases to own one hundred percent (100%) of the
issued and outstanding Capital Stock of any other Borrower,
(c) any Person, other than David McCarthy or Claudio
Guazzoni, controls (directly or indirectly) management, major d
ecisions, and day to day operations of any Borrower, or (d) a
  majority of the members of the Board of Directors do not
constitute Continuing Directors.

       "Closing Date" shall mean the date of this Agreement.
       "Closing Document List" shall have the meaning specified in
Section 17(a).

       "Collateral" shall mean all of the assets of Borrowers,
including without limitation the property of Borrowers described
in Section 5 hereof, together with all other real or personal
property of any Obligor or any other Person now or hereafter
pledged to Lender to secure, either directly
or indirectly, repayment of any of the Liabilities.

       "Contingent Acquisition or Other Liabilities" shall mean
the obligations and liabilities described on Schedule 11(jj)
and all other existing and future deferred purchase price
obligations, installment sale obligations, litigation settlement
obligations or other material payment obligations of each
Borrower (other than indebtedness for borrowed money
and trade debt in the ordinary course of business),
including acquisition purchase price obligations
permitted under Section 13(e).

       "Continuing Director" shall mean (a) any member of the
Board of Directors who was a director of the respective
Borrower on the Closing Date and (b) any individual who
becomes a member of such Board of Directorsafter the Closing
Date if such individual was appointed or nominated for election
to such Board of Directors by a majority of the Continuing
Directors, but excluding any such individual originally proposed for
election in opposition to such Board of Directors in office at
the Closing Date in an actual or threatened election contest
relating to the election of the directors of such Borrower
(as such terms are used in Rule 14(a)-11 under the
Exchange Act) and whose initial assumption of office resulted from
such contest or the settlement thereof.

       "Contract Term" shall mean the period of time commencing on
the Closing Date and expiring on December 21, 2009.

       "Default" shall mean an event which, with the passage of
time or giving of notice, will become an Event of Default.

       "Default Rate" shall have the meaning set forth in Section
4(a)(iii).

       "Dilution" shall mean, with respect to any period, the
percentage obtained by dividing (i) the sum of non-cash credits
against Accounts (including, but not limited to returns, adjustments
and rebates) of Borrowers for such period, plus pending or probable,
but not yet applied, non-cash credits against Accounts of Borrowers
for such period, as determined by Lender in its reasonable
discretion by (ii) gross invoiced sales of Borrowers
for such period.

       "Dollars" and "$"shall have the meaning specified in
Section 32.

       "EBITDA" shall mean, with respect to any period and
determined on a consolidated basis in accordance with GAAP,
Borrowers' net income after taxes for such period (excluding
any extraordinary gains or losses) plus all interest expense,
non-cash compensation expense (net of cash payments made for
prior periods), federal, state and local income tax expense, and
depreciation and amortization expense for such period.

       "Eligible Account" shall mean an Account owing to any
Borrower which is acceptable to Lender in its sole discretion for
lending purposes (provided that Lender shall give Borrowers
written notice of any eligibility criteria established by
Lender and not set forth herein).   Without limiting Lender's
discretion, Lender shall, in general, consider an Account to be an
Eligible Account if it meets, and so long as it continues to meet,
the following requirements:

            (i)    it is genuine and in all respects what it
purports to be;

            (ii)    it is owned by any Borrower, such Borrower
has the right to subject it to a security interest in favor of
Lender or assign it to Lender and it is subject to a first
priority perfected security interest in favor of Lender and to no
other claim, lien, security interest or encumbrance whatsoever,
other than Permitted Liens;

            (iii)    it arises from (A) the performance of services
by any Borrower in the ordinary course of such Borrower's business,
and such services have been fully performed and acknowledged and
accepted by the Account Debtor thereunder; or (B) the sale or lease
of Goods by any Borrower in the ordinary course of such Borrower's
business, and (x) such Goods have been completed in accordance with
the Account Debtor's specifications (if any) and delivered
to the Account Debtor, (y) such Account Debtor has not refused to
accept,
returned or offered to return, any of the Goods which are the subject
of such Account, and (z) any Borrower has possession of, or any
Borrower has delivered to Lender (at Lender's request) shipping
and delivery receipts evidencing delivery of such Goods;

             (iv)    it is evidenced by an invoice rendered to the
Account Debtor thereunder, and does not remain unpaid sixty
(60) days past the due date or ninety (90) days past the
invoice date thereof; provided, however, that if more than
twenty-five percent (25%) of the aggregate dollar amount of
invoices owing by a particular Account Debtor remain
unpaid sixty (60) days after the respective due dates or ninety (90)
days after the respective invoice dates thereof, then all Accounts
owing by that Account Debtor shall be deemed ineligible;

            (v)    it is a valid, legally enforceable and unconditional
obligation of the Account Debtor thereunder, and it shall not be an
Eligible Account to the extent of: (A) all maximum discounts,
credits and allowances which may be taken by or granted to
the applicable account Debtor in connection therewith in the
ordinary course of the applicable Borrower's
business, and (B) any setoff, counterclaim or other adjustment by the
applicable Account Debtor, or if it is subject to any claim by
such Account Debtor denying liability thereunder in whole or in part;

            (vi)    it does not arise out of a contract or order which fails
in any material respect to comply with the requirements of applicable law;
            (vii)    the Account Debtor thereunder is not another Borrower
or
a director, officer, employee or agent of any Borrower, or a Subsidiary,
Parent or Affiliate;

            (viii)    it is not an Account with respect to which the Account
Debtor is the United States of America or any state or local government, or
any department, agency or instrumentality thereof, unless any Borrower
assigns its right to payment of such Account to Lender pursuant to, and in
full compliance with, the Assignment of Claims Act of 1940, as amended, or
any comparable state or local law, as applicable, including without
limitation, all notice of assignment requirements.

            (ix)    it is not an Account with respect to which the Account
Debtor is located in a state which requires any Borrower, as a precondition
to commencing or maintaining an action in the courts of that state, either
to (A) receive a certificate of authority to do business and be in good
standing in such state; or (B) file a notice of business activities report
or similar report with such state's taxing authority, unless (x) such
Borrower has taken one of the actions described in clauses (A) or (B);
(y) the failure to take one of the actions described in either clause (A)
or (B) may be cured retroactively by such Borrower at its election; or (z)
such Borrower has proven, to Lender's satisfaction, that it is exempt from
any such requirements under any such state's laws;

            (x)    the Account Debtor is located within the United States
of America or Canada (unless Lender has received evidence that such
Account
is fully supported by letter(s) of credit or credit insurance acceptable
to Lender in Lender's sole discretion);

            (xi)    it is not an Account with respect to which the Account
Debtor's obligation to pay is subject to any repurchase obligation or
return right, as with sales made on a bill-and-hold, guaranteed sale,
sale on approval, or sale or return on consignment basis;

            (xii)    it is not an Account (A) with respect to which any
representation or warranty contained in this Agreement is untrue; or (B)
which violates any of the covenants of any Borrower contained in this
Agreement;

            (xiii)    it is not an Account which, when added to a particular
Account Debtor's other indebtedness to any Borrower, exceeds twenty percent
(20%) of all Accounts of such Borrower or a credit limit determined by
Lender in its sole discretion for that Account Debtor (except that Accounts
excluded from Eligible Accounts solely by reason of this clause (xiii)
shall be Eligible Accounts to the extent of such credit limit);

            (xiv)    it is not an Account with respect to which the prospect
of payment or performance by the Account Debtor is or will be impaired, as
determined by Lender in its sole discretion;

            (xv)    it is not an Account subject to any chargebacks,
defenses, offsets (including without limitation, any reserves or accruals
maintained by any Borrower for installment billings, commissions or third
party billings related to work or services performed by other Persons on
behalf of such Borrower), advertising allowances, finance charges or
credits
or otherwise classifiable as a "contra" Account (provided that any Account
shall be deemed to be ineligible under the provisions of this clause (xv)
only to the aggregate extent of any such chargebacks, defenses, offsets,
advertising allowances, finance charges or credits, etc.);
 
            (xvi)    the Account Debtor is Solvent and is not the subject of
any state or federal bankruptcy, insolvency or receivership proceedings (or
any similar proceedings under the laws of any foreign jurisdiction); and
            (xvii)    it is not an Account arising from a performance
obligation by any Borrower with respect to which such performance is bonded
or otherwise guarantied by a surety.

