INNOVIR LABORATORIES INC
SC 13D, 1996-08-28
IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  SCHEDULE 13D
                    UNDER THE SECURITIES EXCHANGE ACT OF 1934


                           INNOVIR LABORATORIES, INC.
- --------------------------------------------------------------------------------
                                (Name of Issuer)


                     Common Stock, $0.13 per share par value
- --------------------------------------------------------------------------------
                         (Title of Class of Securities)


                                    45764Y106
             -------------------------------------------------------
                                 (CUSIP Number)


James W. Giddens, solely in his   with a copy to:     Richard M. Siegel, Esq.
  capacity as trustee for the                       Hughes Hubbard & Reed LLP
liquidation of the business of A.R.                   One Battery Park Plaza
        Baron & Co., Inc.                          New York, New York 10004-1482
          P.O. Box 359                                     212-837-6000
      Bowling Green Station 
    New York, New York 10274
          212-425-3005
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
                                Communications)


                                  July 11, 1996
             -------------------------------------------------------
             (Date of Event which Requires Filing of this Statement)

If the filing person has previously  filed a statement on Schedule 13G to report
the  acquisition  which is the subject of this  Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box .

Check the following box if a fee is being paid with the statement |X|. (A fee is
not required only if the reporting person:  (1) has a previous statement on file
reporting  beneficial  ownership  of more  than  five  percent  of the  class of
securities  described  in Item 1;  and (2) has  filed  no  amendment  subsequent
thereto reporting  beneficial  ownership of five percent of less of such class.)
(See Rule 13d-7.)

Note: Six copies of this statement, including all exhibits, should be filed with
the  Commission.  See Rule  13d-1(a) for other  parties to whom copies are to be
sent.


<PAGE>
                                    2

*The  remainder  of  this  cover  page  shall  be  filled  out  for a  reporting
person'sinitial  filing  on this  form  with  respect  to the  subject  class of
securities,  and for any subsequent amendment containing information which would
alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the  Securities  Exchange  Act of
1934 ("Act") or otherwise  subject to the liabilities of that section of the Act
but  shall be  subject  to all other  provisions  of the Act  (however,  see the
Notes).


                                  SCHEDULE 13D
- --------------------------------------------------------------------------------
CUSIP No. 45764Y106
- --------------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
  1    NAME OF REPORTING PERSON
       S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON

       James W.  Giddens,  solely in his capacity as trustee under SIPA pursuant
       to the court order described herein
- ------ -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
  2    CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
                                                                         (a) |_|
                                                                         (b) |_|
- ------ -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
  3    SEC USE ONLY

- ------ -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
  4    SOURCE OF FUNDS*
                                       00
- ------ -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
  5    CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
       ITEMS 2(d) OR 2(e)
                                                                             |_|
- ------ -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
  6    CITIZENSHIP OR PLACE OF ORGANIZATION

                            United States of America
- ------ -------------------------------------------------------------------------
                      ----- ----------------------------------------------------
                       7    SOLE VOTING POWER

     NUMBER OF                   199,128 shares
                      ----- ----------------------------------------------------
                      ----- ----------------------------------------------------
       SHARES          8    SHARED VOTING POWER
    BENEFICIALLY
      OWNED BY
                      ----- ----------------------------------------------------
                      ----- ----------------------------------------------------
        EACH           9    SOLE DISPOSITIVE POWER
     REPORTING
       PERSON                    199,128 shares
                      ----- ----------------------------------------------------
                      ----- ----------------------------------------------------
        WITH           10   SHARED DISPOSITIVE POWER

                                 991,874 shares
                      ----- ----------------------------------------------------
- ------ -------------------------------------------------------------------------
 11    AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON

                                1,191,002 shares
- ------ -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
 12    CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
                                                                             |_|
- ------ -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------

<PAGE>
                                       3

- ------ -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
 13    PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)

                                      19.9%
- ----- -------------------------------------------------------------------------
- ------ -------------------------------------------------------------------------
 14    TYPE OF REPORTING PERSON*
                                       IN
- ------ -------------------------------------------------------------------------

Item 1.   Security and Issuer

          This statement on Schedule 13D (this "Statement") relates to shares of
common  stock,  par  value of $0.13  per  share  ("Common  Stock"),  of  Innovir
Laboratories,  Inc. (the "Issuer"), which has its principal executive offices at
510 East 73rd Street, New York, New York, 10021.

Item 2.   Identity and Background

          (a) The person filing this  statement is James W.  Giddens,  solely in
his capacity as trustee for the liquidation of the business of A.R. Baron & Co.,
Inc., a broker-dealer registered under Section 15 of the Securities Exchange Act
of 1934, as amended (the "Act") and a Delaware corporation ("ARB"),  pursuant to
the  Court  Order  (as  defined  and  further  described  below)  under  section
78eee(b)(3) of the  Securities  Investor  Protection Act ("SIPA"),  with all the
duties  and  powers of a trustee  as  prescribed  in SIPA (the  "Trustee").  The
Trustee was appointed  pursuant to an order of the United States  District Court
for the Southern  District of New York, dated July 11, 1996 (the "Court Order"),
attached  hereto as Exhibit 1. By operation of law, the Trustee is in possession
and effective  control of the assets of ARB.  Those assets include the shares of
Common  Stock  described  in Item 5 as to which the Trustee may have  beneficial
ownership.

          (b) The  Trustee's  business  address is One  Whitehall  Street,  18th
Floor, New York, NY 10004 and his mailing address is P.O. Box 359, Bowling Green
Station, New York, New York 10274.

          (c) Mr. Giddens,  in his individual  capacity,  is a member of the law
firm of Hughes  Hubbard & Reed LLP, a New York  limited  liability  partnership,
whose principal place of business is One Battery Park Plaza, New York, NY 10004.

          (d)-(e) During the past five years,  the Trustee (and Mr. Giddens,  in
his  individual  capacity)  has not  been  convicted  in a  criminal  proceeding
(excluding  traffic  violations or similar  misdemeanors) or been a party to any
civil proceedings of a judicial or administrative body of competent jurisdiction
as a result of which the Trustee (or Mr.  Giddens,  in his individual  capacity)
was or is  subject  to a  judgment,  decree  or  final  order  enjoining  future
violations  of, or prohibiting  or mandating  activities  subject to, federal or
state securities laws or finding any violation with respect to such laws.

          (f) The Trustee is a United States citizen.

Item 3.   Source and Amount of Funds

          As described in Item 2(a) above,  the Trustee  succeeded to the Shares
(as defined below) pursuant to the Court Order.

Item 4.   Purpose of Transaction

          The Trustee  was  appointed  to fulfill the duties of a trustee  under
SIPA, and is acting solely in connection therewith.  In his capacity as Trustee,
the Trustee  intends to dispose of the Shares in an orderly  fashion in order to
maximize the value realized for the estate of ARB consistent with applicable law
and his duties and powers as prescribed in SIPA.

          Other than as stated  above,  the  Trustee  has no plans or  proposals
which relate to or would result in any of the following:

          (a) The  acquisition  by any person of  additional  securities  of the
              Issuer;

          (b) An   extraordinary   corporate   transaction  such  as  a  merger,
              reorganization or liquidation,  involving the Issuer or any of its
              subsidiaries;


<PAGE>
                                       4

          (c) A sale or transfer of a material amount of assets of the Issuer or
              any of its subsidiaries;

          (d) Any change in the present  board of directors or management of the
              Issuer,  including  any plans or proposals to change the number or
              term of directors or to fill any existing vacancies on the board;

          (e) Any  material  change in the  present  capitalization  or dividend
              policy of the Issuer;

          (f) Any other  material  change in the Issuer's  business or corporate
              structure;

          (g) Changes  in  the   Issuer's   charter,   by-laws  or   instruments
              corresponding  thereto  or other  actions  which  may  impede  the
              acquisition of control of the Issuer by any person;

          (h) Causing a class of  securities of the Issuer to be delisted from a
              national  securities  exchange or to cease to be  authorized to be
              quoted  in  an  inter-dealer  quotation  system  of  a  registered
              national securities association;

          (i) A class of equity  securities of the Issuer becoming  eligible for
              termination of  registration  pursuant to Section  12(g)(4) of the
              Securities Exchange Act of 1934; or

          (j) Any action similar to any of those enumerated above.

Item 5.   Interest in Securities of the Company

     (a) The Trustee  believes that, for the purposes of Rule 13d-3(a) under the
Act, the Trustee may be the beneficial owner of a total of 1,191,002 shares (the
"Shares")  of  Common  Stock,  of which  296,703  are  shares  of  Common  Stock
underlying currently excercisable Redeemable Class A and Class B Warrants of the
Issuer and 53,325 are shares of Common Stock  underlying  currently  exercisable
Unit  Purchase  Options  of the  Issuer  (the Unit  Purchase  Options  represent
currently  exercisable  options to purchase  17,775  shares of Common  Stock and
options  to  purchase  Redeemable  Class A and Class B Warrants  exercisable  to
purchase  35,550 shares of Common  Stock).  The Shares  represent  approximately
19.9% of the total  outstanding  shares of Common  Stock  (based on the Issuer's
most recently available filing with the Securities and Exchange Commission).  As
of the date of the Court Order, 199,128 of the Shares (the "Proprietary Shares")
were  directly  owned by ARB, and 991,874 of the Shares (the  "Pledged  Shares")
were  pledged  to ARB by 110958  Ontario  Inc.,  Ken  Stokes  and Eric  Broadley
(collectively,  the "Note Obligors")  pursuant to Secured Demand Note Collateral
Agreements for Equity Capital dated May 22, 1996,  August 31, 1995 and September
4, 1995, respectively  (collectively,  the "Security  Agreements"),  by the Note
Obligors in favor of ARB as security for the Note Obligors' obligations pursuant
to Secured  Demand  Notes dated May 22, 1996,  August 31, 1995 and  September 4,
1995, respectively (collectively, the "Notes"), by the Note Obligors in favor of
ARB. The Security  Agreements  and the Notes are  summarized  in part herein and
such  summaries  are  qualified  by  reference  to the copies of such  documents
attached  hereto as Exhibits 2 through 7.  Pursuant to the Security  Agreements,
the Pledged Shares are held of record by Bear Stearns as nominee for ARB and ARB
has the right under certain conditions to liquidate the Pledged Shares.

          (b) The Trustee possesses the sole power to vote or direct the vote of
              the Proprietary  Shares. The Trustee has the sole power to dispose
              or to direct the disposition of all of the Proprietary  Shares and
              the right  under  certain  circumstances  to dispose or direct the
              disposition of all of the Pledged Shares.

          (c) Other than the  acquisition  of the Shares  pursuant  to the Court
              Order as described above,  during the past sixty days, neither the
              Trustee nor Mr. Giddens, in his individual capacity,  has effected
              any transactions in the Common Stock.

          (d) Except as disclosed in Item 5(a) above, no person is known to have
              the  right to  receive  or the  power to  direct  the  receipt  of
              dividends  from,  or the  proceeds  from the  sale of,  any of the
              Shares.

          (e) Not applicable.


<PAGE>
                                       5

Item 6.   Contracts, Arrangements, Understandings or Relationships with Respect
          to Securities of the Issuer.

          Except  as noted  above,  the  Trustee  does  not  have any  contract,
arrangement, understanding or relationship with respect to any securities of the
Issuer.

Item 7.   Material To Be Filed as Exhibits

<TABLE>
<CAPTION>

         Exhibit Number                             Title
         --------------                             -----

               <S>            <C>                                                              
               1              Order of the United States  District Court for the
                              Southern District of New York, entered on July 11,
                              1996,  appointing  James W. Giddens as trustee for
                              the  liquidation  of the business of A.R.  Baron &
                              Co., Inc. ("ARB")

               2              Secured  Demand  Note  Collateral   Agreement  for
                              Equity  Capital,  dated May 22, 1996,  between ARB
                              and 110958 Ontario Inc.

               3              Secured Demand Note,  dated May 22, 1996,  between
                              ARB and 110958 Ontario Inc.

               4              Secured  Demand  Note  Collateral   Agreement  for
                              Equity Capital, dated August 31, 1995, between ARB
                              and Ken Stokes

               5              Secured  Demand  Note,   dated  August  31,  1995,
                              between ARB and Ken Stokes

               6              Secured  Demand  Note  Collateral   Agreement  for
                              Equity Capital,  dated September 4, 1995,  between
                              ARB and Eric Broadley

               7              Secured  Demand  Note,  dated  September  4, 1995,
                              between ARB and Eric Broadley

</TABLE>

                                   SIGNATURES

          After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete,  and
correct.

Dated:  August 27, 1996



                                        By:  /s/ James W. Giddens
                                             -----------------------------------
                                             James W. Giddens, solely as trustee
                                             pursuant to a court order dated
                                             July 11, 1996

<TABLE>
<CAPTION>

Exhibit Number             Title                        Method of Filing         Page
- --------------             -----                        ----------------         ----

     <S>       <C>                                       <C>                     <C>         
      1        Order of the United States District       Filed herewith          6         
               Court for the Southern District of
               New York, entered on July 11, 1996,
               appointing James W. Giddens as the
               trustee for the liquidation of the
               business of A.R. Baron & Co., Inc. 
               ("ARB")


<PAGE>
                                       6

      2        Secured Demand Note Collateral            Filed herewith          8
               Agreement for Equity Capital, dated
               May 22, 1996, between ARB and 110958
               Ontario Inc. 

      3        Secured Demand Note, dated May 22,        Filed herewith          15
               1996, between ARB and 110958 Ontario
               Inc. 

      4        Secured Demand Note Collateral            Filed herewith          18
               Agreement for Equity Capital, dated
               August 31, 1996, between ARB and Ken
               Stokes

      5        Secured Demand Note, dated August        Filed herewith           25
               31, 1996, between ARB and Ken Stokes

      6        Secured Demand Note Collateral           Filed herewith           28
               Agreement for Equity Capital, dated
               September 4, 1995, between ARB and
               Eric Broadley

      7        Secured Demand Note, date September      Filed herewith           36
               4, 1996, between ARB and Eric
               Broadley

</TABLE>



                       IN THE UNITED STATES DISTRICT COURT

                      FOR THE SOUTHERN DISTRICT OF NEW YORK

- ------------------------------------------------------------
                                                           )
SECURITIES INVESTOR PROTECTION                             )
CORPORATION,                                               )  Civil Action No.
                                                           )  96 CIV 5171 (LAP)
                                                           )
                             Plaintiff-Applicant,          )
                                                           )
              v.                                           )
                                                           )
A.R. BARON & CO., INC.                                     )
                                                           )
                             Defendant.                    )
                                                           )
- ------------------------------------------------------------


                                     ORDER

          On the Complaint and Application of the SECURITIES INVESTOR PROTECTION
CORPORATION ("SIPC"), it is hereby:

          I. ORDERED,  ADJUDGED and DECREED,  that the customers of A.R. Baron &
Co.,  Inc.  ("Defendant"),  are  in  need  of  the  protection  afforded  by the
Securities Investor Protection Act ("SIPA").

         II. ORDERED  that pursuant to section  78eee(b)(3) of SIPA, 15 U.S.C.A.
ss.  78eee(b)(3)  (1981),  James W. Giddens is hereby appointed  trustee for the
liquidation of the business of the Defendant with all the duties and powers of a
trustee  as  prescribed  in SIPA,  and the law firm of Hughes  Hubbard & Reed is
hereby  appointed  counsel for said trustee.  Said trustee shall file a fidelity
bond satisfactory to the Court in the amount of $100,000.00.

