Document:

EXHIBIT 10.8
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                                 LOAN AGREEMENT

           This LOAN AGREEMENT, dated as of June 4, 2002, is made by and between
LocatePLUS Holdings Corporation, a Delaware corporation which has a place of
business at 100 Cummings Center, Beverly, Massachusetts 01915 (the "Borrower"),
Mr. Jon Latorella, a Massachusetts resident ("Mr. Latorella"), and Gemstone
Investment Company, Inc., with a principal place of business at 320 Main Street,
Worcester, Massachusetts 01608 (the "Lender"). The Borrower, Mr. Latorella, and
the Lender are referred to collectively as the "parties".

                          W I T N E S S E T H T H A T :

           IN CONSIDERATION OF THE MUTUAL COVENANTS CONTAINED HEREIN AND FOR
OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE
ACKNOWLEDGED BY EACH OF THE PARTIES, THE PARTIES HAVE AGREED AS FOLLOWS:

SECTION 1. FINANCING ARRANGEMENT.

           1.1 LOAN TRANSACTION. In consideration for a wire transfer of
US$750,000.00 to be made upon the execution of this Agreement by all parties
(the "Loan"), Borrower agrees to execute a US$750,000 promissory note
substantially in the form attached hereto as EXHIBIT A (the "Note").

           1.2 USE OF PROCEEDS. The proceeds to the Loan shall be used to
acquire data and for general working capital. Mr. Latorella represents and
warrants that he holds the majority of the issued voting securities of the
Borrower.

           1.3 SECURITY. Prompt repayment of the Loan shall be secured pursuant
to (I) the terms of a Security Agreement, substantially in the form attached
hereto as EXHIBIT B (the "Security Agreement"), and (II) a pledge by Mr.
Latorella of 5,000,000 shares of Class A Voting Common Stock of the Borrower
pursuant to a pledge agreement substantially in the form attached hereto as
EXHIBIT C (the "Pledge Agreement"), and (III) a mortgage on real property owned
by Mr. Latorella, substantially in the form attached hereto as EXHIBIT D (the
"Mortgage"). Each of the Security Agreement, the Pledge Agreement and the
Mortgage shall be executed prior to the advancement of the Loan. The property
subject to the Security Agreement, Pledge Agreement and Mortgage is referred to
in this Agreement as the "Collateral".

SECTION 2. REPRESENTATIONS, WARRANTIES AND COVENANTS.

           2.1 INFORMATION TO BE FURNISHED. The Borrower covenants and agrees
that, so long as any obligation under or with respect to this Agreement, the
Note or the Loan is outstanding, the Borrower shall permit the Lender's
representatives to visit and inspect any of its properties, to examine and make
extracts from its financial records, and to discuss its affairs, finances and
accounts, all at such reasonable times and as often as the Lender may reasonably
request.

           2.2 NOTICE OF DEFAULT. The Borrower and Mr. Latorella each covenant
and agree to notify the Lender promptly if any event occurs or condition exists
which constitutes, or which after notice or lapse of time, or both, would
constitute an "Event of Default", as defined in Section 3, below.

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SECTION 3. EVENTS OF DEFAULT.

           3.1 REMEDIES. Upon the occurrence of any one of the following (each,
an "Event of Default"):

                     (A) any default by the Borrower in the payment when due and
           payable of any principal of or interest on the Note or any part
           thereof;

                     (B) any default in the performance or observance by the
           Borrower of any terms, conditions or agreements contained herein and
           continuance thereof unremedied for thirty days after notice of such
           default has been received by the Borrower from any source (or if such
           default can not be remedied within thirty days, if action
           satisfactory to the Lender is not taken with respect thereto within
           thirty days);

                     (C) the institution of bankruptcy, reorganization,
           arrangement, liquidation, receivership, moratorium or similar
           proceedings by or against the Borrower or Mr. Latorella, and if
           instituted against the Borrower or Mr. Latorella, as applicable, its
           or his consent thereto or the pendency thereof for sixty days;

                     (D) any statement or other information furnished by the
           Borrower to Lender under or in connection with this Agreement shall
           prove to be false or misleading in any material respect as of the
           time made or furnished; or

                     (E) loss, theft, damage or destruction of any substantial
           portion of any collateral for the obligations of the Borrower or Mr.
           Latorella or the making of any levy, seizure, or attachment of the
           Collateral by any third party,

THEN, or at any time thereafter while such Event of Default is continuing,
Lender may, at Lender's option, proceed to do any one or more of the following:

                     (I) to declare the Note and all other indebtedness of the
           Borrower to the Lender to be forthwith due and payable, whereupon the
           same shall become forthwith due and payable without presentment,
           demand, protest or notice of any kind, all of which are hereby
           expressly waived;

                     (II) exercise any of the rights and remedies granted or
           available to it, whether provided under this Agreement, under the
           Note or otherwise, including any rights Lender may have as a secured
           party; and

                     (III) proceed to protect and enforce Lender's rights by an
           action at law, suit in equity or other appropriate proceeding,
           whether for specific performance of or for an injunction against a
           violation of any covenant contained herein or in the Note.

           3.2 REMEDIES OF DEFAULTS. If Borrower or Mr. Latorella, as
applicable, shall remedy all Events of Default prior to the Lender's full
recovery of all indebtedness due to under the Note then, to the extent that the
Borrower' obligations hereunder shall not then have been fully discharged and
satisfied, the Lender, at its sole discretion, may rescind any acceleration of
the maturity of any indebtedness then due to the Lender hereunder or any other
action which it may have taken, and the Borrower shall in such event be deemed
reinstated with respect to such remaining obligations as if no Event of Default
had occurred.

           3.3 PAYMENT OF COSTS OF COLLECTION. In the case of a default in the
payment of any principal of or interest on the Note, the Borrower will pay to
Lender such further amount as shall

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be sufficient to cover the cost of expenses of collection, including but not
limited to reasonable attorneys' fees and cost.

           3.4 REMEDIES CUMULATIVE. No right, power or remedy conferred upon the
Lender hereby or by the Note shall be exclusive of any other right, power or
remedy referred to herein or therein or now or hereafter available at law, in
equity, by statute or otherwise.

SECTION 4. GENERAL.

           4.1 NO WAIVER BY IMPLICATION. No failure or delay on the part of the
Lender in exercising any right hereunder shall operate as a waiver thereof or of
any other right, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or of any other right or remedy.

           4.2 WHEN WAIVER EFFECTIVE. No modification or waiver of any provision
of this Agreement or of the Note and no consent to departure by the Borrower or
Mr. Latorella therefrom shall in any event be effective unless the same shall be
in writing, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice or demand on
the Borrower or Mr. Latorella in any case shall entitle the Borrower or Mr.
Latorella to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any right of the Lender to take action
without notice or demand.

