Document:

EXHIBIT 10.3

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                                 LOAN AGREEMENT

                                      among

                       ALPHANET HOSPITALITY SYSTEMS, INC.,

                                VARIOUS LENDERS,

                                       AND

                             APPEL INVESTMENTS INC.,
                                    AS AGENT

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

                          Dated as of October 21, 1999
                           --------------------------

                                   $2,525,000

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         LOAN  AGREEMENT,   dated  as  of  October  21,  1999,   among  ALPHANET
HOSPITALITY SYSTEMS, INC., a Delaware corporation (the "Borrower"),  the lenders
from  time to time  party  hereto  (each,  a  "Lender"  and,  collectively,  the
"Lenders"), as set forth in Annex I hereto, and APPEL INVESTMENTS INC., as Agent
(the "Agent").  Unless  otherwise  defined herein,  all  capitalized  terms used
herein are defined in Section 1.01 hereof.

                              W I T N E S S E T H :

         WHEREAS, subject to and upon the terms and conditions herein set forth,
the Lender is willing to make loans to the Borrower upon the terms  provided for
herein;

         NOW, THEREFORE, IT IS AGREED:

         SECTION 1. Definitions.
                    -----------
         1.01 Defined Terms. As used herein,  the following terms shall have the
              -------------
meanings herein specified unless the context otherwise requires.

                  "Agent" shall have the meaning provided in the first paragraph
of this  Agreement  and shall  include  any  successor  to the  Agent  appointed
pursuant to Section 10.09 hereof.

                  "Affiliate" shall mean, with respect to any Person,  any other
Person  directly or  indirectly  controlling  (including  but not limited to all
directors,  officers,  general partners and/or managing members of such Person),
controlled by, or under direct or indirect  common  control with such Person.  A
Person shall be deemed to control a corporation,  partnership, limited liability
company or trust if such Person possesses, directly or indirectly, the power (i)
to vote 10% or more of the equity interests having ordinary voting power for the
election of  directors  or managers of such  corporation,  partnership,  limited
liability  company  or trust or (ii) to  direct or cause  the  direction  of the
management  and policies of such  corporation,  partnership,  limited  liability
company  or trust,  whether  through  the  ownership  of voting  securities,  by
contract or otherwise.

                  "Agreement" shall mean this Loan Agreement, as the same may be
from time to time further modified, amended and/or supplemented.

                  "Authorized  Officer" shall mean any senior  officer,  general
partner,  nonmember manager and/or managing member of the Borrower designated as
such in  writing  to the  Lender by the  Borrower,  in each  case to the  extent
acceptable to the Lender.

                  "Bankruptcy  Code" shall mean Title 11, United States Codes in
effect from time to time.

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                  "Bill of Sale" shall mean the Bill of Sale,  dated October 21,
1999, whereby AlphaNet Telecom, Inc., a ________________ corporation, and/or its
trustee, Price  Waterhousecoopers,  conveys title to certain intangible property
assets to Guarantor.

                  "Borrower"  shall  have  the  meaning  provided  in the  first
paragraph of this Agreement.

                  "Business Day" shall mean, for all purposes, any day excluding
Saturday, Sunday and any day which shall be in the City of New York, New York, a
legal holiday or a day in which banking  institutions  are  authorized by law or
other governmental actions to close.

                  "Code"  shall  mean the  Internal  Revenue  Code of  1986,  as
amended  from time to time,  and the  regulations  promulgated  and the  rulings
issued thereunder.  Section references to the Code are to the Code, as in effect
on the  date  hereof  and any  subsequent  provisions  of the  Code,  amendatory
thereof, supplemental thereto or substituted therefor.

                  "Collateral"  is defined  in the  Security  Agreement  and the
Guarantor Security Agreement.

                  "Contingent  Obligations"  shall  mean  as to any  Person  any
obligation   of  such  Person   guaranteeing   or  intending  to  guarantee  any
Indebtedness,  leases, dividends or other obligations ("primary obligations") of
any other  Person (the  "primary  obligor") in any manner,  whether  directly or
indirectly,  including,  without  limitation,  any  obligation  of such  Person,
whether or not  contingent,  (i) to purchase any such primary  obligation or any
property constituting direct or indirect security,  therefor; (ii) to advance or
supply funds (A) for the purchase or payment of any such primary  obligation  or
(B) to maintain  working  capital or equity  capital of the  primary  obligor or
otherwise to maintain the net worth or solvency of the primary obligor; (iii) to
purchase property,  securities or services primarily for the purpose of assuring
the owner of any such primary  obligation of the ability of the primary  obligor
to make payment of such primary  obligation or (iv)  otherwise to assure or hold
harmless the owner of such primary  obligation  against loss in respect thereof,
provided  however,  that the  term  Contingent  Obligations  shall  not  include
endorsements  of instruments for deposit or collection in the ordinary course of
business.  The  amount of any  Contingent  Obligations  shall be deemed to be an
amount equal to the stated or determinable  amount of the primary  obligation in
respect  of which  such  Contingent  Obligations  are made or, if not  stated or
determinable,  the maximum reasonably  anticipated  liability in respect thereof
(assuming  such Person is required to perform  thereunder) as determined by such
Person in good faith.

                  "Credit  Parties"  means,  collectively,  the Borrower and the
Guarantor.

                  "Dollars" and the sign "$" shall each mean freely transferable
lawful money of the United States.

                  "Eligible  Transfer" shall mean and include a commercial bank,
financial institution or other institutional "accredited investor" as defined in
SEC Regulation D.

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                  "Events of Default" are defined in Section 8.

                  "Frank  Proceeding" shall mean that certain pending proceeding
initiated  by Martin Frank  against  Guarantor  before the American  Arbitration
Association in Dallas, Texas.

                  "Funding  Date"  shall mean the date upon which the funding of
the Loan occurs.

                  "GAAP"  means   generally   accepted   accounting   principles
consistently applied.

                  "Governmental  Authority"  shall  mean any  federal,  state or
local entity having  jurisdiction over the affairs or property of the applicable
Credit Party.

                  "Guarantor" shall  mean Tech Electro Industries, Inc., a Texas
corporation.

                  "Guarantor   Security  Agreement"  shall  mean  the  Guarantor
Security Agreement in the form of Exhibit D attached hereto.

                  "Guaranty"  shall mean the Continuing  Guaranty in the form of
Exhibit C attached hereto.

                  "Indebtedness" of any Person shall mean, without  duplication,
(i) all  indebtedness  of such  Person for  borrowed  money,  (ii) the  deferred
purchase  price of assets or  services  which in  accordance  with GAAP would be
shown on the liability side of the balance sheet of such Person,  (iii) the face
amount of all  letters of credit  issued for the  account  of such  Person  and,
without  duplication,  all drafts drawn  thereunder,  (iv) all Indebtedness of a
second  Person  secured by any Lien on any property  owned by such first Person,
whether or not such  indebtedness  has been assumed,  (v) all capitalized  lease
obligations  of such  Person,  (vi)  all  obligations  of such  Person  to pay a
specified  purchase  price for goods or  services  whether or not  delivered  or
accepted,  i.e.,  take-or-pay  and  similar  obligations,  (vii) all  Contingent
Obligations of such Person,  provided that Indebtedness  shall not include trade
payables and accrued  expenses,  in each case arising in the ordinary  course of
business.

                  "Insolvency  Proceeding"  means and  includes  any  proceeding
commenced  by or against  Borrower,  or any other  person or  entity,  under any
provision  of the  federal  Bankruptcy  Code,  as  amended,  or under  any other
bankruptcy or insolvency law, including, but not limited to, assignments for the
benefit of creditors, formal or informal moratoriums, compositions or extensions
with some or all creditors.

                  "Lead Lender" means  Appel  Investments Inc., a British Virgin
Islands corporation.

                  "Lender  Expenses"  means and  includes  all of the  following
costs or expenses required to be paid by Borrower under this Agreement which are
paid,  advanced,  or incurred by the Lenders in connection  with this Agreement,
the other Loan Documents, the Collateral, and the Secured Obligations: all taxes
and insurance premiums of every nature and kind of Borrower paid by the Lenders,
filing, recording, publication and search fees paid or incurred by the Lenders

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in  connection  with the  Lenders'  transactions  with  Borrower;  all costs and
expenses  to  correct  or cure any  default or  enforce  any  provision  of this
Agreement,  or in gaining  possession  of,  redeeming,  withdrawing,  receiving,
collecting, demanding, safekeeping,  maintaining, appraising, selling, preparing
for sale and/or  advertising  to sell or  otherwise  dispose of the  Collateral,
whether  or not a sale or  other  disposition  is  consummated;  all  costs  and
expenses  of  arbitration  or suit  incurred  by the  Lenders  in  enforcing  or
defending the Loan  Agreements or any portion  thereof;  and all attorneys' fees
and expenses incurred by the Lenders in advising the Lenders and in structuring,
drafting, reviewing, amending,  terminating,  enforcing, defending or concerning
the Loan  Documents  or any portion  hereof or any  agreement  related  thereto,
whether or not arbitration proceedings are commenced or suit is brought.

                  "Lenders"  shall  have  the  meaning  provided  in  the  first
paragraph of this Agreement.

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

                  "Loan" means the term loan made pursuant to Section 2.01.

                  "Loan Documents" means this Agreement,  the Note, the Security
Agreement, the Guaranty, the Guarantor Security Agreement and any other document
or agreement executed in connection herewith or therewith.

                  "Loan Fee" is defined in Section 2.12.

                  "Material Adverse Effect" shall mean a material adverse effect
on  the  business,  property,  assets,  liabilities,   operations  or  financial
condition of the Credit Party and its Subsidiaries, taken as a whole.

                  "Maturity Date" shall mean the second  anniversary of the date
hereof.

                  "Multiemployer  Plan"  shall  mean a  "multiemployer  plan" as
defined in Section  4001(a)(3) of ERISA which (i) is  contributed to or required
to be  contributed  to by the Credit Party or an ERISA  Affiliate or (ii) was so
contributed to by the Credit Party or an ERISA Affiliate in respect of which the
Credit Party or an ERISA Affiliate could have liability.

                  "Note"  means  the  Promissory  Note in the form of  Exhibit A
attached hereto.

                  "Patent and  Trademark  Office" means either the United States
Patent and Trademark Office or its Canadian equivalent, as applicable.

                  "Payment  Offices"  shall means,  as to the Lead  Lender,  c/o
Wisman Cosway #27-02, Jalan Raja Chulan, 50200 Kuala Lumpur, Malaysia, and as to
AHS Funding LLC, P.O. Box 4005,  Tustin,  California 92781, or such other office
as such Lender may designate to the Borrower in writing from time to time.

                  "PBGC"  shall mean the Pension  Benefit  Guaranty  Corporation
established pursuant to Section 4002 of ERISA, or any successor thereto.

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                  "Permitted Liens" shall mean Liens described in Section 6.03.

                  "Person"  shall  mean  any  individual,   partnership,   joint
venture,  firm,  corporation,  association,  trust  or other  enterprise  or any
government or political subdivision or any agency, department or instrumentality
thereof.

                  "Plan"  shall mean any pension plan as defined in Section 3(2)
of ERISA,  which (i) is maintained or contributed to by (or to which there is an
obligation to contribute of a Credit Party,  a Subsidiary or an ERISA  Affiliate
or (ii) was so maintained or  contributed  to by a Credit Party, a Subsidiary or
an ERISA  Affiliate  in respect of which the  Subsidiary  or an ERISA  Affiliate
could have liability under Section 4069 or Section 4212 of ERISA.

                  "Prime" shall mean Prime Leasing, Inc.an Illinois corporation.

                  "Reportable  Event"  shall mean an event  described in Section
4043(c)  of ERISA  with  respect  to a Plan that is subject to Title IV of ERISA
other than those  events as to which the 30-day  notice  period is waived  under
PBGC regulations.

                  "SEC" shall mean the Securities and Exchange Commission.

                  "Secured  Obligations"  means  any and all  loans  (including,
without  limitation,  the Loans  evidenced  by the  Note),  debts,  liabilities,
obligations,  covenants  and duties  owing by Borrower to Lender  under the Loan
Documents, of any kind and description,  whether direct or indirect, absolute or
contingent,  due or to become  due,  now  existing  or  hereafter  arising,  and
including,  without limitation,  all interest not paid when due and all fees and
expenses  (including  without  limitation all Lender Expenses) which Borrower is
required to pay or reimburse by this  Agreement,  the other Loan  Documents,  by
law, or otherwise,  and including prompt performance by Borrower of each and all
of its  covenants  and  obligations  under  this  Agreement  and the other  Loan
Documents.

                  "Security  Agreement" means the Security Agreement in the form
of Exhibit B attached hereto.

                  "Security  Interests"  means  the  security  interests  in the
Collateral  granted  under the Security  Agreement  and the  Guarantor  Security
Agreement.

                  "Solvent"  shall mean, as to any Person,  that such Person has
capital  sufficient to carry on its business and  transactions  and all business
and  transactions  in which it is about to  engage,  is able to pay its debts as
they mature,  and owns property  having a value,  both at fair  valuation and at
then current fair saleable  value,  greater than the amount  required to pay its
debts (including contingencies).

                  "Subsidiary"  of any  Person  shall mean and  include  (i) any
entity 50% or more of whose ownership interest of any class or classes having by
the terms thereof ordinary voting power to elect or appoint a manager,  managing
member,  general  partner  or a majority  of the  directors  of such  Subsidiary
(irrespective  of whether or not at the time ownership  interest of any class or
classes of such Subsidiary shall have or might have voting power by reason of

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the happening of any  contingency)  is at the time owned by such Person directly
or  indirectly  through  Subsidiaries  and (ii) any limited  liability  company,
partnership,  association,  joint  venture or other  entity in which such Person
directly or indirectly through Subsidiaries,  has 50% or more equity interest at
the time.

                  "UCC"  means the Uniform  Commercial  Code as in effect on the
date  hereof,  or which may  hereafter  be in effect,  in the State of New York;
provided that if by reason of mandatory provisions of law, the perfection or the
effect  of  perfection  or  non-perfection  of  the  Security  Interest  in  any
Collateral  is  governed  by the  Uniform  Commercial  Code  as in  effect  in a
jurisdiction  other than New York, "UCC" means the Uniform Commercial Code as in
effect in such other jurisdiction for purposes of the provisions hereof relating
to such perfection or effect of perfection or non-perfection.

