F I N O V A
                                                            FINANCIAL INNOVATORS



                          LOAN AND SECURITY AGREEMENT


                          ORGANIC FOOD PRODUCTS, INC.

                                    Borrower

                              550 Monterey Avenue

                             Morgan Hill, CA 95037

                                    Address

                                   94-3076294

                            Borrower Fed ID Tax No.



                                   $3,500,000
                                  Credit Limit

                                October 9, 1998


                             FINOVA BUSINESS CREDIT

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     THIS LOAN AND SECURITY  AGREEMENT  (collectively  with the Schedule to Loan
Agreement (the "Schedule")  attached hereto, the "Agreement") dated the date set
forth on the cover page,  is entered into by and between the  borrower  named on
the cover page (the  "Borrower"),  whose  address is set forth on the cover page
and FINOVA  Capital  Corporation  ("FINOVA"),  whose  address is 355 South Grand
Avenue, Suite 2400, Los Angeles, California 90071.


1. DEFINITIONS.

     1.1. Defined Terms. As used in this Agreement, the following terms have the
definitions set forth below:

     "ADA" has the meaning set forth in Section 4.1(w) hereof.

     "Additional Sums" has the meaning set forth in Section 2.8(a) hereof.

     "Affiliate"  means any Person  controlling,  controlled  by or under common
control with  Borrower.  For purposes of this  definition,  "control"  means the
possession, directly or indirectly, of the power to direct or cause direction of
the management and policies of any Person,  whether through  ownership of common
or preferred stock or other equity interests, by contract or otherwise.  Without
limiting the  generality of the  foregoing,  each of the  following  shall be an
Affiliate:  any  officer,  director,  employee or other agent of  Borrower,  any
shareholder, member or subsidiary of Borrower, and any other Person with whom or
which Borrower has common shareholders, officers or directors.

     "Agreement" has the meaning set forth in the preamble.

     "Annual Renewal Fee" has the meaning set forth in the Schedule.

     "Applicable Law" has the meaning set forth in Section 8.2(a) hereof.

     "Applicable Usury Law" has the meaning set forth in Section 2.8(b) hereof.

     "Blocked Account" has the meaning set forth in Section 2.9(c) hereof.

     "Business Day" means any day on which commercial banks in both Los Angeles,
California and Phoenix, Arizona are open for business.

     "Capital Expenditures" means all expenditures made and liabilities incurred
for the acquisition of any fixed asset or improvement, replacement, substitution
or addition thereto which has a useful life of more than one year and including,
without limitation, those arising in connection with Capital Leases.

     "Capital Lease" means any lease of property by Borrower that, in accordance
with GAAP, should be capitalized for financial  reporting purposes and reflected
as a liability on the balance sheet of Borrower.

     "Closing  Date"  means  the  date of the  initial  advance  made by  FINOVA
pursuant to this Agreement.

     "Closing Fee" has the meaning set forth in the Schedule.

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

     "Collateral" has the meaning set forth in Section 3.1 hereof.

     "Collateral Monitoring Fee" has the meaning set forth in the Schedule.

     "Current  Assets" at any date means the amount at which the current  assets
of  Borrower  would be shown on a balance  sheet of  Borrower  as at such  date,
prepared in accordance with GAAP,  provided that amounts due from Affiliates and
investments in Affiliates shall be excluded therefrom.

     "Current  Liabilities"  at any date means the  amount at which the  current
liabilities of Borrower would be shown on a balance sheet of Borrower as at such
date, prepared in accordance with GAAP.

     "Deposit Accounts" has the meaning set forth in Section 9105 of the Code.

     "Dominion Account" has the meaning set forth in Section 2.9(c) hereof.


<PAGE>


     "Earnings Before Interest,  Taxes,  Depreciation and  Amortization" for any
fiscal  period of  Borrower  means the net income of  Borrower  for such  fiscal
period,   before  payment  of  any  management  fees,  plus  interest   expense,
depreciation  and  amortization  and  provision for income taxes for such fiscal
period,  and  minus  non-recurring   miscellaneous  income  and  expenses,   all
calculated in accordance with GAAP.

     "Eligible  Inventory"  means  Inventory  which  FINOVA,  in  its  Permitted
Discretion, deems Eligible Inventory, based on such considerations as FINOVA may
from time to time deem  appropriate.  Without  limiting  the  generality  of the
foregoing,  no  Inventory  shall  be  Eligible  Inventory  unless,  in  FINOVA's
Permitted Discretion,  such Inventory (i) consists of raw materials and finished
goods,   in  good,  new  and  salable   condition  which  are  not  obsolete  or
unmerchantable, and are not comprised of work in process, packaging materials or
supplies;  (iii)  meets all  standards  imposed  by any  governmental  agency or
authority;  (iv) conforms in all respects to the warranties and  representations
set forth herein; (v) is at all times subject to FINOVA's duly perfected,  first
priority  security  interest;  and (vi) is situated at a location in  compliance
with  Section 5.16 hereof.  Notwithstanding  any other term hereof,  in no event
shall  Eligible  Inventory  include (i)  perishable  Inventory or (ii) Inventory
located at co-packing facilities.

     "Eligible  Receivables" means Receivables arising in the ordinary course of
Borrower's  business  from the sale of goods or  rendition  of  services,  which
FINOVA,  in  its  Permitted  Discretion,  shall  deem  eligible  based  on  such
considerations  as  FINOVA  may  from  time to time  deem  appropriate.  Without
limiting  the  foregoing,  a  Receivable  shall not be deemed to be an  Eligible
Receivable if (i) the account debtor has failed to pay the Receivable within (A)
a period of ninety (90) days after  invoice  date or (B) a period of thirty (30)
days after due date,  but not to exceed  ninety (90) days after invoice date, to
the extent of any amount  remaining  unpaid after such period;  (ii) the account
debtor has failed to pay more than twenty-five  percent (25%) of all outstanding
Receivables  owed by it to Borrower  within ninety (90) days after invoice date;
(iii) the account  debtor is an Affiliate of Borrower;  (iv) the goods  relating
thereto are placed on consignment,  guaranteed  sale,  "bill and hold," "COD" or
other terms pursuant to which payment by the account debtor may be  conditional;
(v)  the  account  debtor  is not  located  in the  United  States,  unless  the
Receivable  is  supported  by a letter of credit or other  form of  guaranty  or
security,  in each case in form and substance  satisfactory to FINOVA;  (vi) the
account debtor is the United States or any department, agency or instrumentality
thereof or any State, city or municipality of the United States;  (vii) Borrower
is or may  become  liable  to the  account  debtor  for goods  sold or  services
rendered by the account  debtor to Borrower;  (viii) the account  debtor's total
obligations  to  Borrower   exceed   fifteen   percent  (15%)  of  all  Eligible
Receivables,  to the extent of such  excess;  (ix) the account  debtor  disputes
liability  or makes any claim  with  respect  thereto  (up to the amount of such
liability or claim),  or is subject to any insolvency or bankruptcy  proceeding,
or becomes  insolvent,  fails or goes out of a material portion of its business;
(x) the amount  thereof  consists of late charges or finance  charges;  (xi) the
amount thereof consists of a credit balance more than ninety (90) days past due;
(xii) the face amount thereof  exceeds Ten Thousand  Dollars  ($10,000),  unless
accompanied by evidence of shipment of the goods relating  thereto  satisfactory
to FINOVA in its Permitted Discretion; (xiii) the invoice constitutes a progress
billing on a project not yet  completed,  except that the final  billing at such
time as the matter has been  completed  and  delivered  to the  customer  may be
deemed  an  Eligible  Receivable;  or  (xiv)  the  amount  thereof  is  not  yet
represented by an invoice or bill issued in the name of the  applicable  account
debtor.

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

     "Environmental Costs" has the meaning set forth in Section 8.2(b) hereof.

     "ERISA" means the  Employment  Retirement  Income  Security Act of 1974, as
amended, and the regulations  thereunder. 

     "ERISA Affiliate" means each trade or business (whether or not incorporated
and whether or not foreign) which is or may hereafter become a member of a group
of which  Borrower is a member and which is treated as a single  employer  under
ERISA Section 4001(b)(1), or IRC Section 414.

     "Event of Default" means any of the events set forth in Section 7.1 of this
Agreement.

     "Examination Fee" has the meaning set forth in the Schedule.


<PAGE>


     "Excess  Availability"  means,  as of the Closing Date, the amount by which
the total principal balance of the Revolving Credit Loans facility  outstanding,
based on the formulas and reserves set forth in the Schedule, exceeds the sum of
the Receivable  Loans and the Inventory  Loans then actually  outstanding,  such
excess then being  reduced by an amount  necessary to provide for the payment of
all accounts  payable of Borrower  which are more than thirty (30) days past due
date and all book overdrafts.

     "FINOVA Affiliate" has the meaning set forth in Section 9.22 hereof.

     "GAAP" means generally accepted accounting  principles in the United States
of  America  as in effect  from time to time as set  forth in the  opinions  and
pronouncements of the Accounting  Principles Board and the American Institute of
Certified  Public  Accountants  and the  statements  and  pronouncements  of the
Financial  Accounting Standards Boards which are applicable to the circumstances
as of the date of  determination  consistently  applied,  except  that,  for the
financial covenants set forth in this Agreement, GAAP shall be determined on the
basis of such  principles in effect on the date hereof and consistent with those
used in the preparation of the audited financial  statements delivered to Lender
prior to the date hereof.