       In the event that the Dilution with respect to any Borrower's
Accounts
for any twelve (12) month period is greater than five percent (5%), then the
full amount of Borrowers' Eligible Accounts for purposes of calculating
availability under Section 2(a) shall be reduced by the percentage by which
such Dilution is in excess of five percent (5%).

       "Environmental Laws" shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees
relating to health, safety, hazardous substances, pollution and
environmental matters, as now or at any time hereafter in effect,
applicable to any Borrower's business or facilities owned or
operated by such Borrower, including laws relating to
emissions, discharges, releases or threatened
releases of pollutants, contamination, chemicals, or hazardous, toxic or
dangerous substances, materials or wastes into the environment (including,
without limitation, ambient air, surface water, ground water, land surface
or subsurface strata) or otherwise relating to the generation, manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.

       "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, modified or restated from time to time.

       "ERISA Affiliate" shall mean (i) any Person subject to ERISA whose
employees are treated as employed by the same employer as the employees of
any Borrower under IRC Section 414(b), (ii) any trade or business subject to
ERISA whose employees are treated as employed by the same employer as the
employees of any Borrower under IRC Section 414(c), (iii) solely for purposes
of Section 302 of ERISA and Section 412 of the IRC, any Person subject to
ERISA that is a member of an affiliated service group of which any Borrower
is a member under IRC Section 414(m), or (iv) solely for purposes of Section
302 of ERISA and Section 412 of the IRC, any Person subject to ERISA that is
a party to an arrangement with any Borrower and whose employees are
aggregated with the employees of such Borrower under IRC Section 414(o).

       "ERISA Event" shall mean (i) a Reportable Event with respect to any
Benefit Plan or Multiemployer Plan, (ii) the withdrawal of any Borrower, any
of its Subsidiaries or ERISA Affiliates from a Benefit Plan during, a plan
year in which it was a "substantial employer" (as defined in Section 4001(a)
(2) of ERISA), (iii) the providing of notice of intent to terminate a Benefit
Plan in a distress termination (as described in Section 4041(c) of ERISA),
(iv) the institution by the PBGC of proceedings to terminate a Benefit Plan
or Multiemployer Plan, (v) any event or condition (A) that provides a basis
under Section 4042(a)(1), (2), or (3) of ERISA for the termination of, or
the appointment of a trustee to administer, any Benefit Plan or Multiemployer
Plan, or (B) that may result in termination of a Multiemployer Plan pursuant
to Section 4041A of ERISA, (or the partial or complete withdrawal within the
meaning of Sections 4203 and 4205 of ERISA), of any Borrower, any of its
Subsidiaries or ERISA Affiliates from a Multiemployer Plan, or (vi) providing
any security to any Plan under Section 401(a)(29) of the IRC by any Borrower
or any of its Subsidiaries or any of their ERISA Affiliates.

       "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC thereunder.

       "Executive Order" shall have the meaning specified in Section 11(hh).

       "Event of Default" shall have the meaning specified in Section 15
hereof.

       "Fiscal Year" shall mean each twelve (12) month accounting period of
Borrowers, which ends on December 31st of each year.

       "Fixed Charge Coverage Ratio" shall mean with respect to any
applicable
period and determined on a consolidated basis in accordance with GAAP, the
ratio of (A) the sum of (i) EBITDA of Borrowers during such period, minus
(i) unfinanced Capital Expenditures of Borrowers during such period, minus
(ii) cash dividends and distributions paid by Borrowers during such period,
minus (iii) cash income taxes paid by Borrowers during such period in respect
of income earned by Borrowers, to (B) the sum of (i) actual principal payments
made with respect to Funded Indebtedness of Borrowers (other than the Loans)
during such period, plus (ii) interest expense of Borrowers during such
period ((i) with EBITDA (A) being measured for the period beginning October
1, 2006 and ending on the applicable test date, and (B) being annualized by
multiplying it by (x) four (4) for the December 31, 2006 test date, (y) two
(2) for the March 31, 2007 test date, and (z) one and one-third (1-1/3) for
the June 30, 2007 test date, and (ii) with EBITDA being measured on a rolling
four quarters basis for each test date after June 30, 2007).

       "Foreign Assets Control Regulations" shall have the meaning specified
in Section 11(hh).

       "Fraudulent Transfer Laws" shall have the meaning specified in
Section 37.

       "Funded Indebtedness" shall mean, with respect to any Person
and determined on a consolidated basis in accordance with GAAP, without
duplication, on any date of determination (i) the sum of (a) the principal
portion of all obligations of such Person for borrowed money, (b) the
principal portion of all obligations of such Person evidenced by bonds,
debentures, notes or similar instruments, or upon which interest payments
are customarily made, (c) the principal portion of all obligations of
such Person under conditional sale or other title retention agreements
relating to property purchased by such Person (other than customary
reservations or retentions of title under agreements with suppliers
entered into in the ordinary course of business), (d) the principal
portion of all obligations of such Person issued or assumed as the
deferred purchase price of property or services purchased by such Person
(other than trade debt incurred in the ordinary course of business and
due within six (6) months of the incurrence thereof) which would appear
as liabilities on a balance sheet of such Person, (e) the implied
principal component of all obligations of such Person under capitalized
leases, (f) the principal portion of all obligations of such Person as
an account party in respect of letters of credit (other than trade letters
of credit) and bankers' acceptances, including, without duplication, all
unreimbursed drafts drawn thereunder (less the amount of any cash
collateral securing any such letters of credit and bankers' acceptances),
(g) the implied principal component of all obligations of such Person
under synthetic leases, (h) all obligations of such Person to repurchase
any securities issued by such Person at any time prior to 3 1/2 years
from closing which repurchase obligations are related to the issuance
thereof, including, without limitation, obligations commonly known as
residual equity appreciation potential shares, (i) the aggregate amount
of uncollected accounts receivable of such Person subject at such time
to a sale of receivables (or similar transaction) to the extent such
transaction is effected with recourse to such Person (whether or not
such transaction would be reflected on the balance sheet of such Person
in accordance with GAAP), (j) all Funded Indebtedness of others secured
by (or for which the holder of such Funded Indebtedness has an existing
right, contingent or otherwise, to be secured by) any Lien on, or payable
out of the proceeds of production for property owned or acquired by such
Person, whether or not the obligations secured thereby have been assumed,
(k) all guaranty obligations of such Person with respect to Funded
Indebtedness of another Person, (l) the Funded Indebtedness of any
partnership or unincorporated joint venture in which such Person is a
general partner or a joint venturer to the extent such indebtedness is
recourse to such Person.   For the avoidance of doubt, Funded Indebtedness
shall not include (x) any value attributable to the warrants that are
treated as a debt on Borrowers' financial statements or (y) any value
attributable to any preferred stock of any Borrower that is treated as
a debt on Borrowers' financial statements, and (m) to the extent not
included under any of the above subsections, all Contingent Acquisition
or Other Liabilities.

       "GAAP" shall mean generally accepted accounting principles in the
United States of America as set forth in the opinions and pronouncements
of the Accounting Principles Board and the American Institute of
Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or such other principles as may
be approved by a significant segment of the accounting profession in
the United States, that are applicable to the circumstances as of the
date of determination consistently applied.   If at any time any change
in GAAP would affect the computation of any financial ratio or
requirement set forth in any Loan Document, and Borrowers shall so
request, Lender and Borrowers shall negotiate in good faith to amend
such ratio or requirement to preserve the original intent thereof in
light of such change in GAAP; provided that, until so amended, (i)
such ratio or requirement shall continue to be computed in accordance
with GAAP prior to such change therein and (ii) Borrowers shall provide
to Lender financial statements and other documents required under this
Agreement or as reasonably requested hereunder setting forth a
reconciliation between calculations of such ratio or requirement made
before and after giving effect to such change in GAAP.

