FIRST UNION
                            NATIONAL BANK OF FLORIDA
                               CLOSING STATEMENT

BORROWER:                  Fountain Pharmaceuticals, Inc.

ADDRESS:                   7279 Bryan Dairy Road
                           Largo, Florida 34647

CLOSING DATE:              October 17, 1996

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


Loan Amount: :                                                     $100,000.00

Facility Fee:                                      $1,000.00
UCC- Filing                                           $33.00
       Pre-Search:                                    $10.00
       Post-Search                                    $10.00

      Total Closing Costs:                         $1,053.00
      "Plus Doc Stamps"                               350.00
                                                   --------- 
                                                   $1,403.00 ("Initialed")  


I hereby approve the above  statement as being a true and accurate  statement of
transactions on my account,

Fountain Pharmaceuticals, Inc.

By: /s/John C. Walsh
    ------------------------
    John C. Walsh, President

The foregoing is a correct amount of the funds received by us in connection with
this transaction.

FIRST UNION NATIONAL BANK, of Florida

By: /s/Ruth Kamide
    -------------------------
    Ruth Kamide, Vice President





<PAGE>
                                  FIRST UNION

                                PROMISSORY NOTE

$100,000.00                                                October 17 1996   

Fountain Pharmaceuticals, Inc.
7279 Bryan Dairy Road
Largo, Florida 34647
[Individually and collectively "Borrower")

First Union National Bank of Florida
214 North Hogan Street - FLO070
Jacksonville, Florida 32202
(Hereinafter referred to as the "Bank")

Borrower  promises  to pay to the order of Bank,  in lawful  money of the United
States of  America,  at its office  Indicated  above or  wherever  else Bank may
specify,  the sum of One Hundred  Thousand and No/100 Dollars  ($100,000.00)  or
such sum as may be  advanced  from  time to time  with  interest  on the  unpaid
principal  balance at the rate and on the terms provided in this Promissory Note
(including all renewals, extensions or modifications hereof, this "Note").

SECURITY.  Borrower  has  granted  Bank a security  interest  in the  collateral
described  in the  Loan  Documents,  Including,  but not  limited  to,  personal
property  collateral  described in that certain Security Agreement dated October
17, 1996.

INTEREST  RATE.  Interest shall accrue on the unpaid  principal  balance of this
Note from the date  hereof at the rate of Bank's  Prime Rate plus .50% (50 basis
points) as that rate may change  from time to time with  changes to occur on the
date Bank's Prime Rate  changes  ("Interest  Rate").  Bank's Prime Rate shall be
that rate  announced  by Bank from time to time as its Prime  Rate and is one of
several  interest  rate bases  used by Bank.  Bank lends at rates both above and
below Bank's Prime Rate, and Borrower acknowledges that Bank's Prime Rate Is not
represented  or  intended  to be the lowest or most  favorable  rate of interest
offered by Bank.

DEFAULT  RATE.  In addition to all other  rights  contained  in this Note,  if a
default In the payment of the Obligations  occurs,  all outstanding  Obligations
shall bear Interest at the Interest Rate plus 3% ("Default  Rate").  The Default
Rate shall else apply from  acceleration  until the  Obligations or any judgment
thereon is paid in full.

INTEREST COMPUTATION. (Actual/360}. Interest shall be computed on the basis of a
360-day year for the actual number of days in the interest  period  ("Actual/360
Computation").  The  Actual/360  Computation  determines  the  annual  effective
interest yield by taking the stated (nominal)  interest rate for a year's period
and then dividing  said rate by 360 to determine  the daily  periodic rate to be
applied  for each day in the  interest  period.  Application  of the  Actual/360
Computation produces an annualized effective interest rate exceeding that of the
nominal rate.

REPAYMENT  TERMS.  This Note  shall be due and  payable in  consecutive  monthly
payments of accrued  interest only  commencing on November 17, 1996,  and on the
same day of each month  thereafter  until  fully paid.  In any event,  this Note
shall be due and payable in full,  including all principal and accrued interest,
on demand.

APPLICATION OF PAYMENTS. Monies received by Bank from any source for application
toward payment of the Obligations  shall be applied to accrued interest and then
to principal. Upon the occurrence of a default in the payment of the Obligations
or a Default  (as  defined  in the other  Loan  Documents)  under any other Loan
Document, monies may be applied to the Obligations in any manner or order deemed
appropriate by Bank.





<PAGE>



if any  payment  received  by Bank under this Note or other  Loan  Documents  is
rescinded,  avoided or for any reason  returned  by Bank  because of any adverse
claim or threatened  action,  the returned  payment  shall remain  payable as an
obligation  of all persons  liable  under this Note or other Loan  Documents  as
though such payment had not been made.

LOAN DOCUMENTS AND OBLIGATIONS.  The term "Loan Documents" used in this Note and
other Loan  Documents  refers to all documents  executed in connection  with the
loan evidenced by this Note end may include,  without  limitation,  a commitment
letter that survives closing, a lean agreement,  this Note, guaranty agreements,
security  agreements,  security  instruments,   financing  statements,  mortgage
instruments,  letters of credit end any renewals or modifications,  but however,
does net include swap  agreements  as defined in 11 U.S.C.  Section 101 whenever
executed.

The term  "Obligations" used in this Note refers to any and all indebtedness and
ether  obligations  under this  Note,  all other  obligations  as defined in the
respective  Loan  Documents,  and all  obligations  under any swap agreements as
defined in 11 U.S.C. Section 101 between Borrower and Bank whenever executed.

LATE CHARGE.  If any payments  are not timely made,  Borrower  shall also pay to
Bank a late charge equal to 5% of each payment past due far 10 or more days.

Acceptance by Bank of any late payment without an accompanying late charge shall
not be deemed a waiver of Bank's right to collect such late charge or to collect
a late charge for any subsequent late payment received,

If this Note is secured by  owner-occupied  residential  real  property  located
outside the state in which the office of Bank first shown above is located,  the
late charge laws of the state where the real  property is located shall apply to
this Note, or if permitted  under the law of that state, 5% of each payment past
due for 10 or more days.

ATTORNEYS'  FEES AND OTHER  COLLECTION  COSTS.  Borrower shall pay all of Bank's
reasonable  expenses  incurred  to enforce or  collect  any of the  Obligations,
including, without limitation, reasonable arbitration,  paralegals',  attorneys'
and experts' fees and expenses.  whether  incurred without the commencement of a
suit,  in  any  trial,  arbitration,  or  administrative  proceeding,  or in any
appellate or bankruptcy proceeding.

USURY.  Regardless of any other  provision of this Note or other Loan Documents,
if for any reason the  effective  interest  should  exceed  the  maximum  lawful
interest,  the effective interest shall be deemed reduced to, and shall be, such
maximum lawful  interest,  and (i) the amount which would be excessive  Interest
shall be deemed' applied to the reduction of the principal  balance of this Note
and not to the payment of interest,  and (ii) if the loan evidenced by this Note
has been or is thereby  paid in full,  the excess shall be returned to the party
paying  same,  such  application  to the  principal  balance of this Note or the
refunding of excess to be a complete settlement and acquittance thereof.

BORROWER'S  ACCOUNTS.  Except  as  prohibited  by law,  Borrower  grants  Bank a
security  interest  in all of  Borrower's  accounts  with  Bank  and  any of its
affiliates.

DEMAND NOTE.  This is a demand Note and all  Obligations  hereunder shall become
immediately  due and payable upon demand.  In addition,  the  Obligations  shall






                                     Page 2



<PAGE>

automatically become immediately due and payable If Borrower or any guarantor or
endorser of this Note  commences or has  commenced  against it a  bankruptcy  or
insolvency proceeding.

REMEDIES.  Upon the occurrence of a default in the payment of the Obligations or
a  Default  (as  defined  In the other  Loan  Documents)  under  any other  Loan
Document, Bank may at any time thereafter, take the following actions: Bank Lien
and Set-off, Exercise its right of set-off or to foreclose Its security interest
or lien  against any  account of any nature or  maturity  of Borrower  with Bank
without notice.  Cumulative,  Exercise any rights end remedies as provided under
the Note and other Loan Documents, or as provided by law or equity.

ANNUAL  FINANCIAL  STATEMENTS.  Borrower  shall deliver to Bank,  within 90 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year,  including,  without  limitation,  a balance
sheet,  profit and loss statement and statement of cash flows,  with  supporting
schedules;  all on a  consolidated  and  consolidating  basis and in  reasonable
detail,  prepared in conformity with generally accepted  accounting  principles,
applied  on a  basis  consistent  with  that of the  preceding  year.  All  such
statements  shall be  examined by an  Independent  certified  public  accountant
acceptable to Bank. The opinion of such independent  certified public accountant
shall not be  acceptable to Bank if qualified  due to any  limitations  in scope
imposed by Borrower or its Subsidiaries,  if any. Any other qualification of the
opinion by the  accountant  shall  render  the  acceptability  of the  financial
statements subject to Bank's approval.

PERIODIC  FINANCIAL  STATEMENTS.  Borrower  shall deliver to Bank  quarterly AIR
Aging & Inventory Reports,  as soon as available and in any event within 30 days
after the close of each such period; all in reasonable  detail.  Such statements
shall be certified as to their  correctness by a principal  financial officer of
Borrower and in each case, if audited statements are required,  subject to audit
and year-end adjustments.

LINE OF CREDIT ADVANCES,  Borrower may borrow, repay and reborrow,  end Bank may
advance and readvance under this Note respectively from time to time, so long as
the  total  indebtedness   outstanding  at  any  one time  does not  exceed  the
principal amount stated on the face of this Note.  Bank's  obligation to advance
or  readvance  under this Note shall  terminate  if a demand for payment is made
under this Note or if a Default (as defined in the other Loan  Documents)  under
any Loan Document occurs or in any event, on the first anniversary hereof unless
renewed or  extended  by Bank in writing  upon such terms then  satisfactory  to
Bank,

WAIVERS AND AMENDMENTS. No waivers, amendments or modifications of this Note and
other Loan  Documents  shall be valid unless in writing and signed by an officer
of Bank.  No  waiver  by Bank of any  Default  {as  defined  in the  other  Loan
Documents) shall operate as a waiver of any other Default or the same Default on
a future  occasion.  Neither  the  failure  nor any delay on the part of Bank in
exercising any right,  power, or remedy under this Note end other Loan Documents
shall  operate as a waiver  thereof,  not,  shall a single or  partial  exercise
thereof  preclude any other or further  exercise  thereof or the exercise of any
other right, power or remedy.

Each Borrower or any person liable under this Note waives presentment,  protest,
notice of  dishonor,  notice of  Intention  to  accelerate  maturity,  notice of
acceleration  of  maturity,  notice of sale and all other  notices  of any kind.
Further,  each agrees that Bank may extend,  modify or renew this Note or make a
novation  of the loan  evidenced  by this  Note for any  period  and  grant  any
releases,  compromises  or indulgences  with respect to any collateral  securing
this Note,  or with respect to any Borrower or any person liable under this Note
or other Loan Documents, all without notice to or consent of any Borrower or any
person who may be liable  under this Note or other Loan  Documents  end  without
affecting  the  liability of Borrower or any person who may be liable under this
Note or other Loan Documents.



