NETLOJIX COMMUNICATIONS INC
EXHIBIT 10.1
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>3
<FILENAME>ex-10_1.txt
<DESCRIPTION>EXHIBIT 10.1
<TEXT>

<PAGE>




                                  EXHIBIT 10.1




                              AMENDED AND RESTATED
                           LOAN AND SECURITY AGREEMENT

                                      among


                          NETLOJIX COMMUNICATIONS, INC.
                       (f/k/a AVTEL COMMUNICATIONS, INC.),
                             a Delaware corporation


                                       and


                            REMOTE LOJIX/PCSI, INC.,
         a New York corporation (a wholly owned subsidiary of Netlojix)


                                       and


                             NETLOJIX TELECOM, INC.,
                             a Delaware corporation
                     (a wholly owned subsidiary of NetLojix)


                                       and

                             COAST BUSINESS CREDIT,
                      a division of Southern Pacific Bank,
                            a California corporation


                            Dated as of May 30, 2000

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<S>                                                                                 <C>

1.    DEFINITIONS....................................................................2
             Account Debtor..........................................................2
             Affiliate...............................................................2
             Audit...................................................................2
             Availability............................................................2
             Billed Receivable Loans.................................................2
             Billed Receivables......................................................2
             Borrower              ..................................................2
             Borrower's Address    ..................................................2
             Business Day          ..................................................2
             Change of Control     ..................................................2
             Closing Date          ..................................................2
             Coast                 ..................................................2
             Code                  ..................................................2
             Collateral            ..................................................2
             Credit Limit          ..................................................2
             Default               ..................................................2
             Deposit Account       ..................................................2
             Dilution Percentage   ..................................................3
             Dollars or $          ..................................................3
             Early Termination Fee ..................................................3
             EBIT                  ..................................................3
             EBITDA                ..................................................3
             Eligible Receivables  ..................................................3
             Equipment             ..................................................4
             Event of Default      ..................................................4
             GAAP                  ..................................................4
             General Intangibles   ..................................................4
             Inventory             ..................................................4
             Investment Property   ..................................................5
             Letter of Credit      ..................................................5
             Letter of Credit Sublimit...............................................5
             Loan Documents        ..................................................5
             Loans                 ..................................................5
             Material Adverse Effect.................................................5
             Maturity Date         ..................................................5
             Maximum Dollar Amount ..................................................5
             Minimum Monthly Interest................................................5
             NetLojix              ..................................................5
             Net Worth             ..................................................5
             Obligations           ..................................................5
             Permitted Liens       ..................................................5
             Person                ..................................................6
             Prime Rate            ..................................................6
             Receivables           ..................................................6
             Remote                ..................................................6
             Renewal Date          ..................................................6
             Renewal Fee           ..................................................6
             Solvent               ..................................................6
             Telecom               ..................................................6
             Unbilled Receivables  ..................................................6
             Unbilled Receivable Loans...............................................6
             Year or Yearly        ..................................................6
             Other Terms           ..................................................6

2.    CREDIT FACILITIES..............................................................7
             2.1      Loans..........................................................7
             2.2      Letters of Credit..............................................7

3.    INTEREST AND FEES..............................................................7
             3.1      Interest.......................................................7

                                        i
</TABLE>

<PAGE>

<TABLE>
<S>                                                                                 <C>
             3.2      Fees...........................................................7

4.    SECURITY INTEREST..............................................................7

5.    CONDITIONS PRECEDENT...........................................................7
             5.1      Status of Accounts at Closing..................................8
             5.2      Minimum Availability...........................................8
             5.3      Landlord Waiver................................................8
             5.4      Executed Agreement.............................................8
             5.4      Opinion of Borrower's Counsel..................................8
             5.5      Priority of Coast's Liens......................................8
             5.6      Insurance......................................................8
             5.7      Borrower's Existence...........................................8
             5.8      Organizational Documents.......................................8
             5.9      Taxes..........................................................8
             5.10     Intentionally Deleted..........................................8
             5.11     Due Diligence..................................................8
             5.12     Lockbox/Triparty/Blocked Account Agreements....................8
             5.13     Net Worth......................................................8
             5.14     Other Documents and Agreements.................................8

6.    REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER......................9
             6.1      Existence and Authority........................................9
             6.2      Name; Trade Names and Styles...................................9
             6.3      Place of Business; Location of Collateral......................9
             6.4      Title to Collateral; Permitted Liens...........................9
             6.5      Maintenance of Collateral......................................9
             6.6      Books and Records..............................................9
             6.7      Financial Condition, Statements and Reports...................10
             6.8      Tax Returns and Payments; Pension Contributions...............10
             6.9      Compliance with Law...........................................10
             6.10     Litigation....................................................10
             6.11     Use of Proceeds...............................................10
             6.12     [Intentionally omitted].......................................10

7.    RECEIVABLES...................................................................10
             7.1      Representations Relating to Receivables.......................10
             7.2      Representations Relating to Documents and Legal Compliance....10
             7.3      Schedules and Documents relating to Receivables...............11
             7.4      Collection of Receivables.....................................11
             7.5      Disputes......................................................11
             7.6      Returns.......................................................11
             7.7      Verification..................................................11
             7.8      No Liability..................................................11

8.    ADDITIONAL DUTIES OF THE BORROWER.............................................12
             8.1      Financial and Other Covenants.................................12
             8.2      Insurance.....................................................12
             8.3      Reports.......................................................12
             8.4      Access to Collateral, Books and Records.......................12
             8.5      Negative Covenants............................................12
             8.6      Remittance of Proceeds........................................13
             8.7      Litigation Cooperation........................................13
             8.8      Further Assurances............................................13

9.    TERM..........................................................................13
             9.1      Maturity Date.................................................13
             9.2      Early Termination.............................................13
             9.3      Payment of Obligations........................................14

10.   EVENTS OF DEFAULT AND REMEDIES................................................14
             10.1     Events of Default.............................................14
             10.2     Remedies......................................................15
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                 <C>

             10.3     Standards for Determining Commercial Reasonableness...........16
             10.4     Power of Attorney.............................................16
             10.5     Application of Proceeds.......................................18
             10.6     Remedies Cumulative...........................................18

11.          GENERAL PROVISIONS.....................................................18
             11.1     Interest Computation..........................................18
             11.2     Application of Payments.......................................18
             11.3     Charges to Accounts...........................................18
             11.4     Monthly Accountings...........................................18
             11.5     Notices.......................................................18
             11.6     Severability..................................................19
             11.7     Integration...................................................19
             11.8     Waivers.......................................................19
             11.9     No Liability for Ordinary Negligence..........................19
             11.10    Amendment.....................................................19
             11.11    Time of Essence...............................................19
             11.12    Attorneys Fees, Costs and Charges.............................19
             11.13    Benefit of Agreement..........................................20
             11.14    Publicity.....................................................20
             11.15    Paragraph Headings; Construction..............................20
             11.16    Governing Law; Jurisdiction; Venue............................20
             11.17    Mutual Waiver of Jury Trial...................................20
             11.18    Confidentiality...............................................20
</TABLE>

                                       iii

<PAGE>

                              Amended and Restated
                           Loan and Security Agreement


Borrower:                     NETLOJIX COMMUNICATIONS, INC.
                              (f/k/a AVTEL COMMUNICATIONS, INC.),
                              a Delaware corporation

Address:                      501 Bath Street
                              Santa Barbara, California  93101

Borrower:                     REMOTE LOJIX/PCSI, INC.,
                              a New York corporation

Address:                      501 Bath Street
                              Santa Barbara, California  93101

Borrower:                     NETLOJIX TELECOM, INC.,
                              a Delaware corporation

Address:                      501 Bath Street
                              Santa Barbara, California  93101

Date:                         May 30, 2000

             WHEREAS, Avtel Communications, Inc., a Delaware corporation
("Avtel") and its wholly owned subsidiary Matrix Telecom, Inc., a Texas
corporation ("Matrix")were joint and several borrowers under that certain Loans
and Security Agreement, dated as of September 30, 1998 (the "Prior Loan
Agreement"); and

             WHEREAS, Remote Lojix/PCSI, Inc., a New York corporation ("Remote")
was subsequent to the date of the Prior Loan Agreement added as an additional
Borrower thereunder; and

             WHEREAS, Avtel has changed its name to NetLojix Communications,
Inc., a Delaware corporation ("NetLojix") and has sold Matrix; and

             WHEREAS, NetLojix and Remote desire to amend and restate the Prior
Loan Agreement in its entirety to, among other things, sever the liability of
NetLojix and Remote under the Prior Loan Agreement from that of Matrix
thereunder; to restate and amend the terms of the existing obligations of
NetLojix and Remote under the Prior Loan Agreement; and, to add, as an
additional Borrower, NetLojix Telecom, Inc., a Delaware corporation (a wholly
owned subsidiary of NetLojix) ("Telecom"); and

             WHEREAS, Coast acknowledges that no Default or Event of Default by
NetLojix or Remote under the Prior Loan Agreement has occurred; and

             NOW THEREFORE, NetLojix, Remote and Telecom whose chief executive
offices are located at the addresses referenced above ("Borrower's Address") are
jointly and severally entering into this Amended and Restated Loan and Security
Agreement, dated as of May 30, 2000 with Coast Business Credit, a division of
Southern Pacific Bank, a California corporation, whose address is 12121 Wilshire
Boulevard, Suite 1400, Los Angeles, California 90025 on the terms contained
herein. This Agreement amends, restates and supercedes in its entirety the Prior
Loan Agreement. The Schedule to this Agreement (the "Schedule") shall for all
purposes be deemed to be a part of this Agreement, and the same is an integral
part of this Agreement. (Definitions of certain terms used in this Agreement are
set forth in Section 1 below.)

                                        1

<PAGE>

1.    DEFINITIONS.  As used in this Agreement, the following terms have the
following meanings:

      "ACCOUNT DEBTOR" means the obligor on a Receivable or General Intangible.

      "AFFILIATE" means, with respect to any Person, a relative, partner,
shareholder, director, officer, or employee of such Person, or any parent or
subsidiary of such Person, or any Person controlling, controlled by or under
common control with such Person.

      "AUDIT" means to inspect, audit and copy Borrower's books and records
and the Collateral.

      "AVAILABILITY" means the amount of Eligible Receivables multiplied by
the advance percentage described in the Schedule NET of Borrower's
outstanding Obligations.

      "BILLED RECEIVABLE LOANS" means the Loans described in Section 2.1(a)
of the Schedule.

      "BILLED RECEIVABLES" means Receivables that have been invoiced and sent
to an Account Debtor for payment, by Borrower, by a local exchange carrier
(including, Bell Atlantic, SBC Communications, Ameritech and US West), or by
a third party billing company (including, OAN and GTE Choicebilling).

      "BORROWER" means, jointly and severally, NetLojix, Remote and Telecom.

      "BORROWER'S ADDRESS" has the meaning set forth in the introduction to
this Agreement.

      "BUSINESS DAY" means a day on which Coast is open for business.

      "CHANGE OF CONTROL" shall be deemed to have occurred at such time as a
"person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934) (other than the current holders of the
ownership interests in any Borrower) becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, as a result of any single transaction, of more than twenty-five
percent (25%) of the total voting power of all classes of stock or other
ownership interests then outstanding of any Borrower normally entitled to
vote in the election of directors or analogous governing body.

      "CLOSING DATE" means the date of this Agreement indicated on page 1
hereof.

      "COAST" has the meaning set forth in the introduction to this Agreement.

