Exhibit 10.3

                           LOAN AND SECURITY AGREEMENT

      This Loan and Security Agreement (as it may be amended,  this "Agreement")
is  entered  into  on  November  21,  1997,  between   NATIONSCREDT   COMMERICAL
CORPORATION,  THROUGH ITS NATIONSCREDTT  COMMERCIAL FUNDING DIVISION ("Lender"),
having an address at 1177 Avenue of the Americas, 36th Floor, New York, New York
10036 and COFFEE HOLDING CO., INC. ("Borrower"), whose chief executive office is
located  at 4401  First  Avenue,  Brooklyn,  New  York  11232-0005  ("Borrower's
Address").  The  Schedules  to  this  Agreement  are an  integral  part  of this
Agreement and are incorporated herein by reference.  Terms used, but not defined
elsewhere, in this Agreement are defined in Schedule B.

1.    LOANS AND CREDIT ACCOMMODATIONS.

      1.1   Amount.  Subject  to the  terms  and  conditions  contained  in this
            Agreement, Lender will:

            (a)  Revolving  Loans and Credit  Accommodations.  From time to time
during  the  Term at  Borrower's  request,  make  revolving  loans  to  Borrower
("Revolving Loans"),  and make letters of credit,  bankers acceptances and other
credit accommodations  ("Credit  Accommodations")  available to Borrower in each
case to the extent  that there is  sufficient  Availability  at the time of such
request to cover,  dollar for dollar,  the  requested  Revolving  Loan or Credit
Accommodation;  provided,  that after giving  effect to such  Revolving  Loan or
Credit  Accommodation,  (x) the outstanding balance of all monetary  Obligations
(including the principal balance of any Term Loan and, solely for the purpose of
determining  compliance with this provision,  the Credit Accommodation  Balance)
will not  exceed  the  Maximum  Facility  Amount  set forth in  Section I (a) of
Schedule  A and (y) none of the other  Loan  Limits  set  forth in  Section I of
Schedule A will be exceeded. For this purpose, "Availability" means:

                  (i) the aggregate  amount of Eligible  Accounts  (less maximum
existing or asserted taxes, discounts, credits and allowances) multiplied by the
Accounts  Advance  Rate set forth in Section  1(b)(i)  of  Schedule A but not to
exceed the Accounts Sublimit set forth in Section 1(c) of Schedule A,

                                      plus

                  (ii) the lower of cost or market  value of Eligible  Inventory
multiplied  by the  Inventory  Advance  Rates) set forth in Section  1(b)(ii) of
Schedule  A, but not to exceed the  Inventory  Sublimit(s)  set forth in Section
1(d) of Schedule A;

                                      minus

                  (iii) all Reserves  which Lender has  established  pursuant to
Section 1.2 (including  those to be established in connection with the requested
Revolving Loan or Credit Accommodation);

                                      minus

                  (iv)  the   outstanding   balance  of  all  of  the   monetary
Obligations  (excluding  the  Credit  Accommodation  Balance  and the  principal
balance of the Term Loan); and

                                      plus

                  (v) the Overadvance  Amount, if any, set forth .n Section 1(g)
of Schedule A.

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            (b) Term Loan. On the date of this Agreement, make (i) an advance to
Borrower  computed  with respect to the value of Borrower's  Eligible  Equipment
(the ("Equipment Advance") in the principal amount, if any, set forth in Section
2(a)(i) of Schedule A, and (ii) an advance to Borrower  computed with respect to
the value of Borrower's  Eligible Real Property (the "Real Property Advance') in
the principal  amount,  if any, set forth in Section 2(a)(ii) of Schedule A. The
Equipment Advance and the Real Property Advance are collectively  referred to as
the "Term Loan. "

      1.2  Reserves.  Lender may from time to time  establish  and  revise  such
reserves as Lender deems  appropriate  in its sole  discretion  ("Reserves")  to
reflect  (i) events,  conditions,  contingencies  or risks  which  affect or may
affect (A) the  Collateral  or its value,  or the security  interests  and other
rights of Lender in the  Collateral or (B) the assets,  business or prospects of
Borrower or any Obligor,  (ii) Lender's  good faith concern that any  Collateral
report or  financial  information  furnished  by or on behalf of Borrower or any
Obligor to Lender is or may have been  incomplete,  inaccurate  or misleading in
any material respect,  (iii) any fact or circumstance which Lender determines in
good faith  constitutes,  or could constitute,  a Default or Event of Default or
(iv) any other events or  circumstances  which Lender  determines  in good faith
make the  establishment or revision of a Reserve  prudent.  Without limiting the
foregoing,  Lender shall (x) in the case of each Credit Accommodation issued for
the  purchase of Inventory  (a) which meets the criteria for Eligible  Inventory
set  forth in  clauses  (i),  (ii),  (iii),  (v) and (vi) of the  definition  of
Eligible  Inventory,  (b) which is or will be in transit to one of the locations
set forth in Section 9(d) of Schedule A, (c) which is fully  insured in a manner
satisfactory  to Lender and (d) with respect to which Lender is in possession of
all bills of lading and all other documentation which Lender has requested,  all
in form and substance satisfactory to Lender in its sole discretion, establish a
Reserve equal to the cost of such Inventory  (plus all duties,  freight,  taxes,
insurance,  costs  and  other  charges  and  expenses  relating  to such  Credit
Accommodation  or such Eligible  Inventory)  multiplied by a percentage equal to
100% minus the Inventory  Advance Rate applicable to Eligible  Inventory and (y)
in the case of any other Credit Accommodation issued for any purpose,  establish
a Reserve equal to the full amount of such Credit  Accommodation  plus all costs
and other  charges  and  expenses  relating  to such  Credit  Accommodation.  In
addition, (x) Lender shall establish a permanent Reserve in the amount set forth
in Section 1(f) of Schedule A, and (y) if the outstanding  principal  balance of
the Term Loan advance with respect to Eligible  Equipment exceeds the percentage
set forth in  Section  2(a)(i)  of  Schedule  A of the  appraised  value of such
Eligible Equipment,  Lender may establish an additional Reserve in the amount of
such excess (and,  for this  purpose,  if payments of principal on the Term Loan
advances  against  Eligible  Equipment  and  Real  Property  are not  calculated
separately,  payments of  principal  of the Term Loan made by Borrower  shall be
deemed to apply to the Term Loan advance with respect to Eligible  Equipment and
Real Property,  respectively, in proportion to the original principal amounts of
such advances). Lender may, in its discretion,  establish and revise Reserves by
deducting them in determining Availability or by reclassifying Eligible Accounts
or Eligible  Inventory as ineligible.  In no event shall the  establishment of a
Reserve in respect  of a  particular  actual or  contingent  liability  obligate
Lender to make advances  hereunder to pay such  liability or otherwise  obligate
Lender with respect thereto.

      1.3 Other Provisions Applicable to Credit  Accommodations.  Lender may, in
its sole  discretion  and on terms and  conditions  acceptable  to Lender,  make
Credit  Accommodations  available  to  Borrower  either by issuing  them,  or by
causing other financial institutions to issue them supported by Lenders guaranty
or  indemnification;   provided,   that  after  giving  effect  to  each  Credit
Accommodation,  the  Credit  Accommodation  Balance  will not  exceed the Credit
Accommodation Limit set forth in Section 1(e) of Schedule A. Any amounts paid by
Lender in respect of a Credit  Accommodation will be treated for all purposes as
a Revolving Loan which shall be secured by the Collateral and bear interest, and
be payable,  in the same manner as a Revolving Loan.  Borrower agrees to execute
all documentation  required by Lender or the issuer of any Credit  Accommodation
in connection with any such Credit Accommodation.

<PAGE>

      1.4  Repayment.  Accrued  interest on all  monetary  Obligations  shall be
payable  on the first day of each  month.  Principal  of the Term Loan  shall be
repaid as set forth in  Section  2(b) of  Schedule  A. If at any time any of the
Loan Limits are exceeded,  Borrower will  immediately pay to Lender such amounts
(or provide cash  collateral to Lender with respect to the Credit  Accommodation
Balance in the manner set forth in Section 7.3),  as shall cause  Borrower to be
in full  compliance with all of the Loan Limits.  Notwithstanding  the foregoing
Lender may, in its sole  discretion,  make or permit  Revolving  Loans, the Tern
Loan,  any Credit  Accommodations  or any other  monetary  Obligations  to be in
excess of any of the Loan Limits;  provided,  that Borrower shall, upon Lender's
demand,  pay to  Lender  such  amounts  as shall  cause  Borrower  to be in full
compliance with all of the Loan Limits. All unpaid monetary Obligations shall be
payable in full on the Maturity Date (as defined in Section 7.1) or, if earlier,
the date of any early termination pursuant to Section 7.2.

      1.5  Minimum  Borrowing.  Subject  to the  terns  and  conditions  of this
Agreement,  Borrower  agrees  to (i)  borrow  sufficient  amounts  to cause  the
outstanding  principal  balance  of the Loans to equal or  exceed,  at all times
prior to the  Maturity  Date,  the Minimum Loan Amount set forth in Section 4 of
Schedule A and (ii) maintain  Availability  sufficient to enable  Borrower to do
so.  However,  Lender shall not be  obligated to loan  Borrower the Minimum Loan
Amount other than in  accordance  with all of the terms and  conditions  of this
Agreement.

2.    INTEREST AND FEES.

      2.1 Interest. All Loans and other monetary Obligations shall bear interest
at the  Interest  Rate(s) set forth in Section 3 of  Schedule  A,  except  where
expressly set forth to the contrary in this  Agreement or another Loan Document;
provided,  that after the occurrence of an Event of Default, all Loans and other
monetary  Obligations  shall,  at Lender's  option,  bear interest at a rate per
annum  equal to two  percent  (2 %) in excess of the rate  otherwise  applicable
thereto (the "Default  Rate") until paid in full  (notwithstanding  the entry of
any  judgment  against  Borrower or the exercise of any other right or remedy by
Lender),  and all such  interest  shall be  payable  on  demand.  Changes in the
Interest Rate shall be effective as of the date of any change in the Prime Rate.
Notwithstanding  anything  to the  contrary  contained  in this  Agreement,  the
aggregate  of all  amounts  deemed  to be  interest  hereunder  and  charged  or
collected by Lender is not intended to exceed the highest rate permissible under
any  applicable  law, but if it should,  such interest  shall  automatically  be
reduced to the extent  necessary to comply with  applicable  law and Lender will
refund to Borrower any such excess interest received by Lender.

      2.2 Fees and Warrants.  Borrower shall pay Lender the following  fees, and
issue Lender the following  warrants,  which are in addition to all interest and
other sums  payable by  Borrower  to Lender  under this  Agreement,  and are not
refundable:

            (a)  Closing  Fee. A closing  fee in the amount set forth in Section
6(a) of Schedule A, which shall be deemed to be fully  earned as of, and payable
on, the date hereof.

            (b) Facility Fees. A facility fee for the Initial Term in the amount
set forth in Section  6(b)(i) of Schedule A (which  shall be fully  earned as of
the date of this  Agreement  and shall be  payable  in equal  installments  due,
respectively,  on the date of this  Agreement  and on each  anniversary  thereof
during the Initial Term), and a facility fee for each Renewal Term in the amount
set forth in Section  6(b)(ii) of Schedule A (which  shall be fully earned as of
the first day of such  Renewal  Term and shall be payable in equal  installments
due, respectively, on the first day of such Renewal Term and on each anniversary
thereof during such Renewal Term).

            (c) Servicing  Fee. A monthly  servicing fee in the amount set forth
in Section 6(c) of Schedule A, in consideration of Lender's  administration  and
other services for each month (or part thereof),

<PAGE>

which  shall be fully  earned as of, and payable in advance on, the date of this
Agreement  and on the first date of each month  thereafter so long as any of the
Obligations are outstanding.

            (d)  Unused  Line  Fee.  An unused  line fee at a rate  equal to the
percentage  per annum set forth in Section  6(d) of  Schedule A of the amount by
which  the  Maximum  Facility  Amount  exceeds  the  average  dally  outstanding
principal balance of the Loans and the Credit  Accommodation  Balance during the
immediately  preceding month (or part thereof),  which fee shall be payable,  in
arrears,  on the first day of each month so long as any of the  Obligations  are
outstanding and on the Maturity Date.

