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                                                                   EXHIBIT 10.10


























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                          FREESHOP INTERNATIONAL, INC.

                           LOAN AND SECURITY AGREEMENT

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        This LOAN AND SECURITY AGREEMENT is entered into as of September 18,
1998, by and between IMPERIAL BANK ("Bank") and FREESHOP INTERNATIONAL, INC.
("Borrower").


                                    RECITALS

        Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.


                                    AGREEMENT

        The parties agree as follows:

        1. DEFINITIONS AND CONSTRUCTION.

           1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:

               "Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.

               "Advance" or "Advances" means a cash advance under the Revolving
Facility.

               "Affiliate" means, with respect to any Person, any Person that
owns or controls directly or indirectly such Person, any Person that controls or
is controlled by or is under common control with such Person.

               "Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents; reasonable Collateral audit fees; and Bank's reasonable attorneys'
fees and expenses incurred in amending, enforcing or defending the Loan
Documents (including fees and expenses of appeal), incurred before, during and
after an Insolvency Proceeding, whether or not suit is brought.

               "Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.

               "Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California or Washington are authorized
or required to close.

               "Closing Date" means the date of this Agreement.





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               "Code" means the California Uniform Commercial Code.

               "Collateral" means the property described on Exhibit A attached
hereto.

               "Committed Revolving Line" means a credit extension of up to Five
Hundred Thousand Dollars ($500,000), increasing to Seven Hundred Fifty Thousand
Dollars ($750,000) upon the occurrence of an Equity Event and Borrower's
election to do so.

               "Contingent Obligation" means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another, including, without limitation, any such obligation
directly or indirectly guaranteed, endorsed, co-made or discounted or sold with
recourse by that Person, or in respect of which that Person is otherwise
directly or indirectly liable; (ii) any obligations with respect to undrawn
letters of credit issued for the account of that Person; and (iii) all
obligations arising under any interest rate, currency or commodity swap
agreement, interest rate cap agreement, interest rate collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; provided, however,
that the term "Contingent Obligation" shall not include endorsements for
collection or deposit in the ordinary course of business. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably
anticipated liability in respect thereof as determined by such Person in good
faith; provided, however, that such amount shall not in any event exceed the
maximum amount of the obligations under the guarantee or other support
arrangement.

               "Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether published or unpublished and
whether or not the same also constitutes a trade secret, now or hereafter
existing, created, acquired or held.

               "Credit Extension" means each Advance, Equipment Advance, or any
other extension of credit by Bank for the benefit of Borrower hereunder.

               "Current Assets" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.

               "Current Liabilities" means, as of any applicable date, all
amounts that should, in accordance with GAAP, be included as current liabilities
on the consolidated balance sheet of Borrower and its Subsidiaries, as at such
date, plus, to the extent not already included therein, all outstanding Advances
made under this Agreement, including all Indebtedness that is payable upon
demand or within one year from the date of determination thereof unless such
Indebtedness is renewable or extendible at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination.

               "Daily Balance" means the amount of the Obligations owed at the
end of a given day.





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               "Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.

               "Equipment Advance" has the meaning set forth in Section 2.1.1.

               "Equity Event" means the sale or issuance by Borrower of its
equity securities in which Borrower receives net cash proceeds of not less than
Two Million Five Hundred Thousand Dollars ($2,500,000) from investors acceptable
to Bank in its sole discretion or before December 31, 1998.

               "ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.

               "Event of Default" has the meaning assigned in Article 8.

               "GAAP" means generally accepted accounting principles as in
effect from time to time.

               "Indebtedness" means (a) all indebtedness for borrowed money or
the deferred purchase price of property or services, including without
limitation reimbursement and other obligations with respect to surety bonds and
letters of credit, (b) all obligations evidenced by notes, bonds, debentures or
similar instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.

               "Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

               "Intellectual Property Collateral" means:

                    (a) Copyrights, Trademarks and Patents;

                    (b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;

                    (c) Any and all design rights which may be available to
Borrower now or hereafter existing, created, acquired or held;

                    (d) Any and all claims for damages by way of past, present
and future infringement of any of the rights included above, with the right, but
not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;

                    (e) All licenses or other rights to use any of the
Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights;

                    (f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks or Patents; and





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                    (g) All proceeds and products of the foregoing, including
without limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.

               "Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.

               "Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

               "IRC" means the Internal Revenue Code of 1986, as amended, and
the regulations thereunder.

               "Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.

               "Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.

               "Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.

               "Negotiable Collateral" means all of Borrower's present and
future letters of credit of which it is a beneficiary, notes, drafts,
instruments, securities, documents of title, and chattel paper, and Borrower's
Books relating to any of the foregoing.

               "Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.

               "Patents" means all patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.

               "Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.





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               "Permitted Indebtedness" means:

                    (a) Indebtedness of Borrower in favor of Bank arising under
this Agreement or any other Loan Document;

                    (b) Indebtedness existing on the Closing Date and disclosed
in the Schedule;

                    (c) Indebtedness secured by a lien described in clause (c)
of the defined term "Permitted Liens," provided such Indebtedness does not
exceed the lesser of the cost or fair market value of the equipment financed
with such Indebtedness;

                    (d) Subordinated Debt;

                    (e) Indebtedness to trade creditors incurred in the ordinary
course of business; and

                    (f) Indebtedness (other than (a) through (e)) at any time
outstanding in an amount not exceeding $100,000.

               "Permitted Investment" means:

                    (a) Investments existing on the Closing Date disclosed in
the Schedule;

                    (b) (i) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having rating of at least A-2 or P-2 from either
Standard & Poor's Corporation or Moody's Investors Service, Inc., (iii)
certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by Bank, (iv) Bank's money market accounts and (v)
Investments made in connection with transactions permitted under Section 7.3;
and

                    (c) Loans to employees to purchase Borrower's capital stock.

               "Permitted Liens" means the following:

                    (a) Any Liens existing on the Closing Date and disclosed in
the Schedule or arising under this Agreement or the other Loan Documents;

                    (b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
security interests;

                    (c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
acquired and improvements thereon, and the proceeds of such equipment;





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                    (d) Liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.

               "Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.

               "Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.

               "Quick Assets" means, at any date as of which the amount thereof
shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.

               "Responsible Officer" means each of the Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer and the Controller of
Borrower.

               "Revolving Maturity Date" means September 17, 1999.

               "Revolving Facility" means the facility under which Borrower may
request Bank to issue Advances, as specified in Section 2.1.1 hereof.

               "Schedule" means the schedule of exceptions attached hereto, if
any.

               "Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms reasonably
acceptable to Bank (and identified as being such by Borrower and Bank).

               "Subsidiary" means any corporation or partnership in which (i)
any general partnership interest or (ii) more than 50% of the stock of which by
the terms thereof ordinary voting power to elect the Board of Directors,
managers or trustees of the entity shall, at the time as of which any
determination is being made, be owned by Borrower, either directly or through an
Affiliate.