      "CODE" means the Uniform Commercial Code as adopted and in effect in
the State of California from time to time.

      "COLLATERAL" has the meaning set forth in Section 4 hereof.

      "CREDIT LIMIT" means the maximum amount of Loans that Coast may make to
Borrower pursuant to the amounts and percentages shown on the Schedule.

      "DEFAULT" means any event which with notice or passage of time or both,
would constitute an Event of Default.

      "DEPOSIT ACCOUNT" has the meaning set forth in Section 9105 of the Code.

      "DILUTION PERCENTAGE" shall mean the total amount of chargebacks,
discounts and other items reducing the outstanding amounts of Receivables,
calculated as a percentage of the total amount of outstanding Receivables.

                                        2

<PAGE>

      "DOLLARS OR $" means United States dollars.

      "EARLY TERMINATION FEE" means the amount set forth on the Schedule that
Borrower must pay Coast if this Agreement is terminated by Borrower or Coast
pursuant to Section 9.2 hereof.

      "EBIT" means, in any fiscal period, Borrower's consolidated net income
(other than extraordinary or non-recurring items of Borrower for such period),
PLUS (i) the amount of all interest expense and income tax expense of Borrower
for such period, on a consolidated basis, and PLUS OR MINUS (as the case may be)
(ii) any other non-cash charges which have been added or subtracted, as the case
may be, in calculating Borrower's consolidated net income for such period.

      "EBITDA" means, in any fiscal period, Borrower's consolidated net income
(other than extraordinary or non-recurring items of Borrower for such period),
PLUS (i) the amount of all interest expense, income tax expense, depreciation
expense, and amortization expense of Borrower for such period, on a consolidated
basis, and PLUS OR MINUS (as the case may be) (ii) any other non-cash charges
(including non-cash expenses for the amortization of stock options) which have
been added or subtracted, as the case may be, in calculating Borrower's
consolidated net income for such period.

      "ELIGIBLE RECEIVABLES" means Billed Receivables and Unbilled Receivables
arising in the ordinary course of Borrower's business from the sale of goods or
rendition of services, which Coast, in its sole reasonable credit judgment,
shall deem eligible for borrowing, based on such considerations as Coast may
from time to time deem appropriate. Eligible Receivables shall not include the
following:

      (a) Billed Receivables that the Account Debtor has failed to pay within 90
days of invoice date or Accounts with selling terms of more than 30 days;

      (b) Unbilled Receivables that have not been invoiced and sent to an
Account Debtor for payment within 45 days of Account Debtor's incurring of the
obligation to be invoiced;

      (c) Receivables owed by an Account Debtor or its Affiliates where
twenty-five percent (25%) or more of all Receivables owed by that Account Debtor
(or its Affiliates) are deemed ineligible under clause (a) above;

      (d) Receivables with respect to which the Account Debtor is an employee,
or agent of Borrower;

      (e) Receivables with respect to an Account Debtor who is an Affiliate of
Borrower whose total obligations owing to Borrower exceed ten percent (10%) of
all Eligible Receivables, to the extent of the obligation owing by such Account
Debtor in excess of such percentage.

      (f) Receivables with respect to which goods are placed on consignment,
guaranteed sale, sale or return, sale on approval, bill and hold, or other terms
by reason of which the payment by the Account Debtor may be conditional;

      (g) Receivables that are not payable in Dollars or with respect to which
the Account Debtor: (i) does not maintain its chief executive office in the
United States, or (ii) is not organized under the laws of the United States or
any State thereof, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality, or other political
subdivision thereof, or of any department, agency, public corporation, or other
instrumentality thereof;

      (h) Receivables with respect to which the Account Debtor is either (i)
the United States or any department, agency, or instrumentality of the United
States (exclusive, however, of Accounts with respect to which Borrower has
complied, to the satisfaction of Coast, with the Assignment of Claims Act, 31
U.S.C. 3727),

                                        3

<PAGE>

or (ii) any State of the United States (exclusive, however, of Receivables owed
by any State that does not have a statutory counterpart to the Assignment of
Claims Act);

      (i) Receivables with respect to which the Account Debtor is a creditor of
Borrower: (1) who has a right of setoff or who has asserted a right of setoff,
but only to the extent of the setoff, or (2) who has disputed its liability, or
has made any claim with respect to the Receivables, provided, however, that
Coast, on a case-by-case basis and in its sole discretion, may limit this
provision to the extent of the obligations in dispute;

      (j) Receivables with respect to an Account Debtor whose total obligations
owing to Borrower exceed twenty percent (20%) of all Eligible Receivables, to
the extent of the obligations owing by such Account Debtor in excess of such
percentage;

      (k) Receivables with respect to which the Account Debtor is subject to any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation proceeding, or becomes insolvent, or goes out of
business;

      (l) Receivables the collection of which Coast, in its reasonable credit
judgment, believes to be uncollectible by reason of the Account Debtor's
financial condition;

      (m) Receivables with respect to which the goods giving rise to such
Receivable have not been shipped and billed to the Account Debtor, the services
giving rise to such Receivable have not been performed and accepted by the
Account Debtor, or the Receivable otherwise does not represent a final sale
except for those Receivables in which the Account Debtor has entered into an
agreement with Borrower, in form and substance acceptable to Coast, whereby
Borrower is contractually bound to pay the Receivables and/or estopped from
contesting the Receivables;

      (n) Receivables with respect to which the Account Debtor is located in the
states of New Jersey, Minnesota, Indiana, or West Virginia (or any other state
that requires a creditor to file a Business Activity Report or similar document
in order to bring suit or otherwise enforce its remedies against such Account
Debtor in the courts or through any judicial process of such state), unless
Borrower has qualified to do business in New Jersey, Minnesota, Indiana, West
Virginia, or such other states, or has filed a Notice of Business Activities
Report with the applicable division of taxation, the department of revenue, or
with such other state offices, as appropriate, for the then-current year, or is
exempt from such filing requirement; and

      (o) Receivables that represent progress payments or other advance billings
that are due prior to the completion of performance by Borrower of the subject
contract for goods or services except for those Receivables in which the Account
Debtor has entered into an agreement with Borrower in form and substance
acceptable to Coast, whereby Borrower is contractually bound to pay the
Receivables and/or estopped from contesting the Receivables.

      "EQUIPMENT" means all of Borrower's present and hereafter acquired
machinery, molds, machine tools, motors, furniture, equipment, furnishings,
fixtures, trade fixtures, motor vehicles, tools, parts, dies, jigs, goods and
other goods (other than Inventory) of every kind and description used in
Borrower's operations or owned by Borrower and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements,
substitutions, additions or improvements to any of the foregoing, wherever
located.

      "EVENT OF DEFAULT" means any of the events set forth in Section 10.1 of
this Agreement.

                                        4

<PAGE>

      "GAAP" means generally accepted accounting principles as in effect from
time to time in the United States, consistently applied.

      "GENERAL INTANGIBLES" means all general intangibles of Borrower,
whether now owned or hereafter created or acquired by Borrower, including,
without limitation, all choses in action, causes of action, corporate or
other business records, Deposit Accounts, investment property, inventions,
designs, drawings, blueprints, patents, patent applications, trademarks and
the goodwill of the business symbolized thereby, names, trade names, trade
secrets, goodwill, copyrights, registrations, licenses, franchises, customer
lists, security and other deposits, rights in all litigation presently or
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims
of Borrower against Coast, rights to purchase or sell real or personal
property, rights as a licensor or licensee of any kind, royalties, telephone
numbers, proprietary information, purchase orders, and all insurance policies
and claims (including without limitation life insurance, key man insurance,
credit insurance, liability insurance, property insurance and other
insurance), tax refunds and claims, computer programs, discs, tapes and tape
files, claims under guaranties, security interests or other security held by
or granted to Borrower, all rights to indemnification and all other
intangible property of every kind and nature (other than Receivables).

      "INVENTORY" means all of Borrower's now owned and hereafter acquired
goods, merchandise or other personal property, wherever located, to be
furnished under any contract of service or held for sale or lease (including
without limitation all raw materials, work in process, finished goods and
goods in transit, and including without limitation all farm products), and
all materials and supplies of every kind, nature and description which are or
might be used or consumed in Borrower's business or used in connection with
the manufacture, packing, shipping, advertising, selling or finishing of such
goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.

      "INVESTMENT PROPERTY" has the meaning set forth in Section 9115 of the
Code as in effect as of the date hereof.

      "LETTER OF CREDIT" has the meaning set forth in Section 2.2 hereof.

      "LETTER OF CREDIT SUBLIMIT" has the meaning set forth in Section 2.2
hereof.

      "LOAN DOCUMENTS" means this Agreement, the agreements and documents
listed on Section 5 of the Schedule, and any other agreement, instrument or
document executed in connection herewith or therewith.

      "LOANS" has the meaning set forth in Section 2.1 hereof.

      "MATERIAL ADVERSE EFFECT" means a material adverse effect on (i) the
business, assets, financial condition or results of operations of Borrower or
any subsidiary of Borrower or any guarantor of any of the Obligations, (ii)
the ability of Borrower or any guarantor of any of the Obligations to perform
its obligations under this Agreement (including, without limitation,
repayment of the Obligations as they come due) or (iii) the validity or
enforceability of this Agreement or any other agreement or document entered
into by any party in connection herewith, or the rights or remedies of Coast
hereunder or thereunder.

      "MATURITY DATE" means the date that this Agreement shall cease to be
effective, as set forth on the Schedule, subject to the provisions of Section
9.1 and 9.2 hereof.

      "MAXIMUM DOLLAR AMOUNT" has the meaning set forth in Section 2 of the
Schedule.

                                        5

<PAGE>

      "MINIMUM MONTHLY INTEREST" has the meaning set forth in Section 3 of the
Schedule.

      "NETLOJIX" means NetLojix Communications, Inc., a California corporation.

      "NET WORTH" means consolidated shareholders's equity of a Person at any
date determined in accordance with GAAP, plus subordinated debt.

      "OBLIGATIONS" means all present and future Loans, advances, debts,
liabilities, obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower (and not Matrix) to Coast, whether evidenced by this
Agreement, the Prior Loan Agreement (but only to the extent of Obligations
arising under the Prior Loan Agreement prior to the date hereof) or any note or
other instrument or document, whether arising from an extension of credit,
opening of a letter of credit, banker's acceptance, loan, guaranty,
indemnification or otherwise, whether direct or indirect (including, without
limitation, those acquired by assignment and any participation by Coast in
Borrower's debts owing to others), absolute or contingent, due or to become due,
including, without limitation, all interest, charges, expenses, fees, attorneys'
fees (including attorneys' fees and expenses incurred in bankruptcy), expert
witness fees, audit fees, letter of credit fees, collateral monitoring fees,
closing fees, facility fees, termination fees, minimum interest charges and any
other sums chargeable to Borrower under this Agreement or under any other
present or future instrument or agreement between Borrower and Coast.

      "PERMITTED LIENS" means the following:

      (1)   purchase money security interests in specific items of Equipment;

      (2)   leases of specific items of Equipment;

      (3)   liens for taxes not yet payable;

      (4) additional security interests and liens consented to in writing by
Coast, which consent shall not be unreasonably withheld;

      (5) security interests being terminated substantially concurrently with
this Agreement;

      (6) liens of materialmen, mechanics, warehousemen, carriers, or other
similar liens arising in the ordinary course of business and securing
obligations which are not delinquent;

      (7) liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by liens of the type described above in
clauses (1) or (2) above, provided that any extension, renewal or replacement
lien is limited to the property encumbered by the existing lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase; or

      (8) liens in favor of customs and revenue authorities which secure payment
of customs duties in connection with the importation of goods.