            (e)  Minimum  Borrowing  Fee. A minimum  borrowing  fee equal to the
excess, if any, of (i) interest which would have been payable in respect of each
period set forth in Section  6(e)(i) of Schedule A if, at all times  during such
period,  the principal balance of the Loans was equal to the Minimum Loan Amount
over (ii) the actual interest payable in respect of such period, which fee shall
be fully  earned as of the last day of such  period and  payable on the date set
forth in Section  6(e)(ii) of Schedule A and on the  Maturity  Date,  commencing
with the immediately following period.

            (f)  Success  Fee. A success  fee in the amount set forth in Section
6(f) of Schedule A, which shall be fully earned as of the date of this Agreement
and payable as set forth in Section 6(f) of Schedule A.

            (g) Warrants.  Warrants to acquire the capital stock of Borrower, as
summarized  in  Section  6(g) of  Schedule  A and as more  fully  set forth in a
separate  warrant  agreement  executed by Borrower  contemporaneously  with this
Agreement.

            (h) Credit  Accommodation  Fees.  All of the fees relating to Credit
Accommodations set forth in Section 6(i) of Schedule A.

      2.3  Computation  of Interest  and Fees.  All  interest  and fees shall be
calculated daily on the closing balances in the Loan Account based on the actual
number  of days  elapsed  in a year of 360 days.  For  purposes  of  calculating
interest and fees, if the outstanding  daily principal  balance of the Revolving
Loans is a credit balance, such balance shall be deemed to be zero.

      2.4 Loan  Account;  Monthly  Accountings.  Lender  shall  maintain  a loan
account for Borrower  reflecting  all advances,  charges,  expenses and payments
made pursuant to this Agreement (the "Loan Account"), and shall provide Borrower
with a monthly  accounting  reflecting  the activity in the Loan  Account.  Each
accounting  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 Lender),  unless Borrower notifies Lender in
writing to the  contrary  within  sixty days  after  such  account is  rendered,
describing  the nature of any alleged errors or  admissions.  However,  Lender's
failure to maintain the Loan Account or to provide any such accounting shall not
affect the legality or binding  nature of the  Obligations.  Interest,  fees and
other monetary  Obligations  due and owing under this Agreement  (including fees
and other  amounts paid by Lender to issuers of Credit  Accommodations)  may, in
Lender's  discretion,  be charged to the Loan  Account,  and will  thereafter be
deemed to be  Revolving  Loans and will bear  interest at the same rate as other
Revolving Loans.

3.    SECURITY INTEREST.

      3.1 To secure the full payment and performance of all of the  Obligations,
Borrower  hereby  grants  to Lender a  continuing  security  interest  in all of
Borrower's  property and interests in property,  whether tangible or intangible,
now owned or in existence or hereafter  acquired or arising,  wherever  located,
including  Borrower's interest in all of the following,  whether or not eligible
for lending purposes: (i) all Accounts,  Chattel Paper, Instruments,  Documents,
Goods  (including  Inventory,  Equipment,  farm  products and  consumer  goods),

<PAGE>

Investment Property,  General Intangibles,  Deposit Accounts and money, (ii) all
proceeds  and  products  of all  of the  foregoing  (including  proceeds  of any
insurance  policies,  proceeds of proceeds and claims  against third parties for
loss or my  destruction  of my of the foregoing) and (iii) all books and records
relating to my of the foregoing.

4.    ADMINISTRATION.

      4.1 Lock  Boxes and  Blocked  Accounts.  Borrower  will,  at its  expense,
establish  (and  revise  from time to time as  Lender  may  require)  collection
procedures acceptable to Lender, in Lender's sole discretion, for the collection
of checks,  wire transfers and other proceeds of Accounts ("Account  Proceeds"),
which my include (i)  directing  all Account  Debtors to send all such  proceeds
directly  to a post  office  box  designated  by  Lender  either  in the name of
Borrower (but as to which Lender has exclusive  access) or, at Lender's  option,
in the name of Lender (a "Lock Box") or (ii)  depositing  all  Account  Proceeds
received by Borrower into one or more bank accounts maintained in Borrowers name
(each, a "Blocked  Account"),  under an arrangement  acceptable to Lender with a
depository bank acceptable to Lender, pursuant to which all funds deposited into
each Blocked  Account are to be transferred  to Lender in such manner,  and with
such frequency, as Lender shall specify or (iii) a combination of the foregoing.
Borrower agrees to execute,  and to cause its depository banks to execute,  such
Lock Box and Blocked Account agreements and other  documentation as Lender shall
require from time to time in connection with the foregoing.  On the date of this
Agreement,  Borrower  will  execute  and  deliver  to Lender a  Blocked  Account
agreement, in form and substance satisfactory to Lender.

      4.2  Remittance  of  Proceeds.  Except as  provided  in Section  4.1,  all
proceeds  arising from the sale or other  disposition of my Collateral  shall be
delivered, in kind, by Borrower to Lender in the original form in which received
by Borrower not later than the following Business Day after receipt by Borrower.
Until so delivered to Lender,  Borrower  shall hold such  proceeds  separate and
apart from  Borrowers  other funds and property in an express  trust for Lender.
Nothing in this  Section  4.2 shall limit the  restrictions  on  disposition  of
Collateral set forth elsewhere in this Agreement.

      4.3 Application of Payments.  Lender may, in its sole  discretion,  apply,
reverse and  re-apply  all cash and  non-cash  proceeds of  Collateral  or other
payments  received with respect to the Obligations,  in such order and manner as
Lender  shall  determine,  whether or not the  Obligations  are due, and whether
before or after the occurrence of a Default or an Event of Default. For purposes
of determining  Availability,  such amounts will be credited to the Loan Account
and the Collateral balances to which they relate upon Lender's receipt of advice
from  Lender's Bank (set forth in Section 11 of Schedule A) that such items have
been credited to Lender's  account at Lender's  Bank (or upon  Lender's  deposit
thereof at Lender's Bank in the case of payments received by Lender in kind), in
each case  subject to final  payment and  collection.  However,  for purposes of
computing  interest on the  Obligations,  such items shall be deemed  applied by
Lender three Business Days after Lender's  receipt of advice of deposit  thereof
at Lender's Bank.

      4.4 Notification;  Verification.  Lender or its designee may, from time to
time,  whether  or not a Default or Event of Default  has  occurred:  (i) verify
directly  with the  Account  Debtors  the  validity,  amount  and other  matters
relating to the  Accounts  and Chattel  Paper,  by means of mail,  telephone  or
otherwise, either in the name of Borrower or Lender or such other name as Lender
may choose;  and (ii) notify Account Debtors that Lender has a security interest
in the Accounts and that payment thereof is to be made directly to Lender.  Upon
the  occurrence  of a Default or Event of Default,  Lender or its designee  may,
from time to time,  demand,  collect or  enforce  payment  of any  Accounts  and
Chattel Paper (but without any duty to do so).

      4.5 Power of Attorney.  Borrower  hereby  grants to Lender an  irrevocable
power of attorney,  coupled with an interest,  authorizing and permitting Lender
(acting  through any of its officers,  employees,  attorneys or agents),  at any
time  (whether  or not a  Default  or  Event  of  Default  has  occurred  and is
continuing,

<PAGE>

except as expressly provided below), at Lender's option, but without obligation,
with or without notice to Borrower,  and at Borrowers expense,  to do any or all
of the  following,  in  Borrowers  name or  otherwise:  (i) execute on behalf of
Borrower any documents that Lender may, in its sole  discretion,  deem advisable
in order to perfect and maintain Lenders  security  interests in the Collateral,
to  exercise a right of  Borrower  or  Lender,  or to fully  consummate  all the
transactions  contemplated  by this  Agreement  and  the  other  Loan  Documents
(including such financing statements and continuation financing statements,  and
amendments  thereto,  as Lender shall deem necessary or appropriate) and to file
as a financing  statement any copy of this Agreement or any financing  statement
signed by Borrower;  (ii) execute on behalf of Borrower any document exercising,
transferring or assigning any option to purchase,  sell or otherwise  dispose of
or lease (as lessor or lessee)  any real or personal  property  which is part of
the  Collateral  or in which Lender has an interest;  (iii) execute on behalf of
Borrower any invoices  relating to any  Accounts,  any draft against any Account
Debtor,  any proof of claim in bankruptcy,  any notice of Lien or claim, and any
assignment or  satisfaction  of mechanic's,  materialman's  or other Lien;  (iv)
execute on behalf of Borrower any notice to any Account Debtor,  (v) receive and
otherwise take control in any manner of any cash or non-cash items of payment or
proceeds of  Collateral;  (vi) endorse  Borrower's  name on all checks and other
forms of remittances  received by Lender;  (vii) 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;  (viii) after the  occurrence  of a Default or
Event of Default,  grant extensions of time to pay,  compromise  claims relating
to, and settle  Accounts,  Chattel Paper and General  Intangibles  for less than
face value and execute all releases and other documents in connection therewith;
(ix) pay any sums  required  on  account  of  Borrowers  taxes or to secure  the
release of any Liens  therefor;  (x) pay any  amounts  necessary  to obtain,  or
maintain in effect, any of the insurance  described in Section 5.12; (xi) settle
and adjust, and give releases of, any insurance claim that relates to any of the
Collateral  and obtain payment  therefor;  (xii) instruct any third party having
custody or  control  of any  Collateral  or books or  records  belonging  to, or
relating to,  Borrower to give Lender the same rights of access and other rights
with respect  thereto as Lender has under this  Agreement;  and (xiii) after the
occurrence of a Default or Event of Default,  change the address for delivery of
Borrower's mail and receive and open all mail addressed to Borrower. Any and all
sums  paid,  and any and  all  costs,  expenses,  liabilities,  obligations  and
reasonable  attorneys'  fees  incurred,  by Lender with respect to the foregoing
shall  be added to and  become  part of the  Obligations,  shall be  payable  on
demand,  and shall bear  interest at a rate equal to the highest  interest  rate
applicable to any of the Obligations. Borrower agrees that Lender's rights under
the  foregoing  power of  attorney or any of Lender's  other  rights  under this
Agreement or the other Loan  Documents  shall not be construed to indicate  that
Lender is in control of the business, management or properties of Borrower.

      4.6 Disputes.  Borrower  shall  promptly  notify Lender of all disputes or
claims  relating  to Accounts  and Chattel  Paper.  Borrower  will not,  without
Lender's  prior  written  consent,  compromise  or settle any Account or Chattel
Paper for less than the full  amount  thereof,  grant any  extension  of time of
payment  of any  Account  or Chattel  Paper,  release  (in whole or in part) any
Account  Debtor or other person liable for the payment of any Account or Chattel
Paper  or  grant  any  credits,  discounts,   allowances,   deductions,   return
authorizations or the like with respect to any Account or Chattel Paper;  except
that prior to the  occurrence  of an Event of Default,  Borrower may take any of
such actions in the ordinary  course of its  business,  provided  that  Borrower
promptly reports the same to Lender.

      4.7 Invoices.  At Lender's  request,  Borrower will cause all invoices and
statements  which it sends to  Account  Debtors  or other  third  parties  to be
marked,  in a manner  satisfactory,  to  Lender,  to  reflect  Lenders  security
interest therein.

      4.8 Inventory.

            (a) Returns.  Provided  that 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 will

<PAGE>

promptly  determine  the reason  for such  return  and  promptly  issue a credit
memorandum to the Account Debtor in the  appropriate  amount  (sending a copy to
Lender). After the occurrence of an Event of Default, Borrower will (i) hold the
returned  Inventory in trust for Lender,  (ii) segregate all returned  Inventory
from all of Borrower's other property;  (iii)  conspicuously  label the returned
Inventory as Lenders property;  and (iv) immediately notify Lender of the return
of such  Inventory,  specifying  the reason for such  return,  the  location and
condition  of the  returned  Inventory  and, at Lender's  request,  deliver such
returned Inventory to Lender at an address specified by Lender.

            (b) Other  Covenants.  Borrower  will not,  without  Lender's  prior
written  consent,  (i) store any Inventory with any  warehouseman or other third
party other than as set forth in Section  9(d) of Schedule A and on Schedule 4.8
hereto;  provided, that the Inventory stored at the locations listed on Schedule
4.8 hereto must not exceed, in the aggregate,  20% of Borrower's total Inventory
at any one time,  or (ii) sell any  Inventory  on a  sale-or-return,  guaranteed
sale,  consignment,  or other  contingent  basis.  All of the Inventory has been
produced  only in accordance  with the Fair Labor  Standards Act of 1938 and all
rules, regulations and orders promulgated thereunder, if applicable.