           4.3 NOTICE. All notices and other communications to any party
pursuant to this Agreement shall be in writing and shall be deemed to have been
given when delivered in hand or three business days after being properly
deposited in the mails, first class postage prepaid, addressed to such party at
its address given at the beginning of this Agreement or at any such other
address as may be specified in writing by the party to whom such notice is
given, or one business day after dispatch of a telegram, telex or telefax,
addressed to such party as provided above or at such other address of the
recipient as is appropriate for the means of communication involved.

           4.4 WAIVERS AND ASSENTS. The Borrower and Mr. Latorella waive notice
of acceptance of this Agreement, notice of loans made, credit extended, and all
other actions taken in reliance hereon. With respect to both obligations and
collateral, the Borrower and Mr. Latorella assent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange or release of collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payments thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the Lender may deem
advisable. No waiver shall be valid unless in writing and signed by the parties
and then only to the extent set forth in such writing. TO THE EXTENT PERMITTED
BY APPLICABLE LAW, EACH OF THE BORROWER AND MR. LATORELLA WAIVES ITS AND HIS
RIGHTS TO TRIAL BY JURY WITH RESPECT TO THIS AGREEMENT AND ALL RIGHTS TO REQUIRE
THE LENDER TO ELECT AMONG ANY OF LENDER'S REMEDIES WITH RESPECT TO THIS
AGREEMENT OR ANY COLLATERAL.

           4.5 SEALED INSTRUMENT; SUCCESSORS AND ASSIGNS. This Agreement,
intended to take effect as a sealed instrument, shall be binding upon and inure
to the benefit of the Lender and the Borrower and his respective successors and
assigns, except that the Borrower and Mr. Latorella may not assign or transfer
its and his rights hereunder.

           4.6 GOVERNING LAW. This Agreement and the Note shall be deemed to be
contracts under the laws of the Commonwealth of Massachusetts. The Borrower and
Mr. Latorella each

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hereby submit to the jurisdiction of the courts of the Commonwealth of
Massachusetts and the United States District Court for the District of
Massachusetts, as well as to the jurisdiction of all courts to which an appeal
may be taken or other review sought from the aforesaid courts, for the purpose
of any suit, action or other proceeding arising out of any of the Borrower's or
Mr. Latorella's obligations under or with respect to this Agreement, expressly
waive any and all objections it or he may have as to venue in any of such
courts, and agree that service of process may be made by mailing a copy of the
summons to the Borrower and Mr. Latorella at its or his address set forth above.

           4.7 PROVISIONS SEVERABLE. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective, valid and
enforceable under applicable law. The provisions of this Agreement are
severable, however, and if any of these provisions shall be held by any court of
competent jurisdiction to be unenforceable, such holding shall not affect or
impair any other provision hereof, or, to the extent not invalidated, the effect
of said unenforceable provisions in other jurisdictions.

           4.8 RIGHTS AND REMEDIES CUMULATIVE. The rights and remedies set forth
herein are cumulative and not exclusive of any other right which this or any
subsequent holder or holders of the Note would otherwise have.

           4.9 CAPTIONS. The captions in this Agreement are for convenience of
reference only and shall not define or limit the provisions of this Agreement.

           4.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed and delivered shall be deemed an
original but all of which together shall constitute but one Agreement, and it
shall not be necessary to produce or account for more than one such counterpart.

                            [SIGNATURE PAGE FOLLOWS]

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                                                   LOAN AGREEMENT SIGNATURE PAGE

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

                                             BORROWER:

                                       LOCATEPLUS HOLDINGS CORPORATION

                                       ---------------------------
                                       By: Jon R. Latorella, President

                                       LATORELLA:

                                       ---------------------------
                                       Jon R. Latorella, individually

      LENDER:

GEMSTONE INVESTMENT COMPANY, INC.

By: _________________________

Its: _________________________

                                        5EXHIBIT 10.9
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                               SECURITY AGREEMENT

           This SECURITY AGREEMENT ("Agreement") is made as of this June 4,
2002, by and between LocatePLUS Holdings Corporation, a Delaware corporation
with a principal place of business located at 100 Cummings Center, Suite 235M,
Beverly, Massachusetts 01915 ("Debtor"), and Gemstone Investment Company, Inc.,
a resident residing at 320 Main Street, Worcester, Massachusetts 01608 ("Secured
Party").

           WHEREAS, pursuant to a Loan Agreement of even date herewith, Debtor
executed a Promissory Note (the "Note") as of the date hereof evidencing a loan
from the Secured Party as set forth in the Note (the "Secured Obligation"); and

           WHEREAS, Debtor is the owner of the Pledged Collateral (as defined in
Section 1); and

           WHEREAS, Secured Party's willingness to extend said Loan to Debtor
was subject to the condition that Debtor execute and deliver this Security
Agreement to secure the Loan.

           NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, Debtor and Secured Party agree as follows:

           SECTION 1.GRANT OF SECURITY INTERESTS. As security for the prompt and
complete payment and performance when due of all the Secured Obligations, Debtor
hereby pledges, assigns, transfers and grants to Secured Party a continuing
security interest in and to all of the following property (collectively, the
"Pledged Collateral"): all of the right, title and interest of Debtor in, to and
under (I) all Receivables (as defined in Section 17 of this Agreement) now
existing or hereafter arising from time to time; (II) all Inventory (as defined
in Section 17) now existing or hereafter acquired from time to time; (III) all
books, records, ledgers, print-outs, file materials and other papers containing
information relating to Receivables and any account debtors in respect thereof,
together with all Contracts (as defined in Section 17) now existing or hereafter
arising from time to time; (IV) all Equipment (as defined in Section 17) now
existing or hereafter acquired from time to time; (V) all Intangibles (as
defined in Section 17) now existing or hereafter acquired from time to time;
(VI) all Investment Property (as defined in Section 17) now existing or
hereafter acquired from time to time; (VII) all Insurance Policies (as defined
in Section 17) now existing or hereafter acquired from time to time; (VIII) all
Licenses (as defined in Section 17) now existing or hereafter arising from time
to time; and (IX) any and all other property of the Debtor of every name and
nature which from time to time after the date hereof, by delivery or by writing
of any kind for the purposes hereof, shall have been conveyed, mortgaged,
pledged, assigned or transferred by Debtor or by anyone on its behalf or with
its consent to the Secured Party, as and for additional security for the payment
of the Secured Obligation; and all Proceeds of any and all of the foregoing.

           SECTION 2. SECURED OBLIGATION. This Security Agreement secures, and
the Pledged Collateral is collateral security for, the prompt payment and
performance in full when due, whether at stated maturity, by acceleration
pursuant to the terms of the Note or otherwise (including, without limitation,
the payment of interest and other amounts which would accrue and become due but
for the filing of a petition in bankruptcy or the operation of the automatic
stay under Section 362(a) of the Bankruptcy Code) of all obligations of the
Debtor now or hereafter arising under or in respect of the Note or this Security
Agreement (including, without limitation, the Debtor's obligation to pay
principal and interest and all other charges, fees, expenses, commissions,
reimbursements, indemnities and other payments related to or in respect of the
obligations contained in the Note or this Security Agreement).