        "Hazardous Materials" shall mean any hazardous, toxic or
dangerous
substance, materials and wastes, including, without limitation,
hydrocarbons (including naturally occurring or man-made petroleum and
hydrocarbons), flammable explosives, asbestos, urea formaldehyde
insulation, radioactive materials, biological substances,
polychlorinated biphenyls, pesticides, herbicides and any other
kind and/or type of pollutants or contaminants (including, without
limitation, materials which include hazardous
constituents), sewage, sludge, industrial slag, solvents
and/or any other similar substances, materials, or wastes and including
any other substances, materials or wastes that are or become regulated
under any Environmental Law (including, without limitation any that are
or become classified as hazardous or toxic under any Environmental Law).
       "Hedge Agreement" shall mean any and all transactions, agreements
or documents now existing or hereafter entered into, that provide for
an interest rate, credit, commodity or equity swap, cap, floor, collar,
forward foreign exchange transaction, currency swap, cross currency
rate swap, currency option, or any combination of, or option with respect
to, these or similar transactions, for the purpose of hedging Borrowers'
exposure to fluctuations in interest or exchange rates, loan, credit
exchange, security or currency valuations or commodity prices.

       "Indemnified Party" shall have the meaning specified in
Section 18 hereof.

       "Indenture" shall mean the Indenture dated as of February 1,
2005
  between Zanett, as obligor, and U.S. Bank National Association, as
trustee, as such agreement may be amended, restated or modified and
all replacement indentures.

       "Interest Period" shall mean any continuous period of thirty
(30), sixty (60) or ninety (90) days, as selected from time to time
by Borrowers by irrevocable notice (in writing, by telex, telegram or
cable) given to Lender not less than three (3) Business Days prior to
  the first day of each respective Interest Period; provided that:  
(A) each such period occurring after such initial period shall commence
on the day on which the immediately preceding period expires; (B) the
final Interest Period shall be such that its expiration occurs on or
before the end of the Contract Term; (C) if an Interest Period would
end on a day that is not a Business Day, it shall end on the next
succeeding Business Day unless such day falls in the next succeeding
calendar month, in which case the Interest Period shall end on the
next preceding Business Day; and (D) if for any reason Borrowers shall
fail to timely select a period, then such Loans shall continue as, or
revert to, Prime Rate Loans.

       "Key Managers" shall mean Claudio Guazzoni and Jack Rapport.

       "Key Man Life Insurance Policy" shall have the meaning
specified in Section 5(e).

       "LaSalle Bank" shall mean LaSalle Bank, N.A., Chicago,
Illinois.

       "Letter of Credit" shall mean any standby letter of credit
issued on behalf of any Borrower in accordance with this Agreement.

       "Letter of Credit Fee" shall have the meaning specified in
Section 3(a).

       "Letter of Credit Obligations" shall mean, as of any date of
determination, the sum of (i) the aggregate undrawn face amount of
all Letters of Credit, and (ii) the aggregate unreimbursed amount of
all drawn Letters of Credit not already converted to Loans hereunder.
       "Liabilities" shall mean any and all obligations, liabilities
and indebtedness of Borrowers to Lender or to any Parent, Affiliate or
Subsidiary of Lender of any and every kind and nature, howsoever
created, arising or evidenced and howsoever owned, held or acquired,
whether now or hereafter existing, whether now due or to become due,
whether primary, secondary, direct, indirect, absolute, contingent or
otherwise (including, without limitation, obligations of performance),
whether several, joint or joint and several, and whether arising or
existing under written or oral agreement or by operation of law,
provided that, such obligations, liabilities and indebtedness are
arising under,out of or in connection with the Loans, the Loan
Documents or any Bank Products.   "Liabilities" shall include,
without limitation, all obligations to repay principal,
interest (including interest accruing after the
commencement of a bankruptcy or reorganization
case whether or not recoverable in such case),
fees (including without limitation, the Termination Fee),
expenses and other sums due hereunder, under any of
the Loan Documents or in connection with any Bank Products.

       "LIBOR Rate" shall mean, with respect to any LIBOR Rate Loan for
any Interest Period, a rate per annum equal to (a) the offered rate for
deposits in United States dollars for a period equal to such Interest
Period as displayed in the Bloomberg Financial Markets system (or in the
event that Bloomberg Financial Markets system is not then available or
used by Lender, such other authoritative source as selected by Lender
in its sole discretion) as of 11:00 a.m. (London time) two (2) Business
Days prior to the first (1st) day of such Interest Period divided by
(b) a number equal to 1.0 minus the maximum reserve percentages
(expressed as a decimal fraction) including, without limitation,
basic supplemental, marginal and emergency reserves under any
regulations of the Board of Governors of the Federal Reserve
System or other governmental authority having jurisdiction
with respect thereto, as now and from time to time in effect,
for Eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of
such Board) which are required to be maintained by Lender by the Board
of Governors of the Federal Reserve System.   The LIBOR Rate shall be
adjusted automatically on and as of the effective date of any change
in such reserve percentage.

       "LIBOR Rate Loans" shall mean the Loans (or portions of unpaid
principal balances thereof) bearing interest with reference to the LIBOR
Rate.

       "Loan Documents" shall mean this Agreement, the promissory notes
executed and delivered pursuant hereto and the Other Agreements.

       "Loans" shall mean all loans and advances made by Lender to or on
behalf of Borrowers hereunder.

       "Loan Year" shall mean each twelve (12) month period during the
Contract Term, as such Contract Term may be extended from time to time,
i.e., the first Loan Year will commence on the Closing Date.

       "Lock Box", "Lock Box Account" and "Lock Box Agreement" shall
have the meanings specified in Section 8(a) hereof.

       "Material Adverse Effect" shall mean (a) a material adverse
effect on the business, property, assets, prospects, operations or
condition, financial or otherwise, of a Borrower, (b) a
material impairment of any Borrower's ability to perform
its obligations under the Loan Documents to which it is
a party or of Lender's ability to enforce the Liabilities
or realize upon the Collateral, or (c) a material impairment of the
enforceability or priority of Lender's lien with respect to the
Collateral as a result of an action or failure to act on the
part of any Borrower.

       "Maximum Revolving Loan Limit" shall mean $8,000,000 as of the
date of this Agreement, provided that such amount may be increased to
$10,000,000
in accordance with the provisions of Section 2(e).

       "Minimum Net Availability" shall mean, as of the date of
determination,
an amount equal to the Revolving Loan Limit available to Borrowers, minus
the sum of (A) all outstanding Revolving Loans, plus (B) the total
outstanding amount of all Letter of Credit Obligations, plus (C) all sums
due and owing by Borrowers to their trade creditors which are outstanding
beyond trade terms usually and customarily afforded to Borrowers by their
trade creditors, plus (D) all taxes then due to any federal, state or
local
taxing authority, plus (E) the costs incurred by Borrowers in connection
with closing the transactions contemplated under this Agreement.

       "Net Worth" shall mean, at any time, Borrowers' consolidated total
assets minus Borrowers' consolidated total liabilities as shown on the
consolidated balance sheet of Borrowers as prepared in accordance with
GAAP.

       "Non-Assignable Contracts" shall mean all of each Borrower's
licenses,
permits, approvals, license rights, agreements and General Intangibles
with
respect to which there are valid and enforceable legal or contractual
restrictions prohibiting the collateral assignment or granting of a
security interest therein.

       "Notice of Increase" shall have the meaning specified in
Section 2(e).

       "Obligor" shall mean each Borrower and each other Person who is or
shall become primarily or secondarily liable for any of the Liabilities.

       "Other Agreements" shall mean all agreements, instruments and
documents,
other than this Agreement, including, without limitation, guaranties,
mortgages, trust deeds, pledges, powers of attorney, consents, assignments,
contracts, notices, security agreements, leases, financing statements and
all other writings heretofore, now or from time to time hereafter executed
by or on behalf of any Borrower or any other Person and delivered to Lender
or to any Parent, Affiliate or Subsidiary of Lender in connection with the
Liabilities or the transactions contemplated by this Agreement, as each of
the same may be amended, modified, supplemented or replaced from time to
time.

       "Parent" shall mean any Person now or at any time or times hereafter
owning or controlling (alone or with any other Person) at least a majority
  of the issued and outstanding equity of any Borrower and, if such Borrower
is a partnership, the general partner of Borrower.