                                     Page 3


<PAGE>


MISCELLANEOUS PROVISIONS.  Assignment.  This Note and other Loan Documents shall
inure to the benefit of end be binding  upon the  parties  and their  respective
heirs, legal  representatives,  successors and assigns.  Bank's interests in and
rights under this Note end other Loan Documents are freely assignable,  in whole
or in part, by Bank. Borrower shall not assign its rights and interest hereunder
without the prior written consent of Bank. and any attempt by Borrower to assign
without Bank's prior written consent is null and void. Any assignment  shall not
release  Borrower  from  the  Obligations.   Applicable  Law;  Conflict  Between
Documents. This Note and other Loan Documents shall be governed by and construed
under the laws of the state  where Bank  first  shown  above is located  without
regard to that state's  conflict of laws  principles.  If the terms of this Note
should  conflict with the terms of the loan agreement or any  commitment  letter
that  survives  closing,  the terms of this Note  shall  control,  Jurisdiction.
Borrower irrevocably agrees to non-exclusive  personal jurisdiction in the state
in which the office of Bank first shown above is located.  Severability.  If any
provision of this Note or of the other Loan  Documents  shall be  prohibited  or
invalid under  applicable  law, such provision  shall be ineffective but only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such  provision  or the  remaining  provisions  of this  Note or  other  such
document.  Notices.  'Any notices to Borrower shall be sufficiently given, if in
writing and mailed or delivered to the  Borrower's  address  shown above or such
other  address as provided  hereunder,  and to Bank, if in writing end mailed or
delivered to Bank's office address shown above or such other address as Bank may
specify  in  writing  from time to time.  In the  event  that  Borrower  changes
Borrower's  address  at any time prior to the date the  Obligations  are paid in
full,  Borrower agrees to promptly give written notice of said change of address
by registered or certified mail, return receipt requested,  all charges prepaid.
Plural;  Captions. All references in the Loan Documents to Borrower,  guarantor,
person,  document or other nouns of reference  mean both the singular and plural
form,  as the case may be,  and the term  "person"  shall  mean any  individual,
person or entity.  The captions contained in the Loan Documents are inserted for
convenience only and shall not affect the meaning or  interpretation of the Loan
Documents,  Binding Contract, Borrower by execution of and Bank by acceptance of
this Note  agree that each  party is bound to all terms and  provisions  of this
Note.  Advances.  Bank In its  sole  discretion  may  make  other  advances  and
readvances  under this Note pursuant hereto.  Posting of Payments.  All payments
received during normal banking hours after 2:00 p.m. local time at the office of
Bank first  shown  above  shall be deemed  received  at the  opening of the next
banking  day.  Joint and  Several  Obligations.  Each  Borrower  is jointly  and
severally obligated under this Note. Fees and Taxes. Borrower shall promptly pay
all documentary, intangible recordation and/or similar taxes on this transaction
whether assessed at closing or arising from time to time.

ARBITRATION.  Upon  demand of any party  hereto,  whether  made  before or after
institution  of any  judicial  proceeding,  any  dispute,  claim or  controversy
arising out of, connected with or relating to this Note and other Loan Documents
("Disputes")  between or among parties to this Note shall be resolved by binding
arbitration as provided herein.  Institution of a judicial proceeding by a party
does not waive the right of that party to demand arbitration hereunder. Disputes
may include,  without  limitation,  tort claims,  counterclaims,  disputes as to
whether a matter is subject to  arbitration,  claims  brought as class  actions,
claims arising from Loan Documents executed-in the future, or claims arising out
of or connected with the transaction reflected by this Note.

Arbitration  shall be conducted  under and governed by the Commercial  Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association  {the "AAA") end Title 9 of the U.S. Code. All arbitration  hearings
shall be conducted in the city in which the office of Bank first stated above is
located,  The  expedited  procedures  set  forth  in  Rule  51 et  seq.  of  the
Arbitration Rules shall be applicable to claims of less then $1,000,000.00.  All
applicable  statutes of limitation  shall apply to any Dispute.  A judgment upon
the award may be entered in any court having jurisdiction.  The panel from which
all  arbitrators  are selected  shall be Comprised  of licensed  attorneys.  The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general Jurisdiction,  state or federal, of the state where

                                     Page 4


<PAGE>

the hearing will be conducted or if such person Is not  available to serve,  the
single  arbitrator may be a licensed  attorney.  Notwithstanding  the foregoing,
this  arbitration  provision does not apply to disputes under or related to swap
agreements.

PRESERVATION AND LIMITATION OF REMEDIES,  Notwithstanding  the preceding binding
arbitration provisions, Bank and Borrower agree to preserve, without diminution,
certain   remedies  that  any  party  hereto  may  employ  or  exercise  freely,
independently  or in  connection  with an  arbitration  proceeding  or  after an
arbitration action is brought. Bank and Borrower shall have the right to proceed
in any court of proper jurisdiction or by self-help to exercise or prosecute the
following remedies, as applicable:  (i) all rights to foreclose against any real
or personal  property or other  security by  exercising  a power of sale granted
under Loan  Documents or under  applicable  law or by judicial  foreclosure  and
sale,  including a proceeding to confirm the sale;  (ii) all rights of self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful  possession of personal  property;  (iii) obtaining  provisional or
ancillary remedies  including  injunctive  relief,  sequestration,  garnishment,
attachment,  appointment  of  receiver  and  filing  an  involuntary  bankruptcy
proceeding;  and (iv) when  applicable,  a judgment 'by  confession of judgment.
Preservation  of these  remedies  does not limit the power of an  arbitrator  to
grant similar remedies that may be requested by a party in a Dispute.

Borrower  and Bank  agree  that  they  shall not have a remedy  of  punitive  or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or  exemplary  damages they have now or which may arise in the
future in  connection  with any  Dispute  whether  the  Dispute is  resolved  by
arbitration or judicially.

IN WITNESS  WHEREOF,  Borrower,  on the day and year first  above  written,  has
caused this Note to be executed under seal.



                              Fountain Pharmaceuticals, Inc.
                              Taxpayer Identification Number: 62-1386759



CORPORATE                     By: /s/ John C. Welsh
SEAL                             ------------------------------------   
                                 John C. Welsh, President

























                                     Page 6


<PAGE>
                                  FIRST UNION

                               SECURITY AGREEMENT

Fountain Pharmaceuticals, Inc.                         October 17, 1996
7279 Bryan Dairy Road
Largo, Florida 34647
(Individually and collectively "Debtor")

First Union National Bank of Florida
214 North Hogan Street - FL0070
Jacksonville, Florida 32202
(Hereinafter referred to as the "Bank")

For value received end to secure payment and  performance of the Promissory Note
executed by the Debtor dated October 17, 1996, in the original  principal amount
of $100,000.00,  payable to Bank, and any extensions, renewals, modifications or
novations  thereof (the  "Note"),  this  Security  Agreement  and the other Loan
Documents,  and any other obligations of Debtor to Bank however created, arising
or evidenced,  Whether direct or indirect,  absolute or contingent, now existing
or hereafter  arising or acquired,  including swap  agreements (as defined in 11
U.S.C.  Section 101),  future advances,  and all costs and expenses  incurred by
Bank to obtain,  preserve,  perfect end enforce the  security  interest  granted
herein  and to  maintain,  preserve  and  collect  the  property  subject to the
security interest (collectively,  "Obligations"), Debtor hereby grants to Bank a
continuing  security interest in and lien upon the following described property,
now owned or hereafter  acquired,  any additions,  accessions,  or substitutions
thereof end thereto,  and all proceeds and products  thereof,  including cash or
non-cash dividends (collectively, "Collateral"):

All accounts, contract rights, leases, and any other rights of Debtor to payment
for goods  sold or  leased or for  services  rendered;  furniture;  furnishings;
equipment; machinery;  accessories; moveable trade fixtures; goods held for sale
or being processed for sale in Debtor's  business,  including all raw materials,
supplies,  and other materials used or consumed in Debtor's  business,  goods in
process,   finished  goods,  and  all  other  items  customarily  classified  as
inventory;   building  improvement  and  construction  materials,  supplies  and
equipment; chattel paper; instruments; documents; all funds on deposit with Bank
and  its  affiliates;  and  all  general  intangibles;  as  well  as all  parts,
replacements, substitutions, profits, products and cash and non-cash proceeds of
the foregoing (including  insurance and condemnation  proceeds payable by reason
of condemnation of or loss or damage thereto) in any form and wherever located.

All  inventory,  including all raw materials and work in process to be processed
into such  inventory,  and all  accessions,  attachments and other additions to,
substitutes  for,   replacements  for,  improvements  to  end  returns  of  such
inventory, all accounts arising from the disposition of inventory.

Debtor hereby represents end agrees that:

OWNERSHIP. Debtor owns the Collateral or Debtor will purchase and acquire rights
in the Collateral  within ten days of the date advances are made under the Note.
If Collateral is being  acquired with the proceeds of an advance under the Note,
Debtor  authorizes  Bank to  disburse  proceeds  directly  to the  seller of the
Collateral,  The Collateral is free and clear of all liens,  security interests,
and claims except those previously  reported in writing to Bank, and Debtor will
keep the  Collateral  free end clear  from all  liens,  security  interests  and
claims, other than those granted to Bank.

NAME AND  OFFICES,  There has been no change In the name of Debtor,  or the name
under which Debtor conducts  business,  within the 5 years preceding the date of









<PAGE>

execution  of this  Security  Agreement  and Debtor has not moved its  executive
offices or residence  within the 5 years preceding the date of execution of this
Security  Agreement  except as  previously  reported  in  writing  to Bank.  The
taxpayer identification number of Debtor as provided herein is correct,

TITLE/TAXES, Debtor has good and marketable title to Collateral and will warrant
and defend same against all claims.  Debtor will not  transfer,  sell,  or lease
Collateral  (except in the ordinary  course of  business).  Debtor agrees to pay
promptly all taxes and assessments upon or for the use of Collateral and on this
Security Agreement.  At its option,  Bank may discharge taxes,  liens,  security
interests  or other  encumbrances  at any time  levied or placed on  Collateral.
Debtor agrees to reimburse  Bank, on demand,  for any such payment made by Bank.
Any amounts so paid shall be added to the Obligations.

WAIVERS, Debtor waives presentment,  demand, protest, notice of dishonor, notice
of default, demand for payment, notice of intention to accelerate, and notice of
acceleration of maturity.  Debtor further agrees not to assert against Bank as a
defense (legal or equitable), as a set-off, as a counterclaim, or otherwise, any
claims  Debtor may have  against'  any seller or lessor that  provided  personal
property or services  relating to any part of the Collateral.  Debtor Waives all
exemptions and homestead rights with regard to the Collateral. Debtor waives any
and all  rights  to  notice  or to  hearing  prior to  Bank's  taking  immediate
possession or control of any Collateral, and to any bond or security which might
be required by  applicable  law prior to the exercise of any of Bank's  remedies
against any Collateral.

EXTENSIONS, RELEASES, Debtor agrees that Bank may extend, renew or modify any of
the Obligations and grant any releases,  compromises or indulgences with respect
to any security for the Obligations, or with respect to any party liable for the
Obligations,  all without  notice to or consent of Debtor and without  affecting
the liability of Debtor or the enforceability of this Security Agreement.