      4.9 Access to Collateral,  Books and Records.  At reasonable times, and on
one Business  Day's notice,  prior to the occurrence of a Default or an Event of
Default,  and at any time and with or without  notice after the  occurrence of a
Default or an Event of  Default,  Lender or its  agents  shall have the right to
inspect the Collateral,  and the right to examine and copy Borrower's  books and
records. Lender shall take reasonable steps to keep confidential all information
obtained in any such inspection or examination,  but Lender shall have the right
to disclose any such information to its auditors, regulatory agencies, attorneys
and participants,  and pursuant to any subpoena or other legal process. Borrower
agrees to give  Lender  access to any or all of  Borrower's  premises  to enable
Lender to conduct  such  inspections  and  examinations.  Such  inspections  and
examinations  shall be at Borrower's  expense and the charge  therefor  shall be
$750 per person per day (or such higher amount as shall represent  Lender's then
current standard charge), plus reasonable out-of-pocket expenses. Lender may, at
Borrower's  expense,  use Borrower's  personnel,  computer and other  equipment,
programs,  printed output and computer readable media, supplies and premises for
the collection, sale or other disposition of Collateral to the extent Lender, in
its sole discretion,  deems appropriate.  Borrower hereby irrevocably authorizes
all  accountants  and third  parties to  disclose  and  deliver  to  Lender,  at
Borrower's expense, all financial  information,  books and records, work papers,
management reports and other information in their possession regarding Borrower.
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 Borrowers  Address without first obtaining  Lender's written consent (which
consent may be conditioned  upon such accounting  firm,  service bureau or other
third party  agreeing  to give Lender the same rights with  respect to access to
books and records and related rights as Lender has under this Agreement).

5.    REPRESENTATIONS, WARRANTIES AND COVENANTS.

      To  induce  Lender  to enter  into this  Agreement,  Borrower  represents,
warrants  and  covenants  as  follows  (it being  understood  that (i) each such
representation  and warranty  will be deemed remade as of the date on which each
Loan is made and each Credit Accommodation is provided and shall not be affected
by any knowledge of, or any investigation  by, Lender,  and (ii) the accuracy of
each such representation, warranty and covenant will be a condition to each Loan
and Credit Accommodation).

      5.1 Existence and Authority.  Borrower is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its  incorporation or
formation.   Borrower  is   qualified   and  licensed  to  do  business  in  all
jurisdictions in which any failure to do so would have a material adverse effect
on  Borrower.  The  execution,  delivery  and  performance  by  Borrower of this
Agreement  and all of the  other  Loan  Documents  have  been  duly and  validly
authorized,  do not violate Borrower's articles or certificate of incorporation,
by-laws or

<PAGE>

other organizational documents, or any law or any agreement or instrument or any
court order which is binding upon  Borrower or its property,  do not  constitute
grounds for  acceleration of any  indebtedness or obligation under any agreement
or instrument which is binding upon Borrower or its property, and, except as set
forth on  Schedule  5.1 hereto,  do not require the consent of any Person.  This
Agreement  and such other Loan  Documents  have been duly executed and delivered
by, and are  enforceable  against,  Borrower,  and all other  Obligors  who have
signed them, in accordance with their respective terms (except as enforceability
may be limited by bankruptcy,  insolvency,  reorganization,  moratorium or other
laws  relating  to or  limiting  creditors'  rights or by  equitable  principles
generally  (regardless  of whether  enforcement is sought in equity or at law)).
Sections 9(g) and 9(h) of Schedule A set forth the ownership of Borrower and the
names and ownership of Borrower's Subsidiaries as of the date of this Agreement.

      5.2 Name;  Trade Names and Styles.  The name of Borrower  set forth in the
heading to this  Agreement is its correct and complete legal name as of the date
hereof. Listed in Sections 9(a), 9(b) and 9(c) of Schedule A are all prior names
of Borrower and all of Borrower's present and prior trade names.  Borrower shall
give Lender at least thirty days' prior written notice before  changing its name
or doing  business  under any other name.  Borrower has  complied  with all laws
relating to the conduct of business under a fictitious  business name.  Borrower
represents  and  warrants  that (i) each  trade  name does not refer to  another
corporation  or other legal entity;  (ii) all Accounts  invoiced  under any such
trade names are owned  exclusively  by Borrower  and are subject to the security
interest  of  Lender  and the  other  terms of this  Agreement;  and  (iii)  all
schedules of Accounts,  including any sales made or services  rendered using any
trade name shall show Borrower's name as assignor.

      5.3 Title to Collateral; Permitted Liens. Borrower has good and marketable
title to, or a valid leasehold interest in, the Collateral. All Equipment leased
by Borrower is listed on Schedule  5.3 hereto,  which  Schedule 5.3 sets forth a
complete  description of such leased  Equipment.  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. Lender 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 Lender and the  Collateral  against all claims
of others.  None of the  Collateral  which is Equipment is or will be affixed to
any real property in such a manner, or with such intent, as to become a fixture.
Except for leases or  subleases as to which  Borrower has  delivered to Lender a
landlord's waiver in form and substance satisfactory to Lender,  Borrower is not
a lessee or sublessee  under any real  property,  lease or sublease  pursuant to
which the lessor or  sublessor  may obtain any rights in any of the  Collateral,
and no such lease or sublease now prohibits,  restrains,  impairs or conditions,
or will prohibit, restrain, impair or condition,  Borrower's right to remove any
Collateral  from the 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  Lender,  cause each such third  party to execute  and  deliver to
Lender,  in  form  and  substance   acceptable  to  Lender,   such  waivers  and
subordinations as Lender shall specify,  so as to ensure that Lender'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.

      5.4 Accounts and Chattel Paper. As of each date reported by Borrower,  all
Accounts which Borrower has reported to Lender as being Eligible Accounts comply
in all respects with the criteria for  eligibility  established by Lender and in
effect at such time.  All  Accounts  and  Chattel  Paper are  genuine and in all
respects  what  they  purport  to be,  arise out of a  completed,  bona fide and
unconditional  and  non-contingent  sale and  delivery of goods or  rendition of
services by Borrower in the ordinary  course of its  business and in  accordance
with the  terms  and  conditions  of all  purchase  orders,  contracts  or other
documents  relating thereto,  each Account Debtor thereunder had the capacity to
contract at the time any contract or other document giving

<PAGE>

rise to such  Accounts and Chattel  Paper were  executed,  and the  transactions
giving rise to such Accounts and Chattel Paper comply with all  applicable  laws
and governmental rules and regulations.

      5.5 Investment  Property.  Borrower will take any and all actions required
or  requested  by  Lender,  from  time to time,  to (i)  cause  Lender to obtain
exclusive  control of any Investment  Property in a manner  acceptable to Lender
and (ii) obtain from any issuers of  Investment  Property and such other Persons
as Lender shall  specify,  for the benefit of Lender,  written  confirmation  of
Lenders  exclusive  control  over such  Investment  Property and take such other
actions as Lender may  request to perfect  Lender's  security  interest  in such
Investment  Property.  For  purposes  of this  Section  5.5,  Lender  shall have
exclusive  control  of  Investment  Property  if (A)  such  Investment  Property
consists of  certificated  securities  and Borrower  delivers such  certificated
securities  to  Lender  (with  appropriate  endorsements  if  such  certificated
securities are in registered  form);  (B) such Investment  Property  consists of
uncertificated  securities  and either (x) Borrower  delivers such  uncerticated
securities to Lender or (y) the issuer thereof agrees, pursuant to documentation
in  form  and  substance  satisfactory  to  Lender,  that it  will  comply  with
instructions  originated by Lender without further consent by Borrower;  and (C)
such Investment Property consists of security entitlements and either (x) Lender
becomes  the   entitlement   holder  thereof  or  the   appropriate   securities
intermediary   agrees,   pursuant  to   documentation   in  form  and  substance
satisfactory to Lender,  that it will comply with entitlement  orders originated
by Lender without further consent by Borrower.

      5.6 Place of  Business;  Location  or  Collateral.  Borrowers  Address  is
Borrower's chief executive office and the location of its books and records.  In
addition, except as provided in the immediately following sentence, Borrower has
places of business and  Collateral  located only at the  locations  set forth on
Sections  9(d) and 9(e) of Schedule A. Borrower will give Lender at least thirty
days' prior written  notice  before  opening any  additional  place of business,
changing its chief executive office or the location of its books and records, or
moving any of the Collateral to a location other than Borrower's  Address or one
of the  locations  set forth in  Sections  9(d) and 9(e) of Schedule A, and will
execute and deliver all financing  statements and other agreements,  instruments
and documents which Lender shall require as a result thereof.

      5.7 Financial Condition,  Statements and Reports. All financial statements
delivered to Lender by or on behalf of Borrower have been prepared in conformity
with GAAP and completely and fairly reflect the financial condition of Borrower,
at the times and for the periods therein  stated.  Between the last date covered
by any such financial statement provided to Lender and the date hereof (or, with
respect to the remaking of this  representation in connection with the making of
any Loan or the  providing  of any Credit  Accommodation,  the date such Loan is
made or such  Credit  Accommodation  is  provided),  there has been no  material
adverse change in the financial  condition or business of Borrower.  Borrower is
solvent and able to pay its debts as they come due, and has  sufficient  capital
to carry on its business as now conducted  and as proposed to be conducted.  All
schedules, reports and other information and documentation delivered by Borrower
to Lender with respect to the Collateral are, or will be, when delivered,  true,
correct and complete as of the date delivered or the date specked therein.

      5.8 Tax Returns and Payments;  Pension Contributions.  Borrower has timely
filed all tax returns and reports  required by  applicable  law, has timely paid
all applicable taxes, assessments,  deposits and contributions owing by Borrower
and will timely pay all such items in the future as they became due and payable.
Borrower may,  however,  defer payment of any contested  taxes;  provided,  that
Borrower  (i) in good  faith  contests  Borrower's  obligation  to such taxes by
appropriate  proceedings promptly and diligently instituted and conducted;  (ii)
notifies Lender in writing of the commencement of, and any material  development
in, the proceedings; (iii) posts bonds or takes any other steps required to keep
the  contested  taxes from becoming a Lien upon any of the  Collateral  and (iv)
maintains  adequate  reserves  therefor  in  conformity  with GAAP.  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

<PAGE>

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
withdrawn from  participation in, permitted partial or complete  termination of,
or permitted  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 any other governmental agency.

      5.9 Compliance with Laws.  Borrower has complied in all material  respects
with all  provisions of all applicable  laws and  regulations,  including  those
relating to Borrower's  ownership of real or personal property,  the conduct and
licensing of Borrowers business, the payment and withholding of taxes, ERISA and
other employee matters, safety and environmental matters.

      5.10  Litigation.  Section  9(f)  of  Schedule  A  discloses  all  claims,
proceedings,  litigation or investigations  pending or (to the best of Borrowers
knowledge)  threatened against Borrower.  There is no claim,  suit,  litigation,
proceeding or  investigation  pending or (to the 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 any material  adverse change in the
financial  condition or business of Borrower,  or in any material  impairment in
the  ability of  Borrower to carry on its  business  in  substantially  the same
manner as it is now being  conducted.  Borrower will  promptly  inform Lender in
writing of any claim,  proceeding,  litigation  or  investigation  in the future
threatened or instituted by or against Borrower.

      5.11 Use of  Proceeds.  All  proceeds of all Loans will be used solely for
lawful business purposes.

      5.12 Insurance.  Borrower will at all times carry property,  liability and
other insurance,  with insurers  acceptable to Lender, in such form and amounts,
and with such  deductibles and other  provisions,  as Lender shall require,  and
Borrower will provide  evidence of such  insurance to Lender,  so that Lender is
satisfied that such insurance is, at all times,  in full force and effect.  Each
property  insurance  policy shall name Lender as loss payee and shall  contain a
lender's loss payable  endorsement in form acceptable to Lender,  each liability
insurance policy shall name Lender as an additional  insured,  and each business
interruption  insurance policy shall be collaterally  assigned to Lender, all in
form and  substance  satisfactory  to Lender.  All policies of  insurance  shall
provide that they may not be cancelled or changed  without at least thirty days'
prior written notice to Lender,  shall contain breach of warranty coverage,  and
shall otherwise be in form and substance satisfactory to Lender. Upon receipt of
the  proceeds  of any such  insurance,  Lender  shall  apply  such  proceeds  in
reduction of the Obligations as Lender shall  determine in its sole  discretion.
Borrower will promptly deliver to Lender copies of all reports made to insurance
companies.