      Coast will have the right to require, as a condition to its consent under
subparagraph (4) above, that the holder of the additional security interest or
lien sign an intercreditor agreement on Coast's then standard form, acknowledge
that the security interest is subordinate to the security interest in favor of
Coast, and agree not to take any action to enforce its subordinate security
interest so long as any Obligations remain outstanding, and that Borrower agree
that any uncured default in any obligation secured by the subordinate security
interest, subject to any applicable notice and cure period applicable thereto,
shall also constitute an Event of Default under this Agreement.


                                        6

<PAGE>

      "PERSON" means any individual, sole proprietorship, general partnership,
limited partnership, limited liability partnership, limited liability company,
joint venture, trust, unincorporated organization, association, corporation,
government, or any agency or political division thereof, or any other entity.

      "PRIME RATE" means the actual "Reference Rate" or the substitute therefor
of the Bank of America NT & SA, or its successor, whether or not that rate is
the lowest interest rate charged by said bank. If the Prime Rate, as defined, is
unavailable, "Prime Rate" shall mean the highest of the prime rates published in
the Wall Street Journal on the first business day of the applicable month, as
the base rate on corporate loans at large U.S. money center commercial banks.

      "RECEIVABLES" means all of Borrower's now owned and hereafter acquired
accounts (whether or not earned by performance), letters of credit, contract
rights, chattel paper, instruments, securities, documents, securities accounts,
security entitlements, commodity contracts, commodity accounts, investment
property and all other forms of obligations at any time owing to Borrower, all
guaranties and other security therefor, all merchandise returned to or
repossessed by Borrower, and all rights of stoppage in transit and all other
rights or remedies of an unpaid vendor, lienor or secured party.

      "REMOTE" means Remote Lojix/PCSI, Inc., a New York corporation.

      "RENEWAL DATE" shall mean the Maturity Date if this Agreement is renewed
pursuant to Section 9.1 hereof, and each anniversary thereafter that this
Agreement is renewed pursuant to Section 9.1 hereof.

      "RENEWAL FEE" means the fee that Borrower must pay Coast upon renewal of
this Agreement pursuant to Section 9.1 hereof, in the amount set forth on the
Schedule.

      "SOLVENT" means, with respect to any Person on a particular date, that on
such date (a) at fair valuations, all of the properties and assets of such
Person are greater than the sum of the debts, including contingent liabilities,
of such Person, (b) the present fair salable value of the properties and assets
of such Person is not less than the amount that will be required to pay the
probable liability of such Person on its debts as they become absolute and
matured, (c) such Person is able to realize upon its properties and assets and
pay its debts and other liabilities, contingent obligations and other
commitments as they mature in the normal course of business, (d) such Person
does not intend to, and does not believe that it will, incur debts beyond such
Person's ability to pay as such debts mature, and (e) such Person is not engaged
in business or a transaction, and is not about to engage in business or a
transaction, for which such Person's properties and assets would constitute
unreasonably small capital after giving due consideration to the prevailing
practices in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount that, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual or matured liability.

      "TELECOM" means NetLojix Telecom, Inc., a Delaware corporation.

      "UNBILLED RECEIVABLES" means Receivables where the services have already
been provided and performed but have not yet been invoiced and sent to an
Account Debtor for payment.

      "UNBILLED RECEIVABLE LOANS" means the Loans described in Section 2.1(b) of
the Schedule.

      "YEAR OR YEARLY" shall mean a calendar year unless as otherwise set forth.


                                        7


<PAGE>



      "OTHER TERMS." All accounting terms used in this Agreement, unless
otherwise indicated, shall have the meanings given to such terms in accordance
with GAAP. All other terms contained in this Agreement, unless otherwise
indicated, shall have the meanings provided by the Code, to the extent such
terms are defined therein.

 2.   CREDIT FACILITIES.

      2.1 Loans. Coast will make loans to Borrower (the "Loans"), in amounts and
in percentages to be determined by Coast in its good faith discretion, up to the
Credit Limit, provided no Default or Event of Default has occurred and is
continuing. In addition, Coast may create reserves against or reduce its advance
rates based upon Eligible Receivables without declaring a Default or an Event of
Default if it determines that there has occurred a Material Adverse Effect.

      2.2 Letters of Credit. At the request of Borrower, Coast may, in its sole
discretion, arrange for the issuance of letters of credit for the account of
Borrower (collectively, "Letters of Credit"), by issuing guarantees to the
issuer of the letter of credit or by other means. All Letters of Credit shall be
in form and substance satisfactory to Coast in its sole discretion. The
aggregate face amount of all outstanding Letters of Credit from time to time
shall not exceed the amount shown on the Schedule (the "Letter of Credit
Sublimit"), and shall be reserved against Loans which would otherwise be
available hereunder. Borrower shall pay all bank charges for the issuance of
Letters of Credit. Any payment by Coast under or in connection with a Letter of
Credit shall constitute a Loan hereunder on the date such payment is made. Each
Letter of Credit shall have an expiry date no later than thirty (30) days prior
to the Maturity Date. Borrower hereby agrees to indemnify, save, and hold Coast
harmless from any loss, cost, expense, or liability, including payments made by
Coast, expenses, and reasonable attorneys' fees incurred by Coast arising out of
or in connection with any Letters of Credit. Borrower agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit
guarantied by Coast and opened for Borrower's account or by Coast's
interpretations of any Letter of Credit issued by Coast for Borrower's account,
and Borrower understands and agrees that Coast shall not be liable for any
error, negligence, or mistake, whether of omission or commission, in following
Borrower's instructions or those contained in the Letters of Credit or any
modifications, amendments, or supplements thereto. Borrower understands that
Letters of Credit may require Coast to indemnify the issuing bank for certain
costs or liabilities arising out of claims by Borrower against such issuing
bank. Borrower hereby agrees to indemnify and hold Coast harmless with respect
to any loss, cost, expense, or liability incurred by Coast under any Letter of
Credit as a result of Coast's indemnification of any such issuing bank. The
provisions of this Agreement, as it pertains to Letters of Credit, and any other
present or future documents or agreements between Borrower and Coast relating to
Letters of Credit are cumulative.

 3.   INTEREST AND FEES.

      3.1 Interest. All Loans and all other monetary Obligations shall bear
interest at the rate shown on the Schedule, except where expressly set forth to
the contrary in this Agreement. Interest shall be payable monthly, on the last
day of the month. Interest may, in Coast's discretion, be charged to Borrower's
loan account, and the same shall thereafter bear interest at the same rate as
the other Loans. Regardless of the amount of Obligations that may be outstanding
from time to time, Borrower shall pay Coast Minimum Monthly Interest during the
term of this Agreement with respect to the Loans in the amount set forth on the
Schedule.

      3.2 Fees. Borrower shall pay Coast the fee(s) shown on the Schedule, which
are in addition to all interest and other sums payable to Coast under the Loan
Documents and are deemed fully earned and are nonrefundable.


                                        8

<PAGE>

 4.   SECURITY INTEREST.

      To secure the payment and performance of all of the Obligations when due,
Borrower hereby grants to Coast a security interest in all of Borrower's
interest in the following, whether now owned or hereafter acquired, and wherever
located: All Receivables, Inventory, Equipment, Investment Property, and General
Intangibles, including, without limitation, all of Borrower's Deposit Accounts,
and all money, and all property now or at any time in the future in Coast's
possession (including claims and credit balances), and all proceeds of any of
the foregoing (including proceeds of any insurance policies, proceeds of
proceeds, and claims against third parties), all products of any of the
foregoing, and all books and records related to any of the foregoing (all of the
foregoing, together with all other property in which Coast may now or in the
future be granted a lien or security interest, is referred to herein,
collectively, as the "Collateral")

 5.   CONDITIONS PRECEDENT.

      The obligation of Coast to make the Loans is subject to the satisfaction,
in the sole discretion of Coast, at or prior to the first advance of funds
hereunder, of each, every and all of the following conditions:

      5.1 Status of Accounts at Closing. No accounts payable shall be due and
unpaid sixty (60) days past its due date except for such accounts payable being
contested in good faith in appropriate proceedings and for which adequate
reserves have been provided.

      5.2 Minimum Availability. Borrower shall have minimum Availability
immediately following the initial funding in the amount set forth on the
Schedule.

      5.3 Landlord Waiver. Coast shall have received duly executed landlord
waivers and access agreements in form and substance satisfactory to Coast, in
Coast's sole and absolute discretion, and, when deemed appropriate by Coast, in
form for recording in the appropriate recording office, with respect to all
leased locations where Borrower maintains any inventory or equipment.

      5.4 Executed Agreement. Coast shall have received this Agreement duly
executed and in form and substance satisfactory to Coast in its sole and
absolute discretion.

      5.4 Opinion of Borrower's Counsel. Coast shall have received an opinion of
Borrower's counsel, in form and substance satisfactory to Coast in its sole and
absolute discretion.

      5.5 Priority of Coast's Liens. Coast shall have received the results of
"of record" searches satisfactory to Coast in its sole and absolute discretion,
reflecting its Uniform Commercial Code filings against Borrower indicating that
Coast has a perfected, first priority lien in and upon all of the Collateral,
subject only to Permitted Liens.

      5.6 Insurance. Coast shall have received copies of the insurance binders
or certificates evidencing Borrower's compliance with Section 8.2 hereof,
including lender's loss payee endorsements.

      5.7 Borrower's Existence. Coast shall have received copies of Borrower's
articles or certificate of incorporation and all amendments thereto, and a
Certificate of Good Standing, each certified by the Secretary of State of the
state of Borrower's organization, and dated a recent date prior to the Closing
Date, and Coast shall have received Certificates of Foreign Qualification for
Borrower from the Secretary of State of each state wherein the failure to be so
qualified could have a Material Adverse Effect.


                                        9

<PAGE>

      5.8 Organizational Documents. Coast shall have received copies of
Borrower's By-laws and all amendments thereto, and Coast shall have received
copies of the resolutions of the board of directors of Borrower, authorizing the
execution and delivery of this Agreement and the other documents contemplated
hereby, and authorizing the transactions contemplated hereunder and thereunder,
and authorizing specific officers of Borrower to execute the same on behalf of
Borrower, in each case certified by the Secretary or other acceptable officer of
Borrower as of the Closing Date.

      5.9 Taxes. Coast shall have received evidence from Borrower that Borrower
has complied with all tax withholding and Internal Revenue Service regulations
and that Borrower has paid and is current on all taxes, whether federal, state
or other applicable taxing body, in form and substance satisfactory to Coast in
its sole and absolute discretion.

      5.10 Intentionally Deleted.

      5.11 Due Diligence. Coast shall have completed its due diligence with
respect to Borrower including but not limited to (i) an audit by Coast of
Borrower and (ii) acceptance by Coast, in its sole and absolute discretion of
Borrower's projections for the next two years.

      5.12 Lockbox/Triparty/Blocked Account Agreements. Coast shall have
received evidence that all cash remittances of Borrower shall be collected
pursuant to one or more lockbox/triparty agreements or blocked account
agreements, in form and substance acceptable to Coast. The agreements shall
provide, without limitation, that remittances resulting from Borrower's
invoicing of Receivables are to be remitted through a lockbox and remittances
resulting from the invoicing of Receivables by a local exchange carrier or a
third party billing company are to be remitted by wire transfer.

      5.13 Net Worth. Coast shall have received evidence satisfactory to Coast
in its sole and absolute discretion that Borrower's Net Worth is equal to or
greater than Three Million Dollars ($3,000,000).