        III. ORDERED  that  creditors  and  all  other  persons or entities  are
hereby  notified  that,  subject to the other  provisions  of section 362 of the
Bankruptcy  Code, 11 U.S.C.A.  ss. 362, the automatic stay provisions of section
362(a) of the Bankruptcy Code, 11 U.S.C.A. ss. 362(a) (Supp. 1996), operate as a
stay of:

<PAGE>
                                       7

               (i) the  commencement or continuation,  including the issuance or
     employment of process, of a judicial,  administrative,  or other proceeding
     against  the  Defendant  that was or could have been  commenced  before the
     commencement  of  this  proceeding,  or to  recover  a  claim  against  the
     Defendant that arose before the commencement of this proceeding;

              (ii) the  enforcement, against the Defendant or  against  property
     of the estate, of a judgment  obtained  before  the  commencement  of  this
     proceeding;

             (iii) any  act to obtain possession of property of the estate or of
     property from the estate;

              (iv) any  act to create,  perfect,  or  enforce  any lien  against
     property of the estate;

               (v) any  act to create, perfect, or enforce against  property  of
     the Defendant any lien to the extent that such lien secures  a  claim  that
     arose before the commencement of this proceeding;

              (vi) any  act to collect, assess,  or recover a claim  against the
     Defendant that arose before the commencement of this proceeding;

             (vii) the  setoff  of any debt  owing to the  Defendant  that arose
     before the  commencement of this  proceeding  against any claim against the
     Defendant; and

            (viii) the  commencement or continuation of a  proceeding before the
     United States Tax Court concerning the Defendant.

         IV. ORDERED that  pursuant to section  78eee(b)(2)(B)(i)  of  SIPA,  15
U.S.C.A.  ss.  78eee(b)(2)(B)(i)   (1981),  any  pending  bankruptcy,   mortgage
foreclosure,  equity receivership, or other proceeding to reorganize,  conserve,
or liquidate the debtor or its property and any other suit against any receiver,
conservator, or trustee of the debtor or its property, is hereby stayed.

          V. ORDERED that pursuant to sections 5(b)(2)(B)(ii) and (iii) of SIPA,
15 U.S.C.A. ss.ss.  78eee(b)(2)(B)(ii) and (iii) (1981), and notwithstanding the
provisions of sections 555 and 559 of the  Bankruptcy  Code, 11 U.S.C.A.  ss.ss.
555 and 559 (Supp.  1996),  all creditors of Defendant and all other persons be,
and they hereby are, stayed, enjoined, and restrained for a period of twenty-one
(21) days or such other time as may subsequently be ordered by this Court or any
other court having competent jurisdiction of this proceeding, from enforcing
liens or pledges  against the property of the  Defendant,  from  exercising  any
right of setoff;  and from causing the  liquidation  of a  repurchase  agreement
whether  or not it meets the  definition  set forth in  section  101(47)  of the
Bankruptcy Code, 11 U.S.C.A.  ss. 101(47) (Supp. 1996),  without first receiving
the written consent of SIPC and the trustee.

         VI. ORDERED that  Defendant,  its  officers,  directors,  shareholders,
employees  and any other  person or persons  are  hereby  stayed,  enjoined  and
restrained  from directly or  indirectly  removing,  transferring,  setting-off,
receiving,  retaining,  changing,  selling,  pledging,  assigning,  or otherwise
disposing of,  withdrawing  or  interfering  with any assets or property  owned,
controlled  or in the  possession  of  Defendant,  including  but not limited to
customers'  securities and credit balances,  except for the purpose of effecting
possession and control of said property by the trustee.

        VII. ORDERED  that  pursuant  to  sections  5(b)(2)(B)(ii)  and (iii) of
SIPA, 15 U.S.C.A. ss.  78eee(b)(2)(B)(ii)  and (iii) (1981), and notwithstanding
the provisions of section 555 of the Bankruptcy Code, 11 U.S.C.A. ss. 555 (Supp.
1996),  all  stockbrokers,   financial  institutions,  and  securities  clearing
agencies as defined in section 101 of the Bankruptcy  Code, 11 U.S.C.A.  ss. 101
(Supp.  1996), be, and they hereby are, stayed,  enjoined,  and restrained for a
period of twenty-one (21) days or such other time as may subsequently be ordered
by  this  Court  or any  other  court  having  competent  jurisdiction  of  this
proceeding,  from  exercising a contractual  right to cause the liquidation of a
contract for the loan of a security  within the meaning of section 741(7) of the
Bankruptcy Code, l1 U.S.C.A.  ss. 741(7) (Supp.  1996),  without first receiving
the written consent of SIPC and the trustee.

       VIII. ORDERED  that  the  stays  set  forth  above shall not apply to (a)
any suit,  action or proceeding  brought or to be brought by the  Securities and
Exchange  Commission or any  self-regulatory  organization of which Defendant is
now a member or was a member within the past six months;  or (b) the exercise of

<PAGE>
                                       8

a contractual  right of any securities  clearing agency to cause the liquidation
of a securities contract as defined in section 741(7) of the Bankruptcy Code, 11
U.S.C.  741(7) (Supp.  1996); or (c) the exercise of a contractual  right of any
stockbroker  or  financial  institution,  as  defined  in  section  101  of  the
Bankruptcy  Code,  11 U.S.C.  ss.  101 (Supp.  1996),  to use cash or letters of
credit held by it as  collateral,  to cause the  liquidation of its contract for
the loan of a security  to the  Defendant  or for the  pre-release  of  American
Depository  Receipts or the  securities  underlying  such  receipts;  or (d) any
setoff or liquidating  transaction undertaken pursuant to the rules or bylaws of
any securities  clearing agency registered under section 17(a) of the Securities
Exchange  Act of 1934 or by any person  acting  under  instructions  from and on
behalf of such a securities  clearing agency; or (e) any settlement  transaction
undertaken by such securities clearing agency using securities either (i) in its
custody or  control,  or (ii) in the  custody  or control of another  securities
agency with which it has an SEC  approved  interface  procedure  for  securities
transactions  settlements,  provided that the entire proceeds  thereof,  without
benefit of any offset, are promptly turned over to the receiver, or a subsequent
trustee, appointed herein.

         IX. ORDERED  that pursuant to section  78eee(b)(4) of SIPA, 15 U.S.C.A.
ss. 78eee(b)(4)  (1981),  this liquidation  proceeding (not including any action
brought  herein by the  Securities  and Exchange  Commission)  is removed to the
United States Bankruptcy Court for this District.

          X. ORDERED that the trustee is  authorized to open accounts and obtain
a safe  deposit  box at a bank or banks to be  chosen  by the  trustee,  and the
trustee may  designate  such of his  representatives  who shall be authorized to
have access thereto.

DATED:     July 11, 1996
ISSUED AT: 10:30 a.m.
                                            /s/ Loretta A. Preska
                                            ------------------------------------
                                            UNITED STATES DISTRICT JUDGE



                                      NASD
                             
                               SECURED DEMAND NOTE
                              COLLATERAL AGREEMENT
                               FOR EQUITY CAPITAL

                                      SL-6

                               AGREEMENT BETWEEN:
                                    

Lender      110958 Ontario Inc.
            --------------------------------------------------------------------
                                     (Name)


            RR2 Puslinch
            --------------------------------------------------------------------
                                (Street Address)


Ontario            Canada                        NOB 2JO
- --------------     ------------                  --------------
    (City)            (State)                         (Zip)


                                       AND


Broker-Dealer      A.R. Baron & Co., Inc.
                   -------------------------------------------------------------
                                     (Name)


<PAGE>
                                       9

                   153 East 53rd Street
                   -------------------------------------------------------------
                                (Street Address)


New York            New York                         10022
- --------------     ------------                  --------------
    (City)            (State)                         (Zip)


NASD ID NO: 29285
            --------------------------------------------------------------------
Date Filed:
            --------------------------------------------------------------------



                                      NASD

                         SECURED DEMAND NOTE COLLATERAL
                          AGREEMENT FOR EQUITY CAPITAL


          AGREEMENT  dated May 22, 1996 to be  effective  May 22,  1996  between
110958   Ontario  Inc.  (the   "Lender")  and  A.R.   Baron  &  Co.,  Inc.  (the
"Broker-Dealer").

          Subject  to the  terms  and  conditions  hereinafter  set  forth,  the
Broker-Dealer  promises to return to the Lender or assigns, on September 1, 1999
(the  "Scheduled  Maturity  Date")(the  last day of a month at least three years
from the date hereof) at the principal office of the Broker- Dealer the Note and
Collateral  as defined  herein,  and interest  payable  Quarterly at the rate of
Prime (as published by Citicorp)  percent per annum from the  effective  date of
this  Agreement,  which date shall be the date so agreed  upon by the Lender and
the  Broker-Dealer  unless otherwise  determined by the National  Association of
Securities  Dealers,  Inc.  ("NASD").  This Agreement  shall not be considered a
satisfactory  subordination  agreement  pursuant  to  the  provisions  of 17 CFR
240.15c31d unless and until the NASD has found the Agreement acceptable and such
Agreement has become effective in the form found acceptable.

          The Lender has executed in favor of you A.R.  Baron & Co.,  Inc.  (the
Broker-Dealer),  a Secured  Demand  Note of even date in the form of  Addendum I
hereto. References herein to the "Note" shall be deemed to refer to such Secured
Demand Note and to any Note  substituted  therefor in accordance  with the terms
hereof.  The unpaid principal  amount of the Note is hereinafter  referred to as
the "Indebtedness".

          As security  for the payment of the  principal  evidenced by the Note,
the Lender hereby pledges to the  Broker-Dealer the securities and cash, if any,
described in Schedule A, attached to the Note, as the same may from time to time
be amended in accordance with the terms hereof (the securities from time to time
listed in said  Schedule  are herein  referred  to as the  "Securities"  and any
securities,  cash or other  property at any time  pledged  hereunder  are herein
referred  to as the  "Collateral"  and  shall  be  subject  to the  risks of the
business).  All  Securities  shall  be  fully  paid  for and in  bearer  form or
registered in the name of the Broker-Dealer or its nominee or custodian.

          The  Lender   irrevocably   agrees   that  the   obligations   of  the
Broker-Dealer  under this Agreement with respect to the payment of principal and
interest  shall be and are  subordinate  in right of payment  and subject to the
prior  payment  or  provision  for  payment  in full of all  claims of all other
present  and future  creditors  of the  Broker-Dealer  arising out of any matter
occurring prior to the date on which the related Payment  Obligation (as defined
herein)  matures  consistent  with  the  provisions  of 17  CFR  240.15c3-1  and
240.15c3-1d except for claims which are the subject of subordination  agreements
which  rank on the same  priority  as or are  junior to the claim of the  Lender
under such subordination agreements.

I.    OWNERSHIP AND PROPERTY RIGHTS WITH RESPECT TO COLLATERAL
      --------------------------------------------------------

          (a) Subject  only  to the prior  rights of the  Broker-Dealer  pledgee
hereunder and under the Note, until liquidation in accordance with Paragraph III
hereof the Lender shall have and retain full legal and  beneficial  ownership of
the  Collateral and shall have the benefit of any increases and bear the risk of
any decreases in the value of such Collateral.  Prior to such  liquidation,  the
Lender  shall  have the sole  right to vote or have the sole right to any income

<PAGE>
                                       10

therefrom  or  distribution  thereon by  payment of  interest  or  dividends  or
otherwise,  subject  however,  to the right of the  Broker-Dealer to receive and
hold as pledgee all dividends payable in securities and all partial and complete
liquidating  dividends;  and shall pay all taxes,  assessments  or other charges
upon or with respect to such Securities or the income therefrom or distributions
thereon or the gain or loss of value thereof.

          (b) The  Lender, subject to the prior rights of the  Broker-Dealer  as
pledgee,  shall have the right to direct the sale of any Securities  included in
the  Collateral,  to direct the purchase of  securities  with any cash  included
therein, to withdraw excess Collateral or to substitute cash or other securities
as  Collateral,  provided  that  the net  proceeds  of any  sale and the cash so
substituted  and the  securities  so  purchased or  substituted  are held by the
Broker-Dealer,  as pledgee,  and are included  within the  Collateral  to secure
payment  of  the  Secured  Demand  Note,  and  provided  further  that  no  such
transactions shall be permitted if, after giving effect thereto,  the sum of the
amount  of any  cash,  plus the  Collateral  Value (as  defined  herein)  of the
- -Securities,  then pledged as Collateral to secure the Secured Demand Note would
be less than the unpaid principal amount of the Secured Demand Note.

II.   CERTAIN RIGHTS OF THE BROKER-DEALER
      -----------------------------------

          The  Broker-Dealer,  as the  holder  of the  Note and  pledgee  of the
Collateral, shall have the right to:

          (a) Pledge,  repledge,  hypothecate and re-hypothecate,  any or all of
the Securities  pledged as Collateral to secure the Secured Demand Note, without
notice,  separately  or in common  with other  securities  or  property  for the
purpose of securing any indebtedness of the Broker-Dealer;

          (b) Lend to  itself or others  any or all of the  Securities  and cash
pledged as Collateral to secure this Secured Demand Note;

          (c) Deposit  any cash from time to time  pledged as  Collateral  in an
account or  accounts in its own name in any bank or trust  company,  and to hold
the Securities in bearer form, in its own name, or in the name of its nominee or
custodian; and,

          (d) Liquidate  all  or any  part of the  Securities  then  pledged  as
Collateral and to apply the net proceeds of such liquidation,  together with any
cash then  included  in the  Collateral,  in  payment in whole or in part of the
Payment  Obligation,  if the Note is not paid  upon  presentment  and  demand as
provided for therein.

III.  INSUFFICIENT COLLATERAL VALUE
      -----------------------------

          If any  cash  plus  Collateral  Value  of any  Securities  pledged  as
collateral  to secure this Note is at any time less than the  Indebtedness,  the
Broker-Dealer shall give immediate written notice to the Lender and the NASD, in
which event the Lender may at its option:

          (a)(i) Prior  to 12 o'clock noon on the  business  day  following  the
transmittal of such notice, pledge additional Collateral to bring the Collateral
Value up to an amount not less than the unpaid  principal of the Note; and,

            (ii) Unless  such additional  Collateral  is so pledged  prior to 12
o'clock noon of the business day following the  transmittal of such notice,  the
Broker-Dealer  shall  forthwith  sell all or any part of the  Collateral for the
account  of the Lender and apply so much of the  proceeds  thereof  and any cash
then  included in the  Collateral as may be necessary to reduce or eliminate the
unpaid  principal,  provided that the unpaid principal need not be reduced below
the sum of any  remaining  cash  plus  the  Collateral  Value  of the  remaining
Securities.  The  Broker-Dealer  shall  not  purchase  for its own  account  any
Securities  subject  to such a sale.

          (b)(i)(OPTIONAL)  With the prior  written  consent of the NASD and the
Broker-Dealer,  reduce the unpaid  principal amount of the Note by not more than
15 percent of its original  principal  amount,  provided that the  Broker-Dealer
clearly  establishes  that its aggregate  indebtedness  would not,  after giving
effect to such a  reduction,  exceed  1000  percent of its net  capital as those
terms are defined in 17 CFR  240.15c3-1,  or if the  Broker-Dealer  is operating
pursuant to paragraph  (f) of 17 CFR  240.15c3-1  its net capital  would be less
than 5 percent of  aggregate  debit  items  computed in  accordance  with 17 CFR
240.15c3-3a, or if registered as a futures commission merchant, 7 percent of the

<PAGE>
                                       11

funds required to be segregated  pursuant to the Commodity Exchange Act, and the
regulations thereunder, (less the market value of commodity options purchased by
option  customers  on or subject to the rules of a  contract  market,  provided,
however,  the deduction for each option  customer shall be limited to the amount
of customer  funds in such option  customer's  account,) if greater,  and in the
event of such  reduction,  the right of the  Lender to  withdraw  Collateral  as
provided in paragraph  I(b) shall be suspended.  The NASD shall not consent to a
reduction of the  principal  amount of this Note, if after giving effect to such
net capital would be less than 120 percent of the minimum dollar amount required
by 17 CFR 240.15c3-3-1  including paragraph (f), if applicable,  or such greater
dollar  amount as may be made applicable to the  Broker-Dealer by the NASD, or a
governmental agency or self-regulatory body having appropriate authority.