      5.13  Financial and  Collateral  Reports.  Borrower has kept and will keep
adequate  records and books of account with  respect to its business  activities
and the  Collateral  in which proper  entries are made in  accordance  with GAAP
reflecting  all its  financial  transactions,  and will cause to be prepared and
furnished to Lender the following  (all to be prepared in accordance  with GAAP,
unless Borrowers  certified public  accountants concur in any change therein and
such change is disclosed to Lender):

            (a)  Collateral  Reports.  On or before  the  fifteenth  day of each
month, an aging of Borrower's Accounts,  Chattel Paper and notes receivable, and
monthly Inventory  reports,  all in such form, and together with such additional
certificates,  schedules and other information with respect to the Collateral or
the business of Borrower or any Obligor, as Lender shall request; provided, that
Borrower's  failure to execute  and  deliver  the same shall not affect or limit
Lender's security  interests and other rights in any of the Accounts,  nor shall
Lender's  failure to advance or lend against a specific  Account affect or limit
Lender's  security  interest and other rights  therein.  Together with each such
schedule,  Borrower shall furnish  Lender with copies (or, at Lender's  request,
originals) of all contracts,  orders, invoices, and other similar documents, and
all original shipping

<PAGE>

instructions,  delivery  receipts,  bills  of  lading,  and  other  evidence  of
delivery,  for any  goods  the sale or  disposition  of which  gave rise to such
Accounts,  and Borrower  warrants the  genuineness of all of the  foregoing.  In
addition,  Borrower  shall deliver to Lender the  originals of all  Instruments,
Chattel Paper, security agreements,  guaranties and other documents and property
evidencing or securing any Accounts, immediately upon receipt thereof and in the
same form as received,  with all necessary  endorsements.  Lender may destroy or
otherwise  dispose of all  documents,  schedules  and other papers  delivered to
Lender pursuant to this Agreement (other than originals of Instruments,  Chattel
Paper,  security  agreements,  guaranties  and  other  documents  and  property,
evidencing  or securing any  Accounts)  six months after Lender  receives  them,
unless  Borrower  requests  their  return in writing in advance and arranges for
their return to Borrower at Borrower's expense.

            (b) Annual Statements. Not later than ninety days after the close of
each fiscal year of  Borrower,  unqualified  (except for a  qualification  for a
change in  accounting  principles  with which the  accountant  concurs)  audited
financial  statements  of Borrower  and its  Subsidiaries  as of the end of such
year,  on a  consolidated  and  consolidating  basis,  certified  by a  firm  of
independent  certified  public  accountants of recognized  standing  selected by
Borrower but acceptable to Lender, together with a copy of any management letter
issued in connection therewith and a letter from such accountants  acknowledging
that Lender is relying on such financial statements;

            (c) Interim Statements.  Not later than twenty days after the end of
each month hereafter,  and sixty days after the last month of Borrower's  fiscal
year, unaudited interim financial statements of Borrower and its Subsidiaries as
of the end of such  month and of the  portion  of  Borrower's  fiscal  year then
elapsed, on a consolidated and consolidating  basis,  certified by the principal
financial  officer of Borrower as  prepared in  accordance  with GAAP and fairly
presenting  the  consolidated  financial  position and results of  operations of
Borrower and its  Subsidiaries for such month and period subject only to changes
from audit and year-end  adjustments  and except that such  statements  need not
contain notes;

            (d)  Projections,  Etc.  Such  business  projections,   Availability
projections,  business plans,  budgets and cash flow statements for Borrower and
its Subsidiaries as Lender shall request from time to time;

            (e) Shareholder  Reports,  Etc. Promptly after the sending or filing
thereof,  as the  case  may  be,  copies  of any  proxy,  statements,  financial
statements or reports which Borrower has made available to its  shareholders and
copies of any regular,  periodic and special reports or registration  statements
which  Borrower  files  with  the  Securities  and  Exchange  Commission  or any
governmental  authority  which  may be  substituted  therefor,  or any  national
securities exchange;

            (f) ERISA  Reports.  Upon  request by  Lender,  copies of any annual
report to be filed pursuant to the requirements of ERISA in connection with each
plan subject thereto, and

            (g) Other  Information.  Such other data and information  (financial
and otherwise) as Lender,  from time to time, may  reasonably  request,  bearing
upon or related to the  Collateral  or  Borrowers  and each of its  Subsidiary's
financial condition or results of operations.

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

      5.15  Maintenance  of Collateral,  Etc.  Borrower will maintain all of its
Equipment  in good  working  condition,  ordinary  wear and tear  excepted,  and
Borrower will not use the  Collateral  for any unlawful  purpose.

<PAGE>

Borrower  will  immediately  advise  Lender in writing of any  material  loss or
damage to the Collateral and of any investigation,  action, suit,  proceeding or
claim  relating to the  Collateral or which may result in an adverse impact upon
Borrower's business, assets or financial condition.

      5.16  Notification  of Changes.  Borrower will  promptly  notify Lender in
writing of any change in its officers or directors,  the opening of any new bank
account or other deposit account, or any material adverse change in the business
or  financial  affairs of Borrower or the  existence of any  circumstance  which
would make any  representation  or warranty of Borrower  untrue in any  material
respect or constitute a material breach of any covenant of Borrower.

      5.17  Further  Assurances.  Borrower  agrees at its  expense,  to take all
actions,  and  execute  or cause to be  executed  and  delivered  to Lender  all
promissory notes, security agreements, agreements with landlords, mortgagees and
processors and other bailees,  subordination  and  intercreditor  agreements and
other  agreements,  instruments and documents as Lender may request from time to
time to perfect and maintain Lender's  security  interests in the Collateral and
to fully effectuate the transactions contemplated by this Agreement.

      5.18 Negative Covenants.  Except as set forth in Section 13 of Schedule A,
Borrower  will  not,  without  Lender's  prior  written  consent,  (i)  merge or
consolidate with another Person, form any new Subsidiary or acquire any interest
in any Person; (ii) acquire any assets except in the ordinary course of business
and as otherwise permitted by this Agreement and the other Loan Documents; (iii)
enter into any transaction outside the ordinary course of business; (iv) sell or
transfer any Collateral or other assets,  except that Borrower may sell finished
goods Inventory in the ordinary  course of its business;  (v) make any loans to,
or  investments  in, any Affiliate or other Person in the form of money or other
assets;  (vi) incur any debt  outside the  ordinary  course of  business;  (vii)
guaranty or otherwise  become liable with respect to the  obligations of another
party or entity;  (viii) pay or declare any dividends or other  distributions on
Borrower's  stock,  if Borrower is a corporation  (except for dividends  payable
solely in capital stock of Borrower) or with respect to any equity interests, if
Borrower is not a  corporation;  (ix)  redeem,  retire,  purchase  or  otherwise
acquire, directly or indirectly, any of Borrower's capital stock or other equity
interests; (x) make any change in Borrower's capital structure; (xi) dissolve or
elect to dissolve; (xii) pay any principal or interest on any indebtedness owing
to an Affiliate;  (xiii) enter into any transaction with an Affiliate other than
on arms-length terms; or (xiv) agree to do any of the foregoing.

      5.19 Financial Covenants.

            (a)  Capital  Expenditures.  Borrower  will not  expend or commit to
expend,  directly or indirectly,  for capital  expenditures  (including  capital
lease obligations) in excess of the amount set forth in Section 8(a) of Schedule
A as the Capital Expenditure Limitation in any fiscal year.

            (b) Net Worth. Borrower will at all times maintain a net worth of at
least the amount set forth in Section 8(b) of Schedule A.

            (c)  Tangible  Net  Worth.  Borrower  will at all times  maintain  a
minimum  tangible  net worth of at least the amount set forth in Section 8(c) of
Schedule A.

            (d) Working  Capital.  Borrower will at all times  maintain  working
capital of at least the amount set forth in Section 8(d) of Schedule A.

            (e) Net Losses.  Borrower will not permit its cumulative net loss to
exceed the amount set forth in Section 8(e) of Schedule A.

<PAGE>

            (f) Net Income.  Borrower will not permit its  cumulative net income
to be less than the amount set forth in Section 8(f) of Schedule A.

            (g)  Leverage.  Borrower  will not  permit  the  ratio of its  total
liabilities  to its net worth to  exceed,  at any  time,  the ratio set forth in
Section 8(g) of Schedule A.

            (h)  Other  Financial  Covenants.  Borrower  will  comply  with  any
additional financial covenants set forth in Section 8(j) of Schedule A.

6.    RELEASE AND INDEMNITY.

      6.1 Release.  Borrower hereby releases Lender and its Affiliates and their
respective directors,  officers,  employees,  attorneys and agents and any other
Person affiliated with or representing  Lender (the "Released Parties") from any
and all  liability  arising  from acts or  omissions  under or  pursuant to this
Agreement, whether based on errors of judgment or mistake of law or fact, except
for those arising from willful misconduct.  However, in no circumstance will any
of the  Released  Parties  be  liable  for  lost  profits  or other  special  or
consequential  damages.  Such release is made on the date hereof and remade upon
each request for a Loan or Credit  Accommodation  by Borrower.  Without limiting
the foregoing:

            (a) Lender shall not be liable for (i) any  shortage or  discrepancy
in,  damage  to,  or loss or  destruction  of,  any  goods,  the  sale or  other
disposition of which gave rise to an Account:  (ii) any error, act, omission, or
delay of any kind occurring in the settlement,  failure to settle, collection or
failure to collect any  Account;  (iii)  settling  any Account in good faith for
less than the full amount thereof;  or (iv) any of Borrower's  obligations under
any contract or agreement giving rise to an Account; and

            (b) In  connection  with  Credit  Accommodations  or any  underlying
transaction,  Lender shall not be responsible for the conformity of any goods to
the documents  presented,  the validity or genuineness of any documents,  delay,
default or fraud by Borrower,  shippers and/or any other Person. Borrower agrees
that any action taken by Lender,  if taken in good faith, or any action taken by
an issuer of any Credit  Accommodation,  under or in connection  with any Credit
Accommodation,  shall be binding on Borrower and shall not create any  resulting
liability to Lender.  In furtherance  thereof,  Lender shall have the full right
and authority to clear and resolve any questions of non-compliance of documents,
to give any  instructions  as to  acceptance  or rejection  of any  documents or
goods, to execute for Borrower's  account any and all applications for steamship
or airway guaranties, indemnities or delivery orders, to grant any extensions of
the maturity of, time of payment  for, or time of  presentation  of, any drafts,
acceptances or documents, and to agree to any amendments,  renewals, extensions,
modifications, changes or cancellations of any of the terms or conditions of any
of the Credit Accommodations or applications and other documentation  pertaining
thereto.

      6.2 Indemnity.  Borrower  hereby agrees to indemnify the Released  Parties
and hold them harmless from and against any and all claims, debts,  liabilities,
demands,  obligations,  actions, causes of action, penalties, costs and expenses
(including  attorneys fees), of every nature,  character and description,  which
the  Released  Parties  may sustain or incur based upon or arising out of any of
the  transactions  contemplated by this Agreement or the other Loan Documents or
any of the Obligations,  including any  transactions or occurrences  relating to
the issuance of any Credit  Accommodation,  the Collateral relating thereto, any
drafts  thereunder and any errors or omissions  relating thereto  (including any
loss or claim due to any  action or  inaction  taken by the issuer of any Credit
Accommodation)  (and for this  purpose  any  charges  to Lender by any issuer of
Credit Accommodations shall be conclusive as to their appropriateness and may be
charged to the Loan  Account),  or any other matter,  cause or thing  whatsoever
occurred, done, omitted or suffered to be done by Lender relating to Borrower or
the Obligations  (except any such amounts sustained or incurred as the result of
the willful

<PAGE>

misconduct  of the  Released  Parties).  Notwithstanding  any  provision in this
Agreement to the  contrary,  the  indemnity  agreement set forth in this Section
shall survive any termination of this Agreement.

7.    TERM.

      7.1 Maturity Date. Lender's obligation to make Loans and to provide Credit
Accommodations under this Agreement shall initially continue in effect until the
Initial  Maturity Date set forth in Section 7 of Schedule A (the "Initial Term")
provided,  that such date shall  automatically be extended (the Initial Maturity
Date, as it may be so extended,  being  referred to as the "Maturity  Date") for
successive  additional terms of three years each (each a "Renewal Term"), unless
one party gives written  notice to the other,  not less than sixty days prior to
the Maturity Date,  that such party elects not to extend the Maturity Date. This
Agreement and the other Loan  Documents and Lender's  security  interests in and
Liens upon the Collateral, and all representations,  warranties and covenants of
Borrower  contained  herein and  therein,  shall remain in full force and effect
after the Maturity Date until all of the monetary  Obligations are  indefeasibly
paid in full.