               "Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.

           1.2 Accounting Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.





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        2. LOAN AND TERMS OF PAYMENT.

           2.1 Credit Extensions.

               Borrower promises to pay to the order of Bank, in lawful money of
the United States of America, the aggregate unpaid principal amount of all
Credit Extensions made by Bank to Borrower hereunder. Borrower shall also pay
interest on the unpaid principal amount of such Credit Extensions at rates in
accordance with the terms hereof.

               2.1.1 Revolving Advances

                     (a) Subject to and upon the terms and conditions of this
Agreement, Borrower may request Advances in an aggregate outstanding amount not
to exceed the Committed Revolving Line. Borrower may elect to use any Advances
for the purchase of Equipment (each an "Equipment Advance" and, collectively,
the "Equipment Advances") Each Equipment Advance shall not exceed one hundred
percent (100%) of the invoice amount of equipment, software and corporate
purposes approved by Bank from time to time (which Borrower shall, in any case,
have purchased within 180 days of the date of the corresponding Equipment
Advance) , excluding taxes, shipping, warranty charges, freight discounts and
installation expense.

                         Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section may be repaid and reborrowed at any
time prior to the Revolving Maturity Date, at which time all Advances under this
Section shall be immediately due and payable. Borrower may prepay any Advances
without penalty or premium.

                     (b) Effective as of the Revolving Maturity Date, Borrower
may elect to convert any outstanding Equipment Advances into a term loan. Such
amount shall be payable in thirty-six (36) equal monthly installments of
principal, plus all accrued interest, beginning on October 17, 1999, and
continuing on the same day of each month thereafter through October 17, 2002, at
which time all amounts due under this Section 2.1.1 and any other amounts due
under this Agreement shall be immediately due and payable. Equipment Advances,
once repaid, may not be reborrowed. Borrower may prepay any Equipment Advances
without penalty or premium.

                     (c) When Borrower desires to obtain an Advance or an
Equipment Advance, Borrower shall notify Bank (which notice shall be
irrevocable) by facsimile transmission to be received no later than 3:00 p.m.
Pacific time one (1) Business Day before the day on which the Advance or
Equipment Advance is to be made. Such notice shall be substantially in the form
of Exhibit B. Any Equipment Advance notice shall be signed by a Responsible
Officer or its designee and include a copy of the invoice for any Equipment to
be financed.

                         Bank is authorized to make Advances under this
Agreement, based upon instructions received from a Responsible Officer or a
designee of a Responsible Officer, or without instructions if in Bank's
discretion such Advances are necessary to meet Obligations which have become due
and remain unpaid. Bank shall be entitled to rely on any telephonic notice given
by a person who Bank reasonably believes to be a Responsible Officer or a
designee thereof, and Borrower shall indemnify and hold Bank harmless for any
damages or loss suffered by Bank as a result of such reliance. Bank will credit
the amount of Advances made under this Section to Borrower's deposit account.





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           2.2 Overadvances. If any Advances and Equipment Advances hereunder
exceed the Committed Revolving Line, Borrower, upon written notice from Bank,
shall immediately pay to Bank, in cash, the amount of such excess.

           2.3 Interest Rates, Payments, and Calculations.

               (a) Interest Rates. Except as set forth in Section 2.3((b)), the
Advances and Equipment Advances shall bear interest, on the outstanding daily
balance thereof, at a rate equal to One and One-half Percent (1.5%) above the
Prime Rate.

               (b) Late Fee; Default Rate. If any payment is not made within ten
(10) days after the date such payment is due, Borrower shall pay Bank a late fee
equal to the lesser of (i) five percent (5%) of the amount of such unpaid amount
or (ii) the maximum amount permitted to be charged under applicable law. All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to five (5) percentage
points above the interest rate applicable immediately prior to the occurrence of
an Event of Default.

               (c) Payments. Interest on Advances and Equipment Advances shall
be due and payable on the seventeenth calendar day of each month during the term
hereof. Bank shall, at its option, charge such interest, all Bank Expenses, and
all Periodic Payments against any of Borrower's deposit accounts or against the
Committed Revolving Line, in which case those amounts shall thereafter accrue
interest at the rate then applicable hereunder. Any interest not paid when due
shall be compounded by becoming a part of the Obligations, and such interest
shall thereafter accrue interest at the rate then applicable hereunder. Bank
shall deliver to Borrower statements of account in the ordinary course of
business reflecting charges made hereunder.

               (d) Computation. In the event the Prime Rate is changed from time
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased effective as of the day the Prime Rate is changed, by an amount
equal to such change in the Prime Rate. All interest chargeable under the Loan
Documents shall be computed on the basis of a three hundred sixty (360) day year
for the actual number of days elapsed.

           2.4 Crediting Payments. Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies. After the
occurrence of an Event of Default, the receipt by Bank of any wire transfer of
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such payment is of immediately available federal funds or unless
and until such check or other item of payment is honored when presented for
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer or payment received by Bank after 12:00 noon Pacific time shall be
deemed to have been received by Bank as of the opening of business on the
immediately following Business Day. Whenever any payment to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

           2.5 Fees. Borrower shall pay to Bank the following:

               (a) Facility Fee. On the Closing Date, a Facility Fee equal to
One Thousand Two Hundred Fifty Dollars ($1,250) which shall be nonrefundable;
upon the occurrence of an Equity





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Event, and at Borrower's election, as a condition to increasing the Committed
Revolving Line to $750,000, an additional Facility Fee of One Thousand Two
Hundred Fifty Dollars ($1,250) which shall be non-refundable.

               (b) Bank Expenses. On the Closing Date, all Bank Expenses
incurred through the Closing Date, including reasonable attorneys' fees and
expenses and, after the Closing Date, all Bank Expenses, including reasonable
attorneys' fees and expenses, as and when they become due.

           2.6 Term. This Agreement shall become effective on the Closing Date
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Term Maturity Date. Notwithstanding the foregoing, Bank shall have
the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on
the Collateral shall remain in effect for so long as any Obligations are
outstanding.

        3. CONDITIONS OF LOANS.

           3.1 Conditions Precedent to Initial Credit Extension. The obligation
of Bank to make the initial Credit Extension is subject to the condition
precedent that Bank shall have received, in form and substance satisfactory to
Bank, the following:

               (a) this Agreement;

               (b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;

               (c) a financing statement (Form UCC-1);

               (d) an intellectual property security agreement;

               (e) a warrant;

               (f) a guaranty executed by Persons acceptable to Bank; and

               (g) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.

           3.2 Conditions Precedent to all Credit Extensions. The obligation of
Bank to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:

               (a) timely receipt by Bank of the Payment/Advance Form as
provided in Section 2.1; and

               (b) the representations and warranties contained in Section 5
shall be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension
(provided, however, that those representations and warranties expressly
referring to another date shall be true, correct and complete in all material
respects as of such date). The making of each Credit Extension shall





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be deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section
3.2((b)).

