LOAN AND SECURITY AGREEMENT


         THIS LOAN AND SECURITY  AGREEMENT  ("Agreement") is dated and effective
as of the 6 day of October,  1998 by and between  Compu-DAWN,  Inc.,  a Delaware
corporation ("Lender"), and LocalNet Communications, Inc., a Florida corporation
("Borrower").

                                 R E C I T A L S

         WHEREAS,  Lender for adequate and bargained for consideration agrees to
advance monies to Borrower under the terms and conditions set forth herein;

         NOW,  THEREFORE,  in consideration  of the respective  representations,
warranties,  agreements and covenants in this Agreement,  and for other good and
valuable  consideration,   the  receipt  and  sufficiency  of  which  is  hereby
acknowledged,  and subject to the conditions  contained in this  Agreement,  the
parties, intending to be legally bound, hereby agree as follows:

                                    SECTION 1
                                   DEFINITIONS

         1.1      Specific Definitions.  The following definitions shall apply:

         (a) "Account  Debtors"  shall mean  Borrower's  customers and all other
persons who are  obligated  or  indebted  to  Borrower  in any  manner,  whether
directly or indirectly,  primarily or  secondarily,  contingently  or otherwise,
with respect to Accounts.

         (b) "Accounts" shall mean all accounts, accounts receivable, monies and
debt  obligations in any form owing to Borrower  (whether  arising in connection
with contracts,  contract rights,  instruments,  general  intangibles or chattel
paper)  arising out of the  rendition  of  services  by Borrower  whether or not
earned by  performance;  all deposit  accounts,  credit  insurance,  guaranties,
letters of credit,  advices of credit and other  security  for any of the above;
Borrower's  Books  relating to any of the  foregoing,  and without  limiting the
foregoing,  the "Accounts"  shall mean "Accounts"  under the Uniform  Commercial
Code.

         (c) "Advance" shall mean an advance of loan proceeds  constituting  all
or a part of the Loan.

         (d)  "Borrower's   Books"  shall  mean  Borrower's  books  and  records
including,  but not limited  to:  minute  books;  ledgers;  records  indicating,
summarizing or evidencing Borrower's assets,  liabilities and the Accounts;  all
information  relating to Borrower's business operations or financial  condition;
and all  computer  programs,  disk or tape  files,  printouts,  runs  and  other
computer-prepared information and the equipment containing such information.

         (e) "Closing Date" shall mean the date hereof.


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         (f)  "Collateral"  shall  mean and  include  any and all  tangible  and
intangible  assets,  including without limitation all of Borrower's right, title
and interest in local and long distance revenues earned, and received by, or due
to, Borrower from Unidial Incorporated as well as all of Borrower's right, title
and interest in Internet service revenues earned,  and received by, the Borrower
from Earthlink Network, Inc. in which Borrower has or shall have an interest now
or hereafter  existing or  acquired,  and wherever  located,  together  with all
additions and accessions thereto and replacements and substitutions  thereof and
all Proceeds and products of the foregoing.

         (g)  "Distribution"  shall mean,  with respect to any shares of capital
stock or any  Warrant or right to acquire  shares of capital  stock or any other
security:  (i)  the  retirement,  redemption,  purchase  or  other  acquisition,
directly or indirectly,  for value by the issuer of any such security, except to
the extent that the consideration therefor consists of shares of stock; (ii) the
declaration or (without  duplication)  payment of any dividend in cash, directly
or indirectly,  on or with respect to any such security; (iii) any investment in
the holder of five  percent  (5%) or more of any such  security  if a purpose of
such  investment  is  to  avoid   characterization   of  the  transaction  as  a
Distribution;  and (iv) any other cash payment constituting a distribution under
applicable laws with respect to such security.

         (h) "Event of Default"  shall have the meaning  specified in Section 11
hereof.

         (i) "GAAP" means generally accepted accounting  principles set forth in
the opinions of the  Accounting  Principles  Board of the American  Institute of
Certified Public  Accountants  and/or in statements of the Financial  Accounting
Standards Board, consistently applied.

         (j) Indebtedness  means, (i) indebtedness for borrowed money of for the
deferred  purchase price of property or services in respect of which Borrower is
liable,  contingently or otherwise, as obligor or otherwise or any commitment by
which  Borrower   assures  a  creditor   against  loss,   including   contingent
reimbursement  obligations with respect to letters of credit,  (ii) indebtedness
guaranteed  in any manner by  Borrower  including  guarantees  in the form of an
agreement to repurchase or reimburse, (iii) obligations under leases which shall
have been or should be, in accordance with GAAP,  recorded as capital in respect
of which obligations Borrower is liable,  contingently or otherwise, as obligor,
guarantor or otherwise,  or in respect of which  obligations  assures a creditor
against loss,  and (iv) any unfunded  obligation of Borrower to any benefit plan
or multi-employer plan.

         (k) "Lender Expenses" shall mean: (i) all costs or expenses (including,
without  limitation,  taxes  and  insurance  premiums)  required  to be  paid by
Borrower  under this Agreement or under any of the other Loan Documents that are
paid or advanced by Lender; (ii) filing, recording,  publication and search fees
paid or  incurred  by Lender  in  connection  with  Lender's  transactions  with
Borrower;  (iii) costs and  expenses  incurred by Lender to correct any Event of
Default or enforce any provision of the Loan Documents or in gaining  possession
of, maintaining, handling, preserving, storing, shipping, selling, and preparing
for  sale  or  advertising  to sell  the  Collateral,  whether  or not a sale is
consummated,  in any such case only after the occurrence of an Event of Default;
(iv) costs and expenses of suit incurred by Lender in enforcing or defending the
Loan Documents or any portion

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thereof; (v) costs and expenses incurred by Lender to convert any data submitted
to Lender by  Borrower  to an  acceptable  form;  and (vi)  Lender's  reasonable
attorney  fees  and  expenses  incurred  (before  or  after  execution  of  this
Agreement)  in advising  Lender with  respect to, or in  structuring,  drafting,
reviewing, negotiating, amending, terminating, enforcing, defending or otherwise
concerning,  the Loan Documents or any portion thereof,  irrespective of whether
suit is brought.

         (l)  "Lien"  shall  mean  any  security  interest,   mortgage,  pledge,
assignment,  lien or other encumbrance of any kind,  including any interest of a
vendor under a conditional  sale contract or  consignment  and any interest of a
lessor under a capital lease.

         (m)  "Loan"  shall  mean each loan or any other  loan or loans  made by
Lender to Borrower pursuant to this Agreement.

         (n) "Loan Documents"  shall mean: (i) this Agreement;  (ii) the Secured
Promissory  Note; (iii) the Pledge  Agreement;  (iv) and any other agreements or
documents  hereafter  delivered to secure  repayment of the Loan; (iv) any other
certificates,  documents,  instruments,  or  financing  statements  delivered by
Borrower to Lender pursuant to the terms of this Agreement.

         (o) "Note" shall mean the Secured  Promissory Note executed by Borrower
pursuant to the terms of this Agreement.

         (p)  "Obligations"  shall mean any and all  indebtedness,  obligations,
liabilities,  and guarantees of any kind of Borrower to Lender,  now existing or
hereafter   arising,   and  whether  direct  or  indirect,   acquired  outright,
conditionally,  absolute or contingent,  joint or several, secured or unsecured,
due or not due, contractual or tortuous, liquidated or unliquidated,  arising by
operation of law or otherwise, whether or not of a nature presently contemplated
by the parties or subsequently agreed to by them.

         (q)  "Permitted  Liens" shall mean:  (i) Liens for  property  taxes and
assessments  or  governmental  charges  or levies and Liens  securing  claims or
demands of mechanics and  materialmen,  provided that payment thereof is not yet
due or is being  contested  as  permitted  in this  Agreement;  (ii) Liens of or
resulting  from any  judgment or award,  the time for the appeal or petition for
rehearing of which has not expired,  or in respect of which  Borrower is in good
faith prosecuting an appeal or proceeding for a review and in respect of which a
stay of execution pending such appeal or proceeding for review has been secured;
(iii) Liens and  priority  claims  incidental  to the conduct of business or the
ownership of properties and assets  (including  warehouse's and attorney's Liens
and  statutory  landlord's  Liens);  deposits,  pledges  or Liens to secure  the
performance  of  bids,  tenders,  or trade  contracts,  or to  secure  statutory
obligations;  and surety or appeal bonds or other Liens of like  general  nature
incurred in the  ordinary  course of  business  and not in  connection  with the
borrowing of money;  provided  that in each case the  obligation  secured is not
overdue or, if overdue,  is being contested in good faith by appropriate actions
or  proceedings;  and further  provided that any such  warehouse's  or statutory
landlord's  Liens  have  been  subordinated  to the  Liens of Lender in a manner
satisfactory  to Lender;  and (iv) Liens  existing on the date of this Agreement
that secure Indebtedness of Borrower outstanding on such date and that have been
disclosed to Lender;

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         (r) "Proceeds"  shall mean all proceeds of the Collateral and documents
covering Collateral; all property received wholly or partly in trade or exchange
for Collateral;  and all revenues,  profits and proceeds  arising from the sale,
encumbrance,  collection or any other temporary or permanent  disposition of the
Collateral or any interest therein.

         (s) "Subordinate  Obligations"  shall mean all Indebtedness of Borrower
subordinated to the Obligations  pursuant to subordination  and/or intercreditor
agreements  (the  "Subordination  Agreements")  in form  satisfactory to Lender,
including,  without  limitation the  Indebtedness  set forth on Schedule  1.1(s)
attached hereto.

         (t) All other terms used herein which are not otherwise  defined herein
and are defined in the Uniform  Commercial Code of the State of New York ("UCC")
shall have the meanings therein stated.

         1.2 Generally  Accepted  Accounting  Principles and Uniform  Commercial
Code. All financial  terms used in this  Agreement,  other than those defined in
this Section 1, have the meanings  accorded to them under GAAP.  All other terms
used in this  Agreement,  other than those  defined in this  Section 1, have the
meanings accorded to them in the New York Uniform Commercial Code.