      7.2 Early  Termination.  Lenders  obligation  to make Loans and to provide
Credit  Accommodations  under  this  Agreement  may be  terminated  prior to the
Maturity Date as follows: (i) by Borrower,  effective thirty business days after
written  notice of  termination is given to Lender or (ii) by Lender at any time
after  the  occurrence  of  an  Event  of  Default,  without  notice,  effective
immediately;  provided,  that if any  Affiliate of Borrower is also a party to a
financing  arrangement with Lender,  no such early  termination under clause (i)
above shall be effective  unless such  Affiliate  simultaneously  terminates its
financing  arrangement  with Lender.  If so  terminated  under this Section 7.2,
Borrower  shall  pay  to  Lender  (i)  an  early  termination  fee  (the  "Early
Termination  Fee") in the amount set forth in  Section  6(h) of  Schedule A plus
(ii) any earned but unpaid  Facility  Fee.  Such fee shall be due and payable on
the effective date of termination  and thereafter  shall bear interest at a rate
equal to the highest rate applicable to any of the Obligations.  In addition, if
Borrower so terminates and repays the Obligations without having provided Lender
with at least thirty days' prior written notice  thereof,  an additional  amount
equal to thirty days of interest al the applicable  Interest  Rate(s),  based on
the  average  outstanding  amount of the  Obligations  for the six month  period
immediately preceding the date of termination.

      7.3  Payment  of  Obligations.  On the  Maturity  Date  or on any  earlier
effective  date of  termination,  Borrower  shall  pay in full all  Obligations,
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 or on any earlier effective date of termination,  there are any outstanding
Credit  Accommodations,  then on such date Borrower shall provide to Lender cash
collateral  in an amount  equal to 110% of the Credit  Accommodation  Balance to
secure all of the  Obligations  (including  estimated  attorneys' fees and other
expenses)  relating to said Credit  Accommodations or such greater percentage or
amount  as  Lender  reasonably  deems  appropriate,  pursuant  to a cash  pledge
agreement in form and substance satisfactory to Lender.

      7.4 Effect of Termination. No termination shall affect or impair any right
or remedy of Lender or relieve  Borrower of any of the Obligations  until all of
the monetary  Obligations  have been  indefeasibly and irrevocably paid in full.
Upon indefeasible and irrevocable  payment and performance in full of all of the
monetary  Obligations  (and the provision of cash collateral with respect to any
Credit Accommodation Balance as required by Section 7.3) and termination of this
Agreement,  Lender shall promptly  deliver to Borrower  termination  statements,
requests  for  reconveyances  and  such  other  documents  as may be  reasonably
required to terminate Lender's security interests in the Collateral.

8.    EVENTS OF DEFAULT AND REMEDIES.

      8.1 Events of Default. The occurrence of any of the following events shall
constitute an "Event of Default" under this  Agreement,  and Borrower shall give
Lender immediate  written notice thereof:  (i) if any

<PAGE>

warranty, representation,  statement, report or certificate made or delivered to
Lender by Borrower or any of Borrower's officers,  employees or agents is untrue
or misleading;  (ii) if Borrower fails to pay when due any principal or interest
on any Loan or any other  monetary  Obligation;  (iii) if Borrower  breaches any
covenant or  obligation  contained  in (a) any of the first  sentence of Section
5.1,  Section 5.5,  Section 5.8, clauses (b), (c), (d) or (f) of Section 5.13 or
Section  5.14 of this  Agreement  and such breach has not been cured to Lender's
satisfaction  within 10 days' of the  occurrence  thereof or (b) any  Section of
this  Agreement,  other  than  those  listed in clause  (a),  or any other  Loan
Document  or fails to perform  any other  non-monetary  Obligation;  (iv) if any
levy,  assessment,  attachment,  seizure,  lien  or  encumbrance  (other  than a
Permitted  Lien)  is  made  or  permitted  to  exist  on all or any  part of the
Collateral;  (v) if one or more judgments  aggregating in excess of $25,000,  or
any injunction or attachment,  is obtained against Borrower or any Obligor which
remains  unstayed for more than ten days or is enforced;  (vi) the occurrence of
any  default  under  any  financing  agreement,   security  agreement  or  other
agreement,  instrument or document  executed and delivered by (A) Borrower with,
or in favor of, any Person other than Lender or (B) Borrower or any Affiliate of
Borrower  with,  or in favor of,  Lender or any  Affiliate of Lender;  (vii) the
dissolution,  death,  termination of existence in good  standing,  insolvency or
business  failure or suspension or cessation of business as usual of Borrower or
any  Obligor  (or of any  general  partner of Borrower or any Obligor if it is a
partnership) or the  appointment of a receiver,  trustee or custodian for all or
any part of the  property of, or an  assignment  for the benefit of creditors by
Borrower or any Obligor,  or the  commencement  of any proceeding by Borrower or
any  Obligor  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 if Borrower  makes or sends a
notice of a bulk transfer or calls a meeting of its creditors;  provided that in
the event of the death or bankruptcy of any Obligor,  Borrower shall have thirty
days from the date of such  occurrence  to replace  such  Obligor  with a Person
acceptable to Lender; (viii) the commencement of any proceeding against Borrower
or any Obligor 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;  (ix) the  actual or  attempted
revocation or  termination  of, or limitation or denial of liability  upon,  any
guaranty of the Obligations,  or any security document securing the Obligations,
by any Obligor; (x) if Borrower 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 attempts to limit or terminate its
subordination agreement; (xi) if there is any actual or threatened indictment of
Borrower or any Obligor under any criminal statute or commencement or threatened
commencement of criminal or civil  proceedings  against Borrower or any Obligor,
pursuant  to which the  potential  penalties  or  remedies  sought or  available
include  forfeiture of any property of Borrower or such Obligor;  (xii) if there
is a change in the record or  beneficial  ownership of an aggregate of more than
49 % of  the  outstanding  shares  of  stock  of  Borrower  (or  partnership  or
membership  interests if it is a partnership or limited liability  company),  in
one or more  transactions,  compared to the ownership of  outstanding  shares of
stock (or  partnership  or  membership  interests)  of  Borrower  as of the date
hereof,  without the prior written consent of Lender, which consent shall not be
unreasonably  withheld;  (xiii) if there is any  change  in the chief  executive
officer,  chief operating officer or chief financial officer of Borrower;  (xiv)
if an Event of Default  occurs  under any Loan and  Security  Agreement  between
Lender and an Affiliate of Borrower;  or (xv) if Lender determines in good faith
that the Collateral is  insufficient to fully secure the Obligations or that the
prospect of payment of performance of the Obligations is impaired.

      8.2  Remedies.  Upon  the  occurrence  of any  Default,  and  at any  time
thereafter, Lender, at its option, may cease making Loans or otherwise extending
credit to Borrower  under this  Agreement or any other Loan  Document.  Upon the
occurrence of any Event of Default,  and at any time thereafter,  Lender, 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:  (i)
cease  making  Loans or  otherwise  extending  credit  to  Borrower  under  this
Agreement or any other Loan  Document;  (ii)  accelerate  and declare all or any
part  of  the  Obligations  to be

<PAGE>

immediately  due,  payable  and  performable,  notwithstanding  any  deferred or
installment payments allowed by any instrument  evidencing or relating to any of
the Obligations;  (iii) take possession of any or all of the Collateral wherever
it may be found, and for that purpose Borrower hereby authorizes Lender, 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 (or cause a custodian to remain) on the premises in exclusive control
thereof,  without charge for so long as Lender deems it reasonably  necessary in
order to complete  the  enforcement  of its rights  under this  Agreement or any
other agreement; provided, that if Lender seeks to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives (A) any bond and
any surety,  or security relating thereto required by law as an incident to such
possession,  (B) any demand for possession prior to the commencement of any suit
or action to recover  possession  thereof  and (C) any  requirement  that Lender
retain  possession of, and not dispose of any such Collateral  until after trial
or  final  judgment;  (iv)  require  Borrower  to  assemble  any  or  all of the
Collateral  and make it available to Lender at one or more places  designated by
Lender which are reasonably convenient to Lender and Borrower, and to remove the
Collateral  to such  locations  as Lender may deem  advisable;  (v) complete the
processing,  manufacturing  or repair of any  Collateral  prior to a disposition
thereof and, for such purpose and for the purpose of removal,  Lender shall have
the right to use Borrower's premises, vehicles and other Equipment and all other
property  without charge;  (vi) sell,  lease or otherwise  dispose of any of the
Collateral,  in its  condition at the time Lender  obtains  possession  of it or
after  further  manufacturing,  processing  or repair,  at one or more public or
private sales, in lots or in bulk, for cash,  exchange or other property,  or on
credit (a "Sale"), and to adjourn any such Sale from time to time without notice
other than oral  announcement at the time scheduled for Sale (and, in connection
therewith,  (A) Lender shall have the right to conduct  such Sale on  Borrower's
premises without charge, for such times as Lender deems reasonable,  on Lender's
premises.  or elsewhere,  and the Collateral need not be located at the place of
Sale; (B) Lender may directly or through any of its Affiliates purchase or lease
any of the Collateral at any such public  disposition,  and if permissible under
applicable law, at any private  disposition and (C) any Sale of Collateral shall
not relieve  Borrower of any  liability  Borrower may have if any  Collateral is
defective  as to title,  physical  condition  or otherwise at the time of sale);
(vii) demand payment of and collect any Accounts, Chattel Paper, Instruments and
General  Intangibles  included in the Collateral  and, in connection  therewith,
Borrower irrevocably authorizes Lender 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  Collateral  or proceeds  thereof  and, in Lender's  sole
discretion,  to grant  extensions of time to pay,  compromise  claims and settle
Accounts,  General Intangibles and the like for less than face value; and (viii)
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
relating thereto. In addition to the foregoing remedies,  upon the occurrence of
any Event of Default  resulting from a breach of any of the financial  covenants
set forth in Section  5.19,  Lender may,  at its option,  upon not less than ten
days' prior notice to Borrower, reduce any or all of the Advance Rates set forth
in Section  1(b) of  Schedule A to the extent  Lender,  in its sole  discretion,
deems  appropriate.  In addition  to the rights and  remedies  set forth  above,
Lender  shall have all the other rights and  remedies  accorded a secured  party
after default under the UCC and under all other  applicable  laws, and under any
other Loan  Document,  and all of such rights and  remedies are  cumulative  and
non-exclusive.  Exercise  or  partial  exercise  by Lender of one or more of its
rights or remedies shall not be deemed an election or bar Lender from subsequent
exercise or partial  exercise of any other  rights or  remedies.  The failure or
delay of Lender 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 fully paid and performed.  If notice of
any sale or other  disposition of Collateral is required by law, notice at least
seven days prior to the sale  designating the time and place of sale in the case
of a public sale or the time after which any private  sale or other  disposition
is to be made shall be deemed to be reasonable  notice,  and Borrower waives any
other notice.  If any  Collateral is sold or leased by Lender on credit terms or
for future  delivery,  the Obligations  shall not be reduced as a result thereof
until payment is collected by Lender.

<PAGE>

      8.3 Application of Proceeds.  Subject to any application  required by law,
all  proceeds  realized  as the result of any Sale shall be applied by Lender to
the Obligations in such order as Lender shall determine in its sole  discretion.
Any  surplus  shall be paid to  Borrower  or  other  persons  legally,  entitled
thereto;  but Borrower  shall  remain  liable to Lender for any  deficiency.  If
Lender,  in its sole discretion,  directly or indirectly  enters into a deferred
payment or other credit transaction with any purchaser at any Sale, Lender shall
have the option,  exercisable  at any time,  in its sole  discretion,  of either
reducing  the  Obligations  by the  principal  amount of the  purchase  price or
deferring the reduction of the Obligations until the actual receipt by Lender of
the cash therefor.

9.    GENERAL PROVISIONS.

      9.1  Notices.  All  notices to be given under this  Agreement  shall be in
writing and shall be given  either  personally,  by reputable  private  delivery
service, by regular first-class mail or certified mail return receipt requested,
addressed  to Lender or  Borrower  at the  address  shown in the heading to this
Agreement,  or by  facsimile  to the  facsimile  number shown in Section 9(i) of
Schedule  A,  or at  any  other  address  (or  to any  other  facsimile  number)
designated  in writing by one party to the other party in the manner  prescribed
in this  Section  9.1.  All  notices  shall be deemed to have  been  given  when
received or when delivery is refused by the recipient.