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

     "Hazardous Substance" has the meaning set forth in Section 8.2(a) hereof.

     "Indebtedness"  means all of  Borrower's  present  and future  obligations,
liabilities,  debts,  claims and indebtedness,  contingent,  fixed or otherwise,
however evidenced,  created, incurred, acquired, owing or arising, whether under
written or oral agreement,  operation of law or otherwise, and includes, without
limiting the foregoing (i) the Obligations,  (ii) obligations and liabilities of
any Person  secured by a lien,  claim,  encumbrance  or security  interest  upon
property  owned by  Borrower,  even  though  Borrower  has not assumed or become
liable therefor,  (iii) obligations and liabilities created or arising under any
lease  (including  Capital Leases) or conditional  sales contract or other title
retention agreement with respect to property used or acquired by Borrower,  even
though the rights and  remedies of the  lessor,  seller or lender are limited to
repossession, (iv) all unfunded pension fund obligations and liabilities and (v)
deferred taxes.

     "Initial Term" has the meaning set forth on the Schedule.

     "Inventory" means all of Borrower's now owned and hereafter acquired goods,
merchandise or other personal property,  wherever located, to be furnished under
any contract of service or held for sale or lease,  all raw  materials,  work in
process,  finished  goods and  materials  and  supplies  of any kind,  nature or
description  which are or might be used or  consumed in  Borrower's  business or
used in connection with the manufacture, packing, shipping, advertising, selling
or finishing of such goods,  merchandise  or other  personal  property,  and all
documents of title or other documents representing them.

     "Inventory Loans" has the meaning set forth in the Schedule.


<PAGE>


     "IRC"  means  the  Internal  Revenue  Code of  1986,  as  amended,  and the
regulations thereunder.

     "Loans" has the meaning set forth in Section 2.2 hereof.

     "Loan Documents"  means,  collectively,  this Agreement,  any note or notes
executed by  Borrower  and  payable to FINOVA,  and any other  present or future
agreement  entered into in  connection  with this  Agreement,  together with all
alterations,  amendments,  changes,  extensions,  modifications,   refinancings,
refundings, renewals,  replacements,  restatements, or supplements, of or to any
of the foregoing.

     "Loan  Party" means  Borrower,  and each other party (other than FINOVA) to
any Loan Document,  including James F. Swallow and David J. O'Gorman, as parties
to the Validity and Support Agreements.

     "Loan  Reserves"  means, as of any date of  determination,  such amounts as
FINOVA may from time to time  establish  and revise in good faith  reducing  the
amount of Revolving  Credit Loans which would otherwise be available to Borrower
under the lending  formula(s)  provided in the Schedule:  (a) to reflect events,
conditions, contingencies or risks which, as determined by FINOVA in good faith,
do or may  affect  either  (i) the  Collateral  or any other  property  which is
security  for the  Obligations  or its  value,  (ii)  the  assets,  business  or
prospects of Borrower or (iii) the security interests and other rights of FINOVA
in  the  Collateral  (including  the  enforceability,  perfection  and  priority
thereof) or (b) to reflect FINOVA's good faith belief that any collateral report
or financial  information  furnished by or on behalf of Borrower to FINOVA is or
may have been  incomplete,  inaccurate or misleading in any material  respect or
(c) in  respect  of any state of facts  which  FINOVA  determines  in good faith
constitutes  an Event of Default or may, with notice or passage of time or both,
constitute an Event of Default."

     "Loan Year" means each twelve (12) month period  commencing  on the Closing
Date.

     "Maximum Interest Rate" has the meaning set forth in Section 2.8(c) hereof.

     "Minimum Interest Charge" has the meaning set forth in the Schedule.

     "Multiemployer  Plan"  means a  "multiemployer  plan" as  defined  in ERISA
Sections  3(37) or  4001(a)(3) or IRC Section  414(f) which covers  employees of
Borrower or any ERISA Affiliate.

     "Obligations"  means  all  present  and  future  loans,  advances,   debts,
liabilities,  obligations,  covenants, duties and indebtedness at any time owing
by Borrower to FINOVA,  whether  evidenced by this Agreement,  any note or other
instrument or document,  whether arising from an extension of credit, opening of
a letter of credit,  banker's  acceptance,  loan,  guaranty,  indemnification or
otherwise,  whether direct or indirect  (including,  without  limitation,  those
acquired by assignment and any participation by FINOVA in Borrower's debts owing
to others),  absolute or contingent,  due or to become due,  including,  without
limitation,  all interest,  charges,  expenses,  fees,  attorney's fees,  expert
witness fees,  Examination Fee,  Collateral  Monitoring Fee, Closing Fee, Annual
Renewal  Fee,  Termination  Fee,  Minimum  Interest  Charge  and any other  sums
chargeable to Borrower hereunder or under any other agreement with FINOVA.

     "Overadvance" has the meaning set forth in Section 2.3.

     "Overline" has the meaning set forth in Section 2.3.

     "PBGC" means the Pension Benefit Guarantee Corporation.

     "Permitted  Discretion"  means  FINOVA's  judgment  exercised in good faith
based upon its  consideration of any factor which FINOVA believes in good faith:
(i)  will  or  could  adversely   affect  the  value  of  any  Collateral,   the
enforceability  or priority of FINOVA's liens thereon or the amount which FINOVA
would be likely to receive (after giving  consideration to delays in payment and
costs of enforcement) in the liquidation of such Collateral;  (ii) suggests that
any collateral report or financial information delivered to FINOVA by any Person
on behalf  of the  Borrower  is  incomplete,  inaccurate  or  misleading  in any
material  respect;  (iii)  materially  increases the likelihood of a bankruptcy,
reorganization or other insolvency  proceeding involving the Borrower,  any Loan
Party or any of the Collateral,  or (iv) creates or reasonably could be expected
to create an Event of Default. In exercising such judgment,  FINOVA may consider
such  factors  already  included  in or tested  by the  definition  of  Eligible
Receivables  or Eligible  Inventory,  as well as any of the  following:  (i) the
financial  and  business   climate  of  the  Borrower's   industry  and  general
macroeconomic  conditions,  (ii) changes in collection history and dilution with
respect  to the  Receivables,  (iii)  changes in demand  for,  and  pricing  of,
Inventory, (iv) changes in any concentration of risk with respect to Receivables
and/or  Inventory,  and (v) any other  factors  that  change the credit  risk of
lending to the Borrower on the security of the  Receivables  and Inventory.  The
burden of establishing lack of good faith hereunder shall be on the Borrower.


<PAGE>


     "Permitted  Encumbrance"  means  each of the  liens,  mortgages  and  other
security interests set forth on the Schedule.

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

     "Plan"  means any plan  described  in ERISA  Section  3(2)  maintained  for
employees of Borrower or any ERISA Affiliate, other than a Multiemployer Plan.

     "Prepared  Financials"  means the balance sheets of Borrower as of the date
set forth in the Schedule in the section entitled 'Reporting Requirements' , and
as of each  subsequent  date on which  audited  balance  sheets are delivered to
FINOVA from time to time  hereunder,  and the related  statements of operations,
changes in  stockholder's  equity and changes in cash flow for the periods ended
on such dates.

     "Prime Rate" has the meaning set forth in the Schedule.

     "Prohibited  Transaction" means any transaction described in Section 406 of
ERISA which is not exempt by reason of Section 408 of ERISA, and any transaction
described in Section 4975(c) of the IRC which is not exempt by reason of Section
4975(c)(2) of the IRC.

     "Property" has the meaning set forth in Section 8.2(a) hereof. 

     "Receivable Loans" has the meaning set forth on the Schedule.

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

     "Renewal Term" has the meaning set forth on the Schedule.

     "Reportable  Event" means a reportable  event  described in Section 4043 of
ERISA or the  regulations  thereunder,  a  withdrawal  from a Plan  described in
Section 4063 of ERISA, or a cessation of operations described in Section 4068(f)
of ERISA.

     "Revolving Credit Loans" has the meaning set forth in the Schedule.

     "Revolving Credit Limit" has the meaning set forth in the Schedule.

     "Revolving Interest Rate" has the meaning set forth in the Schedule.

     "Schedule" has the meaning set forth in the preamble.

     "Senior  Contractual  Debt  Service"  means,  for  any  period,  the sum of
payments  made or  required  to be made by  Borrower  during such period for (i)
interest  and  scheduled  principal  payments  due on the Term Loans  (excluding
voluntary  prepayment),  and (ii)  interest  only  payments due on the Revolving
Credit Loans facility plus the Collateral Monitoring Fee, the Annual Renewal Fee
and the Unused Line Fee.

     "Subordinated Debt" means liabilities of Borrower the repayment of which is
subordinated,  to the payment and performance of the Obligations,  pursuant to a
subordination agreement acceptable to FINOVA in its sole discretion.

     "Term Loans" has the meaning set forth in the Schedule.

     "Termination Fee" has the meaning set forth in Section 9.2(d) hereof.

     "Total Facility" has the meaning set forth in Section 2.1 hereof.