       "PBGC" shall have the meaning specified in Section 12(b)(v) hereof.
       "Permitted Liens" shall mean (i) statutory liens of landlords,
carriers, warehousemen, processors, mechanics, materialmen or suppliers
incurred in the ordinary course of business and securing amounts not yet
due or declared to be due by the claimant thereunder; (ii) liens or
security interests in favor of Lender; (iii) zoning restrictions and
easements, licenses, covenants and other restrictions affecting the use
of real property that do not individually or in the aggregate have a
material adverse effect on Borrowers' ability to use such real property
for their intended purpose in connection with Borrowers' business; (iv)
liens in connection with purchase money indebtedness and capitalized
leases otherwise permitted pursuant to this Agreement, provided that,
such liens attach only to the assets the purchase of which was financed
by such purchase money indebtedness or which is the subject of such
capitalized leases; (v) liens set forth on Schedule 1; (vi) taxes not
yet due and payable; and (vii) liens specifically permitted by Lender
in writing.   Notwithstanding the foregoing, no liens shall be permitted
to encumber any Accounts of any Borrower or any proceeds of such
Accounts or any Capital Stock of ZCS or Paragon.

       "Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization,
association, corporation, limited liability company, institution,
entity, party or foreign or United States government (whether federal,
state, county, city, municipal or otherwise), including, without
limitation, any instrumentality, division, agency, body or department
thereof.

       "Plan" shall have the meaning specified in Section 12(b)(v)
hereof.

       "Prime Rate" shall mean LaSalle Bank's publicly announced
prime rate (which is not intended to be LaSalle Bank's lowest or
most favorable rate in effect at any time) in effect from time to
time.

       "Prime Rate Loans" shall mean the Loans (or portions of
unpaid principal balances thereof) bearing interest with reference
to the Prime Rate.

       "Private Subordinated Promissory Notes" shall mean the
promissory notes described in Schedule 1(b) attached hereto and all
future promissory notes evidencing Private Subordinated Debt, as
such notes may be amended, restated or modified and all replacement
notes.
 
       "Private Subordinated Debt" shall mean all Subordinated Debt
other than Public Subordinated Debt.

       "Public Subordinated Promissory Notes" shall mean each of the
Renewable Unsecured Subordinated Notes described on Schedule 1(a)
attached hereto and all future promissory notes evidencing Public
Subordinated Debt, as such notes may be amended, restated or modified
and all replacement notes.

       "Public Subordinated Debt" shall mean all Subordinated Debt
issued and outstanding pursuant to the terms of the Indenture
or pursuant to any other existing or future public offering
of debt by any Borrower.

       "Regulatory Change" shall have the meaning specified in
Section 4(b)(iii).

       "Reportable Event" shall mean any of the events described in
Section 4043(c) of ERISA or the regulations thereunder.

       "Revolving Loan Limit" shall have the meaning specified in
Section 2(a) hereof.

        "Revolving Loans" shall have the meaning specified in
Section 2(a) hereof.

       "SEC" shall mean the Securities and Exchange Commission, or
any governmental authority succeeding to any of its principal
functions.

       "Senior Debt Ratio" shall mean, as of each test date, the ratio
of (a) Total Senior Debt of Borrowers as of the applicable test date,
to (b) EBITDA of Borrowers for the period ending on the applicable test
date ((i) with EBITDA (A) being measured for the period beginning
October 1, 2006 and ending on the applicable test date, and (B) being
annualized by multiplying it by (x) four (4) for the December 31, 2006
test date, (y) two (2) for the March 31, 2007 test date, and (z) one
and one-third (1-1/3) for the June 30, 2007 test date, and (ii) with
EBITDA being measured on a rolling four quarters basis for each test
date after June 30, 2007).

       "Significant Contracts" shall have the meaning specified in
Section 11(ee).

       "Solvent" shall mean, with respect to any Person on a particular
date, that on such date (i) at fair valuations, all of the properties
and assets (both tangible and intangible) of such Person are greater
than the sum of the debts, including contingent liabilities, of such
Person, (ii) the present fair saleable value of the properties and
assets (both tangible and intangible) of such Person is not less than
the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured, (iii) such
Person is able to realize upon its properties and assets and pay its
debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (iv) such
Person does not intend to, and does not believe that it will, incur
debts beyond such Person's ability to pay as such debts mature or fall
due, and (v) such Person is not engaged in business or a transaction,
and is not about to engage in business or a transaction, for which such
Person's properties and assets would constitute unreasonably small
capital after giving due consideration to the prevailing practices in
the industry in which such Person is engaged.   In computing the amount
of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the
facts and circumstances existing at such time, represents the amount
that reasonably can be expected to become an actual or matured
liability.

       "Subordinated Debt" shall mean collectively all indebtedness
now
or hereafter owed by any Borrower which is subordinated to the
Liabilities pursuant to a written agreement in a form and content
acceptable to and approved by Lender.
 
       "Subordinated Debt Documents" shall mean all documents
evidencing or related to the Subordinated Debt,
including without limitation (i) the Private Subordinated
Promissory Notes; (ii) the Public Subordinated
Promissory Notes; (iii) the Indenture; and (iv) the Subordination
Agreements.

       "Subordinated Notes" shall mean collectively the Private
Subordinated Promissory Notes and the Public Subordinated Promissory
Notes.

       "Subordination Agreements" shall mean collectively, and
individually, those certain Subordination Agreements, in form and
substance satisfactory to and approved by Lender, pursuant to which
the Subordinated Debt is subordinated to the Liabilities, which
agreements prohibit any payments to be made to the Subordinated Debt
holders by Borrowers, in respect of the Subordinated Debt, during the
Contract Term, except as expressly provided in such Subordination
Agreement.   The Indenture shall constitute a Subordination Agreement
with respect to the Public Subordinated Promissory Notes.
       "Subsidiary" shall mean any corporation of which more than fifty
percent (50%) of the outstanding Capital Stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time Capital Stock of any other class of
such corporation shall have or might have voting power by reason of the
happening of any contingency) is at the time, directly or indirectly,
owned by any Borrower, or any partnership, joint venture or limited
liability company of which more than fifty percent (50%) of the
outstanding equity interests are at the time, directly or indirectly,
owned by any Borrower or any partnership of which any Borrower is a
general partner.

       "Tax"   shall mean, in relation to any LIBOR Rate Loans and the
applicable LIBOR Rate, any tax, levy, impost, duty, deduction,
withholding or charges of whatever nature required to be paid by Lender
and/or to be withheld or deducted from any payment otherwise required
hereby to be made by Borrowers to Lender; provided, that the term "Tax"
shall not include any taxes imposed upon the net income of Lender.

       "Termination Fee" shall have the meaning in Section 4(c)(vi).
       "Total Senior Debt" shall mean all Funded Indebtedness of
Borrowers determined on a consolidated basis in accordance with GAAP
other than the Subordinated Debt.

       "Trading With the Enemy Act" shall have the meaning specified
in Section 11(hh).

       "Transaction" shall have the meaning specified in Section 24.

       "Voting Stock" shall mean with respect to any Person (a) one
(1) or more classes of Capital Stock of such Person having general
voting powers to elect at least a majority of the board of directors,
managers or trustees of such Person, irrespective of whether at the
time Capital Stock of any other class or classes have or might have
voting power by reason of the happening of any contingency, and (b)
any Capital Stock of such Person convertible or exchangeable without
restriction at the option of the holder thereof into Capital Stock of
such Person described in clause (a) of this definition.

       (b)    Matters of Construction.

       The terms "hereto", "hereby," "herein," "hereof" and
"hereunder" and other words of similar import refer to this Agreement
as a whole and not to any particular section, paragraph or
subdivision.   Any pronoun used shall be deemed to cover all genders.
Wherever appropriate in the context, terms used herein in the singular
also include the plural and vice versa.   All references to statutes and
related regulations shall include any amendments of the same and any
successor statutes and regulations.   Unless otherwise provided, any
reference in this Agreement or in the Loan Documents to this Agreement,
any of the Loan Documents or any other document or agreement shall
include all alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, supplements, and restatements
thereto and thereof, as applicable.   Except as otherwise provided in
this Agreement, all computations and determinations as to accounting
or financial matters shall be made, and all financial statements to
be delivered pursuant to this Agreement shall be prepared, in
accordance with GAAP, and all accounting or financial terms shall
have the meanings ascribed to such terms by GAAP.

    2.    LOANS.

       (a)    Revolving Loans.