         1.3      Construction.

         (a) Unless the context of this Agreement  clearly  requires  otherwise,
the plural  includes the singular,  the singular  includes the plural,  the part
includes the whole,  "including"  is not  limiting,  and "or" has the  inclusive
meaning of the phrase  "and/or." The words "hereof,"  "hereby,"  "hereunder" and
other similar terms in this Agreement refer to this Agreement as a whole and not
exclusively to any particular provision of this Agreement.

         (b) Neither this  Agreement  nor any  uncertainty  or ambiguity  herein
shall be construed or resolved  against  Lender or Borrower,  whether  under any
rule of  construction  or otherwise.  On the contrary,  this  Agreement has been
reviewed  by each of the parties  and its  counsel  and shall be  construed  and
interpreted  according  to the  ordinary  meaning  of the  words  used  so as to
accomplish the purposes and intentions of all parties hereto fairly.

                                    SECTION 2
                                      LOAN

         2.1      The Loan.

         (a)   Subject  to  the  terms  and   conditions   and  relying  on  the
representations  and  warranties  set forth  herein and  further  subject to the
provisions of Section 2.1(b) hereof, Lender agrees to make Advances as a Loan to
Borrower from time to time during the period  commencing on the Closing Date and
terminating twelve months from the Closing Date in the aggregate amount of up to
Five Hundred Thousand Dollars ($500,000) (the "Amount").


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         (b) Notwithstanding the provisions of Section 2.1(a), Lender shall only
be required to Advance to Borrower  from time to time an aggregate  amount equal
to an aggregate of other loans, advances or investments (collectively the "Other
Financing  Proceeds")  received by the  Borrower or its escrow  agent from other
persons on terms and  conditions  acceptable to the Lender,  provided the Lender
has received evidence acceptable to it that the Borrower or its escrow agent has
received such Other Financing Proceeds, it being agreed that a letter from [Name
of  Firm],  stating  that it has  received  and is  holding  [amount]  of  Other
Financing Proceeds on behalf of the Borrower and that there are no conditions to
[Name of Firm] releasing the Other Financing Proceeds to the Borrower other than
the delivery of the Advances by the Lender to the  Borrower in  accordance  with
the terms of this Agreement,  shall be deemed to be acceptable  evidence for the
purposes hereof.

         2.2 Note.  The Loan made by the Lender  under this  Agreement  shall be
evidenced by, and repaid with interest in accordance with, the terms of the Note
in  substantially  the form attached as Schedule  "2.2" duly  completed,  in the
original  principal amount equal to the Amount,  dated the Closing Date, payable
to the Lender and maturing as to principal on September __, 1999.  The principal
amount of Advances  received by the Borrower  shall be recorded in its books and
records of original  entry,  which  recordations  shall be  conclusive as to the
outstanding balance of and other information related to the Loan.

         2.3 Use of Proceeds. The proceeds of the Loan shall be used by Borrower
for the business purpose(s) set forth in Schedule "2.3."

         2.4 Term of Agreement; Prepayment. The term of this Agreement is twelve
(12) months from the Closing Date.

         2.5  Interest on the Loan.  The Loan shall bear simple  interest at the
rate of twelve  percent  (12%) . Interest  shall be calculated on the basis of a
year of three  hundred  sixty  (360)  days,  but for the  actual  number of days
elapsed.  Interest shall be accrued and paid together with the principal  amount
when such principal is due,  whether on the Due Date (as that term is defined in
the Note) or as a result of acceleration.

         2.6 Conditions to the Closing.  Lender's obligation to make the initial
Advance (the  "Initial  Advance") of the Loan  proceeds  hereunder is subject to
Lender's  determination that Borrower, as of the Closing Date, has substantially
satisfied the following conditions precedent:

         (a) The  representations and warranties set forth in this Agreement and
in the other Loan  Documents  shall be true and correct on and as of the Closing
Date, and Borrower shall have performed all obligations  which were to have been
performed by it hereunder.

         (b)  Lender  shall have  received  each of the  following,  in form and
substance satisfactory to Lender:

                  (i) certified copies of all corporate (including  stockholder,
if required) action taken by Borrower to authorize (A) the borrowings  hereunder
and (B) the execution, delivery and


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performance in accordance with their  respective  terms of this  Agreement,  the
Loan  Documents  and any  other  documents  executed  in  connection  with  this
Agreement;

                  (ii) a certificate of incumbency  with respect to the officers
of  Borrower  authorized  to execute  and deliver  this  Agreement  and the Loan
Documents;

                  (iii) copies of the Certificate of  Incorporation  and By-Laws
of  Borrower,  as  restated  or amended to the date of the making of the Initial
Advance,  certified,  with respect to the Certificate of  Incorporation,  by the
appropriate authority in the jurisdiction of incorporation, and, with respect to
the By-Laws, by an appropriate officer of Borrower;

                  (iv)  certificates  of good  standing  for  Borrower  from the
appropriate  authority in the jurisdiction of  incorporation,  and in each other
jurisdiction in which the Borrower is qualified to do business;

                  (v)   duly executed copies of the Note and the other Loan 
Documents;

                  (vi) a signed copy of the opinion of Robert E.  Meshel,  P.C.,
counsel  for  Borrower,  dated  the  date of the  Initial  Advance,  in the form
attached hereto as Exhibit 2.6(b)(vi)

                  (vii)  acknowledgment  copies  of the  filing  of all  UCC and
similar state  financing  statements  filed in connection with the perfection of
Lender's security interest in the Collateral;

                  (viii)  a  UCC  search   report  and  similar   state  reports
confirming  that there are no liens on the  Collateral  other than those granted
hereby any Permitted Loans; and

                  (ix)  certificates  of  insurance  and  loss  payable  clauses
covering the Collateral and meeting the requirements of paragraph 10.16.

                  (x)  Subordination  Agreements  from the  persons set forth on
Schedule 1.1(s) attached hereto.

         (c) The intended uses of the Advance shall be in strict conformity with
a budget to be agreed upon between Lender and Borrower (the "Budget").

         2.7  Conditions to Advances.  Lender's  obligation to make each Advance
(including  the Initial  Advance) is subject to the  fulfillment  of each of the
following  conditions  immediately  prior  to  or  contemporaneously  with  such
Advance:

         (a) All of the  representations  and  warranties of Borrower made under
this  Agreement  and each other Loan  Document  shall be true and correct in all
material  respects at the time of the disbursement of such Advance as if made as
of such date,  Borrower  shall  have  performed  and  complied  in all  material
respects with all covenants and  agreements  required by this Agreement and each
other Loan  Document to be  performed or complied  with by Borrower,  and Lender
shall have

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received a certificate,  dated the date of the Advance,  signed by the President
of Borrower as to the satisfaction of the foregoing  conditions.  Lender may, in
its sole discretion,  without waiving this condition, consider it fulfilled, and
a  representation  by Borrower to such effect made, if no written  notice to the
contrary is received from Borrower prior to the making of such Advance.

         (b) The corporate  actions of Borrower referred to in Section 2.6(b)(i)
hereof shall remain in full force and effect,  the  incumbency of officers shall
be as stated in the  certificates  of incumbency  delivered  pursuant to Section
2.6(b)(ii) hereof or as subsequently  modified and reflected in a certificate of
incumbency delivered to Lender, the respective Certificates of Incorporation and
ByLaws delivered pursuant to Section 2.6(b)(iii) hereof shall remain unmodified,
Borrower shall remain in good standing in each jurisdiction of incorporation and
in each other  jurisdiction  in which the entity is qualified to do business and
Lender shall have received a certificate,  dated the date of the Advance, signed
by the President of Borrower as to the satisfaction of the foregoing conditions.
Lender may, in its sole discretion,  without waiving this condition, consider it
fulfilled,  and a  representation  by Lender to such effect made,  if no written
notice to the  contrary is received  from  Borrower  prior to the making of such
Advance.

         (c) No Event of Default (as  hereinafter  defined)  shall have occurred
and be continuing and Lender shall have received a  certificate,  dated the date
of the Advance,  signed by the President of Borrower as to the  satisfaction  of
the foregoing conditions.

         (d) There shall not be any litigation,  investigation  or proceeding of
or before any court,  arbitrator  or  authority  pending or  threatened  against
Lender or Borrower  seeking,  nor any injunction,  writ,  temporary  restraining
order or any order or judgment of any nature issued by any court,  arbitrator or
authority  directing,   that  the  transactions   provided  for  herein  not  be
consummated as herein provided.

         (e) Borrower shall have delivered to Lender a purchase order,  executed
on behalf of  Borrower,  with  respect to the  intended  use of the Advance (the
"Purchase Order").

         (f) Borrower  shall not have suffered a material  adverse change in its
business, operations or financial condition from that reflected in the Financial
Statements of Borrower delivered to Lender or otherwise.

         (g) Lender shall have received such  additional  supporting  documents,
certificates  and assurances as Lender shall  reasonable  require which shall be
satisfactory to Lender in form and substance.

         (h) That the repayment of certain indebtedness to the Borrower, and the
rights of the  creditors  relating  to certain  indebtedness  by Borrower in the
aggregate  amount of  $290,000  as of August 31,  1998,  as  represented  in the
Borrower's  draft  balance  sheet of that date  furnished by the Borrower to the
Lender prior to the date  hereof,  and more  particularly  described on Schedule
2.7(h)  attached  hereto,  shall have been  subordinated  in all respects to the
rights of the Lender hereunder and under the other Loan Documents upon terms and
conditions reasonably satisfactory to the Lender

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and the Lender shall have received Subordination  Agreements from such creditors
pursuant to Section 2.6(b)(x).

         (i) Lender shall have received evidence reasonably acceptable to it (as
described in Section  2.1(b)  hereof) that Borrower  and/or its escrow agent has
received Other Financing  Proceeds in the aggregate amount at least equal to the
aggregate amount to the Advances made and to be made.

         2.8 Disbursement of Advances.  Lender is authorized to make any and all
Advances  directly to the vendor  indicated on the  Purchase  Order and all such
payments shall be considered Advances hereunder.