<PAGE>


     "Trademarks,  Copyrights,  Licenses  and Patents"  means all of  Borrower's
right,  title and interest in and to,  whether now owned or hereafter  acquired:
(i) trademarks, trademark registrations,  trade names, trade name registrations,
and trademark or trade name  applications,  including without limitation such as
are listed on the Schedule  attached hereto and made a part hereof,  as the same
may be amended  from time to time,  and (a)  renewals  thereof,  (b) all income,
royalties,  damages and  payments  now and  hereafter  due and/or  payable  with
respect thereto, including without limitation,  damages and payments for past or
future infringements  thereof, (c) the right to sue for past, present and future
infringements  thereof,  (d) all rights  corresponding  thereto  throughout  the
world, and (e) the goodwill of the business operated by Borrower  connected with
and  symbolized by any  trademarks or trade names;  (ii)  copyrights,  copyright
registrations and copyright  applications,  including without limitation such as
are listed on the Schedule  attached hereto and made a part hereof,  as the same
may be amended  from time to time,  and (a)  renewals  thereof,  (b) all income,
royalties,  damages and  payments  now and  hereafter  due and/or  payable  with
respect thereto, including without limitation,  damages and payments for past or
future infringements  thereof, (c) the right to sue for past, present and future
infringements  thereof, and (d) all rights corresponding  thereto throughout the
world; (iii) license agreements, including without limitation such as are listed
on the Schedule attached hereto and made a part hereof, and the right to prepare
for sale,  sell and advertise  for sale any Inventory now or hereafter  owned by
Borrower and now or  hereafter  covered by such  licenses;  and (iv) patents and
patent applications, registered or pending, including without limitation such as
are listed on the Schedule attached hereto, together with all income, royalties,
shop rights,  damages and payments  thereto,  the right to sue for infringements
thereof,  and  all  rights  thereto  throughout  the  world  and  all  reissues,
divisions,   continuations,   renewals,   extensions  and  continuations-in-part
thereof.

     "Unused Line Fee" has the meaning set forth in the Schedule.

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

2. LOANS; INTEREST RATE AND OTHER CHARGES.

     2.1.  Total  Facility.  Upon the terms and  conditions set forth herein and
provided  that no Event of Default or event which,  with the giving of notice or
the passage of time, or both, would  constitute an Event of Default,  shall have
occurred and be continuing, FINOVA shall, upon Borrower's request, make advances
to Borrower from time to time in an aggregate  outstanding  principal amount not
to exceed the Total  Facility  amount  (the "Total  Facility")  set forth on the
Schedule hereto,  subject to deduction of reserves for accrued interest and such
other reserves as FINOVA deems proper from time to time, and less amounts FINOVA
may be obligated to pay in the future on behalf of Borrower.  The Schedule is an
integral part of this Agreement and all  references to "herein",  "herewith" and
words of  similar  import  shall  for all  purposes  be deemed  to  include  the
Schedule.

     2.2. Loans. Advances under the Total Facility ("Loans" and individually,  a
"Loan") shall be comprised of the amounts shown on the Schedule.

     2.3.  Overlines;  Overadvances.  If at any  time  or  for  any  reason  the
outstanding amount of advances extended or issued pursuant hereto exceeds any of
the dollar limitations ("Overline") or percentage limitations ("Overadvance") in
the Schedule,  then Borrower  shall,  upon FINOVA's  demand,  immediately pay to
FINOVA,  in cash,  the full amount of such  Overline or  Overadvance  which,  at
FINOVA's option,  may be applied to reduce the outstanding  principal balance of
the Loans.  Without limiting Borrower's  obligation to repay to FINOVA on demand
the  amount of any  Overline  or  Overadvance,  Borrower  agrees  to pay  FINOVA
interest on the outstanding principal amount of any Overline or Overadvance,  on
demand,  at the rate set forth on the Schedule and  applicable  to the Revolving
Credit Loans.

     2.4. Loan Account. All advances made hereunder shall be added to and deemed
part of the  Obligations  when  made.  FINOVA  may from time to time  charge all
Obligations of Borrower to Borrower's loan account with FINOVA.

     2.5.  Interest;  Fees.  Borrower  shall pay  FINOVA  interest  on the daily
outstanding  balance of the  Obligations  at the per annum rate set forth on the
Schedule. Borrower shall also pay FINOVA the fees set forth on the Schedule.

     2.6. Default Interest Rate. Upon the occurrence and during the continuation
of an  Event of  Default,  Borrower  shall  pay  FINOVA  interest  on the  daily
outstanding  balance of the Obligations at a rate per annum which is two percent
(2%) in excess of the rate which would otherwise be applicable  thereto pursuant
to the Schedule.


<PAGE>


     2.7.  Examination Fee. Borrower agrees to pay to FINOVA the Examination Fee
in the  amount  set forth on the  Schedule  in  connection  with  each  audit or
examination  of Borrower  performed by FINOVA prior to or after the date hereof.
Without  limiting the generality of the foregoing,  Borrower shall pay to FINOVA
an  initial  Examination  Fee in an amount  equal to the amount set forth on the
Schedule.  Such initial Examination Fee shall be deemed fully earned at the time
of payment and due and payable upon the closing of this  transaction,  and shall
be deducted  from any good faith deposit paid by Borrower to FINOVA prior to the
date of this Agreement.

     2.8. Excess Interest.

     (a) The  contracted for rate of interest of the loan  contemplated  hereby,
without  limitation,  shall consist of the following:  (i) the interest rate set
forth on the Schedule,  calculated  and applied to the principal  balance of the
Obligations in accordance with the provisions of this  Agreement;  (ii) interest
after  an  Event  of  Default,  calculated  and  applied  to the  amount  of the
Obligations in accordance with the provisions  hereof;  and (iii) all Additional
Sums (as herein defined), if any. Borrower agrees to pay an effective contracted
for rate of  interest  which is the sum of the  above-referenced  elements.  The
Examination  Fee,  attorneys fees,  expert witness fees,  collateral  monitoring
fees, closing fees,  facility fees,  Termination Fees, Minimum Interest Charges,
other charges, goods, things in action or any other sums or things of value paid
or payable by Borrower  (collectively,  the "Additional Sums"), whether pursuant
to this Agreement or any other documents or instruments in any way pertaining to
this lending transaction, or otherwise with respect to this lending transaction,
that under any  applicable law may be deemed to be interest with respect to this
lending  transaction,  for the purpose of any  applicable law that may limit the
maximum  amount  of  interest  to  be  charged  with  respect  to  this  lending
transaction,  shall be  payable  by  Borrower  as,  and  shall be  deemed to be,
additional  interest and for such purposes only, the agreed upon and "contracted
for  rate of  interest"  of this  lending  transaction  shall  be  deemed  to be
increased by the rate of interest resulting from the inclusion of the Additional
Sums.

     (b) (It is the intent of the  parties to comply  with the usury laws of the
State of Arizona (the "Applicable  Usury Law").  Accordingly,  it is agreed that
notwithstanding  any provisions to the contrary in this Agreement,  or in any of
the documents  securing payment hereof or otherwise relating hereto, in no event
shall  this  Agreement  or such  documents  require  the  payment  or permit the
collection of interest in excess of the maximum  contract rate  permitted by the
Applicable Usury Law (the "Maximum  Interest  Rate").  In the event (a) any such
excess of interest  otherwise would be contracted for,  charged or received from
Borrower or otherwise in connection with the loan evidenced  hereby,  or (b) the
maturity of the  Obligations  is  accelerated in whole or in part, or (c) all or
part  of  the  Obligations  shall  be  prepaid,   so  that  under  any  of  such
circumstances  the amount of  interest  contracted  for,  shared or  received in
connection  with the loan evidenced  hereby,  would exceed the Maximum  Interest
Rate,  then in any such event (1) the provisions of this paragraph  shall govern
and control,  (2) neither  Borrower nor any other Person now or hereafter liable
for the payment of the Obligations  shall be obligated to pay the amount of such
interest to the extent that it is in excess of the Maximum  Interest  Rate,  (3)
any such  excess  which may have been  collected  shall be either  applied  as a
credit against the then unpaid  principal  amount of the Obligations or refunded
to Borrower, at FINOVA's option, and (4) the effective rate of interest shall be
automatically  reduced to the  Maximum  Interest  Rate.  It is  further  agreed,
without  limiting the generality of the foregoing,  that to the extent permitted
by the Applicable Usury Law; (x) all calculations of interest which are made for
the purpose of determining  whether such rate would exceed the Maximum  Interest
Rate shall be made by amortizing, prorating, allocating and spreading during the
period of the full stated term of the loan evidenced hereby, all interest at any
time  contracted  for,  charged  or  received  from  Borrower  or  otherwise  in
connection  with such  loan;  and (y) in the event  that the  effective  rate of
interest on the loan should at any time exceed the Maximum  Interest Rate,  such
excess  interest  that would  otherwise  have been  collected  had there been no
ceiling imposed by the Applicable Usury Law shall be paid to FINOVA from time to
time, if and when the effective  interest rate on the loan otherwise falls below
the  Maximum  Interest  Rate,  to the extent that  interest  paid to the date of
calculation  does not exceed the Maximum  Interest Rate, until the entire amount
of interest which would  otherwise have been collected had there been no ceiling
imposed  by the  Applicable  Usury Law has been paid in full.  Borrower  further
agrees that should the Maximum  Interest Rate be increased at any time hereafter
because  of a  change  in the  Applicable  Usury  Law,  then to the  extent  not
prohibited  by the  Applicable  Usury Law,  such  increases  shall  apply to all
indebtedness  evidenced  hereby  regardless of when incurred;  but, again to the
extent not prohibited by the Applicable  Usury Law, should the Maximum  Interest
Rate be  decreased  because  of a  change  in the  Applicable  Usury  Law,  such
decreases shall not apply to the  indebtedness  evidenced  hereby  regardless of
when incurred.