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

      9.3 Integration. This Agreement and the other Loan Documents represent the
final,  entire and complete  agreement between Borrower and Lender and supersede
all prior and contemporaneous negotiations, oral representations and agreements,
all of which are merged and integrated  into this  Agreement.  THERE ARE NO ORAL
UNDERSTANDINGS,  REPRESENTATIONS OR AGREEMENTS BETWEEN THE PARTIES WHICH ARE NOT
SET FORTH IN THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS.

      9.4  Waivers.  The  failure  of  Lender  at any time or  times to  require
Borrower to strictly  comply with any of the provisions of this Agreement or any
other Loan  Documents  shall not waive or diminish  any right of Lender 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 Loan
Document  shall be deemed to have been waived by any act or  knowledge of Lender
or its agents or employees,  but only by a specific  written waiver signed by an
authorized officer of Lender 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,  Chattel
Paper,  Investment  Property  or  guaranty  at any time  held by Lender on which
Borrower  is or may in any way be  liable,  and  notice of any  action  taken by
Lender,  unless expressly  required by this Agreement,  and notice of acceptance
hereof.

      9.5  Amendment.  The terms and  provisions  of this  Agreement  may not be
amended  or  modified  except  in a  writing  executed  by  Borrower  and a duly
authorized officer of Lender.

      9.6 Time of Essence. Time is of the essence in the performance by Borrower
of each and every obligation under this Agreement and the other Loan Documents.

      9.7 Attorneys  Fees and Cents.  Borrower  shall  reimburse  Lender for all
reasonable  attorneys' and paralegals'  fees (including  in-house  attorneys and
paralegals  employed  by  Lender)  and  all  filing,  recording,  search,  title
insurance, appraisal, audit, and other costs incurred by Lender, pursuant to, in
connection  with,  or  relating  to this  Agreement,  including  all  reasonable
attorneys'  fees and costs Lender incurs to prepare and

<PAGE>

negotiate this Agreement and the other Loan Documents; to obtain legal advice in
connection  with this  Agreement and the other Loan Documents or Borrower or any
Obligor,  to administer  this Agreement and the other Loan Documents  (including
the cost of periodic financing statement,  tax lien and other searches conducted
by Lender); to enforce, or seek to enforce, any of its rights; prosecute actions
against,  or defend actions by, Account Debtors;  to commence,  intervene in, or
defend any action or proceeding; to initiate any complaint to be relieved of the
automatic stay in bankruptcy; to file or prosecute any probate claim, bankruptcy
claim,  third-party claim, or other claim; to examine,  audit, copy, and inspect
any of the Collateral or any of Borrower's books and records; to protect, obtain
possession  of,  lease,  dispose  of, or  otherwise  enforce  Lender's  security
interests  in,  the  Collateral,  and  to  otherwise  represent  Lender  in  any
litigation relating to Borrower.  If either Lender 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 reasonable  costs and attorneys'
fees, including reasonable attorneys' fees and costs incurred in the enforcement
of,  execution  upon or defense of any order,  decree,  award or  judgment.  All
attorneys'  fees and costs to which  Lender  may be  entitled  pursuant  to this
Section  shall  immediately  become  part of the  Obligations,  shall  be due on
demand,  and shall bear  interest at a rate equal to the highest  interest  rate
applicable to any of the Obligations.

      9.8 Benefit of Agreement;  Assignability. 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 Lender;
provided,  that Borrower may not assign or transfer any of its rights under this
Agreement  without  the prior  written  consent  of Lender,  and any  prohibited
assignment  shall be void. No consent by Lender to any assignment  shall release
Borrower from its liability  for any of the  Obligations.  Lender shall have the
right  to  assign  all or any of its  rights  and  obligations  under  the  Loan
Documents,  and to sell participating  interests  therein,  to one or more other
Persons,  and  Borrower  agrees  to  execute  all  agreements,  instruments  and
documents  requested  by Lender in  connection  with  each such  assignment  and
participation.

      9.9 Headings;  Construction.  Section and subsection  headings are used in
this Agreement only for  convenience.  Borrower and Lender  acknowledge that the
headings  may not  describe  completely  the  subject  matter of the  applicable
Sections or  subsections,  and the  headings  shall not be used in any manner to
construe,  limit,  define or interpret any term or provision of this  Agreement.
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 Lender or Borrower under any role of construction or
otherwise.

      9.10  GOVERNING  LAW;  CONSENT  TO FORUM,  ETC.  THIS  AGREEMENT  HAS BEEN
NEGOTIATED,  EXECUTED AND DELIVERED,  AND SHALL, BE DEEMED TO HAVE BEEN MADE, IN
NEW YORK,  NEW YORK,  AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH
THE LAWS OF SUCH STATE APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED ENTIRELY
IN SUCH STATE.  BORROWER  HEREBY  CONSENTS AND AGREES THAT THE STATE AND FEDERAL
COURTS IN NEW YORK,  NEW YORK OR THE  STATE IN WHICH  ANY OF THE  COLLATERAL  IS
LOCATED SHALL HAVE  NON-EXCLUSIVE  JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS
OR DISPUTES BETWEEN BORROWER AND LENDER PERTAINING TO THIS AGREEMENT,  ANY OTHER
LOAN  DOCUMENTS OR ANY MATTER ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE
OTHER LOAN DOCUMENTS. BORROWER EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION  IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT,  AND WAIVES ANY
OBJECTION WHICH BORROWER HAVE BASED UPON LACK OF PERSONAL JURISDICTION, IMPROPER
VENUE OR FORUM NON  CONVENIENTS.  BORROWER ALSO AGREES THAT ANY CLAIM OR DISPUTE
BROUGHT BY BORROWER  AGAINST LENDER PURSUANT TO THIS  AGREEMENT,  ANY OTHER LOAN
DOCUMENT OR ANY MATTER  ARISING OUT OF THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT

<PAGE>

SHALL BE BROUGHT EXCLUSIVELY IN THE STATE AND FEDERAL COURTS OF NEW YORK COUNTY.
BORROWER  HEREBY  WAIVES  PERSONAL  SERVICE OF THE SUMMONS,  COMPLAINT AND OTTER
PROCESS  ISSUED  IN ANY SUCH  ACTION OR SUIT AND  AGREES  THAT  SERVICE  OF SUCH
SUMMONS,  COMPLAINT  AND OTHER  PROCESS  MAY BE MADE IN THE  MANNER AND SHALL BE
DEEMED RECEIVED AS SET FORTH IN SECTION 9.1 FOR NOTICES, TO THE EXTENT PERMITTED
BY LAW. NOTHING IN THIS AGREEMENT SHALL BE DEEMED OR OPERATE TO AFFECT THE RIGHT
OF LENDER TO SERVE LEGAL  PROCESS IN ANY OTHER  MANNER  PERMITTED  BY LAW, OR TO
PRECLUDE THE  ENFORCEMENT  BY LENDER OF ANY  JUDGMENT OR ORDER  OBTAINED IN SUCH
FORUM OR THE TAKING OF ANY ACTION  UNDER THIS  AGREEMENT  TO ENFORCE THE SAME IN
ANY OTHER APPROPRIATE FORUM OR JURISDICTION.

      9.11 WAIVER OF JURY TRIAL,  ETC. BORROWER WAIVES (i) THE RIGHT TO TRIAL BY
JURY (WHICH LENDER ALSO WAIVES) IN ANY ACTION, SUIT,  PROCEEDING OR COUNTERCLAIM
OF ANY  KIND  ARISING  OUT OF OR  RELATED  TO ANY  OF THE  LOAN  DOCUMENTS,  THE
OBLIGATIONS  OR THE  COLLATERAL  OR ANY CONDUCT,  ACTS OR OMISSIONS OF LENDER OR
BORROWER OR ANY OF THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, ATTORNEYS OR
AGENTS OR ANY OTHER PERSONS AFFILIATED WITH LENDER OR BORROWER, WHETHER SOUNDING
IN  CONTRACT,  TORT OR  OTHERWISE;  (ii) THE  RIGHT  TO  INTERPOSE  ANY  CLAIMS,
DEDUCTIONS,  SETOFFS OR  COUNTERCLAIMS  OF ANY KIND IN ANY ACTION OR  PROCEEDING
INSTITUTED BY LENDER WITH RESPECT TO THE LOAN  DOCUMENTS OR ANY MATTER  RELATING
THERETO,  EXCEPT FOR  COMPULSORY  COUNTERCLAIMS;  (iii) NOTICE PRIOR TO LENDER'S
TAKING  POSSESSION OR CONTROL OF THE  COLLATERAL  OR ANY BOND OR SECURITY  WHICH
MIGHT BE  REQUIRED BY ANY COURT  PRIOR TO  ALLOWING  LENDER TO  EXERCISE  ANY OF
LENDER'S  REMEDIES  AND (iv) THE  BENEFIT  OF ALL  VALUATION,  APPRAISEMENT  AND
EXEMPTION LAWS. BORROWER  ACKNOWLEDGES THAT THE FOREGOING WAIVERS ARE A MATERIAL
INDUCEMENT TO LENDER'S  ENTERING INTO THIS  AGREEMENT AND THAT LENDER IS RELYING
UPON THE  FOREGOING  WAIVERS  IN ITS FUTURE  DEALINGS  WITH  BORROWER.  BORROWER
WARRANTS AND  REPRESENTS  THAT IT HAS REVIEWED  THE  FOREGOING  WAIVERS WITH ITS
LEGAL COUNSEL AND HAS KNOWINGLY  AND  VOLUNTARILY  WAIVED IT'S JURY TRIAL RIGHTS
FOLLOWING  CONSULTATION  WITH LEGAL COUNSEL.  IN THE EVENT OF  LITIGATION,  THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

<PAGE>

      IN WITNESS  WHEREOF,  Borrower and Lender have signed this Agreement as of
the date set forth in the heading.

Borrower:                                       Lender:
COFFEE HOLDING CO., INC.                        NATIONSCREDIT COMMERCIAL
                                                CORPORATION, THROUGH ITS
                                                NATIONSCREDIT FUNDING
                                                DIVISION

By_______________________                       By___________________________
Name_____________________                       Its Authorized Signatory
Title____________________

<PAGE>

                                   SCHEDULE A

                          Description of Certain Terms

      This  Schedule  is an  integral  part of the Loan and  Security  Agreement
between  COFFEE  HOLDING CO.,  INC. and  NATIONSCREDTT  COMMERCIAL  CORPORATION,
THROUGH ITS NATIONSCREDTT COMMERCIAL FUNDING DIVISION (the "Agreement").

1.    Loan Limits for Revolving
      Loans:

      (a)   Maximum Facility
            Amount:                                  $5,000,000

      (b)   Advance Rates:

            (i)   Accounts                           85%; provided,  that if the
                  Advance Rate:                      Dilution Percentage exceeds
                                                     4%, such  advance rate will
                                                     be reduced by the number of
                                                     full or partial  percentage
                                                     points of such  excess

            (ii)  Inventory
                  Advance
                  Rate(s):


            (A)   Finished
                  goods:                             60 %

            (B)   Raw
                  materials:                         60 %

            (C)   Work in
                  process:                           Not Applicable

      (c)   Accounts Sublimit:                       Not Applicable

      (d)   Inventory
            Sublimit(s):

      (i)   Overall sublimit on                      $750,000  or, if less,  the
            advances against                         aggregate  advances against
            Eligible Inventory                       Accounts  at  any  time  of
                                                     determination

      (ii)  Sublimit on advances                     Not Applicable
            against finished goods

      (iii) Sublimit on advances                     Not Applicable
            against raw materials

<PAGE>

      (e)   Credit                                   $500,000
            Accommodation
            Limit:

      (f)   Permanent Reserve                        Not Applicable
            Amount:

      (g)   Overadvance Amount:                      Not Applicable

2.    Loan Limits for Term Loan:

      (a)   Principal Amount:

            (i)   Equipment                          The lesser of $500,000  and
                  Advance:                           80%   of   the    appraised
                                                     auction   sale   value   of
                                                     Borrower's         Eligible
                                                     Equipment

            (ii)  Real Property                      Not Applicable
                  Advance:

      (b)   Repayment Schedule:

            (i)   Equipment                          The Equipment Advance shall
                  Advance:                           be    repaid    in    equal
                                                     consecutive         monthly
                                                     installments amortized over
                                                     60  months  payable  on the
                                                     first day of each  calendar
                                                     month commencing January 1,
                                                     1998,   with   the   entire
                                                     unpaid   balance   due  and
                                                     payable  on  the   Maturity
                                                     Date