                  "Unfunded  Current  Liability"  of any  Plan  shall  mean  the
amount,  if any, by which the actuarial  present value of the  accumulated  plan
benefits under the Plan as of the close of its most recent plan year exceeds the
fair market value of the assets allocable thereto, each determined in accordance
with  Statement  of  Financial  Accounting  Standards  No.  87,  based  upon the
actuarial  assumptions  used by the  Plan's  actuary in the most  recent  annual
valuation of the Plan.

                  "United  States  Person" is defined in Section  7701(a)(30) of
the Code.

                  "USA  Technologies  Litigation"  means  that  certain  pending
action initiated by USA Technologies, Inc. against Borrower in the United States
Court for the Eastern District of Pennsylvania.

                  "Written"  or "in  writing"  shall  mean any  form of  written
communication  or a  communication  by means of telex,  facsimile  transmission,
telegraph or cable.

         1.02     Other Definitional Provisions

                  (a) All terms defined in this  Agreement in the singular shall
have comparable meanings when used in the plural, and vice versa.

                  (b) The words  "hereof,"  "hereby,"  "herein," and "hereunder"
and words of similar  import  when used in this  Agreement  shall  refer to this
Agreement as a whole and not to any particular provisions of this Agreement as a
whole  and  not to  any  particular  provisions  of  this  Agreement;  the  term
"hereafter" shall mean after, and the term "heretofore"  shall mean before,  the
date of this Agreement; and Section,  schedule,  exhibit and like references are
to this Agreement unless otherwise specified.

                  (c) Any defined term that relates to a document  shall include
within its definition any  amendments,  modifications,  renewals,  restatements,
extensions,  supplements,  or  substitutions  that  heretofore  may have been or
hereafter  may be  executed  in  accordance  with  the  terms  thereof  and,  if
applicable, hereof.

                  (d) References in this Agreement to particular sections of the
Code, ERISA, Bankruptcy Code, UCC or any other legislation shall be deemed to

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refer  also to any  successor  sections  thereto  or  other  redesignations  for
codification purposes.

                  (e) All terms defined in the UCC and not otherwise  defined or
modified herein shall have the respective meanings ascribed to such terms in the
UCC.

                  (f) All references to the masculine  gender shall be deemed to
refer to the feminine and neuter gender,  and  vice-versa,  and all terms in the
singular shall include the plural, and vice versa.

         SECTION 2.   Amount and Terms of Loans.
                      -------------------------
         2.01 Term Loan and Note.  Subject to and upon the terms and  conditions
              ------------------
herein set forth, the Lenders agree, on the terms and conditions hereinafter set
forth and in  reliance  upon the  representations  and  warranties  of  Borrower
hereinafter  set forth,  to make a Loan to Borrower in the amount of Two Million
Five  Hundred  Twenty-Five   Thousand  Dollars   ($2,525,000).   The  Borrower's
obligation to pay the principal of, and interest on, the Loan shall be evidenced
by the Note, with blanks  appropriately  completed in conformity  herewith.  The
Note shall be dated the date hereof and be payable in accordance  with the terms
set forth in Section 2.05 hereof and the Note.

         2.02     Interest. The Loan shall bear interest on the unpaid principal
                  --------
balance  commencing  on the Funding  Date at a rate per annum which shall at all
times be equal to the rate or rates of interest as set forth in the Note.

         2.03     Increased Costs, Illegality, etc.,  In  the  event that at any
                  ----------------------------------
time, any Lender determines that it shall incur increased costs or reductions in
the amounts received or receivable  hereunder (other than taxes on any increased
cost or  reduction  in the amount  received  or  receivable  resulting  from the
imposition  of or a change in the rate of taxes or similar  charges)  because of
(i) any change from the Funding Date in any applicable law,  governmental  rule,
regulation,  guideline  or order  (or in the  interpretation  or  administration
thereof and  including the  introduction  of any new law or  governmental  rule,
regulation,  guideline or order)  (such as, for  example,  but not limited to, a
change  in  official  reserve  requirements)  and/or  (ii)  other  circumstances
affecting  such Lender,  then,  and in any such event,  such Lender shall (x) on
such date and (y)  within ten  Business  Days of the date on which such event no
longer  exists give notice (by  telephone  confirmed in writing) to the Borrower
and to such Lender of such determination.  Thereafter, the Borrower shall pay to
such Lender, upon written demand therefor,  such additional amounts (in the form
of an  increased  rate of, or a  different  method of  calculating,  interest or
otherwise  as  such  Lender  in  its  reasonable   discretion  determines  after
consultation  with the Borrower) as shall be required to compensate  such Lender
for such  increased  costs or  reductions  in amounts  receivable  hereunder  (a
written notice as to the additional amounts owed to such Lender,  describing the
basis for such increased costs and showing the calculation thereof, submitted to
the  Borrower  by such  Lender  shall,  absent  manifest  error,  be  final  and
conclusive and binding upon all parties hereto).

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         2.04     Notice of Borrowing; Disbursements.
                  ----------------------------------
                  (a) Whenever  Borrower desires to borrow under this Section 2,
it shall deliver to Agent a notice of borrowing no later than 1:00 P.M. (Eastern
time) at least two Business Days in advance of the proposed  Funding  Date.  The
notice of borrowing shall specify (i) the proposed  Funding Date (which shall be
a Business Day) and (ii) the amount of the proposed borrowing.

                  (b)  Disbursement  of Funds.  Within three (3)  business  days
after receipt of a notice of borrowing,  but subject to the conditions set forth
in Section 3, the  Lenders  shall make the  proceeds  of the Loan  available  to
Borrower on the Funding Date by causing an amount of same day funds equal to the
proceeds of such Loan as directed by Borrower.

         2.05     Payments of Principal and Interest.  All accrued  interest and
                  ----------------------------------
unpaid  principal  shall be paid in accordance  with the terms of the Note.  All
payments  received by the Agent shall be applied first to Lender Expenses,  then
to late charges, then to interest, and finally to reduce the principal amount of
the Loan.
         2.06     Voluntary  Prepayments.  The Borrower shall have the right, at
                  ----------------------
any time and from time to time, to prepay the Loans in whole or in part;provided
that any  partial  prepayment  of the Loan  shall be in an  aggregate  principal
amount of at least $100,000.

         2.07     Method and Place of Payment. All payments made by the Borrower
                  ---------------------------
in accordance  with the terms of the Note and otherwise in accordance  with this
Agreement shall be made to the Agent not later than 1:00 P.M.  (Eastern time) on
the date when due and shall be made in immediately available funds and in lawful
money of the United  States of America,  at the  Payment  Offices of each Lender
with respect to each Lender's  proportionate  interest in the Loan. Any payments
under this Agreement which are made later than 1:00 P.M. (Eastern time) shall be
deemed to have been  made on the next  succeeding  Business  Day.  Whenever  any
payment to be made  hereunder  shall be stated to be due on a day which is not a
Business  Day,  the due date  thereof  shall be extended to the next  succeeding
Business  Day and,  with  respect to payments of  principal,  interest  shall be
payable during such extension at the applicable rate in effect immediately prior
to such extension.

         2.08     Net Payments.  All  payments made by the Borrower hereunder or
                  ------------
under the Note will be made without set off,  counterclaim or other defense. All
such  payments  will be made  free  and  clear  of,  and  without  deduction  or
withholding for, any present or future taxes,  levies,  imposts,  duties,  fees,
assessments or other charges of whatever nature now or hereafter  imposed by any
jurisdiction  or by any political  subdivision  or taxing  authority  thereof or
therein with respect to such payments.

         2.09     Repayment  of  Loan.  Borrower  shall  repay   the   Loan   in
                  ---------
accordance with the Note.

         2.10     Note  Records.  Each Lender is hereby  authorized to record in
                  -------------
its books and records the date and portion of the Loan made by such Lender,  and
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the date and  amount of each  payment  or  prepayment  of  principal  thereof or
interest accrued thereon, and any such recordation shall constitute  presumptive
evidence of the accuracy of the  information so recorded;  provided that failure
by  such  Lender  to  effect  such  recordation   shall  not  affect  Borrower's
obligations hereunder.

         2.11     Loan Fee. On the date hereof,  Borrower  shall be obligated to
                  --------
pay Agent a loan fee (the "Loan Fee") of  $249,565.  The Loan Fee has been fully
earned and is non-refundable, and is payable as follows: $130,000 payable on the
Funding  Date,  and  the  balance  shall  be due in two  equal  installments  of
$59,782.50  each thirty (30) and sixty (60) days following the Funding Date. The
balance  shall bear  interest at twenty and one-half  percent  (20.5%) per annum
from the Funding Date until paid;  accrued  interest shall be paid  concurrently
with each installment.  Notwithstanding  the foregoing,  the entire Loan Fee and
all accrued  interest due thereon shall be payable no later than the earliest to
occur of: (i) the Maturity Date; (ii) the occurrence of an Event of Default; and
(iii) any prepayment of the Note.

         2.12     Monthly  Statements.   At  Agent's  election, Agent may render
                  -------------------
monthly  statements  of the  Secured  Obligations  owing by Borrower to Lenders,
including  statements  of all  principal,  interest,  late  charges  and  Lender
Expenses  owing.  If Agent renders such  statements,  such  statements  shall be
rebuttably  presumed to be correct and  accurate  and to  constitute  an account
stated between Borrower and Lenders.

         SECTION 3.     Conditions Precedent.
                        --------------------
         3.01 Conditions Precedent to Making Loan. The obligation of the Lenders
              -----------------------------------
to make the Loan on the Funding Date is subject to the  satisfaction  of each of
the following conditions at such time:

                  (a)   Note.  There  shall have been delivered to the Agent the
                        ----
Note executed by the Borrower in the amount and as otherwise provided herein.

                  (b)   Certain Other  Loan  Documents.  There  shall  have been
                        ------------------------------
delivered to the Agent the following:

                        (i)      The Security Agreement, executed by Borrower;

                        (ii)     The Guaranty, executed by the Guarantor;

                        (iii)    The  Guarantor  Security Agreement, executed by
Guarantor;

                        (iv)     All documents requested by Agent to perfect the
Security Interests, all in form and substance satisfactory to Agent.

                  (c)   Opinion of Counsel. An opinion of counsel to each of the
                        ------------------
Credit  Parties and  Guarantor  addressed to Agent in the form  satisfactory  to
Agent.

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                  (d)   Other Documents.  There shall have been delivered to the
                        ----------------
Lender the following:

                        (i)      A  Warrant   Certificate   issued   to   Lender
representing One Hundred  Ninety-Three  Thousand Two Hundred Seventeen (193,217)
shares of Guarantor's common stock exercisable warrants to purchase at the price
of  seventy-five  cents  ($0.75),  exercisable  over  five  (5)  years,  in form
satisfactory to Agent.

                        (ii)     A  copy  of  the executed Bill of Sale and such
other evidence, satisfactory to Agent, that the transaction contemplated thereby
has been consummated.

                        (iii)    A list of all tangible and intangible  personal
property that is currently owned by Borrower.

                        (iv)     Confirmation  that all Indebtedness of Borrower
to HLC has been paid in full, and that HLC has terminated all security interests
in the Collateral.

                         (v)     Copies  of  each  employment  agreement between
Mark Holzberg and Borrower.

                         (vi)    A proforma financial statement of Borrower, and
a copy of  Guarantor's  Form 10-Q for the period ended June 30,  1999,  as filed
with the SEC.

                         (vii)   Evidence,    satisfactory    to     Agent,   of
compliance by Credit Parties with the  representation  set forth in Section 4.18
hereof and Section 10(q) of the Guaranty.

                  (e)     Credit Party Proceedings.
                          ------------------------
                          (i)    The  Agent  shall  have received a certificate,
dated the Funding Date,  signed by an  Authorized  Officer of each of the Credit
Parties, substantially in the form of Exhibit E. with appropriate insertions and
deletions, together with (x) copies of the articles of incorporation and by-laws
of each of the  Credit  Parties  and (y) the  resolutions  of each of the Credit
Parties and all of the foregoing (including the organizational  documents) shall
be reasonably satisfactory to the Agent.

                          (ii)   On  the  Funding  Date,   all  instruments  and
agreements in connection  with the  transactions  contemplated by this Agreement
and the  other  Loan  Documents  shall be  reasonably  satisfactory  in form and
substance to the Agent,  and the Agent shall have received all  information  and
copies of all  certificates,  documents  and  papers,  including  good  standing
certificates  and any  other  records  of  corporate,  partnership  and  limited
liability  company  proceedings and  governmental  approvals,  if any, which the
Agent may have reasonably requested in connection therewith,  such documents and
papers,  where appropriate,  to be certified by proper corporate or governmental
authorities.

                  (f)     Plans.  On  or prior to date hereof,  there shall have
                          -----
been made available to the Agent true and correct  copies of any Plans,  and for

                                       61

<PAGE>

each  such Plan (x) that is a  "single-employer  plan" (as  defined  in  Section
4001(a)(15) of ERISA) the most recently completed  actuarial  valuation prepared
therefore by such Plan's regular  enrolled actuary and the Schedule B (Actuarial
Information)  to the most recent  annual report (Form 5500 Series) for each Plan
most  recently  filed  with  the  Internal  Revenue  Service;  and (y) that is a
Multiemployer  Plan,  each of the  documents  referred  to in clause  (x) to the
extent in  possession  of the  Credit  Parties  and/or  any ERISA  Affiliate  or
reasonably  available to the Credit Parties from the sponsor or trustees of such
Plan and an estimate of withdrawal  liability prepared by the plan administrator
of  such  Multiemployer  Plan  with  all  of  the  foregoing  to  be  reasonably
satisfactory to the Agent.

                  (g)     Adverse Change, etc. From December 31,1998 to the date
                          -------------------
hereof as to each Credit  Party,  nothing  shall have  occurred (and the Lenders
shall have not become aware of any facts or  conditions  not  previously  known)
which the Agent shall  determine  (i) has, or is  reasonably  likely to have,  a
material  adverse  effect on the rights or remedies of the Lenders  hereunder or
under any other Loan Document, or on the ability of each Credit Party to perform
its  respective  obligations  under  the  Loan  Documents,  or (ii)  has,  or is
reasonably likely to have, a Material Adverse Effect.

                  (h)     Litigation. Except for the USA Technologies Litigation
                          ----------
and the Frank Proceeding, there shall be no actions,suits or proceedings pending
or threatened  (a) with respect to this  Agreement or any other Loan Document or
(b) which the Agent shall determine  could  reasonably be expected to (i) have a
Material  Adverse Effect or (ii) have a material adverse effect on the rights or
remedies of the  Lenders  hereunder  or under any other Loan  Document or on the
ability of any Credit Party to perform its obligations under the Loan Documents.