       Subject to the terms and conditions of this Agreement and
the Other Agreements, during the Contract Term, Lender may, in its
sole discretion, make revolving loans and advances (the "Revolving
Loans") up to the following amounts outstanding at any time (the
"Revolving Loan Limit"):

            (i)    Eighty percent (80%) of the face amount of
Borrowers' then existing Eligible Accounts; minus

             (ii)    such reserves as Lender elects, in its sole
discretion to establish from time to time; minus

            (iii)    the total outstanding amount of all Letter of
Credit Obligations;

provided that, the Revolving Loan Limit shall in no event exceed the
then applicable Maximum Revolving Loan Limit.

       The aggregate unpaid principal balance of the Revolving Loans
shall not at any time exceed the lesser of the (i) Revolving Loan
Limit, and (ii) the then applicable Maximum Revolving Loan Limit.  
If at any time the outstanding Revolving Loans exceed either the
Revolving Loan Limit or the then applicable Maximum Revolving Loan
Limit, in each case minus the Letter of Credit Obligations, or any
portion of the Revolving Loans exceeds any applicable sublimit set
forth in this Agreement, Borrowers shall immediately, and without
the necessity of demand by Lender, pay to Lender such amount as may
be necessary to eliminate such excess and Lender shall apply such
payment to the Revolving Loans in such order as Lender shall
determine in its sole discretion.

       Borrowers hereby authorize Lender, in its sole discretion,
to charge any Borrower's accounts or advance Revolving Loans to make
any payments of principal, interest, fees, costs or expenses required
to be made under this Agreement or the Other Agreements.

       A request for a Revolving Loan shall be made or shall be deemed
to be made, each in the following manner:   the Administrative Borrower
shall give Lender same day notice, no later than 10:30 A.M. (Chicago,
Illinois time) for such day, of its request for a Revolving Loan as a
Prime Rate Loan, and at least three (3) Business Days prior notice of
its request for a Revolving Loan as a LIBOR Rate Loan, in which notice
the Administrative Borrower shall specify the amount of the proposed
borrowing and the proposed borrowing date; provided, however, that no
such request may be made at a time when there exists a Default or an
Event of Default.   In the event that Borrowers maintain a controlled
disbursement account at LaSalle Bank, each check presented for payment
against such controlled disbursement account and any other charge or
request for payment against such controlled disbursement account shall
constitute a request for a Revolving Loan as a Prime Rate Loan.   As
an accommodation to Borrowers, Lender may permit telephone requests for
Revolving Loans and electronic transmittal (including e-mail
transmittals) of instructions, authorizations, agreements or
  reports to Lender by Borrowers.   Unless the
Administrative Borrower specifically directs
Lender in writing not to accept or act upon telephonic or electronic
communications from the Administrative Borrower, Lender shall have no
liability to Borrowers for any loss or damage suffered by Borrowers as
a result of Lender's honoring of any requests, execution of any
instructions, authorizations or agreements or reliance on any reports
communicated to it telephonically or electronically and purporting to
have been sent to Lender by the Administrative Borrower and Lender
shall have no duty to verify the origin of any such communication or the
authority of the Person sending it.

       Revolving Loans may be borrowed, repaid and reborrowed during
the Contract Term.

        Borrowers hereby irrevocably authorize Lender to disburse the
proceeds of each Revolving Loan requested by the Administrative Borrower,
or deemed to be requested by the Administrative Borrower, as follows:  
the proceeds of each Revolving Loan requested under Section 2(a) shall
be disbursed by Lender in lawful money of the United States of America
in immediately available funds, in the case of the initial borrowing, in
accordance with the terms of the written disbursement letter from the
Administrative Borrower, and in the case of each subsequent borrowing,
by wire transfer or Automated Clearing House (ACH) transfer to such bank
account as may be agreed upon by the Administrative Borrower and Lender
from time to time, or elsewhere if pursuant to a written direction from
the Administrative Borrower.

       (b)    Repayments.

       Subject to Lender's right under Section 16(a) to declare all
Liabilities immediately due and payable at any time after the occurrence
of an Event of Default which is continuing and the automatic acceleration
of all Liabilities under the first sentence of Section 16(a), the
Revolving Loans and all other Liabilities shall be repaid on the last day
of the Contract Term.   In the event that this Agreement is terminated for
any reason, as a result of an Event of Default or otherwise, the
outstanding principal balance of the Revolving Loans, together with any
accrued and unpaid interest thereon, and all Liabilities shall be due
and payable immediately.

       (c)    Notes.

       The Loans shall be evidenced by one or more promissory notes in
form and substance satisfactory to Lender.   However, if such Loans
are not so evidenced, such Loans may be evidenced solely by entries
upon the books and records maintained by Lender.

       (d)    Bank Products.

       The Administrative Borrower on behalf of any Borrower may request,
and Lender or its affiliates may, in their sole and absolute discretion,
provide, Bank Products to any Borrower although Borrowers are not
required to do so.   In the event the Administrative Borrower requests
Lender and/or its affiliates to procure or provide Bank Products, then
Borrowers agree with Lender and/or such affiliates, as applicable, to
pay when due all indebtedness, liabilities and obligations with respect
to Bank Products and further agree to indemnify and hold Lender and/or
such affiliates harmless from any and all indebtedness, liabilities,
obligations, losses, costs and expenses (including, without limitation,
reasonable attorneys fees) now or hereafter owing to or incurred by Lender
(including, without limitation, those under agreements of indemnifications
or assurances provided by Lender to its affiliates) and/or its affiliates
with respect to Bank Products, all as the same may arise; provided,
however that Borrowers shall not have any obligation hereunder to
indemnify Lender and/or its affiliates with respect to matters caused by
or resulting from the willful misconduct or gross negligence of Lender
and/or such affiliates.   In the event Borrowers shall not have paid to
Lender and/or its affiliates such amounts when due, Lender may cover
such amounts by an advance as a Revolving Loan, which advance shall be
deemed to have been requested by the Administrative Borrower.  
Borrowers acknowledge and agree that (i) all indebtedness, liabilities
and obligations with respect to Bank Products provided by Lender or its
affiliates, and all of its agreements under this Section, are part of
the Liabilities secured by the Collateral, and (ii) the obtaining of
Bank Products from Lender or its affiliates (A) is in the sole and
absolute discretion of Lender or its affiliates and (B) is subject to
all rules and regulations of Lender or its affiliates.

       (e)    Increase of the Maximum Revolving Loan Limit.
 
            Borrowers shall have the right during the Contract Term to
increase the Maximum Revolving Loan Limit from $8,000,000 to
$10,000,000, provided that, at the time Borrowers
exercise such right no Default or Event of Default has
occurred and is continuing and, provided that,
Borrowers comply with the terms of this subsection (e).   In order to
exercise the right to increase the Maximum Revolving Loan Limit, the
Administrative Borrower shall provide Lender with a duly executed and
completed written notice of such exercise in the form attached hereto
as Exhibit D (the "Notice of Increase").   Such Notice of Increase must
be accompanied by payment of the increase fee set forth in Section
4(c)(ii).   The increase of the Maximum Revolving Loan Limit shall then
be effective on the third (3rd) Business Day after Lender's receipt of
the duly executed and completed Notice of Increase and the payment of
the increase fee.

    3.    LETTERS OF CREDIT.

       (a)    General Terms:

       Subject to the terms and conditions of this Agreement and the
Other Agreements, during the Contract Term, Lender may, in its sole
discretion, from time to time issue upon the Administrative Borrower's
request, standby Letters of Credit; provided that, the aggregate undrawn
face amount of all such Letters of Credit shall at no time exceed the
lesser of (i) the Revolving Loan Limit (without reduction for outstanding
Letter of Credit Obligations) minus all outstanding Loans, or (ii) One
Million and No/100 Dollars ($1,000,000).   Payments made by Lender to any
Person on account of any Letter of Credit shall be immediately payable
by Borrower without notice, presentment or demand and Borrowers agree
that each payment made by Lender in respect of a Letter of Credit shall
constitute a request by the Administrative Borrower for a Loan to
reimburse Lender for such payment.   In the event such Loan is not made
for any reason, such reimbursement obligations shall become part of the
Liabilities hereunder and shall bear interest at the rate then
applicable to Prime Rate Loans until paid.
 