            (ii)  Real Property                      Not Applicable
                  Advance:

3.    Interest Rates:

      (a)   Revolving Loans:                         1 % per  annum in excess of
                                                     the Prime Rate

      (b)   Term Loan:                               1 % per  annum in excess of
                                                     the Prime Rate

4.    Minimum Loan Amount:                           $2,750,000

5.    Maximum Days:

      (a)   Maximum days after
            original invoice date
            for Eligible Accounts:                   90 days

      (b)   Maximum  days  after
            original invoice date
            due   date for Eligible

<PAGE>

            Accounts:                                60 days

6.    Fees:

            (a)   Closing Fee:                       Not Applicable

            (b)   Facility Fee:

                  (i)   Initial Term:                $50,000

                  (ii)  Renewal
                        Term(s)                      $75,000

            (c)   Servicing Fee:                     $300 per month

            (d)   Unused Line Fee:                   Not Applicable

            (e)   Minimum Borrowing
                  Fee:

                  (i)   Applicable                   Each Year
                        period:

                  (ii)  Date payable:                Each   anniversary  of  the
                                                     date of the Agreement

            (f)   Success Fee:                       Not Applicable

            (g)   Warrants:                          Not Applicable

            (h)   Early Termination
                  Fee:                               3% of the Maximum  Facility
                                                     Amount if terminated during
                                                     the first year of the Term,
                                                     2% of the Maximum  Facility
                                                     Amount if terminated during
                                                     the  second   year  of  the
                                                     Term,   and  1  %  of   the
                                                     Maximum  Facility Amount if
                                                     terminated  thereafter  and
                                                     prior to the Maturity Date;
                                                     provided   that  the  Early
                                                     Termination   Fee  will  be
                                                     waived    by    Lender   if
                                                     Borrower    transfers   the
                                                     Loans  and all of its other
                                                     Obligations   hereunder  to
                                                     another     division     of
                                                     NationsCredit    Commercial
                                                     Corporation or NationsBank,
                                                     N.A.

            (i)   Fees for letters of                1% per  annum  of the  face
                  credit and other Credit            amount of each open  Credit
                  Accommodations (or                 Accommodation,   plus   all
                  guaranties thereof by              costs and fees  charged  by
                  Lender):                           the issuer

7.    Initial Maturity Date:                         November 20, 2000

8.    Financial Covenants:

<PAGE>

      (a)   Capital Expenditure
            Limitation:                              Not Applicable

      (b)   Minimum Net Worth
            Requirement:                             Not Applicable

      (c)   Minimum Tangible
            Net   Worth:                             Not Applicable

      (d)   Minimum Working
            Capital:                                 Not Applicable

      (e)   Maximum Cumulative
            Net   Loss:                              Not Applicable

      (f)   Minimum Cumulative
            Net   Income:                            Not Applicable

      (g)   Maximum Leverage
            Ratio:                                   Not Applicable

      (I)   Limitation on
            Equipment Leases:                        Not Applicable

      (h)   Limitation on
            Purchase Money                           Not Applicable
            Security Interests:                      Not Applicable

      (j)   Additional Financial
            Covenants:                               Not Applicable

9.    Borrower Information:

      (a)   Prior Names of                           None
            Borrower:

      (b)   Prior Trade Names of                     None
            Borrower:

      (c)   Existing Trade Names                     None
            of    Borrower

      (d)   Inventory Locations:                     54A Hackensack Avenue
                                                     River Terminal
                                                     Kearny, New Jersey 09032

      (e)   Other Locations:                         4425a First Avenue
                                                     Brooklyn, New York 11232

<PAGE>

      (f)   Litigation:                              Borrower    is    currently
                                                     involved   in  a  workmen's
                                                     compensation claim which is
                                                     not    material    to   the
                                                     financial    condition   or
                                                     operation  of the  business
                                                     of Borrower

      (g)   Ownership of                             Andrew Gordon - 21%
            Borrower:                                David Gordon - 21%
                                                     Rachelle Gordon - 58%
                                                     Grantor Retained
                                                     Annuity Trust

      (h)   Subsidiaries (and                        None
            ownership thereof):

      (i)   Facsimile Numbers:

            Borrower:                                718-832-0892

            Lender:                                  212-597-1666

10.   Description of Real Property:                  None

11.   Lender's Bank:                                 First Chicago NBD

12.   Other Covenants:                               None

13.   Exceptions to Negative                         None
      Covenants:

      IN WITNESS WHEREOF,  Borrower and Lender have signed this Schedule A as of
the date set forth in the heading to the Agreement.

Borrower:                                       Lender:

COFFEE HOLDING CO., INC.                        NAITIONSCREDIT COMMERCIAL
                                                CORPORATION, THROUGH ITS
                                                NATIONSCREDIT COMMERCIAL
                                                FUNDING DIVISION

By_______________________                       By_________________________
Name_____________________                       Its Authorized Signatory
Title____________________

<PAGE>

                                   Schedule B

                                   Definitions

      This  Schedule  is an  integral  pan of the  Loan and  Security  Agreement
between  COFFEE  HOLDING CO.,  INC. and  NATIONSCREDTT  COMMERCIAL  CORPORATION,
THROUGH ITS NATIONSCREDTT COMMERCIAL FUNDING DIVISION ("Agreement")

      As used in the Agreement. the following terms have the following meanings:

      "Account"  means any  right to  payment  for  Goods  sold or leased or for
services  rendered  which is not evidenced by an  Instrument  or Chattel  Paper;
whether or not it has been earned by performance.

      "Account Debtor" means the obligor on an Account or Chattel Paper.

      "Account Proceeds" has the meaning set forth in Section 4.1.

      "Affiliate"  means,  with  respect to any  Person,  a  relative,  partner,
shareholder, member, manager, director, officer, or employee of such Person, any
parent or subsidiary of such Person, or any Person controlling, controlled by or
under common control with such Person or any other Person  affiliated,  directly
or  indirectly,  by  virtue  of  family  membership,  ownership,  management  or
otherwise.

      "Agreement" and "this  Agreement" mean the Loan and Security  Agreement of
which this Schedule B is a part and the Schedules thereto.

      "Availability" has the meaning set forth in Section 1.1(a).

      "Bankruptcy Code" means the United States Bankruptcy Code (11 U.S.C.ss.101
et seq.), as the same may be amended from time to time.

      "Blocked Account" has the meaning set forth in Section 4.1.

      "Borrower" has the meaning set forth in the heading to the Agreement.

      "Borrower's  Address"  has the  meaning  set forth in the  heading  to the
Agreement.

      "Business  Day" means a day other  than a Saturday  or Sunday or any other
day on which Lender or banks in New York are authorized to close.

      "Chattel Paper" has the meaning set forth in the UCC.

      "Collateral"  means all  property and  interests  in property,  in or upon
which a security interest or other Lien is granted pursuant to this Agreement or
the other Loan Documents.

      "Credit Accommodation" has the meaning set forth in Section 1.1(a).

<PAGE>

      "Credit Accommodation  Balance" means the sum of (i) the aggregate undrawn
face amount of all outstanding Credit Accommodations and (ii) all interest, fees
and costs due or, in  Lenders  estimation,  likely to become  due in  connection
therewith.

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

      "Default Rate" has the meaning set forth in Section 2.1.

      "Deposit Account" has the meaning set forth in the UCC.

      "Dilution  Percentage" means the gross amount of all returns,  allowances,
discounts, credits, write-offs and similar items relating to Borrower's Accounts
computed as a percentage of Borrower's gross sales,  calculated on a ninety (90)
day rolling average.

      "Document" has the meaning set forth in the UCC.

      "Early Termination Fee" has the meaning set forth in Section 7.2.

      "Eligible  Account" means, at any time of determination,  an Account which
satisfies the general criteria set forth below and which is otherwise acceptable
to Lender (provided, that Lender may, in its sole discretion, change the general
criteria for  acceptability  of Eligible  Accounts  upon at least  fifteen days'
prior  notice to  Borrower).  An  Account  shall be  deemed to meet the  current
general  criteria if (1) neither the Account Debtor nor any of its Affiliates is
an Affiliate,  creditor or supplier of Borrower;  (ii) it does not remain unpaid
more than the  earlier  to occur of (A) the  number of days  after the  official
invoice  date set forth in Section  5(a) of Schedule A or (B) the number of days
after the  original  invoice  due date set forth in Section  5(b) of Schedule A;
(iii) the Account  Debtor or its  Affiliates  are not past due on other Accounts
owing to  Borrower  comprising  more  than 50% of all of the  Accounts  owing to
Borrower by such Account  Debtor or its  Affiliates;  (iv) all Accounts owing by
the  Account  Debtor or its  Affiliates  do not  represent  more than 20% of all
otherwise  Eligible  Accounts  (except  in the  case of the  Preferred  Products
Account,  which  Account  may  represent  up to 25% of  all  otherwise  Eligible
Accounts)  (provided,  that Accounts which are deemed to be ineligible solely by
reason of this clause (iv) shall be considered  Eligible  Accounts to the extent
of the  amount  thereof  which does not  exceed  20% of all  otherwise  Eligible
Accounts);  (v) no  covenant,  representation  or  warranty  contained  in  this
Agreement with respect to such Account (including any of the representations set
forth in Section 5.4) has been breached;  (vi) the Account is not subject to any
contra relationship,  counterclaim,  dispute or set-off (provided, that Accounts
which are deemed to be ineligible  solely by reason of this clause (vi) shall be
considered  Eligible  Accounts to the extent of the amount  thereof which is not
affected by such contra  relationships,  counterclaims,  disputes or  set-offs);
(vii) the Account Debtor's chief executive office or principal place of business
is located in the United  States or  Provinces  of Canada which have adopted the
Personal  Property  Security Act or a similar act,  unless (A) the sale is fully
backed by a letter of credit, guaranty or acceptance acceptable to Lender in its
sole discretion,  and if backed by a letter of credit, such letter of credit has
been issued or confined by a bank satisfactory to Lender, is sufficient to cover
such Account,  and if required by Lender,  the original of such letter of credit
has been delivered to Lender or Lenders agent and the issuer thereof notified of
the  assignment  of the  proceeds of such letter of credit to Lender or (B) such
Account is subject to credit  insurance  payable to Lender  issued by an insurer
and on terms and in an amount  acceptable  to  Lender;  (viii) it is  absolutely
owing to Borrower and does not arise from a sale on a bill-and-hold,  guarantied
sale,  sale-or-return,  sale-on-approval,  consignment,  retainage  or any other
repurchase  or return basis or consist of progress  billings;  (ix) Lender shall
have verified the Account in a manner  satisfactory  to Lender;  (x) the Account
Debtor is not the United States of America or any state or political subdivision
(or any  department,

<PAGE>

agency  or  instrumentality  thereof  unless  Borrower  has  compiled  with  the
Assignment of Claims Act of 1940 (31 U.S.C. ss. 203 et seq.) or other applicable
similar state or local law in a manner  satisfaction,  to Lender;  (xi) it is at
all times subject to Lenders duly perfected, fast priority security interest and
to no other Lien that is not a Permitted Lien, and the goods giving rise to such
Account (A) were not, at the time of sale,  subject to any Lien except Permitted
Liens and (B) have been delivered to and accepted by the Account Debtor,  or the
services  giving  rise to such  Account  have been  performed  by  Borrower  and
accepted by the Account  Debtor;  (xii) the Account is not  evidenced by Chattel
Paper or an Instrument of any kind and has not been reduced to judgment;  (xiii)
the Account  Debtor's total  indebtedness to Borrower does not exceed the amount
of any credit limit  established by Borrower or Lender and the Account Debtor is
otherwise deemed to be creditworthy by Lender (provided, that Accounts which are
deemed  to be  ineligible  solely  by  reason  of this  clause  (xiii)  shall be
considered  Eligible Accounts to the extent the amount of such Accounts does not
exceed  the  lower  of  such  credit  limits);  (xiv)  there  are  no  facts  or
circumstances existing, or which could reasonably be anticipated to occur, which
might result in any adverse change in the Account Debtor's  financial  condition
or impair or delay the  collectibility  of all or any  portion of such  Account;
(xv)  Lender  has  been  furnished  with all  documents  and  other  information
pertaining  to such Account  which Lender has  requested,  or which  Borrower is
obligated to deliver to Lender,  pursuant to this Agreement;  (xvi) Borrower has
not made an  agreement  with the  Account  Debtor to extend  the time of payment
thereof beyond the time periods set forth in clause (ii) above without the prior
written consent of Lender,  and (xvii) Borrower has not posted a surety or other
bond in respect of the contract under which such Account arose.