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           SECTION 3. NO RELEASE. Nothing set forth in this Security Agreement
shall relieve the Debtor from the performance of any term, covenant, condition
or agreement on the Debtor's part to be performed or observed under or in
respect of any of the Pledged Collateral, or from any liability to any Person
under or in respect of any of the Pledged Collateral, or impose any obligation
on the Secured Party to perform or observe any such term, covenant, condition or
agreement on the Debtor's part to be so performed or observed, or shall impose
any liability on the Secured Party for any act or omission on the part of the
Debtor relating thereto, or for any breach of any representation or warranty on
the part of the Debtor contained in this Security Agreement or the Note, or in
respect of the Pledged Collateral or made in connection herewith or therewith.
The obligations of the Debtor contained in this Section 3 shall survive the
termination of this Security Agreement and the discharge of the Debtor's other
obligations hereunder and under the Note.

           SECTION 4. REPRESENTATIONS, WARRANTIES AND COVENANTS. The Debtor
covenants as follows:

                     (A) NECESSARY FILINGS. The Debtor shall deliver to Secured
           Party such documents, or shall make such filings, endorse such
           certificates or otherwise do such things necessary or appropriate to
           perfect the security interest of Secured Party with respect to the
           Pledged Collateral under the provisions of the applicable law
           (including, without limitation, the Uniform Commercial Code) as in
           effect in Massachusetts or such other jurisdiction where such Pledged
           Collateral is located.

                     (B) LOCATION OF INVENTORY. All Inventory now held or
           subsequently acquired by the Debtor shall be located and remain on
           property or premises owned, rented and/or leased by the Debtor on the
           date hereof, except for Inventory in transit in the ordinary course
           of business to such locations, or such new location as Debtor may
           establish if (I) Debtor shall have given to Secured Party at least 45
           days prior written notice of such intention, clearly describing such
           new location and providing such other information in connection
           therewith as Secured Party may request; and (II) with respect to such
           new locations, the Debtor shall have taken all action satisfactory to
           Secured Party to maintain the perfection and proof of the security
           interest in the Pledged Collateral intended to be granted hereby,
           including, without limitation, obtaining waivers of any landlord's or
           warehouseman's liens with respect to such new location and amending
           this Security Agreement accordingly.

                     (C) LOCATION OF EQUIPMENT. All Equipment held on the date
           hereof by the Debtor shall be located on property or premises owned,
           leased and/or rented by the Debtor on the date hereof, except that
           Equipment may be removed from these locations solely for the purpose
           of performing repairs to such Equipment; PROVIDED that (I)
           immediately upon completion of the repair work, such Equipment shall
           be returned to said property and or premises; and (II) the aggregate
           value of all Equipment not located on said property or premises at
           any one time shall not exceed $50,000. All Equipment now held or
           subsequently acquired shall be kept on property or premises owned,
           leased or rented by Debtor as of the date hereof, or such new
           location as the Debtor may establish if (I) Debtor shall have given
           to the Secured Party at least 45 days prior written notice of such
           intention, clearly describing such new location and providing such

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           other information in connection therewith as Secured Party may
           request; and (II) with respect to such new location, Debtor shall
           have taken all action satisfactory to Secured Party to maintain the
           perfection and proof of the security interest of Secured Party in the
           Pledged Collateral intended to be granted hereby, including, without
           limitation, obtaining waivers of any landlord's or warehouseman's
           liens with respect to such new location and amending this Security
           Agreement accordingly.

           SECTION 5. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF
DEBTOR. The Debtor hereby repeats each of the representations and warranties
made by the Debtor and contained or incorporated by reference in the Note as
fully as if each such representation and warranty were expressly set forth
herein and expressly made herein by the Debtor on and as of the date hereof,
each such representation and warranty being incorporated in this Security
Agreement by reference MUTATIS MUTANDIS.

           SECTION 6. SPECIAL PROVISIONS CONCERNING RECEIVABLES.

                     (A) SPECIAL REPRESENTATIONS AND WARRANTIES. As of the time
           when each of its Receivables arises, Debtor shall be deemed to have
           represented and warranted that such Receivable and all records,
           papers and documents relating thereto: (I) are genuine and in all
           material respects what they purport to be, (II) represent the legal,
           valid and binding obligation of the account debtor evidencing
           indebtedness unpaid and owed by such account debtor arising out of
           the performance of labor or services or the sale or lease and
           delivery of the merchandise listed therein, or both, (III) will,
           except for the original or duplicate original invoice sent to a
           purchaser evidencing such purchaser's account, be the only original
           writings evidencing and embodying such obligation of the account
           debtor named therein, (IV) constitute and evidence true and valid
           obligations, enforceable in accordance with their respective terms,
           except as the binding nature thereof may be limited by applicable
           bankruptcy, insolvency, reorganization or moratorium or other similar
           laws from time to time in effect affecting the enforcement of
           creditors' rights and remedies generally and by general principles of
           equity (regardless of whether enforcement is sought in a proceeding
           at law or in equity), and (V) in all material respects are in
           compliance and conform with all applicable federal, state and local
           laws and applicable laws of any relevant foreign jurisdiction.

                     (B) MAINTENANCE OF RECORDS. Debtor shall keep and maintain
           at its own cost and expense satisfactory and complete records of each
           Receivable, in a manner consistent with prudent business practices,
           for at least three years from the date on which such Receivable comes
           into existence, including, without limitation, records of all
           payments received, all credits granted thereon, all merchandise
           returned and all other documentation relating thereto, and Debtor
           shall make the same available to Secured Party for inspection, at
           Debtor's own cost and expense, at any and all reasonable times upon
           demand. Upon the occurrence and during the continuance of an Event of
           Default (as defined in Section 3 of the Loan Agreement), Debtor
           shall, at its own cost and expense, deliver all tangible evidence of
           Receivables (including, without limitation, all documents evidencing
           Receivables) and such books and records to Secured Party or to its
           representatives (copies of which evidence and books and records may
           be retained by Debtor) at any time upon Secured Party's demand. Upon
           the occurrence and during the continuance of an Event of Default,
           Secured Party may transfer a full and complete copy of Debtor's
           books, records, credit information, reports, memoranda and all other
           writings

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           relating to the Receivables to and for the use by any Person that has
           acquired or is contemplating acquisition of an interest in the
           Receivables or Secured Party's security interest therein without the
           consent of Debtor.

                     (C) LEGEND. Debtor shall legend, in form and manner
           satisfactory to Secured Party, the Receivables and other books,
           records and documents of Debtor evidencing or pertaining to the
           Receivables with an appropriate reference to the fact that the
           Receivables have been assigned to Secured Party and that Secured
           Party has a security interest therein.