        4. CREATION OF SECURITY INTEREST.

           4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Except as set forth in the
Schedule and for Permitted Liens, such security interest constitutes a valid,
first priority security interest in the presently existing Collateral, and will
constitute a valid, first priority security interest in Collateral acquired
after the date hereof.

           4.2 Delivery of Additional Documentation Required. Borrower shall
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.

           4.3 Right to Inspect. Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours but no more than once a year (unless an
Event of Default has occurred and is continuing), to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.

        5. REPRESENTATIONS AND WARRANTIES.

               Borrower represents and warrants as follows:

           5.1 Due Organization and Qualification. Borrower and each Subsidiary
is a corporation duly existing under the laws of its state of incorporation and
qualified and licensed to do business in any state in which the conduct of its
business or its ownership of property requires that it be so qualified, except
where failure to so qualify would not have a Material Adverse Effect.

           5.2 Due Authorization; No Conflict. The execution, delivery, and
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Certificate of Incorporation or Bylaws, nor
will they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.

           5.3 No Prior Encumbrances. Borrower has good and indefeasible title
to the Collateral, free and clear of Liens, except for Permitted Liens.

           5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
existing obligations. The services giving rise to such Eligible Accounts have
been performed and the account debtor has an unconditional obligation to pay
Borrower for such services. Borrower has not received notice of actual or
imminent Insolvency Proceeding of any account debtor that is included in any
Borrowing Base Certificate as an Eligible Account.





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           5.5 Merchantable Inventory. All Inventory is in all material respects
of good and marketable quality, free from all material defects, except for
Inventory for which adequate reserves have been made.

           5.6 Name; Location of Chief Executive Office. Borrower has not done
business under any name other than that specified on the signature page hereof.
The chief executive office of Borrower is located at the address indicated in
Section 10 hereof.

           5.7 Litigation. Except as set forth in the Schedule, there are no
actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could have a
Material Adverse Effect or a material adverse effect on Borrower's interest or
Bank's security interest in the Collateral.

           5.8 No Material Adverse Change in Financial Statements. All
consolidated financial statements related to Borrower and any Subsidiary that
are delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended. There
has not been a material adverse change in the consolidated financial condition
of Borrower since the date of the most recent of such financial statements
submitted to Bank.

           5.9 Solvency, Payment of Debts. Borrower is solvent and able to pay
its debts (including trade debts) as they mature.

           5.10 Regulatory Compliance. Borrower and each Subsidiary have met the
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.





















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           5.11 Environmental Condition. Except as disclosed in the Schedule,
none of Borrower's or any Subsidiary's properties or assets has ever been used
by Borrower or any Subsidiary or, to the best of Borrower's knowledge, by
previous owners or operators, in the disposal of, or to produce, store, handle,
treat, release, or transport, any hazardous waste or hazardous substance other
than in accordance with applicable law; to the best of Borrower's knowledge,
none of Borrower's properties or assets has ever been designated or identified
in any manner pursuant to any environmental protection statute as a hazardous
waste or hazardous substance disposal site, or a candidate for closure pursuant
to any environmental protection statute; to the best of Borrower's knowledge, no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and to the best of Borrower's knowledge, neither Borrower nor any
Subsidiary has received a summons, citation, notice, or directive from the
Environmental Protection Agency or any other federal, state or other
governmental agency concerning any action or omission by Borrower or any
Subsidiary resulting in the releasing, or otherwise disposing of hazardous waste
or hazardous substances into the environment.

           5.12 Taxes. Borrower and each Subsidiary has filed or caused to be
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.

           5.13 Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities of any Person, except for Permitted
Investments.

           5.14 Government Consents. Borrower and each Subsidiary has obtained
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted, the
failure to obtain which could have a Material Adverse Effect.

           5.15 Full Disclosure. No representation, warranty or other statement
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.

        6. AFFIRMATIVE COVENANTS.

               Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:

           6.1 Good Standing. Borrower shall maintain its and each of its
Subsidiaries' corporate existence in its jurisdiction of incorporation and
maintain qualification in each jurisdiction in which the failure to so qualify
could have a Material Adverse Effect. Borrower shall maintain, and shall cause
each of its Subsidiaries to maintain in force all licenses, approvals and
agreements, the loss of which could have a Material Adverse Effect.

           6.2 Government Compliance. Borrower shall meet, and shall cause each
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which





                                       13
<PAGE>   14

could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.

           6.3 Financial Statements, Reports, Certificates. Borrower shall
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each calendar month, a Borrower prepared consolidated
balance sheet and income statement covering Borrower's consolidated operations
during such period, in a form and certified by a Responsible Officer; (b) as
soon as available, but in any event within one hundred twenty (120) days after
the end of Borrower's fiscal year, audited consolidated financial statements of
Borrower prepared in accordance with GAAP, consistently applied; (c) promptly
upon receipt of notice thereof, a report of any legal actions pending or
threatened against Borrower or any Subsidiary that could result in damages or
costs to Borrower or any Subsidiary of Fifty Thousand Dollars ($50,000) or more;
and (d) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time generally prepared
by Borrower in the ordinary course of business.

               Borrower shall deliver to Bank with the monthly financial
statements a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto.

           6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
marketable condition, free from all material defects except for Inventory for
which adequate reserves have been made. Returns and allowances, if any, as
between Borrower and its account debtors shall be on the same basis and in
accordance with the usual customary practices of Borrower, as they exist at the
time of the execution and delivery of this Agreement. Borrower shall promptly
notify Bank of all returns and recoveries and of all disputes and claims, where
the return, recovery, dispute or claim involves more than Fifty Thousand Dollars
($50,000).

           6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.

           6.6 Insurance.

               (a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.

               (b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss





                                       14
<PAGE>   15

payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
over $50,000 payable under any such policy shall, at the option of Bank, be
payable to Bank to be applied on account of the Obligations.

           6.7 Principal Depository. Borrower shall maintain its principal
banking and investment accounts with Bank.

           6.8 Quick Ratio. Beginning as of January 31, 1999, Borrower shall
maintain, as of the last day of each calendar month, a ratio of Quick Assets to
Current Liabilities, less deferred revenue of at least .80 to 1.00.

           6.9 Equity Infusion. On or before December 31, 1998, Borrower shall
receive no less than Two Million Five Hundred Thousand Dollars ($2,500,000) in
cash proceeds from investors acceptable to Bank.