<PAGE>


     2.9. Principal Payments; Proceeds of Collateral.

     (a)  Principal   Payments.   Except  where  evidenced  by  notes  or  other
instruments issued or made by Borrower to FINOVA specifically containing payment
provisions  which are in  conflict  with this  Section  2.9 (in which  event the
conflicting  provisions  of said  notes or other  instruments  shall  govern and
control),  that portion of the  Obligations  consisting of principal  payable on
account of Loans  shall be payable by Borrower  to FINOVA  immediately  upon the
earliest of (i) the receipt by FINOVA or Borrower of any  proceeds of any of the
Collateral,  to the extent of said proceeds,  (ii) the occurrence of an Event of
Default in  consequence  of which FINOVA elects to  accelerate  the maturity and
payment of such loans,  or (iii) any  termination of this Agreement  pursuant to
Section 9.2 hereof; provided, however, that any Overadvance or Overline shall be
payable on demand pursuant to the provisions of Section 2.3 hereof.

     (b) Collections.  Until FINOVA notifies Borrower to the contrary,  Borrower
may make  collection  of all  Receivables  for FINOVA by  directing  all account
debtors and other third  parties to remit all payments  owing to Borrower to the
lockbox  established  in  connection  with the  Blocked  Account.  In the  event
Borrower shall  nevertheless  directly  receive any payments or other  financial
proceeds of any  Collateral,  Borrower  shall receive all payments as trustee of
FINOVA and immediately  deliver all payments to FINOVA in their original form as
set forth below, duly endorsed in blank or cause the same to be deposited into a
Blocked  Account  Dominion  Account.  FINOVA or its  designee  may, at any time,
notify account debtors that the Receivables  have been assigned to FINOVA and of
FINOVA's security interest therein, and may collect the Receivables directly and
charge the collection  costs and expenses to Borrower's  loan account.  Borrower
agrees that, in computing the charges under this Agreement, all items of payment
shall be deemed applied by FINOVA on account of the Obligations two (2) Business
Days after  receipt by FINOVA of good funds which have been finally  credited to
FINOVA's account, whether such funds are received directly from Borrower or from
the Blocked  Account  bank or the  Dominion  Account  bank,  pursuant to Section
2.9(c) hereof,  and this provision  shall apply  regardless of the amount of the
Obligations  outstanding or whether any Obligations are  outstanding;  provided,
that if any such good funds are received after 12:00 p.m. noon (California time)
on any Business Day or at any time on any day not  constituting  a Business Day,
such funds shall be deemed received on the immediately  following  Business Day.
FINOVA is not, however,  required to credit Borrower's account for the amount of
any  item  of  payment  which  is  unsatisfactory  to  FINOVA  in its  Permitted
Discretion and FINOVA may charge  Borrower's  loan account for the amount of any
item of payment which is returned to FINOVA unpaid.

     (c) Establishment of a Lockbox Account or Dominion Account. Unless Borrower
shall be  otherwise  directed  by FINOVA in  writing,  Borrower  shall cause all
proceeds of Collateral  to be deposited  into a lockbox  account,  or such other
"blocked account" as FINOVA may require (each, a "Blocked  Account") pursuant to
an  arrangement  with such bank as may be selected by Borrower and be acceptable
to FINOVA which proceeds,  unless otherwise provided herein, shall be applied in
payment  of the  Obligations  in such  order as  FINOVA  determines  in its sole
discretion.  Borrower  shall  issue to any such  bank an  irrevocable  letter of
instruction  directing  said bank to transfer such funds so deposited to FINOVA,
either to any account  maintained  by FINOVA at said bank or by wire transfer to
appropriate account(s) of FINOVA. All funds deposited in a Blocked Account shall
immediately  become the sole  property of FINOVA and  Borrower  shall obtain the
agreement  by such  bank to  waive  any  offset  rights  against  the  funds  so
deposited. FINOVA assumes no responsibility for any Blocked Account arrangement,
including  without  limitation,  any claim of accord and satisfaction or release
with respect to deposits accepted by any bank thereunder.  Alternatively, FINOVA
may establish  depository  accounts in the name of FINOVA at a bank or banks for
the  deposit of such funds  (each,  a "Dominion  Account")  and  Borrower  shall
deposit  all  proceeds  of  Receivables  and all  cash  proceeds  of any sale of
Inventory  or, to the extent  permitted  herein,  Equipment  or cause same to be
deposited,  in kind, in such  Dominion  Accounts of FINOVA in lieu of depositing
same to Blocked Accounts,  and, unless otherwise provided herein, all such funds
shall be applied by FINOVA to the Obligations in such order as FINOVA determines
in its sole discretion.

     (d) Payments Without  Deductions.  Borrower shall pay principal,  interest,
and all other  amounts  payable  hereunder,  or under any other  Loan  Document,
without any deduction whatsoever,  including,  but not limited to, any deduction
for any setoff or counterclaim.

<PAGE>


     (e)  Collection  Days Upon  Repayment.  In the event  Borrower  repays  the
Obligations  in full at any  time  hereafter,  such  payment  in full  shall  be
credited  (conditioned upon final collection) to Borrower's loan account two (2)
Business Days after FINOVA's receipt thereof.

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

     2.10.  Application  of  Collateral.  Except as otherwise  provided  herein,
FINOVA shall have the  continuing  and  exclusive  right to apply or reverse and
re-apply  any and all payments to any portion of the  Obligations  in such order
and manner as FINOVA shall determine in its sole discretion.  To the extent that
Borrower  makes a payment or FINOVA  receives  any  payment or  proceeds  of the
Collateral for Borrower's benefit which is subsequently invalidated, declared to
be fraudulent or preferential,  set aside or required to be repaid to a trustee,
debtor in  possession,  receiver or any other party  under any  bankruptcy  law,
common  law or  equitable  cause,  or  otherwise,  then,  to  such  extent,  the
Obligations  or part  thereof  intended  to be  satisfied  shall be revived  and
continue as if such payment or proceeds had not been received by FINOVA.

     2.11.  Application  of  Payments.  The  amount of all  payments  or amounts
received  by FINOVA  with  respect  to the Loan  shall be  applied to the extent
applicable under this Agreement: (i) first, to accrued interest through the date
of such payment,  including any Default  Interest;  (ii) then, to any late fees,
overdue risk  assessments,  Examination  Fee and expenses,  collection  fees and
expenses  and any other fees and  expenses  due to FINOVA  hereunder;  and (iii)
last,  the remaining  balance,  if any, to the unpaid  principal  balance of the
Loan;  provided however,  while an Event of Default exists under this Agreement,
or under any other Loan Document,  each payment  hereunder  shall be (x) held as
cash  collateral  to  secure  contingent  Obligations  arising  under  the  Loan
Documents  and/or (y) applied to amounts owed to FINOVA by Borrower as FINOVA in
its sole discretion may determine. In calculating interest and applying payments
as set forth above:  (a) interest shall be calculated and collected  through the
date a payment is actually  applied by FINOVA under the terms of this Agreement;
(b) interest on the outstanding balance shall be charged during any grace period
permitted  hereunder;  (c) at the end of each  month,  all  accrued  and  unpaid
interest  and  other  charges  provided  for  hereunder  shall  be  added to the
principal  balance of the Loan;  and (d) to the  extent  that  Borrower  makes a
payment  or FINOVA  receives  any  payment or  proceeds  of the  Collateral  for
Borrower's benefit that is subsequently invalidated, set aside or required to be
repaid to any other Person, then, to such extent, the Obligations intended to be
satisfied  shall be revived and  continue as if such payment or proceeds had not
been  received by FINOVA and FINOVA may adjust the Loan  balances as FINOVA,  in
its sole discretion, deems appropriate under the circumstances.


     2.12. Notification of Closing.  Borrower shall provide FINOVA with at least
forty-eight  (48) hours  prior  written  notice of the Closing  Date,  to enable
FINOVA to arrange for the  availability  of funds. In the event the closing does
not take place on the date specified in Borrower's notice to FINOVA,  other than
through the fault of FINOVA,  Borrower  agrees to reimburse  FINOVA for FINOVA's
costs to maintain the necessary  funds  available  for the closing,  at the Term
Interest Rate with respect to the amount  specified in the Schedule,  and at the
Revolving  Interest Rate with respect to an amount equal to the initial  advance
under the  Revolving  Credit Loans  facility  which is to be made on the Closing
Date,  for the  number  of days  which  elapse  between  the date  specified  in
Borrower's  notice and the date upon which the closing  actually  occurs  (which
number of days shall not include the date  specified in Borrower's  notice,  but
shall include the Closing Date).

<PAGE>


3. SECURITY.

     3.1.  Security  Interest  in the  Collateral.  To secure  the  payment  and
performance  of the  Obligations  when due,  Borrower  hereby grants to FINOVA a
first priority security interest (subject only to Permitted Encumbrances) in all
of Borrower's now owned or hereafter acquired or arising  Inventory,  Equipment,
Receivables,  life  insurance  policies  and the proceeds  thereof,  Trademarks,
Copyrights,  Licenses  and Patents,  Investment  Property (as defined in Section
9-115 of the Code) and General Intangibles,  including,  without limitation, all
of Borrower's  Deposit Accounts,  money, any and all property now or at any time
hereafter in FINOVA's possession (including claims and credit balances), and all
proceeds (including proceeds of any insurance policies, proceeds of proceeds and
claims  against  third  parties),  all  products  and all books and  records and
computer data related to any of the foregoing  (all of the  foregoing,  together
with all other  property  in which  FINOVA  may be  granted  a lien or  security
interest, is referred to herein, collectively, as the "Collateral").