                     (D) MODIFICATION OF TERMS, ETC. Subject to the provisions
           of Section 6(e), Debtor shall not rescind or cancel any indebtedness
           evidenced by any Receivable or modify any term thereof or make any
           adjustment with respect thereto, or extend or renew any such
           indebtedness, or compromise or settle any dispute, claim, suit or
           legal proceeding relating thereto, or sell any Receivable or interest
           therein, without the prior written consent of the Secured Party.
           Debtor shall timely fulfill in all material respects all obligations
           on its part to be fulfilled under or in connection with the
           Receivables.

                     (E) COLLECTION. Debtor shall take all commercially
           reasonable actions to cause to be collected from the account debtor
           of each of the Receivables, as and when due (including, without
           limitation, Receivables that are delinquent, such Receivables to be
           collected in accordance with generally accepted commercial collection
           procedures), any and all amounts owing under or on account of such
           Receivable, and apply forthwith upon receipt thereof all such amounts
           as are so collected to the outstanding balance of such Receivable,
           except that Debtor may allow in the ordinary course of business (I) a
           refund or credit due as a result of returned or damaged or defective
           merchandise and (II) so long as no Event of Default shall exist and
           be continuing, such extensions of time to pay amounts due in respect
           of Receivables and such other modifications or payment terms or
           settlements in respect of Receivables as shall be commercially
           reasonable in the circumstances, all in accordance with Debtor's
           ordinary course of business consistent with its collection practices
           as in effect from time to time. The costs and expenses (including,
           without limitation, attorneys' fees and the allocated costs of
           internal counsel) of collection, whether incurred by Debtor or
           Secured Party, shall be paid by Debtor. The Secured Party shall have
           the right at any time to notify an account debtor or the obligor on
           any insurance with respect to a Receivable of the security interest
           herein and to make payment directly to the Secured Party.

           SECTION 7. PROVISIONS CONCERNING ALL PLEDGED COLLATERAL.

                     (A) PROTECTION OF SECURED PARTY'S SECURITY. Debtor shall
           not take any action that impairs the rights of Secured Party in the
           Pledged Collateral. Debtor shall at all times keep the Inventory and
           Equipment insured in favor of Secured Party, at the Debtors' own
           expense, to Secured Party's reasonable satisfaction against fire,
           theft and all other risks to which the Pledged Collateral may be
           subject, in such amounts (but in no event greater than the
           replacement cost thereof) and with such deductibles as would be
           maintained by operators of businesses similar to the business of
           Debtor or as Secured Party may otherwise require. Each policy or
           certificate with respect to such insurance shall be endorsed to
           Secured Party's satisfaction for the benefit of Secured Party
           (including, without limitation, by naming Secured Party as an
           additional named insured or an additional loss payee as Secured Party
           may request) and such policy or

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           certificate shall be delivered to Secured Party. Each such policy
           shall state that it cannot be cancelled without 30 days' prior
           written notice to Secured Party. At least 30 days prior to the
           expiration of any such policy of insurance, Debtor shall deliver to
           Secured Party an extension or renewal policy or an insurance
           certificate evidencing renewal or extension of such policy. If Debtor
           shall fail to insure such Pledged Collateral to Secured Party's
           reasonable satisfaction or if Debtor shall fail to so endorse and
           deposit, or to extend or renew, all such insurance policies or
           certificates with respect thereto, Secured Party shall have the right
           (but shall be under no obligation) to advance funds to procure or
           renew or extend such insurance and Debtor agrees to reimburse Secured
           Party for all costs and expenses thereof, with interest on all such
           funds from the date advanced, at the highest rate then payable under
           the Note. Except to the extent such proceeds are used to repair,
           replace or improve damaged Equipment as provided in Section 7(h),
           Secured Party may apply any proceeds of such insurance when received
           by it toward the payment of any of the Secured Obligations in such
           order as Secured Party shall determine.

                     (B) MAINTENANCE OF EQUIPMENT. Debtor shall cause the
           Equipment to be maintained and preserved in the same condition,
           repair and working order as when new, ordinary wear and tear
           excepted, and to the extent consistent with past business practice in
           accordance with any manufacturer's manual, and shall forthwith, or in
           the case of any loss or damage which (individually or in the
           aggregate) exceeds $100,000 to any of the Equipment (of which prompt
           notice shall be given to the Secured Party), as quickly as
           practicable after the occurrence thereof, make or cause to be made
           all repairs, replacements and other improvements in connection
           therewith which are necessary or desirable to such end.

                     (C) PAYMENT OF TAXES; CLAIMS. Debtor shall pay promptly
           when due all property and other taxes, assessments and governmental
           charges or levies imposed upon, and all claims (including claims for
           labor, materials and supplies) against, the Pledged Collateral.

                     (D) FURTHER ACTIONS. Debtor shall, at its own expense,
           make, execute, endorse, acknowledge, file and/or deliver to Secured
           Party from time to time such lists, descriptions and designations of
           the Pledged Collateral, copies of warehouse receipts, receipts in the
           nature of warehouse receipts, bills of lading, documents of title,
           vouchers, invoices, schedules, confirmatory assignments, supplements,
           additional security agreements, conveyances, financing statements,
           transfer endorsements, powers of attorney, certificates, reports and
           other assurances or instruments and take such further steps relating
           to the Pledged Collateral and other property or rights covered by the
           security interest hereby granted, which Secured Party deems
           appropriate or advisable to exercise and enforce its rights and
           remedies hereunder with respect to any Pledged Collateral and to
           perfect, preserve or protect the security interest in the Pledged
           Collateral created by this Agreement.

                     (E) FINANCING STATEMENTS. Debtor shall sign and deliver to
           Secured Party such financing and continuation statements, in form
           acceptable to Secured Party, as may from time to time, be rehired to
           continue and maintain a valid, enforceable, security interest in the
           Pledged Collateral as provided herein and the other rights, as
           against third parties, provided hereby, all in accordance with the
           Uniform Commercial Code as

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           enacted in any and all relevant jurisdictions or any other relevant
           law. Debtor shall pay any applicable filing fees and other expenses
           related to the filing of such financing and continuation statements.
           Debtor authorizes Secured Party to file any such financing or
           continuation statements without the signature of Debtor.

                     (F) WAREHOUSE RECEIPTS NON-NEGOTIABLE. If any warehouse
           receipt or receipt in the nature of a warehouse receipt is issued
           with respect to any of the Inventory, Debtor shall not permit such
           warehouse receipt or receipt in the nature thereof to be "negotiable"
           (as such term is used in Section 7-104 of the Code or under other
           relevant law).
                     (G) LICENSES. Debtor will not sell, license, amend or
           permit the amendment of any of the Licenses in any manner adverse to
           the interests of the Secured Party without the prior written consent
           of the Secured Party.