           6.10 Registration of Intellectual Property Rights.

                (a) Borrower shall register or cause to be registered on an
expedited basis (to the extent not already registered) with the United States
Patent and Trademark Office or the United States Copyright Office, as
applicable, those intellectual property rights listed on Exhibits A, B and C to
the Intellectual Property Security Agreement delivered to Bank by Borrower in
connection with this Agreement within thirty (30) days of the date of this
Agreement. Borrower shall register or cause to be registered with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, those additional intellectual property rights developed or acquired
by Borrower from time to time in connection with any product prior to the sale
or licensing of such product to any third party, including without limitation
major revisions or additions to the intellectual property rights listed on such
Exhibits A, B and C.

                (b) Borrower shall execute and deliver such additional
instruments and documents from time to time as Bank shall reasonably request to
perfect Bank's security interest in the Intellectual Property Collateral.

                (c) Borrower shall (i) protect, defend and maintain the validity
and enforceability of the Trademarks, Patents and Copyrights, (ii) use its best
efforts to detect infringements of the Trademarks, Patents and Copyrights and
promptly advise Bank in writing of material infringements detected and (iii) not
allow any material Trademarks, Patents or Copyrights to be abandoned, forfeited
or dedicated to the public without the written consent of Bank, which shall not
be unreasonably withheld.

                (d) Bank may audit Borrower's Intellectual Property Collateral
to confirm compliance with this Section 6.10, provided such audit may not occur
more often than once per year, unless an Event of Default has occurred and is
continuing. Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.10 to take but which Borrower fails to take, after fifteen (15) days'
notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.10.





                                       15
<PAGE>   16

           6.11 Further Assurances. At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.

        7. NEGATIVE COVENANTS.

               Borrower covenants and agrees that, so long as any credit
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Credit
Extensions, Borrower will not do any of the following:

           7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries; (iii) Transfers of surplus, worn-out or obsolete Equipment; or
(iv) Transfers of immaterial assets other than Accounts ($50,000 or less
individually and $100,000 in the aggregate in each fiscal year) outside the
ordinary course of business.

           7.2 Change in Business. Engage in any business, or permit any of its
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto). Borrower will not, without thirty (30) days prior
written notification to Bank, relocate its chief executive office.

           7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person in any
transaction involving consideration of more than $100,000; provided, however,
that Borrower or any Subsidiary may merge, consolidate or reorganize with or
into another entity as long as Borrower or such Subsidiary is the surviving
corporation and an Event of Default does not exist before or after giving effect
to such transaction.

           7.4 Indebtedness. Create, incur, assume or be or remain liable with
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.

           7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.

           7.6 Distributions. Pay any dividends or make any other distribution
or payment on account of or in redemption, retirement or purchase of any capital
stock, except that Borrower may (i) repurchase the stock of former employees
pursuant to stock repurchase agreements and (ii) pay cash dividends relating to
federal and state income taxes incurred by its shareholders as a result of
Borrower's operations, as long as an Event of Default does not exist or would
not exist after giving effect to such action.

           7.7 Investments. Directly or indirectly acquire or own, or make any
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.

           7.8 Transactions with Affiliates. Directly or indirectly enter into
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary





                                       16
<PAGE>   17

course of Borrower's business, upon fair and reasonable terms that are no less
favorable to Borrower than would be obtained in an arm's length transaction with
a nonaffiliated Person.

           7.9 Subordinated Debt. Make any payment in respect of any
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.

           7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory; provided, however, that Borrower may deposit software
code in escrow for customers in the ordinary course of business. Except for
Inventory sold in the ordinary course of business and except for such other
locations as Bank may approve in writing, Borrower shall keep the Inventory only
at the location set forth in Section 10 hereof and such other locations of which
Borrower gives Bank prior written notice and as to which Borrower signs and
files a financing statement where needed to perfect Bank's security interest.

           7.11 Compliance. Become an "investment company" or be controlled by
an "investment company," within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur, fail
to comply with the Federal Fair Labor Standards Act or violate any law or
regulation, which violation could have a Material Adverse Effect or a material
adverse effect on the Collateral or the priority of Bank's Lien on the
Collateral, or permit any of its Subsidiaries to do any of the foregoing.

        8. EVENTS OF DEFAULT.

           Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:

           8.1 Payment Default. If Borrower fails to pay, when due, any of the
Obligations;

           8.2 Covenant Default. If Borrower fails to perform any obligation
under Article 6 or violates any of the covenants contained in Article 7 of this
Agreement, or fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant, or agreement contained in this Agreement,
in any of the Loan Documents, or in any other present or future written
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within twenty (20) days after Borrower receives written notice
thereof or any officer of Borrower becomes aware thereof; provided, however,
that if the default cannot by its nature be cured within the twenty (20) day
period or cannot after diligent attempts by Borrower be cured within such twenty
(20) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed forty-five (45) days) to attempt to cure such default, and
within such reasonable time period the failure to have cured such default shall
not be deemed an Event of Default (provided that no Credit Extensions will be
required to be made during such cure period);

           8.3 Material Adverse Change. If there occurs a material adverse
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of





                                       17
<PAGE>   18

repayment of any portion of the Obligations or a material impairment of the
value or priority of Bank's security interests in the Collateral;

           8.4 Attachment. If any material portion of Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within twenty (20) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, and the same is not paid within twenty (20) days
after Borrower receives notice thereof, provided that note of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);

           8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within forty-five (45) days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);

           8.6 Other Agreements. If there is a default in any agreement to which
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;

           8.7 Subordinated Debt. If Borrower makes any payment on account of
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank or otherwise consented to in
writing by Bank;

           8.8 Judgments. If a judgment or judgments for the payment of money in
an amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of thirty (30) days (provided that no Credit Extensions
will be made prior to the satisfaction or stay of such judgment); or

           8.9 Misrepresentations. If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.

        9. BANK'S RIGHTS AND REMEDIES.

           9.1 Rights and Remedies. Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:

               (a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of





                                       18
<PAGE>   19

an Event of Default described in Section 8.5 all Obligations shall become
immediately due and payable without any action by Bank);

               (b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;

               (c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;

               (d) Make such payments and do such acts as Bank considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the
Collateral available to Bank as Bank may designate. Borrower authorizes Bank to
enter the premises where the Collateral is located, to take and maintain
possession of the Collateral, or any part of it, and to pay, purchase, contest,
or compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;

               (e) Set off and apply to the Obligations any and all (i) balances
and deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to
or for the credit or the account of Borrower held by Bank;

               (f) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;

               (g) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;

               (h) Bank may credit bid and purchase at any public sale; and

               (i) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.

           9.2 Power of Attorney. Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account,





                                       19
<PAGE>   20

drafts against account debtors, schedules and assignments of Accounts,
verifications of Accounts, and notices to account debtors; (d) dispose of any
Collateral; (e) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (f) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.

           9.3 Accounts Collection. Upon the occurrence and during the
continuance of an Event of Default, Bank may notify any Person owing funds to
Borrower of Bank's security interest in such funds and verify the amount of such
Account. Borrower shall collect all amounts owing to Borrower for Bank, receive
in trust all payments as Bank's trustee, and immediately deliver such payments
to Bank in their original form as received from the account debtor, with proper
endorsements for deposit.