                  (i)     Approvals.  All  material  necessary  governmental and
                          ---------
third party  approvals in  connection  with the Loan  Documents  shall have been
obtained and remain in effect.

                  (j)     Solvency.   Each  of  the  Credit  Parties  shall have
                          --------
delivered  to the  Agent a  solvency  certificate  substantially  in the form of
Exhibit F hereto  from an  Authorized  Officer of such Credit  Party  expressing
opinions  of value and offer  appropriate  facts or  information  regarding  the
solvency of such Credit Party.

                  (k)     Outstanding Indebtedness. On  the  Closing  Date,  the
                          ------------------------
Borrower shall have no outstanding  Indebtedness other than the Loans and as set
forth on Exhibit G attached hereto.

                  (l)     Insurance  Policies.  The  Agent  shall  have received
                          -------------------
evidence of insurance  complying with the  requirements  of Section 5.03 for the
business and properties of the Credit Parties.

                  (m)     Lender Expenses. The  Borrower shall  have paid to the
                          ---------------

                                       62

<PAGE>

Lenders all of the Lender  Expenses  incurred by the Lenders in connection  with
the Loan Documents.

                  (n)     Additional Documents. Each of the Credit Parties shall
                          --------------------
have  delivered,  or caused to be delivered,  to the Agent all other  additional
documents, instruments and certificates as the Agent may reasonably require.

                  (o)     Representations  and Warranties.  No Event of Default.
                          -------------------------------
The representations and warranties of each Credit Party under the Loan Documents
are true and correct, and no Event of Default shall have occurred.

                  (p)     Conversion  of  Debt.  All  outstanding  debt  of  the
                          ----------
Borrower  to  AiphaNet Telecom, Inc. and each of its affiliates and subsidiaries
shall have been converted into additional paid-in capital of the Borrower.

         SECTION 4.    Representations, Warranties  and  Agreements. In order to
                       --------------------------------------------
induce the Lenders to enter into this  Agreement and for the Lenders to make the
Loan,  the Borrower makes the following  representations  and warranties to, and
agreements  with the  Lenders,  all of which  shall  survive the  execution  and
delivery of this  Agreement and the making of the Loan, and which shall continue
for as long as this  Agreement  is in effect and until the Loan,  together  with
interest,  Lender Expenses and other Secured Obligations incurred hereunder,  is
fully and indefeasibly paid and performed:

         4.01     Status.  The  Borrower  (i)  is  a  duly organized and validly
                  ------
existing corporation,  in good standing under the laws of the State of Delaware,
and has the power and  authority  to own its property and assets and to transact
the  business in which it is engaged and  presently  proposes to engage and (ii)
has duly  qualified  and is authorized to do business and is in good standing in
all jurisdictions  where it is required to be so qualified and where the failure
to be so qualified would have a Material Adverse Effect.

         4.02     Power and Authority.  Borrower has the power and authority  to
                  -------------------
execute, deliver and carry out the terms and provisions of the Loan Documents to
which it is a party and has taken all  necessary  corporate  action to authorize
the execution,  delivery and  performance of the Loan Documents to which it is a
party.  Borrower has duly executed and delivered  each Loan Document to which it
is a party and each such Loan Document  constitutes the legal, valid and binding
obligation of Borrower  enforceable in accordance with its terms, subject to the
effects of bankruptcy, insolvency, reorganization,  moratorium and other similar
laws relating to or affecting  creditors'  rights  generally,  general equitable
principles (regardless of whether enforcement is sought in equity or at law) and
an implied covenant of good faith and fair dealing.

         4.03     No Violation. Neither the execution, delivery  and performance
                  ------------
by Borrower of the Loan Documents to which it is a party nor compliance with the
terms  and  provisions  thereof,   nor  the  consummation  of  the  transactions

                                       63

<PAGE>

contemplated  therein (i) will  contravene any applicable  provision of any law,
statute,  rule,  regulation,  order, writ,  injunction or decree of any court or
governmental  instrumentality,  (ii) will  conflict or be  inconsistent  with or
result in any breach of, any of the terms,  covenants,  conditions or provisions
of,  or  constitute  a  default  under,  or  (other  than  pursuant  to the Loan
Documents)  result in the creation or imposition of (or the obligation to create
or impose) any Lien upon any of the  property or assets of Borrower  pursuant to
the  terms  of any  indenture,  mortgage,  deed of  trust,  agreement  or  other
instrument to which Borrower is a party or by which it or any of its property or
assets  are  bound or to which it may be  subject  or  (iii)  will  violate  any
provision of the  organizational  documents of the Borrower.  The performance by
Borrower  under the  documents  listed in clause  (ii)  above is not  reasonably
expected to have a Material Adverse Effect.

         4.04     Litigation.  Except for the USA Technologies Litigation, there
                  ----------
are no actions,  suits or proceedings  pending or, to the best of its knowledge,
threatened with respect to the Borrower or Borrower's  Affiliates (i) that could
reasonably  be  expected  to have a Material  Adverse  Effect or (ii) that could
reasonably  be  expected  to have a  material  adverse  effect on the  rights or
remedies  of the  Lenders  or on the  ability  of  Borrower  taken as a whole to
perform its obligations under the Loan Documents.

         4.05     Use of Proceeds. The proceeds of the Loan shall be utilized on
                  ---------------
the  Funding  Date  only  for  the  following  purposes: (a)  full  payment   of
Indebtedness of Borrower  due HLC  Financial,  Inc.;  (b)  payment  of loan fees
under this Agreement;  (c) working capital purposes;  and (d) payments obligated
to be made to the Guarantor.

         4.06     Governmental Approvals. Except for filings and  recordings  in
                  ----------------------
connection with the Security Interest,  no order,  consent,  approval,  license,
authorization,  or validation of, or filing,  recording or registration with, or
exemption by, any foreign or domestic  governmental or public body or authority,
or  any  subdivision  thereof,  is  required  to  authorize  or is  required  in
connection with (i) the execution, delivery and performance of any Loan Document
or (ii) the legality,  validity,  binding effect or  enforceability  of any Loan
Document.

         4.07    Investment Company Act. Borrower is not an "investment company"
                 ----------------------
or a company "controlled" by an "investment  company," within the meaning of the
Investment Company Act of 1940, as amended.

         4.08    Public Utility Holding Company Act.  Borrower is not a "holding
                 ----------------------------------
company," or a "subsidiary company" of a "holding company," or an "affiliate" of
a "holding company" or of a "subsidiary  company" of a "holding company," within
the meaning of the Public Utility Holding Company Act of 1935, as amended.

         4.09    True and Complete Disclosure.Except with respect to projections
                 ----------------------------
and pro forma financial information,  all factual information (taken as a whole)
heretofore or contemporaneously furnished by or on behalf of Borrower in writing

                                       64

<PAGE>

to the  Lenders for  purposes of or in  connection  with this  Agreement  or any
transaction  contemplated  herein  is, and all other  such  factual  information
(taken as a whole) hereafter furnished by or on behalf of Borrower in writing to
the Lenders hereunder will be, true and accurate in all material respects on the
date as of which such  information  is dated or certified and not  incomplete by
omitting to state any material fact necessary to make such information (taken as
a whole) not misleading at such time in light of the  circumstances  under which
such  information  was provided.  There is no fact known to Borrower which would
have a Material  Adverse Effect,  which has not been disclosed herein or in such
other documents, certificates and statements furnished to the Lenders for use in
connection with the transactions contemplated hereby.

         4.10    Financial Condition and Financial Statements.
                 --------------------------------------------
                 (a) On and as of the Funding  Date,  (i) the sum of the assets,
at a fair valuation,  of Borrower,  taken separately will exceed its debts, (ii)
Borrower will not have  incurred or intended to, or believe that it will,  incur
debts  beyond  its  ability  to pay such  debts as such  debts  mature and (iii)
Borrower  will not have  unreasonably  small  capital  with which to conduct its
business.  For purposes of this Section  4.11,  "debt" means any  liability on a
claim,  and  "claim"  means (x) right to payment  whether or not such a right is
reduced to  judgment,  liquidated,  unliquidated,  fixed,  contingent,  matured,
unmatured,  disputed, undisputed, legal, equitable, secured or unsecured; or (y)
right to an equitable remedy for breach of performance if such breach gives rise
to a payment,  whether or not such  right to an  equitable  remedy is reduced to
judgment, fixed, contingent,  matured, unmatured,  disputed, undisputed, secured
or unsecured.

                  (b) The consolidated  unaudited  balance sheets of Borrower at
July 31, 1999, and the related  consolidated  unaudited statements of operations
and cash flows of the  Borrower  for the fiscal year ended as of July 31,  1999,
copies of all of which have  heretofore  been furnished to the Lenders,  present
fairly the  consolidated  financial  position  of  Borrower at the dates of said
statements and the results for the periods  covered  thereby in accordance  with
GAAP,  except to the extent  provided in the notes to said financial  statements
and subject to normal and  recurring  year-end  adjustment.  All such  financial
statements have been prepared in accordance with GAAP and practices consistently
applied except to the extent provided in the notes to said financial statements.
Nothing has  occurred  since July 31, 1999 that has had or could  reasonably  be
expected to have a Material Adverse Effect.

                  (c) Except as reflected in the  financial  statements  and the
notes thereto  described in Section 4. 10(b),  there were as of the Funding Date
no liabilities or obligations  with respect to the Borrower or any of Borrower's
Subsidiaries of a nature (whether absolute, accrued, contingent or otherwise and
whether  or not  due)  which,  either  individually  or in  aggregate,  would be
material  to the  Borrower  and its  Subsidiaries  taken as a whole,  except  as
incurred in the ordinary course of business consistent with past practices.

         4.11     Security Interests.The Security Agreement creates, as security
                  ------------------
for the Secured  Obligations  secured hereby, a valid and enforceable  perfected
security interest in and Lien on all of the Collateral subject thereto, superior
to and prior to the rights of all third  Persons  and  subject to no other Liens
(other than Permitted Liens relating thereto), in favor of the Agent as agent

                                       65

<PAGE>

for the benefit of the Lenders.  Except as provided in Section  5.11 hereof,  no
filings or  recordings  are required in order to perfect the security  interests
created  under the  Security  Agreement  except for filings or  recordings:  (A)
required in connection  with the Security  Agreement  which shall have been made
upon or prior to (or are the subject of arrangements, reasonably satisfactory to
the  Lenders,  for filing on or promptly  after the date of) the  execution  and
delivery thereof and (B) that are required by the Security  Agreement to be made
thereafter.

         4.12     Tax Returns and Payments.  Except for tax returns for the year
                  ------------------------
ended  December 31, 1998,  Borrower has filed all federal income tax returns and
all other material tax returns, domestic and foreign, required to be filed by it
and has paid all material taxes and assessments  payable by it which have become
due, except for those contested in good faith and adequately disclosed and fully
provided for on the financial  statements  of Borrower in accordance  with GAAP.
Borrower has at all times paid, or has provided  adequate  reserves (in the good
faith  judgment of the  management of Borrower) for the payment of, all federal,
state and foreign income taxes applicable for all prior fiscal years and for the
current   fiscal  year  to  date.   There  is  no  action,   suit,   proceeding,
investigation, audit, or claim now pending or, to the knowledge of the Borrower,
threatened by any authority regarding any taxes relating to Borrower which could
reasonably  be expected  to have a Material  Adverse  Effect.  As of the Funding
Date,  Borrower has not entered into an agreement or waiver or been requested to
enter into an agreement or waiver extending any statute of limitations  relating
to  the  payment  or  collection  of  taxes  of  Borrower,  or is  aware  of any
circumstances  that would cause the taxable  years or other  taxable  periods of
Borrower not to be subject to the normally applicable statute of limitations.

         4.13     Compliance with ERISA. As of the Funding Date Borrower, or any
                  ---------------------
ERISA Affiliate,  does not maintain,  contribute to or is required to contribute
to any Multiemployer  Plan. Except to the extent that all events and obligations
described  in the  following  sentence  of this  Section  4.13  would not in the
aggregate  have a Material  Adverse  Effect,  each Plan (and each related trust,
insurance contract or fund) is in substantial compliance with its terms and with
all applicable laws, including, without limitation, ERISA and the Code; Borrower
or any ERISA Affiliate has not incurred and does not reasonably expect to incur,
and to the Borrower's  knowledge,  no condition exists which presents a material
risk to Borrower or any ERISA Affiliate of incurring,  any liability,  nor has a
lien been  imposed  against the assets of Borrower  or any ERISA  Affiliate,  on
account of a Plan or Multiemployer  Plan under the Code or ERISA; each Plan (and
each related trust,  if any) which is intended to be qualified  under Section 40
1(a) of the Code has received a determination  letter from the Internal  Revenue
Service to the effect that it meets the  requirements of Sections 40 1(a) and 50
1(a) of the Code;  no  Reportable  Event has  occurred;  to the knowledge of the
Borrower no Multiemployer Plan is insolvent or in reorganization; no Plan has an
Unfunded Current Liability;  no Plan which is subject to Section 412 of the Code
or  Section  302 of ERISA has an  accumulated  funding  deficiency,  within  the
meaning of such sections of the Code or ERISA,  or has applied for or received a
waiver of an accumulated  funding deficiency or an extension of any amortization
period,  within the  meaning of Section 412 of the Code or Section 303 or 304 of
ERISA; no proceedings  have been instituted to terminate or appoint a trustee to
administer  any Plan  which is subject  to Title IV of ERISA;  no action,  suit,
proceeding,  hearing  or  audit  or,  to  the  knowledge  of  the  Borrower,  no
investigation with respect to the administration, operation or the investment of

                                       66

<PAGE>

assets of any Plan (other than routine  claims for  benefits) is pending,  or to
the knowledge of the Borrower is,  expected or  threatened.  In addition,  using
actuarial assumptions and computation methods consistent with Part I of subtitle
E of  Title  IV of  ERISA,  to the  knowledge  of the  Borrower,  the  aggregate
liabilities  which  would be payable in any fiscal  year of the  Borrower or any
ERISA  Affiliates to all Plans which are  Multiemployer  Plans in the event of a
complete withdrawal therefrom, as of the close of the most recent fiscal year of
each such Plan ended prior to the date of the Funding Date,  would not result in
any liability to Borrower or any ERISA Affiliate; and Borrower does not maintain
or  contribute to any (i) employee  welfare  benefit plan (as defined in Section
3(1) of ERISA)  which  provides  benefits to retired  employees  or other former
employees  (other than as required by Section 601 of ERISA) the obligations with
respect to which as a  consequence  of any  termination  or other  extraordinary
event (other than benefits in the ordinary  course) could reasonably be expected
to have a Material  Adverse Effect or (ii) Plan, the obligations with respect to
which could reasonably be expected to have a Material Adverse Effect.