NOTIFICATIONS  OF CHANGE.  Debtor  will  notify Bank in writing at least 30 days
prior to any change in: {i) Debtor's  chief place of business  and/or  residence
{ii) Debtor's name or Identity;  or (iii} Debtor's corporate  structure.  Debtor
will keep Collateral at the location(s)  previously  provided to Bank until such
time as Bank provides  written advance  consent to a change of location.  Debtor
will bear the cost of preparing  and filing any  documents  necessary to protect
Bank's liens.

COLLATERAL  CONDITION AND LAWFUL USE.  Debtor  represents  that Collateral is in
good repair and condition and that Debtor shall use  reasonable  care to prevent
Collateral from being damaged or depreciating.  Debtor shall immediately  notify
Bank of any material loss or damage to  Collateral.  Debtor shall not permit any
item of  equipment  to become a fixture to real estate or an  accession to other
personal  property.  Debtor  represents it is in compliance in all respects with
all  federal,  state and local laws,  rules and  regulations  applicable  to its
properties,  Collateral,  operations, business, end finances, including, without
limitation,  any federal or State laws  relating to liquor  (including 18 U.S.C.
Section 3617, et seq.) or narcotics  (including 21 U.S.C.  Section 801, et seq.)
and all applicable  federal,  state and local laws, and regulations  intended to
protect the environment,

RISK OF LOSS AND  INSURANCE.  Debtor shall bear all risk of loss with respect to
the  Collateral.  The injury to or loss of Collateral,  either partial or total,
shall not release Debtor from payment or other performance hereof. Debtor agrees
to obtain and keep in force casualty and hazard  Insurance on Collateral  naming
Bank as loss payee. Such insurance is to be in form and amounts  satisfactory to
Bank.  All such  policies  shall  provide to Bank a minimum  of 30 days  written
notice of  cancellation.  Debtor shall furnish to Bank such  policies,  or other
evidence of such policies  satisfactory  to Bank.  Bank is  authorized,  but not
obligated,  to purchase  any or all  insurance  or "Single  Interest  insurance"
protecting  such interest as Bank deems  appropriate  against such risks and for
such coverage and for such amounts, including either the loan amount or value of


                                     Page 2



<PAGE>

the Collateral at its discretion, all at Debtor's expense. In such event, Debtor
agrees to reimburse  Bank for the cost of such  insurance  and Bank may add such
cost to the Obligations, Debtor shall bear the risk of loss to the extent of any
deficiency in the effective insurance coverage with respect to loss or damage to
any of the  Collateral.  Debtor hereby assigns  to Bank the proceeds of all such
insurance  and  directs any insurer to make  payments  directly to Rank.  Debtor
hereby  appoints  Bank  its   attorney-in-fact,   which   appointment  shall  be
irrevocable  and coupled  with an interest  for so 10ng as the  Obligations  are
unpaid,  to file proof of loss and/or any other forms  required to collect  from
any  insurer any amount due from any damage or  destruction  of  Collateral,  to
agree to and  bind  Debtor  as to the  amount  of said  recovery,  to  designate
payee(s) of such recovery,  to grant releases to insurer,  to grant  subrogation
rights to any  insurer,  and to endorse any  settlement  check or draft.  Debtor
agrees not to exercise any of the foregoing  powers  granted to Bank without the
Bank's prior written consent.

ADDITIONAL COLLATERAL. If at any time Collateral is unsatisfactory to Bank, then
on demand of Rank, Debtor shall immediately  furnish such additional  Collateral
satisfactory to Bank to be held by Bank as if originally  pledged  hereunder and
shall execute such additional  Security  agreements end financing  statements as
requested by Bank.

FINANCING  STATEMENTS.  No Financing  Statement (other than any filed by Bank or
disclosed  above)  covering any of Collateral or proceeds  thereof is on file in
any public filing office,  This Security  Agreement,  or a copy thereof,  or any
Financing  Statement  executed  hereunder  may be recorded.  On request of Bank,
Debtor will execute one or more  Financing  Statements in form  satisfactory  to
Bank and will pay all costs and  expenses  of filing the same or of filing  this
Security Agreement in all public filing offices,  where filing is deemed by Bank
to be desirable.  Bank is authorized to file  Financing  Statements  relating to
Collateral  without Debtor's  signature where authorized by law. Debtor appoints
Bank as its  attorney-in-fact  to execute such documents necessary to accomplish
perfection  of Rank's  security  interest.  The  appointment  is coupled with an
interest and shall be irrevocable as long as any Obligations remain outstanding.
Debtor  further  agrees to take such other actions as might be requested for the
perfection,  Continuation  end assignment,  in whole or in part, of the security
interests granted herein. If certificates are issued or outstanding as to any of
the Collateral,  Debtor will cause the security interests of Bank to be properly
protected, including perfection of notation thereon,

LANDLORD/MORTGAGEE  WAIVERS.  Debtor shall cause each mortgagee of real property
owned by Debtor and each landlord of real  property  leased by Debtor to execute
and deliver Instruments satisfactory in form and substance to Bank by which such
mortgagee or landlord waives its rights, if any, in the Collateral.

STOCK,  DIVIDENDS.  If, with respect to any security pledged hereunder,  a stock
dividend is declared,  any stock split made or right to subscribe Is Issued, all
the certificates for the shares representing such stock dividend, stock split or
right to subscribe will be immediately, delivered, duly endorsed, to the Bank as
additional  collateral,  and any cash or non-cash  dividend will be immediately
delivered to Bank.

CONTRACTS,  CHATTEL PAPER, ACCOUNTS,  GENERAL INTANGIBLES,  Debtor warrants that
the  Collateral  consisting of contract  rights,  chattel  paper,  accounts,  or
general  intangibles is (i) genuine and enforceable in accordance with its terms
except as limited by law;  (ii) not subject to any  defense,  set-off,  claim or
counterclaim  of a material  nature against Debtor except as to which Debtor has
notified Bank in writing;  and (lit) not subject to any other circumstances that
would impair the validity, enforceability or amount of such Collateral except as
to which Debtor has notified Bank In writing.  Debtor shall not amend, modify or
supplement any lease, contract or agreement contained in the Collateral or waive
any provision therein, without prior written consent of Bank.



                                     Page 3

<PAGE>


ACCOUNT  INFORMATION.  From time to time,  at the Bank's  request,  Debtor shall
provide Bank with schedules  describing  all accounts and  contracts,  including
customers'  addressee,  credited or acquired by Debtor end at the Bank's request
shall execute and deliver  written  assignments of contracts end other documents
evidencing  such accounts and contracts 'to Bank.  Together with each  schedule,
Debtor shall,  if requested by Bank,  furnish Bank with copies of Debtor's sales
journals,  invoices,  customer purchase orders or the equivalent,.  and original
shipping  or  delivery  receipts  for all goods sold,  and Debtor  warrants  the
genuineness thereof,

ACCOUNT AND  CONTRACT  DEBTORS,  Bank shall have the right to notify the account
and contract  debtors  obligated on any or all of the Collateral to make payment
thereof  directly to Bank and Bank may take  control of all proceeds of any such
Collateral,  which  rights  Bank  may  exercise  at any  time.  The cost of such
collection and  enforcement,  including  attorneys' fees and expenses,  shall be
borne  solely by Debtor  whether the same is  incurred  by Bank or Debtor.  Upon
demand of Bank, Debtor will, upon receipt of all checks,  drafts, cash end other
remittances in payment on Collateral, deposit the same in a special bank account
maintained with Bank, over which Rank also has the power of withdrawal,

If a Default  occurs,  no discount,  credit,  or  allowance  shall be granted by
Debtor to any account or contract  debtor and no return of merchandise  shall be
accepted by Debtor without Bank's  consent.  Bank may, after Default,  settle or
adjust  disputes and claims directly with account  contract  debtors for amounts
and upon terms  that Bank  considers  advisable,  and in such  cases,  Bank will
credit the Obligations  with the net amounts  received by Bank,  after deducting
all of the expenses incurred by Bank. Debtor agrees to indemnify and defend Bank
and hold it harmless with respect to any claim or proceeding  arising out of any
matter related to collection of the Collateral.

GOVERNMENT  CONTRACTS.  If any  accounts  receivable  or proceeds  of  inventory
covered hereby arises from obligations due to Debtor from any governmental  unit
or organization, Debtor shall immediately notify Bank in writing end execute all
documents end take all actions  demanded by Bank to ensure  recognition  by such
governmental unit or organization of the rights of Bank in the Collateral.

FARM PRODUCTS.  Debtor agrees to deliver to Bank a written list  identifying all
points  of  delivery  of,  and  identifying  all  potential  buyers,  commission
merchants,  and selling  agents to or through whom Debtor may sell farm products
secured by this Security Agreement.

LIVESTOCK.  It the  Collateral  includes  livestock,  Debtor  grants  to  Bank a
security interest in all increase,  progeny and products thereof, all feed owned
by Debtor, all Water privileges, all equipment used in feeding and handling said
livestock, end all rights, title and interest in and to all contracts and leases
covering lands for pasture and grazing purposes.

INVENTORY.  So long as no Default has  occurred,  Debtor shall have the right in
the regular course of business,  to process and sell Debtor's inventory,  unless
Bank shall hereafter  otherwise direct In writing.  Upon demand of Bank,  Debtor
will, upon receipt of all checks, drafts, cash and other remittances, in payment
of Collateral sold,  deposit the same in a special bank account  maintained with
Bank, over which Bank also has the power of withdrawal. Debtor shall comply with
all federal, state, and local laws, regulations,  rulings, end orders applicable
to Debtor or its assets or  business,  in all  respects.  Without  limiting  the
generality of the previous  sentence,  Debtor shall comply with all requirements
of the federal Fair Labor  Standards  Act In the conduct of its business and the
production of Inventory.  Debtor shall notify Bank  immediately of any violation
by Debtor of the Fair Labor  Standards Act, and a failure of Debtor to so notify
Bank shall  constitute  a  continuing  representation  that all  inventory  then
existing has been produced in compliance with the Fair Labor Standards Act.






                                     Page 4

<PAGE>


INSTRUMENTS,  CHATTEL PAPER,  Any Collateral that is instruments,  chattel paper
and negotiable  documents will be properly  assigned to, deposited with and held
by Bank,  unless Bank shall  hereafter  otherwise  direct or consent in writing,
Bank may, without notice, before or after maturity of the Obligations,  exercise
any or all rights of  collection,  conversion,  or  exchange  and other  similar
rights,  privileges and options pertaining to the Collateral,  but shall have no
duty to do so.

COLLATERAL DUTIES. Bank shall have no custodial or ministerial duties to perform
with respect to Collateral  pledged  except as set forth  herein;  and by way or
explanation and not by way of limitation,  Bank shall incur no liability for any
of the following:  (i) loss or depreciation of the Collateral  (unless caused by
its  willful  misconduct),  (ii) its failure to present any paper for payment or
protest,  to protest or give  notice of  nonpayment,  or any other  notice  with
respect to any paper or Collateral, or (iii) its failure to present or surrender
for redemption,  conversion or exchange any bond, stock, paper or other security
whether in  connection  with any  merger,  consolidation,  recapitalization,  or
reorganization,  arising Out of the refunding of the original  security,  or for
any other reason,  or its failure to notify any parry hereto that the Collateral
should be so presented or surrendered.