           9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following
after reasonable notice to Borrower: (a) make payment of the same or any part
thereof; (b) set up such reserves under the Revolving Facility as Bank deems
necessary to protect Bank from the exposure created by such failure; or (c)
obtain and maintain insurance policies of the type discussed in Section 6.6 of
this Agreement, and take any action with respect to such policies as Bank deems
prudent. Any amounts so paid or deposited by Bank shall constitute Bank
Expenses, shall be immediately due and payable, and shall bear interest at the
then applicable rate hereinabove provided, and shall be secured by the
Collateral. Any payments made by Bank shall not constitute an agreement by Bank
to make similar payments in the future or a waiver by Bank of any Event of
Default under this Agreement.

           9.5 Bank's Liability for Collateral. So long as Bank complies with
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.

           9.6 Remedies Cumulative. Bank's rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.

           9.7 Demand; Protest. Borrower waives demand, protest, notice of
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.





                                       20
<PAGE>   21

        10. NOTICES.

            Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:

       If to Borrower:        FreeShop International, Inc.
                              95 South Jackson, Suite 300
                              Seattle, WA 98104
                              Attn:  John A. Wade
                              FAX:  (206) 441-9661

       If to Bank:            Imperial Bank
                              226 Airport Parkway
                              San Jose, CA  95110-1024
                              Attn:  Corporate Banking Center
                              FAX:  (408) 451-8523

       with a copy to:        Imperial Bank
                              777 108th Avenue NE, Suite 1670
                              Bellevue, WA  98004
                              Attn:  J. P. Michael
                              FAX:  (425) 454-6224

        Any notice received by Borrower shall be effective notwithstanding the
lack of receipt by Borrower's counsel. The parties hereto may change the address
at which they are to receive notices hereunder, by notice in writing in the
foregoing manner given to the other.

        11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.

            This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the
nonexclusive jurisdiction of the state and Federal courts located in the County
of Santa Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.





                                       21
<PAGE>   22

        12. GENERAL PROVISIONS.

            12.1 Successors and Assigns. This Agreement shall bind and inure to
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of or notice to Borrower to sell, transfer, negotiate, or
grant participation in all or any part of, or any interest in, Bank's
obligations, rights and benefits hereunder.

            12.2 Indemnification. Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.

            12.3 Time of Essence. Time is of the essence for the performance of
all obligations set forth in this Agreement.

            12.4 Severability of Provisions. Each provision of this Agreement
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.

            12.5 Amendments in Writing, Integration. This Agreement cannot be
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.

            12.6 Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

            12.7 Survival. All covenants, representations and warranties made in
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.

        13. JUDICIAL REFERENCE.

                 (a) Other than (i) nonjudicial foreclosure and all matters in
connection therewith regarding security interests in real or personal property;
or (ii) the appointment of a receiver, or the exercise of other provisional
remedies (any and all of which may be initiated pursuant to applicable law),
each controversy, dispute or claim between the parties arising out of or
relating to this Agreement, which controversy, dispute or claim is not settled
in writing within thirty (30) days after the "Claim Date" (defined as the date
on which a party subject to this Agreement gives written notice to all other
parties that a controversy, dispute or claim exists), will be settled by a
reference proceeding in California





                                       22
<PAGE>   23

in accordance with the provisions of Section 638 et seq. of the California Code
of Civil Procedure, or their successor section ("CCP"), which shall constitute
the exclusive remedy for the settlement of any controversy, dispute or claim
concerning this Agreement, including whether such controversy, dispute or claim
is subject to the reference proceeding and except as set forth above, the
parties waive their rights to initiate any legal proceedings against each other
in any court or jurisdiction other than the Superior Court in the County where
the Real Property, if any, is located or Santa Clara County if none (the
"Court"). The referee shall be a retired Judge of the Court selected by mutual
agreement of the parties, and if they cannot so agree within forty-five (45)
days after the Claim Date, the referee shall be promptly selected by the
Presiding Judge of the Court (or his representative). The referee shall be
appointed to sit as a temporary judge, with all of the powers for a temporary
judge, as authorized by law, and upon selection should take and subscribe to the
oath of office as provided for in Rule 244 of the California Rules of the Court
(or any subsequently enacted Rule). Each party shall have one peremptory
challenge pursuant to CCP Section 170.6. The referee shall (a) be requested to
set the matter for hearing within sixty (60) days after the date of selection of
the referee and (b) try any and all issues of law or fact and report a statement
of decision upon them, if possible, within ninety (90) days of the Claim Date.
Any decision rendered by the referee will be final, binding and conclusive and
judgment shall be entered pursuant to CCP Section 644 in any court in the State
of California having jurisdiction. Any party may apply for a reference
proceeding at any time after thirty (30) days following notice to any other
party of the nature of the controversy, dispute or claim, by filing a petition
for a hearing and/or trial. All discovery permitted by this Agreement shall be
completed no later than fifteen (15) days before the first hearing date
established by the referee. The referee may extend such period in the event of a
party's refusal to provide requested discovery or unavailability of a witness
due to absence or illness. No party shall be entitled to "priority" in
conducting discovery. Depositions may be taken by either party upon seven (7)
days written notice, and request for production or inspection of documents which
cannot be resolved by the parties shall be submitted to the referee as provided
herein. The Superior Court is empowered to issue temporary and/or provisions
remedies, as appropriate.

                 (b) Except as expressly set forth in this Agreement, the
referee shall determine the manner in which the reference proceeding is
conducted including the time and place of all hearings, the order of
presentation of evidence, and all other questions that arise with respect to the
course of the reference proceeding. All proceedings and hearings conducted
before the referee, except for trial, shall be conducted without a court
reporter except that when any party so requests, a court reporter will be used
at any hearing conducted before the referee. The party making such a request
shall have the obligation to arrange for and pay for the court reporter. The
costs of the court reporter at the trial shall be borne equally by the parties.

                 (c) The referee shall be required to determine all issues in
accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, to provide all
temporary and/or provisional remedies and to enter equitable orders that will be
binding upon the parties. The referee shall issue a single judgment at the close
of the reference proceeding which shall dispose of all of the claims of the
parties that are the subject of the reference. The parties hereto expressly
reserve the right to contest or appeal from the final judgment or any appealable
order or appealable judgment entered by the referee. The parties hereto
expressly reserve the right to findings of fact, conclusions of laws, a written
statement of decision, and the right to move for a new trial or a different
judgment, which new trial, if granted, is also to be a reference proceeding
under this provisions.