         4.14     Subsidiaries.  On and as of the Funding Date, the Borrower has
                  ------------
no  Subsidiaries  other  than  those  Subsidiaries  listed on  Exhibit  H, which
correctly sets forth, as of the Funding Date, the percentage  ownership  (direct
and  indirect)  of the  Borrower  in each  class of  equity  or other  ownership
interest of its Subsidiaries and also identifies the direct owner thereof.

         4.15     Intellectual  Property.  Borrower  has  obtained  all material
                  ----------------------
patents, trademarks, service marks, trade names, copyrights,  licenses and other
rights, free from burdensome restrictions,  that are necessary for the operation
of its business  taken as a whole as presently  conducted  and as proposed to be
conducted.

         4.16     Labor Relations. Borrower is not engaged  in any unfair  labor
                  ---------------
practice that could  reasonably be expected to have a Material  Adverse  Effect.
There is (i) no unfair labor practice  complaint pending against Borrower or, to
the best of its  knowledge,  threatened  against  Borrower,  before the National
Labor Relations Board, and no grievance or arbitration proceeding arising out of
or under any collective  bargaining agreement is so pending against Borrower or,
to the best of its knowledge, threatened against Borrower, (ii) no strike, labor
dispute,  slowdown or stoppage  pending against  Borrower or, to the best of its
knowledge,  threatened  against  Borrower  and  (iii)  no  union  representation
question  existing  with  respect  to the  employees  of  Borrower  and no union
organizing  activities  are  taking  place,  except  with  respect to any matter
specified in clause (i),  (ii) or (iii)  above,  either  individually  or in the
aggregate, such as is not reasonably likely to have a Material Adverse Effect.

         4.17     Compliance with Statutes.  etc.  To  the  best  of  Borrower's
                  ------------------------
knowledge,  Borrower is in compliance with all applicable statutes,  regulations
and orders of, and all  applicable  restrictions  imposed  by, all  governmental
bodies,  domestic or foreign,  in respect of the conduct of its business and the
ownership of its property, except such noncompliance as is not reasonably likely
to, individually or in the aggregate, have a Material Adverse Effect.

                                       67

<PAGE>

         4.18     Year 2000 Compliance. To the best of Borrower's knowledge, all
                  --------------------
computer  software and hardware used, sold or acquired by Borrower will function
without  error or  interruption  related  to Date Data,  specifically  including
errors or  interruptions  from  functions  which may involve Date Data from more
than one  century.  When used in this Section  4.18,  the term "Date Data" shall
mean any data or input which includes an indication of or reference to date.

         4.19     Margin Regulations. Borrower is not engaged in the business of
                  ------------------
extending  credit for the purpose of  purchasing or carrying  margin  stock.  No
proceeds  received  pursuant to this Agreement will be used to purchase or carry
any equity security of a class which is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended.

         4.20     Brokers. There  are  no  brokers, investment bankers  or other
                  -------
persons or  entities  that are  entitled  to claim a fee of any kind as a result
of the Loan.

         SECTION 5.   Affirmative  Covenants.  The Borrower hereby covenants and
                      ----------------------
agrees  that for so long as this  Agreement  is in  effect  and  until the Loan,
together  with  interest,  Lender  Expenses  and all other  Secured  Obligations
incurred hereunder, is fully and indefeasibly paid and performed in full:

         5.01     Information Covenants. The Borrower will furnish to the Agent:
                  ---------------------
                  (a) Annual Financial Statements. Within ninety (90) days after
                      ---------------------------
the close of each fiscal year of the Borrower, consolidated balance sheet of the
Borrower,  as at the end of  such  fiscal  year  and  the  related  consolidated
statements  of income and  retained  earnings  and of cash flows for such fiscal
year,  in each case  setting  forth  comparative  consolidated  figures  for the
preceding fiscal year, each of which shall be certified by an Authorized Officer
of the Borrower, subject to changes resulting from normal year-end adjustments.

                  (b) Monthly Financial Statements.  As soon as available and in
                      ----------------------------
any  event  within  twenty-five  (25)  days  after  the  close  of each  monthly
accounting period in each fiscal year, the unaudited  consolidated balance sheet
of the Borrower,  as at the end of such monthly period and the related unaudited
statements  of income and  retained  earnings and of cash flows for such monthly
period and for the elapsed portion of the fiscal year ended with the last day of
such monthly  period,  and in each case setting forth  comparative  consolidated
figures for the related periods in the prior fiscal year, each of which shall be
certified by an Authorized  Officer of the Borrower subject to changes resulting
from normal year-end adjustments.

                  (c) Officer's Certificates. At the time of the delivery of the
                      ----------------------
financial  statements provided for in Sections 5.01(a) and (b), a certificate of
an  Authorized  Officer of the  Borrower  to the effect that no Event of Default
exists or, if any Event of Default does exist,  specifying the nature and extent
thereof.

                                       68

<PAGE>

                  (d) Tax  Returns.  Within 10 days  after the  filing  thereof,
                      ------------
copies of any and all foreign,  federal, state and local tax returns and reports
of or relating to Borrower.

                  (e)  Notice of  Default or  Litigation.  Promptly,  and in any
                       ---------------------------------
event  within  three  Business  Days after any officer of the  Borrower  obtains
knowledge  thereof,  notice of (i) the occurrence of any event which constitutes
an Event of Default which notice shall specify the nature thereof, the period of
existence  thereof and what action the  Borrower  proposes to take with  respect
thereto,  (ii) the  commencement  of, or any  significant  development  in,  any
litigation  or  governmental   proceeding  pending  against  Borrower  which  is
reasonably  likely to have a Material Adverse Effect or is reasonably  likely to
have a material  adverse  effect on the  ability  of  Borrower  to  perform  its
obligations  hereunder  or under any other Loan  Document,  and (iii) a material
breach by Borrower in any  indebtedness or other  obligation owed by Borrower to
third parties.

                  (f) Other Information. (a) Promptly upon transmission thereof,
                      -----------------
(i) copies of any filings and registrations with, and reports to, the Securities
and Exchange  Commission  or any  successor  thereto by the  Borrower,  and (ii)
copies of all financial statements, proxy statements, notices and reports as the
Borrower shall send generally to analysts;  and (b) with reasonable  promptness,
such other information or documents  (financial or otherwise) as the Lenders may
reasonably request from time to time

         5.02     Books. Records and Inspections. The Borrower will permit, upon
                  ------------------------------
reasonable  notice  to the  chief  financial  officer,  controller  or any other
Authorized   Officer  of  the  Borrower,   officers,   managers  and  designated
representatives  of the Lenders to visit and inspect  any of the  properties  or
assets of the Borrower,  and to examine the books of account of the Borrower and
discuss the affairs,  finances and accounts of the Borrower with, and be advised
as to the same by, its and their officers, managers and independent accountants,
all at such reasonable times and intervals and to such reasonable  extent as the
Lenders may desire.

         5.03     Insurance.  The  Borrower  will  at all times maintain in full
                  ---------
force and effect insurance in such amounts,  covering such risks and liabilities
and with such  deductibles or self-insured  retentions as are in accordance with
normal industry practice.  The Borrower will furnish to the Agent on the Funding
Date and  thereafter,  upon  request  of the Agent,  a summary of the  insurance
carried  together  with  certificates  of insurance  and other  evidence of such
insurance.

         5.04     Payment of Taxes. The Borrower  will  pay  and  discharge  all
                  ----------------
taxes,  assessments and  governmental  charges or levies imposed upon it or upon
its income or profits, or upon any properties belonging to it, prior to the date
on which penalties attach thereto, and all lawful claims which, if unpaid, might

                                       69

<PAGE>

become a Lien or charge  upon any  properties  of the  Borrower,  provided  that
Borrower shall not be required to pay any such assessment, charge, levy or claim
which is being  contested  in good  faith  and by proper  proceedings  if it has
maintained  adequate  reserves (in the good faith  judgment of the management of
the Borrower) with respect thereto in accordance with GAAP.

         5.05     Franchise. The Borrower will do or cause to be done,all things
                  ---------
reasonably necessary to preserve and keep in full force and effect its existence
and to preserve its material rights and franchises and organizational  existence
and status,  other than those the failure to preserve which could not reasonably
be expected to have a Material Adverse Effect.

         5.06     Compliance with Statutes.  etc.  The Borrower will comply with
                  ------------------------
all  applicable  statutes,   regulations  and  orders  of,  and  all  applicable
restrictions imposed by, any Governmental  Authority,  in respect of the conduct
of its respective  business and the ownership of its  respective  property other
than  those the  non-compliance  with which  would not have a  Material  Adverse
Effect.

         5.07     ERISA.  As soon as possible and, in any event,  within fifteen
                  -----
days  after  the chief  financial  officer  or chief  executive  officer  of the
Borrower or any ERISA  Affiliate,  knows or has reason to know of the occurrence
of any of the following  events (but in each case, only to the extent that it is
reasonably  likely that the  liability of the Borrower,  individually  or in the
aggregate,  attributable to such event will be at least  $50,000),  the Borrower
will  deliver  to the  Agent a  certificate  of the  Borrower  setting  forth in
reasonable  detail  as to such  occurrence  and the  action,  if any,  that  the
Borrower or such ERISA Affiliate is required or proposes to take,  together with
any  notices  required  or  proposed  to be  given  to or  filed  with or by the
Borrower,  the  ERISA  Affiliate,   the  PBGC,  a  Plan  or  Multiemployer  Plan
participant,  the Plan or the  Multiemployer  Plan  administrator  with  respect
thereto:  that a Reportable  Event has  occurred;  that an  accumulated  funding
deficiency,  within the  meaning of  Section  412 of the Code or Section  302 of
ERISA,  has been incurred or an application  may reasonably be expected to be or
has been made for a waiver  or  modification  of the  minimum  funding  standard
(including   any  required   installment   payments)  or  an  extension  of  any
amortization period under Section 412 of the Code or Section 303 or 304 of ERISA
with respect to a Plan or Multiemployer Plan; that any contribution  required to
be made by the  Borrower,  or any  ERISA  Affiliate  with  respect  to a Plan or
Multiemployer Plan that is subject to the funding requirements of Section 412 of
the Code or  Section  302 of  ERISA  has not been  timely  made;  that a Plan or
Multiemployer  Plan has been or may  reasonably  be expected to, be  terminated,
reorganized,  partitioned or declared insolvent under Title IV of ERISA; or that
some action has been taken or proceedings  have been  instituted  which would be
reasonably  likely to cause any such termination,  reorganization,  partition or
declaration or result in the filing of any such application;  that a Plan has an
Unfunded Current Liability; that proceedings may reasonably be expected to be or
have been  instituted to appoint a trustee to administer a Plan which is subject
to Title IV of ERISA; that a proceeding has been instituted  pursuant to Section
515 of ERISA to collect a delinquent  contribution to a Multiemployer Plan; that
the Borrower, or any ERISA Affiliate will or may reasonably be expected to incur
any liability to or on account of the termination of or

                                       70

<PAGE>

withdrawal from a Plan under Section 4062,  4063, 4064, 4069, 4201, 4204 or 4212
of  ERISA  or  with  respect  to a Plan  or  Multiemployer  Plan  under  Section
401(a)(29), 4971, 4975 or 4980 of the Code or Section 409 or 502(i) or 502(i) of
ERISA or with  respect to a group  health plan (as defined in Section  607(1) of
ERISA or Section  4980B(g)(2)  of the Code) under  Section 4980B of the Code; or
that the Borrower has incurred or is reasonably likely to incur any liability as
a  consequence  of any  termination  or other  extraordinary  event  (other than
benefits in the ordinary course) in connection with any employee welfare benefit
plan (as  defined in Section  3(1) of ERISA) that  provides  benefits to retired
employees  or other former  employees  (other than as required by Section 601 of
ERISA) or any Plan or  Multiemployer  Plan.  Upon the request of the Agent,  the
Borrower  will  deliver  to the Agent a complete  copy of the annual  report (on
Internal  Revenue  Service Form  5500-series)  of each Plan  (including,  to the
extent required, the related financial and actuarial statements and opinions and
other supporting  statements,  certifications,  schedules and information)  most
recently required to be filed with the Internal Revenue Service.  In addition to
any  certificates  or  notices  delivered  to the  Agent  pursuant  to the first
sentence hereof,  copies of any material notices received by the Borrower or any
ERISA Affiliate (i) from any government  agency with respect to any Plan or (ii)
received from any government agency or Plan  administrator or sponsor or trustee
with respect to any  Multiemployer  Plan shall be delivered to the Agent as soon
as  practicable,  but in no event  later  than 20 days,  after  such  request is
received.

         5.08     Good  Repair.  The  Borrower  will  ensure  that  its material
                  ------------
properties and equipment  necessary in the operation of its respective  business
are kept in good  repair,  working  order and  condition,  normal  wear and tear
excepted,  and that from  time to time  there  are made in such  properties  and
equipment all needful and proper repairs,  renewals,  replacements,  extensions,
additions, betterments and improvements thereto, to the extent and in the manner
useful or customary for companies in similar businesses.

         5.09     End  of  Fiscal  Years;  Fiscal  Quarters.  The  Borrower will
                  -----------------------------------------
maintain for financial  reporting  purposes a fiscal year and fiscal quarters on
the same basis as are maintained on the Funding Date.

         5.10     Use of Proceeds.The Borrower agrees to use the proceeds of the
                  ---------------
Loans in accordance with Section 4.05 hereof.

         5.11     Post-Closing Special Covenant. No later than December 8, 1999,
                  -----------------------------
Borrower  shall deliver to Agent  evidence  that (i) all patents and  trademarks
included in the  Collateral  pursuant to the Security  Agreement  and  Guarantor
Security  Agreement  shall have been  registered  in the  applicable  Patent and
Trademark Office, in the name of Borrower or Guarantor, as applicable;  and (ii)
the  records of each of the  Patent  and  Trademark  Offices  reflect  the first
priority  Security  Interest in, and do not reflect any adverse  claims or other
liens against any of, such patents and trademarks.

         5.12     Broker Fee. The Borrower shall pay, on or before the date due,
                  ----------
any  broker's  or  finder's  fee  due  in  connection with the Loan and the Loan
Documents.