TRANSFER OF COLLATERAL.  The Bank may assign its rights in the Collateral or any
part thereof,  to the assignee,  as well as any subsequent  holder  hereof,  who
shall thereupon become vested with all the powers and rights herein given to the
Bank with respect to the property so  transferred  and  delivered,  and the Bank
shall  thereafter be forever  relieved and fully  discharged  from any liability
with respect to such property so  transferred,  but with respect to any property
not so transferred the Bank shall retain all rights and powers hereby given,

SUBSTITUTE COLLATERAL.  With prior written consent of Bank, other Collateral may
be  substituted  for the original  Collateral  herein in which event all rights,
duties,  obligations,  remedies and security  interests provided for, created or
granted shall apply fully to such substitute Collateral.

INSPECTION,  BOOKS AND  RECORDS.  Debtor  will at all times  keep  accurate  and
complete  records  covering  each item of  Collateral,  including  the  proceeds
therefrom.  Bank, or any of its agents, shall have the right, at Intervals to be
determined  by Bank and  without  hindrance  or delay,  to inspect,  audit,  and
examine the Collateral and to make extracts from the books,  records,  journals,
orders,  receipts,  correspondence  and other data  relating to the  Collateral,
Debtor's  business or any other transaction  between the parties hereto.  Debtor
will at its expense furnish Bank copies thereof upon request.

CROSS COLLATERALIZATION  LIMITATION. As to any other existing or future consumer
purpose  loan by Bank to Debtor,  within the  meaning  of the  Federal  Consumer
Credit  Protection  'Act, Bank expressly  waives any security  interest  granted
herein in  Collateral  that Debtor uses as a principal  dwelling  and  household
goods.

ATTORNEYS'  FEES AND OTHER COSTS OF  COLLECTION.  Debtor shall pay all of Bank's
reasonable  expenses  incurred in enforcing this Agreement and In preserving and
liquidating   the   Collateral,   Including  but  not  limited  to,   reasonable
arbitration,  paralegals',  attorneys'  and experts' fees and expenses,  whether
incurred  without the  commencement  of a suit,  in any trial,  arbitration,  or
administrative proceeding, or in any appellate or bankruptcy proceeding.

DEFAULT.  If any of the  following  occurs,  a default  ("Default")  under  this
Security Agreement shall exist: (i) The failure of timely payment or performance
of any of the Obligations or a default under any Loan Document;  (ii) Any breach
of any  representation  or agreement  contained or referred to in this  Security
Agreement or other Loan Document;  (iii) Any loss, theft, substantial damage, or
destruction  of the  Collateral  not fully covered by insurance,  or as to which




                                     Page 5

<PAGE>

insurance proceeds are not remitted to Bank within 30 days of the loss; any sale
(except the sale of Inventory in the ordinary  course of  business),  lease,  or
encumbrance of any of the Collateral  without prior written  consent of Bank; or
the making of any levy,  seizure, or attachment on or of the Collateral which is
not removed with 10 days;  or {iv) the death of,  appointment  of guardian  for,
dissolution  of,  termination of existence of, loss of good standing  statue by,
appointment  of a receiver for,  assignment  for the benefit of creditors of, or
commencement  of any bankruptcy or insolvency  proceeding by or against  Debtor,
its  Subsidiaries  or  Affiliates,  if any,  or any  general  partner  of or the
holder(s) of the majority ownership interests of Debtor or any party to the Loan
Documents.

REMEDIES ON DEFAULT  (INCLUDING POWER OF SALE). If a Default occurs,  all of the
Obligations shall be immediately due and payable,  without notice and Bank shall
have all the rights and remedies of a secured party under the Uniform Commercial
Code.  Without  limitation  thereto,  Bank shall have the  following  rights and
remedies: (i) To take immediate possession of the Collateral,  without notice or
resort to legal  process,  and for such  purpose,  to enter upon any premises on
which the  Collateral or any part thereof may be situated and to remove the same
therefrom,  or, at its option,  to render the Collateral  unusable or dispose of
said  Collateral on Debtor's  premises.  (ii) To require  Debtor to assemble the
Collateral  and make it available to Bank at a place to be designated  by, Bank.
(iii) To  exercise  its right of set-off or bank lien as to any monies of Debtor
deposited in demand,  checking,  time, savings,  certificate of deposit or other
accounts of any nature  maintained  by Debtor with Bank or  Affiliates  of Bank,
without  advance  notice,  regardless  of whether  such  accounts are general or
special. (iv) To dispose of Collateral,  as a unit or In parcels,  separately or
with any real property interests also securing the Obligations, In any county or
place to be selected bY Bank, at either  private or public sale (at which public
sale bank may be the purchaser) with or without having the Collateral physically
present at said sale.  (v) Any notice of sale,  disposition  or other  action by
Bank required by law and sent to Debtor at Debtor's  address shown above,  or at
such other address of Debtor as may from time to time be shown on the records of
Bank, at least 5 days prior to such action,  shall constitute  reasonable notice
to Debtor.  Notice shall be deemed given Or sent when mailed postage  prepaid to
Debtor's  address as provided  herein.  (vi) Bank shall be entitled to apply the
proceeds of any sale or other  disposition of the  Collateral,  and the payments
received by Bank with respect to any of the  Collateral,  to the  Obligations In
such order and manner as Bank may determine. (vii) Collateral that is subject to
rapid  declines in value and is  customarily  sold in recognized  markets may be
disposed of by Bank in a recognized market for such collateral without providing
notice of sale.

REMEDIES  ARE  CUMULATIVE.  No failure on the part of Bank to  exercise,  and no
delay in exercising,  any right,  power or remedy  hereunder  shall operate as a
waiver thereof,  nor shall any single or partial  exercise by Bank or any right,
power or remedy hereunder  preclude any other or further exercise thereof or the
exercise  of any right,  power or  remedy.  The  remedies  herein  provided  are
cumulative and are not exclusive of any remedies  provided by law, in equity, or
in other Loan Documents.

MISCELLANEOUS.   (i)   Amendments  and  Waivers.   No  waivers,   amendments  or
modifications of any provision of this Security  Agreement shall be valid unless
in writing  and signed by an officer of Bank.  No waiver by Bank of any  Default
shall  operate  as a waiver of any other  Default  or of the same  Default  on a
future  occasion.  Neither the failure of, nor any delay by, Bank in  exercising
any right,  power or privilege granted pursuant to this Security Agreement shall
operate  as a waiver  thereof,  nor shall a single or partial  exercise  thereof
preclude any other or further  exercise of any other right,  power or privilege.
(ii) Assignment. All rights of Bank hereunder are freely assignable, in whole or
in part,  and shall  inure to the  benefit of end be  enforceable  by Bank,  its
successors,  assigns  and  affiliates.  Debtor  shall not  assign its rights and
interest hereunder without the prior written consent of Bank, and any attempt by
Debtor to assign  without  Bank's prior  written  consent is null and void.  Any
assignment  shall  not  release  Debtor  from  the  Obligations.  This  Security
Agreement shall be binding upon Debtor, and the heirs, personal representatives,


                                      Page 6

<PAGE>

successors,  and  assigns of Debtor.  (iii)  Applicable  Law;  Conflict  Between
Documents.  This Security Agreement shall be governed by and construed under the
law of the state in which the office of Bank as stated above is located  without
regard  to that  state's  conflict  of laws  principles.  If any  terms  of this
Security  Agreement  conflict  with the terms of any  commitment  letter or loan
proposal, the terms of this Security Agreement shall control. (iv) Jurisdiction.
Debtor irrevocably agrees to non-exclusive personal jurisdiction in the state in
which the office of Bank as stated above is located.  (v)  Severability.  If any
provision of this Security  Agreement  shall .be  prohibited by or invalid under
applicable  law. such provision  shall be ineffective  but only to the extent of
such  prohibition  or  invalidity,  without  invalidating  the remainder of such
provision or the remaining provisions of this Security Agreement.  (vi) Notices.
Any notices to Debtor shall be  sufficiently  given, if in writing and mailed or
delivered to the address of Debtor shown above or such other address as provided
hereunder;  and to Bank,  if in writing and mailed or delivered to Bank's office
address  shown above or such other  address as Bank may specify in writing  from
time to time. In the event that the Debtor changes  Debtor's address at any time
prior to the date this Note is paid in full,  Debtor  agrees  to  promptly  give
written notice of said change of address by registered or Certified mail, return
receipt requested,  all charges prepaid.  (vii) Captions. The captions contained
herein are  inserted  for  convenience  only and shall not affect the meaning or
interpretation of this Security  Agreement or, any provision  hereof. The use of
the plural shall also mean the singular,  end vice versa. (viii) Loan Documents,
The term "Loan  Documents"  refers to all documents  executed in connection with
the Obligations end may include,  without limitation,  commitment letters,  loan
agreements,  guaranty agreements, other security agreements,  letters of credit,
instruments  financing  statements,  mortgages,  deeds of trust, deeds to secure
debt, end any amendments or supplements (excluding swap agreements as defined In
11 U.S.C.  Section  101).  (ix} Joint and  Several  Liability.  If more than One
person  has signed  this  Security  Agreement,  such  parties  are  jointly  and
severally  obligated  hereunder.  (x) Binding Contract.  Debtor by execution and
Bank by acceptance of this Security Agreement, agree that each party is bound by
all terms and provisions of this Security Agreement.

IN WITNESS WHEREOF,  Debtor, on the day end year first written above, has caused
this Agreement to be executed under seal.




                Fountain Pharmaceuticals, Inc.
                Taxpayer Identification Number: 62-1386759


CORPORATE       By: /s/ John C. Welsh
SEAL            ------------------------------------   
                John C. Welsh, President





















                                     Page 7

<PAGE>
                                  FIRST UNION

                                 LOAN AGREEMENT

First Union National Bank of Florida
214 North Hogan Street - FL0070
Jacksonville, Florida 32202
{Hereinafter referred to as the "Bank")

Fountain Pharmaceuticals, Inc.
7279 Bryan Dairy Road
Largo, Florida 33777
{Individually and collectively "Borrower")

This Loan  Agreement  {"Agreement")  is entered into  October 17,  1996,  by and
between Bank and Borrower, a Corporation organized under the laws of Florida.