IV.   PAYMENT BY LENDER
      -----------------

          Upon payment by the Lender,  as distinguished  from a reduction by the
Lender  which is provided in  paragraph  IIIb(i),  or  reduction  by the Broker-
Dealer  as  provided  for in  paragraph  V,  of all or any  part  of the  unpaid
principal  amount of this Note,  the  Broker-Dealer  shall issue to the Lender a
subordinated loan agreement, preferred or common stock of the Broker-Dealer,  or
if a partnership,  shall credit a capital account of the Lender in the amount of
such payment, or in any combination of the foregoing, as specified below:

          Subordinated Loan Agreement
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------

V.    PERMISSIVE PREPAYMENTS (OPTIONAL)
      ---------------------------------

          At the  option  of the  Broker-Dealer,  but not at the  option  of the
Lender, payment of all or any part of the Payment Obligation hereof prior to the
Scheduled  Maturity Date may be made by the  Broker-Dealer  only upon receipt of
the prior written  approval of the NASD,  but in no event may any  prepayment be
made  before  the  expiration  of one year from the date this  Agreement  became
effective.  No prepayment  shall be made if after giving effect  thereto (and to
all payments of Payment  Obligations  under any other  subordination  agreements
then  outstanding,  the maturity of which is scheduled to fall due either within
six months after the date such prepayment is to occur or on or prior to the date
on which the Payment Obligation hereof is scheduled to mature, whichever date is
earlier),   without   reference  to  any   projected   profit  or  loss  of  the
Broker-Dealer,  either aggregate  indebtedness of the Broker-Dealer would exceed
1000 percent of its net capital or such lesser percent as may be made applicable
to the Broker-Dealer  from time to time by the NASD or a governmental  agency or
self-regulatory  body having appropriate  authority,  or if the Broker-Dealer is
operating pursuant to paragraph (f) of 17 CFR 240.15c3-1,  its net capital would
be less than 5 percent of aggregate  debit items computed in accordance  with 17
CFR 240.15c3-3a, or if registered as a futures commission merchant, 7 percent of
the funds required to be segregated  pursuant to the Commodity  Exchange Act and
the  regulations  thereunder,  (less  the  market  value  of  commodity  options
purchased by option  customers on or subject to the rules of a contract  market,
provided,  however,  the deduction for each option  customer shall be limited to
the amount of customer funds in such option customer s account,) if greater,  or
its net  capital  would be less than 120 percent of the  minimum  dollar  amount
required by 17 CFR 240.15c3-1  including  paragraph (f), if applicable,  or such
greater  dollar  amount as may be made  applicable to the  Broker-Dealer  by the
NASD,  or a  governmental  agency or  self-regulatory  body  having  appropriate
authority.

VI.   SUSPENDED REPAYMENTS
      --------------------

          (a) The Payment Obligation of the Broker-Dealer shall be suspended and
shall not mature if, after  giving  effect to such  payment  (together  with the
payment  of  any  Payment  Obligation  of  the  Broker-Dealer  under  any  other
subordination   agreement   scheduled  to  mature  on  or  before  such  Payment
Obligation),  the aggregate  indebtedness of the Broker-Dealer would exceed 1200
percent of its net capital or such lesser  percent as may be made  applicable to
the  Broker-Dealer  from  time to time by the NASD or a  governmental  agency or
self-regulatory  body having appropriate  authority,  or if the Broker-Dealer is
operating pursuant to paragraph (f) of 17 CFR 240.15c3-1,  its net capital would
be less than 5 percent of aggregate  debit items computed in accordance  with 17
CFR 240.15c3-3a, or if registered as a futures commission merchant, 6 percent of

<PAGE>
                                       12

the funds required to be segregated  pursuant to the Commodity  Exchange Act and
the regulations  thereunder,  if greater,  or its net capital would be less than
120 percent of the minimum dollar amount required by 17 CFR 240.15c3-1 including
paragraph  (f),  if  applicable  or such  greater  dollar  amount as may be made
applicable,  to the  Broker-Dealer  by the  NASD,  or a  governmental  agency or
self-regulatory body having appropriate authority.

VII.  NOTICE OF MATURITY
      ------------------

          The Broker-Dealer  shall immediately  notify the NASD if, after giving
effect to all payments of Payment  Obligations  under  subordination  agreements
then  outstanding  which  are then  due or  mature  within  six  months  without
reference  to any  projected  profit or loss of the  Broker-Dealer,  either  the
aggregate indebtedness of the Broker-Dealer would exceed 1200 percent of its net
capital,  or in the case of a Broker-Dealer  operating pursuant to paragraph (f)
of 17 CFR 240.15c3-1,  its net capital would be less than 5 percent of aggregate
debit items computed in accordance with 17 CFR 240.15c3-3a,  or if registered as
a futures commission  merchant, 6 percent of the funds required to be segregated
pursuant to the Commodity Exchange Act and the regulations thereunder, (less the
market value of commodity options purchased by option customers on or subject to
the rules of a contract market, provided, however, the deduction for each option
customer  shall be  limited  to the  amount  of  customer  funds in such  option
customer s account,) if greater, and in either case, if its net capital would be
less than 120 percent of the minimum dollar amount required by 17 CFR 240.15c3-1
including paragraph (f), if applicable,  or such greater dollar amount as may be
made applicable to the  Broker-Dealer by the NASD,- or a governmental  agency or
self-regulatory body having appropriate authority.

VIII. WARRANTIES OF THE LENDER
      ------------------------

          The Lender hereby warrants that he has duly executed the Note; that he
has duly  delivered  the Note to the  Broker-Dealer  and upon such  delivery the
Broker-Dealer  acquired  good  title  thereto;  that the Note is his  valid  and
binding  obligation  enforceable  by the  Broker-Dealer  in accordance  with its
terms;  that  he has  duly  and  validly  pledged  with  the  Broker-Dealer  the
Securities  described  in  Schedule  A  attached  to the  Note;  and,  that  the
Broker-Dealer  as pledge of the Securities  has the rights with respect  thereto
which are conferred  upon it by this  Agreement.  Each such  representation  and
warranty  shall survive the execution and delivery of the Note and the pledge of
the Securities.

          The Lender  represents that the Securities may be publicly offered and
sold without  registration  under the Securities Act of 1933 as amended and that
the sale and transfer of the  Securities is not  restricted by the Act nor is it
restricted by any other law, agreement or in any other manner.

IX.   LIMITATIONS ON WITHDRAWALS OF EQUITY CAPITAL
      --------------------------------------------

          The  proceeds  covered  by this  Agreement  shall in all  respects  be
subject  to the  provisions  of  paragraph  (e) of 17 CFR  240.15c3-1.  Pursuant
thereto no equity  capital of the  Broker-Dealer  or a  subsidiary  or affiliate
consolidated  pursuant  to 17 CFR  240.15c3-1c,  whether  in the form of capital
contributions by partners, par or stated value of capital stock, paid-in capital
in excess of par, retained earnings or other capital accounts,  may be withdrawn
by action of a stockholder or partner,  or by redemption or repurchase of shares
of stock by any of the consolidated  entities or though the payment of dividends
or any similar distribution,  nor may any unsecured advance or loan be made to a
stockholder,  partner, sole proprietor,  or employee after giving effect thereto
and to any other such withdrawals, advances or loans and any payments of Payment
Obligations under satisfactory  subordination  agreements which are scheduled to
occur within six months  following  such  withdrawals,  advance or loan,  either
aggregate  indebtedness of any of the consolidated entities exceeds 1000 percent
of its net  capital,  or in the case of a  Broker-Dealer  operating  pursuant to
paragraph (f) of 17 CFR 240.15c3-1, its net capital would be less than 5 percent
of aggregate debit items computed in accordance with 17 CFR  240.15c3-3a,  or if
registered as a futures commission  merchant, 7 percent of the funds required to
be  segregated  pursuant to the  Commodity  Exchange  Act,  and the  regulations
thereunder,  if greater,  and in either case,  if its net capital  would be less
than 120  percent of the minimum  dollar  amount  required by 17 CFR  240.15c3-1
including paragraph (f), if applicable,  or such greater dollar amount as may be
made applicable to the  Broker-Dealer by the NASD, or, a governmental  agency or
self-regulatory body having appropriate authority;  or, should the Broker-Dealer

<PAGE>
                                       13

be  included  within  such  consolidation,  if the total  outstanding  principal
amounts of satisfactory  subordination  agreements of the  Broker-Dealer  (other
than such  agreements  which  qualify as equity  under  paragraph  (d) of 17 CFR
240.15c3-1)  would  exceed 70 percent of its  debt-equity  total as this term is
defined in paragraph (d) of 17 CFR 240.15c3-1 for a period in excess of 90 days,
or for such longer  period  which the  Commission  may upon  application  of the
Broker-Dealer grant in the public interest or for the protection of investors.

X.    BROKER-DEALERS  CARRYING THE ACCOUNTS OF SPECIALISTS AND MARKET MAKERS  IN
      IN LISTED OPTIONS
      --------------------------------------------------------------------------

          A Broker-Dealer who guarantees, endorses, carries or clears specialist
or market-maker transactions in options listed on a national securities exchange
or facility of a national  securities  association shall not permit a reduction,
prepayment,  or  repayment  of the unpaid  principal  amount if the effect would
cause the equity required in such specialist or market-maker  accounts to exceed
1000 percent of the  Broker-Dealer's  net capital or such percent as may be made
applicable to the Broker-Dealer  from time to time by the NASD or a governmental
agency or self-regulatory body having appropriate authority.

XI.   BROKER-DEALERS REGISTERED WITH CFTC.
      ------------------------------------

          If the Broker-Dealer is a futures commission  merchant or introductory
broker as that term is defined in the Commodity  Exchange Act, the  Organization
agrees,  consistent with the  requirements of Section 1.17(h) of the regulations
of the CFTC (17 CFR 1.17(h)) that:

          (a) Whenever prior written notice by the Broker-Dealer to the NASD is
required  pursuant to the provisions of this  Agreement,  the same prior written
notice  shall  be given by the  Broker-Dealer  to (i) the CFTC at its  principal
office in Washington,  D.C.,  attention Chief  Accountant of Division of Trading
and Markets,  and/or (ii) the commodity  exchange of which the Organization is a
member and which is then designated by the CFTC as the Organization's designated
self-regulatory organization (the "DSRO");

          (b) Whenever prior written consent, permission or approval of the NASD
is required  pursuant to the  provisions of this  Agreement,  the  Broker-Dealer
shall also obtain the prior written consent,  permission or approval of the CFTC
and/or of the DSRO; and,

          (c) Whenever the Broker-Dealer receives written notice of acceleration
of maturity  pursuant to the  provisions of this  Agreement,  the  Broker-Dealer
shall  promptly  give written  notice  thereof to the CFTC at the address  above
stated and/or to the DSRO.

XIII. GENERAL
      -------

          In the  event of the  appointment  of a  receiver  or  trustee  of the
Broker-Dealer  or in the event of its  insolvency,  liquidation  pursuant to the
Securities Investor Protection Act of 1970 or otherwise, bankruptcy,  assignment
for  the  benefit  of  creditors,  reorganization  whether  or not  pursuant  to
bankruptcy  laws, or any other  marshaling of the assets and  liabilities of the
Broker-Dealer, the Payment Obligation of the Broker-Dealer shall mature, and the
holder  hereof  shall  not be  entitled  to  participate  or share,  ratably  or
otherwise,  in the  distribution  of the assets of the  Broker-Dealer  until all
claims of all other present and future  creditors of the  Broker-Dealers,  whose
claims are senior hereto, have been fully satisfied

          Neither the Lender, his heirs, executors,  administrators,  or assigns
shall be  personally  liable  on such  Note,  and in the event of  default,  the
Broker-Dealer  shall  look for  payment  of such Note  solely to the  Collateral
pledged herein.

          This  Agreement  shall not be  subject to  cancellation  by either the
Lender or the  Broker-Dealer,  and no payment  shall be made,  nor the Agreement
terminated,  rescinded, or modified by mutual consent or otherwise if the effect
thereof would be  inconsistent  with the  requirements  of 17 CFR 240.15c3-1 and
240.15c3-ld.

          This Agreement may not be transferred,  sold,  assigned,  pledged,  or
otherwise  encumbered or otherwise  disposed of, and no lien,  charge,  or other
encumbrance  may be created or permitted to be created thereon without the prior
written consent of the NASD.

<PAGE>
                                       14

          The Lender  irrevocably  agrees that the loan evidenced  hereby is not
being  made in  reliance  upon the  standing  of the  Broker-Dealer  as a member
organization of the NASD or upon the NASD  surveillance  of the  Broker-Dealer s
financial  position or its compliance  with the By-Laws,  rules and practices of
the NASD. The Lender has made such  investigation of the  Broker-Dealer  and its
partners,  officers,  directors,  and stockholders as the Lender deems necessary
and appropriate under the circumstances. The Lender is not relying upon the NASD
to provide any  information  concerning  or relating  to the  Broker-Dealer  and
agrees  that  the NASD has no  responsibility  to  disclose  to the  Lender  any
information  concerning or relating to the Broker-Dealer which it may now, or at
any future time, have.

          The term "Broker-Dealer", as used in this Agreement, shall include the
broker-dealer, its heirs, executors, administrators, successors, and assigns.

          The term  "Payment  Obligation"  shall mean the return of the  Secured
Demand Note  contributed  to the  Broker-Dealer  or the  reduction of the unpaid
principal  amount  thereof,  and the  return of cash or  securities  pledged  as
Collateral to secure this Secured Demand Note.

          The term "Collateral  Value" of any securities  pledged to secure this
Secured  Demand  Note  shall mean the market  value of such  Securities  after g
effect to the haircut  deductions  specified in  subparagraph  (c)(2)(vi) of 1 ~
240.15c3-1.

          The   provisions  of  this   Agreement   shall  be  binding  upon  the
Broker-Dealer,   and  the  Lender,   and  their  respective  heirs,   executors,
administrators, successors, and assigns.

          Any  controversy  arising out of or relating to this  Agreement may be
submitted to and settled by arbitration pursuant to the By-Laws and rules of the
NASD.  The  Broker-Dealer  and the Lender  shall be  conclusively  bound by such
arbitration.

          This   instrument   embodies   the  entire   agreement   between   the
Broker-Dealer  and Lender and no other  evidence of such  agreement has been, or
will be, executed without the prior written consent of the NASD.

          This Agreement  shall be deemed to have been made under,  and shall be
governed by, the laws of the State of New York in all respects.

          IN WITNESS WHEREOF the parties have set their hands and seal this 22nd
day of May 1996. 