                                       23
<PAGE>   24

                 (d) In the event that the enabling legislation which provides
for appointment of a referee is repealed (and no successor statute is enacted),
any dispute between the parties that would otherwise be determined by the
reference procedure herein described will be resolved and determined by
arbitration. The arbitration will be conducted by a retired judge of the Court,
in accordance with the California Arbitration Act, Section 1280 through
Section 1294.2 of the CCP as amended from time to time. The limitations with
respect to discovery as set forth hereinabove shall apply to any such
arbitration proceeding.

        14. CONFIDENTIALITY.

            In handling any confidential information Bank shall exercise the
same degree of care that it exercises with respect to its own proprietary
information of the same types to maintain the confidentiality of any non-public
information thereby received or received pursuant to this Agreement except that
disclosure of such information may be made (i) to the Subsidiaries or Affiliates
of Bank in connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in the
Advances or Term Advances, provided that they have entered into a comparable
confidentiality agreement in favor of Borrower and have delivered a copy to
Borrower, (iii) as required by law, regulations, rule or order, subpoena,
judicial order or similar order, (iv) as may be required in connection with the
examination, audit or similar investigation of Bank and (v) as Bank may
determine in connection with the enforcement of any remedies hereunder.
Confidential information hereunder shall not include information that either:
(a) is in the public domain or in the knowledge or possession of Bank when
disclosed to Bank, as evidenced by Bank's records in existence at the time of
such disclosure, or becomes part of the public domain after disclosure to Bank
through no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have actual knowledge that such third party is prohibited from
disclosing such information and provided such disclosure is not otherwise in
violation of Borrower's rights.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.



                                        FREESHOP INTERNATIONAL, INC.



                                        By: ____________________________________

                                        Title: _________________________________


                                        IMPERIAL BANK



                                        By: ____________________________________

                                        Title: _________________________________











                                       24


<PAGE>   25

                                    EXHIBIT A

                        COLLATERAL DESCRIPTION ATTACHMENT
                         TO LOAN AND SECURITY AGREEMENT

        All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created, written, produced or
acquired, including, but not limited to:

           (i) all accounts receivable, accounts, chattel paper, contract rights
(including, without limitation, royalty agreements, license agreements and
distribution agreements), documents, instruments, money, deposit accounts and
general intangibles, including, without limitation, returns, repossessions,
books and records relating thereto, and equipment containing said books and
records, all investment property, including securities and securities
entitlements;

           (ii) all software, computer source codes and other computer programs
(collectively, the "Software Products"), and all common law and statutory
copyrights and copyright registrations, applications for registration, now
existing or hereafter arising, United States of America and foreign, obtained or
to be obtained on or in connection with the Software Products, or any parts
thereof or any underlying or component elements of the Software Products
together with the right to copyright and all rights to renew or extend such
copyrights and the right (but not the obligation) of Bank (herein referred to as
"Bank" or "Secured Party") to sue in its own name and/or the name of the Debtor
for past, present and future infringements of copyright;

           (iii) all goods, including, without limitation, equipment and
inventory (including, without limitation, all export inventory);

           (iv) all guarantees and other security therefor;

           (v) all trademarks, service marks, trade names and service names and
the goodwill associated therewith;

           (vi) (a) all patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (b)
licenses pertaining to any patent whether Debtor is licensor or licensee, (c)
all income, royalties, damages, payments, accounts and accounts receivable now
or hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past, present or future
infringements thereof, (d) the right (but not the obligation) to sue for past,
present and future infringements thereof, (e) all rights corresponding thereto
throughout the world in all jurisdictions in which such patents have been issued
or applied for, and (f) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part with any of the foregoing (all of the
foregoing patents and applications and interests under patent license
agreements, together with the items described in clauses (a) through (f) in this
paragraph are sometimes herein individually and collectively referred to as the
"Patents"); and

           (vii) all products and proceeds, including, without limitation,
insurance proceeds, of any of the foregoing.




<PAGE>   26

                                    EXHIBIT B

                   LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM

           DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., Pacific Time


TO:  EMERGING GROWTH INDUSTRIES             DATE: ______________________________

FAX#:  (425) 454-6224                       TIME: ______________________________


________________________________________________________________________________

FROM: __________________________________________________________________________
                             CLIENT NAME (BORROWER)

REQUESTED BY: __________________________________________________________________
                            AUTHORIZED SIGNER'S NAME

AUTHORIZED SIGNATURE: __________________________________________________________

PHONE NUMBER: __________________________________________________________________

FROM ACCOUNT # ___________________ TO ACCOUNT # ________________________________

REQUESTED TRANSACTION TYPE                         REQUEST DOLLAR AMOUNT
--------------------------                         ---------------------

PRINCIPAL INCREASE (ADVANCE)                       $____________________________
PRINCIPAL PAYMENT (ONLY)                           $____________________________
INTEREST PAYMENT (ONLY)                            $____________________________
PRINCIPAL AND INTEREST (PAYMENT)                   $____________________________

OTHER INSTRUCTIONS: ____________________________________________________________
________________________________________________________________________________

        All representations and warranties of Borrower stated in the Loan
Agreement are true, correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Borrowing
Certificate; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.

                                  BANK USE ONLY

TELEPHONE REQUEST:
------------------

The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.

___________________________________________       ______________________________
             Authorized Requester                             Phone #

___________________________________________       ______________________________
             Authorized Requester                             Phone #

________________________________________________________________________________
                           Authorized Signature (Bank)


<PAGE>   27

                                    EXHIBIT C

                             COMPLIANCE CERTIFICATE

TO:         IMPERIAL BANK

FROM:       FreeShop International, Inc.

        The undersigned authorized officer of FreeShop International, Inc.
hereby certifies that in accordance with the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower
is in complete compliance for the period ending __________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.

  PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.

<TABLE>
<CAPTION>
        REPORTING COVENANT                   REQUIRED                                        COMPLIES
        ------------------                   --------                                        --------

<S>                                          <C>                                         <C>            <C>
        Monthly financial statements         Monthly within 30 days                      Yes            No
        Annual (CPA Audited)                 FYE within 120 days                         Yes            No

        FINANCIAL COVENANT                   REQUIRED              ACTUAL                    COMPLIES
        ------------------                   --------              ------                    ---------
        Maintain on a Monthly Basis:
          Minimum Quick Ratio(1)             .80:1.00(2)           _____:1.00            Yes            No
          Equity Infusion(3)                 $2,500,000            $________             Yes            No
</TABLE>

1    Less deferred revenue
2    Beginning 01/31/99
3    No later than 12/31/98


                                    --------------------------------------------
COMMENTS REGARDING EXCEPTIONS:        BANK USE ONLY
See Attached.