                     (H) NO PROHIBITION. Nothing in this Section 7 shall be
           deemed to prohibit (I) the sale of Inventory and the collection of
           Receivables by Debtor in the ordinary course of business, or (II) the
           disposition and replacement of obsolete assets.

           SECTION 8. REASONABLE CARE. Secured Party shall be deemed to have
exercised reasonable care in the custody and preservation of Pledged Collateral
in its possession if such Pledged Collateral is accorded treatment substantially
equivalent to that which Secured Party, in its individual capacity, accords its
own property, it being understood that Secured Party shall not have
responsibility for taking any necessary steps to preserve rights against any
Person with respect to any Pledged Collateral.

           SECTION 9. REMEDIES.

                     (A) OBTAINING THE PLEDGED COLLATERAL UPON EVENT OF DEFAULT.
           If any Event of Default shall have occurred and be continuing, then
           and in every such case, the Secured Party may, at any time or from
           time to time during the continuance of such Event of Default:

                             (I) Personally, or by agents or attorneys,
                   immediately take possession of the Pledged Collateral or any
                   part thereof, from Debtor or any other Person who then has
                   possession of any part thereof with or without notice or
                   process of law, and for that purpose may enter upon Debtor's
                   premises where any of the Pledged Collateral is located and
                   remove such Pledged Collateral, and use in connection with
                   such removal any and all services, supplies, aids and other
                   facilities of Debtor;

                             (II) Instruct the obligor or obligors on any
                   agreement, instrument or other obligation (including, without
                   limitation, the Receivables) constituting the Pledged
                   Collateral, to make any payment required by the terms of such
                   instrument or agreement directly to Secured Party; PROVIDED,
                   HOWEVER, in the event that any such payments are made
                   directly to Debtor, Debtor shall hold such payments in trust
                   and shall segregate all amounts received pursuant thereto in
                   a separate account and pay the same promptly to Secured
                   Party;

                                                                               6
<PAGE>

                             (III) Sell, assign or otherwise liquidate, or
                   direct Debtor to sell, assign or otherwise liquidate the
                   Pledged Collateral, or any part thereof, and take possession
                   of the proceeds of any such sale, assignment or liquidation;

                             (IV) Take possession of the Pledged Collateral, or
                   any part thereof, by directing Debtor in writing to deliver
                   the same to Secured Party at any place or places designated
                   by Secured Party, in which event Debtor shall at its own
                   expense:

                                        (A) forthwith cause the same to be moved
                             to the place or places so designated by Secured
                             Party and there delivered to Secured Party;

                                        (B) store and keep any Pledged
                             Collateral so delivered to Secured Party at such
                             place or places pending further action by Secured
                             Party as provided in Section 9(b); and

                                        (C) while the Pledged Collateral shall
                             be so stored and kept, provide such guards and
                             maintenance services as shall be necessary to
                             protect the same and to preserve and maintain them
                             in good condition. Debtor's obligation to deliver
                             the Pledged Collateral is of the essence of this
                             Agreement. Upon application to a court of equity
                             having jurisdiction, Secured Party shall be
                             entitled to a decree requiring specific performance
                             by the Debtor of such obligation.

                     (B) DISPOSITION OF THE PLEDGED COLLATERAL.

                               (I) Upon the occurrence and during the
                     continuance of an Event of Default, the Secured Party may,
                     from time to time, exercise in respect of the Pledged
                     Collateral, in addition to other rights and remedies
                     provided for herein or otherwise available to it, all the
                     rights and remedies of a secured party under the Uniform
                     Commercial Code at the time of an event of default, and the
                     Secured Party may also in its sole discretion, without
                     notice except as specified below, sell the Pledged
                     Collateral or any part thereof in one or more parcels at
                     public or private sale , at any exchange, broker's board or
                     at any of the Secured Party's offices or elsewhere, for
                     cash, on credit or for future delivery, and at such price
                     or prices and upon such other terms as the Secured Party
                     may deem commercially reasonable. The Secured Party may be
                     the purchaser of any or all of the Pledged Collateral at
                     any such sale and shall be entitled, for the purpose of
                     bidding and making settlement or payment of the purchase
                     price for all or any portion of the Pledged Collateral sold
                     at such sale, to use and apply any of the Secured
                     Obligations owed to such Person as a credit on account of
                     the purchase price of any Pledged Collateral payable by
                     such Person at such sale. Each purchaser at any such sale
                     shall acquire the property sold free from any claim or
                     right on the part of Debtor and Debtor hereby waives, to
                     the fullest extent permitted by law, all rights of
                     redemption, stay or appraisal hereafter enacted. The
                     Secured Party shall not be obligated to make any sale of
                     Pledged Collateral regardless of notice of sale having been
                     given. The Secured Party may adjourn any public or private
                     sale from time to time by announcement at the time and
                     place fixed therefor, and such sale may, without further
                     notice, be made

                                                                               7
<PAGE>

                     at the time and place to which it was so adjourned. Debtor
                     hereby waives, to the fullest extent permitted by law, any
                     claims against the Secured Party arising by reason of the
                     fact that the price at which any Pledged Collateral may
                     have been sold at such a private sale was less than the
                     price which might have been obtained at a public sale, even
                     if the Secured Party accepts the first offer received and
                     does not offer such Pledged Collateral to more than one
                     offeree.

                               (II) Debtor agrees that, to the extent notice of
                     sale shall be required by law, 10 days' notice from Secured
                     Party of the time and place of any public sale or of the
                     time after which a private sale or other intended
                     disposition is to take place shall be commercially
                     reasonable notification of such matters. No notification
                     need be given to Debtor if it has signed, after the
                     occurrence of an Event of Default, a statement renouncing
                     or modifying any right to notification of sale or other
                     intended disposition. In addition to the rights and
                     remedies provided in this Agreement and in the Note,
                     Secured Party shall have all the rights and remedies of a
                     secured party under the Uniform Commercial Code.

                     (C) WAIVER OF CLAIMS. Except as otherwise provided herein,
           Debtor hereby waives, to the fullest extent permitted by applicable
           law, notice or judicial hearing in connection with Secured Party's
           taking possession, or Secured Party's disposition of any of the
           Pledged Collateral, including, without limitation, any and all prior
           notice and hearing for any prejudgment remedy or remedies and any
           such right which Debtor would otherwise have under law, and Debtor
           hereby further waives to the extent permitted by applicable law: (I)
           all damages, occasioned by such taking of possession; (II) all other
           requirements as to the time, place and terms of sale or other
           requirements with respect to the enforcement of Secured Party's
           rights hereunder; and (III) all rights of redemption, appraisal,
           valuation, stay, extension or moratorium now or hereafter in force
           under any applicable law. Any sale of, or the grant of options to
           purchase, or any other realization upon, any Pledged Collateral shall
           operate to divest all rights, title, interest, claim and demand,
           either at law or in equity, of Debtor therein and thereto, and shall
           be a perpetual bar both at law and in equity against Debtor and
           against any and all Persons claiming or attempting to claim the
           Pledged Collateral so sold, optioned or realized upon, or a thereof,
           from, through or under Debtor.