                              A.R.  Baron & Co.,  Inc.
                              --------------------------------------------------
                              (Name of Broker-Dealer)


                              By: /s/ Andrew Bressman                       L.S.
                                  ------------------------------------------
                                  (Authorized Person) Andrew Bressman, Pres.
                                         

                              /s/ Colwyn Rich
                              --------------------------------------------------
                              (Lender) 110958 Ontario, Inc. By Colwyn G. Rich


                              FOR NASD USE ONLY


                              ACCEPTED BY:   Colwyn G. Rich
                                             -----------------------------------
                                             (Name)


                                             President
                                             -----------------------------------
                                             (Title)


                              EFFECTIVE DATE:-----------------------------------

                              LOAN NUMBER:--------------------------------------



<PAGE>

                                       15

                                   ADDENDUM I

                               SECURED DEMAND NOTE


                                                                    May 22, 1996

          FOR VALUE  RECEIVED,  I promise to pay to A.R.  Baron & Co., Inc. (the
Broker-Dealer)  at its principal  office at 153 East 53rd Street,  New York, New
York 10022 (where  presentment  and demand for payment  shall be made),  without
interest, the sum of Four Million Dollars ($ 4,000,000 ), on demand.

          This Note is secured at its date by the pledge of the  securities  and
cash, if any, described in Schedule A attached hereto. I agree that whenever the
value of the securities and cash securing this Note, as determined in accordance
with the capital requirements of 17 CFR 240.15c3-1 or the rules-and  regulations
of the National  Association of Securities Dealers,  Inc. ("NASD") or those of a
governmental agency or self-regulatory  body having appropriate  authority which
are applicable to the Broker-Dealer at the time of such valuation,  is less than
the unpaid balance of this Note, the Broker-Dealer shall exercise the rights set
forth in paragraph  III(a)(ii) of the Secured Demand Note  Collateral  Agreement
(the  Agreement)  of even date between me and the  Broker-Dealer  without  first
making a demand for payment hereof.

          The  Broker-Dealer,  by acceptance  hereof,  agrees,  for itself,  its
representatives, successors and assigns (1) that neither I, my heirs, executors,
administrators  or assigns  shall be  personally  liable on this Note,  it being
intended that my obligation to pay the principal amount of this Note is included
for  the  sole  purpose  of  establishing  the  existence  of  the  indebtedness
represented  hereby and (2) that in the event of default,  the Broker-Dealer and
any such successor or assign shall look for payment solely to the Collateral, as
defined  herein,  then pledged to secure this Note,  and will not make claims or
institute   any  action  or   proceeding   against  me,  my  heirs,   executors,
administrators  or assigns for the  payment of this Note (or for any  deficiency
remaining  after  application of the Collateral  pledged to secure this Note, or
otherwise);  provided, however, that nothing herein contained shall be construed
to release or impair the  indebtedness  evidenced  by this Note,  or of the lien
upon the  Collateral  pledged to secure it, or preclude the  application of said
pledged  Collateral to the payment  hereof in accordance  with the provisions of
the Agreement.

          The Broker-Dealer agrees that upon payment by me of all or any portion
of this Note, as  distinguished  from a reduction by me as provided in paragraph
III(b)(i) of the  Agreement or  reduction  by the  Broker-Dealer  as provided in
paragraph V of the Agreement, the Broker-Dealer shall issue to me the securities
listed on  Schedule A hereto as amended  from time to time in the amount of such
payment, as provided pursuant to paragraph IV of the Agreement.

          The  Broker-Dealer  further  agrees  that it will  make a  demand  for
payment  hereof  only  after  it  determines  in  good  faith  that  it is in or
approaching  financial  difficulty,  provided,  however, that no failure to make
such a determination  in good faith shall affect the  effectiveness of a demand,
or give rise to any claim which is superior to my claim under the  Agreement for
the withdrawal, return or reduction of this Note.

          The term "in or approaching  financial  difficulty" shall mean for the
purpose  hereof any of the specified and clearly  measurable  events  enumerated
below:

Excess net capital falls below what is needed to operate  according to SEC Rule:
- --------------------------------------------------------------------------------
SEC 15c3-1
- --------------------------------------------------------------------------------

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

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

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

<PAGE>
                                       16

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

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

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

          This Note and the  securities  and cash from time to time  pledged  to
secure it are subject in all respects to the provisions of the Agreement, a copy
of  which  may  be  examined  at the  principal  office  of  the  Broker-Dealer.

          The term "Collateral" shall mean, as defined in subparagraph (b)(6) of
Appendix D of SEC Rule l5c3-1,  "only cash and  securities  which are fully paid
for and which may be publicly  offered or sold  without  registration  under the
Securities  Act of 1933,  and the  offer,  sale and  transfer  of which  are not
otherwise  restricted".


                               /s/ Colwyn G. Rich                           L.S.
                               ---------------------------------------------
                               Lender 110958 Ontario, Inc. By Colwyn G. Rich



                               A.R.  Baron & Co.,  Inc.
                               ---------------------------------------------
                               Broker-Dealer



                               By:  /s/ Andrew Bressman, President          L.S.
                                    ----------------------------------------
                                    Authorized Person
                                    Andrew Bressman, President



                          SUBORDINATED LOAN AGREEMENT
                              LENDER'S ATTESTATION
                          ---------------------------

          It is recommended  that you discuss the merits of this investment with
an attorney, accountant or some other person who has knowledge and experience in
financial and business matters prior to executing this Agreement.

          1.   I have received and reviewed NASD Form SLD, which is a reprint of
               Appendix  D of 17  CFR  240.15c3-1,  and  am  familiar  with  its
               provisions.

          2.   I am aware that the funds or securities subject to this Agreement
               are not  covered by the  Securities  Investor  Protection  Act of
               1970.

          3.   I  understand  that  I will  be  furnished  financial  statements
               pursuant to SEC Rule 17a-5(c).

          4.   On the date this  Agreement was entered into,  the  broker-dealer
               carried funds or securities for my account.  (State Yes or No) No
               Bear Sterns is clearing broker.

          5.   Lender's business  relationship to the broker-dealer is: 5% owner
               of The Baron  Group,  Inc.  (parent of A.R.  Baron) & customer of
               A.R. Baron.

          6.   If not a partner or stockholder  actively engaged in the business
               of the broker-dealer, acknowledge receipt of the following:

               a.   Certified audit and accountant's certificate dated 12/31/95.

               b.   Disclosure of financial  and/or  operational  problems since
                    the last certified audit which required  reporting  pursuant
                    to SEC Rule  17a-11.  (If no such  reporting  was  required,
                    state ("none") Focus Report Part IIA as of March 31, 1996

               c.   Balance  sheet  and  statement  of  ownership  equity  dated
                    3/31/96.

<PAGE>
                                       17

               d.   Most  recent   computation  of  net  capital  and  aggregate
                    indebtedness   or  aggregate   debit  items  dated   4/30/96
                    reflecting  a net  capital  of $  1,125,000  and a ratio  of
                    386.5.

               e.   Debt/equity ratio as of 4/30/96 of 36.1%.

               f.   Other  disclosures:  Discussions  with Management  regarding
                    status of business including investigation by the regulatory
                    bodies (SEC, NASD).


Dated: May 22, 1996                     /s/ Colwyn G. Rich L.S.
       ------------                     ----------------------------------------
                                        (Lender)
                                        110958 Ontario Inc. By Colwyn G. Rich



                                   SCHEDULE A

                 SCHEDULE OF COLLATERAL FOR SECURED DEMAND NOTE*



                             A.R. Baron & Co., Inc.
             -------------------------------------------------------
                                 (Broker-Dealer)




Cash Pledged:                    $______________________________________________


Securities Pledged:


         Stocks:
         Number of Shares        Description




         Bonds:
         Principal Amount        Description



          *Only cash and securities  which are fully  paid for and which may  be
publicly offered or sole without  registration under the Securities Act of 1933,
and the offer, sale and transfer of which are not otherwise  restricted,  may be
pledged as collateral to secure a Secured Demand Note.



                   Addendum #1 to Subordinated Loan Agreement
                              Lender's Attestation

In connection  with the  subordinated  loan being made hereby,  the  undersigned
hereby represents and warrants as follows:

1.  The undersigned has carefully reviewed the financial materials  provided  to
me by A.R. Baron & Co., Inc. (the "Firm") and understands, among  other  things,
that  the  firm has a negative  net worth and that this  loan  involves  a  high
degree of risk.

2.  The undersigned  is a person who is able to bear the economic  risks of this
subordinated  loan to the  firm and has  adequate  means  of  providing  for any
current needs and personal  contingencies with no need for liquidity of the loan
proceeds provided hereby. In making this statement, consideration has been given
to whether the undersigned could afford a complete loss of this investment.

3.  The  undersigned   acknowledges   that  the  Firm  is  subject  to  possible
disciplinary action due to capital deficiency.

<PAGE>
                                       18

May 22, 1996                            /s/ Colwyn G. Rich
- ------------                            ----------------------------------------
Dated                                   Lender's Signature
                                        110958 Ontario Inc. By Colwyn G. Rich



                                      NASD

                               SECURED DEMAND NOTE
                              COLLATERAL AGREEMENT
                               FOR EQUITY CAPITAL

                                      SL-6

                               AGREEMENT BETWEEN:


Lender      Ken Stokes
            --------------------------------------------------------------------
                                          (Name)


            Magdapug Charlton Avenue
            --------------------------------------------------------------------
                                     (Street Address)


Midsomer Norton Bath               BA34BD                        ENGLAND
- ------------------------        ------------                  --------------
         (City)                    (State)                         (Zip)


                                       AND


Broker-Dealer    A.R. Baron & Co., Inc.
                 ---------------------------------------------------------------
                                          (Name)


                 153 East 53rd Street, 56th Floor
                 ---------------------------------------------------------------
                                        (Street Address)



New York           New York                      10022
- --------------     ------------                  --------------
    (City)            (State)                         (Zip)     


NASD ID NO:  029285
             -------------------------------------------------------------------
Date Filed:
             -------------------------------------------------------------------


                                      NASD

                         SECURED DEMAND NOTE COLLATERAL
                          AGREEMENT FOR EQUITY CAPITAL


          AGREEMENT dated as of August 31, 1995 to be effective as of August 31,
1995  between  Ken  Stokes  (the  "Lender")  and  A.R.  Baron & Co.,  Inc.  (the
"Broker-Dealer").

          Subject  to the  terms  and  conditions  hereinafter  set  forth,  the
Broker-Dealer promises to return to the Lender or assigns, on September 15, 1996
(the  "Scheduled  Maturity  Date")(the  last day of a month at least three years
from the date hereof) at the principal office of the Broker- Dealer the Note and

<PAGE>
                                       19

Collateral as defined herein,  and interest  payable  Quarterly at Citibank NA's
prime rate of  interest  as  published  on the first day of each month per annum
from the  effective  date of this  Agreement,  which  date  shall be the date so
agreed upon by the Lender and the Broker-Dealer  unless otherwise  determined by
the National  Association of Securities Dealers,  Inc. ("NASD").  This Agreement
shall not be considered a satisfactory  subordination  agreement pursuant to the
provisions  of 17 CFR  240.15c31d  unless  and  until  the  NASD has  found  the
Agreement  acceptable and such Agreement has become  effective in the form found
acceptable.

          The Lender has executed in favor of you A.R.  Baron & Co.,  Inc.  (the
Broker-Dealer),  a Secured  Demand  Note of even date in the form of  Addendum I
hereto. References herein to the "Note" shall be deemed to refer to such Secured
Demand Note and to any Note  substituted  therefor in accordance  with the terms
hereof.  The unpaid principal  amount of the Note is hereinafter  referred to as
the "Indebtedness".

          As security  for the payment of the  principal  evidenced by the Note,
the Lender hereby pledges to the  Broker-Dealer the securities and cash, if any,
described in Schedule A, attached to the Note, as the same may from time to time
be amended in accordance with the terms hereof (the securities from time to time
listed in said  Schedule  are herein  referred  to as the  "Securities"  and any
securities,  cash or other  property at any time  pledged  hereunder  are herein
referred  to as the  "Collateral"  and  shall  be  subject  to the  risks of the
business).  All  Securities  shall  be  fully  paid  for and in  bearer  form or
registered in the name of the Broker-Dealer or its nominee or custodian.

          The  Lender   irrevocably   agrees   that  the   obligations   of  the
Broker-Dealer  under this Agreement with respect to the payment of principal and
interest  shall be and are  subordinate  in right of payment  and subject to the
prior  payment  or  provision  for  payment  in full of all  claims of all other
present  and future  creditors  of the  Broker-Dealer  arising out of any matter
occurring prior to the date on which the related Payment  Obligation (as defined
herein)  matures  consistent  with  the  provisions  of 17  CFR  240.15c3-1  and
240.15c3-1d except for claims which are the subject of subordination  agreements
which  rank on the same  priority  as or are  junior to the claim of the  Lender
under such subordination agreements.

I.    OWNERSHIP AND PROPERTY RIGHTS WITH RESPECT TO COLLATERAL
      --------------------------------------------------------

          (a) Subject  only  to the prior  rights of the  Broker-Dealer  pledgee
hereunder and under the Note, until liquidation in accordance with Paragraph III
hereof the Lender shall have and retain full legal and  beneficial  ownership of
the  Collateral and shall have the benefit of any increases and bear the risk of
any decreases in the value of such Collateral.  Prior to such  liquidation,  the
Lender  shall  have the sole  right to vote or have the sole right to any income
therefrom  or  distribution  thereon by  payment of  interest  or  dividends  or
otherwise,  subject  however,  to the right of the  Broker-Dealer to receive and
hold as pledgee all dividends payable in securities and all partial and complete
liquidating  dividends;  and shall pay all taxes,  assessments  or other charges
upon or with respect to such Securities or the income therefrom or distributions
thereon or the gain or loss of value thereof.

          (b) The Lender,  subject to the prior rights of the  Broker-Dealer  as
pledgee,  shall have the right to direct the sale of any Securities  included in
the  Collateral,  to direct the purchase of  securities  with any cash  included
therein, to withdraw excess Collateral or to substitute cash or other securities
as  Collateral,  provided  that  the net  proceeds  of any  sale and the cash so
substituted  and the  securities  so  purchased or  substituted  are held by the
Broker-Dealer,  as pledgee,  and are included  within the  Collateral  to secure
payment  of  the  Secured  Demand  Note,  and  provided  further  that  no  such
transactions shall be permitted if, after giving effect thereto,  the sum of the
amount  of any  cash,  plus the  Collateral  Value (as  defined  herein)  of the
- -Securities,  then pledged as Collateral to secure the Secured Demand Note would
be less than the unpaid principal amount of the Secured Demand Note.

II.   CERTAIN RIGHTS OF THE BROKER-DEALER
      -----------------------------------

          The  Broker-Dealer,  as the  holder  of the  Note and  pledgee  of the
Collateral, shall have the right to:

          (a) Pledge,  repledge,  hypothecate and re-hypothecate,  any or all of
the Securities  pledged as Collateral to secure the Secured Demand Note, without
notice,  separately  or in common  with other  securities  or  property  for the
purpose of securing any indebtedness of the Broker-Dealer;

<PAGE>
                                       20

          (b) Lend to  itself or others  any or all of the  Securities  and cash
pledged as Collateral to secure this Secured Demand Note;

          (c) Deposit  any cash from time to time  pledged as  Collateral  in an
account or  accounts in its own name in any bank or trust  company,  and to hold
the Securities in bearer form, in its own name, or in the name of its nominee or
custodian; and,

          (d) Liquidate  all  or any  part of the  Securities  then  pledged  as
Collateral and to apply the net proceeds of such liquidation,  together with any
cash then  included  in the  Collateral,  in  payment in whole or in part of the
Payment  Obligation,  if the Note is not paid  upon  presentment  and  demand as
provided for therein.