Sincerely,                            Received by: _____________________________
                                                         AUTHORIZED SIGNER

________________________________      Date: ____________________________________
SIGNATURE

                                      Verified: ________________________________
                                                        AUTHORIZED SIGNER

________________________________      Date: ____________________________________
TITLE

________________________________      Compliance Status:           Yes     No
DATE
                                    --------------------------------------------


                                       25
<PAGE>   28

                         CORPORATE RESOLUTIONS TO BORROW



________________________________________________________________________________

BORROWER:         FreeShop International, Inc.
________________________________________________________________________________


        I, the undersigned Secretary or Assistant Secretary of FreeShop
International, Inc. (the "Corporation"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of
Washington.

        I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true
and complete copies of the Articles of Incorporation, as amended and the
Restated Bylaws of the Corporation, each of which is in full force and effect on
the date hereof.

        I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.

        BE IT RESOLVED, that ANY ONE (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:

          NAMES                     POSITIONS               ACTUAL SIGNATURES
________________________    ________________________    ________________________

________________________    ________________________    ________________________

________________________    ________________________    ________________________

________________________    ________________________    ________________________

________________________    ________________________    ________________________

acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:

        BORROW MONEY. To borrow from time to time from Imperial Bank ("Bank"),
on such terms as may be agreed upon between the officers, employees, or agents
and Bank, such sum or sums of money as in their judgment should be borrowed,
without limitation, including such sums as are specified in that certain Loan
and Security Agreement dated as of September 18, 1998 (the "Loan Agreement").

        EXECUTE LOAN AGREEMENT. To execute and deliver to Bank the Loan
Agreement, and also to execute and deliver to Bank one or more renewals,
extensions, modifications, refinancings, consolidations, or substitutions for
one or more of the notes, or any portion of the notes.

        GRANT SECURITY. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.

        NEGOTIATE ITEMS. To draw, endorse, and discount with Bank all drafts,
trade acceptances, promissory notes, or other evidences of indebtedness payable
to or belonging to the Corporation or in which the Corporation may have an
interest, and either to receive cash for the same or to cause such proceeds to
be credited to the account of the Corporation with Bank, or to cause such other
disposition of the proceeds derived therefrom as they may deem advisable.





<PAGE>   29

        WARRANTS. To issue a warrant to purchase the Corporation's capital
stock.

        FURTHER ACTS. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.

        BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to
these resolutions and performed prior to the passage of these resolutions are
hereby ratified and approved, that these Resolutions shall remain in full force
and effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.

        I FURTHER CERTIFY that the officers, employees, and agents named above
are duly elected, appointed, or employed by or for the Corporation, as the case
may be, and occupy the positions set forth opposite their respective names; that
the foregoing Resolutions now stand of record on the books of the Corporation;
and that the Resolutions are in full force and effect and have not been modified
or revoked in any manner whatsoever.

        IN WITNESS WHEREOF, I have hereunto set my hand on _______________,
19___ and attest that the signatures set opposite the names listed above are
their genuine signatures.



                                            CERTIFIED TO AND ATTESTED BY:



                                            X___________________________________

================================================================================




<PAGE>   30

                                  IMPERIAL BANK
                                   MEMBER FDIC

                         ITEMIZATION OF AMOUNT FINANCED
                            DISBURSEMENT INSTRUCTIONS
                                   (REVOLVER)

<TABLE>
<S>                         <C>
Name(s):                                                  Date:

          $                 paid to you directly by Cashiers Check No.

          $                 credited to deposit account No. ____________ when Advances are requested

          $                 amounts paid to Bank for Amounts paid to others on your behalf:

          $1,250.00         to Imperial Bank for Loan Fee

          $                 to Imperial Bank for Document Fee

          $                 to Imperial Bank for accounts receivable audit (estimate)

          $                 to Bank counsel fees and expenses

          $                 to

          $                 to

          $                 TOTAL (AMOUNT FINANCED)
</TABLE>


Upon consummation of this transaction, this document will also serve as the
authorization for Imperial Bank to disburse the loan proceeds as stated above.


_____________________________________      _____________________________________
              Signature                                  Signature



<PAGE>   31

                         AGREEMENT TO PROVIDE INSURANCE


TO:     IMPERIAL BANK                     Date:     September 18, 1998
        226 Airport Parkway               Borrower: FreeShop International, Inc.
        San Jose, California 95110


        In consideration of a loan in the amount of up to $750,000, secured by
all tangible personal property including inventory and equipment.

        I/We agree to obtain adequate insurance coverage to remain in force
during the term of the loan.

        I/We also agree to advise the below named agent to add Imperial Bank as
loss payee on the new or existing insurance policy, and to furnish Bank at above
address with a copy of said policy/endorsements and any subsequent renewal
policies.

        I/We understand that the policy must contain:

        1.     Fire and extended coverage in an amount sufficient to cover:

               (a)    The amount of the loan, OR

               (b)    All existing encumbrances, whichever is greater,

        But not in excess of the replacement value of the improvements on the
real property.

        2. Lender's "Loss Payable" Endorsement Form 438 BFU in favor of Imperial
Bank, or any other form acceptable to Bank.


                              INSURANCE INFORMATION

Insurance Co./Agent                                Telephone No.:

Agent's Address:

                   Signature of Obligor: _______________________________________

                   Signature of Obligor: _______________________________________

________________________________________________________________________________


--------------------------------------------------
               FOR BANK USE ONLY

INSURANCE VERIFICATION: Date: _________________

Person Spoken to: _____________________________

Policy Number: ________________________________

Effective Form: __________ To: ________________

Verified By: __________________________________
--------------------------------------------------


<PAGE>   32
--------------------------------------------------------------------------------

       IMPERIAL BANK
CALIFORNIA'S BUSINESS BANKS          AUTOMATIC DEBIT AUTHORIZATION
       MEMBER FDIC

________________________________________________________________________________

________________________________________________________________________________

To:   IMPERIAL BANK

Re:   LOAN # ___________________________________

You are hereby authorized and instructed to charge account No. _________________
in the name of FREESHOP INTERNATIONAL, INC. for principal and interest payments
due on above referenced loan as set forth below and credit the loan referenced
above.

   [SYMBOL]  3  Debit each interest payment as it becomes due according to
                the terms of the note and any renewals or amendments thereof.

   [SYMBOL]  4  Debit each principal payment is at becomes due according to
                the terms of the note and any renewals or amendments thereof.

This Authorization is to remain in full force and effect until revoked in
writing.