      5.14 Other Documents and Agreements. Coast shall have received such other
agreements, instruments and documents as Coast may require in connection with
the transactions contemplated hereby, all in form and substance satisfactory to
Coast in Coast's sole and absolute discretion, and in form for filing in the
appropriate filing office, including, but not limited to, those documents listed
in Section 5 of the Schedule.

 6. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.

      In order to induce Coast to enter into this Agreement and to make Loans,
Borrower represents and warrants to Coast as follows, and Borrower covenants
that the following representations will continue to be true during the term
hereof, and that Borrower will at all times during the term hereof comply with
all of the following covenants:

      6.1 Existence and Authority. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Borrower is and will continue to be qualified
and licensed to do business in all jurisdictions in which any failure to do so
would have a Material Adverse Effect. The execution, delivery and performance by
Borrower of this Agreement, and all other documents contemplated hereby (a) have
been duly and validly authorized, (b) are enforceable against Borrower in
accordance with their terms (except as enforcement may be limited by equitable
principles and by bankruptcy, insolvency, reorganization, moratorium or similar
laws relating to creditors' rights generally), and (c) do not violate Borrower's
articles or certificate of incorporation or Borrower's by-laws, or any law or
any material agreement or instrument which is binding upon Borrower or its
property, and (d) do not constitute grounds for acceleration of any material
indebtedness


                                       10

<PAGE>

or obligation under any material agreement or instrument which is binding upon
Borrower or its property.

      6.2 Name; Trade Names and Styles. The name of Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule are all
prior names of Borrower and all of Borrower's present and prior trade names.
Borrower shall give Coast thirty (30) days' prior written notice before changing
its name or doing business under any other name. Borrower has complied, and will
in the future comply, with all laws relating to the conduct of business under a
fictitious business name.

      6.3 Place of Business; Location of Collateral. The address set forth in
the heading to this Agreement is Borrower's chief executive office. In addition,
Borrower has places of business and Collateral is located only at the locations
set forth on the Schedule. Borrower will give Coast at least thirty (30) days'
prior written notice before opening any additional place of business, changing
its chief executive office, or moving any of the Collateral to a location other
than Borrower's Address or one of the locations set forth on the Schedule.

      6.4 Title to Collateral; Permitted Liens. Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of Equipment which are leased by Borrower. The Collateral now is and will remain
free and clear of any and all liens, charges, security interests, encumbrances
and adverse claims, except for Permitted Liens. Coast now has, and will continue
to have, a first-priority perfected and enforceable security interest in all of
the Collateral, subject only to the Permitted Liens, and Borrower will at all
times defend Coast and the Collateral against all claims of others. None of the
Collateral now is or will be affixed to any real property in such a manner, or
with such intent, as to become a fixture. Borrower is not and will not become a
lessee under any real property lease pursuant to which the lessor may obtain any
rights in any of the Collateral and no such lease now prohibits, restrains,
impairs or will prohibit, restrain or impair Borrower's right to remove any
Collateral from the leased premises. Whenever any Collateral is located upon
premises in which any third party has an interest (whether as owner, mortgagee,
beneficiary under a deed of trust, lien or otherwise), Borrower shall, whenever
requested by Coast, use its best efforts to cause such third party to execute
and deliver to Coast, in form acceptable to Coast, such waivers and
subordinations as Coast shall reasonably specify, so as to ensure that Coast's
rights in the Collateral are, and will continue to be, superior to the rights of
any such third party. Borrower will keep in full force and effect, and will
comply with all the terms of, any lease of real property where any of the
Collateral now or in the future may be located. Coast agrees that its default
rights resulting from Borrower's noncompliance with this paragraph are subject
to the existence of a Material Adverse Effect.

      6.5 Maintenance of Collateral. Borrower will maintain the Inventory and
Equipment in good working condition, and Borrower will not use the Collateral
for any unlawful purpose. Borrower will immediately advise Coast in writing of
any material loss or damage to the Collateral.

      6.6 Books and Records. Borrower has maintained and will maintain at
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with GAAP.

      6.7 Financial Condition, Statements and Reports. All financial statements
now or in the future delivered to Coast have been, and will be, prepared in
conformity with GAAP (except, in the case of unaudited financial statements, for
the absence of footnotes and subject to normal year-end adjustments) and now and
in the future will fairly reflect the financial condition of Borrower in all
material respects, at the times and for the periods therein stated. Between the
last date covered by any such statement provided to Coast and the date hereof,
there has been no Material Adverse Effect. Borrower is now and will continue to
be Solvent.

                                       11

<PAGE>

      6.8 Tax Returns and Payments; Pension Contributions. Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and Borrower has timely paid, and will timely pay,
all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by Borrower. Borrower may, however,
defer payment of any contested taxes, provided that Borrower (i) in good faith
contests Borrower's obligation to pay the taxes by appropriate proceedings
promptly and diligently instituted and conducted, (ii) notifies Coast in writing
of the commencement of, and any material development in, the proceedings, and
(iii) posts bonds or takes any other steps required to keep the contested taxes
from becoming a lien upon any of the Collateral. As of the date hereof, Borrower
is unaware of any claims or adjustments proposed for any of Borrower's prior tax
years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not withdraw
from participation in, permit partial or complete termination of, or permit the
occurrence of any other event with respect to, any such plan which could result
in any liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.
Borrower shall, at all times, utilize the services of an outside payroll service
providing for the automatic deposit of all payroll taxes payable by Borrower.

      6.9 Compliance with Law. Borrower has complied, and will comply, in all
material respects, with all provisions of all material foreign, federal, state
and local laws and regulations relating to Borrower, including, but not limited
to, the Fair Labor Standards Act, and those relating to Borrower's ownership of
real or personal property, the conduct and licensing of Borrower's business, and
environmental matters.

      6.10 Litigation. Except as disclosed in the Schedule, there is no claim,
suit, litigation, proceeding or investigation pending or (to best of Borrower's
knowledge) threatened by or against or affecting Borrower in any court or before
any governmental agency (or any basis therefor known to Borrower) which may
result, either separately or in the aggregate, in a Material Adverse Effect.
Borrower will promptly inform Coast in writing, upon discovery by Borrower, of
any claim, proceeding, litigation or investigation in the future threatened or
instituted by or against Borrower involving an amount set forth on the Schedule.

      6.11 Use of Proceeds. All proceeds of all Loans shall be used solely for
lawful business purposes. Borrower is not purchasing or carrying any "margin
stock" (as defined in Regulation U of the Board of Governors of the Federal
Reserve System) and no part of the proceeds of any Loan will be used to purchase
or carry any "margin stock" or to extend credit to others for the purpose of
purchasing or carrying any "margin stock."

      6.12         [Intentionally omitted]

 7.   RECEIVABLES.

      7.1 Representations Relating to Receivables. Borrower represents and
warrants to Coast as follows: Each Receivable with respect to which Loans are
requested by Borrower shall, on the date each Loan is requested and made,
represent an undisputed bona fide existing unconditional obligation of the
Account Debtor created by the sale, delivery and acceptance of goods or the
rendition of services in the ordinary course of Borrower's business.

      7.2 Representations Relating to Documents and Legal Compliance. Borrower
represents and warrants to Coast as follows: All statements made and all unpaid
balances appearing in all invoices, instruments and other documents evidencing
the Receivables are and shall be true and correct and all such invoices,
instruments and other documents and all of Borrower's books and records are and
shall be genuine and in all respects what they purport to be. All sales and

                                       12

<PAGE>

other transactions underlying or giving rise to each Receivable shall fully
comply with all applicable laws and governmental rules and regulations. All
signatures and indorsements on all documents, instruments, and agreements
relating to all Receivables are and shall be genuine, and all such documents,
instruments and agreements are and shall be legally enforceable in accordance
with their terms (except as enforcement may be limited by equitable principles
and by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to creditors' rights generally).

      7.3 Schedules and Documents relating to Receivables. Borrower shall
deliver to Coast via facsimile, unless otherwise directed by Coast, at such
locations and at such intervals as Coast may request, transaction reports and
loan requests, schedules of Receivables, and schedules of collections, all on
Coast's standard forms; PROVIDED, HOWEVER, that Borrower's failure to execute
and deliver the same shall not affect or limit Coast's security interest and
other rights in all of Borrower's Receivables, nor shall Coast's failure to
advance or lend against a specific Receivable affect or limit Coast's security
interest and other rights therein. Loan requests received after 10:30 A.M. Los
Angeles, California time, will not be considered by Coast until the next
Business Day. Together with each such schedule, or later if requested by Coast,
Borrower shall furnish Coast with copies (or, at Coast's request, originals) of
all contracts, orders, invoices, and other similar documents, and all original
shipping instructions, delivery receipts, bills of lading, and other evidence of
delivery, for any goods the sale or disposition of which gave rise to such
Receivables, and Borrower warrants the genuineness of all of the foregoing.
Borrower shall also furnish to Coast an aged accounts receivable trial balance
in such form and at such intervals as Coast shall request. In addition, Borrower
shall deliver to Coast the originals, as and when requested by Coast, of all
instruments, chattel paper, security agreements, guarantees and other documents
and property evidencing or securing any Receivables, upon receipt thereof and in
the same form as received, with all necessary indorsements, all of which shall
be with recourse. Borrower shall also provide Coast with copies of all credit
memos as and when requested by Coast.

      7.4 Collection of Receivables. Borrower shall have the right to collect
all Receivables, unless and until an Event of Default has occurred. Borrower
shall hold all payments on, and proceeds of, Receivables in trust for Coast, and
Borrower shall deliver all such payments and proceeds to Coast within one (1)
Business Day after receipt by Borrower, in their original form, duly endorsed to
Coast, to be applied to the Obligations in such order as Coast shall determine.
Coast may, in its discretion, require that all proceeds of Collateral be
deposited by Borrower into a lockbox account, or such other "blocked account" as
Coast may specify, pursuant to a blocked account agreement in such form as Coast
may specify. Coast or its designee may, at any time, notify Account Debtors that
Coast has been granted a security interest in the Receivables.

      7.5 Disputes. Borrower shall notify Coast promptly of all disputes or
claims relating to Receivables. Borrower shall not forgive (completely or
partially), compromise or settle any Receivable for less than payment in full,
or agree to do any of the foregoing, except that Borrower may do so, provided
that: (a) Borrower does so in good faith, in a commercially reasonable manner,
in the ordinary course of business, and in arm's length transactions, which are
reported to Coast on the regular reports provided to Coast; (b) no Default or
Event of Default has occurred and is continuing; and (c) taking into account all
such discounts settlements and forgiveness, the total outstanding Loans will not
exceed the Credit Limit. Coast may, at any time after the occurrence of an Event
of Default, settle or adjust disputes or claims directly with Account Debtors
for amounts and upon terms which Coast considers advisable in its reasonable
credit judgment and, in all cases, Coast shall credit Borrower's Loan account
with only the net amounts received by Coast in payment of any Receivables.

      7.6 Returns. Provided no Event of Default has occurred and is continuing,
if any Account Debtor returns any Inventory to Borrower in the ordinary course
of its business, Borrower shall promptly determine the reason for such return
and


                                       13

<PAGE>

promptly issue a credit memorandum to the Account Debtor in the appropriate
amount. In the event any attempted return occurs after the occurrence of any
Event of Default, Borrower shall (a) hold the returned Inventory in trust for
Coast, (b) segregate all returned Inventory from all of Borrower's other
property, (c) conspicuously label the returned Inventory as subject to Coast's
security interest, and (d) immediately notify Coast of the return of any
Inventory, specifying the reason for such return, the location and condition of
the returned Inventory, and on Coast's request deliver such returned Inventory
to Coast.