III.  INSUFFICIENT COLLATERAL VALUE
      -----------------------------

          If any  cash  plus  Collateral  Value  of any  Securities  pledged  as
collateral  to secure this Note is at any time less than the  Indebtedness,  the
Broker-Dealer shall give immediate written notice to the Lender and the NASD, in
which event the Lender may at its option:

          (a)(i) Prior to 12 o'clock  noon on the  business  day  following  the
transmittal of such notice, pledge additional Collateral to bring the Collateral
Value up to an amount not less than the unpaid  principal of the Note; and, (ii)
Unless such additional  Collateral is so pledged prior to 12 o'clock noon of the
business day following the transmittal of such notice,  the Broker-Dealer  shall
forthwith  sell all or any part of the  Collateral for the account of the Lender
and apply so much of the  proceeds  thereof  and any cash then  included  in the
Collateral  as may be  necessary to reduce or  eliminate  the unpaid  principal,
provided  that the unpaid  principal  need not be  reduced  below the sum of any
remaining  cash  plus the  Collateral  Value of the  remaining  Securities.  The
Broker-Dealer  shall not purchase for its own account any Securities  subject to
such a sale.

IV.   PAYMENT BY LENDER
      -----------------

          Upon payment by the Lender,  as distinguished  from a reduction by the
Lender  which is provided in  paragraph  IIIb(i),  or  reduction  by the Broker-
Dealer  as  provided  for in  paragraph  V,  of all or any  part  of the  unpaid
principal  amount of this Note,  the  Broker-Dealer  shall issue to the Lender a
subordinated loan agreement, preferred or common stock of the Broker-Dealer,  or
if a partnership,  shall credit a capital account of the Lender in the amount of
such payment, or in any combination of the foregoing, as specified below:

          a cash  subordinated  loan agreement  meeting the  requirements of the
          ----------------------------------------------------------------------
          National Association of Securities Dealers, Inc.
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------


V.    PERMISSIVE PREPAYMENTS (OPTIONAL)
      ---------------------------------

          At the  option  of the  Broker-Dealer,  but not at the  option  of the
Lender, payment of all or any part of the Payment Obligation hereof prior to the
Scheduled  Maturity Date may be made by the  Broker-Dealer  only upon receipt of
the prior written  approval of the NASD,  but in no event may any  prepayment be
made  before  the  expiration  of one year from the date this  Agreement  became
effective.  No prepayment  shall be made if after giving effect  thereto (and to
all payments of Payment  Obligations  under any other  subordination  agreements
then  outstanding,  the maturity of which is scheduled to fall due either within
six months after the date such prepayment is to occur or on or prior to the date
on which the Payment Obligation hereof is scheduled to mature, whichever date is
earlier),   without   reference  to  any   projected   profit  or  loss  of  the
Broker-Dealer,  either aggregate  indebtedness of the Broker-Dealer would exceed
1000 percent of its net capital or such lesser percent as may be made applicable
to the Broker-Dealer  from time to time by the NASD or a governmental  agency or
self-regulatory  body having appropriate  authority,  or if the Broker-Dealer is
operating pursuant to paragraph (f) of 17 CFR 240.15c3-1,  its net capital would
be less than 5 percent of aggregate  debit items computed in accordance  with 17

<PAGE>
                                       21

CFR 240.15c3-3a, or if registered as a futures commission merchant, 7 percent of
the funds required to be segregated  pursuant to the Commodity  Exchange Act and
the  regulations  thereunder,  (less  the  market  value  of  commodity  options
purchased by option  customers on or subject to the rules of a contract  market,
provided,  however,  the deduction for each option  customer shall be limited to
the amount of customer funds in such option customer s account,) if greater,  or
its net  capital  would be less than 120 percent of the  minimum  dollar  amount
required by 17 CFR 240.15c3-1  including  paragraph (f), if applicable,  or such
greater  dollar  amount as may be made  applicable to the  Broker-Dealer  by the
NASD,  or a  governmental  agency or  self-regulatory  body  having  appropriate
authority.

VI.   SUSPENDED REPAYMENTS
      --------------------

          (a) The Payment Obligation of the Broker-Dealer shall be suspended and
shall not mature if, after  giving  effect to such  payment  (together  with the
payment  of  any  Payment  Obligation  of  the  Broker-Dealer  under  any  other
subordination   agreement   scheduled  to  mature  on  or  before  such  Payment
Obligation),  the aggregate  indebtedness of the Broker-Dealer would exceed 1200
percent of its net capital or such lesser  percent as may be made  applicable to
the  Broker-Dealer  from  time to time by the NASD or a  governmental  agency or
self-regulatory  body having appropriate  authority,  or if the Broker-Dealer is
operating pursuant to paragraph (f) of 17 CFR 240.15c3-1,  its net capital would
be less than 5 percent of aggregate  debit items computed in accordance  with 17
CFR 240.15c3-3a, or if registered as a futures commission merchant, 6 percent of
the funds required to be segregated  pursuant to the Commodity  Exchange Act and
the regulations  thereunder,  if greater,  or its net capital would be less than
120 percent of the minimum dollar amount required by 17 CFR 240.15c3-1 including
paragraph  (f),  if  applicable  or such  greater  dollar  amount as may be made
applicable,  to the  Broker-Dealer  by the  NASD,  or a  governmental  agency or
self-regulatory body having appropriate authority.

          (b)(OPTIONAL) The  Broker-Dealer  agrees that if its obligation to pay
the  principal  amount  hereof  is  suspended  for a period of six  months,  the
Broker-Dealer will thereupon  commence a rapid and orderly complete  liquidation
of its  business.  The  date on which  the  liquidation  commences  shall be the
maturity  date  for  each  subordination  agreement  of the  Broker-Dealer  then
outstanding.

VII.  LENDER'S RIGHT TO ACCELERATE THE MATURITY OF THE PAYMENT
      OBLIGATION (OPTIONAL)
      --------------------------------------------------------

          By written notice to the  Broker-Dealer at its principal office and to
the NASD, no sooner than six months after the effective date of this  Agreement,
the Lender  may  accelerate  such  Payment  Obligation,  together  with  accrued
interest or compensation, to a date not earlier than six months after the giving
of such notice.  However,  the right of the Lender to receive payment,  together
with accrued interest or compensation,  shall remain  subordinate as required by
the provisions of 17 CFR 240.15c3-1 and 240.15c3-1d.

VIII. ACCELERATED MATURITY OF THE SUBORDINATION AGREEMENT UPON THE OCCURRENCE OF
      AN EVENT OF ACCELERATION (OPTIONAL)
      --------------------------------------------------------------------------

          By  prior  written  notice  delivered  to  the  Broker-Dealer  at  its
principal  office  and  to  the  NASD  upon  the  occurrence  of  any  Event  of
Acceleration  (as  defined  herein),  given no sooner  than six months  from the
effective  date of this  Agreement,  the  Lender  may  accelerate  such  Payment
Obligation to the last business day of a calendar month not less than six months
after the receipt of such  notice by both the  Broker-Dealer  and the NASD.  If,
upon such accelerated  maturity,  the Payment Obligation of the Broker-Dealer is
suspended  pursuant to paragraph VI of this  Agreement,  and  liquidation of the
Broker-Dealer  has not commenced on or prior to such accelerated  maturity date,
such Agreement  shall mature on the day immediately  following such  accelerated
maturity date and, in any event,  the Payment  Obligations of the  Broker-Dealer
with respect to all other subordination agreements then outstanding,  shall also
mature at the same time. Events of Acceleration,  which may be included shall be
limited to:

          (a) Failure to pay  interest or any  installment  of principal on this
Agreement as scheduled;

          (b) Failure to pay when due other  money  obligations  of a  specified
material amount;

<PAGE>
                                       22

          (c) Discovery that any material,  specified representation or warranty
of the  Broker-Dealer,  which is  included in this  Agreement  and on which this
Agreement was based or continued,  was  inaccurate in a material  respect at the
same time made; or,

          (d) The following  specified and clearly measurable event(s) which the
Lender  and  Broker-Dealer  agree  (i)  is a  significant  indication  that  the
financial  position of the  Broker-Dealer  has changed  materially and adversely
from agreed upon specified  norms; or (ii) could materially and adversely affect
the ability of the  Broker-Dealer  to conduct its  business as  conducted on the
effective date of the  subordination  agreement;  or (iii) constitute  continued
failure to perform agreed-upon  covenants included in this Agreement relating to
the maintenance and reporting by the Broker-Dealer of its financial position.

          The Events of  Acceleration as discussed in paragraphs (a) through (d)
with respect to this agreement are enumerated below:

          (a), (b), (c) above and (d) above as modified.
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------
          ----------------------------------------------------------------------

IX.   ACCELERATED MATURITY OF THE SUBORDINATION AGREEMENT UPON THE OCCURRENCE OF
      AN EVENT OF DEFAULT (OPTIONAL)
      --------------------------------------------------------------------------

          (a) If the  liquidation  of the business of the Broker- Dealer has not
already commenced,  the Payment  Obligation shall mature,  together with accrued
interest  or  compensation,  upon the  occurrence  of an Event  of  Default,  as
hereinafter defined.

          (b) Further,  if liquidation of the Business of the  Broker-Dealer has
not already commenced,  the rapid and orderly liquidation of the business of the
Broker-Dealer shall then commence upon the happening of an Event of Default, and
the date of said  Event of  Default  shall  be the  date on  which  the  Payment
Obligations  of  the  Broker-Dealer  with  respect  to all  other  subordination
agreements then outstanding shall mature.

          Events of Default which may be included shall be limited to:

          (i) The filing of an application by the Securities Investor Protection
Corporation for a decree adjudicating that customers of the Broker-Dealer are in
need of protection under the Securities  Investor Protection Act of 1970 and the
failure of the Broker-Dealer to obtain the dismissal of such application  within
30 days;

         (ii) The  aggregate  indebtedness of the  Broker-Dealer  exceeding 1500
percent of its net capital or, in the case of a Broker-Dealer  which has elected
to operate  under  paragraph  (a)(1)(ii) of 17 CFR  240.15c3-1,  its net capital
computed in accordance  therewith is less than 2 percent of its aggregate  debit
items  computed in  accordance  with 17 CFR  240.15c3-3a,  or if registered as a
futures  commission  merchant,  4 percent of the funds required to be segregated
pursuant  to the  Commodity  Exchange  Act and the  regulations  thereunder,  if
greater,  throughout a period of 15 consecutive business days, commencing on the
day the Broker-Dealer  first determines and notifies the Lender and the NASD, or
the NASD or the Commission  first  determines and notifies the  Broker-Dealer of
such fact;

        (iii) Revocation  by   the   Commission   of  the  registration  of  the
Broker-Dealer;

         (iv) Suspension  by the NASD (without  reinstatement within 10 days) or
revocation of the Broker-Dealer's status as a member thereof; and,

          (v) Receivership,  insolvency,  liquidation pursuant to the Securities
Investor  Protection  Act of 1970 or otherwise,  bankruptcy,  assignment for the
benefit of creditors, reorganization whether or not pursuant to bankruptcy laws,
or any other marshaling of the assets and liabilities of the Broker-Dealer.

<PAGE>
                                       23

X.    NOTICE OF MATURITY OR ACCELERATED MATURITY
      ------------------------------------------

          The Broker-Dealer  shall immediately  notify the NASD if, after giving
effect to all payments of Payment  Obligations  under  subordination  agreements
then  outstanding  which  are then  due or  mature  within  six  months  without
reference  to any  projected  profit or loss of the  Broker-Dealer,  either  the
aggregate indebtedness of the Broker-Dealer would exceed 1200 percent of its net
capital,  or in the case of a  Broker-Dealer  operating  pursuant  to  paragraph
(a)(1)(ii) of 17 CFR 240.15c3-1, its net capital would be less than 5 percent of
aggregate  debit items  computed in accordance  with 17 CFR  240.15c3-3a,  or if
registered as a futures commission  merchant, 6 percent of the funds required to
be  segregated  pursuant  to the  Commodity  Exchange  Act and  the  regulations
thereunder,  (less the market  value of  commodity  options  purchased by option
customers on or subject to the rules of a contract  market,  provided,  however,
the  deduction  for each  option  customer  shall be  limited  to the  amount of
customer  funds in such option  customer s account,)  if greater,  and in either
case,  if its net capital  would be less than 120 percent of the minimum  dollar
amount  required  by  17  CFR  240.15c3-1  including  paragraph  (a)(1)(ii),  if
applicable,  or such  greater  dollar  amount as may be made  applicable  to the
Broker-Dealer  by the NASD,- or a governmental  agency or  self-regulatory  body
having appropriate authority.

XI.   WARRANTIES OF THE LENDER
      ------------------------

          The Lender hereby warrants that he has duly executed the Note; that he
has duly  delivered  the Note to the  Broker-Dealer  and upon such  delivery the
Broker-Dealer  acquired  good  title  thereto;  that the Note is his  valid  and
binding  obligation  enforceable  by the  Broker-Dealer  in accordance  with its
terms;  that  he has  duly  and  validly  pledged  with  the  Broker-Dealer  the
Securities  described  in  Schedule  A  attached  to the  Note;  and,  that  the
Broker-Dealer  as pledge of the Securities  has the rights with respect  thereto
which are conferred  upon it by this  Agreement.  Each such  representation  and
warranty  shall survive the execution and delivery of the Note and the pledge of
the Securities.

          The Lender  represents that the Securities may be publicly offered and
sold without  registration  under the Securities Act of 1933 as amended and that
the sale and transfer of the  Securities is not  restricted by the Act nor is it
restricted by any other law, agreement or in any other manner.

XII.  BROKER-DEALERS CARRYING THE ACCOUNTS OF SPECIALISTS AND MARKET  MAKERS  IN
      IN LISTED OPTIONS
      --------------------------------------------------------------------------

          A Broker-Dealer who guarantees, endorses, carries or clears specialist
or market-maker transactions in options listed on a national securities exchange
or facility of a national  securities  association shall not permit a reduction,
prepayment,  or  repayment  of the unpaid  principal  amount if the effect would
cause the equity required in such specialist or market-maker  accounts to exceed
1000 percent of the  Broker-Dealer's  net capital or such percent as may be made
applicable to the Broker-Dealer  from time to time by the NASD or a governmental
agency or self-regulatory body having appropriate authority.

XIII. BROKER-DEALERS REGISTERED WITH CFTC.
      ------------------------------------

          If the Broker-Dealer is a futures commission  merchant or introductory
broker as that term is defined in the Commodity  Exchange Act, the  Organization
agrees,  consistent with the  requirements of Section 1.17(h) of the regulations
of the CFTC (17 CFR 1.17(h)) that:

          (a) Whenever prior written notice by the  Broker-Dealer to the NASD is
required  pursuant to the provisions of this  Agreement,  the same prior written
notice  shall  be given by the  Broker-Dealer  to (i) the CFTC at its  principal
office in Washington,  D.C.,  attention Chief  Accountant of Division of Trading
and Markets,  and/or (ii) the commodity  exchange of which the Organization is a
member and which is then designated by the CFTC as the Organization's designated
self-regulatory organization (the "DSRO");

          (b) Whenever prior written consent, permission or approval of the NASD
is required  pursuant to the  provisions of this  Agreement,  the  Broker-Dealer
shall also obtain the prior written consent,  permission or approval of the CFTC
and/or of the DSRO; and,

          (c) Whenever the Broker-Dealer receives written notice of acceleration
of maturity  pursuant to the  provisions of this  Agreement,  the  Broker-Dealer
shall  promptly  give written  notice  thereof to the CFTC at the address  above
stated and/or to the DSRO.