________________________________________________________________________________


--------------------------------------------------------------------------------
Borrower Signature                                                    Date

________________________________________________________________________________

________________________________________________________________________________

--------------------------------------------------------------------------------



<PAGE>   33

                                      TABLE OF CONTENTS
                                         (continued)


                                      TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                        <C>
1.      DEFINITIONS AND CONSTRUCTION........................................................1
        1.1    Definitions..................................................................1
        1.2    Accounting Terms.............................................................8

2.      LOAN AND TERMS OF PAYMENT...........................................................8
        2.1    Credit Extensions............................................................8
        2.2    Overadvances.................................................................9
        2.3    Interest Rates, Payments, and Calculations...................................9
        2.4    Crediting Payments..........................................................10
        2.5    Fees........................................................................10
        2.6    Term........................................................................10

3.      CONDITIONS OF LOANS................................................................10
        3.1    Conditions Precedent to Initial Credit Extension............................10
        3.2    Conditions Precedent to all Credit Extensions...............................11

4.      CREATION OF SECURITY INTEREST......................................................11
        4.1    Grant of Security Interest..................................................11
        4.2    Delivery of Additional Documentation Required...............................11
        4.3    Right to Inspect............................................................11

5.      REPRESENTATIONS AND WARRANTIES.....................................................12
        5.1    Due Organization and Qualification..........................................12
        5.2    Due Authorization; No Conflict..............................................12
        5.3    No Prior Encumbrances.......................................................12
        5.4    Bona Fide Eligible Accounts.................................................12
        5.5    Merchantable Inventory......................................................12
        5.6    Name; Location of Chief Executive Office....................................12
        5.7    Litigation..................................................................12
        5.8    No Material Adverse Change in Financial Statements..........................12
        5.9    Solvency, Payment of Debts..................................................12
        5.10   Regulatory Compliance.......................................................13
        5.11   Environmental Condition.....................................................13
        5.12   Taxes.......................................................................13
        5.13   Subsidiaries................................................................13
        5.14   Government Consents.........................................................13
        5.15   Full Disclosure.............................................................13

6.      AFFIRMATIVE COVENANTS..............................................................13
        6.1    Good Standing...............................................................14
        6.2    Government Compliance.......................................................14
        6.3    Financial Statements, Reports, Certificates.................................14
        6.4    Inventory; Returns..........................................................14
        6.5    Taxes.......................................................................14
</TABLE>





                                       i


<PAGE>   34

                                      TABLE OF CONTENTS
                                         (continued)


<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                        <C>
        6.6    Insurance...................................................................15
        6.7    Principal Depository........................................................15
        6.8    Adjusted Quick Ratio........................................................15
        6.9    Profitability...............................................................15
        6.10   Liquidity; Debt Service Coverage............................................15
        6.11   Registration of Intellectual Property Rights................................16
        6.12   Further Assurances..........................................................16

7.      NEGATIVE COVENANTS.................................................................16
        7.1    Dispositions................................................................16
        7.2    Change in Business..........................................................17
        7.3    Mergers or Acquisitions.....................................................17
        7.4    Indebtedness................................................................17
        7.5    Encumbrances................................................................17
        7.6    Distributions...............................................................17
        7.7    Investments.................................................................17
        7.8    Transactions with Affiliates................................................17
        7.9    Subordinated Debt...........................................................17
        7.10   Inventory...................................................................17
        7.11   Compliance..................................................................17

8.      EVENTS OF DEFAULT..................................................................18
        8.1    Payment Default.............................................................18
        8.2    Covenant Default............................................................18
        8.3    Material Adverse Change.....................................................18
        8.4    Attachment..................................................................18
        8.5    Insolvency..................................................................18
        8.6    Other Agreements............................................................19
        8.7    Subordinated Debt...........................................................19
        8.8    Judgments...................................................................19
        8.9    Misrepresentations..........................................................19

9.      BANK'S RIGHTS AND REMEDIES.........................................................19
        9.1    Rights and Remedies.........................................................19
        9.2    Power of Attorney...........................................................20
        9.3    Accounts Collection.........................................................20
        9.4    Bank Expenses...............................................................20
        9.5    Bank's Liability for Collateral.............................................21
        9.6    Remedies Cumulative.........................................................21
        9.7    Demand; Protest.............................................................21

10.     NOTICES............................................................................21

11.     CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.........................................22
</TABLE>





                                       ii




<PAGE>   35

                                      TABLE OF CONTENTS
                                         (continued)


<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                        <C>
12.     GENERAL PROVISIONS.................................................................22
        12.1   Successors and Assigns......................................................22
        12.2   Indemnification.............................................................22
        12.3   Time of Essence.............................................................23
        12.4   Severability of Provisions..................................................23
        12.5   Amendments in Writing, Integration..........................................23
        12.6   Counterparts................................................................23
        12.7   Survival....................................................................23

13.     JUDICIAL REFERENCE.................................................................23

14.     CONFIDENTIALITY....................................................................24
</TABLE>





























                                      iii



<PAGE>   36

Debtor:  FreeShop International, Inc.

                                    EXHIBIT A

                        COLLATERAL DESCRIPTION ATTACHMENT
                         TO LOAN AND SECURITY AGREEMENT

        All personal property of Borrower (herein referred to as "Borrower" or
"Debtor") whether presently existing or hereafter created, written, produced or
acquired, including, but not limited to:

               (i) all accounts receivable, accounts, chattel paper, contract
rights (including, without limitation, royalty agreements, license agreements
and distribution agreements), documents, instruments, money, deposit accounts
and general intangibles, including, without limitation, returns, repossessions,
books and records relating thereto, and equipment containing said books and
records, all investment property, including securities and securities
entitlements;

               (ii) all software, computer source codes and other computer
programs (collectively, the "Software Products"), and all common law and
statutory copyrights and copyright registrations, applications for registration,
now existing or hereafter arising, United States of America and foreign,
obtained or to be obtained on or in connection with the Software Products, or
any parts thereof or any underlying or component elements of the Software
Products together with the right to copyright and all rights to renew or extend
such copyrights and the right (but not the obligation) of Bank (herein referred
to as "Bank" or "Secured Party") to sue in its own name and/or the name of the
Debtor for past, present and future infringements of copyright;

               (iii) all goods, including, without limitation, equipment and
inventory (including, without limitation, all export inventory);

               (iv) all guarantees and other security therefor;

               (v) all trademarks, service marks, trade names and service names
and the goodwill associated therewith;

               (vi) (a) all patents and patent applications filed in the United
States Patent and Trademark Office or any similar office of any foreign
jurisdiction, and interests under patent license agreements, including, without
limitation, the inventions and improvements described and claimed therein, (b)
licenses pertaining to any patent whether Debtor is licensor or licensee, (c)
all income, royalties, damages, payments, accounts and accounts receivable now
or hereafter due and/or payable under and with respect thereto, including,
without limitation, damages and payments for past, present or future
infringements thereof, (d) the right (but not the obligation) to sue for past,
present and future infringements thereof, (e) all rights corresponding thereto
throughout the world in all jurisdictions in which such patents have been issued
or applied for, and (f) the reissues, divisions, continuations, renewals,
extensions and continuations-in-part with any of the foregoing (all of the
foregoing patents and applications and interests under patent license
agreements, together with the items described in clauses (a) through (f) in this
paragraph are sometimes herein individually and collectively referred to as the
"Patents"); and

               (vii) all products and proceeds, including, without limitation,
insurance proceeds, of any of the foregoing.