     3.2. Perfection and Protection of Security Interest. Borrower shall, at its
expense, take all actions requested by FINOVA at any time to perfect,  maintain,
protect and enforce FINOVA's first priority  security  interest and other rights
in the Collateral and the priority thereof from time to time, including, without
limitation,  (i) executing and filing  financing or continuation  statements and
amendments  thereof and executing and  delivering  such  documents and titles in
connection  with  motor  vehicles  as  FINOVA  shall  require,  all in form  and
substance  satisfactory to FINOVA,  (ii)  maintaining a perpetual  inventory and
complete  and accurate  stock  records,  (iii)  delivering  to FINOVA  warehouse
receipts  covering any portion of the  Collateral  located in warehouses and for
which warehouse  receipts are issued,  and transferring  Inventory to warehouses
designated by FINOVA,  (iv) placing  notations on Borrower's books of account to
disclose  FINOVA's  security  interest  therein and (v) delivering to FINOVA all
letters  of credit on which  Borrower  is named  beneficiary.  FINOVA  may file,
without  Borrower's  signature,  one or  more  financing  statements  disclosing
FINOVA's security interest under this Agreement.  Borrower agrees that a carbon,
photographic,  photostatic  or  other  reproduction  of this  Agreement  or of a
financing statement is sufficient as a financing statement. If any Collateral is
at any time in the possession or control of any  warehouseman,  bailee or any of
Borrower's  agents or processors,  Borrower shall notify such Person of FINOVA's
security interest in such Collateral and, upon FINOVA's  request,  instruct them
to  hold  all  such   Collateral  for  FINOVA's   account  subject  to  FINOVA's
instructions.  From time to time, Borrower shall, upon FINOVA's request, execute
and deliver  confirmatory written instruments pledging the Collateral to FINOVA,
but  Borrower's  failure  to do so shall not affect or limit  FINOVA's  security
interest or other rights in and to the Collateral.  Until the  Obligations  have
been fully satisfied and FINOVA's  obligation to make further advances hereunder
has terminated,  FINOVA's  security interest in the Collateral shall continue in
full force and effect.

     3.3.  Preservation of Collateral.  FINOVA may, in its Permitted Discretion,
at any time  discharge  any lien or  encumbrance  on the  Collateral or bond the
same, pay any insurance,  maintain  guards,  pay any service bureau,  obtain any
record or take any other action to preserve the  Collateral  and charge the cost
thereof to Borrower's loan account as an Obligation.

     3.4.  Insurance.  Borrower will maintain and deliver  evidence to FINOVA of
such insurance as is required by FINOVA,  written by insurers,  in amounts,  and
with  lender's  loss  payee,   additional   insured,   and  other  endorsements,
satisfactory  to FINOVA.  All premiums with respect to such  insurance  shall be
paid by Borrower as and when due.  Accurate and certified copies of the policies
shall be delivered by Borrower to FINOVA.  If Borrower fails to comply with this
Section,  FINOVA may (but shall not be required to) procure such  insurance  and
endorsements  at  Borrower's  expense and charge the cost thereof to  Borrower's
loan account as an Obligation.

     3.5. Collateral Reporting; Inventory.

     (a)  Invoices.  Borrower  shall not  re-date  any  invoice or sale from the
original date thereof or make sales on extended terms beyond those  customary in
Borrower's  industry,  or otherwise extend or modify the term of any Receivable.
If Borrower  becomes  aware of any matter  affecting any  Receivable,  including
information  affecting the credit of the account debtor thereon,  Borrower shall
promptly notify FINOVA in writing.

<PAGE>


     (b) Instruments.  In the event any Receivable is or becomes  evidenced by a
promissory  note,  trade  acceptance or any other  instrument for the payment of
money,   Borrower   shall   immediately   deliver  such   instrument  to  FINOVA
appropriately endorsed to FINOVA and, regardless of the form of any presentment,
demand, notice of dishonor,  protest and notice of protest with respect thereto,
Borrower shall remain liable thereon until such instrument is paid in full.

     (c) Physical  Inventory.  Borrower  shall  conduct a physical  count of the
Inventory at such intervals as FINOVA requests and promptly supply FINOVA with a
copy of such accounts  accompanied  by a report of the value  (calculated at the
lower of cost or market value on a first in,  first out basis) of the  Inventory
and such  additional  information  with  respect to the  Inventory as FINOVA may
request from time to time.

     (d)  Returns.  For so long as no  Event  of  Default  has  occurred  and is
continuing  and  subject to the  provisions  of Section  3.6(b),  if any account
debtor returns any Inventory to Borrower in the ordinary course of its business,
Borrower shall promptly  determine the reason for such return and promptly issue
a credit  memorandum  to the  account  debtor  (sending a copy to FINOVA) in the
appropriate  amount.  In  the  event  any  attempted  return  occurs  after  the
occurrence  of any  Event of  Default,  Borrower  shall  (i)  hold the  returned
Inventory in trust for FINOVA, (ii) segregate all returned Inventory from all of
Borrower's other property,  (iii)  conspicuously label the returned Inventory as
FINOVA's  property,  and (iv)  immediately  notify  FINOVA of the  return of any
Inventory,  specifying the reason for such return, the location and condition of
the returned Inventory,  and on FINOVA's request deliver such returned Inventory
to FINOVA.

     (e) Consignments. Borrower shall not consign any Inventory.

3.6. Receivables. 

     (a) Eligibility.  (i) Borrower represents and warrants that each Receivable
covers and shall cover a bona fide sale or lease and  delivery by it of goods or
the  rendition by it of services in the  ordinary  course of its  business,  and
shall be for a liquidated  amount and FINOVA's  security  interest  shall not be
subject  to  any   offset,   deduction,   counterclaim,   rights  of  return  or
cancellation,  lien or other condition. If any representation or warranty herein
is  breached as to any  Receivable  or any  Receivable  ceases to be an Eligible
Receivable  for any reason  other than  payment  thereof,  then  FINOVA  may, in
addition to its other rights hereunder,  designate any and all Receivables owing
by that account debtor as not Eligible Receivables;  provided, that FINOVA shall
in any such event retain its security  interest in all  Receivables,  whether or
not Eligible  Receivables,  until the Obligations  have been fully satisfied and
FINOVA's obligation to provide loans hereunder has terminated. 

     (ii) FINOVA at any time shall be entitled to (i)  establish and increase or
decrease  reserves against  Eligible  Receivables and Eligible  Inventory,  (ii)
reduce the advance  rates in the Schedule or restore  such advance  rates to any
level  equal to or below the  advance  rates set forth in the  Schedule or (iii)
impose  additional  restrictions  (or  eliminate  the same) to the  standards of
eligibility set forth in the definitions of "Eligible Receivables" and "Eligible
Inventory,"  in the exercise of its Permitted  Discretion.  FINOVA may but shall
not be required to rely on the schedules  an/or  reports  delivered to FINOVA in
connection  herewith in determining  the then  eligibility  of  Receivables  and
Inventory.  Reliance  thereon by FINOVA from time to time shall not be deemed to
limit the right of FINOVA to revise advance rates or standards of eligibility as
provided above.

     (b)  Disputes.  Borrower  shall notify  FINOVA  promptly of all disputes or
claims and settle or adjust such disputes or claims at no expense to FINOVA, but
no discount,  credit or allowance  shall be granted to any account debtor and no
returns of merchandise  shall be accepted by Borrower without FINOVA's  consent,
except for  discounts,  credits  and  allowances  made or given in the  ordinary
course of Borrower's  business.  FINOVA may, at any time after the occurrence of
an Event of Default,  settle or adjust  disputes or claims directly with account
debtors  for  amounts and upon terms which  FINOVA  considers  advisable  in its
reasonable  credit  judgment and, in all cases,  FINOVA shall credit  Borrower's
loan  account  with only the net  amounts  received  by FINOVA in payment of any
Receivables.

     3.7.  Equipment.  Borrower  shall keep and maintain  the  Equipment in good
operating  condition and repair and make all necessary  replacements  thereto to
maintain and preserve the value and  operating  efficiency  thereof at all times
consistent  with  Borrower's  past  practice,  ordinary wear and tear  excepted.
Borrower  shall not permit any item of Equipment to become a fixture (other than
a trade fixture) to real estate or an accession to other property.

<PAGE>


     3.8.  Other Liens;  No  Disposition  of  Collateral.  Borrower  represents,
warrants and covenants  that except for FINOVA's  security  interest,  Permitted
Encumbrances,  and such other liens, claims and encumbrances as may be permitted
by  FINOVA  in its  sole  discretion  from  time  to time  in  writing,  (a) all
Collateral is and shall  continue to be owned by it free and clear of all liens,
claims and encumbrances  whatsoever and (b) Borrower shall not, without FINOVA's
prior  written  approval,  sell,  encumber  or  dispose  of or permit  the sale,
encumbrance or disposal of any Collateral or all or any substantial  part of any
of its other assets (or any interest of Borrower  therein),  except for the sale
of Inventory in the ordinary course of Borrower's business.  In the event FINOVA
gives  any  such  prior  written  approval  with  respect  to any  such  sale of
Collateral,  the same may be  conditioned  on the sale price  being equal to, or
greater than, an amount acceptable to FINOVA.  The proceeds of any such sales of
Collateral   shall  be  remitted  to  FINOVA  pursuant  to  this  Agreement  for
application to the Obligations.