<PAGE>
                                       24

XV.   GENERAL
      -------

          Neither the Lender, his heirs, executors,  administrators,  or assigns
shall be  personally  liable  on such  Note,  and in the event of  default,  the
Broker-Dealer  shall  look for  payment  of such Note  solely to the  Collateral
pledged herein.

          This  Agreement  shall not be  subject to  cancellation  by either the
Lender or the  Broker-Dealer,  and no payment  shall be made,  nor the Agreement
terminated,  rescinded, or modified by mutual consent or otherwise if the effect
thereof would be  inconsistent  with the  requirements  of 17 CFR 240.15c3-1 and
240.15c3-ld.

          This Agreement may not be transferred,  sold,  assigned,  pledged,  or
otherwise  encumbered or otherwise  disposed of, and no lien,  charge,  or other
encumbrance  may be created or permitted to be created thereon without the prior
written consent of the NASD.

          In the  event of the  appointment  of a  receiver  or  trustee  of the
Broker-Dealer  or in the event of its  insolvency,  liquidation  pursuant to the
Securities Investor Protection Act of 1970 or otherwise, bankruptcy,  assignment
for  the  benefit  of  creditors,  reorganization  whether  or not  pursuant  to
bankruptcy  laws, or any other  marshaling of the assets and  liabilities of the
Broker-Dealer, the Payment Obligation of the Broker-Dealer shall mature, and the
holder  hereof  shall  not be  entitled  to  participate  or share,  ratably  or
otherwise,  in the  distribution  of the assets of the  Broker-Dealer  until all
claims of all other present and future  creditors of the  Broker-Dealers,  whose
claims are senior hereto, have been fully satisfied.

          The Lender  irrevocably  agrees that the loan evidenced  hereby is not
being  made in  reliance  upon the  standing  of the  Broker-Dealer  as a member
organization of the NASD or upon the NASD  surveillance  of the  Broker-Dealer s
financial  position or its compliance  with the By-Laws,  rules and practices of
the NASD. The Lender has made such  investigation of the  Broker-Dealer  and its
partners,  officers,  directors,  and stockholders as the Lender deems necessary
and appropriate under the circumstances. The Lender is not relying upon the NASD
to provide any  information  concerning  or relating  to the  Broker-Dealer  and
agrees  that  the NASD has no  responsibility  to  disclose  to the  Lender  any
information  concerning or relating to the Broker-Dealer which it may now, or at
any future time, have.

          The term "Broker-Dealer", as used in this Agreement, shall include the
broker-dealer, its heirs, executors, administrators, successors, and assigns.

          The term  "Payment  Obligation"  shall mean the return of the  Secured
Demand Note  contributed  to the  Broker-Dealer  or the  reduction of the unpaid
principal  amount  thereof,  and the  return of cash or  securities  pledged  as
Collateral to secure this Secured Demand Note.

          The term "Collateral  Value" of any securities  pledged to secure this
Secured  Demand  Note  shall mean the market  value of such  Securities  after g
effect to the haircut  deductions  specified in  subparagraph  (c)(2)(vi) of 1 ~
240.15c3-1.

          The   provisions  of  this   Agreement   shall  be  binding  upon  the
Broker-Dealer,   and  the  Lender,   and  their  respective  heirs,   executors,
administrators, successors, and assigns.

          Any  controversy  arising out of or relating to this  Agreement may be
submitted to and settled by arbitration pursuant to the By-Laws and rules of the
NASD.  The  Broker-Dealer  and the Lender  shall be  conclusively  bound by such
arbitration.

          This   instrument   embodies   the  entire   agreement   between   the
Broker-Dealer  and Lender and no other  evidence of such  agreement has been, or
will be, executed without the prior written consent of the NASD.

          This Agreement  shall be deemed to have been made under,  and shall be
governed by, the laws of the State of NEW YORK in all respects.

          IN WITNESS  WHEREOF  the  parties  have set their hands and seal as of
this 31st day of August 1995.

<PAGE>
                                       25

                                 A.R. Baron & Co., Inc.
                                 -----------------------------------------------
                                 (Name of Broker-Dealer)



                                 By /s/  [illegible]
                                 -----------------------------------------------
                                    (Authorized Person)



                                 /s/ Ken Stokes
                                 -----------------------------------------------
                                 (Lender)


                                 Ken Stokes


                                 FOR NASD USE ONLY



                                 ACCEPTED BY: /s/John J. LaFond              
                                              ----------------------------------
                                              (Name)


                                              Asst. Director
                                              ----------------------------------
                                              (Title)


                                 EFFECTIVE DATE:  September 7, 1995 9:30 a.m.
                                                  ------------------------------

                                 LOAN NUMBER:     10-D-SDN-10012
                                                  ------------------------------




                                   ADDENDUM I

                               SECURED DEMAND NOTE


                                                           As of August 31, 1995

          FOR VALUE  RECEIVED,  I promise to pay to A.R.  Baron & Co., Inc. (the
Broker-Dealer)  at its principal  office at 153 East 53rd Street,  New York, New
York 10022 (where  presentment  and demand for payment  shall be made),  without
interest, the sum of Five Hundred Thousand Dollars ($ 500,000.00 ), on demand.

          This Note is secured at its date by the pledge of the  securities  and
cash, if any, described in Schedule A attached hereto. I agree that whenever the
value of the securities and cash securing this Note, as determined in accordance
with the capital requirements of 17 CFR 240.15c3-1 or the rules-and  regulations
of the National  Association of Securities Dealers,  Inc. ("NASD") or those of a
governmental agency or self-regulatory  body having appropriate  authority which
are applicable to the Broker-Dealer at the time of such valuation,  is less than
the unpaid balance of this Note, the Broker-Dealer shall exercise the rights set
forth in paragraph  III(a)(ii) of the Secured Demand Note  Collateral  Agreement
(the  Agreement)  of even date between me and the  Broker-Dealer  without  first
making a demand for payment hereof.

          The  Broker-Dealer,  by acceptance  hereof,  agrees,  for itself,  its
representatives, successors and assigns (1) that neither I, my heirs, executors,
administrators  or assigns  shall be  personally  liable on this Note,  it being
intended that my obligation to pay the principal amount of this Note is included

<PAGE>
                                       26

for  the  sole  purpose  of  establishing  the  existence  of  the  indebtedness
represented  hereby and (2) that in the event of default,  the Broker-Dealer and
any such successor or assign shall look for payment solely to the Collateral, as
defined  herein,  then pledged to secure this Note,  and will not make claims or
institute   any  action  or   proceeding   against  me,  my  heirs,   executors,
administrators  or assigns for the  payment of this Note (or for any  deficiency
remaining  after  application of the Collateral  pledged to secure this Note, or
otherwise);  provided, however, that nothing herein contained shall be construed
to release or impair the  indebtedness  evidenced  by this Note,  or of the lien
upon the  Collateral  pledged to secure it, or preclude the  application of said
pledged  Collateral to the payment  hereof in accordance  with the provisions of
the Agreement.

          The Broker-Dealer agrees that upon payment by me of all or any portion
of this Note, as  distinguished  from a reduction by me as provided in paragraph
III(b)(i) of the  Agreement or  reduction  by the  Broker-Dealer  as provided in
paragraph  V of  the  Agreement,  the  Broker-Dealer  shall  issue  to me a cash
subordinated loan agreement meeting the requirements of the National Association
of Securities Dealers,  Inc. in the amount of such payment, as provided pursuant
to paragraph IV of the Agreement.

          The  Broker-Dealer  further  agrees  that it will  make a  demand  for
payment  hereof  only  after  it  determines  in  good  faith  that  it is in or
approaching  financial  difficulty,  provided,  however, that no failure to make
such a determination  in good faith shall affect the  effectiveness of a demand,
or give rise to any claim which is superior to my claim under the  Agreement for
the withdrawal, return or reduction of this Note.

          The term "in or approaching  financial  difficulty" shall mean for the
purpose  hereof any of the specified and clearly  measurable  events  enumerated
below:

(a) The failure of the Broker-Dealer to file its Focus  Reports  when  due,  and
- --------------------------------------------------------------------------------
(b) The failure of the  Broker-Dealer  to comply with the  requirements  of Rule
- --------------------------------------------------------------------------------
    15c3-1  promulgated  under the Securities  Exchange Act of 1934 for 72 hours
- --------------------------------------------------------------------------------
    after notice to cure.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

          This Note and the  securities  and cash from time to time  pledged  to
secure it are subject in all respects to the provisions of the Agreement, a copy
of  which  may  be  examined  at the  principal  office  of  the  Broker-Dealer.

          The term "Collateral" shall mean, as defined in subparagraph (b)(6) of
Appendix D of SEC Rule l5c3-1,  "only cash and  securities  which are fully paid
for and which may be publicly  offered or sold  without  registration  under the
Securities  Act of 1933,  and the  offer,  sale and  transfer  of which  are not
otherwise  restricted".


                                 /s/ Ken  Stokes                            L.S.
                                 -------------------------------------------
                                 Lender



                                 A.R. Baron & Co., Inc.
                                 -----------------------------------------------
                                 Broker-Dealer



                             By  /s/[illegible]                             L.S.
                                 -------------------------------------------
                                              Authorized Person

<PAGE>
                                       27

                          SUBORDINATED LOAN AGREEMENT
                              LENDER'S ATTESTATION

          It is recommended  that you discuss the merits of this investment with
an attorney, accountant or some other person who has knowledge and experience in
financial and business matters prior to executing this Agreement.

          1.   I have received and reviewed NASD Form SLD, which is a reprint of
               Appendix  D of 17  CFR  240.15c3-1,  and  am  familiar  with  its
               provisions.

          2.   I am aware that the funds or securities subject to this Agreement
               are not  covered by the  Securities  Investor  Protection  Act of
               1970.

          3.   I  understand  that  I will  be  furnished  financial  statements
               pursuant to SEC Rule 17a-5(c).

          4.   On the date this  Agreement was entered into,  the  broker-dealer
               carried funds or securities for my account. (State Yes or No No .

          5.   Lender's business relationship to the broker-dealer is: Client .

          6.   If not a partner or stockholder  actively engaged in the business
               of the broker-dealer, acknowledge receipt of the following:

               a.   Certified audit and accountant's certificate dated 12/31/94.

               b.   Disclosure of financial  and/or  operational  problems since
                    the last certified audit which required  reporting  pursuant
                    to SEC Rule  17a-11.  (If no such  reporting  was  required,
                    state ("none") Demise of Clearing Firm,  asset reduction and
                    operational losses in August 1995 in excess of $1,000,000

               c.   Balance  sheet  and  statement  of  ownership  equity  dated
                    08/31/95.

               d.   Most  recent   computation  of  net  capital  and  aggregate
                    indebtedness or aggregate debit items dated reflecting a net
                    capital of approximately $1,489,000 and a ratio of 1000%.

               e.   Debt/equity ratio as of 08/31/95 of 60%.

               f.   Other disclosures:  The Firm ceased being in compliance with
                    the Net Capital  Rule  15c3-1.  In absence of this and other
                    loans,  Firm would not be able to continue its activities as
                    a broker-dealer.


Dated: As of August 31, 1995                /s/ Ken Stokes                  L.S.
       ---------------------                --------------------------------
                                                          (Lender)


                                   SCHEDULE A

                 SCHEDULE OF COLLATERAL FOR SECURED DEMAND NOTE*



                             A.R. Baron & Co., Inc.
             -------------------------------------------------------
                                 (Broker-Dealer)





Cash Pledged:                    $______________________________________________


Securities Pledged:

          Stocks:
          Number of Shares       Description

                    295          CYPROS Pharmaceutical Corp.

                184,000          Innovir Laboratories, Inc. B Wts.
                                     Exp. 08/12/98

<PAGE>
                                       28

                 40,000          VOXEL

                110,000          VOXEL A. Wts., Exp. 09/27/99



          Bonds:
          Principal Amount       Description



          *Only  cash and  securities  which are fully paid for and which may be
publicly offered or sole without  registration under the Securities Act of 1933,
and the offer, sale and transfer of which are not otherwise  restricted,  may be
pledged as collateral to secure a Secured Demand Note.



                                      NASD

                               SECURED DEMAND NOTE
                              COLLATERAL AGREEMENT
                               FOR EQUITY CAPITAL


                                      SL-6


                               AGREEMENT BETWEEN:


Lender      Eric Broadley
            --------------------------------------------------------------------
                                          (Name)


            Giebe Road St. Peters Mill
            --------------------------------------------------------------------
                                     (Street Address)


Huntington                      Cambridgeshire                  PE 18705 ENGLAND
- ------------------------        --------------                  ----------------
         (City)                     (State)                           (Zip)


                                       AND


Broker-Dealer    A.R. Baron & Co., Inc.
                 ---------------------------------------------------------------
                                          (Name)


                 153 East 53rd Street
                 ---------------------------------------------------------------
                                        (Street Address)



New York                        New York                        10022
- --------------                ------------                  --------------
    (City)                      (State)                         (Zip)     


NASD ID NO:  
             -------------------------------------------------------------------
Date Filed:
             -------------------------------------------------------------------
           
<PAGE>
                                       29

                                      NASD

                         SECURED DEMAND NOTE COLLATERAL
                          AGREEMENT FOR EQUITY CAPITAL


          AGREEMENT  dated  September 4, 1995 to be effective  September 4, 1995
between  Eric  Broadley  (the   "Lender")  and  A.R.   Baron  &  Co.  Inc.  (the
"Broker-Dealer").

          Subject  to the  terms  and  conditions  hereinafter  set  forth,  the
Broker-Dealer  promises to return to the Lender or assigns, on September 4, 1998
(the  "Scheduled  Maturity  Date")(the  last day of a month at least three years
from the date hereof) at the principal office of the Broker- Dealer the Note and
Collateral as defined herein,  and interest payable Quarterly at the rate of 10%
percent per annum from the effective date of this Agreement, which date shall be
the date so agreed  upon by the Lender and the  Broker-Dealer  unless  otherwise
determined by the National  Association of Securities  Dealers,  Inc.  ("NASD").
This Agreement  shall not be considered a satisfactory  subordination  agreement
pursuant to the  provisions of 17 CFR  240.15c31d  unless and until the NASD has
found the Agreement  acceptable and such  Agreement has become  effective in the
form found acceptable.

          The Lender has  executed in favor of you A.R.  Baron & Co.  Inc.  (the
Broker-Dealer),  a Secured  Demand  Note of even date in the form of  Addendum I
hereto. References herein to the "Note" shall be deemed to refer to such Secured
Demand Note and to any Note  substituted  therefor in accordance  with the terms
hereof.  The unpaid principal  amount of the Note is hereinafter  referred to as
the "Indebtedness".

          As security  for the payment of the  principal  evidenced by the Note,
the Lender hereby pledges to the  Broker-Dealer the securities and cash, if any,
described in Schedule A, attached to the Note, as the same may from time to time
be amended in accordance with the terms hereof (the securities from time to time
listed in said  Schedule  are herein  referred  to as the  "Securities"  and any
securities,  cash or other  property at any time  pledged  hereunder  are herein
referred  to as the  "Collateral"  and  shall  be  subject  to the  risks of the
business).  All  Securities  shall  be  fully  paid  for and in  bearer  form or
registered in the name of the Broker-Dealer or its nominee or custodian.

          The  Lender   irrevocably   agrees   that  the   obligations   of  the
Broker-Dealer  under this Agreement with respect to the payment of principal and
interest  shall be and are  subordinate  in right of payment  and subject to the
prior  payment  or  provision  for  payment  in full of all  claims of all other
present  and future  creditors  of the  Broker-Dealer  arising out of any matter
occurring prior to the date on which the related Payment  Obligation (as defined
herein)  matures  consistent  with  the  provisions  of 17  CFR  240.15c3-1  and
240.15c3-1d except for claims which are the subject of subordination  agreements
which  rank on the same  priority  as or are  junior to the claim of the  Lender
under such subordination agreements.