                                       71

<PAGE>

         SECTION 6. Negative Covenants. The Borrower hereby covenants and agrees
                    ------------------
that for so long as this  Agreement  is in effect  and until the Loan,  together
with interest,  Lender Expenses and all other Obligations incurred hereunder, is
fully and indefeasibly paid and performed:

         6.01     Changes in Business.  The Borrower will not  materially  alter
                  -------------------
the  character  of  the  business  of  t he  Borrower from that conducted by the
Borrower on the date hereof.

         6.02     Business Structure and Operations. Borrower shall not, without
                  ---------------------------------
Lenders' prior written consent:

                  (a) enter  into any  leases,  agreements,  contracts  or other
commitments,  whether  written  or  oral,  other  than  commitments  made in the
ordinary and regular  course of  Borrower's  business and not of unusual size or
duration;

                  (b)  authorize  or  create  any new  class  of  securities  of
Borrower or make any change in Borrower's corporate charter or its bylaws;

                  (c) sell, assign, lease or otherwise transfer or dispose of or
encumber any property  (real or personal),  except for the sale of inventory and
the replacement of equipment, all in the ordinary and usual course of business;

                  (d)  take  any   action   that   results   in  any  merger  or
consolidation  of Borrower with or into any Person,  any  acquisition  of all or
substantially all of the assets of Borrower or any  reorganization of Borrower's
capital structure;

                  (e)  wind up, liquidate or dissolve its affairs;

                  (f)  purchase,  lease or otherwise  acquire all or any part of
the property or assets of any Person (other than purchases or other acquisitions
of  inventory,  leases,  materials  and  equipment  in the  ordinary  course  of
business);

                  (g) grant any options, warrants or other rights to purchase or
obtain any of its capital  stock or issue,  sell or otherwise  dispose of any of
its capital stock (except to Lenders);

                  (h) declare,  set aside,  or pay any dividend or  distribution
with respect to any class of its capital  stock or issue  (whether in cash or in
kind), or redeem, repurchase or otherwise acquire any of its capital stock;

                  (i) issue any note,  bond or other  debt  security  or create,
incur,  assume or guarantee any  Indebtedness  for borrowed money or capitalized
lease  obligations  other than  Indebtedness  incurred in the ordinary and usual
course of business;

                  (j) make  any  capital  investment  in,  make any loan to,  or
acquire the securities or assets of any other person or entity;

                                       72

<PAGE>

                  (k) except as permitted pursuant to the employment  agreements
described in Section 3.01(d),  or employment  agreements entered into to replace
terminated  employees,  hire any  employee (i) for a term of more than one year,
(ii) for  compensation  in excess of $100,000 per annum,  or (iii) other than in
the ordinary and usual course of Borrower's business;

                  (l) make any  material  change in the  business of Borrower or
conduct  Borrower's  business  or take any other  action  otherwise  than in the
ordinary and usual course of business;

                  (m) amend or change the period of exercisability or accelerate
the  exercisability  of any outstanding options or warrants to acquire shares of
capital stock;

                  (n)  commence  or settle any lawsuit or  arbitration  to which
Borrower is a party which  involves an aggregate  amount  (including  attorneys'
fees and costs) in excess of $50,000;

                  (o)  make or  commit  to any  capital  expenditures  involving
$500,000  in  any  individual  transaction  or  an  aggregate  of  greater  than
$2,000,000 in any year, or $2,000,000 annually for leases of capital equipment;

                  (p) increase or decrease the number of authorized directors of
Borrower;

                  (q) continue or enter into any  transaction  with any officer,
director or shareholder  of Borrower or any direct or indirect  Affiliate of any
such Person;

                  (r) make any change in the Borrower's  financial  structure or
in any of its business objectives,  purposes or operations which could adversely
affect the ability of Borrower to repay the Secured Obligations; or

                  (s) agree or commit to any of the foregoing.

         6.03     Liens. The Borrower will not create, incur,assume or suffer to
                  -----
exist any Lien upon or with  respect to any property or assets of any kind (real
or  personal,  tangible  or  intangible)  of the  Borrower  whether now owned or
hereafter  acquired,  or  sell  any  such  property  or  assets  subject  to  an
understanding or agreement, contingent or otherwise, to repurchase such property
or assets (including sales of accounts  receivable or notes with recourse to the
Borrower)  or  assign  any  right  to  receive  income,   except  the  following
(collectively, "Permitted Liens"):

                  (a) Liens  for  taxes  not yet due or Liens  for  taxes  being
contested  in good  faith and by  appropriate  proceedings  for  which  adequate
reserves (in the good faith  judgment of the  management of the  Borrower)  have
been established;

                  (b) Liens in respect  of  property  or assets of the  Borrower
imposed by law which were incurred in the ordinary  course of business,  such as
carriers',  warehousemen's and mechanics' Liens, statutory landlords' Liens, and
other similar Liens arising in the ordinary course of business, and (i) which do
not in the aggregate materially detract from the value of such property or

                                       73

<PAGE>

assets or materially  impair the use thereof in the operation of the business of
the  Borrower  or (ii) which are being  contested  in good faith by  appropriate
proceedings,  which  proceedings have the effect of preventing the forfeiture or
sale of the property or asset subject to such Lien;

                  (c) Liens  created  by  or  pursuant  to this Agreement or the
other Loan Documents;

                  (d) Liens arising from  judgments,  decrees or attachments and
Liens  securing   appeal  bonds  arising  from   judgments,   in  each  case  in
circumstances not constituting an Event of Default;

                  (e) Liens (other than any lien  imposed by ERISA)  incurred or
deposits  made in the ordinary  course of business in  connection  with workers'
compensation,  unemployment  insurance and other types of social security, or to
secure the  performance  of tenders,  statutory  obligations,  surety and appeal
bonds, bids, leases, government contracts, performance and return-of-money bonds
and other  similar  obligations  incurred  in the  ordinary  course of  business
(exclusive  of  obligations  in  respect of the  payment  for  borrowed  money),
provided  that the  aggregate  amount of deposits  at any time  pursuant to this
clause (e) shall not exceed $50,000;

                  (f) Leases or subleases  granted to others not  interfering in
any material respect with the business of the Borrower;

                  (g) Easements,  rights-of-way,  restrictions, minor defects or
irregularities   in  title  and  other  similar  charges  or  encumbrances   not
interfering in any material respect with the ordinary conduct of the business of
the Borrower;

                  (h) Purchase  money Liens securing  payables  arising from the
purchase  by the  Borrower  of any  equipment  or goods in the normal  course of
business;

                  (i)  Any  interest  or  title  of a  lessor  under  any  lease
permitted by this Agreement; and

                  (j) Liens described on Exhibit I attached hereto.

         6.04     Modifications.  The Borrower will not amend,  modify or change
                  -------------
in any manner adverse to the interests of the Lenders, any of its organizational
documents (which shall include the certificate of incorporation and bylaws).

         6.05     Relocate  Its  Chief  Executive   Office.   Borrower will not,
                  ----------------------------------------
without thirty (30) days prior written notification to Agent, relocate its chief
executive office.

         6.06     Agreements with Account Debtors.  After an  Event  of  Default
                  -------------------------------
hereunder, no discount,  credit or allowance shall be granted by Borrower to any
account  debtor  and no return of  merchandise  shall be  accepted  by  Borrower
without  Lenders'  consent.  Lenders may,  after an Event of Default,  settle or
adjust  disputes and claims  directly with account  debtors for amounts and upon
terms which Lenders consider advisable, and in such cases, Lenders will credit
                                       74

<PAGE>

the Secured Obligations with only the net amounts received by Lenders in payment
of such  disputed  accounts,  after  deducting all Lender  Expenses  incurred or
expended in connection therewith.

         SECTION 7. Security  Interest.  Borrower shall grant to Agent,  for the
                    ------------------
benefit of the Lenders,  pursuant to the provisions of the Security Agreement, a
continuing  security  interest in all presently  existing and hereafter  arising
Collateral in order to secure prompt payment of any and all Secured  Obligations
and in order to secure  prompt  performance  by  Borrower of each and all of its
covenants and obligations  under the Loan Documents,  all upon and in accordance
with the provisions of this Agreement, the Security Agreement and the other Loan
Documents.  Agent's  security  interest in the  Collateral  shall  attach to all
Collateral without further act on the part of Lenders or Borrower.

         SECTION 8. Events of Default.  Any one or more of the  following  shall
                    -----------------
constitute  an  Event of Default by Borrower under this Agreement:

         8.01 If Borrower  fails to pay within ten (10) days of the date due and
payable or when  declared  due and  payable,  all or any  portion of the Secured
Obligations   owing  to  Lenders   (whether  of  principal,   interest,   taxes,
reimbursement of Lender Expenses, or otherwise);

         8.02 If any Credit Party fails or neglects to perform,  keep or observe
any  material  term,  provision,  condition,  covenant,  agreement,  warranty or
representation  contained in this Agreement, any of the other Loan Documents, or
any other present or future  agreement  between any Credit Party and any Lender,
which breach is not cured within ten (10) days after delivery of notice;

         8.03 If any warranty or representation made to any Lender by any Credit
Party or any officer, director, partner, member, manager, or agent of any Credit
Party is now or hereafter  shall become  materially  false or  misleading to any
extent,  or if any such warranty or  representation is withdrawn which breach is
not cured within ten (10) days after delivery of notice;

         8.04 If there is a material  impairment of the prospect of repayment of
all or any portion of the Secured  Obligations owing to any Lender or a material
impairment  of the value of any Lender's  security  interests in any  Collateral
which breach is not cured within ten (10) days after delivery of notice;

         8.05 If any or all of any Credit  Party  assets are  attached,  seized,
subjected to a writ or distress  warrant,  or are levied upon,  or come into the
possession of any judicial officer or assignee, including any trustee, receiver,
controller, custodian, assignee for the benefit of creditors or any other Person
having  powers or duties  like or similar to the powers and duties of a trustee,
receiver,  controller,  custodian or assignee for the benefit of creditors which
breach is not cured within ten (10) days after delivery of notice;

         8.06 If an Insolvency  Proceeding is commenced by or against any Credit
Party which breach is not cured within ten (10) days after delivery of notice;

         8.07  If any  Credit  Party  is  enjoined,  restrained  or in  any  way
prevented by court order from  continuing to conduct all or any material part of
its  business  affairs  which  breach is not cured  within  ten (10) days  after
delivery of notice;

                                       75

<PAGE>

         8.08 If a notice of lien,  levy or  assessment  if filed of record with
respect to all or any portion of any Credit  Party's assets by the United States
Government,  or any department,  agency or  instrumentality  thereof,  or by any
state, county,  municipal or other governmental agency, or if any taxes or debts
owing at any time hereafter to any one or more of such entities  becomes a lien,
whether  choate or otherwise,  upon any or all of any Credit  Party's assets and
the same is not paid on the  payment  date  thereof  which  breach  is not cured
within ten (10) days after delivery of notice;

         8.09 If a judgment or other claim  becomes a lien or  encumbrance  upon
any or all of any Credit  Party's  assets  which  breach is not cured within ten
(10) days after delivery of notice;

         8.10 If there is a  default  in any  material  agreement  to which  any
Credit  Party is a party with third  parties  resulting in a right by such third
parties to accelerate  the maturity of such Credit  Party's  indebtedness  which
breach is not cured within ten (10) days after delivery of notice;

         8.11 If Guarantor  revokes the  Guaranty or gives any Lender  notice of
Guarantor's  intention to so revoke,  or is in breach of any covenant  under the
Guaranty  which  breach is not cured  within  ten (10) days  after  delivery  of
notice;

         8.12 If there is a change in control  from  Guarantor of the issued and
outstanding stock of the Borrower which breach is not cured within ten (10) days
after delivery of notice;

         8.13 If Borrower  fails to pay salaries and wages when due which breach
is not cured within ten (10) days after delivery of notice; or

         8.14  William  Kim Wah Tan shall no longer be an officer or director of
Guarantor,  other than as a result of the death or disability of William Kim Wah
Tan.

         SECTION 9. Lenders' Rights and Remedies.
                    ----------------------------
         9.01 Rights and Remedies.  Upon the  occurrence of an Event of Default,
              -------------------
Lenders  may, at their  election,  by and through the Agent,  without  notice of
their election and without demand,  do any one or more of the following,  all of
which are authorized by Borrower:

              (a)   Declare all Secured Obligations,  whether  evidenced by this
Agreement,  by notes,  or otherwise, immediately due and payable;

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

              (c)  Terminate  this  Agreement  as to  any  future  liability  or
obligation  of  Lenders,  but without  affecting  Lenders'  rights and  security
interest in the Collateral and without  affecting the Secured  Obligations owing
by Borrower to Lender; and

              (d) Otherwise  enforce any and all rights and exercise any and all
remedies  Lenders may have under the Loan Documents or as otherwise  provided by
law or equity.
                                       76

<PAGE>

         9.02  Lender  Expenses;  Deficiency;  Surplus.  Borrower  shall pay all
               ---------------------------------------
Lender Expenses incurred in connection with Lenders' enforcement and exercise of
any of their  rights and  remedies  as herein  provided,  whether or not suit is
commenced by Lenders;  and any deficiency which exists after  disposition of the
Collateral as provided above will be paid  immediately  by Borrower.  Any excess
will be returned,  without  interest and subject to the rights of third parties,
to Borrower by Lenders.

         9.03 Cumulative Rights and Remedies. Lenders' rights and remedies under
              ------------------------------
this Agreement and all other agreements shall be cumulative.  Lenders shall have
all other rights and remedies not  inconsistent  herewith as provided  under the
UCC, by law, or in equity.

         SECTION 10.   The Agent.
                       ---------
         10.01 Appointment.  Each Lender hereby designates and appoints, subject
               -----------
to its right to revoke  such  designation  and  appointment,  Lead Lender as the
Agent  of  such  Lender  under  the  Loan  Documents,  and  each  Lender  hereby
irrevocably  authorizes  the Agent to take such  action on its behalf  under the
provisions  hereof and  thereof and to  exercise  such  powers and perform  such
duties as are  expressly  delegated to the Agent by the terms hereof and thereof
together with such other powers as are reasonably  incidental thereto. The Agent
shall hold the security pledged under the Loan Documents.  The Agent may perform
any of its duties  hereunder by or through its respective  officers,  directors,
agents, employees or affiliates.