 
     3.9. Collateral Security. The Obligations shall constitute one loan secured
by the Collateral.  FINOVA may, in its sole discretion,  (i) exchange,  enforce,
waive or release any of the  Collateral,  (ii) apply  Collateral  and direct the
order  or  manner  of  sale  thereof  as it may  determine,  and  (iii)  settle,
compromise,  collect or otherwise liquidate any Collateral in any manner without
affecting  its  right  to take  any  other  action  with  respect  to any  other
Collateral.

4. CONDITIONS OF CLOSING.  

     4.1. Initial Advance.  The obligation of FINOVA to make the initial advance
hereunder is subject to the  fulfillment,  to the satisfaction of FINOVA and its
counsel,  of each of the following  conditions on or prior to the date set forth
on the Schedule:

     (a) Loan  Documents.  FINOVA shall have received each of the following Loan
Documents:  (i) the  Agreement  fully and properly  executed by  Borrower;  (ii)
promissory  notes in such  amounts  and on such terms and  conditions  as FINOVA
shall  specify,  executed by Borrower;  (iii)  Validity  and Support  Agreements
executed by the applicable parties; (iv) such security agreements,  intellectual
property assignments, pledge agreements,  mortgages and deeds of trust as FINOVA
may require with respect to this Agreement and any Guaranties,  executed by each
of the parties thereto and, if applicable,  duly  acknowledged  for recording or
filing in the  appropriate  governmental  offices;  (v) such Blocked  Account or
Dominion  Account  agreements  as  it  shall  determine;  and  (vi)  such  other
documents,  instruments  and  agreements in connection  herewith as FINOVA shall
require, executed, certified and/or acknowledged by such parties as FINOVA shall
designate;

     (b) Minimum Excess  Availability.  Borrower shall have Excess  Availability
under the Revolving  Credit Loans facility of not less than the amount specified
in the Schedule,  after giving effect to the initial advance hereunder and after
giving effect to any applicable  Loan Reserves  against  borrowing  availability
under the Revolving Credit Loans.

 
     (c) Terminations by Existing Lender.  Borrower's existing lender shall have
executed  and  delivered  UCC  termination  statements  and other  documentation
evidencing the termination of its liens and security  interests in the assets of
Borrower;

     (d) Charter  Documents.  FINOVA shall have  received  copies of  Borrower's
By-laws and Articles of Incorporation,  as amended, modified, or supplemented to
the Closing Date, certified by the Secretary of Borrower;

     (e) Good  Standing.  FINOVA shall have received a certificate  of corporate
status with respect to Borrower, dated within ten (10) days of the Closing Date,
by the  Secretary  of State of the state of  incorporation  of  Borrower,  which
certificate shall indicate that Borrower is in good standing in such state;

<PAGE>


     (f) Foreign  Qualification.  FINOVA  shall have  received  certificates  of
corporate status with respect to Borrower and each other Loan Party,  each dated
within ten (10) days of the Closing  Date,  issued by the  Secretary of State of
each state in which such party's  failure to be duly qualified or licensed would
have a material adverse effect on its financial condition or assets,  indicating
that such party is in good standing;

     (g) Authorizing  Resolutions  and Incumbency.  FINOVA shall have received a
certificate  from the  Secretary  of Borrower  attesting  to (i) the adoption of
resolutions of Borrower's  Board of Directors,  and  shareholders  or members if
necessary,  authorizing  the  borrowing of money from FINOVA and  execution  and
delivery of this  Agreement and the other Loan  Documents to which Borrower is a
party, and authorizing  specific  officers of Borrower to execute same, and (ii)
the authenticity of original specimen signatures of such officers;

     (h) Insurance.  FINOVA shall have received the insurance  certificates  and
certified  copies of  policies  required  by  Section  3.4  hereof,  in form and
substance  satisfactory  to FINOVA and its counsel,  together with an additional
insured  endorsement  in favor of FINOVA with respect to all liability  policies
and a lender's loss payable  endorsement  in favor of FINOVA with respect to all
casualty  and  business  interruption  policies,  each  in  form  and  substance
acceptable to FINOVA and its counsel;

     (i) Searches;  Certificates of Title.  FINOVA shall have received  searches
reflecting the filing of its financing  statements  and fixture  filings in such
jurisdictions  as it shall  determine,  and shall have received  certificates of
title with respect to the  Collateral  which shall have been duly  executed in a
manner sufficient to perfect all of the security interests granted to FINOVA;

     (j)  Landlord,  Bailee and  Mortgagee  Waivers.  FINOVA shall have received
landlord,  bailee  and/or  mortgagee  waivers from the lessors,  bailees  and/or
mortgagees of all locations where any Collateral is located;

     (k) Fees.  Borrower  shall have paid all fees  payable by it on the Closing
Date pursuant to this Agreement;

     (l) Opinion of Counsel. FINOVA shall have received an opinion of Borrower's
counsel covering such matters as FINOVA shall determine in its sole discretion;

     (m) Officer  Certificate.  FINOVA shall have received a certificate  of the
Chief  Financial  Officer or similar  official  of  Borrower,  attesting  to the
accuracy of each of the  representations and warranties of Borrower set forth in
this Agreement and the  fulfillment  of all conditions  precedent to the initial
advance hereunder;

     (n) Solvency Certificate. If requested, FINOVA shall have received a signed
certificate of the Borrower's  duly elected Chief Financial  Officer  concerning
the solvency and financial condition of Borrower, on FINOVA's standard form;

     (o) Blocked  Account.  The Blocked  Account  referred to in Section 2.10(c)
hereof shall have been  established  to the  satisfaction  of FINOVA in its sole
discretion;

     (p) Environmental  Assessment.  If required by FINOVA,  Borrower shall have
caused a Phase I  Environmental  Assessment  to be  conducted on the property or
properties owned or occupied by Borrower,  all at Borrower's own expense and the
results of such assessment(s) shall have been in form and substance satisfactory
to FINOVA in its sole discretion.  Such  assessment(s)  shall have included,  in
FINOVA's  discretion,  core  samplings,  and  shall  have been  conducted  by an
environmental engineer acceptable to FINOVA;

     (q) Environmental Certificate.  FINOVA shall have received an Environmental
Certificate from Borrower,  in form and substance  satisfactory to FINOVA in its
discretion, with respect to all locations of Collateral;

     (r) Search and  References.  FINOVA  shall have  received  and approved the
results  of  UCC,  tax  lien,  litigation,  judgment,  and  bankruptcy  searches
regarding  Borrower and shall have received  satisfactory  customer,  vendor and
credit reference checks on Borrower.

     (s) No Material  Adverse  Changes.  Prior to the Closing Date,  there shall
have occurred no material adverse change in the financial condition of Borrower,
or in the  condition  of the  assets of  Borrower,  from that shown on the draft
financial  statements  for Borrower dated on the date set forth in the Schedule.
At the closing,  Borrower  shall  deliver to FINOVA an  officer's  certification
confirming  that  Borrower  is unaware  of the  existence  of any such  material
adverse change in Borrower's financial condition.

<PAGE>


     (t) Material Agreements.  FINOVA shall have received, reviewed and approved
all material agreements to which Borrower shall be a party.

     (u) Projections.  Borrower shall submit cash flow projections and pro forma
balance  sheet with  adjusting  entries (i) showing that the proposed  financing
will provide  sufficient  funds for the  Borrower's  projected  working  capital
needs, and (ii) showing:  (1) that the Borrower will have reasonably  sufficient
capital for the conduct of its business  following the initial funding,  and (2)
that the  Borrower  will not incur debts beyond its ability to pay such debts as
they mature.

     (v) Opinions. To the extent any Person other than Borrower shall be parties
to the  Loan  Documents,  FINOVA  reserves  the  right to  require  satisfactory
opinions of counsel for each such Person  concerning the proper  organization of
such  Person and the due  authorization,  execution,  delivery,  enforceability,
validity  and  binding  effect of the Loan  Documents  to which such Person is a
party.  Each such  opinion of counsel  shall  confirm,  to the  satisfaction  of
FINOVA,  that the opinion is being delivered to FINOVA at the instruction of the
party  represented  by such  counsel,  that  FINOVA is  entitled to rely on such
opinion  and that for  purposes  of such  reliance,  FINOVA  is  deemed to be in
privity with the opining counsel.

     (w) ADA Compliance. If necessary, as of the Closing Date, Borrower shall be
in compliance with the Americans with  Disabilities Act of 1990 ("ADA"),  or, if
any  renovations  of  Borrower's   facilities  or  modifications  of  Borrower's
employment  practices  shall be required to bring them into  compliance with the
ADA, review and approval by FINOVA of Borrower's proposed plan to come into such
compliance. If requested,  Borrower shall deliver representations and warranties
to FINOVA concerning  Borrower's  compliance with the ADA, and no evidence shall
have  come  to the  attention  of  FINOVA  indicating  that  Borrower  is not in
compliance  with the ADA  (except to the extent  that  FINOVA has  reviewed  and
approved Borrower's plan to come into compliance).