      7.7 Verification. Coast may, from time to time, verify directly with the
respective Account Debtors the validity, amount and other matters relating to
the Receivables, by means of mail, telephone or otherwise, either in the name of
Borrower or Coast or such other name as Coast may choose.

      7.8 No Liability. Coast shall not under any circumstances be responsible
or liable for any shortage or discrepancy in, damage to, or loss or destruction
of, any goods, the sale or other disposition of which gives rise to a
Receivable, or for any error, act, omission or delay of any kind occurring in
the settlement, failure to settle, collection or failure to collect any
Receivable, or for settling any Receivable in good faith for less than the full
amount thereof, nor shall Coast be deemed to be responsible for any of
Borrower's obligations under any contract or agreement giving rise to a
Receivable. Nothing herein shall, however, relieve Coast from liability for the
gross negligence or willful misconduct of Coast, or its directors, officers,
employees, agents or contractors.

 8.   ADDITIONAL DUTIES OF THE BORROWER.

      8.1 Financial and Other Covenants. Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule.

      8.2 Insurance. Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Coast, in such form and amounts as Coast may
reasonably require, and Borrower shall provide evidence of such insurance to
Coast, so that Coast is satisfied that such insurance is, at all times, in full
force and effect. All liability insurance policies of Borrower shall name Coast
as an additional insured, and all property casualty and related insurance
policies of Borrower shall name Coast as a loss payee thereon and Borrower shall
cause a lender's loss payee endorsement in form reasonably acceptable to Coast.
Upon receipt of the proceeds of any such insurance, Coast shall apply such
proceeds in reduction of the Obligations as Coast shall determine in its sole
discretion, except that, provided no Default or Event of Default has occurred
and is continuing, Coast shall release to Borrower insurance proceeds with
respect to Equipment totaling less than the amount set forth in Section 8 of the
Schedule, which shall be utilized by Borrower for the replacement of the
Equipment with respect to which the insurance proceeds were paid. Coast may
require reasonable assurance that the insurance proceeds so released will be so
used. If Borrower fails to provide or pay for any insurance, Coast may, but is
not obligated to, obtain the same at Borrower's expense. Borrower shall promptly
deliver to Coast copies of all reports made to insurance companies.

      8.3 Reports. Borrower, at its expense, shall provide Coast with the
written reports set forth in Section 8 of the Schedule, and such other written
reports with respect to Borrower (including budgets, sales projections,
operating plans and other financial documentation), as Coast shall from time to
time reasonably specify.

      8.4 Access to Collateral, Books and Records. At reasonable times but not
less frequently than quarterly and on one (1) Business Day's notice, Coast, or
its agents, shall have the right to perform Audits. Coast shall take reasonable
steps to keep confidential all confidential information obtained in any Audit,


                                       14

<PAGE>

but Coast shall have the right to disclose any such information to its auditors,
regulatory agencies, and attorneys, and pursuant to any subpoena or other legal
process. The Audits shall be at Borrower's expense and the charge for the Audits
shall be Seven Hundred Fifty Dollars ($750) per person per day (or such higher
amount as shall represent Coast's then current standard charge for the same),
plus reasonable out-of-pocket expenses. Borrower will not enter into any
agreement with any accounting firm, service bureau or third party to store
Borrower's books or records at any location other than Borrower's Address,
without first notifying Coast of the same and obtaining the written agreement
from such accounting firm, service bureau or other third party to give Coast the
same rights with respect to access to books and records and related rights as
Coast has under this Loan Agreement.

      8.5   Negative Covenants.  Borrower shall not, without Coast's prior
written consent, do any of the following:

            (a) merge or consolidate with another entity, except in a
transaction in which (i) the owners of the Borrower hold at least fifty
percent (50%) of the ownership interest in the surviving entity immediately
after such merger or consolidation, and (ii) the Borrower is the surviving
entity;

            (b) acquire any assets, except (i) in the ordinary course of
business, or (ii) in a transaction or a series of transactions not involving
the payment of an aggregate amount in excess of the amount set forth in
Section 8 of the Schedule;

            (c) enter into any other transaction outside the ordinary course
of business;

            (d) sell or transfer any Collateral, except for the sale of
finished Inventory in the ordinary course of Borrower's business, and except
for the sale of obsolete or unneeded Equipment in the ordinary course of
business;

            (e) store any Inventory or other Collateral with any warehouseman
or other third party;

            (f) sell any Inventory on a sale-or-return, guaranteed sale,
consignment, or other contingent basis;

            (g) make any loans of any money or other assets, except (i)
advances to customers or suppliers in the ordinary course of business, (ii)
travel advances, employee relocation loans and other employee loans and
advances in the ordinary course of business, and (iii) loans to employees,
officers and directors for the purpose of purchasing equity securities of the
Borrower;

            (h) incur any debts, outside the ordinary course of business,
which would have a Material Adverse Effect;

            (i) guarantee or otherwise become liable with respect to the
obligations of another party or entity;

            (j) pay or declare any dividends or distributions on the
ownership interests in Borrower (except for dividends or distributions
payable solely in stock form of ownership interests in Borrower);

            (k) make any change in Borrower's capital structure which would
have a Material Adverse Effect;

            (l) transfer or sidestream any funds to any Affiliate other than
transfers between Borrowers and the repayment to Affiliates of any amounts
advanced by such Affiliate to Borrower (but then only in an amount not to
exceed the amounts so advanced); or

                                       15

<PAGE>

            (m) change the nature of Borrower's business; PROVIDED, HOWEVER,
NetLojix may, once it has obtained all necessary licenses begin providing
telecommunications services and terminate its relationship with Matrix, its
current provider of telecommunications services; or

            (n) dissolve or elect to dissolve.

      Transactions permitted by the foregoing provisions of this Section are
only permitted in the ordinary course of business as indicated and if no Default
or Event of Default is continuing or would occur as a result of such
transaction.

      8.6 Remittance of Proceeds. All proceeds of any Collateral shall be
delivered to Coast within one (1) Business Day after receipt by Borrower, in
their original form, duly endorsed to Coast, to be applied to the Obligations in
such order as Coast shall determine. Borrower agrees that it will not commingle
proceeds of Collateral with any of Borrower's other funds or property, but will
hold such proceeds separate and apart from such other funds and property and in
an express trust for Coast. Nothing in this Section limits the restrictions on
disposition of Collateral set forth elsewhere in this Agreement.

      8.7 Litigation Cooperation. Should any third-party suit or proceeding be
instituted by or against Coast with respect to any Collateral or relating to
Borrower, Borrower shall, without expense to Coast, make available Borrower and
its officers, employees and agents and Borrower's books and records, to the
extent that Coast may deem them reasonably necessary in order to prosecute or
defend any such suit or proceeding.

      8.8 Further Assurances. Borrower agrees, at its expense, on request by
Coast, to execute all documents and take all actions, as Coast, may deem
reasonably necessary or useful in order to perfect and maintain Coast's
perfected security interest in the Collateral, and in order to fully consummate
the transactions contemplated by this Agreement.

 9.   TERM.

      9.1 Maturity Date. This Agreement shall continue in effect until the
Maturity Date; provided that the Maturity Date shall automatically be extended,
and this Agreement shall automatically and continuously renew, for successive
additional terms of one year each, unless one party gives written notice to the
other, not less than one hundred twenty (120) days prior to the Maturity Date or
the next Renewal Date, that such party elects to terminate this Agreement
effective on the Maturity Date or such next Renewal Date. If this Agreement is
renewed under this Section 9.1, Borrower shall pay to Coast a Renewal Fee in the
amount shown in Section 3 of the Schedule. The Renewal Fee shall be due and
payable on the Renewal Date and thereafter shall bear interest at a rate equal
to the rate applicable to the Loans.

      9.2 Early Termination. This Agreement may be terminated prior to the
Maturity Date as follows: (a) by Borrower, effective on the last Business Day of
the first full month following the calendar month in which written notice of
termination is given to Coast; or (b) by Coast at any time after the occurrence
of an Event of Default, without notice, effective immediately. If this Agreement
is terminated by Borrower or by Coast under this Section 9.2, Borrower shall pay
to Coast an Early Termination Fee in the amount shown in Section 3 of the
Schedule. The Early Termination Fee shall be due and payable on the effective
date of termination and thereafter shall bear interest until paid at a rate
equal to the rate applicable to the Loans.

      9.3 Payment of Obligations. On the Maturity Date or on any earlier
effective date of termination, Borrower shall pay and perform in full all
Obligations, whether evidenced by installment notes or otherwise, and whether or
not all or any part of such Obligations are otherwise then due and payable.
Without limiting the generality of the foregoing, if on the Maturity Date, the


                                       16

<PAGE>

Renewal Date, or on any earlier effective date of termination, there are any
outstanding Letters of Credit issued by Coast or issued by another institution
based upon an application, guarantee, indemnity or similar agreement on the part
of Coast, then on such date Borrower shall provide to Coast cash collateral in
an amount equal to the face amount of all such Letters of Credit plus all
interest, fees and costs due or to become due in connection therewith, to secure
all of the Obligations relating to said Letters of Credit, pursuant to Coast's
then standard form cash pledge agreement. Notwithstanding any termination of
this Agreement, all of Coast's security interests in all of the Collateral and
all of the terms and provisions of this Agreement shall continue in full force
and effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the discretion of
Coast, Coast may, in its sole discretion, refuse to make any further Loans after
termination. No termination shall in any way affect or impair any right or
remedy of Coast, nor shall any such termination relieve Borrower of any
Obligation to Coast, until all of the Obligations have been paid and performed
in full. Upon payment and performance in full of all the Obligations and
termination of this Agreement, Coast shall promptly deliver to Borrower
termination statements, requests for reconveyances and such other documents as
may be required to fully terminate Coast's security interests.

 10.        EVENTS OF DEFAULT AND REMEDIES.

      10.1 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement, and Borrower shall
give Coast immediate written notice thereof:

            (a) any warranty, representation, statement, report or certificate
made or delivered to Coast by Borrower or any of Borrower's officers, employees
or agents, now or in the future, shall be untrue or misleading and results in a
Material Adverse Effect; or

            (b) Borrower shall fail to pay when due any Loan or any interest
thereon or any other monetary Obligation; or

            (c) the total Loans and other Obligations outstanding at any time
shall exceed the Credit Limit; or

            (d) Borrower shall fail to deliver the proceeds of Collateral to
Coast as provided in Sections 7.4 and 8.6 above, or shall fail to give Coast
access to its books and records or Collateral as provided in Section 8.4 above,
or shall breach any negative covenant set forth in Section 8.5 above; or

            (e) Borrower shall fail to comply with the financial covenants (if
any) set forth in the Schedule or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured; or

            (f) Borrower shall fail to perform any other non-monetary
Obligation, which failure is not cured within ten (10) days after the date due;
or

            (g) any levy, assessment, attachment, seizure, lien or encumbrance
(other than a Permitted Lien) is made on all or any part of the Collateral which
is not cured within ten (10) days after the occurrence of the same; or

            (h) any default or event of default occurs under any obligation
secured by a Permitted Lien that results in a Material Adverse Effect, which is
not cured within any applicable cure period or waived in writing by the holder
of the Permitted Lien; or

            (i) Borrower breaches any material contract or obligation, which has
or may reasonably be expected to have a Material Adverse Effect; or


                                       17

<PAGE>

            (j) dissolution, termination of existence, insolvency or business
failure of Borrower or any guarantor of any of the Obligations; or appointment
of a receiver, trustee or custodian, for all or any part of the property of,
assignment for the benefit of creditors by, or the commencement of any
proceeding by Borrower or any guarantor of any of the Obligations under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or

            (k) the commencement of any proceeding against Borrower or any
guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or
statute of any jurisdiction, now or in the future in effect, which is (i) not
timely controverted, or (ii) not cured by the dismissal thereof within thirty
(30) days after the date commenced; or

            (l) revocation or termination of, or limitation or denial of
liability upon, any guaranty of the Obligations or any attempt to do any of the
foregoing, or commencement of proceedings by any guarantor of any of the
Obligations under any bankruptcy or insolvency law; or

            (m) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing, or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or

            (n) Borrower or any guarantor of any of the Obligations makes any
payment on account of any indebtedness or obligation which has been subordinated
to the Obligations, other than as permitted in the applicable subordination
agreement, or if any Person who has subordinated such indebtedness or
obligations terminates or in any way limits his subordination agreement; or

            (o) except as permitted under Section 8.5(a), Borrower shall suffer
or experience any Change of Control without Coast's prior written consent, which
consent shall be in the discretion of Coast in the exercise of its reasonable
business judgment; or

            (p) Borrower shall generally not pay its debts as they become due,
or Borrower shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any transfer
of any of its property which may be fraudulent under any bankruptcy, fraudulent
conveyance or similar law; or

            (q) there shall be any Material Adverse Effect.