         10.02  Nature  of  Duties.  The  Agent  shall  not have any  duties  or
                ------------------
responsibilities  except those  expressly  set forth in this  Agreement  and the
other Loan Documents.  Neither the Agent nor or any of its respective  officers,
directors,  agents, employees or affiliates shall be liable for any action taken
or omitted by them  hereunder or under any other Loan  Document or in connection
herewith  or  therewith,  unless  caused by their  gross  negligence  or willful
misconduct.  The duties of the Agent shall be mechanical and  administrative  in
nature;  the Agent shall not have by reason of this  Agreement or any other Loan
Document a fiduciary  relationship in respect of any Lender or any holder of the
Note;  and nothing in this  Agreement or any other Loan  Document,  expressed or
implied, is intended to or shall be so construed as to impose upon the Agent any
obligations  in respect of this  Agreement or any other Loan Document  except as
expressly set forth herein or therein.

         10.03 Specific  Duties and  Limitations  on Authority of the Agent.  In
               ------------------------------------------------------------
addition to the other duties and obligations of the Agent set forth herein,  the
Agent  shall  provide to each Lender  copies of any and all notices  sent to the
Borrower by the Agent or received by the Agent from the Borrowers, together with
copies of all  documents  which are  provided  by the  Borrower  pursuant to the
requirements  of this  Agreement and the exhibits  hereto.  The Agent shall not,
without the prior written consent of each Lender,  take or elect not to take any
action to  enforce or waive any rights of any  Lender  hereunder.  Any  document
evidencing  the  existence of the Loan and of any  security  held by the Lenders
shall  specifically   indicate  the  name  of  each  Lender,   unless  a  Lender
specifically requests in writing that its identity not be named.

                                       77

<PAGE>

         10.04  Proportionate  Interests.  Each of the parties to this Agreement
                ------------------------
recognizes that the proportionate interests in the Loan are set forth in Annex I
to this  Agreement,  and that each Lender shall be entitled to direct payment by
the  Borrower  of its  proportionate  interest  of each  payment  of  principal,
interest,  fees  and  other  disbursements  hereunder,  and  that  the  security
interests and other benefits granted pursuant to this Agreement and the Exhibits
hereto shall inure to the benefit of each Lender in proportion to their interest
in the Loan, in each case as set forth in Annex I to this Agreement. Each Lender
further  agrees to bear its  proportionate  share of all  expenses  incurred  in
connection with this Agreement.

         10.05 Lack of Reliance on the Agent. Independently and without reliance
               -----------------------------
upon the Agent,  each Lender and each of the holders of the Note,  to the extent
it  deems  appropriate,  has  made  and  shall  continue  to  make  (i)  its own
independent  investigation of the financial  condition and affairs of the Credit
Parties in connection  with the making and the  continuance  of the Loan and the
taking or not  taking  of any  action in  connection  herewith  and (ii) its own
appraisal of the creditworthiness of the Credit Parties and, except as expressly
provided  in this  Agreement;  notwithstanding  the  foregoing,  the Agent shall
initially  and on a continuing  basis,  provide each Lender or any holder of the
Note with any credit or other  information with respect thereto,  whether coming
into  its  possession  before  the  making  of the  Loan or at any time or times
thereafter.  The Agent shall not be  responsible  to any Lender or any holder of
the  Note  for  any  recitals,  statements,   information,   representations  or
warranties herein or in any document,  certificate or other writing delivered in
connection herewith or for the execution, effectiveness,  genuineness, validity,
enforceability,  perfection,  collectibility,  priority or  sufficiency  of this
Agreement or any other Loan  Document or the  financial  condition of the Credit
Parties or be required to make any inquiry  concerning either the performance or
observance of any of the terms,  provisions  or conditions of this  Agreement or
any other Loan Document, or the financial condition of the Credit Parties or the
existence or possible existence of any Event of Default.

         10.06  Certain  Rights  of  the  Agent.  If  the  Agent  shall  request
                -------------------------------
instructions  from the  Lenders  with  respect  to any act or action  (including
failure to act) in connection  with this  Agreement or any other Loan  Document,
the Agent  shall be  entitled  to refrain  from such act or taking  such  action
unless and until the Agent shall have  received  instructions  from the Lenders;
and  the  Agent  shall  not  incur  liability  to any  Person  by  reason  of so
refraining. Without limiting the foregoing, neither any Lender nor any holder of
the Note shall have any right of action whatsoever against the Agent as a result
of the Agent acting or refraining from acting  hereunder or under any other Loan
Document in accordance with the instructions of the Lenders.

         10.07 Reliance. The Agent shall be entitled to rely, and shall be fully
               --------
protected in relying, upon any notes, writing,  resolution,  notice,  statement,
certificate,  telex,  teletype,  facsimile  or  telecopier  message,  cablegram,
radiogram,  order or other document or telephone message signed, sent or made by
any Person that the Agent believed to be the proper Person,  'and,  with respect
to all legal matters  pertaining  to this  Agreement and any other Loan Document
and its duties  hereunder and thereunder upon advice of counsel  selected by the
Agent.

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         10.08  Indemnification.  To the extent the Agent is not  reimbursed and
                ---------------
indemnified by the Borrower, each Lender will reimburse and indemnify the Agent,
in  proportion to their  respective  percentage  interests in the Loan,  for and
against  any and  all  liabilities,  obligations,  losses,  damages,  penalties,
claims, actions,  judgments, costs, expenses or disbursements of whatsoever kind
or nature which may be imposed on, asserted  against or incurred by the Agent in
performing its respective duties hereunder or under any other Loan Document,  or
in any way  relating  to or  arising  out of this  Agreement  or any other  Loan
Document;  provided  that no Lender  shall be  liable  for any  portion  of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements  resulting from the gross negligence or willful
misconduct of the Agent.

         10.09  The  Agent  in Its  Individual  Capacity.  With  respect  to its
                ----------------------------------------
obligation  to make Loan under this  Agreement,  the Agent shall have the rights
and powers  specified herein for a "Lender" and may exercise the same rights and
powers as "Lenders,"  "holders of the Note" or any similar term,  and such terms
shall, unless the context clearly otherwise indicates,  include the Agent in its
individual  capacity.  Without limiting the foregoing,  and in addition thereto,
any Agent which is not a Lender  shall be  entitled  to all  rights,  powers and
protections granted to the Lenders under the Loan Documents,  to the extent that
the context reasonably requires.  The Agent may accept deposits from, lend money
to, and generally  engage in any kind of banking,  trust or other  business with
any  Credit  Party  or any  Affiliate  of any  Credit  Party  as if it were  not
performing  the  duties  specified  herein,   and  may  accept  fees  and  other
consideration  from the  Borrower  or any other  Credit  Party for  services  in
connection  with this Agreement and otherwise  without having to account for the
same to the Lenders.

         10.10  Holders.  The Agent may deem and treat the payees of the Note as
                -------
the owners thereof for all purposes  hereof unless and until a written notice of
the assignment,  transfer or endorsement thereof, as the case may be, shall have
been filed with the Agent. Any request,  authority or consent of any Person who,
at the time of making such request or giving such  authority or consent,  is the
holder of any of the Note shall be  conclusive  and  binding  on any  subsequent
holder, transferee, assignee or indorsee, as the case may be, of such Note or of
any Note issued in exchange therefor.

         10.11    Resignation by the Agent.
                  ------------------------
                  (a) The  Agent  may  resign  from the  performance  of all its
functions and duties hereunder and/or under the other Loan Documents at any time
by giving 15  Business  Days'  prior  written  notice  to the  Borrower  and the
Lenders.  Such resignation shall take effect upon the appointment of a successor
Agent pursuant to clauses (b) and (c) below or as otherwise provided below.

                  (b) Upon any such notice of  resignation,  the  Lenders  shall
appoint a successor Agent hereunder.

                  (c) If a  successor  Agent  shall not have  been so  appointed
within such 15 Business  Day  period,  the Agent shall then  appoint a successor
Agent who shall serve as Agent hereunder or thereunder  until such time, if any,
as the Lenders appoint a successor Agent as provided above.
                                       79

<PAGE>

                  (d) If no  successor  Agent  has been  appointed  pursuant  to
clause (b) or (c) above by the 20th  Business  Day after the date such notice of
resignation  was  given by the  Agent,  the  Agent's  resignation  shall  become
effective and the Lenders shall  thereafter  perform all the duties of the Agent
hereunder  and/or under any other Loan Document  until such time, if any, as the
Lenders appoint a successor Agent as provided above.

         10.12    Foreign  Lenders'  Obligations  to  Deliver  Documents.   Each
                  ------------------------------------------------------
Lender,  if any,  that is not a United  States  Person  for  Federal  income tax
purposes,  agrees (i) prior to the first  payment to such  Lender of any amounts
due to such  Lender  under the Loan  Documents,  upon  request by the Agent,  to
execute and deliver IRS Form W-8,  1001,  or 4224 (or any  successor  thereto or
substitute  therefor),  as  applicable,  and (ii)  thereafter,  to maintain  the
effectiveness and accuracy of such tax forms and otherwise to comply with United
States tax laws,  to execute and deliver  additional or  supplemental  tax forms
with respect to amounts due to such Lender under the Loan Documents.

         SECTION 11. Miscellaneous.
                     -------------
         11.01 Payment of Expenses. etc.
               ------------------------
                  (a) Legal Expenses:  Indemnity. The Borrower agrees to (i) pay
to Lenders all Legal Expenses in connection with the  negotiation,  preparation,
execution and delivery of the Loan  Documents and the documents and  instruments
referred to therein,  (ii) pay to Lenders all Legal Expenses  incurred by Lender
in connection  with the  enforcement of the Loan Documents and the documents and
instruments  referred  to therein,  and (iii) pay and hold the Lenders  harmless
from and against any and all present and future  stamp and other  similar  taxes
with  respect  to the  foregoing  matters  and  from  and  against  any  and all
liabilities  with respect to or resulting from any delay or omission (other than
to the extent attributable to the Lenders) to pay such taxes, and (iv) indemnify
the Lenders and its officers, directors,  employees,  representatives and agents
from and hold each of them  harmless  against any and all  losses,  liabilities,
claims,  damages or  expenses  incurred  by any of them:  (x) as a result of, or
arising out of, or in any way  related  to, or by reason of, any  investigation,
litigation or other proceeding (whether or not the Lender is a party thereto and
whether or not any such investigation, litigation or other proceeding is between
or among the Lenders,  or any third Person or otherwise) related to the entering
into  and/or  performance  of  any  Loan  Document  or the  consummation  of any
transactions contemplated in any Loan Document,  including,  without limitation,
any such investigation, litigation or other proceeding relating to the violation
of,  noncompliance  with or liability under, any environmental law applicable to
the  operations of the Borrower,  any of its  Subsidiaries  or any real property
owned  or  operated  by any  of  them,  and  in  each  case  including,  without
limitation,  the  reasonable  fees and  disbursements  of  counsel  incurred  in
connection  with any such  investigation,  litigation or other  proceeding  (but
excluding  any such  losses,  liabilities,  claims,  damages or  expenses to the
extent  it is  determined  by  non-appealable  order  of a  court  of  competent
jurisdiction  that such losses,  liabilities,  claims,  damages or expenses were
incurred by reason of the gross  negligence or willful  misconduct of the Person
to be  indemnified);  or (y) in order to enforce or seek to enforce  any rights,
commence,  intervene in, respond to, or defend any action or  proceeding,  file,
prosecute  or defend  any claim or cause of action in any  action or  proceeding
(including without limitation any bankruptcy claim,  third-party claim,  secured
creditor claim,  reclamation  complaint,  and complaint for relief from any stay
under the Bankruptcy Code or otherwise), protect, obtain possession of, sell,
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<PAGE>

lease,  dispose of or otherwise  enforce any security interest in or lien on any
property  of any  kind  securing  any or all  of  the  Secured  Obligations,  or
represent the Lenders in any  litigation  with respect to the  Borrower's or any
other Creditor Party's affairs; or (z) arising out of any claim to a broker's or
finder's  fee  relating  to the  Loan.  All of the  Secured  Obligations  of the
Borrower in this Section  11.01(a) are payable on demand and shall bear interest
until paid at the highest rate permitted under the Note.

                  (b) If the Lenders or Borrower files any  arbitration or other
legal proceeding against the other predicated on a breach of this Agreement, the
prevailing party in such action shall be entitled to recover its attorneys' fees
and costs of such proceeding from the non-prevailing party.

         11.02  Right of Set off.  In  addition  to any rights now or  hereafter
                ----------------
granted under  applicable law or otherwise,  and not by way of limitation of any
such  rights,  if an Event of  Default  then  exists,  the  Lenders  are  hereby
authorized  at any  time or from  time to  time,  without  presentment,  demand,
protest or other notice of any kind to Borrower or to any other Person, any such
notice being hereby  expressly  waived,  to set off and to appropriate and apply
any and all deposits (general or special) and any other Indebtedness at any time
held or owing by such Lender  (including,  without  limitation,  by branches and
agencies of the Lenders wherever located) to or for the credit or the account of
Borrower  against and on account of the Secured  Obligations  and liabilities of
Borrower  to the  Lenders  under this  Agreement  or under any of the other Loan
Documents,  and all other claims of any nature or description  arising out of or
connected  with this  Agreement  or any other  Loan  Document,  irrespective  of
whether or not the Lenders shall have made any demand hereunder.

         11.03 Notices.  Unless  applicable  law requires a different  method of
               -------
giving notice, any and all notices,  demands or other communications required or
desired to be given  hereunder by any party shall be in writing.  Assuming  that
the contents of a notice meet the  requirements of the specific  Section of this
Agreement  which  mandates the giving of that notice,  a notice shall be validly
given or made to another  party if served  either  personally or if deposited in
the  United  States  mail,  certified  or  registered,  postage  prepaid,  or if
transmitted by telecopy or other electronic  written  transmission  device or if
sent by overnight  courier service,  and if addressed to the applicable party as
set next to their signature below. If such notice, demand or other communication
is served personally,  service shall be conclusively  deemed made at the time of
such personal service. If such notice, demand or other communication is given by
mail,  service shall be conclusively  deemed given  seventy-two (72) hours after
the deposit  thereof in the United States mail. If such notice,  demand or other
communication  is given  by  overnight  courier,  telecopy  or other  electronic
transmission,  service shall be conclusively made at the time of confirmation of
delivery.  Any party  hereto may change its address for the purpose of receiving
notices,  demands  and other  communications  as herein  provided,  by a written
notice given in the aforesaid manner to the other party hereto.