       As provided in Section 2(a), the Revolving Loan Limit will be
reduced by the total outstanding undrawn amount of all Letters of Credit.
Borrowers shall remit to Lender a Letter of Credit fee (the "Letter of
Credit Fee") equal to two and one-half percent (21/2%) per annum, based
on a 360 day year, on the aggregate undrawn face amount of all Letters
of Credit outstanding, which fee shall be payable monthly in arrears
on the last Business Day of each month.   Borrowers shall also pay on
demand the normal and customary administrative charges of Lender for
issuance, amendment, negotiation, renewal or extension of any Letter
of Credit.

       If at any time the aggregate undrawn face amount of all
outstanding Letters of Credit exceeds the limit set forth in subsection
(i) and insufficient Revolving Loans are outstanding to enable Borrowers
to eliminate such excess by paying down the Revolving Loans as required
under Section 2(a), Borrowers shall immediately, and without the
necessity of demand by Lender, pay to Lender such amount as may be
necessary to eliminate such excess and Lender shall hold such amount as
cash collateral for the Liabilities (including the Letter of Credit
Obligations).

       (b)    Requests for Letters of Credit.

       The Administrative Borrower shall make requests for Letters of
Credit in writing at least three (3) Business Days prior to the date
such Letter of Credit is to be issued.   Each such request shall
specify the date such Letter of Credit is to be issued, the amount
thereof, the name and address of the beneficiary thereof and a
description of the transaction to be supported thereby.   Any such
notice shall be accompanied by the form of Letter of Credit requested
and any application or reimbursement agreement required by Lender.  
If any term of such application or reimbursement agreement is
inconsistent with this Agreement, then the provisions of this Agreement
shall control to the extent of such inconsistency.

       (c)    Obligations Absolute.

       Borrowers shall be obligated to reimburse the issuer of any
Letter of Credit, or Lender if Lender has reimbursed such issuer on
Borrowers' behalf, for any payments made in respect of any Letter
of Credit, which obligation shall be unconditional and irrevocable
and shall be paid regardless of:   (i) any lack of validity or
enforceability of any Letter of Credit, (ii) any amendment or waiver
of or consent or departure from all or any provisions of any Letter
of Credit, this Agreement or any Other Agreement, (iii) the existence
of any claim, set off, defense or other right which any Borrower or
any other Person may have against any beneficiary of any Letter of
Credit, Lender or the issuer of the Letter of Credit, (iv) any draft
or other document presented under any Letter of Credit proving to be
forged, fraudulent, invalid, or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect, (v)
any payment under any Letter of Credit against presentation of a
draft or other document that does not comply with the terms of such
Letter of Credit, and (vi) any other act or omission to act or delay
of any kind of the issuer of such Letter of Credit, the Lender or any
other Person or any other event or circumstance that might otherwise
constitute a legal or equitable discharge of Borrowers' obligations
hereunder.   It is understood and agreed by Borrowers that the issuer
of any Letter of Credit may accept documents that appear on their
face to be in order without further investigation or inquiry,
regardless of any notice or information to the contrary.

       (d)    Expiration Dates of Letters of Credit.

       The expiration date of each standby Letter of Credit shall be
no later than the earlier of (i) one (1) year from the date of
issuance and (ii) the thirtieth (30th) day prior to the end of the
Contract Term.   Notwithstanding the foregoing, a Letter of Credit
may provide for automatic extensions of its expiration date for one
or more one (1) year periods, so long as the issuer thereof has the
right to terminate the Letter of Credit at the end of each one (1)
year period and no extension period extends past the thirtieth (30th)
day prior to the end of the Contract Term.

    4.    INTEREST, FEES AND CHARGES.

       (a)    Interest Rate.

       Subject to the terms and conditions set forth below, the
Revolving Loans shall bear interest at the per annum rate of interest
set forth in subsection (i), (ii) or (iii) below:

            (i)    With respect to Prime Rate Loans, the Prime Rate in
effect from time to time, payable on the first Business Day of each
month in arrears.   Said rate of interest shall increase or decrease
by an amount equal to each increase or decrease in the Prime Rate
effective on the effective date of each such change in the Prime Rate.

            (ii)    With respect to LIBOR Rate Loans, the LIBOR Rate
for the applicable Interest Period plus the Applicable Margin per
annum then in effect for the applicable Interest Period, such rate
to remain fixed for such Interest Period.   Interest shall be payable
on the first Business Day of each month in arrears, expiration of the
then applicable Interest Period and on the date of any payment hereon
by Borrowers.

            (iii)    Upon the occurrence of an Event of Default and
during the continuance thereof, the Loans shall bear interest at the
rate of two percent (2.0%) per annum in excess of the interest rate
otherwise payable thereon (the "Default Rate"), which interest shall
be payable on demand.   All interest shall be calculated on the basis
of a 360-day year and based on actual principal amounts outstanding.

       (b)    Other LIBOR Provisions.

            (i)    Subject to the provisions of this Agreement, the
Administrative Borrower shall have the option (A) as of any date,
to convert all or any part of the Prime Rate Loans to, or request
that new Loans be made as, LIBOR Rate Loans of various Interest
Periods; (B) as of the last day of any Interest Period, to continue
all or any portion of the relevant LIBOR Rate Loans as LIBOR Rate Loans;
(C) as of the last day of any Interest Period, to convert all or any
portion of the LIBOR Rate Loans to Prime Rate Loans; and (D) at any
time, to request new Loans as Prime Rate Loans; provided that,
Loans may not be continued as or converted to LIBOR Rate Loans,
if the continuation or conversion thereof would violate the
provisions of Sections 4(b)(ii) or 4(b)(iii) of this Agreement
or if an Event of Default has occurred.

            (ii)    Lender's determination of the LIBOR Rate as provided
above shall be conclusive, absent manifest error.   Furthermore, if (A)
Lender determines, in good faith (which determination shall be conclusive,
absent manifest error), prior to the commencement of any Interest Period
that (x) U.S. Dollar deposits of sufficient amount and maturity for
funding the Loans are not available to Lender in the London
Interbank Eurodollar market in the ordinary course of business,
or (y) by reason of circumstances affecting
the London Interbank Eurodollar market,
adequate and fair means do not exist for ascertaining the rate of
interest to be applicable to the Loans requested by the
Administrative Borrower to be LIBOR Rate Loans or
the Loans bearing interest at the rates set forth in Section 4(a)(ii) of
this Agreement shall not represent the effective pricing to Lender for
U.S. Dollar deposits of a comparable amount for the relevant period (such
as for example, but not limited to, official reserve requirements required
by Regulation D to the extent not given effect in determining the rate),
or (B) an Event of Default occurs and is then continuing, Lender shall
promptly notify the Administrative Borrower (1) if any of the events
described above in (A) have occurred, all existing LIBOR Rate Loans
shall convert to Prime Rate Loans upon the end of the applicable Interest
Period, (2) if an Event of Default has occurred and is continuing, all
existing LIBOR Rate Loans shall, at the election of Lender, convert to
Prime Rate Loans at the Default Rate, and (3) no additional LIBOR Rate
Loans shall be made until such circumstances or continuing Events of
Default are cured.

            (iii)    If, after the date hereof, the introduction of,
or any change in any applicable law, treaty, rule, regulation or
guideline or in the interpretation or administration thereof by
any governmental authority or any central bank or other fiscal,
monetary or other authority having jurisdiction over Lender or its
lending offices (a "Regulatory Change"), shall, in the opinion of
counsel to Lender, make it unlawful for Lender to make or maintain
LIBOR Rate Loans, then Lender shall promptly notify (with any oral
notification confirmed in writing) the Administrative Borrower and
(A) the LIBOR Rate Loans shall immediately convert to Prime Rate
Loans on the last Business Day of the then existing Interest Period
or on such earlier date as required by law and (B) no additional
LIBOR Rate Loans shall be made until such circumstance is cured.

            (iv)    If, for any reason, a LIBOR Rate Loan is paid
prior to the last Business Day of any Interest Period (including
any conversion to a LIBOR Rate Loan as a result of a continuing
Event of Default) or if a LIBOR Rate Loan does not occur on a date
specified by the Administrative Borrower in their request (other than
as a result of a default by Lender), Borrowers agree to indemnify
Lender against any loss (including any loss on redeployment of the
deposits or other funds acquired by Lender to fund or maintain such
LIBOR Rate Loan) cost or expense incurred by Lender as a result of
such prepayment.