     (x) Asset Appraisal.  Borrower shall have provided to FINOVA, at Borrower's
sole cost and expense, an asset appraisal of all Borrower's Equipment upon which
FINOVA  shall be granted a first  priority  lien and  security  interest,  which
appraisal must be acceptable to FINOVA in all respects.

     (y) Audited  Financials.  Borrower shall have delivered to FINOVA,  audited
consolidated and  consolidating  financial  statements for the fiscal year ended
June 30, 1998,  prepared in accordance  with GAAP applied on a basis  consistent
with the most recent Prepared Financials,  including balance sheets,  income and
cash  flow  statements,   accompanied  by  the  unqualified  report  thereon  of
independent certified public accountants acceptable to FINOVA.

     (z) Schedule  Conditions.  Borrower shall have complied with all additional
conditions precedent as set forth in the Schedule attached hereto.

     (aa) Other  Matters.  All other  documents  and legal matters in connection
with the transactions  contemplated by this Agreement shall have been delivered,
executed and recorded and shall be in form and substance  satisfactory to FINOVA
and its counsel.

     4.2.  Subsequent  Advances.  The  obligation  of FINOVA to make any advance
shall be subject to the further conditions precedent that, on and as of the date
of such advance (a) the  representations and warranties of Borrower set forth in
this Agreement shall be accurate, before and after giving effect to such advance
or issuance  and to the  application  of any proceeds  thereof;  (b) no Event of
Default  and no event  which,  with  notice or  passage  of time or both,  would
constitute an Event of Default has occurred and is  continuing,  or would result
from such advance or issuance or from the  application of any proceeds  thereof;
(c)  no  material  adverse  change  has  occurred  in the  Borrower's  business,
operations,  financial  condition,  in the condition of the  Collateral or other
assets of Borrower or in the prospect of repayment of the  Obligations;  and (d)
FINOVA shall have received such other approvals, opinions or documents as FINOVA
shall reasonably request.

5. REPRESENTATIONS AND WARRANTIES.

     Borrower represents and warrants that:

<PAGE>


     5.1. Due Organization. It is a corporation duly organized, validly existing
and in good standing  under the laws of the State set forth on the Schedule,  is
qualified and authorized to do business and is in good standing in all states in
which such  qualification  and good  standing  are  necessary in order for it to
conduct its  business  and own its  property,  and has all  requisite  power and
authority to conduct its business as  presently  conducted,  to own its property
and to execute and deliver each of the Loan Documents to which it is a party and
perform  all of its  Obligations  thereunder,  and has not  taken  any  steps to
wind-up, dissolve or otherwise liquidate its assets;

     5.2.  Other Names.  Borrower has not,  during the preceding five (5) years,
been known by or used any other corporate or fictitious name except as set forth
on the Schedule,  nor has Borrower been the surviving corporation of a merger or
consolidation or acquired all or  substantially  all of the assets of any Person
during such time;

     5.3. Due Authorization. The execution, delivery and performance by Borrower
of the Loan  Documents  to  which  it is a party  have  been  authorized  by all
necessary  corporate  action and do not and shall not  constitute a violation of
any applicable law or of Borrower's  Articles or Certificate of Incorporation or
By-Laws or any other  document,  agreement or instrument to which  Borrower is a
party or by which Borrower or its assets are bound;

     5.4. Binding Obligation.  Each of the Loan Documents to which Borrower is a
party is the legal, valid and binding obligation of Borrower enforceable against
Borrower in accordance with its terms;

     5.5.  Intangible  Property.  Borrower possesses adequate assets,  licenses,
patents, patent applications, copyrights, trademarks, trademark applications and
trade names for the present and planned future  conduct of its business  without
any known conflict with the rights of others,  and each is valid and, except for
the Garden Valley Naturals trademark, has been duly registered or filed with the
appropriate  governmental  authorities;   each  of  Borrower's  patents,  patent
applications,  copyrights, trademarks and trademark applications which have been
registered or filed with any governmental  authority  (including the U.S. Patent
and Trademark  Office and the Library of Congress) are listed by name,  date and
filing number on the Schedule;

     5.6. Capital.  Borrower has capital sufficient to conduct its business,  is
able to pay its debts as they mature,  and owns  property  having a fair salable
value  greater  than the  amount  required  to pay all of its  debts  (including
contingent debts);

     5.7.  Material  Litigation.  Borrower has no pending or overtly  threatened
litigation,  actions or proceedings  which would materially and adversely affect
its  business,  assets,  operations,   prospects  or  condition,   financial  or
otherwise, or the Collateral or any of FINOVA's interests therein;

     5.8. Title; Security Interests of FINOVA.  Borrower has good,  indefeasible
and merchantable title to the Collateral and, upon the execution and delivery of
the Loan Documents,  the filing of UCC-1 Financing  Statements,  delivery of the
certificate(s)  evidencing any pledged securities,  the filing of any collateral
assignments or security agreements regarding Borrower,  Trademarks,  Copyrights,
Licenses and/or Patents, if any, with the appropriate  governmental  offices and
the recording of any mortgages or deeds of trust with respect to real  property,
in each case in the appropriate offices, this Agreement and such documents shall
create valid and perfected first priority liens in the Collateral,  subject only
to Permitted Encumbrances;

     5.9. Restrictive  Agreements;  Labor Contracts.  Borrower is not a party or
subject  to any  contract  or  subject  to any  charge,  corporate  restriction,
judgment,  decree or order  materially  and  adversely  affecting  its business,
assets,  operations,  prospects or condition,  financial or otherwise,  or which
restricts its right or ability to incur Indebtedness, and it is not party to any
labor dispute. In addition,  no labor contract is scheduled to expire during the
Initial Term of this  Agreement,  except as disclosed to FINOVA in writing prior
to the date hereof;

     5.10.  Laws.  Borrower  is not in  violation  of  any  applicable  statute,
regulation,  ordinance  or any  order of any  court,  tribunal  or  governmental
agency, in any respect materially and adversely  affecting the Collateral or its
business, assets, operations, prospects or condition, financial or otherwise;

<PAGE>

     5.11.  Consents.  Borrower  has obtained or caused to be obtained or issued
any required consent of a governmental agency or other Person in connection with
the financing contemplated hereby;

     5.12.  Defaults.  Borrower  is not in  default  with  respect  to any note,
indenture, loan agreement,  mortgage, lease, deed or other agreement to which it
is a party or by which it or its assets are  bound,  nor has any event  occurred
which, with the giving of notice or the lapse of time, or both, would cause such
a default;

     5.13.   Financial   Condition.   The  Prepared  Financials  fairly  present
Borrower's financial condition and results of operations and those of such other
Persons  described therein as of the date thereof in accordance with GAAP; there
are no  material  omissions  from the  Prepared  Financials  or  other  facts or
circumstances  not reflected in the Prepared  Financials;  and there has been no
material and adverse change in such financial  condition or operations since the
date of the initial Prepared Financials delivered to FINOVA hereunder;

     5.14. ERISA. None of Borrower,  any ERISA Affiliate,  or any Plan is or has
been in violation of any of the  provisions of ERISA,  any of the  qualification
requirements  of IRC  Section  401(a)  or any of the  published  interpretations
thereunder,  nor has Borrower or any ERISA Affiliate received any notice to such
effect.  No notice of intent to  terminate a Plan has been filed  under  Section
4041 of ERISA,  nor has any Plan been terminated  under ERISA.  The PBGC has not
instituted  proceedings to terminate,  or appointed a trustee to  administer,  a
Plan.  No lien upon the assets of Borrower has arisen with respect to a Plan. No
prohibited  transaction or Reportable Event has occurred with respect to a Plan.
Neither  Borrower nor any ERISA Affiliate has incurred any withdrawal  liability
with respect to any Multiemployer  Plan.  Borrower and each ERISA Affiliate have
made all contributions  required to be made by them to any Plan or Multiemployer
Plan when due. There is no accumulated  funding  deficiency in any Plan, whether
or not waived;

     5.15.  Taxes.  Borrower has filed all tax returns and such other reports as
it is required by law to file and has paid or made  adequate  provision  for the
payment on or prior to the date when due of all taxes,  assessments  and similar
charges that are due and payable;

     5.16.  Locations;  Federal Tax ID No. Borrower's chief executive office and
the offices and locations where it keeps the Collateral (except for Inventory in
transit) are at the locations  set forth on the  Schedule,  except to the extent
that such  locations  may have been changed after notice to FINOVA in accordance
with Section 6.1.4 hereof;  Borrower's federal tax  identification  number is as
shown on the Schedule;

     5.17.  Business  Relationships.   There  exists  no  actual  or  threatened
termination,  cancellation  or limitation of, or any  modification or change in,
the  business  relationship  between  Borrower  and any customer or any group of
customers whose  purchases  individually or in the aggregate are material to the
business of Borrower, or with any material supplier, and there exists no present
condition  or state  of  facts  or  circumstances  which  would  materially  and
adversely  affect  Borrower or prevent  Borrower from  conducting  such business
after the  consummation  of the  transactions  contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted; and

     5.18. Reaffirmations.  Each request for a loan made by Borrower pursuant to
this Agreement shall constitute (i) an automatic  representation and warranty by
Borrower  to FINOVA that there does not then exist any Event of Default and (ii)
a reaffirmation as of the date of said request of all of the representations and
warranties of Borrower contained in this Agreement and the other Loan Documents.