I.    OWNERSHIP AND PROPERTY RIGHTS WITH RESPECT TO COLLATERAL
      --------------------------------------------------------

          (a) Subject  only  to the prior  rights of the  Broker-Dealer  pledgee
hereunder and under the Note, until liquidation in accordance with Paragraph III
hereof the Lender shall have and retain full legal and  beneficial  ownership of
the  Collateral and shall have the benefit of any increases and bear the risk of
any decreases in the value of such Collateral.  Prior to such  liquidation,  the
Lender  shall  have the sole  right to vote or have the sole right to any income
therefrom  or  distribution  thereon by  payment of  interest  or  dividends  or
otherwise,  subject  however,  to the right of the  Broker-Dealer to receive and
hold as pledgee all dividends payable in securities and all partial and complete
liquidating  dividends;  and shall pay all taxes,  assessments  or other charges
upon or with respect to such Securities or the income therefrom or distributions
thereon or the gain or loss of value thereof.

          (b) The Lender,  subject to the prior rights of the  Broker-Dealer  as
pledgee,  shall have the right to direct the sale of any Securities  included in
the  Collateral,  to direct the purchase of  securities  with any cash  included
therein, to withdraw excess Collateral or to substitute cash or other securities
as  Collateral,  provided  that  the net  proceeds  of any  sale and the cash so
substituted  and the  securities  so  purchased or  substituted  are held by the
Broker-Dealer,  as pledgee,  and are included  within the  Collateral  to secure
payment  of  the  Secured  Demand  Note,  and  provided  further  that  no  such
transactions shall be permitted if, after giving effect thereto,  the sum of the
amount  of any  cash,  plus the  Collateral  Value (as  defined  herein)  of the

<PAGE>
                                       30

- -Securities,  then pledged as Collateral to secure the Secured Demand Note would
be less than the unpaid principal amount of the Secured Demand Note.

II.   CERTAIN RIGHTS OF THE BROKER-DEALER
      -----------------------------------

          The  Broker-Dealer,  as the  holder  of the  Note and  pledgee  of the
Collateral, shall have the right to:

          (a) Pledge,  repledge,  hypothecate and re-hypothecate,  any or all of
the Securities  pledged as Collateral to secure the Secured Demand Note, without
notice,  separately  or in common  with other  securities  or  property  for the
purpose of securing any indebtedness of the Broker-Dealer;

          (b) Lend to  itself or others  any or all of the  Securities  and cash
pledged as Collateral to secure this Secured Demand Note;

          (c) Deposit  any cash from time to time  pledged as  Collateral  in an
account or  accounts in its own name in any bank or trust  company,  and to hold
the Securities in bearer form, in its own name, or in the name of its nominee or
custodian; and,

          (d)  Liquidate  all or any  part of the  Securities  then  pledged  as
Collateral and to apply the net proceeds of such liquidation,  together with any
cash then  included  in the  Collateral,  in  payment in whole or in part of the
Payment  Obligation,  if the Note is not paid  upon  presentment  and  demand as
provided for therein.

III.  INSUFFICIENT COLLATERAL VALUE
      -----------------------------

          If any  cash  plus  Collateral  Value  of any  Securities  pledged  as
collateral  to secure this Note is at any time less than the  Indebtedness,  the
Broker-Dealer shall give immediate written notice to the Lender and the NASD, in
which event the Lender may at its option:

          (a)(i) Prior to 12 o'clock noon on the  business  day  following  the
transmittal of such notice, pledge additional Collateral to bring the Collateral
Value up to an amount not less than the unpaid  principal of the Note; and,

            (ii) Unless such  additional  Collateral  is so pledged  prior to 12
o'clock noon of the business day following the  transmittal of such notice,  the
Broker-Dealer  shall  forthwith  sell all or any part of the  Collateral for the
account  of the Lender and apply so much of the  proceeds  thereof  and any cash
then  included in the  Collateral as may be necessary to reduce or eliminate the
unpaid  principal,  provided that the unpaid principal need not be reduced below
the sum of any  remaining  cash  plus  the  Collateral  Value  of the  remaining
Securities.  The  Broker-Dealer  shall  not  purchase  for its own  account  any
Securities subject to such a sale.

          (b)(i)(OPTIONAL)  With the prior  written  consent of the NASD and the
Broker-Dealer,  reduce the unpaid  principal amount of the Note by not more than
15 percent of its original  principal  amount,  provided that the  Broker-Dealer
clearly  establishes  that its aggregate  indebtedness  would not,  after giving
effect to such a  reduction,  exceed  1000  percent of its net  capital as those
terms are defined in 17 CFR  240.15c3-1,  or if the  Broker-Dealer  is operating
pursuant to paragraph  (f) of 17 CFR  240.15c3-1  its net capital  would be less
than 5 percent of  aggregate  debit  items  computed in  accordance  with 17 CFR
240.15c3-3a, or if registered as a futures commission merchant, 7 percent of the
funds required to be segregated  pursuant to the Commodity Exchange Act, and the
regulations thereunder, (less the market value of commodity options purchased by
option  customers  on or subject to the rules of a  contract  market,  provided,
however,  the deduction for each option  customer shall be limited to the amount
of customer  funds in such option  customer's  account,) if greater,  and in the
event of such  reduction,  the right of the  Lender to  withdraw  Collateral  as
provided in paragraph  I(b) shall be suspended.  The NASD shall not consent to a
reduction of the  principal  amount of this Note, if after giving effect to such
net capital would be less than 120 percent of the minimum dollar amount required
by 17 CFR 240.15c3-3-1  including paragraph (f), if applicable,  or such greater
`dollar amount as may be made applicable to the  Broker-Dealer by the NASD, or a
governmental agency or self-regulatory body having appropriate authority.

<PAGE>
                                       31

IV.   PAYMENT BY LENDER
      -----------------    

          Upon payment by the Lender,  as distinguished  from a reduction by the
Lender  which is provided in  paragraph  IIIb(i),  or  reduction  by the Broker-
Dealer  as  provided  for in  paragraph  V,  of all or any  part  of the  unpaid
principal  amount of this Note,  the  Broker-Dealer  shall issue to the Lender a
subordinated loan agreement, preferred or common stock of the Broker-Dealer,  or
if a partnership,  shall credit a capital account of the Lender in the amount of
such payment, or in any combination of the foregoing, as specified below:

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

V.    PERMISSIVE PREPAYMENTS (OPTIONAL)
      ---------------------------------

          At the  option  of the  Broker-Dealer,  but not at the  option  of the
Lender, payment of all or any part of the Payment Obligation hereof prior to the
Scheduled  Maturity Date may be made by the  Broker-Dealer  only upon receipt of
the prior written  approval of the NASD,  but in no event may any  prepayment be
made  before  the  expiration  of one year from the date this  Agreement  became
effective.  No prepayment  shall be made if after giving effect  thereto (and to
all payments of Payment  Obligations  under any other  subordination  agreements
then  outstanding,  the maturity of which is scheduled to fall due either within
six months after the date such prepayment is to occur or on or prior to the date
on which the Payment Obligation hereof is scheduled to mature, whichever date is
earlier),   without   reference  to  any   projected   profit  or  loss  of  the
Broker-Dealer,  either aggregate  indebtedness of the Broker-Dealer would exceed
1000 percent of its net capital or such lesser percent as may be made applicable
to the Broker-Dealer  from time to time by the NASD or a governmental  agency or
self-regulatory  body having appropriate  authority,  or if the Broker-Dealer is
operating pursuant to paragraph (f) of 17 CFR 240.15c3-1,  its net capital would
be less than 5 percent of aggregate  debit items computed in accordance  with 17
CFR 240.15c3-3a, or if registered as a futures commission merchant, 7 percent of
the funds required to be segregated  pursuant to the Commodity  Exchange Act and
the  regulations  thereunder,  (less  the  market  value  of  commodity  options
purchased by option  customers on or subject to the rules of a contract  market,
provided,  however,  the deduction for each option  customer shall be limited to
the amount of customer funds in such option customer s account,) if greater,  or
its net  capital  would be less than 120 percent of the  minimum  dollar  amount
required by 17 CFR 240.15c3-1  including  paragraph (f), if applicable,  or such
greater  dollar  amount as may be made  applicable to the  Broker-Dealer  by the
NASD,  or a  governmental  agency or  self-regulatory  body  having  appropriate
authority.

VI.   SUSPENDED REPAYMENTS
      --------------------    

          (a) The Payment Obligation of the Broker-Dealer shall be suspended and
shall not mature if, after  giving  effect to such  payment  (together  with the
payment  of  any  Payment  Obligation  of  the  Broker-Dealer  under  any  other
subordination   agreement   scheduled  to  mature  on  or  before  such  Payment
Obligation),  the aggregate  indebtedness of the Broker-Dealer would exceed 1200
percent of its net capital or such lesser  percent as may be made  applicable to
the  Broker-Dealer  from  time to time by the NASD or a  governmental  agency or
self-regulatory  body having appropriate  authority,  or if the Broker-Dealer is
operating pursuant to paragraph (f) of 17 CFR 240.15c3-1,  its net capital would
be less than 5 percent of aggregate  debit items computed in accordance  with 17
CFR 240.15c3-3a, or if registered as a futures commission merchant, 6 percent of
the funds required to be segregated  pursuant to the Commodity  Exchange Act and
the regulations  thereunder,  if greater,  or its net capital would be less than
120 percent of the minimum dollar amount required by 17 CFR 240.15c3-1 including
paragraph  (f),  if  applicable  or such  greater  dollar  amount as may be made
applicable,  to the  Broker-Dealer  by the  NASD,  or a  governmental  agency or
self-regulatory body having appropriate authority.

          (b)(OPTIONAL) The  Broker-Dealer  agrees that if its obligation to pay
the  principal  amount  hereof  is  suspended  for a period of six  months,  the
Broker-Dealer will thereupon  commence a rapid and orderly complete  liquidation
of its  business.  The  date on which  the  liquidation  commences  shall be the
maturity  date  for  each  subordination  agreement  of the  Broker-Dealer  then
outstanding.

<PAGE>
                                       32

VII.  LENDER'S RIGHT TO ACCELERATE THE MATURITY OF THE PAYMENT
      OBLIGATION (OPTIONAL)
      --------------------------------------------------------

          By written notice to the  Broker-Dealer at its principal office and to
the NASD, no sooner than six months after the effective date of this  Agreement,
the Lender  may  accelerate  such  Payment  Obligation,  together  with  accrued
interest or compensation, to a date not earlier than six months after the giving
of such notice.  However,  the right of the Lender to receive payment,  together
with accrued interest or compensation,  shall remain  subordinate as required by
the provisions of 17 CFR 240.15c3-1 and 240.15c3-1d.

VIII. ACCELERATED MATURITY OF THE SUBORDINATION AGREEMENT UPON THE OCCURRENCE OF
      AN EVENT OF ACCELERATION (OPTIONAL)
      --------------------------------------------------------------------------

          By  prior  written  notice  delivered  to  the  Broker-Dealer  at  its
principal  office  and  to  the  NASD  upon  the  occurrence  of  any  Event  of
Acceleration  (as  defined  herein),  given no sooner  than six months  from the
effective  date of this  Agreement,  the  Lender  may  accelerate  such  Payment
Obligation to the last business day of a calendar month not less than six months
after the receipt of such  notice by both the  Broker-Dealer  and the NASD.  If,
upon such accelerated  maturity,  the Payment Obligation of the Broker-Dealer is
suspended  pursuant to paragraph VI of this  Agreement,  and  liquidation of the
Broker-Dealer  has not commenced on or prior to such accelerated  maturity date,
such Agreement  shall mature on the day immediately  following such  accelerated
maturity date and, in any event,  the Payment  Obligations of the  Broker-Dealer
with respect to all other subordination agreements then outstanding,  shall also
mature at the same time. Events of Acceleration,  which may be included shall be
limited to:

          (a) Failure to pay  interest or any  installment  of principal on this
Agreement as scheduled;

          (b) Failure to  pay when due other  money  obligations  of a specified
material amount;

          (c) Discovery that any material,  specified representation or warranty
of the  Broker-Dealer,  which is  included in this  Agreement  and on which this
Agreement was based or continued,  was  inaccurate in a material  respect at the
same time made; or,

          (d) The following  specified and clearly measurable event(s) which the
Lender  and  Broker-Dealer  agree  (i)  is a  significant  indication  that  the
financial  position of the  Broker-Dealer  has changed  materially and adversely
from agreed upon specified  norms; or (ii) could materially and adversely affect
the ability of the  Broker-Dealer  to conduct its  business as  conducted on the
effective date of the subordination  agreement; or (iii) is a significant change
in  the  senior  management  or  in  the  general  business   conducted  by  the
Broker-Dealer from the date this Agreement became effective;  or (iv) constitute
continued failure to perform  agreed-upon  covenants  included in this Agreement
relating to the maintenance and reporting by the  Broker-Dealer of its financial
position or relating to the conduct of its business.

          The Events of  Acceleration as discussed in paragraphs (a) through (d)
with respect to this agreement are enumerated below:

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

IX.   ACCELERATED MATURITY OF THE SUBORDINATION AGREEMENT UPON THE OCCURRENCE OF
      AN EVENT OF DEFAULT (OPTIONAL)
      --------------------------------------------------------------------------

          (a) If the  liquidation  of the business of the Broker- Dealer has not
already commenced,  the Payment  Obligation shall mature,  together with accrued
interest  or  compensation,  upon the  occurrence  of an Event  of  Default,  as
hereinafter defined.

          (b) Further,  if liquidation of the Business of the  Broker-Dealer has
not already commenced,  the rapid and orderly liquidation of the business of the
Broker-Dealer shall then commence upon the happening of an Event of Default, and
the date of said  Event of  Default  shall  be the  date on  which  the  Payment
Obligations  of  the  Broker-Dealer  with  respect  to all  other  subordination
agreements then outstanding shall mature.

<PAGE>
                                       33

          Events of Default which may be included shall be limited to:

          (i) The filing of an application by the Securities Investor Protection
Corporation for a decree adjudicating that customers of the Broker-Dealer are in
need of protection under the Securities  Investor Protection Act of 1970 and the
failure of the Broker-Dealer to obtain the dismissal of such application  within
30 days;

         (ii) The  aggregate  indebtedness of the  Broker-Dealer  exceeding 1500
percent of its net capital or, in the case of a Broker-Dealer  which has elected
to operate under paragraph (f) of 17 CFR 240.15c3-1, its net capital computed in
accordance  therewith  is less  than 2  percent  of its  aggregate  debit  items
computed in accordance  with 17 CFR  240.15c3-3a,  or if registered as a futures
commission  merchant,  4 percent of the funds required to be segregated pursuant
to the  Commodity  Exchange  Act and the  regulations  thereunder,  if  greater,
throughout a period of 15 consecutive  business days,  commencing on the day the
Broker-Dealer first determines and notifies the Lender and the NASD, or the NASD
or the Commission first determines and notifies the Broker-Dealer of such fact;

        (iii) Revocation  by   the  Commission   of   the  registration  of  the
Broker-Dealer;

         (iv) Suspension  by the NASD (without  reinstatement within 10 days) or
revocation of the Broker-Dealer's status as a member thereof; and,

          (v) Receivership,  insolvency,  liquidation pursuant to the Securities
Investor  Protection  Act of 1970 or otherwise,  bankruptcy,  assignment for the
benefit of creditors, reorganization whether or not pursuant to bankruptcy laws,
or any other marshaling of the assets and liabilities of the Broker-Dealer.