            Coast may cease making any Loans or extending any credit hereunder
during any of the above cure periods.

      10.2 Remedies. Upon the occurrence, and during the continuance, of any
Event of Default, Coast, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by Borrower), may do any one or more
of the following:

            (a) Cease making Loans or otherwise extending credit to Borrower
under this Agreement or any other document or agreement;

            (b) Accelerate and declare all or any part of the Obligations to be
immediately due, payable and performable, notwithstanding any deferred or
installment payments allowed by any instrument evidencing or relating to any
Obligation;


                                       18

<PAGE>

            (c) Take possession of any or all of the Collateral wherever it may
be found, and for that purpose Borrower hereby authorizes Coast without judicial
process to enter onto any of Borrower's premises without interference to search
for, take possession of, keep, store or remove any of the Collateral, and remain
on the premises or cause a custodian to remain on the premises in exclusive
control thereof, without charge for so long as Coast deems it reasonably
necessary in order to complete the enforcement of its rights under this
Agreement or any other agreement; PROVIDED, HOWEVER, that should Coast seek to
take possession of any of the Collateral by Court process, Borrower hereby
irrevocably waives:

                   (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession;

                  (ii) any demand for possession prior to the commencement of
any suit or action to recover possession thereof; and

                   (iii) any requirement that Coast retain possession of, and
not dispose of, any such Collateral until after trial or final judgment;

            (d) Require Borrower to assemble any or all of the Collateral and
make it available to Coast at places designated by Coast which are reasonably
convenient to Coast and Borrower, and to remove the Collateral to such locations
as Coast may reasonably deem advisable;

            (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Coast shall have the right to use Borrower's premises,
vehicles, hoists, lifts, cranes, equipment and all other property without
charge. Coast is hereby granted a license or other right to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and Borrower's
rights under all licenses and all franchise agreements shall inure to Coast's
benefit;

            (f) Sell, lease or otherwise dispose of any of the Collateral, in
its condition at the time Coast obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private sales,
in lots or in bulk, for cash, exchange or other property, or on credit, and to
adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Coast shall have the right to
conduct such disposition on Borrower's premises without charge, for such time or
times as Coast deems reasonable, or on Coast's premises, or elsewhere and the
Collateral need not be located at the place of disposition. Coast may directly
or through any affiliated company purchase or lease any Collateral at any such
public disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve
Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale;

            (g) Demand payment of, and collect any Receivables and General
Intangibles comprising Collateral and, in connection therewith, Borrower
irrevocably authorizes Coast to endorse or sign Borrower's name on all
collections, receipts, instruments and other documents, to take possession of
and open mail addressed to Borrower and remove therefrom payments made with
respect to any item of the Collateral or proceeds thereof, and, in Coast's
reasonable discretion, to grant extensions of time to pay, compromise claims and
settle Receivables and the like for less than face value; and

            (h) Demand and receive possession of any of Borrower's federal and
state income tax returns and the books and records utilized in the preparation
thereof or referring thereto.


                                       19

<PAGE>

            All attorneys' fees, expenses, costs, liabilities and obligations
incurred by Coast (including attorneys' fees and expenses incurred in connection
with bankruptcy) with respect to the foregoing shall be due from the Borrower to
Coast on demand. Coast may charge the same to Borrower's loan account, and the
same shall thereafter bear interest at the same rate as is applicable to the
Loans. Without limiting any of Coast's rights and remedies, from and after the
occurrence of any Event of Default, the interest rate applicable to the
Obligations shall be increased by an additional three percent per annum.

      10.3 Standards for Determining Commercial Reasonableness. Borrower and
Coast agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable:

            (a) Notice of the sale is given to Borrower at least seven (7) days
prior to the sale, and, in the case of a public sale, notice of the sale is
published at least seven (7) days before the sale in a newspaper of general
circulation in the county where the sale is to be conducted;

            (b) Notice of the sale describes the collateral in general,
non-specific terms;

            (c) The sale is conducted at a place designated by Coast, with or
without the Collateral being present;

            (d) The sale commences at any time between 8:00 a.m. and 6:00 p.m
Los Angeles, California time;

            (e) Payment of the purchase price in cash or by cashier's check or
wire transfer is required; and

            (f) With respect to any sale of any of the Collateral, Coast may
(but is not obligated to) direct any prospective purchaser to ascertain directly
from Borrower any and all information concerning the same.

            Coast shall be free to employ other methods of noticing and selling
the Collateral, in its discretion, if they are commercially reasonable.

      10.4 Power of Attorney. Borrower grants to Coast an irrevocable power of
attorney coupled with an interest, authorizing and permitting Coast (acting
through any of its employees, attorneys or agents) at any time, at its option,
but without obligation, with or without notice to Borrower, and at Borrower's
expense, to do any or all of the following, in Borrower's name or otherwise, but
Coast agrees to exercise the following powers in a commercially reasonable
manner:

            (a) Execute on behalf of Borrower any documents that Coast may, in
its sole discretion, deem advisable in order to perfect and maintain Coast's
security interest in the Collateral, or in order to exercise a right of Borrower
or Coast, or in order to fully consummate all the transactions contemplated
under this Agreement, and all other present and future agreements relating to
the Obligations;

            (b) After the occurrence of an Event of Default, execute on behalf
of Borrower any document exercising, transferring or assigning any option to
purchase, sell or otherwise dispose of or to lease (as lessor or lessee) any
real or personal property which is part of Coast's Collateral or in which Coast
has an interest;

            (c) After the occurrence of an Event of Default, execute on behalf
of Borrower, any invoices relating to any Receivable, any draft against any
Account Debtor and any notice to any Account Debtor, any proof of claim in
bankruptcy,


                                       20

<PAGE>

any Notice of Lien, claim of mechanic's, materialman's or other lien, or
assignment or satisfaction of mechanic's, materialman's or other lien;

            (d) Take control in any manner of any cash or non-cash items of
payment or proceeds of Collateral; endorse the name of Borrower upon any
instruments, or documents, evidence of payment or Collateral that may come into
Coast's possession;

            (e) Endorse all checks and other forms of remittances received by
Coast;

            (f) After the occurrence of an Event of Default, pay, contest or
settle any lien, charge, encumbrance, security interest and adverse claim in or
to any of the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same;

            (g) After the occurrence of an Event of Default, grant extensions of
time to pay, compromise claims and settle Receivables and General Intangibles
for less than face value and execute all releases and other documents in
connection therewith;

            (h) After the occurrence of an Event of Default, pay any sums
required on account of Borrower's taxes or to secure the release of any liens
therefor, or both;

            (i) After the occurrence of an Event of Default, settle and adjust,
and give releases of, any insurance claim that relates to any of the Collateral
and obtain payment therefor;

            (j) Instruct any third party having custody or control of any books
or records belonging to, or relating to, Borrower to give Coast the same rights
of access and other rights with respect thereto as Coast has under this
Agreement; and

            (k) After the occurrence of an Event of Default, take any action or
pay any sum required of Borrower pursuant to this Agreement and any other
present or future agreements.

      Any and all sums paid and any and all costs, expenses, liabilities,
obligations and attorneys' fees incurred by Coast (including attorneys' fees and
expenses incurred pursuant to bankruptcy) with respect to the foregoing shall be
added to and become part of the Obligations, and shall be payable on demand.
Coast may charge the foregoing to Borrower's loan account and the foregoing
shall thereafter bear interest at the same rate applicable to the Loans. In no
event shall Coast's rights under the foregoing power of attorney or any of
Coast's other rights under this Agreement be deemed to indicate that Coast is in
control of the business, management or properties of Borrower. Borrower shall
pay, indemnify, defend, and hold Coast and each of its officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an "Indemnified
Person") harmless (to the fullest extent permitted by law) from and against any
and all claims, demands, suits, actions, investigations, proceedings, and
damages, and all attorneys fees and disbursements and other costs and expenses
actually incurred in connection therewith (as and when they are incurred and
irrespective of whether suit is brought), at any time asserted against, imposed
upon, or incurred by any of them in connection with or as a result of or related
to the execution, delivery, enforcement, performance, and administration of this
Agreement and any other Loan Documents or the transactions contemplated herein,
and with respect to any investigation, litigation, or proceeding related to this
Agreement, any other Loan Document, or the use of the proceeds of the credit
provided hereunder (irrespective of whether any Indemnified Person is a party
thereto), or any act, omission, event or circumstance in any manner related
thereto (all the foregoing, collectively, the "Indemnified Liabilities").
Borrower shall have no obligation to any Indemnified Person hereunder with
respect to any Indemnified Liability resulting from the gross negligence or
willful misconduct of any Indemnified


                                       21

<PAGE>

Person or any contractor of any Indemnified Person. This provision shall survive
the termination of this Agreement and the repayment of the Obligations.

      10.5 Application of Proceeds. All proceeds realized as the result of any
sale of the Collateral shall be applied by Coast first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Coast in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Coast shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain liable
to Coast for any deficiency. If, Coast, in its sole discretion, directly or
indirectly enters into a deferred payment or other credit transaction with any
purchaser at any sale of Collateral, Coast shall have the option, exercisable at
any time, in its sole discretion, of either reducing the Obligations by the
principal amount of purchase price or deferring the reduction of the Obligations
until the actual receipt by Coast of the cash therefor.

      10.6 Remedies Cumulative. In addition to the rights and remedies set forth
in this Agreement, Coast shall have all the other rights and remedies accorded a
secured party in equity, under the Code, and under all other applicable laws,
and under any other instrument or agreement now or in the future entered into
between Coast and Borrower, and all of such rights and remedies are cumulative
and none is exclusive. Exercise or partial exercise by Coast of one or more of
its rights or remedies shall not be deemed an election, nor bar Coast from
subsequent exercise or partial exercise of any other rights or remedies. The
failure or delay of Coast to exercise any rights or remedies shall not operate
as a waiver thereof, but all rights and remedies shall continue in full force
and effect until all of the Obligations have been indefeasibly paid and
performed.