           SECTION 10. APPLICATION OF PROCEEDS. The proceeds of any Pledged
Collateral obtained pursuant to the exercise of any remedy set forth in Section
9 shall be applied, together with any other sums then held by Secured Party
pursuant to this Agreement, promptly by Secured Party:

                     FIRST, to the payment of all costs and expenses, fees,
           commissions and taxes of such sale, collection or other realization,
           including, without limitation, reasonable compensation to the Secured
           Party and its agents and counsel, and all expenses, liabilities and
           advances made or incurred by the Secured Party in connection
           therewith, together with interest on each such amount at the highest
           rate then in effect under the Note;

                     SECOND, to the indefeasible payment in full in cash of the
           Secured Obligations, ratably according to the unpaid amounts thereof,
           without preference or priority of any kind among amounts so due and
           payable ; and

                                                                               9
<PAGE>

                     THIRD, to Debtor, or its successors or assigns, or to
           whomsoever may be lawfully entitled to receive the same or as a court
           of competent jurisdiction may direct, of any surplus then remaining
           from such proceeds.

           SECTION 11. EXPENSES. Debtor will upon demand pay to Secured Party
the amount of any and all reasonable expenses, including the fees and expenses
of its counsel and the allocated fees and expenses of staff counsel and the fees
and expenses of any experts and agents, which Secured Party may incur in
connection with (I) the collection of the Secured Obligations, (II) the
administration of this Agreement, (III) the custody or preservation of, or the
sale of, collection from, or other realization upon, any of the Pledged
Collateral, (IV) the exercise or enforcement of any of the rights of Secured
Party hereunder, or (V) the failure by Debtor to perform or observe any of the
provisions hereof. All amounts payable by Debtor under this Section 11 shall be
due upon demand and shall be part of the Secured Obligations. Debtor's
obligations under this Section shall survive the termination of this Agreement
and the discharge of Debtor's other obligations hereunder.

           SECTION 12. NO WAIVER: CUMULATIVE REMEDIES.

                     (A) No failure on the part of Secured Party to exercise, no
           course of dealing with respect to, and no delay on the part of
           Secured Party in exercising, any right, power or remedy hereunder
           shall operate as a waiver thereof; nor shall any single orpartial
           exercise of any such right, power or remedy hereunder preclude any
           other or further exercise thereof or the exercise of any other right,
           power or remedy. The remedies herein provided are cumulative and are
           not exclusive of any remedies provided by law.

                     (B) In the event Secured Party shall have instituted any
           proceeding to enforce any right, power or remedy under this Agreement
           by foreclosure, sale, entry or otherwise, and such proceeding shall
           have been discontinued or abandoned for any reason or shall have been
           determined adversely to Secured Party, then and in every such case,
           Debtor and Secured Party shall be restored to their respective former
           positions and rights hereunder with respect to the Pledged
           Collateral, and all rights, remedies and powers of Secured Party
           shall continue as if no such proceeding had been instituted.

           SECTION 13. SECURED PARTY APPOINTED ATTORNEY-IN-FACT. If Debtor shall
fail to do any act or thing that it has covenanted to do hereunder or if any
warranty on the part of Debtor contained herein shall be breached, Secured Party
may (but shall not be obligated to) do the same or cause it to be done, or may
remedy any such breach, and may expend funds for such purpose. Any and all
amounts so expended by Secured Party shall be paid by Debtor promptly upon
demand therefor, with interest at the highest rate then in effect under the Note
during the period from and including the date on which such funds were so
expended to the date of repayment. Debtor's obligations under this Section 13
shall survive the termination of this Agreement and the discharge and Debtor's
other obligations hereunder. Debtor hereby appoints Secured Party its
attorney-in-fact with an interest, with full authority in the place and stead of
Debtor and in the name of Debtor, or otherwise, from time to time in Secured
Party's discretion, to take any action and to execute any instrument consistent
with the terms of this Agreement and the Note which the Secured Party may deem
necessary or advisable to accomplish the purposes of this Agreement. The
foregoing grant of authority is a power of attorney coupled with an interest and
such appointment shall be irrevocable for the term of this Agreement. Debtor
hereby ratifies all that such attorney shall lawfully do or cause to do be done
by virtue hereof.

                                                                               9
<PAGE>

           SECTION 14. INDEMNITY.

                     (A) INDEMNITY. Debtor agrees to indemnify, reimburse and
           hold Secured Party and its respective successors, assigns, employees,
           agents, attorneys and servants (collectively, "Indemnitees") harmless
           from and against any and all liabilities, obligations, damages,
           injuries, penalties, claims, demands, actions, suits, judgments and
           any and all costs and expenses (including, without limitation,
           attorneys' fees and expenses and the allocated costs of internal
           counsel) of whatsoever kind and nature imposed on, asserted against
           or incurred by any of the Indemnitees in any way relating to or
           arising out of this Agreement or the Note or in any other way
           connected with the administration of the transactions contemplated
           hereby or the enforcement of any of the terms hereof, or the
           preservation of any rights hereunder, or in any way relating to or
           arising out of the manufacture, processing, ownership, ordering,
           purchase, delivery, control, acceptance, lease, financing,
           possession, operation, condition, sale, return or other disposition,
           or use of the Pledged Collateral (including, without limitation,
           latent or other defects, whether or not discoverable), the violation
           of the laws of any country, state or other governmental body or unit,
           any tort (including, without limitation, claims arising or imposed
           under the doctrine of strict liability, or for or on account of
           injury to or the death of any Person (including any Indemnitee)), or
           property damage, or contract claim; PROVIDED, that Debtor shall have
           no obligation to an Indemnitee hereunder to the extent it is
           judicially determined by a final order or decree that such
           indemnified liabilities arise solely from the gross negligence or
           willful misconduct of that Indemnitee. Upon written notice by any
           Indemnitee of the assertion of such a liability, obligation, damage,
           injury, penalty, claim, demand, action, judgement or suit, Debtor
           shall assume full responsibility for the defense thereof. If any
           action, suit or proceeding arising from any of the foregoing is
           brought against any Indemnitee, Debtor shall, if requested by such
           Indemnitee, resist and defend such action, suit or proceeding or
           cause the same to be resisted and defended by counsel reasonably
           satisfactory to such Indemnitee. Each Indemnitee shall, unless any
           other Indemnitee has made the request described in the preceding
           sentence and such request has been complied with, have the right to
           employ its own counsel (or internal counsel) to investigate and
           control the defense of any matter covered by the indemnity set forth
           in this Section 14, and the fees and expenses of such counsel shall
           be paid by Debtor; PROVIDED that, only to the extent no conflict
           exists between or among the Indemnitees as reasonably determined by
           the Indemnitees, Debtor shall not be obligated to pay the fees and
           expenses of more than one counsel for all Indemnitees as a group with
           respect to any such matter, action, suit or proceeding.