         2.9  One  Loan.  All  Advances  shall   constitute  one  Loan  and  all
Obligations shall constitute one general obligation secured by Lender's security
interest in all of the Collateral and by all other liens heretofore,  now, or at
any time or times  hereafter  granted by Borrower to Lender in  connection  with
this  Agreement.  Borrower  agrees that all of the rights of Lender set forth in
this Agreement or the Note shall apply to any  modification  of or supplement to
this Agreement.

                                    SECTION 3
                                SECURITY INTEREST

         3.1 Grant of Security  Interest.  In order to secure prompt payment and
performance  of all  Obligations,  Borrower  hereby  grants  to  Lender a valid,
binding and continuing first-priority pledge and security interest in all of the
Collateral  whether now owned or existing or  hereafter  acquired or arising and
regardless  of where  located,  subject only to Permitted  Liens.  This security
interest in the Collateral shall attach to all Collateral without further action
on the part of Lender or  Borrower.  The  Collateral  shall be  subject  only to
Permitted  Liens  together  with such  third-party  consents,  lien  waivers and
estoppel certificates as Lender shall reasonably require.

         3.2 Pledge of  Securities.  As  additional  security  to insure  prompt
payment and  performance  of all  Obligations,  Rudy C.  Theale,  Jr., the Chief
Executive  Officer of the Borrower,  has agreed to pledge his equity interest in
the Borrower as more  particularly  set forth under the terms and  conditions of
the "Pledge Agreement."



                                    SECTION 4
                            SPECIFIC REPRESENTATIONS

         4.1 Name of  Borrower.  The  exact  name of the  Borrower  is  LocalNet
Communications, Inc.

         4.2  Mergers  and  Consolidations.  No entity  has  merged  into any of
Borrower or been consolidated with Borrower.

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         4.3  Purchase of Assets.  The  Borrower  has not sold any of its assets
except in the ordinary course of business.

         4.4  Change of Name or  Identity.  Borrower  shall not change its name,
business   structure  or  identity  or  use  a  new  trade  name  without  prior
notification to Lender or merge into or consolidate with any other entity.

                                    SECTION 5
                         PROVISIONS CONCERNING ACCOUNTS

         5.1 Office and Records of Borrower.  Borrower's chief executive offices
are located at: 12735 Gran Bay Parkway West, Building 200, Jacksonville, Florida
32241. Borrower has not at any time within the past month maintained their chief
executive  office or their  records  with  respect to the  Accounts at any other
location (other than at 6440 Atlantic Boulevard,  Jacksonville,  Florida 32211),
and shall not do so hereafter  except with thirty (30) days prior written notice
to Lender.

         5.2 Representations. Borrower represents and warrants that the Accounts
securing this Loan at the time of Closing: (a) will be owned solely by Borrower;
(b) will be for a liquidated  amount maturing as stated in Borrower's books; (c)
will be a bona fide existing  obligation created by the rendition of services to
those  customers set forth in Schedule "3.1;" and (d) will not be subject to any
known deduction,  offset,  counterclaim,  return privilege,  or other condition,
except as reflected on  Borrower's  Books.  Borrower  shall  neither  redate any
invoices  or  reissue  new  invoices  in full  or  partial  satisfaction  of old
invoices. Allowances, if any, as between Borrower and the customers set forth in
Schedule  "3.1"  will be on the same  basis  and in  accordance  with the  usual
customary practices of Borrower as they exist on the date of this Agreement.

         5.3 Lender's  Rights.  Any  officer,  employee or agent of Lender shall
have the right, at any reasonable time or times hereafter, in the name of Lender
or its nominee (including Borrower), to verify the validity, amount or any other
matter  relating  to any  Accounts  by mail,  telephone  or  otherwise;  and all
reasonable costs thereof shall be payable by Borrower to Lender.  Lender, or its
designee  may at any  time  after  default  by  Borrower  hereunder  notify  the
customers set forth in Schedule "3.1" has been assigned to Lender or of Lender's
security  interest  therein and after an Event of Default by Borrower  hereunder
collect  the same  directly  and  charge  all  reasonable  collection  costs and
expenses to Borrower's account.

         5.4 Disclaimer of Liability.  Lender shall not be liable to Borrower or
any third person for the  correctness,  validity or  genuineness  of any checks,
instruments,  or similar  documents  released  or endorsed to Borrower by Lender
(which  shall  automatically  be deemed to be without  recourse to Lender in any
event) or for the existence,  character,  quantity, quality, condition, value or
delivery of any goods  purporting to be represented by any such  documents;  and
Lender,  by accepting a Lien on the Collateral or by releasing any Collateral to
Borrower, shall not be deemed to have assumed any obligation or liability to any
supplier or creditor of Borrower or to any other third party. Borrower agrees to
indemnify  and  defend  Lender and hold it  harmless  in respect to any claim or
proceeding arising out of any matter referred to in this Section 5.4.

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         5.5  Post-Default  Rights.  If an Event of Default has  occurred and is
continuing  hereunder,  no  discount,  credit or  allowance  shall be granted or
permitted  by  Borrower  to  any  Account  Debtor;   provided,   however,  that,
notwithstanding the existence of an Event of Default:  (i) Borrower may continue
to invoice and bill the  customers set forth in Schedule  "3.1" under  discount,
credit and  allowance  arrangements  that  Borrower  maintained  in the ordinary
course of business  prior to such Event of Default  occurring;  and (ii) Account
Debtors may,  during the continuance of an Event of Default,  utilize  discount,
credit and allowance arrangements that Borrower extended to them in the ordinary
course of  business.  Lender may,  after an Event of  Default,  settle or adjust
disputes and claims  directly  with  Account  Debtors for amounts and upon terms
that  Lender  considers  advisable,  and  in  such  cases,  Lender  will  credit
Borrower's  account  with only the net amounts  received by Lender in payment of
such  disputed  Accounts,  after  deducting  all  Lender  Expenses  incurred  in
connection therewith.

         5.6 Year 2000.  The Borrower will not incur any Year 2000 liability (as
that term is hereafter  defined) which will result in a material  adverse affect
on the Borrower, its business,  financial condition or its prospects. "Year 2000
Liability" means any cost, expense, liability or obligation (actual,  potential,
contingent or otherwise) of the Borrower arising out of the failure or inability
of any software, hardware, or systems (whether owned or used by the Borrower and
its any of its  vendors,  customers  or other third  parties) to  correctly  (i)
process,  provide  and  receive  date data within and between the years 1999 and
2000 and (ii) account for all required leap year calculations for the year 2000.


                                    SECTION 6
                         PROVISIONS CONCERNING CONTRACTS

         6.1      Contracts.

         (a)  Schedule  "6.1(a)"  is a true and  complete  list of all  material
contracts  and  agreements  to which  Borrower  is a party  with  respect to the
Collateral or Account Debtors.

         (b)  Borrower  shall not amend,  modify or  supplement  any contract or
agreement  included in the Collateral or waive any provision  thereof other than
in  accordance  with  Borrower's  standard  business  practice,  nor shall  such
standard business practice be materially changed without Lender's consent, which
shall not be unreasonably withheld.

         (c)  Borrower  shall  remain  liable to  perform  all of its duties and
obligations under any contracts and agreements included in the Collateral to the
same extent as if this  Agreement  had not been  executed;  and Lender shall not
have any  obligation or liability  under such contracts and agreements by reason
of this Agreement or otherwise.




                                       10

<PAGE>



         (d)  Borrower  need  not pay any  amount  due  under  any  contract  or
agreement nor otherwise  perform any action required under the terms of any such
contract or agreement, if such payment or performance is being contested in good
faith by appropriate proceedings promptly initiated and diligently conducted, if
Lender is notified in advance of such contest,  and if Borrower  establishes any
reserve or other appropriate provision required by GAAP and deposits with Lender
cash or an acceptable bond reasonably requested by Lender.

                                    SECTION 7
                     OTHER PROVISIONS CONCERNING COLLATERAL

         7.1 Further  Assurances.  Borrower shall execute and deliver to Lender,
concurrent with Borrower's  execution of this Agreement and at any time or times
hereafter  at the  request of Lender,  all  financing  statements,  continuation
financing  statements,  security  agreements,  chattel  mortgages,  assignments,
endorsements  of  certificates of title,  applications  for titles,  affidavits,
reports,  notices,  schedules  of Accounts,  letters of authority  and all other
documents  Lender may reasonably  request,  in form  satisfactory to Lender,  to
perfect and maintain  perfected Lender's Liens in the Collateral and in order to
consummate fully all of the transactions  contemplated under the Loan Documents.
Borrower hereby irrevocably  makes,  constitutes and appoints Lender (and any of
Lender's officers,  employees or agents designated by Lender) as Borrower's true
and  lawful  attorney  with  power to sign the  name of  Borrower  on any of the
above-described  documents  or on any other  similar  documents  that need to be
executed,  recorded  or filed in order to perfect or  continue  to be  perfected
Lender's  Liens in the  Collateral.  Lender shall provide  Borrower with written
notice prior to signing the Borrower's name on the documents referred to in this
Section.

         7.2  Lender's  Duty of Care.  Lender  shall  have no duty of care  with
respect to the Collateral except that Lender shall exercise reasonable care with
respect to the  Collateral in Lender's  custody.  Lender shall be deemed to have
exercised  reasonable care if such property is accorded treatment  substantially
equal to that which  Lender  accords its own  property  or if Lender  takes such
action with respect to the  Collateral as Borrower  shall request to or agree in
writing; provided, however, that neither failure to comply with any such request
nor any  omission to do any such act  requested  by  Borrower  shall be deemed a
failure to exercise  reasonable are.  Lender's failure to take steps to preserve
rights  against  any  parties or  property  shall not be deemed to be failure to
exercise reasonable care with respect to the Collateral in Lender's custody.