            (v)    If any Regulatory Change (whether or not having
the force of law) shall (A) impose, modify or deem applicable any
assessment, reserve, special deposit or similar requirement against
assets held by, or deposits in or for the account of or loans by,
or any other acquisition of funds or disbursements by, Lender; (B)
subject Lender or the LIBOR Rate Loans to any Tax or change the
basis of taxation of payments to Lender of principal or interest
due from Borrowers to Lender hereunder (other than a change in the
taxation of the overall net income of Lender); or (C) impose on
Lender any other condition regarding the LIBOR Rate Loans or
Lender's funding thereof, and Lender shall determine (which
determination shall be conclusive, absent any manifest error) that
the result of the foregoing is to increase the cost to Lender of
making or maintaining the LIBOR Rate Loans or to reduce the amount
of principal or interest received by Lender hereunder, then
Borrowers shall pay to Lender, on demand, such additional amounts
as Lender shall, from time to time, determine are sufficient to
compensate and indemnify Lender from such increased cost or reduced
amount.

            (vi)    Lender shall receive payments of amounts of
principal of and interest with respect to the LIBOR Rate Loans
free and clear of, and without deduction for, any Taxes.   If (A)
Lender shall be subject to any Tax in respect of any LIBOR Rate
Loans or any part thereof or, (B) Borrowers shall be required to
withhold or deduct any Tax from any such amount, the LIBOR Rate
applicable to such LIBOR Rate Loans shall be adjusted by Lender
to reflect all additional costs incurred by Lender in connection
with the payment by Lender or the withholding by Borrowers of such
Tax and the Administrative Borrower shall provide Lender with a
statement detailing the amount of any such Tax actually paid by
Borrowers.   Determination by Lender of the amount of such costs shall
be conclusive, absent manifest error.   If after any such adjustment
any part of any Tax paid by Lender is subsequently recovered by
Lender, Lender shall reimburse Borrowers to the extent of the
amount so recovered.   A certificate of an officer of Lender
setting forth the amount of such recovery and the basis
therefor shall be conclusive,
absent manifest error.

            (vii)    Each request for a LIBOR Rate Loan shall be in
an amount not less than One Million and No/100 Dollars ($1,000,000),
and in integral multiples of, One Hundred Thousand and No/100
Dollars ($100,000).

             (viii)    Unless otherwise specified by the
Administrative Borrower, all Loans shall be Prime Rate Loans.

            (ix)    No more than three (3) Interest Periods may be
in effect with respect to outstanding LIBOR Rate Loans at any one
time.

             (x)    No more than ninety percent (90%) of the aggregate
unpaid principal balances of the Loans shall be LIBOR Rate Loans.

       (c)    Fees And Charges.

            (i)    Closing Fee.   Borrowers shall pay to Lender a
closing fee of Thirty-Two Thousand and No/100 Dollars ($32,000),
which fee shall be fully earned, non-refundable and payable on the
date of disbursement of the initial Loans hereunder.

            (ii)    Increase Fee.   If the Administrative Borrower
elects to increase the Maximum Revolving Loan Limit to Ten Million
and No/100 Dollars ($10,000,000) as provided in Section 2(e),
Borrowers shall pay to Lender a fee for such increase in the
amount of Eight Thousand and No/100 Dollars ($8,000), which fee
shall be fully earned, non-refundable and payable on the date
Lender receives the Notice of Increase.

            (iii)    Unused Line Fee.   Borrowers shall pay to Lender
an unused line fee of one-half percent (1/2%) per annum on the
difference between the Maximum Revolving Loan Limit and the average
daily balance of the Revolving Loans plus the Letter of Credit
Obligations for each month, which fee shall be fully earned,
non-refundable and payable monthly in arrears on the last Business
Day of each month.   Said fee shall be calculated on the basis of a
360 day year.

            (iv)    Collateral Management Fee.   For each Loan Year,
Borrowers shall pay to Lender an annual fee for the management of
the Collateral of Seven Thousand and No/100 Dollars ($7,000),
which fee shall be fully earned, non-refundable and payable on the
Closing Date and on the day prior to the anniversary of the Closing
Date for each such Loan Year.

            (v)    Audit Fee.   Borrowers shall pay Lender's audit
fees for the inspection and audit of the Collateral as provided in
Section 12(d) at the rate of Eight Hundred and No/100 Dollars
($800) per Person per day for no more than fifteen (15) days per
Loan Year plus all costs and expenses related thereto, provided
that if an Event of Default has occurred there shall be no limit
on the number of audit days for which such fee shall be payable.

            (vi)    Letter of Credit Fees.   Borrowers shall pay to
Lender the Letter of Credit Fees pursuant to the terms set forth
in Section 3(a).

             (vii)    Termination Fee.   In the event that Borrowers
terminate this Agreement at any time prior to the expiration of
the Contract Term as provided in Section 10, or this Agreement is
terminated by Lender after the occurrence and during the
continuance of an Event of Default, then Borrowers hereby
agree to pay to Lender a termination fee payable as follows:

                      A. Termination in the first Loan Year shall
be accompanied by a termination fee equal to two percent (2%) of
the Maximum Revolving Loan Limit; and

                      B. Termination in the second Loan Year
shall be accompanied by a termination fee equal to one percent
(1%) of the Maximum Revolving Loan Limit.

       In the event this Agreement is terminated by Lender as
a result of an Event of Default, Lender shall be entitled to
receive the termination fee required to be paid as provided above.
In the event this Agreement is terminated for any reason, as a
result of an Event of Default or otherwise, the outstanding balance
of the Revolving Loans, together with any accrued and unpaid
interest thereon and all other Liabilities shall be due
and payable immediately.

       The termination fee described above is referred to herein as the
"Termination Fee".   The Termination Fee shall be presumed to be the
amount of damages sustained by Lender as a result of such early
termination of this Agreement and Borrowers agree that it is reasonable
under the circumstances currently existing.   The Termination Fee shall
be deemed included in the Liabilities and shall be secured by the
Collateral.
      
        In the event that the Contract Term is extended, Lender
reserves the right to extend the period within which the
Termination Fee is payable so that a two percent (2%)
Termination Fee would be payable in the first year of such
extension and a one percent (1%) Termination
Fee would be payable in the second year of such extension.

            (viii)    Costs and Expenses. Borrowers shall reimburse
Lender for all costs and expenses, including, without limitation, legal
expenses and reasonable attorneys' fees (whether for internal or outside
counsel), incurred by Lender in connection with the (A) analysis, due
diligence, documentation, consummation and administration of this
transaction, the Loans and any other transactions between any Borrower
and Lender, including, without limitation, fees and expenses for Uniform
Commercial Code and other public record searches and filings, overnight
courier or other express or messenger delivery, field examination costs
(subject to the limitations in Section 4(c)(v) above and expenses,
appraisal costs, surveys, title insurance and environmental audit or
review costs; (B) collection, protection or enforcement of any rights
in or to the Collateral; (C) collection of any Liabilities; and (D)
administration and enforcement of any of Lender's rights under this
Agreement or any Other Agreement, including without limitation, fees,
costs and expenses incurred under Section 18.   Borrowers shall also
pay all normal service charges with respect to all accounts maintained
by Borrowers with Lender and LaSalle Bank and any additional services
requested by Borrowers from Lender and LaSalle Bank.   All such costs,
expenses and charges shall, if owed to LaSalle Bank, be reimbursed by
Lender and in such event or in the event such costs and expenses are
owed to Lender, constitute Liabilities hereunder, shall be payable by
Borrowers to Lender on demand, and, until paid, shall bear interest at
the highest rate then applicable to Loans hereunder.   In addition,
following the occurrence of an Event of Default, Borrowers shall
reimburse Lender for all costs and expenses, including, without
limitation, legal expenses and attorneys' fees, incurred by Lender
in connection with the (x) collection, protection or enforcement of
any rights in or to the Collateral; (y) collection of any Liabilities;
and (z) administration and enforcement of any of Lender's rights under
this Agreement.