                     (B) MISREPRESENTATIONS. Without limiting the application of
           subsection 14(a), Debtor agrees to pay, indemnify and hold each
           Indemnitee harmless from and against any loss, costs, damages and
           expenses which such Indemnitee may suffer, expend or incur in
           consequence of or growing out of any misrepresentation by Debtor in
           this Agreement or the Note or in any statement or writing
           contemplated by or made or delivered pursuant to or in connection
           with this Agreement or the Note.

                     (C) CONTRIBUTION. If and to the extent that the obligations
           of Debtor under this Section 14 are unenforceable for any reason,
           Debtor hereby agrees to make the

                                                                              10
<PAGE>

           maximum contribution to the payment and satisfaction of such
           obligations that is permissible under applicable law.

                     (D) SURVIVAL. The obligations of Debtor contained in this
           Section 14 shall survive the termination of this Agreement and the
           discharge of Debtor's other obligations hereunder and under the Note.

                     (E) REIMBURSEMENT. Any amounts paid by an Indemnitee as to
           which such Indemnitee has the right to reimbursement shall constitute
           Secured Obligations secured by the Pledged Collateral.

           SECTION 15. MODIFICATIONS IN WRITING. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement, nor
consent to any departure by Debtor therefrom, shall be effective unless the same
shall be in writing and signed by the Secured Party. Any amendment, modification
or supplement of or to any provision of this Agreement, any waiver of any
provision of this Agreement, and any consent to any departure by Debtor from the
terms of any provision of this Agreement, shall be effective only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement or the Note, no notice
to or demand on Debtor in any case shall entitle Debtor to any other or further
notice or demand in similar or other circumstances.

           SECTION 16. TERMINATION; RELEASE. When all the Secured Obligations
(other than Secured Obligations in the nature of continuing indemnitees or
expense reimbursement obligations not yet due and payable) have been
indefeasibly paid in full and have been terminated, the commitments of the
Secured Party to make any loan or issue any letter of credit, and all letters of
credit issued under the Note have expired, this Agreement shall terminate. Upon
termination of this Agreement or any release of Pledged Collateral in accordance
with the provisions of the Note, Secured Party shall, upon the request and at
the expense of Debtor, forthwith assign, transfer and deliver to Debtor, against
receipt and without recourse to or warranty by Secured Party, such of the
Pledged Collateral to be released as may then be in the possession of Secured
Party, on the order of and at the expense of Debtor, and proper instruments
(including Uniform Commercial Code termination statements on Form UCC-3)
acknowledging the termination of this Agreement or the release of such Pledged
Collateral, as the case may be.

           SECTION 17. DEFINITIONS. The following terms shall have the following
meanings. Such definitions shall be equally applicable to the singular and
plural forms of the terms defined.

                     "CONTRACTS" shall mean, all right, title and interest of
           Debtor in, to and under, or derived from, any and all sale, service,
           performance and equipment lease contracts (whether written or oral),
           and any other contract (whether written or oral), between Debtor and
           third parties.

                     "EQUIPMENT" shall mean all equipment, wherever located,
           including, without limitation, all machinery, equipment, office
           machinery, furniture, and all other equipment of every kind and
           nature, wherever situated, and owned by Debtor or in which Debtor may
           have any interest (to the extent of such interest), all
           modifications, alterations, repairs, substitutions, additions and
           accessions thereto, all replacements and all parts therefor, and
           together with all substitutes for any of the foregoing.

                                                                              11
<PAGE>

                     "INSTRUMENT" shall have the meaning assigned to that term
           under the Uniform Commercial Code.

                     "INSURANCE POLICIES" shall mean all insurance policies held
           by Debtor or naming Debtor as insured, additional insured or loss
           payee (including, without limitation, casualty insurance, liability
           insurance, property insurance and business interruption insurance)
           and all such insurance policies entered into after the date hereof.

                     "INTANGIBLES" shall mean all manuals, blueprints, know-how,
           warranties and records in connection with the Equipment; all
           documents of title or documents representing the Inventory and all
           records, files and writings with respect thereto; any and all other
           rights, claims and causes of action of Debtor against any other
           Person and the benefits of any and all collateral or other security
           given by any other Person in connection therewith; all information,
           customer lists, identification of suppliers, data, plans, blueprints,
           specification designs, drawings, recorded knowledge, surveys,
           engineering reports, test reports, manuals, materials, standards,
           processing standards, performance standards, catalogs, research data,
           computer and automatic machinery software and programs, and the like
           pertaining to operations by Debtor; all information relating to sales
           of products now or hereafter manufactured, distributed or franchised
           by Debtor; all accounting information pertaining to Debtor's
           operations of any of the Equipment, Inventory, Receivables or
           Intangibles and all media in which or on which any of the information
           or knowledge or data or records relating to such operations or any of
           the Equipment, Inventory, Receivables or Intangibles may be recorded
           or stored and all computer programs used for the compilation or
           printout of such information, knowledge, records or data; all
           licenses, consents, permits, variances, certifications and approvals
           of governmental agencies now or hereafter held by Debtor pertaining
           to operations now or hereafter conducted by Debtor; all causes of
           action, claims and warranties now or hereafter owned or acquired by
           Debtor; all patents issued and assigned to or applications made by
           Debtor; all trademarks (including service marks), federal and state
           trademark registrations and applications made by Debtor, common law
           trademarks and trade names owned by or assigned to Debtor and all
           registrations and applications for the foregoing; all copyrights,
           whether statutory or common law, owned by or assigned to Debtor; the
           entire goodwill of Debtor's business and other general intangibles
           (including know-how, trade secrets, customer lists, proprietary
           information, inventions, methods, procedures and formulas) connected
           with the use and symbolized by the trademarks of Debtor; and any
           other property consisting of a general intangible under the Uniform
           Commercial Code in effect in any jurisdiction where Debtor maintains
           its records relating to such property.

                     "INVENTORY" shall mean, inclusively, all inventory of
           Debtor, wherever located, and whether now existing or hereafter
           acquired, including, without limitation, all raw materials, work in
           process, goods (as defined under the Uniform Commercial Code),
           materials and supplies of any kind or nature.

                     "INVESTMENT PROPERTY" shall mean all of the Debtor's
           financial assets, securities (whether certificated or
           uncertificated), security entitlements, security accounts, commodity
           contracts and commodity accounts.

                                                                              12
<PAGE>

                     "LICENSES" shall mean all of Debtor's license agreements
           and covenants not to sue with any other Person with respect to a
           patent, trademark, service mark or copyright, whether Debtor is a
           licensor or licensee under any such license agreement, along with any
           and all (I) renewals, extensions, supplements and continuations
           thereof, (II) income, royalties, damages, claims and payments now and
           hereafter due and/or payable to Debtor with respect thereto,
           including, without limitation, damages and payments for past, present
           or future infringements thereof, (III) rights to sue for past,
           present and future infringements thereof and (IV) any other rights to
           use, exploit or practice any patent, trademark, service mark or
           copyright of Debtor.