         7.3 Lender  Expenses.  If  Borrower  fails,  as  required  by the terms
hereof, (i) to pay any monies (whether taxes, assessments, insurance premiums or
otherwise)  due the third  persons or  entities,  (ii) to make any  deposits  or
furnish any required proof of payment or deposit, or (iii) to discharge any Lien
not permitted  hereby,  then Lender may, to the extent that it  determines  that
such  failure  by  Borrower  could have a material  adverse  effect on  Lender's
interests  in the  Collateral,  in its  discretion  and without  prior notice to
Borrower,  make  payment of the same or any part  thereof.  Any amounts  paid or
deposited by Lender shall constitute  Lender Expenses,  shall become part of the
Obligations,  shall bear interest at a fluctuating  rate equal to the Prime Rate
plus one percent (1%), and shall be secured by the Collateral. Any payments made
by Lender  shall  not  constitute  (a) an  agreement  by Lender to make  similar
payments in the future, or (b) a waiver by Lender of any

                                       11

<PAGE>



Event of Default under this Agreement. Lender need not inquire as to, or contest
the validity of, any such expense,  tax, security interest,  encumbrance or Lien
and the  receipt of the usual  official  notice  for the  payment of moneys to a
governmental  entity shall be conclusive  evidence that the same was validly due
and owing.

         7.4 Inspection of Records.  During usual business hours,  upon at least
twenty-four  (24) hours advance notice via fax and telephone,  Lender shall have
the right to inspect  Borrower's books and records in order to verify the amount
or condition of, or any other matter  relating to, the Collateral and Borrower's
financial condition and to copy and make extracts therefrom; subject always to a
confidentiality undertaking by the Lender.

         7.5  Waivers.  Except as  specifically  provided  for herein,  Borrower
waives demand, protest, notice of protest, notice of default or dishonor, notice
of payment  and  nonpayment,  notice of any  default,  nonpayment  at  maturity,
release, compromise,  settlement,  extension or renewal of any or all commercial
paper,  accounts,  documents,  instruments,  chattel paper and guaranties at any
time held by Lender on which Borrower may in any way be liable.

                                    SECTION 8
                   REPRESENTATIONS AND WARRANTIES OF BORROWER

         As of the date hereof Borrower hereby warrants and represents to Lender
the following:

         8.1 Corporate Status. Borrower is a corporation validly existing and in
good  standing  under  the laws of the State of  Florida.  It is  qualified  and
licensed  to do  business  and is in good  standing  in any  state in which  the
conduct of its  business or its  ownership  of property  requires  that it be so
qualified or licensed,  and has the power and authority (corporate or otherwise)
to execute and carry out the terms of the Loan Documents to which it is a party,
to own its assets and to carry on its business as currently conducted.

         8.2 Authorization. The execution, delivery, and performance by Borrower
of this Agreement and each other Loan  Document(s)  have been duly authorized by
all necessary  corporate  action.  Borrower has duly executed and delivered this
Agreement and each other Loan  Document(s)  to which it is a party,  and each of
them  constitutes  a valid and binding  obligation of Borrower,  as  applicable,
enforceable  according to its terms except as such enforceability may be limited
by equitable principles and by bankruptcy,  insolvency or similar laws affecting
the rights of creditors generally.

         8.3 No Breach.  The execution,  delivery and performance by Borrower of
this  Agreement  and the Loan  Document(s)  to which it is a party  (a) will not
contravene any law or any governmental  rule or order binding on the Collateral;
(b) will not violate any provision of the Articles of  Incorporation  or Bylaws,
as applicable,  of Borrower; (c) will not violate any agreement or instrument by
which  Borrower  is bound;  (d) do not  require  any  notice to  consent  by any
governmental authority; and (e) will not result in the creation of a Lien on any
assets of Borrower except the Lien to Lender granted herein.

                                       12

<PAGE>



         8.4  Taxes.  All  assessments  and taxes,  whether  real,  personal  or
otherwise,  due or payable by or imposed, levied or assessed against Borrower or
any of its  property  have been paid in full  before  delinquency  or before the
expiration of any extension period; and Borrower has made due and timely payment
or deposit of all federal,  state and local taxes,  assessments or contributions
required  of it by law,  except  only  for  items  that  Borrower  is  currently
contesting  diligently  and in good faith and that have been fully  disclosed in
writing  to  Lender  or  that  Borrower  has  reserved   against  its  financial
statements.

         8.5 Litigation and  Proceedings.  Except as set forth in Schedule "8.5"
attached hereto there are no outstanding  judgments  against  Borrower or any of
its  assets  and there are no  actions  or  proceedings  pending  by or  against
Borrower before any Court or administrative agency. Borrower has no knowledge or
belief  of  any  pending,  threatened,  or  imminent  litigation,   governmental
investigations,  or  claims,  complaints,  actions,  or  prosecutions  involving
Borrower.

         8.6 Business.  All of Borrower's franchises,  authorizations,  patents,
trademarks,  copyrights and other rights used to conduct its business are all in
full force and effect and are not in known  conflict  with the rights of others.
Borrower is not a party to or subject to any agreement or restriction that is so
unusual or burdensome that it might have a material adverse effect on Borrower's
business, properties or prospects.

         8.7 Laws and  Agreements.  Borrower is in compliance  with all material
agreements applicable to it, including obligations to contribute to any employee
benefit plan or pension regulated by ERISA.  Borrower is in material  compliance
with all laws applicable to it.

         8.8 Ownership of Collateral. Prior to the Lender making any Loan as set
forth  herein,  the  Borrower  will be the sole  owner  of,  and  have  good and
marketable title to the Collateral pledged as security for such Loan.

         8.9 No Conflict.  The granting of a security interest in the Collateral
to the Lender will not violate the terms or  provisions  of any loan document or
any  other  agreement  to which the  Borrower  then is a party or by which it is
bound.

         8.10 Security Interest. After giving effect to the Loan contemplated by
this  Agreement,  the  Lender  will be the  holder  of a valid  perfected  first
priority  security  interest in the Collateral,  subject to the provisions of an
Intercreditor Agreement among the Lender, [Beacon] and the Borrower of even date
herewith.  The  Collateral  pledged to the Lender  will be free and clear of all
Liens,  except  Permitted  Liens  and the  Accounts  pledged  to the  Lender  in
connection with the Loan as part of the Collateral will be free and clear of all
Liens.

         8.11 Origination of Accounts. Each Account will have been originated by
the  Borrower in the  ordinary  course of its  business in  accordance  with the
Borrower's  regular  credit  approval  process and does not contravene any laws,
rules or  regulations  applicable  thereto.  No pledged  Account  will have been
selected on any basis which would have any adverse effect on the Lender.


                                       13

<PAGE>



         8.12 Legality. The Collateral and the shares of Common Stock pledged in
the  companion  "Pledge   Agreement"  are  not  subject  to  the  laws  of,  any
jurisdiction  whose  laws  would  make  the  terms  hereof  or  any  transaction
contemplated hereby unlawful.

         8.13  Consents.  No consent or approval is required for the pledging of
the Collateral to the Lender pursuant to the terms of this Agreement, except for
such consents or approvals as have been obtained.

         8.14 Financial  Condition.  All financial  statements  and  information
relating to Borrower that have been or may hereafter be delivered by Borrower to
Lender are, to Borrower's best knowledge and belief, accurate and complete, they
present the Borrower's financial condition fairly and they have been prepared in
accordance with GAAP. Borrower has no material obligations or liabilities of any
kind not disclosed in that financial information, and there has been no material
adverse change in the financial condition of Borrower since the date of the most
recent financial statements submitted to Lender.

         8.15  Solvency.  After giving effect to the  transactions  contemplated
hereby and by the other Loan Documents  Borrower now has  sufficient  capital to
carry on the business in which it is now engaged,  is solvent and is able to pay
its debts as they mature.

                                    SECTION 9
                    REPRESENTATIONS AND WARRANTIES OF LENDER

         9.1  Organization,  Power  and  Authority.  Lender  is duly  organized,
validly  existing and in good standing  under the laws of the State of Delaware,
and has the requisite  corporate power and authority to carry on its business as
it is not being conducted.

         9.2 Due Authorization;  Binding Obligation. The execution, delivery and
performance  of  this  Agreement  and  the   consummation  of  the  transactions
contemplated  by this  Agreement  have been  duly  authorized  by all  necessary
corporate  action.  This  Agreement is a valid and binding  obligation of Lender
enforceable in accordance with its terms.  Neither the execution and delivery of
this Agreement,  nor the consummation of the  transactions  contemplated by this
Agreement will not conflict with or violate any provisions of the Securities Act
of  1933  and/or  the  Securities  Exchange  Act of  1934,  and/or  any  related
Securities  and  Exchange   Commission  Rules,  and/or  Rules  of  the  National
Association  of  Securities  Dealers,  and/or the Articles of  Incorporation  or
By-Laws of Lender, or of any law, ordinance or regulation or any decree or order
of any  Court or  administrative  or other  governmental  body  which is  either
applicable to,  binding upon or enforceable  against it; result in any breach of
or default under a material  mortgage,  contract,  agreement,  indenture,  will,
trust or other  instrument  which is either binding upon or enforceable  against
Lender or its assets;  violate any legally  protected right of any individual or
entity or give to any individual or entity a right or claim; or impair or in any
way  limit  any   governmental  or  official   license,   approval,   permit  or
authorization.

                                   SECTION 10

                                       14

<PAGE>



                                    COVENANTS

         10.1  Encumbrance  of  Collateral.  Borrower  shall not create,  incur,
assume  or permit to exist  any Lien on the  Collateral  now owned or  hereafter
acquired by Borrower,  except for Liens to Lender and Permitted  Liens under the
terms of this Agreement.

         10.2   Assignability.  Borrower shall not sell, assign, or transfer the
Collateral now owned or hereafter acquired by Borrower during the term of this 
Agreement.

         10.3 Business.  Borrower shall engage primarily in business of the same
general character as that now conducted by Borrower.

         10.4  Condition and Repair.  Borrower shall maintain in good repair and
working order all properties  used in their business and form time to time shall
make all appropriate repairs and replacements thereof.