Borrower has applied to Bank for s loan or loans {individually and collectively,
the "Loan")  evidenced by one or more promissory notes (whether one or more, the
"Note") as follows:

Line of Credit - In the principal  amount of  $100,000.00  which is evidenced by
the Promissory Note dated October 17, 1996 ("Line of Credit Note"),  under which
Borrower may borrow,  repay,  and  reborrow,  from time to time,  so long as the
total  indebtedness  outstanding  at any one time does not exceed the  principal
amount.  The Loan proceeds are to be used by Borrower  solely for Support of A/R
and  Inventory.  Bank's  obligation  to advance or  readvance  under the Line of
Credit  Note  shall  terminate  if a default in the  payment of the  Obligations
occurs or the  Borrower is in Default (as defined in the Loan  Documents)  under
any Loan  Document,  or in any event,  on January  31,  1997  unless  renewed or
extended by Bank in writing upon such terms then satisfactory to Bank,

This  Agreement  applies  to the Loan and all Loan  Documents.  The terms  "Loan
Documents"  and  "Obligations,"  as used in this  Agreement,  are defined in the
Note. The term "Borrower" shall include its Subsidiaries and Affiliates. As used
in this  Agreement as to Borrower,  "Subsidiary"  shall mean any  corporation of
which more than 50% of the issued and outstanding voting stock is owned directly
or indirectly by Borrower. As to Borrower, "Affiliate" shall have the meaning as
defined in 11 U.S.C. Section 101, except that the term "debtor" therein shall be
substituted by the term "Borrower" herein.

Relying upon the covenants, agreements, representations and warranties contained
in this  Agreement,  Bank is willing to extend credit to Borrower upon the terms
and subject to the conditions  set forth herein,  and Bank and Borrower agree as
follows:

REPRESENTATIONS.  Borrower  represents  that from the date of this Agreement and
until  final  payment  in full of the  Obligations:  Accurate  Information.  All
information now and hereafter furnished to Bank is and will be true, correct and
complete.  Any such information  relating to Borrower's financial condition will
accurately  reflect  Borrower's  financial  condition as of the date{s) thereof,
{including  all  contingent  liabilities  of every type),  and Borrower  further
represents that its financial  condition has not changed materially or adversely
since the  date(s)  of such  documents.  Authorization;  Non-Contravention.  The
execution,   delivery  and  performance  by  Borrower  and  any  guarantor,   as
applicable,  of this  Agreement and other Loan  Documents to which it is a party
are within its power, have been duly authorized by all necessary action taken by
the duly  authorized  officers of Borrower and any guarantors and, if necessary,
by making appropriate  filings with any governmental  agency or unit and are the









<PAGE>

legal,  binding,   valid  and  enforceable   obligations  of  Borrower  and  any
guarantors; and do not (i) contravene, or constitute {with or without the giving
of notice or lapse of time or both) a violation of any  provision of  applicable
law, a violation of the  organizational  documents of Borrower or any guarantor,
or a default under any agreement,  judgment,  injunction, order, decree or other
instrument binding upon or affecting  Borrower or any guarantor,  (ii) result in
the creation or  imposition  of any lien (other than the lien(s)  created by the
Loan Documents) on any of Borrower's or guarantor's  assets, or (iii) give cause
for the  acceleration  of any  obligations  of Borrower or any  guarantor tO any
other creditor.  Asset Ownership.  Borrower has good and marketable title to all
of the  properties  and assets  reflected  on the balance  sheets end  financial
statements  supplied Bank by Borrower,  and all such  properties  and assets are
free and clear of mortgages,  security deeds,  pledges,  liens, charges, and all
other encumbrances, except as otherwise disclosed to Bank by Borrower in writing
("Permitted Liens"). To Borrower's knowledge,  no default has occurred under any
Permitted Liens and no claims or interests adverse to Borrower's  present rights
in its properties and assets have arisen. Discharge of Liens and Taxes. Borrower
has duly  filed,  paid and/or  discharged  all taxes or other  claims  which may
become a lien on any of its  property or assets,  except to the extent that such
items are being  appropriately  contested in good faith and an adequate  reserve
for the payment thereof is being maintained. Sufficiency of Capital. Borrower is
not, end after  consummation  of this  Agreement  and after giving effect to all
indebtedness incurred and liens created by Borrower in connection with the Loan,
will  not be,  insolvent  within  the  meaning  of 11  U.S.C.  Section  101(32).
Compliance  with  Laws.  Borrower  is in  compliance  in all  respects  with all
federal,  state  and  local  laws,  rules  and  regulations  applicable  to  its
properties,  operations,  business, and finances, including, without limitation,
any federal or state laws relating to liquor {Including 18 U.S.C.  Section 3617,
et seq.) or  narcotics  {including  21 U.S.C.  Section  801, at sea.) and/or any
commercial crimes; all applicable federal,  state and local laws and regulations
intended to protect the environment; and the Employee Retirement income Security
Act of 1974, as amended  {"ERISA"),  if applicable.  Organization and Authority.
Each  corporate or limited  liability  company  Borrower and any  guarantor,  as
applicable,  is duly created,  validly  existing end In good standing  under the
laws  of the  state  of Its  organization,  and  has  all  powers,  governmental
licenses,  authorizations,  consents  and  approvals  required  to  operate  its
business as now conducted,  Each corporate or limited liability company Borrower
and any guarantor,  if any, is duly qualified,  licensed and In good standing in
each jurisdiction where  qualification or licensing is required by the nature of
its  business  or the  character  and  location  of its  property,  business  or
customers,  and in which the failure to so qualify or be  licensed,  as the case
may be, in the aggregate,  could have a material adverse effect on the business,
financial position,  results of operations,  properties or prospects of Borrower
or any such guarantor. No Litigation.  There are no pending or threatened suits,
claims or demands against Borrower or any guarantor that have not been disclosed
to Bank by Borrower in writing.

AFFIRMATIVE COVENANTS.  Borrower agrees that from the date of this Agreement and
until final  payment in full of the  Obligations,  unless  Bank shall  otherwise
consent in writing, Borrower will: Business Continuity.  Conduct its business in
substantially  the same  manner and  locations  as such  business is now and has
previously been conducted. Maintain Properties.  Maintain, preserve and keep Its
property  In good  repair,  working  order  and  condition,  making  all  needed
replacements,  additions and Improvements thereto, to the extent allowed by this
Agreement.  Access to Books & Records.  Allow Bank, or its agents, during normal
business  hours,  access to the  books,  records  and such  other  documents  of
Borrower as Bank shall reasonably require, and allow Bank to make copies thereof
at Bank's expense. Insurance.  Maintain adequate insurance coverage with respect
to its  properties  and business  against loss or damage of the kinds and in the
amounts  customarily  insured  against by  companies of  established  reputation
engaged  in the  same  or  similar  businesses  including,  without  limitation,
commercial general liability  insurance,  workers  compensation  insurance,  and
business  Interruption  Insurance;  all  acquired In such  amounts end from such
companies  as Bank may  reasonably  require.  Notices,  Promptly  notify Bank In
writing of (i) any material  adverse  change in its  financial  condition or its
business;  (ii) any  default  under any  material  agreement,  contract or other
instrument to which it is a party or by which any of its  properties  are bound,


                                     Page 2

<PAGE>

or any acceleration of the maturity of any Indebtedness owing by Borrower; (iii)
any material  adverse  claim  against or  affecting  Borrower or any part of its
properties;  (iv) the  commencement of, and any material  determination  in, any
litigation with any third party or any proceeding before any governmental agency
or unit affecting Borrower;  end (v) at least 30 days prior thereto,  any change
in  Borrower's  name or address as shown above,  and/or any change in Borrower's
structure.   Compliance  with  Other  Agreements.  Comply  with  all  terms  and
conditions contained in this Agreement,  and any other Loan Documents,  and swap
agreements,  if applicable,  as defined in the Note.  Payment of Debts,  Pay and
discharge  when due,  and before  subject to  penalty  or  further  charge,  and
otherwise satisfy before maturity or delinquency, all obligations, debts, taxes,
and  liabilities  of whatever  nature or amount,  except those which Borrower in
good faith disputes.  Reports and Proxies.  Deliver to Bank, promptly, a copy of
all  financial  statements,  reports,  notices,  and proxy  statements,  sent by
Borrower to  stockholders,  and all regular or periodic  reports  required to be
filed by Borrower with any  governmental  agency or authority.  Other  Financial
Information.  Deliver promptly such other  information  regarding the operation,
business affairs,  and financial condition of Borrower which Bank may reasonably
request. Estoppel Certificate.  Furnish, within 15 days after request by Bank, a
written statement duly acknowledged of the amount due under the Loan and whether
offsets or defenses exist against the Obligations.

NEGATIVE  COVENANTS,  Borrower  agrees that from the date of this  Agreement and
until final  payment in full of the  Obligations,  unless  Bank shall  otherwise
consent in writing, Borrower will not: Nonpayment;  Nonperformance.  Pail to pay
or perform the Obligations or Default (as defined in the Loan  Documents)  under
any of the Loan Documents.  Cross Default.  Default in payment or performance of
any obligation under any other loans,  contracts or agreements of Borrower,  any
Subsidiary  or  Affiliate  of  Borrower  ("Affiliate"  shall have the meaning as
defined in 11 U.S.C. Section 101, except that the term "debtor" therein shall be
substituted  by  the  term  "Borrower"  herein;   "Subsidiary"  shall  mean  any
corporation of which more than 50% of the issued and outstanding voting stock is
owned  directly  or  Indirectly  by  Borrower),  any  general  partner of or the
holder(s)  of the  majority  ownership  interests  of Borrower  with Bank or its
affiliates; Material Capital Structure or Business Alteration.  Materially alter
the  type  or kind  of  Borrower's  business  or  that  of its  Subsidiaries  or
Affiliates,  if any; or suffer or permit the acquisition of substantially all of
Borrower's  business  or  assets,  or a material  portion  (10% or more) of such
business  or  assets if such a sale is  outside  Borrower's  ordinary  course of
business,  or more than 50% of its outstanding stock or voting power in a single
transaction or a series of  transactions;  or acquire  substantially  all of the
business or assets or more than 50% of the outstanding  stock or Voting power of
any other  entity;  or enter  into any  merger or  consolidation  without  prior
written consent of Bank.  Default on Other Contracts or Obligations.  Default on
any material contract with or obligation when due to a third party or default in
the  performance of any obligation To a third party incurred for money borrowed.
Judgment  Entered.  Permit the entry of any monetary  judgment or The assessment
against,  the filing of any tax lien  against,  or the  issuance  of any writ of
garnishment  or  attachment  against  any  property  of or debts  due  Borrower.
Government Intervention.  Permit the assertion or making of any seizure, vesting
or  intervention by or under authority of any government by which the management
of Borrower or any guarantor is displaced of its authority in the conduct of its
respective  business  or such  business is  curtailed  or  materially  impaired.
Prepayment of Other Debt.  Retire any  long-term  debt entered into prior to the
date of this  Agreement at a date in advance of its legal  obligation  to do so.
Retire or  Repurchase  Capital  Stock.  Retire or  otherwise  acquire any of its
capital stock.