         11.04    Benefit of Agreement.
                  --------------------
                  (a) This  Agreement  shall be  binding  upon and  inure to the
benefit of and be enforceable  by the  respective  successors and assigns of the
parties hereto, provided that the Borrower may not assign or transfer any of its

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<PAGE>

rights or  obligations  hereunder  without  the  prior  written  consent  of the
Lenders.  Each Lender may at any time grant  participations in any of its rights
hereunder or under the Note to another financial  institution,  provided that in
the case of any such  participation,  the participant  shall not have any rights
under this  Agreement  or any of the other  Loan  Documents  (the  participant's
rights  against  such  Lender in respect of such  participation  to be those set
forth in the  agreement  executed  by such  Lender  in favor of the  participant
relating  thereto) and all amounts  payable by the Borrower  hereunder  shall be
determined  as if such  Lender had not sold such  participation,  and,  provided
further that no Lender shall transfer,  grant or assign any participation  under
which the participant shall have rights to approve any amendment to or waiver of
this  Agreement  or any other  Loan  Document  except as agreed to by all of the
Lenders.

                  (b) Notwithstanding  the foregoing,  (x) any Lender may assign
all or a portion  of its  percentage  interest  in the Loan and its  rights  and
obligations  hereunder to one or more  Lenders,  and (y) with the consent of the
Agent (which shall not be unreasonably withheld), any Lender may assign all or a
portion of its  percentage  interest in the Loan and its rights and  obligations
hereunder to one or more Eligible  Transferees.  No  assignment  pursuant to the
immediately preceding sentence shall to the extent such assignment represents an
assignment to an institution other than one or more Lenders hereunder,  be in an
aggregate amount less than $500,000 unless the entire percentage interest of the
assigning Lender is so assigned. If any Lender so sells or assigns all or a part
of its rights  hereunder or under the Note,  any reference in this  Agreement or
the Note to such assigning  Lender shall  thereafter refer to such Lender and to
the  respective  assignee  to the  extent of its  respective  interests  and the
respective  assignee  shall  have,  to the  extent  of such  assignment  (unless
otherwise provided therein), the same rights and benefits as it would if it were
such assigning Lender.  Each assignment  pursuant to this Section 11.04(b) shall
be  effected  by the  assigning  Lender and the  assignee  Lender  executing  an
assignment  agreement  in a form  approved  by the  Agent and  giving  the Agent
written  notice  thereof.  At the time of any such  assignment,  (i)  either the
assigning  or  the  assignee  Lender  shall  pay to the  Agent  a  nonrefundable
assignment fee of $1,000,  (ii) Annex I shall be deemed to be amended to reflect
the  percentage  interest in the Loan of the  respective  assignee  (which shall
result  in a direct  reduction  to the  percentage  interest  in the Loan of the
assigning  Lender).  To the extent of any  assignment  pursuant to this  Section
11.04(b) to a Person which is not already a Lender  hereunder and which is not a
United States Person for Federal income tax purposes,  the  respective  assignee
Lender  shall  provide to the Borrower  and the Agent the  appropriate  Internal
Revenue  Service  Forms.  Each  Lender and the  Borrower  agree to execute  such
documents  (including  without  limitation  amendments to this Agreement and the
other Loan Documents) as shall be necessary to effect the foregoing.  Nothing in
this  clause  (b) shall  prevent  or  prohibit  any  Lender  from  pledging  its
percentage  interest  in the  Note  to a  Federal  Reserve  Bank in  support  of
borrowings made by such Lender from such Federal Reserve Bank.

                  (c)  Notwithstanding  any  other  provisions  of this  Section
11.04,  no transfer or assignment of the interests or  obligations of any Lender
hereunder  or any grant of  participation  therein  shall be  permitted  if such
transfer,  assignment or grant would require the Borrower to file a registration
statement  with the SEC or to  qualify  the Loan  under the  "Blue  "laws of any
state.

                                       82

<PAGE>

                  (d)  Each  Lender  initially  party to this  Agreement  hereby
represents,  and each  Person that  became a Lender  pursuant  to an  assignment
permitted by this Section 11 will,  upon its becoming  party to this  Agreement,
represent  that it is an Eligible  Transferee  which makes Loan in the  ordinary
course of its business and that it will make or acquire Loan for its own account
in the ordinary course of such business,  provided that subject to the preceding
clauses (a) and (b), the disposition of any promissory  notes or other evidences
of or interests in Indebtedness held by such Lender shall at all times be within
its exclusive control.

         11.05 No  Waiver.  No  failure  or delay on the part of the  Lender  in
               ----------
exercising  any  right,  power or  privilege  hereunder  or under any other Loan
Document and no course of dealing  between any Credit Party and any Lender shall
operate as a waiver  thereof;  nor shall any single or partial  exercise  of any
right,  power or privilege  hereunder or under any other Loan Document  preclude
any other or further exercise thereof or the exercise of any other right,  power
or privilege hereunder or thereunder.  No notice to or demand on Borrower in any
case shall entitle  Borrower to any other or further notice or demand in similar
or other circumstances or constitute a waiver of the rights of the Lender to any
other or further action in any circumstances without notice or demand.

         11.06    Payments Pro Rata.
                  -----------------
                  (a) The Agent agrees that  promptly  after its receipt of each
payment from or on behalf of the Borrower in respect of any Secured  Obligations
hereunder,  it shall  distribute such payment to the Lenders pro rata based upon
their respective  interests,  if any, of the Secured Obligations with respect to
which such payment was received.

                  (b) Each of the Lenders  agrees that, if it should receive any
amount hereunder (whether by voluntary payment, by realization upon security, by
the exercise of the right of set off or banker's lien, by  counterclaim or cross
action, by the enforcement of any right under the Loan Documents,  or otherwise)
which is applicable to the payment of the principal of, or interest on, the Loan
or to the payment of any of the other Secured  Obligations,  of a sum which with
respect to the  related sum or sums  received  by other  Lenders is in a greater
proportion  than the total of such Secured  Obligation then owed and due to such
Lender bears to the total of such Secured Obligation then owed and due to all of
the Lenders  immediately prior to such receipt,  then such Lender receiving such
excess  payment  shall  purchase for cash without  recourse or warranty from the
other Lenders an interest in the Secured  Obligations of the  respective  Credit
Party  to  such  Lenders  in such  amount  as  shall  result  in a  proportional
participation by all of the Lenders in such amount, provided that if all or, any
portion of such excess amount is  thereafter  recovered  from such Lender,  such
purchase  shall be rescinded  and the purchase  price  restored to the extent of
such recovery, but without interest.

         11.07    Calculations: Computations.
                  --------------------------
                  (a) The  financial  statements  to be  furnished to the Lender
pursuant hereto shall be made and prepared in accordance with GAAP  consistently
applied  throughout  the  periods  involved  (except  as set  forth in the notes
thereto or as otherwise  disclosed  in writing by the Borrower to the  Lenders);
provided that if at any time such computations utilize accounting principles

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<PAGE>

different  from those  utilized in the  financial  statements  furnished  to the
Lenders,  such  financial  statements  shall be  accompanied  by  reconciliation
work-sheets.

                  (b) All  computations  of interest  hereunder shall be made on
the actual number of days elapsed over a year of 360 days.

         11.08    Governing Law: Arbitration: Waiver of Jury Trial.
                  ------------------------------------------------
                  (a) This Agreement and the other Loan Documents and the rights
and  obligations of the parties  hereunder and thereunder  shall be construed in
accordance with and be governed by the laws of the State of New York. Subject to
the remaining  provisions of this Section 11.08,  any legal action or proceeding
with respect to this  Agreement or any other Loan Document may be brought in the
courts of the State of New York sitting in the City of New York or of the United
States for the Southern  District of New York, and, by execution and delivery of
this Agreement, Borrower hereby irrevocably accepts for itself and in respect of
its property,  generally and unconditionally,  the jurisdiction of the aforesaid
courts.  Nothing herein shall affect the right of any Lender to serve process in
any manner  permitted  by law or to  commence  legal  proceedings  or  otherwise
proceed against Borrower in any other jurisdiction.

                  (b) Except as otherwise  specifically  agreed to in writing by
the parties,  any action,  dispute,  claim or  controversy  between or among the
parties,  whether  sounding  in  contract,  tort,  or  otherwise  ("Dispute"  or
"Disputes"),  shall be  resolved  by  arbitration  as set forth  below and shall
include all Disputes  arising out of or in connection with (i) this Agreement or
any  related  agreements  or  instruments,  (ii) all past,  present,  and future
agreements involving the parties, (iii) any transaction contemplated hereby, and
all past and future  transactions  involving  the parties and (iv) any aspect of
the past, present or future relationship of the parties.  Such disputes shall be
resolved by binding  arbitration in accordance with the Federal  Arbitration Act
and the  Commercial  Arbitration  Rules  ("Rules") of the  American  Arbitration
Association  ("AAA").  In the event of any  inconsistency  between the Rules and
these  arbitration  provisions,  these provisions shall supersede the Rules. All
statutes of limitations  which would otherwise be applicable  shall apply to any
arbitration  proceeding under this subsection (b). In any arbitration proceeding
subject to these provisions,  the arbitrator is specifically empowered to decide
(by documents  only, or with a hearing,  at the  arbitrator's  sole  discretion)
pre-hearing  motions which are substantially  similar to pre-hearing  motions to
dismiss and motions for summary adjudications.  Judgment upon the award rendered
may be entered in any court  having  jurisdiction.  Whenever an  arbitration  is
required,  the parties  shall  select an  arbitrator  in the manner  provided in
subsection  (d). The  arbitration  proceeding  shall be held in the State of New
York, City of New York.

                  (c) No  provision  of, nor the  exercise of any rights  under,
subsection  (a) hereof,  shall  limit the right of the Lenders (i) to  foreclose
against any real or personal  property  collateral by the exercise of a power of
sale under a deed of trust,  mortgage or other security agreement or instrument,
or applicable law, (ii) to exercise self help remedies such as set-off, or (iii)
to obtain  provisional  or ancillary  remedies such as injunctive  relief or the
appointment  of a receiver from a court having  jurisdiction  before,  during or
after  the  pendency  of  any  arbitration  or  referral.  The  institution  and
maintenance of an action for judicial relief or pursuit of provisional or

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<PAGE>

ancillary  remedies or exercise of self help  remedies  shall not  constitute  a
waiver of the right of any party, including the plaintiff, to submit the Dispute
to arbitration or judicial references.

                  (d) Whenever an arbitration is required under  subsection (b),
the arbitrator shall be selected in accordance with this  subsection.  Except as
otherwise  provided,  the  arbitrator  shall be selected in accordance  with the
Rules.  Any arbitrator  selected under this subsection shall be knowledgeable in
the subject  matter of the Dispute.  Qualified  retired judges shall be selected
through  panels  maintained by the AAA, or the New York Supreme  Court. A single
arbitrator who is an attorney but is not a retired judge shall have the power to
render a maximum award of $100,000. Where any party makes timely written request
prior to appointment of the arbitrator,  or where the claim of any party exceeds
$100,000,  the arbitrator shall be a retired judge formerly sitting on the bench
of the New York Supreme  Court or any higher State court,  or a retired  Federal
Court judge formerly sitting on the bench in the Southern  District of New York.
A single  arbitrator  who is a retired  judge  shall  have the power to render a
maximum  award of  $1,000,000.  Where  any  party  seeks an award in  excess  of
$1,000,000 the Dispute shall be decided by a majority vote of three arbitrators,
at least one of whom shall meet the  requirements  for retired  judges set forth
herein.  For purposes of this  subsection  (d), the  computation  of the maximum
award an arbitrator  may make includes  amounts  awarded for  arbitration  fees,
attorneys' fees, and all other related costs provided by subsection (e).

                  (e) Any  arbitration  questions  arising under this section on
dispute resolution shall be governed in accordance with the Federal  Arbitration
Act. This section  constitutes the entire  agreement of the parties with respect
to its  subject  matter  and  supersedes  all prior  discussions,  arrangements,
negotiations and other  communications on dispute resolution.  The provisions of
this section  shall  survive any  termination,  amendment or  expiration  of the
agreement  in which this  section is  contained,  unless the  parties  otherwise
expressly  agree in  writing.  In the  event  of any  Dispute  governed  by this
section, each of the parties shall pay all of its own expenses,  and, subject to
the award of the arbitrator,  shall pay an equal share of the arbitrators' fees.
The  arbitrator  shall  have the power to award  recovery  of all costs and fees
(including  attorneys' fees,  administrative fees,  arbitrators' fees, and court
costs) to the prevailing  party. No provision of, nor the exercise of any rights
under,  this  Section  11.08  shall  limit the right of either  party to conduct
reasonable  discovery in accordance with applicable  rules and procedures of the
AAA.

                  (f) THE PARTIES HERETO HEREBY WAIVE THE RIGHT TO TRIAL BY JURY
IN ANY ACTION,  CLAIM,  LAWSUIT OR PROCEEDING BASED UPON,  ARISING OUT OF, OR IN
ANY  WAY.RELATING  TO: (i) THIS  AGREEMENT  OR ANY OTHER LOAN  DOCUMENT,  OR ANY
SUPPLEMENT OR AMENDMENT THERETO;  OR (ii) ANY OTHER PRESENT OR FUTURE INSTRUMENT
OR AGREEMENT BETWEEN ANY OF THE LENDERS,  ON THE ONE HAND, AND ANY OF THE CREDIT
PARTIES, ON THE OTHER HAND, OR (iii) ANY BREACH,  CONDUCT,  ACTS OR OMISSIONS OF
ANY OF THE CREDIT PARTIES OR THE LENDERS, OR ANY OF THEIR RESPECTIVE  DIRECTORS,
MANAGERS, OFFICERS,  EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSON AFFILIATED
WITH OR  REPRESENTING  ANY OF THE CREDIT PARTIES OR THE LENDERS,  IN EACH OF THE
FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

         11.09  Counterparts.  This  Agreement  may be executed in any number of
                ------------

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<PAGE>

counterparts and by the different parties hereto on separate counterparts,  each
of which when so executed and delivered  shall be an original,  but all of which
shall together  constitute one and the same  instrument.  A set of  counterparts
executed by all the parties  hereto  shall be lodged with the  Borrower  and the
Agent.

         11.10 Effectiveness.  This Agreement shall become effective on the date
               -------------
on which the Borrower and the Lenders  shall have signed a copy hereof  (whether
the same or different  copies) and shall have  delivered the same to the Lenders
at Agent's  address  specified  herein for  purposes  of  delivering  notices to
Lenders,  and shall have given to the Agent  telephonic  (confirmed in writing),
written  telex or  facsimile  transmission  notice  (actually  received) at such
office that the same has been signed and mailed to it.

         11.11 Headings  Descriptive.  The headings of the several  sections and
               ---------------------
subsections of this Agreement are inserted for convenience only and shall not in
any way affect the meaning or construction of any provision of this Agreement.