         10.5 Taxes.  Borrower  shall file all tax and  information  returns and
reports  required by all taxing  authorities and pay all taxes,  assessments and
other governmental charges imposed upon it or any of its assets or in respect of
any of its  franchises,  business,  income or  profits  before  any  penalty  or
interest accrues thereon, and all claims (including,  without limitation, claims
for labor,  services,  materials and supplies) for sums that have become due and
payable  and that by law have or might  become a Lien or charge  upon any of its
assets,  provided  that  (unless any  material  item or property  would be lost,
forfeited or  materially  impaired as a result  thereof) no such charge or claim
need be paid if it is being  contested in good faith by appropriate  proceedings
promptly initiated and diligently conducted, if Lender is notified in advance of
such  contest,  and if Borrower  establishes  any  reserve or other  appropriate
provision required by GAAP. Borrower shall make timely payment or deposit of all
FICA payments and withholding  taxes required of it by applicable laws and will,
upon request,  furnish Lender with proof  satisfactory to Lender indicating that
Borrower has made such payments or deposits.

         10.6 Accounting System.  Borrower at all times hereafter shall maintain
a standard and modern system of accounting  books and records in accordance with
GAAP,  with ledger and account  cards or computer  tapes,  disks,  printouts and
records that contain information pertaining to the Collateral that may from time
to time be requested by Lender.  Borrower  will  provide  reasonable  protection
against  loss of or damage to books of record and  account.  Borrower  shall not
modify or change its method of accounting or enter into any agreement  hereafter
with any  third-party  accounting  firm or service bureau for the preparation or
storage of  Borrower's  accounting  records  without said  accounting  firm's or
service  bureau's  agreeing  to  provide  to Lender  information  regarding  the
collateral and Borrower's financial condition.

         10.7 Quarterly Financial  Statements.  Borrower shall furnish Lender as
soon as practicable  but in no event later than  forty-five  (45) days after the
end of each of the first three (3) quarterly  fiscal periods of each fiscal year
with unaudited quarterly financial  statements in form and substance as required
by Lender, including a balance sheet, an income statement and a statement of

                                       15

<PAGE>



cash  flows,  prepared  in  accordance  with GAAP  together  with a  certificate
executed by the chief financial or accounting  officer of Borrower  stating that
the financial statements fairly represent the financial condition of Borrower as
of the  date  and for  the  periods  covered  and  that  as of the  date of such
certificate  there has not been any violation of any provision of this Agreement
or the happening of any Event of Default or unmatured default hereunder.

         10.8 Annual Financial Statements. Borrower shall furnish Lender as soon
as  practicable  but in no event  later than ninety (90) days after the close of
each fiscal year with  audited  annual  financial  statements,  which  financial
statements  shall be prepared  in  accordance  with GAAP and shall be  certified
without  qualification  by  an  independent  certified  public  accounting  firm
satisfactory  to  Lender.  With all  financial  statements,  Borrower  will also
deliver a certificate  of its chief  financial or accounting  officer  attesting
that no Event of Default or unmatured  default  under the Agreement has occurred
and is continuing.

         10.9 Punctual  Payment.  Borrower will duly and  punctually pay any and
all  amounts  payable  under  the  Note and the  other  Loan  Documents,  all in
accordance  with  the  terms  thereof.  Borrower  will  comply  with  all of the
covenants, agreements and other conditions contained in this Agreement, the Note
and the other Loan Documents.

         10.10  Corporate  Existence.   Borrower  will  maintain  its  corporate
existence  and  the  quali  fication  and  good  standing  of  Borrower  in  all
jurisdictions  in which such  qualification  and good  standing are necessary in
order for Borrower to conduct its businesses and own its properties.

         10.11  Compliance with Laws and Regulations.  Borrower will comply,  in
all material respects with all laws, statutes, rules,  regulations,  ordinances,
judgments,  writs,  decrees,  and orders of any governmental  body applicable to
Borrower and Borrower  will not fail to obtain (and will not allow to lapse) any
license, permit or other authorization which may be or become necessary in order
for  Borrower  to conduct  its  business,  own its  properties,  and perform its
Obligations under this Agreement, the Note or the other Loan Documents.

         10.12    Tax Obligations.

                  (a) Borrower  shall file all tax and  information  returns and
reports  required by all taxing  authorities  (all prepared in  accordance  with
applicable law), pay or cause to be paid all license fees,  bonding premiums and
related taxes and charges,  and pay or cause to be paid all income,  employment,
real and  personal  property  taxes and  other  governmental  taxes and  charges
assessed  against  Borrower,  or payable by Borrower,  at such times and in such
manner as to prevent any penalty or interest from accruing or any Lien or charge
from  attaching to any assets or property of Borrower;  provided  that  Borrower
shall have the right to contest any such fees, premiums, taxes and charges prior
to the payment thereof for so long as such contest is pursued  diligently and in
good faith by appropriate proceedings.

                  (b) Borrower  shall notify  Lender  promptly  (and in no event
later than fifteen (15) days) after becoming aware of the intent of the Internal
Revenue Service or other taxing authority

                                       16

<PAGE>



(the "Taxing  Authority")  to assert a deficiency  with respect to it, and shall
promptly (and in no event later than fifteen (15) days following  receipt of any
notice of deficiency)  inform Lender of such proposed  deficiency and deliver to
Lender a copy of any notices of deficiency  received from the Taxing  Authority.
If  Lender  so  requests  and if there is a  reasonable  legal  basis  therefor,
Borrower shall,  take all reasonable  actions  necessary to contest such claimed
deficiency and shall appoint outside tax counsel acceptable to Lender to contest
such claims of  deficiency  and shall direct such counsel to consult with and to
provide Lender with periodic  status reports and assessments of the legal merits
of the contest.  At Lender's  request,  such contest shall continue  through the
appropriate  administrative  and court procedures  including  appeals  therefrom
until such  outside tax counsel  informs  Lender that further  contest  would be
inadvisable  taking into  account  all  factors  (including  any  settlement  or
compromise proposed by the Taxing Authority).

         10.13  Litigation  and Other  Proceedings.  Borrower will notify Lender
promptly after  Borrower  knows of (i) the  institution or threat of any action,
suit, proceeding, governmental investigation or arbitration against or affecting
Borrower or any of the material  assets or property of any of them,  or (ii) any
material  development  in  any  such  action,  suit,  proceeding,   governmental
investigation or arbitration.

         10.14 Labor  Relations.  Borrower  will  notify  Lender  promptly  upon
learning  of any  labor  dispute  to which  Borrower  may be a party  and  which
involves  any  group  of  employees  or  independent  sales  representatives  of
Borrower.

         10.15  Insurance.  Borrower  will carry and  maintain in full force and
effect at all times with  financially  sound and  reputable  insurers (or, as to
workers'  compensation  or  similar  insurance,  in  an  insurance  fund  or  by
self-insurance  authorized  by the  jurisdiction  in which  its  operations  are
carried on):

                  (a)   all worker's compensation or similar insurance as may be
required under the laws of any jurisdiction;

                  (b) public  liability  insurance  against  claims for personal
injury,  death or property  damage suffered upon, in or about any premises owned
or occupied by it or  occurring  as a result of the  ownership,  maintenance  or
operation by it of any automobile,  truck or other vehicle or as a result of any
services rendered by it;

                  (c)  insurance   against  loss  or  damage  by  fire,   theft,
pilferage,  explosion,  spoilage or other casualty, with a replacement value and
agreed amount endorsement; and

                  (d) insurance  against such other risks as are usually insured
against  by  persons of  established  reputation  engaged in the same or similar
businesses and similarly situated or as may be reasonably required by Lender.

The  insurance  specified  in the  foregoing  clauses  (b), (c) and (d) shall be
maintained  with respect to Borrower and the Collateral in such form and in such
amounts as Lender may from time to time

                                       17

<PAGE>



require,  including  provisions  (A) requiring that coverage  evidenced  thereby
shall not be terminated or materially  modified  without thirty (30) days' prior
written  notice  to  Lender,  and (B)  requiring  that no  claims  shall be paid
thereunder   without  ten  (10)  days'   advance   written   notice  to  Lender.
Additionally, all such insurance shall be in the name of and with loss or damage
payable to Borrower and to Lender, as their interests may appear. Borrower shall
deliver to Lender the original or duplicate  policies,  or certificates or other
evidence  satisfactory  to Lender,  of compliance  with the foregoing  insurance
provisions.  Borrower assumes all  responsibility and liability arising from the
use of the Collateral,  either for negligence or otherwise,  by whomsoever used,
employed or operated,  and will defend,  indemnify and hold Lender harmless from
and against any and all claim,  loss or damage to persons or property  caused by
the  Collateral  or by its use and  operation,  except any such  claim,  loss or
damage directly caused by the gross negligence or willful misconduct of Lender.

         10.16 Use of Loan  Proceeds.  Except  with  written  consent of Lender,
Borrower  shall use the  proceeds of the Loan,  as drawn down from time to time,
strictly in accordance with the Budget.

         10.17  Indemnification.  Borrower  shall  indemnify,  defend  and  hold
harmless  Lender  and each  holder  of the Note and in each  case its  officers,
directors,  agents and  employees  from and against all  losses,  costs,  fines,
liabilities,  judgments, actions, penalties, damages, injuries, claims, demands,
disbursements  and expenses,  including  reasonable  attorneys'  fees and costs,
arising out of (a) claims by or on behalf of any brokers,  finders or investment
bankers made with respect to the  transactions  contemplated  by this Agreement;
(b) the execution or consummation of this Agreement,  the Note or the other Loan
Documents; (c) the operation or maintenance of any of the Collateral; or (d) any
aspect of, or any  transaction  contemplated by or referred to in, or any matter
related to, this Agreement, in each case whether or not Lender or such holder is
a party thereto,  except to the extent such losses,  cost,  fines,  liabilities,
judgments, actions, penalties, damages, injuries, claims, demands, disbursements
and expenses are directly caused by the gross  negligence or willful  misconduct
of Lender or such holder.  Borrower  shall assume the  settlement and defense of
any suit or other legal proceeding brought to enforce any of the foregoing (with
counsel reasonably  satisfactory to Lender), and shall pay all judgments entered
in any such suit or legal  proceeding.  Borrower  shall not compromise or settle
any such suit or other legal  proceeding  without the prior  written  consent of
Lender,  which consent shall not be unreasonably  withheld.  The indemnities and
assumptions of liabilities and obligations herein provided for shall continue in
full force and effect notwithstanding the termination of this Agreement.