FINANCIAL COVENANTS.  Borrower, on a consolidated basis, agrees to the following
provisions  from The date of This  Agreement  and until final payment in full of
the  Obligations,   unless  Bank  shall  otherwise  consent  in  writing:  Total
Liabilities to Tangible Net Worth Ratio.  Borrower shall, at all times, maintain
a ratio of Total  Liabilities,  including fully  subordinated  debt,  divided by
Tangible  Net  Worth  of not  more  than  1.50 to  1.00.  For  purposes  of this
computation,  "Total  Liabilities"  shall  mean  all  liabilities  of  Borrower,


                                     Page 3


<PAGE>

including  capitalized  leases and all  reserves  for  deferred  taxes and other
deferred sums appearing on the liabilities  side of a balance sheet of Borrower,
in  accordance  with  generally  accepted  accounting  principles  applied  on a
consistent  basis.  "Tangible Net Worth" shall mean the total assets minus total
liabilities.  For  purposes of this  computation,  the  aggregate  amount of any
intangible  assets  of  Borrower  including,   without   limitation,   goodwill,
franchises,  licenses,  patents,  trademarks,  trade names, copyrights,  service
marks,  end brand  names,  shall be  subtracted  from  total  assets,  and total
liabilities  shall include fully  subordinated  debt. Funds Flow Coverage Ratio.
Borrower  shall at all times  maintain a Funds Flow  Coverage  Ratio of not less
than 1.00 to 1.00. "Funds Flow Coverage Ratio" shall mean the sum of net profit,
depreciation  and  amortization  minus all dividends,  withdrawals  and non-cash
income  divided  by the sum of all  currant  maturities  of long  term  debt and
capital lease obligations.  Limitation on Debt.  Borrower shall not, directly or
indirectly,  create,  incur,  assume or become  liable for any  additional  debt
without written consent from FUNB.

ANNUAL  FINANCIAL  STATEMENTS.  Borrower  shall deliver to Bank,  within 90 days
after the close of each fiscal year, audited financial statements reflecting its
operations during such fiscal year,  including,  without  limitation,  a balance
sheet,  profit and loss statement and statement of cash flows,  with  supporting
schedules:  all on a  consolidated  and  consolidating  basis and in  reasonable
detail,  prepared in conformity with generally accepted  accounting  principles,
applied  on a  basis  consistent  with  that of the  preceding  year.  All  such
statements  shall be  examined by an  independent  certified  public  accountant
acceptable to Bank. The opinion of such independent  certified public accountant
shall not be  acceptable to Bank if qualified  due to any  limitations  in scope
Imposed by Borrower or its Subsidiaries,  if any. Any other qualification of the
opinion by the  accountant  shall  render  the  acceptability  of the  financial
statements subject to Bank's approval.

PERIODIC FINANCIAL STATEMENTS.  Borrower shall deliver to Bank audited quarterly
financial statements, including, without limitation, a balance sheet, profit and
loss statement and statement of cash flows, with supporting  schedules,  as soon
as  available  and in any  event  within  30 days  after  the close of each such
period;  all in  reasonable  detail and prepared in  conformity  with  generally
accepted accounting  principles,  applied on a basis consistent with that of the
preceding year. Such statements shall be certified as to their  correctness by a
principal  financial officer of Borrower and in each case, if audited statements
are required, subject to audit and year-end adjustments,

Borrower shall also deliver on a quarterly  basis, A/R Aging Listing & Inventory
Reports,  as soon as available,  and in any event within 30 days after the close
of each such period


CONDITIONS PRECEDENT.  The obligations of Bank to make the Loan and any advances
pursuant to this  Agreement are subject to the following  conditions  precedent:
Additional Documents. Receipt by Bank of Such additional supporting documents as
Bank or its counsel may reasonably request.














                                      Page 4

<PAGE>


IN WITNESS WHEREOF,  Borrower and Bank, on the day and year first written above,
have caused this Agreement to be executed under seal.

                Fountain Pharmaceuticals, Inc.
                Taxpayer Identification Number: 62-1386759


CORPORATE       By: /s/ John C. Welsh
SEAL            ------------------------------------   
                John C. Welsh, President



First Union National Bank of Florida


/s/Ruth Kamide
----------------------------------------
Ruth Kamide, Vice President













































                                     Page 5



<PAGE>
                                  FIRST UNION
           
                          LANDLORD'S/MORTGAGEE'S WAIVER

PINELLAS           COUNTY, FLORIDA
-----------------

                        KNOW ALL MEN BY THESE PRESENTS:

          That  for and in  consideration  of the sum of one  dollar  and  other
valuable  considerations,  the receipt of which are hereby acknowledged from the
hereinafter named secured party, the undersigned,  being:  B.D.B.P.  Enterprises
(Landlord),  the  holder  of a note  secured  by a  mortgage,  deed of  trust or
security agreement (security  instrument) in or upon the real property described
in the lease or  security  instrument  do hereby  covenant  and agree with FIRST
UNION NATIONAL BANK OF FLORIDA, hereinafter called the "secured party", that the
security  interest acquired or to be acquired by the secured party from FOUNTAIN
PHARMACEUTICALS, INC. in and to the following described goods:

All furniture;  furnishings;  equipment: machinery;  accessories; moveable trade
fixtures;  goods held for sale or being processed for sale in Debtor's business,
Including all raw materials,  supplies,  and other materials used or consumed in
Debtor's  business,  goods in  process,  finished  goods,  and all  other  items
customarily  classified  as inventory;  building  improvement  and  construction
materials, supplies end equipment.

All  inventory,  including all raw materials and work in process to be processed
into such  inventory,  and all  accessions,  attachments and other additions to,
substitutes  for,   replacements  for,  improvements  to  and  returns  of  such
inventory, all accounts arising from the disposition of Inventory.

which have been or may be Installed upon or affixed to the above  described real
property,  shall be senior end paramount to the rights of the undersigned in and
to said real property  and,  upon default under the terms end  provisions of the
security  agreement  or  security  agreements  creating or  evidencing  the said
security  interest,  the secured party,  or the assigns of the secured party may
remove the above described goods from the said real property  without  liability
to the undersigned.

         The  undersigned  agree to make this waiver known to any  translates of
the  premises or note secured by the security  instrument  and further  agree to
notify the secured  party of any default in the lease or security  instrument at
least ten days prior to  termination  or  foreclosure  during which time secured
party shall have the, option to cure any such default,

           In  witness  whereof  the  undersigned  have  executed,   sealed  and
 delivered this waiver Oct 27 , 1996.
                       -------

SIGNED, SEALED AND DELIVERED

B.D.B.P. Enterprises (Landlord)
--------------------


By: /s/Manual Garcia
-----------------------------
    Manual Garcia





<PAGE>




STATE OF FLORIDA
COUNTY OF PINELLAS
          --------
 
The foregoing  instrument was acknowledged  before me this  17th day of October,
1996, by Manual Garcia as "VICE PRESIDENT" of "B.D.B.P.  Enterprises  (Landlord)
who is "personally  known" to me or has produced  ___________ as  identification
and who did/did not take an oath.

                                               /s/Denise A. Braun 
                                               ----------------------------  
  " SEAL "  Denise A Braun                     NOTARY PUBLIC                   
            My Commission CC617264             State of Florida, at Large      
            Expires Dec. 11, 1999              My commission expires: 12/11/99 
                                                                      -------- 
                                               


























<PAGE>
                                  FIRST UNION

                       CERTIFICATE OF BORROWING RESOLUTION

I, the  undersigned,  hereby  certify to FIRST  UNION  NATIONAL  BANK OF FLORIDA
("Bank")   that  I  am  the   President   of  Fountain   Pharmaceuticals,   Inc.
{"Corporation"), a Corporation duly organized and existing under the laws of the
State of  Florida;  that the  following  is a true copy of the  Resolution  duly
adopted by the Board of Directors on October 17, 1996; and that such  Resolution
Is in full  force and effect and has not been  amended  or  rescinded,  and that
there is no provision in the  Articles of  Incorporation,  Charter or By-laws of
the  Corporation,  limiting  the  power of the  Board of  Directors  to pass the
following  Resolution,  which is in full  conformity  with the provisions of the
Articles of Incorporation, Charter or By-laws of the Corporation.

1.  RESOLVED, that EACH of the present holder(s) of the following office(s) and/
    or position{s) of Corporation and his successor{s) in office,  membership or
    position:

        President

    is hereby  authorized,  on behalf of, in the name of and for the  account of
    Corporation to:

    a. borrow money and/or obtain or continue credit (with or without  security)
       from Bank,  upon such terms and  conditions  and In such  amounts as such
       officer(s), member(s) or position-holder(s) may deem desirable;

    b. execute  and/or  endorse all  documents  necessary or required by Bank to
       evidence or consummate any loan to Corporation;

    c. guarantee the obligations of others to Bank;

    d. engage In  business  transactions  of all nature end kind and/or to enter
       into all manner of contractual relationships with Bank;

    a. grant or assign a  security  interest  of any kind in  property,  whether
       real, personal, tangible, intangible and/or mixed, pledged by Corporation
       as collateral securing payment or any performance relative to any lean to
       Corporation;

    f. sell, purchase and/or lease real, personal, tangible,  intangible, and/or
       mixed property to/from Bank;

    g. enter Into, execute and deliver,  and perform  Corporation's  obligations
       under any swap agreement with Bank as defined in 11 USC Section 101 [55),
       derivative  agreement or foreign exchange agreement,  and execute any and
       all documents relative thereto as may be necessary or required by Bank;
       

2.   RESOLVED  FURTHER,  that  foregoing  authority  shall not be limited to the
     above-identified or described officer(s), member(s),  position-holder(s) or
     other  representative{s) of Corporation but shall extend to such additional
     or different individuals as are named as being so authorized in any letter,
     form  or  other   written   or  oral   notice  by  any   officer,   member,
     position-holder  or  other  representative  of  Corporation  identified  or
     described above;

3.   RESOLVED  FURTHER,  that the President of Corporation  shall furnish Bank a
     certified copy of this  Resolution,  and Bank is hereby  authorized to deal
     with the present holder(s) of the  above-identified or described office{s),
     membership(s) or position(s)  under the authority of this Resolution unless
     and until it shall be  expressly  notified  in writing to the  contrary  by
     Corporation;







<PAGE>


4.   RESOLVED  FURTHER,  that the President of Corporation,  shall, from time to
     time  hereafter,  as changes in the  personnel of the  above-identified  or
     described office(s}, membership(s) or position{s) of Corporation, are made,
     immediately  certify  such  changes  to Bank,  and that Bank shall be fully
     protected  in  relying  upon  such   certifications  of  the  President  of
     Corporation,  end shall be indemnified  and saved harmless from any claims,
     demands, expenses, losses and/or damages resulting from, or growing out of,
     honoring the signature or any  officer{s),  member{s),  position-holder{s},
     representative{s),  agent{s),  or employee(s} so certified,  or refusing to
     honor any  signature  not so certified  which is not described or stated in
     the foregoing Resolution;

5.   RESOLVED  FURTHER,  that the President of  Corporation  Is  authorized  and
     directed to certify to Bank that the foregoing Resolution was duly adopted,
     and that the provisions thereof are in full conformity with the Articles of
     Incorporation, Charter or By-laws of the Corporation;

6.   RESOLVED  FURTHER,  that all  transactions  by any  officer{s),  member{s},
     position-holder(s),   representative(s},   agent(s},   or   employee(s)  of
     Corporation  on its behalf and in its name with Bank prior to delivery of a
     certified  copy of the foregoing  Resolution  is, in all  respects,  hereby
     ratified, confirmed and adopted;

7.   RESOLVED  FURTHER,  that the present holder(s) of the  above-identified  or
     described office(s), membership(s) or position(s), are expressly authorized
     and directed to affix the seal, if any, of  Corporation  on any  instrument
     and to  adopt  any  facsimile  seal for any  occasion  and  purpose  on any
     instrument as the seal, If any, of  Corporation,  and that this  Resolution
     supersedes  any By-law or other  organizational  document of Corporation to
     the COntrary; and

8.   RESOLVED  FURTHER,  that  any  person(s)  authorized  to act on  behalf  of
     Corporation pursuant to the terms of this Resolution is fully authorized to
     take any action or exercise any powers as set out or granted by those terms
     In relation to any subsidiary, parent or affiliate of Corporation.