 11.        GENERAL PROVISIONS.

      11.1 Interest Computation. In computing interest on the Obligations, all
checks, wire transfers and other items of payment received by Coast (including
proceeds of Receivables and payment of the Obligations in full) shall be deemed
applied by Coast on account of the Obligations two (2) Business Days after
receipt by Coast of immediately available funds, and, for purposes of the
foregoing, any such funds received after 10:30 AM Los Angeles, California time,
on any day shall be deemed received on the next Business Day. Coast shall be
entitled to charge Borrower's account for such two (2) Business Days of
"clearance" or "float" at the rate(s) set forth in Section 3 of the Schedule on
all checks, wire transfers and other items received by Coast, regardless of
whether such two (2) Business Days of "clearance" or "float" actually occur, and
shall be deemed to be the equivalent of charging two (2) Business Days of
interest on such collections. This across-the-board two (2) Business Day
clearance or float charge on all collections is acknowledged by the parties to
constitute an integral aspect of the pricing of Coast's financing of Borrower.
Coast shall not, however, be required to credit Borrower's account for the
amount of any item of payment which is unsatisfactory to Coast in its reasonable
credit judgment, and Coast may charge Borrower's loan account for the amount of
any item of payment which is returned to Coast unpaid only if Coast previously
shall have applied such item of payment.

      11.2 Application of Payments. Subject to Section 10.5 hereof, all payments
with respect to the Obligations may be applied, and in Coast's sole discretion
reversed and re-applied, to the Obligations, in such order and manner as Coast
shall determine in its sole discretion.

      11.3 Charges to Accounts. Coast may, in its discretion, require that
Borrower pay monetary Obligations in cash to Coast, or charge them to Borrower's
Loan account, in which event they will bear interest from the date due to the
date paid at the same rate applicable to the Loans.


                                       22


<PAGE>

      11.4 Monthly Accountings. Coast shall provide Borrower monthly with an
account of advances, charges, expenses and payments made pursuant to this
Agreement. Such account shall be deemed correct, accurate and binding on
Borrower and an account stated (except for reverses and reapplications of
payments made and corrections of errors discovered by Coast), unless Borrower
notifies Coast in writing to the contrary within thirty (30) days after each
account is rendered, describing the nature of any alleged errors or omissions.

      11.5 Notices. All notices to be given under this Agreement shall be in
writing and shall be given either personally or by reputable private delivery
service or by regular first-class mail, facsimile or certified mail return
receipt requested, addressed to Coast or Borrower at the addresses shown in the
heading to this Agreement, or at any other address designated in writing by one
party to the other party. Notices to Coast shall be directed to the Commercial
Finance Division, to the attention of the Division Manager or the Division
Credit Manager. All notices shall be deemed to have been given upon delivery in
the case of notices personally delivered, faxed (at time of confirmation of
transmission), or at the expiration of one (1) Business Day following delivery
to the private delivery service, or two (2) Business Days following the deposit
thereof in the United States mail, with postage prepaid.

      11.6 Severability. Should any provision of this Agreement be held by any
court of competent jurisdiction to be void or unenforceable, such defect shall
not affect the remainder of this Agreement, which shall continue in full force
and effect.

      11.7 Integration. This Agreement and such other written agreements,
documents and instruments as may be executed in connection herewith are the
final, entire and complete agreement between Borrower and Coast and supersede
all prior and contemporaneous negotiations and oral representations and
agreements, all of which are merged and integrated in this Agreement. THERE ARE
NO ORAL UNDERSTANDINGS, REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH
ARE NOT SET FORTH IN THIS AGREEMENT OR IN OTHER WRITTEN AGREEMENTS SIGNED BY THE
PARTIES IN CONNECTION HEREWITH.

      11.8 Waivers. The failure of Coast at any time or times to require
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between Borrower and Coast shall not waive or
diminish any right of Coast later to demand and receive strict compliance
therewith. Any waiver of any Default shall not waive or affect any other
Default, whether prior or subsequent, and whether or not similar. None of the
provisions of this Agreement or any other agreement now or in the future
executed by Borrower and delivered to Coast shall be deemed to have been waived
by any act or knowledge of Coast or its agents or employees, but only by a
specific written waiver signed by an authorized officer of Coast and delivered
to Borrower. Borrower waives demand, protest, notice of protest and notice of
default or dishonor, notice of payment and nonpayment, release, compromise,
settlement, extension or renewal of any commercial paper, instrument, account,
General Intangible, document or guaranty at any time held by Coast on which
Borrower is or may in any way be liable, and notice of any action taken by
Coast, unless expressly required by this Agreement.

      11.9 No Liability for Ordinary Negligence. Neither Coast, nor any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by Borrower
or any other party through the ordinary negligence of Coast, or any of its
directors, officers, employees, agents, attorneys or any other Person affiliated
with or representing Coast, but nothing herein shall relieve Coast from
liability for the gross negligence or willful misconduct of Coast or its
directors, officers, employees, agents or contractors.


                                       23

<PAGE>

      11.10 Amendment. The terms and provisions of this Agreement may not be
waived or amended, except in a writing executed by a duly authorized officer of
Borrower and a duly authorized officer of Coast.

      11.11 Time of Essence. Time is of the essence in the performance by
Borrower of each and every obligation under this Agreement.

      11.12 Attorneys Fees, Costs and Charges. Borrower shall reimburse Coast
for all attorneys' fees (including attorneys' fees and expenses incurred
pursuant to bankruptcy) and all filing, recording, search, title insurance,
appraisal, audit, and other costs incurred by Coast, pursuant to, or in
connection with, or relating to this Agreement (whether or not a lawsuit is
filed), including, but not limited to, any attorneys' fees and costs (including
attorneys' fees and expenses incurred pursuant to bankruptcy) Coast incurs in
order to do the following: prepare and negotiate this Agreement and the
documents relating to this Agreement; obtain legal advice in connection with
this Agreement or Borrower; enforce, or seek to enforce, any of its rights;
prosecute actions against, or defend actions by, Account Debtors; commence,
intervene in, or defend any action or proceeding; initiate any complaint to be
relieved of the automatic stay in bankruptcy; file or prosecute any probate
claim, bankruptcy claim, third-party claim, or other claim; examine, audit,
copy, and inspect any of the Collateral or any of Borrower's books and records;
protect, obtain possession of, lease, dispose of, or otherwise enforce Coast's
security interest in, the Collateral; and otherwise represent Coast in any
litigation relating to Borrower. If either Coast or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing party
in such action shall be entitled to recover its costs and attorneys' fees
(including attorneys' fees and expenses incurred pursuant to bankruptcy),
including (but not limited to) attorneys' fees and costs incurred in the
enforcement of, execution upon or defense of any order, decree, award or
judgment. Borrower shall also pay Coast's standard charges for returned checks
and for wire transfers, in effect from time to time. All attorneys' fees, costs
and charges (including attorneys' fees and expenses incurred pursuant to
bankruptcy) and other fees, costs and charges to which Coast may be entitled
pursuant to this Agreement may be charged by Coast to Borrower's loan account
and shall thereafter bear interest at the same rate as the Loans.

      11.13 Benefit of Agreement. The provisions of this Agreement shall be
binding upon and inure to the benefit of the respective successors, assigns,
heirs, beneficiaries and representatives of Borrower and Coast; provided,
however, that Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of Coast, and any prohibited
assignment shall be void. No consent by Coast to any assignment shall release
Borrower from its liability for the Obligations. Coast may assign its rights and
delegate its duties hereunder without the consent of Borrower and, so long as
Coast remains the Agent under this Agreement, Coast may assign and delegate its
duties hereunder without notice to Borrower. Coast reserves the right to
syndicate all or a portion of the transaction created herein or sell, assign,
transfer, negotiate, or grant participations in all or any part of, or any
interest in Coast's rights and benefits hereunder. In connection with any such
syndication, assignment or participation, Coast may, subject to the
confidentiality provisions of Section 11.18 disclose all documents and
information which Coast now or hereafter may have relating to Borrower or
Borrower's business. To the extent that Coast assigns its rights and obligations
hereunder to a third Person, Coast thereafter shall be released from such
assigned obligations to Borrower to the extent arising after the date of the
assignment, provided that the third Person assumes Coast's obligations
hereunder.

      11.14 Publicity. Coast is hereby authorized, at its expense, to issue
appropriate press releases and to cause a tombstone to be published announcing
the consummation of this transaction and the aggregate amount thereof.

      11.15 Paragraph Headings; Construction.  Paragraph headings are only
used in this Agreement for convenience.  Borrower and Coast acknowledge that
the headings

                                       24

<PAGE>

may not describe completely the subject matter of the applicable paragraph,
and the headings shall not be used in any manner to construe, limit, define
or interpret any term or provision of this Agreement. The term Aincluding",
whenever used in this Agreement, shall mean "including (but not limited to)".
This Agreement has been fully reviewed and negotiated between the parties and
no uncertainty or ambiguity in any term or provision of this Agreement shall
be construed strictly against Coast or Borrower under any rule of
construction or otherwise.

      11.16 Governing Law; Jurisdiction; Venue. This Agreement and all acts
and transactions hereunder and all rights and obligations of Coast and
Borrower shall be governed by the internal laws of the State of California,
without regard to its conflicts of law principles. As a material part of the
consideration to Coast to enter into this Agreement, Borrower (a) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Coast's option, be litigated in courts located within California,
and that the exclusive venue therefor shall be Los Angeles County; (b)
consents to the jurisdiction and venue of any such court and consents to
service of process in any such action or proceeding by personal delivery or
any other method permitted by law; and (c) waives any and all rights Borrower
may have to object to the jurisdiction of any such court, or to transfer or
change the venue of any such action or proceeding.

      11.17 Mutual Waiver of Jury Trial. BORROWER AND COAST EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING
OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR
FUTURE INSTRUMENT OR AGREEMENT BETWEEN COAST AND BORROWER, OR ANY CONDUCT,
ACTS OR OMISSIONS OF COAST OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH COAST OR
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT
OR OTHERWISE.

      11.18 Confidentiality. Coast will maintain the confidentiality of any
non public information marked as confidential and relating to the business
operations and methodology of Borrower and financial performance of Borrower
("Borrower Information") provided to Coast solely by the Borrower as required
under the terms of this Agreement, and will not disclose Borrower Information
to any person, other than employees, agents, attorneys or accountants of
Coast. Coast will not disclose Borrower information to any other party
unless, prior to such disclosure, Coast obtains an executed acknowledgment
binding such party to maintain the confidentiality of the information,
prohibiting its disclosure except for the purposes permitted under this
Agreement, and agreeing that the information may not be used to compete with
the Borrower in any way. In the event Coast receives a subpoena or other
process for any Borrower Information, it will immediately give notice in
writing of the subpoena or other process, including a copy thereof, to
Borrower.