         10.18  Notice of  Default.  Promptly  after  becoming  aware of (a) the
existence of (i) any Event of Default  hereunder  on the part of Borrower,  (ii)
any  default by  Borrower  in the  fulfillment  of any of the terms,  covenants,
provisions or conditions of this Agreement or any of the Loan Documents or (iii)
any default under any material note, indenture, loan agreement, mortgage, lease,
deed or similar  agreement or material  contract to which Borrower is a party or
by which it or its  assets  or  property  may be bound or  affected;  or (b) any
indebtedness  of Borrower  being  declared  due and  payable  before its express
maturity,  or any holder of such  indebtedness  having the right to declare such
indebtedness  due and  payable  before  its  express  maturity,  because  of the
occurrence of any default (or any event which, with notice and/or lapse of time,
shall  constitute  any  such  default)  under  such  indebtedness;  or  (c)  any
litigation, suit or administrative proceeding affecting

                                       18

<PAGE>



Borrower  whether or not the claim is  considered  by  Borrower to be covered by
insurance, which litigation,  suit or administrative proceeding has an amount in
controversy  in excess of $25,000 in each instance or $175,000 in the aggregate,
then in each case a certificate of an authorized  financial  officer of Borrower
describing  the nature and status of such  matters and what  action  Borrower is
taking or proposes to take with respect thereto.

         10.19 Notice of Material Adverse Change.  Promptly after becoming aware
of  any  material  adverse  change  in  the  business,   assets,  operations  or
conditions,  financial or otherwise,  of Borrower,  a  certificate  of the chief
financial officer of Borrower setting forth the details of such material adverse
change and  stating  what  action  Borrower  has taken or  proposes to take with
respect thereto.

         10.20 Other  Information.  Borrower shall promptly  furnish Lender such
other  information   respecting  the  condition  or  operations,   financial  or
otherwise, of Borrower,  insurance coverage and other matters as Lender may from
time to time reasonably request;  provided that from and after the occurrence of
an Event of  Default,  all  reports  required  to be  provided to Lender may, at
Lender's  discretion,  be required to be provided with more frequency and within
shorter time periods than otherwise provided.

         10.21 Working  Capital Ratio.  Borrower  shall, at all times during the
term of this  Agreement  and during the period that any amounts are  outstanding
under the Note,  maintain a minimum ratio of Current  Assets (as that is defined
under GAAP) to Current  Liabilities  (as that term is defined  under GAAP) of at
least 1 to 1.

         10.22 Negative Covenants. From and after the date hereof and continuing
so long as any of the  Obligations  shall  remain  unpaid,  unless  Lender shall
otherwise consent in writing:

          (a)  Conduct  of  Business.  Borrower  will not cease to  continuously
               engage in its business as currently  operated.  Borrower will not
               engage in, directly or indirectly,  in any other line of business
               without the prior written  consent of Lender.  Borrower shall not
               change its name,  identity or  structure  or operate its business
               under any other name.

          (b)  Transaction  with Affiliates;  Fees.  Except for the transactions
               contemplated  hereby  and by the other Loan  Documents,  Borrower
               will not enter into, directly or indirectly, any transaction with
               any  officer,  director,  employee,  shareholder  or affiliate of
               Borrower,   except  transactions  (including  without  limitation
               payment of salaries to employees who are also  shareholders) with
               officers,  directors or employees made in the ordinary  course of
               business  and upon  fair and  reasonable  terms  which  are fully
               disclosed to Lender in advance; or pay, fees (including,  without
               limitation,  management fees) to any officer, director, employee,
               partner,  shareholder  or  affiliate,  other than in the ordinary
               course of business.

          (c)  Liens. Borrower will not create or suffer to exist, any Lien upon
               or with respect to their respective assets or properties, whether
               now owned or hereafter acquired, or

                                       19

<PAGE>



                  assign any right to receive income, in each case to secure any
                  indebtedness of any person, except Liens in favor of Lender.

          (d)  Dividends  and Stock  Redemptions.  Borrower  will not declare or
               pay,  directly  or  indirectly,  any  dividends,  or  purchase or
               otherwise  acquire  for  value  any of its  capital  stock now or
               hereafter outstanding;  or make any distribution of assets to its
               stockholders.

          (e)  Compensation.  Borrower will not pay any bonus, grant any option,
               provide any perquisites to, or pay any other compensation to, any
               officer,  director,  or employee or sales representative which is
               not provided for in an  employment or other  agreement  with such
               person or is inconsistent with past practice.  Additionally,  the
               Borrower will not amend any  employment or other  agreement  with
               any officer,  director,  employee or sales  representative  which
               provides for  extraordinary  compensation in type or amount which
               is inconsistent with past practice.

          (f)  Amendments.  Borrower will not request,  permit or consent to any
               amendment to its Certificate of  Incorporation,  By-Laws or other
               organizational  documents,  which amendment could have an adverse
               effect on Lender in its capacity as lender or secured party under
               this Agreement.

          (g)  Environmental  Matters.  Borrower shall not for itself, nor shall
               it knowingly  permit any other party to,  discharge  any toxic or
               hazardous  waste or material in or on the property used in any of
               its   business,   other  than  in  compliance   with   applicable
               environmental  laws and  regulations,  or  otherwise  violate  or
               permit a  violation  of any  applicable  law or  regulation  with
               respect to environmental  matters.  If and to the extent required
               by applicable  environmental laws or regulations,  Borrower shall
               remove and  otherwise  mitigate  the  effects of any such  waste,
               material  or  violation  and  shall  protect  the  value  of  the
               Collateral.  In the event  Borrower  fails to do so in accordance
               with applicable environmental laws or regulations,  upon not less
               than thirty (30) days (or lesser period if determined  reasonably
               necessary  by  Lender)  written  notice to  Borrower,  Lender may
               remove  or  mitigate  the  effects  of such  waste,  material  or
               violation  and any  amounts  paid by Lender to remove or mitigate
               the effects of such waste material or violation  shall be part of
               the Obligations.  Nothing contained in the immediately  preceding
               sentence  shall  be  construed  to  imply  that  Lender  has  any
               responsibility for any obligation to remove or otherwise mitigate
               the effects of such waste, material or violations.

          (h)  Other  Actions.  Borrower will not,  take any action  outside the
               usual and ordinary  course of business and  consistent  with past
               practice,  except in strict  conformity with the Budget.  Without
               limiting the generality of the foregoing, Borrower will not, make
               any  investments in or loans to, or otherwise  acquire any of the
               capital stock of, or any equity or  proprietary  interest in, any
               other person or entity.


                                       20

<PAGE>



                                   SECTION 11
                                EVENTS OF DEFAULT

         11.1 Event of Default.  An Event of Default shall be deemed to exist if
any of the following events shall have occurred and be continuing:

         (a) Borrower  fails to make any payment of principal or interest or any
other  payment  on the Note on the Due Date,  and such  failure  shall  continue
uncured after written notice by Lender for seven (7) business days;

         (b)  Borrower  fails to observe or perform any  covenant,  condition or
agreement to be observed or performed  pursuant to the terms  hereof,  any other
Loan Document or any loan or lease  agreement  with respect to  Indebtedness  to
which  it is a party  and  such  failure  is not  cured  as  soon as  reasonably
practicable  and in any event  within  fifteen  (15) days after  written  notice
thereof by Lender;  provided,  however,  if such failure is susceptible or cure,
but to cure will take longer than fifteen  (15) days and  provided  further that
Borrower is diligently  working to cure the default,  the cure period pay exceed
fifteen (15) days but in no event shall it exceed sixty (60) days;

         (c) A Court  enters a decree or order for relief in respect of Borrower
in an involuntary  case under any applicable  bankruptcy,  insolvency,  or other
similar  law then in effect,  or  appoints  a  receiver,  liquidator,  assignee,
custodian,  trustee,  or sequestrator (or other similar official) of Borrower or
for any substantial part of its property, or orders the windup or liquidation of
Borrower's  affairs; or a petition initiating an involuntary case under any such
bankruptcy,  insolvency, or similar law is filed against Borrower and is pending
for sixty (60) days without dismissal;

         (d)  Borrower   commences  a  voluntary   case  under  any   applicable
bankruptcy,  insolvency or other  similar law then in effect,  makes any general
assignment  for the benefit of creditors,  fails  generally to pay, or admits in
writing  its  inability  to pay,  its debts as such debts  become  due,  becomes
insolvent or takes corporate action in furtherance of any of the foregoing;

         (e) Final  judgment  for the payment of money on any claim in excess of
Twenty Five Thousand Dollars  ($25,000) is rendered against Borrower and remains
undischarged  for thirty (30) days during  which  execution  is not  effectively
stayed;

         (f) The  Pledgor of the Loan  revokes or attempts to revoke his pledge,
or becomes the subject of an  insolvency  proceeding  of the type  described  in
clauses (c) or (d) above with respect to Borrower or fails to observe or perform
any covenant,  condition or agreement to be performed under any Loan Document to
which it is a party;

         (g)  Borrower   makes  any  payment  on  account  of  any   Subordinate
Obligations,  other than  payments  specifically  permitted by the terms of such
subordination of this Agreement;


                                       21

<PAGE>



         (h) Any person holding any Subordinate  Obligations becomes the subject
of any  proceeding  resulting  in a final  adjudication  that the  subordination
arrangement is terminated, or terminates the subordination arrangement.

         (i) The  Collateral  or any part  thereof  is sold,  agreed to be sold,
conveyed or allocated by operation of law or otherwise;

         (j) Borrower is enjoined,  restrained  or in any way prevented by Court
order  from  continuing  to conduct  all or any  material  part of its  business
affairs;

         (k) A judgment or other claim in excess of Twenty Five Thousand Dollars
($25,000)  becomes a Lien upon any or all of  Borrower's  assets,  other  than a
Permitted Lien;

         (l) A notice of Lien,  levy or  assessment  in  excess  of Twenty  Five
Thousand  Dollars  ($25,000)  is filed of record  with  respect to any or all of
Borrower's assets by the United States Government, or any department, agency, or
instrumentality  thereof, or by any state, county, municipal or other government
authority;  or any tax or debt owing at any time hereafter to any one or more of
such entities  becomes a Lien upon any or all of Borrower's  assets and the same
is not paid on the payment date  thereof,  except to the extent such tax or debt
is being contested by Borrower as permitted in Section 8.4; or

         (m) There is a material  impairment  of the value of the  Collateral or
priority of Lender's Liens on the Collateral.