I,  finally,  certify that the  following is the  person{s)  who now hold(s) the
office(s),  membership(s},  and/or  position(s}  referred to In this  Resolution
above and' that their bona fide signatures are set forth below;
                            
                            /s/John C. Walsh                 
                            --------------------------         President
                            John C. Walsh, President

IN WITNESS WHEREOF, i have hereunto  subscribed my name(s) and affixed the seal,
if any, of Corporation this October 17, 1996.


CORPORATE                   /s/John C. Walsh           
SEAL                        --------------------------
                            John C. Walsh, Secretary                           















                                     Page 2


<PAGE>
                                  FIRST UNION

                             UNCONDITIONAL GUARANTY
                                                                October 17, 1996
Fountain Pharmaceuticals, Inc.
7279 Bryan Dairy Road
Largo, Florida 34647
(Individually and collectively "Borrower")

Joan D. Walsh
1340 Gulf Blvd.
Clearwater, Florida 34630
{Individually end collectively "Guarantor")

First Union National Bank of Florida
214 North Hogan Street - FL0070
Jacksonville, Florida 32202
{Hereinafter referred to as "Bank")

To  induce  Bank to make,  extend or renew  loans,  advances,  credit,  or other
financial accommodations to or for the benefit of Borrower, and In consideration
of loans, advances,  credit, or other financial accommodations made, extended or
renewed  to or  for  the  benefit  of  Borrower,  Guarantor  hereby  absolutely,
irrevocably and unconditionally  guarantees to Bank and its successors,  assigns
end  affiliates  the timely  payment  and  performance  of all  liabilities  and
obligations of Borrower to Bank and its affiliates,  including,  but not limited
to, all  obligations  under any notes,  loan  agreements,  security  agreements,
letters of credit,  swap  agreements  (as defined in 11 U.S.  Code Section 101},
instruments,  accounts receivable,  contracts,  drafts,  leases,  chattel paper,
Indemnities,  acceptances,  repurchase  agreements,  overdrafts,  end  the  Loan
Documents  defined below,  however and whenever  Incurred or evidenced,  whether
primary,  secondary,  direct, indirect,  absolute,  contingent, due or to become
due, now existing or hereafter  contracted or acquired,  end all  modifications,
extensions or renewals  thereof,  including  without  limitation  all principal,
interest,  charges,  and  costs  and  expenses  incurred  thereunder  {including
attorneys'  fees and other costs of collection  incurred,  regardless of whether
suit is commenced) (collectively, the "Guaranteed Obligations").

Guarantor further covenants and agrees:

GUARANTOR'S LIABILITY.  This Guaranty is a continuing and unconditional guaranty
of payment and performance  and not of collection.  The parties to this Guaranty
are jointly and severally obligated hereunder, This Guaranty does not impose any
obligation on Bank to extend or continue to extend credit or otherwise deal with
Borrower at any subsequent time. This Guaranty shall continue to be effective or
be reinstated.  as the case may be, if at any time any payment of the Guaranteed
Obligations  is  rescinded,  avoided or for any other reason must be returned by
Bank,  and the returned  payment shall remain  payable as part of the Guaranteed
Obligations,  all as though such payment had not been made. Except to the extent
the provisions of this Guaranty give the Bank additional  rights,  this Guaranty
shall not be deemed to supersede or replace any other  guaranties  given to Bank
by Guarantor;  and the obligations guaranteed hereby shall be in addition to any
other  obligations  guaranteed by Guarantor  pursuant to any other  agreement of
guaranty given to Bank and other guaranties of the Guaranteed Obligations.

TERMINATION  OF  GUARANTY.  Guarantor  may  terminate  this  Guaranty by written
notice,  delivered  personally to or received by certified or registered  United
States  Mail by an  authorized  officer of the Bank at the  address  for notices
provided herein.  Such termination shall be effective with respect to Guaranteed
Obligations  arising  more than 15 days  after the date such  written  notice is
received by said Bank officer.  Guarantor may not terminate  this Guaranty as to









<PAGE>

Guaranteed Obligations  (including any subsequent  extensions,  modifications or
compromises  of the  Guaranteed  Obligations)  then  existing,  or to Guaranteed
Obligations  arising  subsequent  to  receipt  by Bank of  said  notice  if such
Guaranteed  Obligations  are a result  of  Bank's  obligation  to, make advances
pursuant to a commitment  entered into prior to  expiration of the 15 day notice
period,  or are a result of advances which are necessary for Bank to protect its
collateral or otherwise preserve its interests,  Termination of this Guaranty by
any single Guarantor will not affect the existing and continuing  obligations of
any other guarantor hereunder.

APPLICATION OF PAYMENTS,  BANK LIEN AND SET-OFF, Monies received from any source
by Bank for  application  toward  payment of the Guaranteed  Obligations  may be
applied to such Guaranteed Obligations in any manner or order deemed appropriate
by Bank. Except as prohibited by law,  Guarantor grants Bank a security Interest
in all of Guarantor's  accounts  maintained  with Bank and any of its affiliates
(collectively,  the  "Accounts").  If a Default  occurs,  Bank is  authorized to
exercise its right of set-off or to foreclose its lien against any obligation of
Bank to Guarantor including,  without limitation, all Accounts or any other debt
of any maturity, without notice.

CONSENT TO MODIFICATIONS.  Guarantor consents and agrees that Bank may from time
to time, In Its sole  discretion,  without  affecting,  Impairing,  lessening or
releasing the obligations of the Guarantor  hereunder:  (a) extend or modify the
time,  manner,  place or terms of payment or performance and/or otherwise change
or modify the credit terms of the Guaranteed Obligations;  (b) increase,  renew,
of enter into a novation of the Guaranteed Obligations;  (c) waive or consent to
the departure from terms of the Guaranteed Obligations; (d) permit any change in
the business or other dealings and relations of Borrower or any other  guarantor
with Bank; {a) proceed against,  exchange,  release,  realize upon, or otherwise
deal  with  in any  manner  any  collateral  that  is or may be  held by Bank In
connection with the Guaranteed  Obligations or any liabilities or obligations of
Guarantor;  and  (f)  proceed  against,  settle,  release,  or  compromise  with
Borrower,  any insurance carrier, or any other person or entity liable as to any
part of the Guaranteed  Obligations,  and/or subordinate the payment of any part
of the Guaranteed Obligations to the payment of any other obligations, which may
at any time be due or owing to Bank;  all In such  manner and upon such terms as
Bank may deem  appropriate,  and  without  notice  to or  further  consent  from
Guarantor,  No invalidity,  irregularity,  discharge or unenforceability  of, or
action or omission by Bank relating to any part of, the  Guaranteed  Obligations
or any security therefor shall affect or impair this Guaranty.

WAIVERS AND ACKNOWLEDGMENTS. Guarantor waives end releases the following rights,
demands,  and defenses Guarantor may have with respect to Bank and collection of
the Guaranteed Obligations: (a) promptness end diligence in collection of any of
the Guaranteed Obligations from Borrower or any other person liable thereon, and
in  foreclosure  of any security  Interest  and sale of any property  serving as
collateral for the Guaranteed Obligations;  (b) any law or statute that requires
that Bank make demand upon,  assert claims against,  or collect from Borrower or
other persons or entities,  foreclose any security  interest,  sell  collateral,
exhaust any remedies, or take any other action against Borrower or other persons
or  entities  prior to making  demand  upon,  collecting  from or taking  action
against Guarantor with respect to the Guaranteed Obligations; including any such
rights  Guarantor  might  otherwise  have had under Va. Code Sections  49-25 end
49-26,  Et Seq.,  N.C.G.S.  Section  26-7,  et seq.,  Tenn.  Code  Ann.  Section
47-12-101,  O.C.G.A.  Section 10-7-24 land any Successor  statute) and any other
applicable  law; (c) any law or statute that requires that Borrower or any other
person be joined in,  notified of or made part of any action against  Guarantor;
(d) that Bank preserve, insure or perfect any security Interest in collateral or
sell or dispose of  collateral In a particular  manner or at a particular  time;
to)  notice  of  extensions,  modifications,   renewals,  or  novatlons  of  the
Guaranteed  Obligations,  of any new transactions or other relationships between
Bank,  Borrower and/or any guarantor,  and of changes in The financial condition
of, ownership of, or business structure of Borrower or any other guarantor;  (f)
presentment, protest, notice of dishonor, notice of default, demand for payment,
notice of intention to accelerate maturity,  notice of acceleration of maturity,



                                     Page 2

<PAGE>

notice of sale, and all other notices of any kind  whatsoever;  (g) the right to
assert against Bank any defense (legal or equitable),  set-off, counterclaim, or
claim that  Guarantor  may have at any time against  Borrower or any other party
liable  to  Bank;  (h)  all  defenses  relating  to  invalidity,  insufficiency,
unenforceability,  enforcement,  release  or  impairment  of Bank's  lien on any
collateral,  of the Loan Documents, or of any other guaranties held by Bank; (i)
any claim or defense that acceleration of maturity of the Guaranteed Obligations
is stayed against  Guarantor because of the stay of assertion or of acceleration
of claims  against  any other  person or entity  for any  reason  including  the
bankruptcy or  insolvency  of that person or entity;  and (j) the benefit of any
exemption  claimed by Guarantor.  Guarantor  acknowledges and represents that it
has relied upon its own due diligence in making its own independent appraisal of
Borrower,   Borrower's  business  affairs  end  financial  condition,   and  any
collateral;  Guarantor  will  continue  to be  responsible  for  making  its own
independent  appraisal of such  matters;  and  Guarantor has not relied upon and
will not  hereafter  rely upon Bank for  information  regarding  Borrower or any
collateral.

FINANCIAL CONDITION,  Guarantor warrants,  represents and covenants to Bank that
on and after the date hereof:  (a) the fair saleable value of Guarantor's assets
exceeds its  liabilities,  Guarantor is meeting its current  liabilities as they
mature, and Guarantor is' and shall remain solvent; (b) all financial statements
of Guarantor  furnished to Bank are correct and accurately reflect the financial
condition of Guarantor as of the respective dates thereof; {c) since the date of
such financial  statements,  there has not occurred a material adverse change in
the financial condition of Guarantor; (d) there are not now pending any court or
administrative  proceedings or  undischarged  judgments  against  Guarantor,  no
federal or state tax liens have been filed or threatened against Guarantor,  and
Guarantor is not in default or claimed  default under any agreement;  and (a) at
such  reasonable  times as Bank requests,  Guarantor will furnish Bank with such
other financial information as Bank may reasonably request.

INTEREST.  Regardless  of any other  provision  of this  Guaranty  or other Loan
Documents,  if for any reason the  effective  interest on any of the  Guaranteed
Obligations  should exceed the maximum lawful interest,  the effective  interest
shall be deemed  reduced to and shall be such maximum lawful  interest,  and any
sums of interest  which have been  collected  in excess Of such  maximum  lawful
interest  shall be applied as a credit against the unpaid  principal  balance of
the Guaranteed Obligations.