                     "LIEN" shall mean any mortgage, pledge, assignment,
           security interest, encumbrance, lien or charge of any kind, any
           conditional sale or other title retention agreement or any lease in
           the nature thereof (including any agreement to give any of the
           foregoing).

                     "MATERIALLY ADVERSE EFFECT" shall mean, (I) with respect to
           the Debtor, any materially adverse change with respect to the
           business, franchises, results of operations, assets, liabilities
           (contingent or otherwise), condition (financial or otherwise) or
           prospects of the Debtor, or (II) any fact or circumstance (whether or
           not the result thereof would be covered by insurance) as to which,
           singly or in the aggregate, there is a reasonable likelihood of (X) a
           materially adverse change described in clause (i) with respect to the
           Debtor, (Y) the inability of the Debtor to perform in any material
           respect its Secured Obligations hereunder or under the Note or the
           inability of the Secured Party to enforce in any material respect its
           rights hereunder or under the Note or the Secured Obligations
           (including realizing on the Pledged Collateral), or (Z) materially
           adverse effect on the legality, validity or enforceability of this
           Agreement or the Note.

                     "PERSON" shall mean and include any individual,
           partnership, joint venture, firm, corporation, association, trust or
           other enterprise or any body politic.

                     "PROCEEDS" shall have the meaning assigned to that term
           under the Uniform Commercial Code or under other relevant law and, in
           any event, shall include, without limitation, any and all (I)
           proceeds of any insurance (except payments made to a Person which is
           not a party to this Agreement), indemnity, warranty or guaranty
           payable to Secured Party or to Debtor from time to time with respect
           to any of the Pledged Collateral, (II) payments (in any form
           whatsoever) made or due and payable to Debtor from time to time in
           connection with any requisition, confiscation, condemnation, seizure
           or forfeiture of all or any part of the Pledged Collateral by any
           governmental authority (or any person acting on behalf of a
           governmental authority), (III) instruments representing obligations
           to pay amounts in respect of Equipment, Intangibles, Inventory, or
           Receivables, (IV) products of the Pledged Collateral, and (V) other
           amounts from time to time paid or payable under or in connection with
           any of the Pledged Collateral.

                     "RECEIVABLES" shall mean all of Debtor's rights to payment
           for goods sold or leased or services performed by Debtor or any other
           party, whether now in existence or arising from time to time
           hereafter, including, without limitation, rights evidenced by an
           account, note, contract, security agreement, chattel paper, or other
           evidence of indebtedness or security together with (I) all security
           pledged, assigned, hypothecated or granted to or held by Debtor to
           secure the foregoing, (II) general intangibles arising

                                                                              13
<PAGE>

           out of Debtor's rights in any goods, the sale of which gave rise
           thereto, (III) all guarantees, endorsements and indemnifications on,
           or of, any of the foregoing, (IV) all powers of attorney for the
           execution of any evidence of indebtedness or security or other
           writing in connection therewith, and (V) all evidences of the filing
           of financing statements and other statements and the registration of
           other instruments in connection therewith and amendments thereto,
           notices to other creditors or secured parties, and certificates from
           filing or other registration officers.

           SECTION 18. NOTICES. Unless otherwise provided herein or in the Note,
any notice or other communication herein required or permitted to be given shall
be in writing and may be personally served, telecopied, telexed or sent by
United States mail, to Debtor or Secured Party, as the case may be, addressed to
it at the respective address set forth in the Note, or at such other address as
shall be designated by Debtor or Secured Party, as the case may be, in a written
notice to the other party complying as to delivery with the terms of this
Section 18. All such notices and other communications shall be deemed to have
been given when delivered in person, or received by telecopy or telex; or four
business days after deposit in the United States mail, registered or certified,
with postage prepaid and properly addressed; PROVIDED, that notices to Secured
Party shall not be effective until received by Secured Party.

           SECTION 19. CONTINUING SECURITY INTEREST; ASSIGNMENT. This Agreement
shall create a continuing security interest in the Pledged Collateral and shall
(I) remain in full force and effect until the undefeasible payment in full in
cash of all Secured Obligations, (II) be binding upon the Debtor, its successors
and assigns, and (III) inure, together with the rights and remedies of Secured
Party hereunder, to the benefit of Secured Party and its successors, transferees
and assigns; no other Persons (including, without limitation, any other creditor
of the Debtor) shall have any interest herein or any right or benefit with
respect hereto. Without limiting the generality of the foregoing clause (iii),
the Secured Party may assign or otherwise transfer any indebtedness held by it
and secured by this Agreement to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Secured Party, herein or otherwise, subject however, to the provisions of the
Note.

           SECTION 20. GOVERNING LAW; TERMS. This Agreement shall be governed
by, and shall be construed and enforced in accordance with, the laws of the
Commonwealth of Massachusetts, without regard to principles of conflicts of
laws.

           SECTION 21. CONSENT TO JURISDICTION AND SERVICE OF PROCESS. All
judicial proceedings brought against Debtor with respect to this Agreement may
be brought in any state or federal court of competent jurisdiction in the
Commonwealth of Massachusetts and by execution and delivery of this Agreement,
Debtor accepts for itself and in connection with its properties, generally and
unconditionally, the nonexclusive jurisdiction of the aforesaid courts, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Agreement. Debtor hereby irrevocably waives any objection, including,
without limitation, any objection to the laying of venue or based on the grounds
of FORUM NON CONVENIENS, which it may now or hereafter have to the bringing of
any such action or proceeding in such respective jurisdictions. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of the Secured Party to bring proceedings against Debtor
in the courts of any other jurisdiction.

                                                                              14
<PAGE>

           SECTION 22. WAIVER OF JURY TRIAL. DEBTOR HEREBY WAIVES TRIAL BY JURY
IN ANY JUDICIAL PROCEEDING TO WHICH IT IS A PARTY INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY
WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT OR THE
RELATIONSHIP ESTABLISHED HEREUNDER.

           SECTION 23. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.

           SECTION 24. EXECUTION IN COUNTERPARTS. This Agreement and any
amendments, waivers, consents or supplements hereby may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original,
but all such counterparts together shall constitute one and the same agreement.

           SECTION 25. HEADINGS. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction of
this Agreement.

                                                                              15
<PAGE>

           INTENDED TO TAKE EFFECT AS AN INSTRUMENT UNDER SEAL AS OF THE DATE
FIRST WRITTEN ABOVE.

                                     Debtor:

                                     LOCATEPLUS HOLDINGS CORPORATION

                                     By: ___________________________
                                         Jon R. Latorella, President

Secured Party:

GEMSTONE INVESTMENT COMPANY, INC.

By: ___________________________

                                                                              16
<PAGE>

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