         (n) If any warranty, representation or statement of fact made herein or
furnished  to  Lender  at any time by or on  behalf  of any of the  Borrower  or
Pledgor  proves to have been false or  misleading  in any material  respect when
made or furnished;

         (o) If the  Borrower  shall  execute  or file a  certificate  or  other
instrument  evidencing  the legal  change of name without  furnishing  Lender at
least ten (10) days' prior written notice thereof;

         (p) In the event the Borrower shall be dissolved;

         (q) the Borrower shall fail to maintain its corporate existence in good
standing;

         (r) If the  Borrower  shall  make or send  notice of an  intended  bulk
transfer,  or fail, after demand, to furnish any financial information or permit
the inspection of books or records of account;

         (s) If the Borrower shall voluntarily or otherwise suspend or interrupt
the  transaction  of its usual business for ten (10) business days other than by
reason of strikes.

         11.2 Transfer of  Collateral.  Upon and during the  continuation  of an
Event of  Default,  at its  discretion,  Lender  may,  whether or not any of the
Obligations be due, in its name or in the name of Borrower or otherwise,  notify
any account debtor or the obligor on any instrument to make

                                       22

<PAGE>



payment to Lender,  demand, sue for, collect or receive any money or property at
any time  payable or  receivable  on account of or in exchange  for, or make any
commercially reasonable compromise or settlement deemed desirable by Lender with
respect to, any of the  Collateral,  but shall be under no  obligation to do so,
and/or  Lender  may  extend  the  time  of  payment,   arrange  for  payment  in
installments,  or otherwise  modify the terms of the Collateral on  commercially
reasonable  terms, or release any of the Collateral,  without thereby  incurring
responsibility  to, or  discharging  or otherwise  affecting  any  liability of,
Borrower.  At any time,  Lender  may  assign,  transfer  and/or  deliver  to any
transferee  of any  of the  Obligations  any  or  all  of  the  Collateral,  and
thereafter Lender shall be fully discharged from all responsibility with respect
to the Collateral so assigned,  transferred  and/or  delivered.  Such transferee
shall be vested with all the powers and rights of Lender  hereunder with respect
to such  Collateral,  but Lender shall retain all rights and powers hereby given
with respect to any of the Collateral not so assigned, transferred or delivered.

                                   SECTION 12
                                    REMEDIES

         12.1 Specific Remedies.  Upon the occurrence of any Event of Default or
at any  time  thereafter  Lender  may  declare  the  Loan to be due and  payable
immediately upon notice, whereupon they shall immediately become due and payable
without  presentment,  demand,  or protest of any kind,  all of which are hereby
expressly  waived by Borrower  and Lender  shall have the  following  rights and
remedies  in addition  to all rights and  remedies of a secured  party under the
Uniform Commercial Code or other applicable statute or rule relating to Security
Interests in Accounts and otherwise, in any jurisdiction in which enforcement is
sought, all such rights and remedies being cumulative and not exclusive:

         (a) Lender may set off  against  the Loan,  the  Collateral  and/or the
shares of Common Stock  pledged under the companion  Pledge  Agreement,  and all
balances, credits, deposits,  accounts, or moneys of Borrower then or thereafter
held with Lender, including amounts represented by certificates of deposit.

         (b) Lender may pay,  purchase,  contest or compromise any  encumbrance,
charge or Lien that,  in the opinion of Lender,  appears to be prior or superior
to its Lien and pay all reasonable expenses incurred in connection therewith.

         (c) Lender may:  (i) notify the  Account  Debtors set forth in Schedule
"3.1" to make  payment on Accounts  directly  to Lender;  (ii)  settle,  adjust,
compromise,  extend  or renew  Accounts  in a  commercially  reasonable  manner,
whether  before  or after  legal  proceedings  to  collect  such  Accounts  have
commenced;  (iii)  prepare  and file any  bankruptcy  proofs of claim or similar
documents  against  any  Account  Debtor;  (iv)  prepare  and file  any  notice,
assignment,  satisfaction,  or release of Lien, UCC termination statement or any
similar  document;  (v) sell or assign  Accounts,  individually or in bulk, upon
such  terms,  for such  amounts,  and at such  time or  times in a  commercially
reasonable manner; and (vi) complete the performance  required of Borrower under
any contract or agreement to which Borrower is a party and out of which Accounts
arise or may arise.

                                       23

<PAGE>



         (d)  Lender  may at any time and from time to time,  with or (if and to
the extent  permitted by applicable  law) without process of law and with or (if
and to the extent permitted by applicable law) without the aid and assistance of
others,  enter upon any premises in which the Collateral or any part thereof may
be located and, without resistance or interference by Borrower,  take possession
of the Collateral;  and/or dispose of all or any part of the Collateral  located
on any  premises of  Borrower;  and/or  require  Borrower  to assemble  and make
available  to  Lender  all or any part of the  Collateral  at any place and time
designated by Lender;  and/or remove all or any part of the Collateral  from any
premises on which any part  thereof may be located for the purpose of  effecting
preservation or sale or other disposition thereof;  and/or sell, resell,  lease,
assign and deliver,  or otherwise dispose of, the Collateral or any part thereof
in its existing  condition on  commercially  reasonable  terms or following  any
commercially  reasonable  preparation  or  processing,   at  public  or  private
proceedings,  in one or more  parcels  at the same or  different  times  with or
without  having the  Collateral at the place of sale or other  disposition,  for
cash, upon credit or for future delivery, and in connection therewith Lender may
grant  options,  at such place or places and time or times and to such  persons,
firms or corporations on commercially reasonable terms as Lender deems best, and
without demand for performance, and/or liquidate or dispose of the Collateral or
any part thereof in any other commercially  reasonable  manner.  Provided notice
has been given in  accordance  herewith,  failure of  Borrower to contest on the
grounds of commercial reasonability shall be deemed a waiver of said defense.

         (e) If any of the  Collateral  is sold by  Lender  upon  credit  or for
future delivery,  Lender shall not be liable for the failure of the purchaser to
purchase or pay for the same and, in the event of any such  failure,  Lender may
resell  such  Collateral.  Borrower  hereby  waives  all  equity  and  right  of
redemption.  Lender may buy any part or all of the Collateral at any public sale
and if any part of the  Collateral  is of a type which is the  subject of widely
distributed  standard  price  quotations,  Lender may buy at a private sale, all
free from any equity or right of redemption  which is hereby waived and released
by  Borrower,  and Lender may make  payment  therefor  (by  endorsement  without
recourse)  in notes of  Borrower  to the  order of Lender in lieu of cash to the
amount then due thereon which Borrower hereby agrees to accept.

         (f) Lender may apply the cash proceeds  actually received from any sale
or other  disposition to the expenses of selling,  to all reasonable  legal fees
and expenses,  court costs,  collection charges, travel and other expenses which
may be incurred by Lender in attempting to collect the Obligations or to enforce
this Agreement and realize upon the Collateral, or in the prosecution or defense
of any action or proceeding related to the subject matter of this Agreement; and
then to the  Obligations in such order and as to principal  and/or  interest due
under the Note as Lender  may in its sole  discretion  determine;  and  Borrower
shall at all times be and remain liable and, after crediting the net proceeds of
sale or other disposition as aforesaid, will pay Lender on demand any deficiency
remaining,  including  interest  thereon and the balance of any  expenses at any
time  unpaid,  with any surplus to be paid to  Borrower,  subject to any duty of
Lender to the holder of any  subordinate  security  interest  in the  Collateral
known to Lender but only to the extent required by law.


                                       24

<PAGE>



         12.2  Proceeds.  Any of the  proceeds  of the  Collateral  received  by
Borrower shall not be commingled  with other property of Borrower,  but shall be
segregated,  held by Borrower in trust for Lender as the  exclusive  property of
Lender,  and Borrower will immediately  deliver to Lender the identical  checks,
moneys or other proceeds of Collateral received, and Lender shall have the right
to  endorse  the name of  Borrower  on any and all  checks,  or  other  forms of
remittance  received,  where such endorsement is required to effect  collection.
Borrower hereby designates,  constitutes and appoints Lender and any designee or
agent of Lender as attorney-in-fact  of Borrower,  irrevocably and with power of
substitution, to endorse the name of Borrower on any notes, acceptances, checks,
drafts, money orders or other evidences of payment or proceeds of the Collateral
that may come into  Lender's  possession;  to sign the name of  Borrower  on any
invoices,  documents,  drafts against account debtors of Borrower,  assignments,
requests for  verification  of accounts  and notices to debtors of Borrower;  to
execute any  endorsements,  assignments,  or other  instruments of conveyance or
transfer;  and to do all other acts and things  necessary  and  advisable in the
sole discretion of Lender to carry out and enforce this Agreement. Said attorney
or designee  shall not be liable for any acts or  commission or omission nor for
any error of  judgment  or mistake of fact or law.  This  power of  attorney  is
coupled  with an interest and  irrevocable  while any of the  Obligations  shall
remain unpaid.