      "Eligible Equipment" means, at any time of determination,  Equipment owned
by Borrower  which  Lender,  in its sole  discretion,  deems to be eligible  for
borrowing purposes.

      "Eligible Inventory" means, at any time of determination, Inventory (other
than packaging  materials and supplies) which satisfies the general criteria set
forth below and which is otherwise  acceptable to Lender (provided,  that Lender
may, in its sole discretion,  change the general  criteria for  acceptability of
Eligible  Inventory  upon  at  least  fifteen  days'  prior  written  notice  to
Borrower). Inventory shall be deemed to meet the current general criteria if (i)
it consists of raw  materials  or finished  goods,  or  work-in-process  that is
readily  marketable  in its current form;  (ii) it is in good,  new and saleable
condition;  (iii) it is not slow-moving  obsolete,  unmerchantable,  returned or
repossessed;  (iv) it is not in the  possession  of a  processor,  consignee  or
bailee,  or located on premises leased or subleased to Borrower,  or on premises
subject  to a  mortgage  in favor of a Person  other than  Lender,  unless  such
processor,  consignee,  bailee or  mortgagee  or the lessor or sublessor of such
premises, as the case may be, has executed and delivered all documentation which
Lender  shall  require to evidence  the  subordination  or other  limitation  or
extinguishment  of such  Person's  rights  with  respect to such  Inventory  and
Lender's right to gain access thereto; (v) it meets all standards imposed by any
governmental  agency or  authority;  (vi) it  conforms  in all  respects  to any
covenants,  warranties and representations set forth in the Agreement;  (vii) it
is at all times subject to Lender's duly  perfected,  first  priority  security,
interest and no other Lien except a Permitted Lien; and (viii) it is situated at
an Inventory  Location listed in Section 9(d) of Schedule A or other location of
which Lender has been notified as required by Section 5.6.

      "Eligible  Real  Property"  means,  at any  time  of  determination,  Real
Property owned by Borrower  which Lender,  in its sole  discretion,  deems to be
eligible for borrowing purposes.

      "Equipment"  means all Goods which are used or bought for use primarily in
business  (including farming or a profession) or by a Person who is a non-profit
organization or governmental subdivision or agency, and which are not Inventory,
farm products or consumer goods, including all machinery,  molds, machine tools,
motors,  furniture,  equipment,  furnishings,  fixtures,  trade fixtures,  motor
vehicles,  tools,  pans,  dies  and  jigs,  and  all  attachments,  accessories,
accessions, replacements,  substitutions, additions or improvements to, or spare
parts for, any of the foregoing.

<PAGE>

      "Equipment Advance" has the meaning set forth in Section 1.1(b).

      "ERISA" means the Employee  Retirement Income Security Act of 1974 and all
roles, regulations and orders promulgated thereunder.

      "Event of Default" has the meaning set forth in Section 8.1.

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

      "General  Intangibles"  has the meaning set forth in the UCC, and includes
all books and  records  pertaining  to the  Collateral  and other  business  and
financial records in the possession of Borrower or any other Person, inventions,
designs,  drawings,  blueprints,   patents,  patent  applications,   trademarks,
trademark applications (other than "intent to use" applications until a verified
statement of use is filed with respect to such applications) and the goodwill of
the business  symbolized thereby,  names, trade names, trade secrets,  goodwill,
copyrights,  registrations,  licenses, franchises,  customer lists, security and
other deposits, causes of action and other 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,  rights to
purchase or sell real or personal  property  rights  licensor or licensee of any
kind, telephone numbers, internet addresses, proprietary,  information, purchase
orders, and all insurance policies and claims (including life insurance, key man
insurance, credit insurance,  liability insurance,  property insurance and other
insurance),  tax refunds and claims, letters of credit, banker's acceptances and
guaranties,  computer programs, discs, tapes and tape files in the possession of
Borrower or any other Person,  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.

      "Goods"  means all  things  which  are  movable  at the time the  security
interest   attaches  or  which  are  fixtures  (other  than  money,   Documents,
Instruments,  Investment Property Accounts,  Chattel Paper, General Intangibles,
or minerals or the like  (including oil and gas) before  extraction),  including
standing  timber which is to be cut and removed  under a conveyance  or contract
for sale, the unborn young of animals, and growing crops.

      "Initial Term" has the meaning set forth in Section 7.1.

      "Instrument" has the meaning set forth in the UCC.

      "Inventory"  means all Goods held for sale or lease or  furnished or to be
furnished  under  contracts of service,  including  all raw  materials,  work in
process,  finished goods,  goods in transit and materials and supplies which are
or  might be used or  consumed  in a  business  or used in  connection  with the
manufacture, packing, shipping, advertising, selling or finishing of such Goods,
and all  products  of the  foregoing,  and  shall  include  interests  in  goods
represented by Accounts,  returned, reclaimed or repossessed goods and rights as
an unpaid vendor.

      "Investment  Property"  shall mean all of Borrower's  securities,  whether
certificated or uncertificated,  securities  entitlements,  securities accounts,
commodity contracts and commodity accounts.

      "Lender" has the meaning set forth in the heading to the Agreement.

<PAGE>

      "Lien" means any interest in property securing an obligation owed to, or a
claim by, a Person other than the owner of the  property,  whether such interest
is based on common law,  statute or contract,  including rights of sellers under
conditional  sales  contracts or title  retention  agreements and  reservations,
exceptions,  encroachments,  easements,  rights-of-way,  covenants,  conditions,
restrictions,  leases and other  title  exceptions  and  encumbrances  affecting
property. For the purpose of this Agreement,  Borrower shall be deemed to be the
owner of any property  which it has acquired or holds  subject to a  conditional
sale agreement or other arrangement  pursuant to which title to the property has
been retained by or vested in some other Person for security purposes.

      "Lien" has the meaning set forth in Section 2.4.

      "Loan  Account"  means the  Agreement and all notes,  Agreement,  security
agreements,  certificates,  landlord's agreements,  Lock Box and Blocked Account
agreements and all other agreements,  documents and instruments now or hereafter
executed or  delivered  by Borrower or any  Obligor in  connection  with,  or to
evidence the transactions contemplated by this Agreement.

      "Loan Limits" means,  collectively,  the Availability limits and all other
limits  on the  amount  of Loans  and  Credit  Accommodations  set forth in this
Agreement.

      "Loans" means, collectively, the Revolving Loans and any Term Loan.

      "Lock Box" has the meaning set forth in Section 4.1.

      "Maturity Date" has the meaning set forth in Section 7.1.

      "Obligations"  means  all  present  and  future  Loans,  advances,  debts,
liabilities,  obligations, guaranties, covenants, duties and indebtedness at any
time owing by Borrower to Lender,  whether  evidenced  by this  Agreement or any
other Loan Document,  whether arising from an extension of credit,  opening of a
Credit  Accommodation,  guaranty,  indemnification  or otherwise  (including all
fees,  costs  and  other  amounts  which  may be  owing  to  issuers  of  Credit
Accommodations  and all  taxes,  duties,  freight,  insurance,  costs  and other
expenses,  costs or amounts payable in connection with Credit  Accommodations or
the underlying goods),  whether direct or indirect  (including those acquired by
assignment and any participation by Lender in Borrower's  indebtedness  owing to
others),  whether  absolute or  contingent,  whether  due or to become due,  and
whether  arising  before or after the  commencement  of a  proceeding  under the
Bankruptcy  Code  or any  similar  statute,  including  all  interest,  charges,
expenses,  fees,  attorney's fees,  expert witness fees,  audit fees,  letter of
credit fees, loan fees, Early Termination  Fees,  Minimum Borrowing Fees and any
other sums  chargeable to Borrower  under this Agreement or under any other loan
Document.

      "Obligor" means any guarantor,  endorser, acceptor, surety or other person
liable  on,  or with  respect  to,  the  Obligations  or who is the owner of any
property which is security for the Obligations, other than Borrower.

      "Permitted Liens" means: (i) purchase money security interests in specific
items of Equipment  in an aggregate  amount net to exceed the limit set forth in
Section  8(h) of Schedule A; (ii) leases of specific  items of  Equipment  in an
aggregate  amount not to exceed the limit set forth in Section  8(i) of Schedule
A; (iii) Liens for taxes not yet due and payable;  (iv)  additional  Liens which
are fully  subordinate to the security  interests of Lender and are consented to
in writing by Lender; (v) security interests being terminated  concurrently with
the  execution  of  this  Agreement;  (vi)  Liens  of  materialmen,   mechanics,
warehousemen or carriers arising in the ordinary course of business and securing
obligations  which are not  delinquent;  (vii) Liens

<PAGE>

incurred  in  connection  with the  extension,  renewal  or  refinancing  of the
indebtedness secured by Liens of the type described in clause (i) or (ii) 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;  (viii)
Liens in favor of  customs  and  revenue  authorities  which  secure  payment of
customs  duties in  connection  with the  importation  of goods;  (ix)  security
deposits posted in connection with real property,  leases or subleases;  and (x)
Liens existing on the date of this Agreement which are listed,  and the property
subject thereto  described,  in Schedule C but only to the,  respective date, if
any, set forth in such  Schedule C for the removal and  termination  of any such
Liens.  Lender  will have the right to require,  as a  condition  to its consent
under  clause  (iv)  above,  that the  holder  of the  additional  Lien  sign an
interereditor  agreement in form and substance  satisfactory  to Lender,  in its
sole  discretion,  acknowledging  that the Lien is  subordinate  to the security
interests  of  Lender,  and  agreeing  not to take any  action  to  enforce  its
subordinate  Lien  so long  as any  Obligations  remain  outstanding,  and  that
Borrower  agree  that any  uncured  default  in any  obligation  secured  by the
subordinate lien shall also constitute an Event of Default under this Agreement.

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

      "Prime  Rate"  means,  at any given time,  the prime rate as quoted in The
Wall Street  Journal as the base rate on corporate  loans posted as of such time
by at least 75% of the nation's 30 largest banks (which rate is not  necessarily
the lowest rate offered by such banks).

      "Real  Property"  means  the real  property  described  in  Section  10 of
Schedule A.

      "Real Property Advance" has the meaning set forth in Section 1.1(b).

      "Released Parties" has the meaning set forth in Section 6.1.

      "Renewal Terms" has the meaning set forth in Section 7.1.

      "Reserves" has the meaning set forth in Section 1.2.

      "Revolving Loans" has the meaning set forth in Section 1.1(a).

      "Sale" has the meaning set forth in Section 8.2.

      "Subsidiary" means any corporation or other entity of which a Person owns,
directly or indirectly,  through one or more  intermediaries,  more than 50 % of
the capital stock or other equity interest at the time of determination.

      "Term"  means the  period  commencing  on the date of this  Agreement  and
ending on the Maturity Date.

      "Term Loan" has the meaning set forth in Section 1.1(b).

      "UCC" means, at any given time, the Uniform Commercial Code as adopted and
in effect at such time in the State of New York.

<PAGE>

      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 UCC, to the extent such terms are defined therein.  The
term "including," whenever used in this Agreement, shall mean "including but not
limited to." The singular  form of any term shall  include the plural form,  and
vice versa,  when the context so requires.  References to Sections,  subsections
and  Schedules  are to  Sections  and  subsections  of, and  Schedules  to, this
Agreement.   All  references  to  agreements  and  statutes  shall  include  all
amendments thereto and successor statutes in the case of statutes.

      IN WITNESS WHEREOF,  Borrower and Lender have signed this Schedule B as of
the date set forth in the heading to the Agreement.

Borrower:                                       Lender:

COFFEE HOLDING CO., INC.                        NATIONSCREDIT COMMERCIAL
                                                CORPORATION, THROUGH ITS
                                                NATIONSCREDIT COMMERCIAL
                                                FUNDING DIVISION

By_______________________                       By_________________________
Name_____________________                       Its Authorized Signatory
Title____________________

<PAGE>

      IN WITNESS WHEREOF,  Borrower and Lender have signed this Schedule C as of
the date set forth in the heading to the Agreement.

Borrower:                                       Lender:

COFFEE HOLDING CO., INC.                        NATIONSCREDIT COMMERCIAL
                                                CORPORATION, THROUGH ITS
                                                NATIONSCREDIT COMMERCIAL
                                                FUNDING DIVISION

By_______________________                       By_________________________
Name_____________________                       Its Authorized Signatory
Title____________________