         11.12  Amendment or Waiver.  Neither this  Agreement nor any other Loan
                -------------------
Document nor any terms hereof or thereof may be changed,  waived,  discharged or
terminated  unless such change,  waiver,  discharge or termination is in writing
signed by  Borrower  and  Lenders;  provided,  that any  provision  set forth in
Section 10 or  otherwise  relating  to the rights  and  responsibilities  of the
Lenders  and the Agent to each other may be amended  without  the  consent of or
notice to the Borrower.

         11.13  Survival.  All  indemnities  set forth herein shall  survive the
                --------
execution  and delivery of this  Agreement  and the making and  repayment of the
Loan.

         11.14 Domicile of Loan. Each Lender may transfer and carry its Loan at,
               ----------------
to or for the account of any branch  office,  subsidiary  or  affiliate  of such
Lender,  provided that the Borrower shall not be responsible for costs resulting
from any such transfer.

         11.15 Lender  Register.  The Borrower  hereby  designates  the Agent to
               ----------------
serve as its agent,  solely for  purposes of this Section  11.15,  to maintain a
register (the "Lender Register") on which it will record the percentage interest
of each Lender in the Loan and each repayment in respect of the principal amount
of the  Loan.  Failure  to make  any  such  recordation,  or any  error  in such
recordation, shall not affect the Borrower's obligations in respect of the Loan.
With respect to any Lender,  the transfer of the rights to the principal of, and
interest on, the Loan shall not be effective  until such transfer is recorded on
the Lender  Register  maintained  by the Agent with  respect to ownership of the
Loan and prior to such  recordation  all amounts  owing to the  transferor  with
respect to the Loan shall remain owing to the  transferor.  The  registration of
assignment or transfer of all or part of the Loan shall be recorded by the Agent
on the  Lender  Register  only upon the  acceptance  by the Agent of a  properly
executed and delivered assignment agreement pursuant to Section 11.04(b). The

                                       86

<PAGE>

Borrower  agrees to  indemnify  the Agent from and  against  any and all losses,
claims,  damages and  liabilities of whatsoever  nature which may be imposed on,
asserted  against or incurred by the Agent in  performing  its duties under this
Section 11.15 other than those resulting from the Agent's willful  misconduct or
gross negligence.

         11.16 Time of the  Essence.  Time is of the essence with respect to all
               --------------------
performance required under this Agreement.

         11.17  Construction:  Severability:  Savings Clause. The Loan Documents
                --------------------------------------------
have been reviewed by  independent  counsel for Borrower and Lenders,  and shall
not be construed against the party or parties who drafted the Loan Documents. If
any  provision  of this  Agreement  or the  application  thereof to any party or
circumstance is held invalid, void, inoperative or unenforceable,  the remainder
of this  Agreement  and the  application  of such  provision to other parties or
circumstances  shall not be affected  thereby,  the provisions of this Agreement
being  severable  in any such  instance.  Notwithstanding  any  provision to the
contrary in this Agreement,  in the event that any rate of interest provided for
in this  Agreement  is found by a court to exceed the  maximum  rate  allowed by
applicable  law, this Agreement  shall be modified to provide for a reduction in
the rate of interest previously charged,  with any excess interest being applied
to  principal,  and any  payments in excess of principal  being  returned to the
Borrower.

         11.18 Integration.  This Agreement,  together with the Exhibits hereto,
               -----------
is the entire and only agreement  between the parties hereto with respect to the
Loan,  and  all  representations,   warranties,   agreements,   or  undertakings
heretofore  or  contemporaneously  made,  which  are not set forth  herein,  are
superseded  hereby.  No course of dealings between the parties,  no usage of the
trade,  and no parole or  extrinsic  evidence of any nature  shall be used or be
relevant  to  supplement  or  explain or modify  any term or  provision  of this
Agreement.

         11.19 Claims.  The Borrower agrees that any claim or cause of action by
               ------
the Borrower  against the Lenders,  or any of them,  or any of their  respective
directors,  officers,  employees,  agents, accountants or attorneys, based upon,
arising from, or relating to this Agreement or any of the other Loan  Documents,
or any other present or future agreement between any Lender and the Borrower, or
any other  transaction  contemplated  hereby or  thereby or  relating  hereto or
thereto, or any other matter, cause or thing whatsoever, whether or not relating
hereto or thereto, occurred, done, omitted or suffered to be done by any Lender,
or  by  any  of  their  respective  directors,   officers,   employees,  agents,
accountants or attorneys,  whether sounding in contract or in tort or otherwise,
shall  be  barred  unless  asserted  by  the  Borrower  by the  commencement  of
arbitration  proceedings in accordance  with Section 11.08 within the shorter of
the following  periods of time: (i) any applicable  statute of limitations,  and
(ii) one year after Borrower  discovers,  or should  reasonably  have discovered
based on facts then known to  Borrower,  the act,  occurrence  or omission  upon
which such claim or cause of action,  or any part thereof,  is based and service
of a notice (in accordance with the Rules) on an officer of such Lender or any

                                       87

<PAGE>

other person  authorized to accept  service of process on behalf of such Lender,
within 30 days  thereafter.  The Borrower  agrees that such one year period is a
reasonable and sufficient  time for the Borrower to investigate and act upon any
such claim or cause of action.  The one year period provided herein shall not be
waived,  tolled,  or  extended  except by a specific  written  agreement  of the
Lenders.  This  provision  shall  survive  any  termination  of any of the  Loan
Documents.  Under  no  circumstances  shall  Lenders,  their  Affiliates  or its
Subsidiaries, or any of their respective directors,  officers, attorneys, agents
or  employees,  or any of  them,  be  liable  for  any  compensatory,  punitive,
exemplary,  consequential  or  indirect  damages  which are or may be alleged to
result from the Loan Documents or the transactions contemplated thereby.

         11.20 No Liability. The Lenders shall not be liable to Borrower (i) for
               ------------
any  loss or  damage  sustained  by  Borrower  or (ii)  for  any  loss,  damage,
depreciation or other  diminution in the value of any of the Collateral that may
occur as a result of, in  connection  with or that is in any way  related to (x)
any  exercise by any Lender of any right or remedy  under the Loan  Documents or
(y) any other act or failure to act of any Lender, except to the extent that the
same shall be  determined  by a judgment of a court of  competent  jurisdiction,
that is final and not  subject to review on appeal,  to be the result of acts or
omissions on the part of the Lender  constituting  gross  negligence  or willful
misconduct.

         11.21    Waivers.
                  -------
                  (a) Waiver of Demand, Protest,  Notice, Default, Etc. Borrower
                      ------------------------------------------------
waives demand, protect, 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 Collateral
or  guarantees  at any time held by Lenders on which  Borrower may in any way be
liable.

                  (b) Waiver of  Confidentiality.  Borrower  waives the right to
                      --------------------------
assert a confidential relationship, if any, it may have with any accounting firm
and/or service bureau in connection  with any  information  requested by Lenders
pursuant to or in accordance with this Agreement, and agrees that any Lender may
contact  directly any such  accounting  firm and/or  service  bureau in order to
obtain such information.

                                       88

<PAGE>

         IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Loan  Agreement to be duty  executed and  delivered as of the date first
above written.

BORROWER:                                ALPHANET HOSPITALITY SYSTEMS, INC.

Alpha Hospitality Systems, Inc.
275 North Franklin Turnpike
Suite 230                                By:  /s/ Mark Holzberg
Ramsey, New Jersey 07446                      ------------------------------
                                              Its: President
Attention:        Mr. Mark Holzberg
                  President
Telecopier No.: (201) 327-7896           By:  /s/ Mee Mee Tan
                                              ------------------------------
                                              Its: Secretary

AGENT:                                   APPEL INVESTMENTS INC.
_______________________
_______________________
_______________________                  By:  /s/ Kim Yeow Tan
                                              ------------------------------
Telecopier No.: _____________                 Its: _________________________

                                       89

<PAGE>

with a copy to:

Jeffer, Mangels, Butler & Marmaro LLP
2121 Avenue of the Stars
10th Floor
Los Angeles, California 90067
Attention:  Robert E. Braun, Esq.
Telecopier No.: (310) 203-0567
                                          AHS FUNDING LLC

                                          By: /s/ Jenny Jechart
                                              --------------------------
                                              Its: Manager

                                       90EXHIBIT 10.4

                                       91
<PAGE>

                                 PROMISSORY NOTE

$2,525,000.00                                                   October 21, 1999

FOR VALUE RECEIVED,  ALPHANET HOSPITALITY SYSTEMS, INC. ("Borrower") promises to
pay to APPEL  INVESTMENTS  INC.  ("Agent"),  as Agent,  or to its order,  at the
Payment  Office or at such other place as the holder  hereof may  designate,  in
lawful money of the United States of America,  in cash or immediately  available
funds acceptable to the holder hereof, principal equal to the sum of TWO MILLION
FIVE HUNDRED TWENTY-FIVE THOUSAND and 00/100 DOLLARS  ($2,525,000.00),  together
with  interest  on the  outstanding  principal  balance  until  paid  in full in
accordance  with the terms,  conditions and provisions  hereinafter set forth in
this Promissory Note (this "Note").

This Note is issued  pursuant  to, and is subject to the terms of, that  certain
Loan  Agreement  (the "Loan  Agreement"),  dated as of October 21,  1999,  among
Borrower,  the lenders from time to time party  hereto  (each,  a "Lender"  and,
collectively, the "Lenders"), and APPEL INVESTMENTS INC., Agent, which provides,
among other things for acceleration  hereof.  Capitalized  terms, which are used
herein but not defined herein,  shall have the meanings  ascribed to them in the
Loan Agreement.

Interest  shall accrue and be payable from the date hereof at the rate of twenty
and one-half  percent  (20.5%) per annum (the "Note Rate"),  subject to increase
upon default as hereinafter provided.

Until the Maturity  Date as  hereinafter  provided,  accrued  interest  shall be
payable monthly, commencing on November 1, 1999, and continuing on the first day
of each succeeding  calendar  month. On October 21, 2001 (the "Maturity  Date"),
the entire unpaid principal  balance,  and all unpaid accrued interest  thereon,
shall be due and  payable  without  demand  and/or  notice.  In the  event  that
Borrower  does not pay this Note in full on the Maturity  Date then,  as of said
Maturity  Date and  thereafter  until  paid in full,  interest  accruing  on the
outstanding  principal  balance  hereunder  shall be  computed,  calculated  and
accrued on a daily basis at the Default Rate, as defined below.

Interest,  late charges,  costs,  or expenses that are not received by Lender on
date such interest,  late charges,  costs, or expenses become due, shall, at the
sole discretion of Agent,  be added to the principal  balance and shall from the
date due bear interest at the Default Rate.

Upon the occurrence of an Event of Default,  Agent may, in its sole and absolute
discretion,  declare the entire  unpaid  principal  balance,  together  with all
accrued and unpaid  interest  thereon,  and all other amounts and/or payment due
hereunder, immediately due and payable, without notice and/or demand.

From and after the  occurrence of any Event of Default,  whether by  nonpayment,
maturity,  acceleration,  nonperformance  or otherwise,  and until such Event of
Default has been cured, all outstanding amounts under this Note (including,  but
not limited to,  interest,  costs and late charges) shall bear interest at a per
annum rate (the  "Default  Rate") equal to four percent (4%) per annum in excess
of the Note Rate.

                                       92

<PAGE>

Time is of the essence for all  payments  and other  obligations  due under this
Note. Borrower  acknowledges that if any payment required under this Note is not
received  by Agent  within  fifteen  (15) days  after the same  becomes  due and
payable,  Agent will incur extra  administrative  expenses (i.e., in addition to
expenses incident to receipt of timely payment) and the loss of the use of funds
in connection with the delinquency in payment.  Because,  from the nature of the
case,  the actual  damages  suffered  by Agent by reason of such  administrative
expenses and loss of use of funds would be impracticable or extremely  difficult
to  ascertain,  Borrower  agrees  that five  percent  (5 %) of the amount of the
delinquent  payment,  together  with  interest  accruing  on the  entire  unpaid
principal balance of this Note at the Default Rate, as provided above,  shall be
the amount of damages  which Agent is entitled to receive upon such  breach,  in
compensation therefor. Therefore, Borrower shall, in such event, without further
demand or notice,  pay to Agent,  as Agent's  monetary  recovery  for such extra
administrative  expenses  and loss of use of funds,  liquidated  damages  in the
amount of five percent (5%) of the amount of the delinquent payment (in addition
to interest at the Default  Rate).  The provision of this paragraph are intended
to govern  only the  determination  of  damages  in the event of a breach in the
performance of Borrower to make timely payments hereunder.  Nothing in this Note
shall be construed as in any way giving Borrower the right,  express or implied,
to fail to make timely payments hereunder,  whether upon payment of such damages
or  otherwise.  The right of Agent to  receive  payment of such  liquidated  and
actual damages, and receipt thereof, are without prejudice to the right of Agent
to collect such  delinquent  payments and any other amounts  provided to be paid
hereunder or under any of the Loan Documents,  or to declare an Event of Default
hereunder or under any of the other Loan Documents.

Borrower hereby waives grace, diligence,  presentment, demand, notice of demand,
dishonor, notice of dishonor,  protest, notice of protest, any and all exemption
rights  against the  indebtedness  evidenced by this Note and the right to plead
any statute of  limitations  as a defense to the repayment of all or any portion
of this Note, and interest thereon, to the fullest extent allowed by law.

This Note is subject to the express  condition that at no time shall Borrower be
obligated, or required, to pay interest on the principal balance at a rate which
could  subject any Lender to either  civil or criminal  liability as a result of
such rate being in excess of the maximum  rate which such Lender is permitted to
charge.  If, by the terms of this Note,  Borrower  is, at any time,  required or
obligated to pay interest on the  principal  balance at a rate in excess of such
maximum  rate,  then the rate of interest  under this Note shall be deemed to be
immediately  reduced to such maximum rate, and interest payable  hereunder shall
be computed at such maximum rate, and any portion of all prior interest payments
in excess of such maximum rate shall be applied,  and/or shall  retroactively be
deemed to have been payments made, in reduction of the principal balance.

IN WITNESS  WHEREOF,  Borrower has executed  this Note on the day and year first
above written.

ALPHANET HOSPITALITY SYSTEMS, INC.

By: /s/ Mark Holzberg
  --------------------------
     Its: President

By: /s/ MeeMee Tan
   --------------------------
     Its: Secretary
                                       93

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