                                   SECTION 13
                                  MISCELLANEOUS

         13.1 Liability Disclaimer.  Except for reasonable care of Collateral in
its  possession,  under no  circumstances  whatsoever  shall Lender be deemed to
assume any  responsibility  for, or obligation or duty with respect to, any part
or all of the  Collateral,  of any nature or kind  whatsoever,  or any matter or
proceeding  arising out of or relating thereto.  Lender shall not be required to
take  any  action  of any  kind  to  collect  or  protect  any  interest  in the
Collateral,  including, but not limited to, any action necessary to preserve its
or Borrower's  rights  against prior  parties to any of the  Collateral.  Lender
shall not be  liable  or  responsible  in any way for the  safekeeping,  care or
custody of any of the Collateral  (except for  reasonable  care of Collateral in
its possession), or for any loss or damage thereto, or for any diminution in the
value  thereof,  or for any act or  default  of any agent or bailee of Lender or
Borrower,  or of any carrier,  forwarding agency or other person whomsoever,  or
for the  collection  of any proceeds,  but the same shall be at Borrower's  sole
risk at all times.  Borrower hereby  releases Lender from any claims,  causes of
action and demands at any time arising out of or with respect to this  Agreement
or the Obligations,  and any actions taken or omitted to be taken by Lender with
respect  thereto,  except  for such  claims,  causes of action,  demands  and/or
actions directly caused by Lender's gross negligence or willful misconduct,  and
Borrower  agrees to defend and hold Lender harmless from and with respect to any
and all such  claims,  causes of action and  demands,  except  for such  claims,
causes of action,  demands  and/or  actions  directly  caused by Lender's  gross
negligence or willful misconduct.  Lender's prior recourse to any part or all of
the Collateral shall not constitute a condition of any demand for payment of the
Obligations  or of any  suit  or  other  proceeding  for the  collection  of the
Obligations.

         13.2 Delay and Waiver. No delay or omission to exercise any right shall
impair  any such  right  or be a  waiver  thereof,  but any  such  right  may be
exercised from time to time and as often as

                                       25

<PAGE>



may be deemed expedient and no single or partial waiver by Lender of any default
or other  right or remedy  which it may have  shall  operate  as a waiver of any
other  default,  right or  remedy or of the same  default,  right or remedy on a
future  occasion.  A waiver on one occasion shall be limited to that  particular
occasion.

         13.3 Waivers.  Borrower hereby waives  presentment,  notice of dishonor
and protest of all instruments  included in or evidencing any of the Obligations
or the Collateral and any and all other notices and demands  whatsoever  (except
as expressly  provided herein) whether or not relating to such  instruments.  In
the event of any  litigation  at any time  arising  with  respect  to any matter
connected with this  Agreement or the  Obligations,  Borrower  hereby waives the
right to a trial by jury and Borrower hereby waives any and all rights of setoff
and rights to interpose  counterclaims  of any nature  except for  counterclaims
which are compulsory or which would be lost for failure to be raised.

         13.4  Application of Payments.  In addition to its other rights herein,
Lender shall have the  continuing  and  exclusive  right to apply or reverse and
reapply any and all  payments to any portion of the  Obligations.  To the extent
that  Borrower  makes a payment or  payments  to Lender or Lender  receives  any
payment or proceeds of any security for such Obligations for Borrower's benefit,
which payment(s) or proceeds or any part thereof are  subsequently  invalidated,
declared to be  fraudulent  or  preferential,  set aside  and/or  required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal  law,  common law or  equitable  cause,  then,  to the extent of such
payment or proceeds  received,  the  Obligations or part thereof  intended to be
satisfied  shall be revived and  continue  in full force and effect,  as if such
payment or proceeds had not been received by Lender.

         13.5  Consent to  Jurisdiction.  As a further  inducement  to Lender to
enter into this Agreement and to make the Advances and in consideration thereof,
Borrower  covenants  and agrees that (i) any state or federal  court  within the
State of New York shall  have  personal  jurisdiction  over  Borrower,  and (ii)
service of any  summons  and  complaint  or other  process in any such action or
proceeding  may be made by registered or certified  mail directed to Borrower at
Borrower's  address set forth  below,  and service so made shall be deemed to be
completed  upon the  earlier of actual  receipt or three (3) days after the same
shall have been posted as aforesaid,  Borrower hereby waiving  personal  service
thereof.  Nothing in this  paragraph  shall  affect the right of Lender to serve
legal process in any other manner permitted by law or affect the right of Lender
to bring any action or proceeding against Borrower or its property in the courts
of any other  jurisdiction.  Borrower  and  Lender  agree that any claim or suit
between or among the parties hereto  involving this Agreement,  any of the other
Loan  Documents  or any  transactions  contemplated  hereby or thereby  shall be
brought in and decided by the state or federal  courts located in Nassau County,
New York.

         13.6  Complete  Agreement.   This  Agreement,  the  Schedules  and  the
companion  Loan Documents are the complete  understanding  of the parties hereto
and supersede all previous understandings relating to the subject matter hereof.
This  Agreement may be amended only by an instrument in writing that  explicitly
states that it amends this  Agreement  and is signed by the party  against  whom
enforcement  of the  amendment  is sought.  This  Agreement  may be  executed in
counterparts, each of which will be an original and all of which will constitute
a single Agreement.

                                       26

<PAGE>




         The representations,  warranties, covenants and agreements set forth in
this Agreement and in the financial  statements and schedules delivered pursuant
hereto constitute all the representations,  warranties, covenants and agreements
of the  parties  and upon which the  parties  have  relied,  shall not be deemed
waived or otherwise  affected by any investigation made by any party hereto and,
except  as  may  be  specifically  provided  herein,  no  change,  modification,
amendment,  addition or  termination of this Agreement or any part thereof shall
be valid unless in writing and signed by or on behalf of the party to be charged
therewith.

         13.7  Severability;  Headings.  If any  part of this  Agreement  or the
application thereof to any Person or circumstance is held invalid, the remainder
of this Agreement shall not be affected thereby. The Section headings herein are
included  for  convenience  only and  shall  not be  deemed to be a part of this
Agreement.

         13.8 Binding Effect.  This Agreement shall be binding upon and inure to
the benefit of the respective legal  representatives,  successors and assigns of
the  parties  hereto;  however,  Borrower  may not  assign  any of its rights or
delegate any of its Obligations hereunder.  Lender (and any subsequent assignee)
may  transfer  and assign  this  Agreement  and deliver  the  collateral  to the
assignee,  who shall thereupon have all of the rights of Lender;  and Lender (or
such  subsequent  assignee  who in turn  assigns  as  aforesaid)  shall  then be
relieved and discharged of any  responsibility  or liability with respect to his
Agreement and said Collateral.

         13.9 Notices.  Any notices under or pursuant to this Agreement shall be
deemed  duly  sent  when  delivered  in hand or when  mailed  by  registered  or
certified mail, return receipt  requested,  or when delivered by courier or when
transmitted by telex,  telecopy,  or similar  electronic medium to the following
addresses:




   If to Borrower:       LocalNet Communications, Inc.
                         12735 Gran Bay Parkway West, Building 200
                         Jacksonville, Florida  32241
                         Telephone:        (904) 680-6690
                         Telecopier:       (904) 680-6642
                         Attention:        Rudy C. Theale, Jr., CEO


                With a copy to:

                         Robert E. Meshel, P.C.
                         601 California Street, Suite 1900
                         San Francisco, California  94108
                         Telephone:        (415) 956-2436

                                       27

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                         Telecopier:       (415) 956-4971
                         Attention:        Robert E. Meshel, Esq.

         If to Lender:
                         Compu-DAWN, Inc.
                         77 Spruce Street
                         Cedarhurst, New York  11516
                         Telephone:        (516) 374-6700
                         Telecopier:       (516) 374-9410
                         Attention:        Mark Honigsfeld, CEO


            With a copy to:
                         Certilman Balin Adler & Hyman, LLP
                         90 Merrick Avenue
                         East Meadow, New York  11554
                         Telephone:        (516) 296-7000
                         Telecopier:       (516) 296-7111
                         Attention:        Fred Skolnik, Esq. and
                                           Gavin C. Grusd, Esq.

         Either party may change such address by sending notice of the change to
the other  party;  such change of address  shall be  effective  only upon actual
receipt of the notice by the other party.

         13.10 Governing Law. All acts and transactions hereunder and the rights
and  obligations  of  the  parties  hereto  shall  be  governed,  construed  and
interpreted in accordance with the laws of the State of New York, without giving
effect to conflicts of law principles.

         13.11 No Third Party Beneficiaries.  No person or entity not a party to
this Agreement shall be entitled to the benefits of, or may rely on, or enforce,
this Agreement or the other Loan Documents.

         13.12 Publicity. Borrower will not issue any report, statement, release
or other public  announcement (in the case of a verbal announcement Lender shall
approve the script of such

                                       28

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announcement)  pertaining  to the  matters  contemplated  by this  Agreement  or
otherwise disclose the terms hereof without the prior written consent of Lender.

         IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement by
their duly authorized officers as of the date first above written.

                                  LENDER:

ATTEST:                           Compu-DAWN, Inc.

                                  By: /s/ Mark Honigsfeld                      
                                     -----------------------------------------
                                     Mark Honigsfeld, Chief Executive Officer

                                  BORROWER:

ATTEST:                           LocalNet Communications, Inc.
       
                                  By: /s/ Rudy C. Theale, Jr.
                                     ------------------------------------------
                                     Rudy C. Theale, Jr.,Chief Executive Officer


                                       29

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                                SCHEDULE 1.1 (s)

                             SUBORDINATE OBLIGATIONS


1.       Name                                        Amount
         ----                                        ------
         Rudy C. Theale                              $140,000
         Robert E. Turner IV                          100,000
         Robert E. Meshel                              50,000


2.       Boca Research,  Inc.  shall  subordinate  its security  interest in the
         assets of the Borrower to the security interest of the Lender.

                                       30

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                                  SCHEDULE 2.2

                    12% ONE (1) YEAR SECURED PROMISSORY NOTE

See attached.

                                       31

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                                  SCHEDULE 2.3

                                 USE OF PROCEEDS


Proceeds will be used for the purposes listed on the attached schedule.


                                       32

<PAGE>



                              SCHEDULE 2.6 (b)(iv)

                                 FORM OF OPINION


See attached.

                                       33

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                                SCHEDULE 2.7 (h)

                         INDEBTEDNESS TO BE SUBORDINATED


See Schedule 1.1(s)(1).

                                       34

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                                SCHEDULE 6.1(a).

                        MATERIAL CONTRACTS AND AGREEMENTS


See attached.

                                       35

<PAGE>


                                  SCHEDULE 8.5

                          OUTSTANDING CLAIMS/LITIGATION


None.


                                       36

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