 BORROWER:

 NETLOJIX COMMUNICATIONS, INC.
 (f/k/a AVTEL COMMUNICATIONS, INC.),
 a Delaware corporation


 By    /s/ ANTHONY E. PAPA
      -------------------------
      Chief Executive Officer

 By    /s/ JAMES P. PISANI
      --------------------------
      Secretary


 REMOTE LOJIX/PCSI, INC.,
 a New York corporation

 By    /s/ ANTHONY E. PAPA


                                       25

<PAGE>



      Chief Executive Officer

 By    /s/ JAMES P. PISANI
      ---------------------------
      Secretary


 NETLOJIX TELECOM, INC.,
 a Delaware corporation


 By    /s/ ANTHONY E. PAPA
      ----------------------------
      Chief Executive Officer

 By    /s/ JAMES P. PISANI
      -----------------------------
      Secretary


 COAST:

 COAST BUSINESS CREDIT,
 a division of Southern Pacific Bank,
 a California corporation


 By    /s/ R. BRITTON TERRELL
       --------------------------
 Title:   Vice President


                                       26


<PAGE>

                                   Schedule to
                              Amended and Restated
                           Loan and Security Agreement

Borrower:               NETLOJIX COMMUNICATIONS, INC.
                        (f/k/a AVTEL COMMUNICATIONS, INC.),
                        a Delaware corporation

Address:                501 Bath Street
                        Santa Barbara, California  93101

Borrower:               REMOTE LOJIX/PCSI, INC.,
                        a New York corporation

Address:                501 Bath Street
                        Santa Barbara, California  93101

Borrower:               NETLOJIX TELECOM, INC.,
                        a California corporation

Address:                501 Bath Street
                        Santa Barbara, California  93101

Date:                   May 30, 2000

            This Schedule forms an integral part of the Amended and Restated
Loan and Security Agreement between Coast Business Credit, a division of
Southern Pacific Bank, a California corporation ("Coast") and the
above-borrowers of even date.



SECTION 2 - CREDIT FACILITIES
<TABLE>
<S>                                                  <C>
      Section 2.1 - Credit Limit:                            Loans in a total amount at any time
                                                             outstanding not to exceed the lesser
                                                             of a total of Three Million Dollars
                                                             ($3,000,000) at any one time
                                                              outstanding (the "Maximum Dollar
                                                              Amount"), or the sum of (a) and (b)
                                                              below:

                                                     (a)      Billed Receivable Loans in an amount
                                                              not to exceed 75% of the amount of
                                                              Borrower's Eligible Receivables
                                                              consisting of Billed Receivables
                                                              (as defined in Section 1 of the
                                                              Agreement), plus

                                                     (b)      Unbilled Receivable Loans in an
                                                              amount not to exceed the lesser of:

                                                          (i)    up to 75% of the amount of
                                                                 Borrower's Eligible Receivables
                                                                 consisting of Unbilled Receivables
                                                                 (as defined in Section 1 of
                                                                 the Agreement),  and

                                                          (ii)   Seven Hundred Fifty Thousand
                                                                 Dollars ($750,000).
</TABLE>

                                       27

<PAGE>

<TABLE>
<S>                                                  <C>
                                                     PROVIDED, HOWEVER, Remote
                                                     shall have access to
                                                     Unbilled Receivable
                                                     advances only after
                                                     NetLojix, as a consolidated
                                                     entity achieves and
                                                     maintains a ratio of EBITDA
                                                     to Interest Coverage of
                                                     1.15:1.0 or greater for
                                                     three consecutive months.

                                                     Upon (i) Borrower's
                                                     Dilution Percentage being
                                                     less than 10% and (ii)
                                                     Borrower maintaining a
                                                     minimum EBITDA to Interest
                                                     Coverage Ratio of at least
                                                     1.1:1.0, Coast may in its
                                                     sole and absolute
                                                     discretion increase the
                                                     advance rates (subject to
                                                     any applicable sub-limits)
                                                     in Sections 2.1(a) and (b)
                                                     above to an amount not to
                                                     exceed 80% of Borrowers
                                                     Eligible Receivables
                                                     consisting of Billed
                                                     Receivables and Unbilled
                                                     Receivables.

      Section 2.2 -  Letter of Credit Sublimit:      One Million Dollars ($1,000,000) for
                                                     Standby Letters of Credit.



SECTION 3 - INTEREST AND FEES

      Section 3.1 -  Interest Rate:                        A rate equal to the Prime Rate plus
                                                           2% per annum, calculated on the
                                                           basis of a 360-day year for the
                                                           actual number of days elapsed.  The
                                                           interest rate applicable to all
                                                           Loans shall be adjusted monthly as
                                                           of the first day of each month, and
                                                           the interest to be charged for each
                                                           month shall be based on the highest
                                                           Prime Rate in effect during the
                                                           prior month, but in no event shall
                                                           the rate of interest charged on any
                                                           Loans in any month be less than 9%
                                                           per annum.

      Section 3.1 - Minimum Monthly Interest:              Based on a minimum
                                                           daily outstanding
                                                           balance of Seven
                                                           Hundred Fifty Thousand
                                                           Dollars ($750,000) for
                                                           the first six (6)
                                                           months of the term of
                                                           this Agreement, and
                                                           One Million Dollars
                                                           ($1,000,000) at all
                                                           times thereafter.

      Section 3.2 -  Loan Fee:                             One percent (1.0%) of the Maximum
                                                           Dollar Amount, such amount being
                                                           fully earned and payable on the
                                                           Closing Date.

      Section 3.2 - Facility Fee:                          $1,500, per quarter, payable on the
                                                           Closing Date (prorated for any
                                                           partial quarter at the beginning
                                                           of the term of this Agreement).


</TABLE>
                                       28

<PAGE>

<TABLE>
<S>                                                       <C>

      Section 3.2 - Letter of Credit Fees:                Two percent (2%) guarantee fee for all
                                                          outstanding Letters of Credit per calendar
                                                          month, plus bank charges and fees.
      Section 9.1 - Renewal Fee:                          .50% of the Maximum Dollar Amount
                                                          per year.

      Section 9.2 - Early Termination Fee:                An amount equal to two percent (2%)
                                                          of the Maximum Dollar Amount
                                                          (as defined in the Schedule), if
                                                          termination occurs on or before the
                                                          first anniversary of the Closing Date;
                                                          and one percent (1%) of the Maximum
                                                          Dollar Amount, if termination occurs
                                                          after the first anniversary of the
                                                          Closing Date and before the Maturity
                                                          Date.


SECTION 5 - CONDITIONS PRECEDENT

      Section 5.2 - Minimum Availability:                 $250,000

      Section 5.13 - Other Documents
                     and Agreements:                 1.   Joint and Several Borrower Rider;

                                                     2.   UCC-1 financing statements, fixture
                                                          filings and termination statements;

                                                     3.   Intellectual Property Security
                                                          Agreement for Remote;

                                                     4.   Landlord Waivers; and

                                                     5.   Lockbox Agreements.

SECTION 6 - REPRESENTATIONS, WARRANTIES
            AND COVENANTS

      Section 6.2 - Prior Names of Borrower:         Avtel Communications, Inc.

      Section 6.2 - Prior Trade Names of Borrower:   AvTel
                                                     AvTel Communications

      Section 6.2 - Existing Trade Names
                    of Borrower:                     NetLojix
                                                     NetLojix Communications
                                                     NetLojix Telecom
                                                     Remote
                                                     Remote Lojix
                                                     Remote Lojix/PCSI

      Section 6.3 - Other Locations and
                    Addresses:                       Schedule 6.3 (attached hereto)

      Section 6.10 - Material Adverse
                     Litigation:                     Schedule 6.10 (attached hereto)
</TABLE>

                                       29

<PAGE>

<TABLE>
<S>                                                  <C>

      Section 6.10 - Future Claims and
                     Litigation:                          Borrower will promptly inform Coast in
                                                          writing of any claim, proceeding,
                                                          litigation or investigation in the
                                                          future threatened or instituted by or
                                                          against Borrower involving any single
                                                          claim of Fifty Thousand Dollars
                                                          ($50,000) or more, or involving One
                                                          Hundred Thousand Dollars ($100,000) or
                                                          more in the aggregate.

SECTION 8 - ADDITIONAL DUTIES OF BORROWER

      Section 8.1 -  Other Provisions:               1.   Borrower shall at all times
                                                          maintain a minimum Net Worth
                                                          equal to or greater than Three
                                                          Million Dollars ($3,000,000).

                                                     2.   Each carrier accounts
                                                          payable of Borrower
                                                          shall be kept current
                                                          during the term of
                                                          this Agreement.

                                                     3.   Borrower shall retain
                                                          80% of actual net
                                                          income.

      Section 8.2 - Insurance:                            Subject to the limitations set forth in
                                                          Section 8.2 of the Agreement, Coast
                                                          shall release to Borrower insurance
                                                          proceeds with respect to Equipment
                                                          totaling less than One Hundred Thousand
                                                          Dollars ($100,000) in a single
                                                          transaction subject to a yearly
                                                          limitation of Two Hundred and Fifty
                                                          Thousand Dollars ($250,000).

      Section 8.3 -  Reporting:                           Borrower shall provide Coast with the
                                                          following:

                                                     2.   Monthly Receivable
                                                          agings, aged by
                                                          invoice date, within
                                                          ten (10) days after
                                                          the end of each month.

                                                     3.   Monthly accounts
                                                          payable agings, aged
                                                          by invoice date, and
                                                          outstanding or held
                                                          check registers within
                                                          ten (10) days after
                                                          the end of each month.

                                                     4.   Monthly internally
                                                          prepared financial
                                                          statements, on a
                                                          consolidating to
                                                          consolidated basis, as
                                                          soon as available, and
                                                          in any event within
                                                          thirty (30) days after
                                                          the end of each month.

                                                     5.   Quarterly internally
                                                          prepared financial
                                                          statements, as soon as
                                                          available, and in any
                                                          event within
                                                          forty-five (45) days
                                                          after the end of each
                                                          fiscal quarter of
                                                          Borrower.
</TABLE>

                                     30

<PAGE>

<TABLE>
<S>                                                  <C>
                                                     6.   Quarterly customer
                                                          lists, including
                                                          customer name,
                                                          address, and phone
                                                          number.

                                                     7.   Annual financial statements, as soon as
                                                          available, and in any event within
                                                          ninety (90) days following the end of
                                                          Borrower's fiscal year, containing the
                                                          unqualified opinion of, and certified
                                                          by, (a) an independent certified public
                                                          accountant from a "Big Six" accounting
                                                          firm or (b) an independent certified
                                                          public accountant reasonably acceptable
                                                          to Coast.

                                                     8.   Monthly
                                                          collateral/reserves
                                                          roll forward with
                                                          General Ledger
                                                          reconciliation, in
                                                          form and substance
                                                          satisfactory to Coast,
                                                          within ten (10) days
                                                          after the end of each
                                                          month.

                                                     9.   Reports for Unbilled
                                                          Receivables as
                                                          frequently as Coast
                                                          shall require, in form
                                                          and substance
                                                          satisfactory to Coast.

                                                     10.  Annual projections, on
                                                          a month-to-month basis,
                                                          in form and substance
                                                          satisfactory to Coast,
                                                          are to  be provided to
                                                          Coast before each anniversary
                                                          date of the effective date
                                                          of this Agreement.

                                                     11.  Weekly Borrowing Base
                                                          reporting which
                                                          includes sales,
                                                          collections and credits,
                                                          in form and substance
                                                          satisfactory to Coast,
                                                          within three (3) business
                                                          days after the end of each
                                                          week.

       Section 8.5 - Negative Covenants
                     (Acquired Assets):              One Million Dollars ($1,000,000) in the
                                                     aggregate for all acquisitions during a
                                                     calendar year, or a proportionate
                                                     amount for a partial year, but in no
                                                     event will any single acquisition
                                                     amount to over One Hundred Thousand
                                                     Dollars ($100,000).

SECTION 9 - TERM

      Section 9.1 - Maturity Date:                   January 31, 2002, subject to
                                                     automatic renewal as provided in
                                                     Section 9.1 of the Agreement, and
                                                     early termination as provided in
                                                     Section 9.2 of the Agreement.
</TABLE>


                                                        31
</TEXT>
</DOCUMENT>