             (ix)    Capital Adequacy Charge.   If Lender shall have
determined that the adoption of any law, rule or regulation regarding
capital adequacy, or any change therein or in the interpretation or
application thereof, or compliance by Lender with any request or
directive regarding capital adequacy (whether or not having the force
of law) from any central bank or governmental authority enacted after
the date hereof, does or shall have the effect of reducing the rate
of return on such party's capital as a consequence of its obligations
hereunder to a level below that which Lender could have achieved but
for such adoption, change or compliance (taking into consideration
Lender's policies with respect to capital adequacy) by a material
amount, then from time to time, after submission by Lender to the
Administrative Borrower of a written demand therefor ("Capital
AdequacyDemand") together with the certificate described below,
Borrowers shall pay to Lender such additional amount or amounts
("Capital Adequacy Charge") as will compensate Lender for such
reduction, such Capital Adequacy Demand to be made with reasonable
promptness following such determination.  
A certificate of Lender claiming
entitlement to payment as set forth above shall be conclusive in the
absence of manifest error.   Such certificate shall set forth the
nature of the occurrence giving rise to such reduction, the amount
of the Capital Adequacy Charge to be paid to Lender, and the method
by which such amount was determined.   In determining such amount,
Lender may use any reasonable averaging and attribution method,
applied on a non-discriminatory basis.

       (d)    Maximum Interest.

       It is the intent of the parties that the rate of interest and
other charges to Borrowers under this Agreement and the Other
Agreements shall be lawful; therefore, if for any reason the interest
or other charges payable under this Agreement are found by a court
of competent jurisdiction, in a final determination, to exceed the
limit which Lender may lawfully charge Borrowers, then the obligation
to pay interest and other charges shall automatically be reduced to
such limit and, if any amount in excess of such limit shall have been
paid, then such amount shall be refunded to Borrowers.

    5.    COLLATERAL.

       (a)    Grant of Security Interest to Lender.

       As security for the payment of all Loans now or in the future
made by Lender to any Borrower hereunder and for the payment or
other satisfaction of all other Liabilities, each Borrower hereby
assigns to Lender and grants to Lender a continuing security interest
and lien on all assets of such Borrower, including without limitation,
the following property of such Borrower, whether now or hereafter
owned, existing, acquired or arising and wherever now or hereafter
located:   (i) all Accounts (whether or not Eligible Accounts) and
all Goods whose sale, lease or other disposition by such Borrower has
given rise to Accounts and have been returned to, or repossessed or
stopped in transit by, such Borrower; (ii) all Chattel Paper,
Instruments, Documents and General Intangibles (including, without
limitation, all patents, patent applications, trademarks, trademark
applications, tradenames, trade secrets, goodwill, copyrights,
copyright applications, registrations, licenses (that are not
Non-Assignable Contracts), software, franchises, customer lists, tax
refund claims, claims against carriers and shippers, guarantee claims,
contract rights, payment intangibles, security interests, security
deposits and rights to indemnification); (iii) all Inventory; (iv)
all Goods (other than Inventory), including, without limitation,
Equipment, vehicles and Fixtures; (iv) all Investment Property; (vi)
all Deposit Accounts, bank accounts, deposits and cash; (vii) all
Letter-of-Credit Rights; (viii) Commercial Tort Claims listed on
Schedule 11(g) hereto (as it may be amended from time to time); (ix)
all Proceeds of all Non-Assignable Contracts, including without
limitation, all Proceeds from the sale, transfer or liquidation of
such Non-Assignable Contract and the value allocable to such
Non-Assignable Contracts in any sale of such Borrower's business or
assets; (x) all condemnation awards; (xi) any other property of such
Borrower now or hereafter in the possession, custody or control of
Lender or any agent or any Parent, Affiliate or Subsidiary of Lender
or any participant with Lender in the Loans, for any purpose (whether
for safekeeping, deposit, collection, custody, pledge, transmission
or otherwise); and (xii) all additions and accessions to,
substitutions for, and replacements, products and Proceeds of the
foregoing property, including, without limitation, proceeds of all
insurance policies insuring the foregoing property, and all of such
Borrower's books and records relating to any of the foregoing and
to such Borrower's business.

       (b)    Other Security.

              Lender, in its sole discretion, without waiving or
releasing any obligation, liability or duty of Borrowers under this
Agreement or the Other Agreements or any Event of Default, may at
any time or times hereafter, but shall not be obligated to, pay,
acquire or accept an assignment of any security interest, lien,
encumbrance or claim asserted by any Person in, upon or against the
Collateral.   All sums paid by Lender in respect thereof and all
costs, fees and expenses including, without limitation, reasonable
attorneys' fees, all court costs and all other charges relating
thereto incurred by Lender shall constitute Liabilities, payable by
Borrowers to Lender on demand and, until paid, shall bear interest
at the highest rate then applicable to Loans hereunder.
             
       (c)    Possessory Collateral.

       Immediately upon any Borrower's receipt of any portion of
the Collateral evidenced by an agreement, Instrument or Document,
including, without limitation, any Tangible Chattel Paper, and any
Investment Property consisting of certificated securities, such
Borrower shall deliver the original thereof to Lender together with
an appropriate endorsement or other specific evidence of assignment
thereof to Lender (in form and substance acceptable to Lender).   If
an endorsement or assignment of any such items shall not be made for
any reason, Lender is hereby irrevocably authorized, as each
Borrower's attorney and agent-in-fact, to endorse or assign the same
on such Borrower's behalf.

       (d)    Electronic Chattel Paper.

       To the extent that any Borrower obtains or maintains any
Electronic Chattel Paper, such Borrower shall create, store and
assign the record or records comprising the Electronic Chattel Paper
in such a manner that (i) a single authoritative copy of the record
or records exists which is unique, identifiable and except as
otherwise provided in clauses (iv), (v) and (vi) below, unalterable,
(ii) the authoritative copy identifies Lender as the assignee of
the record or records, (iii) the authoritative copy is communicated
to and maintained by the Lender or its designated custodian, (iv)
copies or revisions that add or change an identified assignee of
the authoritative copy can only be made with the participation of
Lender, (v) each copy of the authoritative copy and any copy of a
copy is readily identifiable as a copy that is not the authoritative
copy and (vi) any revision of the authoritative copy is readily
identifiable as an authorized or unauthorized revision.

       (e)    Key Man Life Insurance.   As further security for the
Liabilities, Borrowers shall assign and grant to Lender a security
interest (i) in a life insurance policy and the proceeds payable
thereunder in the amount of $500,000, insuring the life of Claudio
Guazzoni, and (ii) in a life insurance policy and the proceeds payable
thereunder in the amount of $500,000 insuring the life of Jack Rapport
(each a "Key Man Life Insurance Policy").   Each Key Man Life Insurance
Policy shall be in addition to all insurance required to be maintained
by Borrowers under Section 12(e) hereof.   Borrowers and Lender agree
that if any proceeds become payable under any Key Man Life Insurance
Policy, such proceeds shall be paid to Lender to be applied as a
prepayment (without any Termination Fee) to the outstanding principal
balance of the Loans as a permanent reduction of the Maximum Revolving
Loan Limit at Lender's sole discretion.

    6.    PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY
INTERESTS THEREIN.
       Each Borrower shall, at Lender's request, at any time and from
time to time, authenticate, execute and deliver to Lender such financing
statements, documents and other agreements and instruments (and pay the
cost of filing or recording the same in all public offices deemed
necessary or desirable by Lender) and do such other acts and things or
cause third parties to do such other acts and things as Lender may deem
necessary or desirable in its sole discretion in order to establish and
maintain a valid, attached and perfected security interest in the
Collateral in favor of Lender (free and clear of all other liens,
claims, encumbrances and rights of third parties whatsoever, whether
voluntarily or involuntarily created, except Permitted Liens) to secure
payment of the Liabilities, and in order to facilitate the collection
of the Collateral.   Each Borrower irrevocably hereby makes, constitutes
and appoints Lender (and all Persons designated by Lender for that
purpose) as such Borrower's true and lawful attorney and agent-in-fact
to execute and file such financing statements, documents and other
agreements and instruments and do such other acts and things as may
be necessary to preserve and perfect Lender's security interest in the
Collateral.   Each Borrower further agrees that a carbon, photographic,
photostatic or other reproduction of this Agreement or of a financing
statement shall be sufficient as a financing statement.   In addition,
each Borrower authorizes Lender to file UCC-1 financing statements
against such Borrower covering the Collateral owned by such Borrower
(and describing such Collateral, if Lender shall so chose in its sole
discretion, as "all assets" of such Borrower) in such jurisdictions