DEFAULT.  If any of the following events occur, a default ("Default") under this
Guaranty  shall  exist:  (a)  Failure of timely  payment or  performance  of the
Guaranteed Obligations or a default under any Loan Document; (b) A breach of any
agreement or representation  contained or referred to in the Guaranty, or any of
the Loan Documents, or contained in any other contract or agreement of Guarantor
with Bank or its affiliates,  whether now existing or hereafter arising; (c) The
death  of,  appointment  of a  guardian  for,  dissolution  of,  termination  of
existence of, loss of good standing  status by,  appointment  of a receiver for,
assignment  for  the  benefit  of  creditors  of,  or  the  commencement  of any
Insolvency  or  bankruptcy  proceeding  by or against,  Guarantor or any general
partner of or the  holder(s) of the majority  ownership  interests of Guarantor;
and/or {d) The entry of any monetary  judgment or the  assessment  against,  the
filing of any tax lien against,  or the issuance of any writ of  garnishment  or
attachment against any property of or debts due Guarantor.

If a Default  occurs,  the Guaranteed  Obligations  shall be due immediately and
payable  without  notice.   Guarantor  shall  pay  interest  on  the  Guaranteed
Obligations  from such Default at the highest rate of interest charged on any of
the Guaranteed Obligations.

ATTORNEY'S FEES AND OTHER COSTS OF COLLECTION. Guarantor shall pay all of Bank's
reasonable  expenses  incurred  to  enforce  or  collect  any of the  Guaranteed
Obligations, including, without limitation, reasonable arbitration, paralegals',
attorneys'  and  experts'  fees  and  expenses,  whether  incurred  without  the
commencement of a suit, in any suit, arbitration,  or administrative proceeding,
or In any appellate or bankruptcy proceeding.

                                     Page 3


<PAGE>


SUBORDINATION  OF  OTHER  DEBTS.   Guarantor  agrees:  (a]  to  subordinate  the
obligations  now or  hereafter  owed by  Borrower  to  Guarantor  ("Subordinated
Debt", to any and all obligations of Borrower to Bank now or hereafter  existing
while this Guaranty is In effect,  provided  however that  Guarantor may receive
regularly  scheduled principal and interest payments on the Subordinated Debt so
long as (i) all sums due and  payable by Borrower to Bank have been paid in full
on or prior to such date,  and (it) no event Or condition  which  constitutes or
which with notice or the lapse or time would constitute an event of default with
respect  to the  Guaranteed  Obligations,  shall be  continuing  on or as of the
payment date; (b) Guarantor will place a legend indicating such subordination on
every  note,  ledger  page  or  other  document   evidencing  any  part  of  the
Subordinated Debt; and (c) except as permitted by this paragraph, Guarantor will
not  request  or  accept  payment  of or  any  security  for  any  part  of  the
Subordinated  Debt, and any proceeds of the Subordinated Debt paid to Guarantor,
through error or otherwise, shall immediately be forwarded to Bank by Guarantor,
properly endorsed to the order of Rank, to apply to the Guaranteed Obligations.

MISCELLANEOUS.  {a)  Assignment.  This Guaranty and other Loan  Documents  shall
Inure to the benefit of and be binding  upon the  parties  and their  respective
heirs,  legal  representatives, successors and assigns.  Bank's interests in and
rights under this Guaranty and other Loan  Documents are freely  assignable,  in
whole or in part, by Bank. Any assignment  shall not release  Guarantor from the
Guaranteed  Obligations.  {b) Applicable Law; Conflict Between  Documents,  This
Guaranty and other Loan Documents  shall be governed by and construed  under the
laws of the state in which  office of Bank first Shown above is located  without
regard  to that  state's  conflict  of laws  principles.  If the  terms  of this
Guaranty should  conflict with the terms of any commitment  letter that survives
closing, the terms of this Guaranty shall control,  (c) Jurisdiction,  Guarantor
irrevocably agrees to non-exclusive  personal jurisdiction in the state in which
the  office of Bank first  shown  above is  located.  {d)  Severability.  If any
provision of this Guaranty or of the other Loan Documents shall be prohibited or
Invalid under  applicable  law, such provision  shall be Ineffective but only to
the extent of such prohibition or invalidity, without invalidating the remainder
of such  provision  or the  remaining  provisions  of  this  Guaranty  or  other
document.  {a) Notices. Any notices to Guarantor shall be sufficiently given, if
in writing and mailed or delivered  to the  Guarantor's  address  shown above or
such other address as provided hereunder,  and to Bank, if in writing and mailed
or delivered to Bank's office  address shown above or such other address as Bank
may specify in writing from time to time.  In the event that  Guarantor  changes
Guarantor's address at any time prior to the date the Guaranteed Obligations are
paid in full, Guarantor agrees to promptly give written notice of said change of
address by registered or certified mail, return receipt  requested,  all charges
prepaid. (f) Plural; Captions. All references in the Loan Documents to borrower,
guarantor,  person,  document or other nouns of reference mean both the singular
and  plural  form,  as the case may be,  and the term  "person"  shall  mean any
Individual,  person or entity.  The captions contained in the Loan Documents are
inserted for convenience only and shall not effect the meaning or Interpretation
of the Loan Documents. (g} Binding Contract.  Guarantor by execution of and Bank
by acceptance  of this Guaranty agree that each party is bound to, all terms and
provisions of this Guaranty.  (h) Amendments,  Waivers end Remedies. No waivers,
amendments or  modifications  of this Guaranty and other Loan Documents shall be
valid  unless in writing and signed by an officer of Bank.  No waiver by Bank of
any Default  shall  operate as a waiver of any other Default or the same Default
on a future  occasion.  Neither the failure nor any delay on the part of Bank in
exercising any right,  power. or privilege granted pursuant to this Guaranty and
other Loan Documents  shall operate as a waiver  thereof,  nor shall a single or
partial  exercise thereof preclude any other or further exercise or the exercise
of any other right,  power or  privilege.  All  remedies  available to Bank with
respect to this Guaranty and other Loan Documents and remedies  available at law
or  In  equity  shall  be  cumulative  and  may  be  pursued   concurrently   or
successively.  {i) Partnerships, If Guarantor Is a partnership, the obligations,
liabilities  and agreements On the part of Guarantor  shall remain in full force
and effect and fully applicable  notwithstanding  any changes in the individuals


                                     Page 4


<PAGE>

comprising  the  partnership.  The term  "Guarantor"  includes  any  altered  or
successive partnerships,  and predecessor  partnership(s) and the partners shall
not be  released  from  any  obligations  or  liabilities  hereunder.  (j)  Loan
Documents.  The term  "Loan  Documents"  refers  to all  documents  executed  in
connection with the Guaranteed Obligations and may include,  without limitation,
commitment  letters  that  survive  closing,  loan  agreements,  other  guaranty
agreements, security agreements,  instruments, financing' statements, mortgages,
deeds of trust,  deeds to secure debt,  letters of credit and any  amendments or
supplements (excluding swap agreements as defined in 11 U.S. Code Section 101).

ANNUAL FINANCIAL  STATEMENTS.  Guarantor shall deliver to Bank annually,  within
thirteen  months of the previous  statement date on file with Rank,  Guarantor's
financial statement.  Said financial statement shall disclose all of Guarantor's
assets,  liabilities,  net  worth  income  and  contingent  liabilities,  all in
reasonable  detail and acceptable to Bank end submitted on a form to be provided
by Bank or on such  other  form  acceptable  to Rank,  signed by  Guarantor  and
certified by Guarantor to Rank to be true, correct and complete.

ARBITRATION.  Upon  demand of any party  hereto,  whether  made  before or after
institution  of any  judicial  proceeding,  any  dispute,  claim or  controversy
arising  out of,  connected  with or relating  to this  Guaranty, and other Loan
Documents  ("Disputes")  between  or among  parties  to this  Guaranty  shall be
resolved by binding  arbitration as provided  herein.  Institution of a judicial
proceeding  by a party  does  not  waive  the  right  of that  party  to  demand
arbitration  hereunder. Disputes may include,  without limitation,  tort claims,
counterclaims, disputes as to whether a matter is subject to arbitration, claims
brought as class actions,  claims  arising from Loan  Documents  executed in the
future, or claims arising out of or connected with the transaction  reflected by
this Guaranty.

Arbitration  shall be conducted  under and governed by the Commercial  Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association  (the "AAA") and Title 9 of the U.S. Code. All arbitration  hearings
shall be conducted in the city in which the office of Bank first stated above is
located.  The  expedited  procedures  set  forth  in  Rule  51 et  seq.  of  the
Arbitration Rules shall be applicable to claims of less than $1,000,000.00,  All
applicable  statutes of limitation  shall apply to any Dispute.  A judgment upon
the award may be entered in any court having jurisdiction,  The panel from which
all  arbitrators  are selected  shall be comprised  of licensed  attorneys.  The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction,  state or federal, of the state where
the hearing will be conducted or if such person is not  available to serve,  the
single  arbitrator may be a licensed  attorney.  Notwithstanding  the foregoing,
this  arbitration  provision does not apply to disputes under or related to swap
agreements.

PRESERVATION AND LIMITATION OF REMEDIES,  Notwithstanding  the preceding binding
arbitration   provisions,   Bank  and  Guarantor  agree  to  preserve,   without
diminution,  certain  remedies  that any party  hereto  may  employ or  exercise
freely,  independently or in connection with an arbitration  proceeding or after
an  arbitration  action is brought.  Bank and Guarantor  shall have the right to
proceed in any court of proper  jurisdiction  or by  self-help  to  exercise  or
prosecute the following  remedies,  as  applicable:  (i) all rights to foreclose
against any real or personal property or other security by exercising a power of
sale  granted  under  Loan  Documents  or under  applicable  law or by  judicial
foreclosure  and sale,  including a  proceeding  to confirm  the sale;  (ii) all
rights  of  self-help   including  peaceful  occupation  of  real  property  and
collection of rents,  set-off,  and peaceful  possession  of personal  property;
(iii) obtaining  provisional or ancillary remedies including  injunctive relief,
sequestration,  garnishment,  attachment,  appointment of receiver and filing an
involuntary  bankruptcy  proceeding;  and (iv) when  applicable,  a judgment  by
confession of judgment. Preservation of these remedies does  not limit the power
of an arbitrator to grant similar remedies that may be requested by a party in a
Dispute.

                                     Page 5


<PAGE>


Guarantor  and Bank  agree  that they  shall not have a remedy  of  punitive  or
exemplary damages against the other in any Dispute end hereby waive any right or
claim to punitive or  exemplary  damages they have now or which may arise in the
future in  connection  with any  Dispute  whether  the  Dispute is  resolved  by
arbitration or judicially.

IN WITNESS  WHEREOF,  Guarantor,  on the day and year first written  above,  has
caused this Unconditional Guaranty to be executed under seal.




                /s/Joan D, Walsh                    (SEAL)
                ------------------------------------------
                Joan D. Walsh  
                Taxpayer Identification Number: ###-##-####








































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