X.    NOTICE OF MATURITY OR ACCELERATED MATURITY
      ------------------------------------------

          The Broker-Dealer  shall immediately  notify the NASD if, after giving
effect to all payments of Payment  Obligations  under  subordination  agreements
then  outstanding  which  are then  due or  mature  within  six  months  without
reference  to any  projected  profit or loss of the  Broker-Dealer,  either  the
aggregate indebtedness of the Broker-Dealer would exceed 1200 percent of its net
capital,  or in the case of a Broker-Dealer  operating pursuant to paragraph (f)
of 17 CFR 240.15c3-1,  its net capital would be less than 5 percent of aggregate
debit items computed in accordance with 17 CFR 240.15c3-3a,  or if registered as
a futures commission  merchant, 6 percent of the funds required to be segregated
pursuant to the Commodity Exchange Act and the regulations thereunder, (less the
market value of commodity options purchased by option customers on or subject to
the rules of a contract market, provided, however, the deduction for each option
customer  shall be  limited  to the  amount  of  customer  funds in such  option
customer s account,) if greater, and in either case, if its net capital would be
less than 120 percent of the minimum dollar amount required by 17 CFR 240.15c3-1
including paragraph (f), if applicable,  or such greater dollar amount as may be
made applicable to the  Broker-Dealer by the NASD,- or a governmental  agency or
self-regulatory body having appropriate authority.

XI.   WARRANTIES OF THE LENDER
      ------------------------
     
          The Lender hereby warrants that he has duly executed the Note; that he
has duly  delivered  the Note to the  Broker-Dealer  and upon such  delivery the
Broker-Dealer  acquired  good  title  thereto;  that the Note is his  valid  and
binding  obligation  enforceable  by the  Broker-Dealer  in accordance  with its
terms;  that  he has  duly  and  validly  pledged  with  the  Broker-Dealer  the
Securities  described  in  Schedule  A  attached  to the  Note;  and,  that  the
Broker-Dealer  as pledge of the Securities  has the rights with respect  thereto
which are conferred  upon it by this  Agreement.  Each such  representation  and
warranty  shall survive the execution and delivery of the Note and the pledge of
the Securities.

          The Lender  represents that the Securities may be publicly offered and
sold without  registration  under the Securities Act of 1933 as amended and that
the sale and transfer of the  Securities is not  restricted by the Act nor is it
restricted by any other law, agreement or in any other manner.

<PAGE>
                                       34

XII.  BROKER-DEALERS CARRYING THE ACCOUNTS OF SPECIALISTS AND MARKET  MAKERS  IN
      LISTED OPTIONS
      --------------------------------------------------------------------------

          A Broker-Dealer who guarantees, endorses, carries or clears specialist
or market-maker transactions in options listed on a national securities exchange
or facility of a national  securities  association shall not permit a reduction,
prepayment,  or  repayment  of the unpaid  principal  amount if the effect would
cause the equity required in such specialist or market-maker  accounts to exceed
1000 percent of the  Broker-Dealer's  net capital or such percent as may be made
applicable to the Broker-Dealer  from time to time by the NASD or a governmental
agency or self-regulatory body having appropriate authority.

XIII. BROKER-DEALERS REGISTERED WITH CFTC.
      ------------------------------------

          If the Broker-Dealer is a futures commission  merchant or introductory
broker as that term is defined in the Commodity  Exchange Act, the  Organization
agrees,  consistent with the  requirements of Section 1.17(h) of the regulations
of the CFTC (17 CFR 1.17(h)) that:

          (a) Whenever prior written notice by the  Broker-Dealer to the NASD is
required  pursuant to the provisions of this  Agreement,  the same prior written
notice  shall  be given by the  Broker-Dealer  to (i) the CFTC at its  principal
office in Washington,  D.C.,  attention Chief  Accountant of Division of Trading
and Markets,  and/or (ii) the commodity  exchange of which the Organization is a
member and which is then designated by the CFTC as the Organization's designated
self-regulatory organization (the "DSRO");

          (b) Whenever prior written consent, permission or approval of the NASD
is required  pursuant to the  provisions of this  Agreement,  the  Broker-Dealer
shall also obtain the prior written consent,  permission or approval of the CFTC
and/or of the DSRO; and,

          (c) Whenever the Broker-Dealer receives written notice of acceleration
of maturity  pursuant to the  provisions of this  Agreement,  the  Broker-Dealer
shall  promptly  give written  notice  thereof to the CFTC at the address  above
stated and/or to the DSRO.

XIV.  SUBORDINATION OF ACCRUED INTEREST PAYABLE (OPTIONAL)
      ----------------------------------------------------

          The Lender and the Borrower hereby elect to have all eligible  accrued
interest payable, on this loan,  considered as additional  subordinated  capital
for purposes of computing net capital,  subject to the terms and  conditions set
forth in the  instructions.  The amount of accrued interest payable per month is
$________________ and the aggregate total of all eligble monthly amounts will be
$________________.



- ------------------------------------        ------------------------------------
(Borrower's Initials)       (Date)          (Lender's Initials)         (Date)


XV.   GENERAL
      -------

          Neither the Lender, his heirs, executors,  administrators,  or assigns
shall be  personally  liable  on such  Note,  and in the event of  default,  the
Broker-Dealer  shall  look for  payment  of such Note  solely to the  Collateral
pledged herein.

          This  Agreement  shall not be  subject to  cancellation  by either the
Lender or the  Broker-Dealer,  and no payment  shall be made,  nor the Agreement
terminated,  rescinded, or modified by mutual consent or otherwise if the effect
thereof would be  inconsistent  with the  requirements  of 17 CFR 240.15c3-1 and
240.15c3-ld.

          This Agreement may not be transferred,  sold,  assigned,  pledged,  or
otherwise  encumbered or otherwise  disposed of, and no lien,  charge,  or other
encumbrance  may be created or permitted to be created thereon without the prior
written consent of the NASD.

          In the  event of the  appointment  of a  receiver  or  trustee  of the
Broker-Dealer  or in the event of its  insolvency,  liquidation  pursuant to the
Securities Investor Protection Act of 1970 or otherwise, bankruptcy,  assignment
for  the  benefit  of  creditors,  reorganization  whether  or not  pursuant  to
bankruptcy  laws, or any other  marshaling of the assets and  liabilities of the
Broker-Dealer, the Payment Obligation of the Broker-Dealer shall mature, and the
holder  hereof  shall  not be  entitled  to  participate  or share,  ratably  or

<PAGE>
                                       35

otherwise,  in the  distribution  of the assets of the  Broker-Dealer  until all
claims of all other present and future  creditors of the  Broker-Dealers,  whose
claims are senior hereto, have been fully satisfied.

          The Lender  irrevocably  agrees that the loan evidenced  hereby is not
being  made in  reliance  upon the  standing  of the  Broker-Dealer  as a member
organization of the NASD or upon the NASD  surveillance  of the  Broker-Dealer s
financial  position or its compliance  with the By-Laws,  rules and practices of
the NASD. The Lender has made such  investigation of the  Broker-Dealer  and its
partners,  officers,  directors,  and stockholders as the Lender deems necessary
and appropriate under the circumstances. The Lender is not relying upon the NASD
to provide any  information  concerning  or relating  to the  Broker-Dealer  and
agrees  that  the NASD has no  responsibility  to  disclose  to the  Lender  any
information  concerning or relating to the Broker-Dealer which it may now, or at
any future time, have.

          The term "Broker-Dealer", as used in this Agreement, shall include the
broker-dealer, its heirs, executors, administrators, successors, and assigns.

          The term  "Payment  Obligation"  shall mean the return of the  Secured
Demand Note  contributed  to the  Broker-Dealer  or the  reduction of the unpaid
principal  amount  thereof,  and the  return of cash or  securities  pledged  as
Collateral to secure this Secured Demand Note.

          The term "Collateral  Value" of any securities  pledged to secure this
Secured  Demand  Note  shall mean the market  value of such  Securities  after g
effect to the haircut  deductions  specified in  subparagraph  (c)(2)(vi) of 1 ~
240.15c3-1.

          The   provisions  of  this   Agreement   shall  be  binding  upon  the
Broker-Dealer,   and  the  Lender,   and  their  respective  heirs,   executors,
administrators, successors, and assigns.

          Any  controversy  arising out of or relating to this  Agreement may be
submitted to and settled by arbitration pursuant to the By-Laws and rules of the
NASD.  The  Broker-Dealer  and the Lender  shall be  conclusively  bound by such
arbitration.

          This   instrument   embodies   the  entire   agreement   between   the
Broker-Dealer  and Lender and no other  evidence of such  agreement has been, or
will be, executed without the prior written consent of the NASD.

          This Agreement  shall be deemed to have been made under,  and shall be
governed by, the laws of the State of __________________ in all respects.

          IN WITNESS  WHEREOF the parties have set their hands and seal this 4th
day of September 1995.
  
                                 A.R. Baron & Co. Inc.
                                 -------------------------------------------
                                 (Name of Broker-Dealer)


<PAGE>
                                       36


                                 By /s/ Andrew Bressman                     L.S.
                                   -----------------------------------------
                                   (Authorized Person)



/s/ Eric Broadley                Eric Broadley                              L.S.
                                 -------------------------------------------
                                 (Lender)
 

                                 FOR NASD USE ONLY


                                 ACCEPTED BY: /s/ John J. La Fond
                                             -------------------------------
                                             (Name)


                                             Assistant Director
                                             -------------------------------
                                             (Title)


                                 EFFECTIVE DATE: September 7, 1995 9:30 a.m.
                                                 ---------------------------

                                 LOAN NUMBER:    10-D-SDN-10017
                                                 --------------------------- 




                                   ADDENDUM I

                               SECURED DEMAND NOTE


                                                               September 4, 1995

          FOR VALUE  RECEIVED,  I promise to pay to A.R.  Baron & Co. Inc.  (the
Broker-Dealer)  at its  principal  office at 153 E. 53rd  Street,  New York,  NY
(where presentment and demand for payment shall be made), without interest,  the
sum of Seven Hundred Thousand Dollars ($700,000 ), on demand.

          This Note is secured at its date by the pledge of the  securities  and
cash, if any, described in Schedule A attached hereto. I agree that whenever the
value of the securities and cash securing this Note, as determined in accordance
with the capital requirements of 17 CFR 240.15c3-1 or the rules-and  regulations
of the National  Association of Securities Dealers,  Inc. ("NASD") or those of a
governmental agency or self-regulatory  body having appropriate  authority which
are applicable to the Broker-Dealer at the time of such valuation,  is less than
the unpaid balance of this Note, the Broker-Dealer shall exercise the rights set
forth in paragraph  III(a)(ii) of the Secured Demand Note  Collateral  Agreement
(the  Agreement)  of even date between me and the  Broker-Dealer  without  first
making a demand for payment hereof.

          The  Broker-Dealer,  by acceptance  hereof,  agrees,  for itself,  its
representatives, successors and assigns (1) that neither I, my heirs, executors,
administrators  or assigns  shall be  personally  liable on this Note,  it being
intended that my obligation to pay the principal amount of this Note is included
for  the  sole  purpose  of  establishing  the  existence  of  the  indebtedness
represented  hereby and (2) that in the event of default,  the Broker-Dealer and
any such successor or assign shall look for payment solely to the Collateral, as
defined  herein,  then pledged to secure this Note,  and will not make claims or
institute   any  action  or   proceeding   against  me,  my  heirs,   executors,
administrators  or assigns for the  payment of this Note (or for any  deficiency
remaining  after  application of the Collateral  pledged to secure this Note, or
otherwise);  provided, however, that nothing herein contained shall be construed
to release or impair the  indebtedness  evidenced  by this Note,  or of the lien
upon the  Collateral  pledged to secure it, or preclude the  application of said
pledged  Collateral to the payment  hereof in accordance  with the provisions of
the Agreement.

          The Broker-Dealer agrees that upon payment by me of all or any portion
of this Note, as  distinguished  from a reduction by me as provided in paragraph
III(b)(i) of the  Agreement or  reduction  by the  Broker-Dealer  as provided in
paragraph V of the Agreement, the Broker-Dealer shall issue to me A Subordinated
Loan Agreement in the amount of such payment,  as provided pursuant to paragraph
IV of the Agreement.

          The  Broker-Dealer  further  agrees  that it will  make a  demand  for
payment  hereof  only  after  it  determines  in  good  faith  that  it is in or
approaching  financial  difficulty,  provided,  however, that no failure to make
such a determination  in good faith shall affect the  effectiveness of a demand,
or give rise to any claim which is superior to my claim under the  Agreement for
the withdrawal, return or reduction of this Note.

          The term "in or approaching  financial  difficulty" shall mean for the
purpose  hereof any of the specified and clearly  measurable  events  enumerated
below:

<PAGE>
                                       37

Failure to meet net capital requirements for a period of seven days.------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

          This Note and the  securities  and cash from time to time  pledged  to
secure it are subject in all respects to the provisions of the Agreement, a copy
of which may be examined at the principal office of the Broker-Dealer.

          The term "Collateral" shall mean, as defined in subparagraph (b)(6) of
Appendix D of SEC Rule l5c3-1,  "only cash and  securities  which are fully paid
for and which may be publicly  offered or sold  without  registration  under the
Securities  Act of 1933,  and the  offer,  sale and  transfer  of which  are not
otherwise restricted".


/s/ Eric Broadley                Eric Broadley                              L.S.
                                 -------------------------------------------  
                                 Lender


                                 /s/ A.R. Baron & Co. Inc.
                                 -------------------------------------------  
                                 Broker-Dealer



                          By /s/ Andrew Bressman                            L.S.
                             -----------------------------------------------
                                            Authorized Person



                           SUBORDINATED LOAN AGREEMENT
                              LENDER'S ATTESTATION
                          ----------------------------


          It is recommended  that you discuss the merits of this investment with
an attorney, accountant or some other person who has knowledge and experience in
financial and business matters prior to executing this Agreement.

          1.   I have received and reviewed NASD Form SLD, which is a reprint of
               Appendix  D of 17  CFR  240.15c3-1,  and  am  familiar  with  its
               provisions.

          2.   I am aware that the funds or securities subject to this Agreement
               are not  covered by the  Securities  Investor  Protection  Act of
               1970.

          3.   I  understand  that  I will  be  furnished  financial  statements
               pursuant to SEC Rule 17a-5(c).

          4.   On the date this  Agreement was entered into,  the  broker-dealer
               carried funds or securities for my account. (State Yes or No) No.

          5.   Lender's business relationship to the broker-dealer is: Customer

          6.   If not a partner or stockholder  actively engaged in the business
               of the broker-dealer, acknowledge receipt of the following:

               a.   Certified audit and accountant's  certificate dated December
                    1994.

               b.   Disclosure of financial  and/or  operational  problems since
                    the last certified audit which required  reporting  pursuant
                    to SEC Rule  17a-11.  (If no such  reporting  was  required,
                    state  ("none")  Demise  of  Clearing  Frim  (Adler  Coleman
                    Clearing Corp.)

<PAGE>
                                       38

               c.   Balance sheet and  statement of ownership  equity dated July
                    31, 1995.

               d.   Most  recent   computation  of  net  capital  and  aggregate
                    indebtedness  or  aggregate  debit  items  dated  8/31/95  ,
                    reflecting a net capital of

               e.   Debt/equity ratio as of 8/31/95 of 9/4/95.



Dated:  9/4/95                              /s/ Eric Broadley               L.S.
      ----------                            --------------------------------
                                                        (Lender)


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