6. COVENANTS.

     6.1.  Affirmative  Covenants.  Borrower  covenants  that,  so  long  as any
Obligation remains outstanding and this Agreement is in effect, it shall:

          6.1.1.  Taxes. File all tax returns and pay or make adequate provision
for the payment of all taxes,  assessments  and other charges on or prior to the
date when due;

<PAGE>


          6.1.2. Notice of Litigation.  Promptly notify FINOVA in writing of any
litigation, suit or administrative proceeding which may materially and adversely
affect the Collateral or Borrower's business, assets,  operations,  prospects or
condition,  financial  or  otherwise,  whether  or not the claim is  covered  by
insurance;

          6.1.3.   ERISA.  Notify  FINOVA  in  writing  (i)  promptly  upon  the
occurrence  of any event  described  in  Paragraph  4043 of ERISA,  other than a
termination,  partial  termination or merger of a Plan or a transfer of a Plan's
assets and (ii) prior to any  termination,  partial  termination  or merger of a
Plan or a transfer of a Plan's assets;

          6.1.4.  Change in Location.  Notify FINOVA in writing  forty-five (45)
days prior to any change in the location of Borrower's chief executive office or
the location of any  Collateral,  or Borrower's  opening or closing of any other
place of business;

          6.1.5.  Corporate Existence.  Maintain its corporate existence and its
qualification  to do business and good standing in all states  necessary for the
conduct of its business and the ownership of its property and maintain  adequate
assets,  licenses,  patents,  copyrights,  trademarks  and  trade  names for the
conduct of its business;

          6.1.6. Labor Disputes.  Promptly notify FINOVA in writing of any labor
dispute to which  Borrower is or may become  subject and the  expiration  of any
labor contract to which Borrower is a party or bound;

          6.1.7.  Violations  of Law.  Promptly  notify FINOVA in writing of any
violation of any law,  statute,  regulation  or  ordinance  of any  governmental
entity,  or of any agency  thereof,  applicable to Borrower which may materially
and adversely affect the Collateral or Borrower's business,  assets,  prospects,
operations or condition, financial or otherwise;

          6.1.8.  Defaults.  Notify  FINOVA in writing  within five (5) Business
Days of Borrower's default under any note, indenture, loan agreement,  mortgage,
lease or other  agreement to which  Borrower is a party or by which  Borrower is
bound, or of any other default under any Indebtedness of Borrower;

          6.1.9. Capital Expenditures . Promptly notify FINOVA in writing of the
making of any Capital  Expenditure  materially  affecting  Borrower's  business,
assets, prospects,  operations or condition,  financial or otherwise,  except to
the extent permitted in the Schedule;

          6.1.10. Books and Records.  Keep adequate records and books of account
with respect to its  business  activities  in which  proper  entries are made in
accordance with GAAP, reflecting all of its financial transactions;

          6.1.11. Leases;  Warehouse Agreements.  Provide FINOVA with (i) copies
of all  agreements  between  Borrower and any landlord,  warehouseman  or bailee
which owns any  premises  at which any  Collateral  may,  from time to time,  be
located  (whether  for  processing,  storage  or  otherwise),  and (ii)  without
limiting the landlord,  bailee and/or mortgagee  waivers to be provided pursuant
to Section 4.1(j) hereof,  additional landlord,  bailee and/or mortgagee waivers
in form  acceptable to FINOVA with respect to all locations where any Collateral
is hereafter located;

          6.1.12. Additional Documents. At FINOVA's request, promptly execute or
cause to be executed and delivered to FINOVA any and all documents,  instruments
or agreements  deemed  necessary by FINOVA to facilitate  the  collection of the
Obligations  or the  Collateral  or otherwise to give effect to or carry out the
terms or intent of this  Agreement or any of the other Loan  Documents.  Without
limiting the generality of the foregoing,  if any of the Receivables with a face
value in excess of $1,000  arises  out of a contract  with the United  States of
America or any  department,  agency,  subdivision  or  instrumentality  thereof,
Borrower shall promptly  notify FINOVA of such fact in writing and shall execute
any  instruments  and take any other  action  required or requested by FINOVA to
comply with the provisions of the Federal Assignment of Claims Act; and

          6.1.13.  Financial Covenants.  Comply with the financial covenants set
forth on the Schedule.

<PAGE>


     6.2.  Negative  Covenants.  Without FINOVA's prior written  consent,  which
consent  FINOVA may withhold in its sole  discretion,  so long as any Obligation
remains outstanding and this Agreement is in effect, Borrower shall not:

          6.2.1. Mergers. Merge or consolidate with or acquire any other Person,
or make any other material change in its capital structure or in its business or
operations which might adversely affect the repayment of the Obligations;

          6.2.2.  Loans.  Make  advances,  loans or  extensions of credit to, or
invest in, any Person,  except for loans or cash advances to employees which are
permitted in the Schedule;

          6.2.3. Dividends.  Declare or pay cash dividends upon any of its stock
or  distribute  any of its  property  or  redeem,  retire,  purchase  or acquire
directly or indirectly any of its stock;

          6.2.4.  Adverse   Transactions.   Enter  into  any  transaction  which
materially  and  adversely  affects the  Collateral  or its ability to repay the
Obligations in full as and when due;

          6.2.5.  Indebtedness  of  Others.  Guarantee  or  become  directly  or
contingently liable for the Indebtedness of any Person, except by endorsement of
instruments for deposit and except for the existing  guarantees made by Borrower
prior to the date hereof, if any, which are set forth in the Schedule;

          6.2.6.  Repurchase.  Make a sale to any  customer on a  bill-and-hold,
guaranteed sale, sale and return,  sale on approval,  consignment,  or any other
repurchase or return basis;

          6.2.7.  Name.  Use any  corporate  or  fictitious  name other than its
corporate name as set forth in its Articles or Certificate of  Incorporation  on
the date hereof or as set forth on the Schedule;

          6.2.8.  Prepayment.  Prepay any Indebtedness other than trade payables
and other than the Obligations;

          6.2.9. Capital Expenditure.  Make or incur any Capital Expenditure if,
after giving effect thereto, the aggregate amount of all Capital Expenditures by
Borrower in any fiscal year would exceed the amount set forth on the Schedule;

          6.2.10.  Compensation.  Pay total  compensation,  including  salaries,
withdrawals,  fees, bonuses,  commissions,  drawing accounts and other payments,
whether directly or indirectly, in money or otherwise, during any fiscal year to
all of Borrower's  executives,  officers and directors (or any relative thereof)
in an amount in excess of the amount set forth on the Schedule;

          6.2.11.  Indebtedness.  Create,  incur,  assume or permit to exist any
Indebtedness  (including  Indebtedness  in  connection  with Capital  Leases) in
excess of the amount set forth on the Schedule,  other than (i) the Obligations,
(ii) trade payables and other contractual obligations to suppliers and customers
incurred  in the  ordinary  course of  business,  and (iii)  other  Indebtedness
existing on the date of this Agreement and reflected in the Prepared  Financials
(except  Indebtedness  paid on the date of this  Agreement  from proceeds of the
initial advances hereunder), and (iv) Subordinated Debt;

          6.2.12.  Affiliate  Transactions.  Except  as set forth  below,  sell,
transfer, distribute or pay any money or property to any Affiliate, or invest in
(by capital  contribution  or otherwise) or purchase or repurchase  any stock or
Indebtedness,  or any  property,  of any  Affiliate,  or  become  liable  on any
guaranty of the  indebtedness,  dividends or other obligations of any Affiliate.
Notwithstanding  the  foregoing,  Borrower  may pay  compensation  permitted  by
Section 6.23 to  employees  who are  Affiliates  and, if no Event of Default has
occurred,  Borrower may (i) engage in transactions with Affiliates in the normal
course of  business,  in amounts  and upon terms  which are fully  disclosed  to
FINOVA and which are no less favorable to Borrower than would be obtainable in a
comparable arm's length  transaction with a Person who is not an Affiliate,  and
(ii) make payments to a Subordinating Creditor that is an Affiliate,  subject to
and  only to the  extent  expressly  permitted  in the  Subordination  Agreement
between such Subordinating Creditor and FINOVA;

          6.2.13.  Nature of  Business.  Enter into any new business or make any
material  change  in  any  of  Borrower's  business   objectives,   purposes  or
operations;

<PAGE>


          6.2.14.  FINOVA's Name. Use the name of FINOVA in connection  with any
of  Borrower's  business  or  activities,  except in  connection  with  internal
business  matters or as required  in dealings  with  governmental  agencies  and
financial  institutions or with trade  creditors of Borrower,  solely for credit
reference purposes; or

          6.2.15.  Margin Security.  Borrower will not (and has not in the past)
engaged principally,  or as one of its important activities,  in the business of
extending  credit for the purpose of purchasing or carrying margin stock (within
the  meaning of  Regulation  U issued by the Board of  Governors  of the Federal
Reserve  System),  and no proceeds of any Loan or other  advance will be used to
purchase or carry any margin stock or to extend credit to others for the purpose
of purchasing  or carrying any margin stock,  or in any manner which might cause
such Loan or other  advance or the  application  of such proceeds to violate (or
require any regulatory filing under) Regulation T, Regulation U, Regulation X or
any other regulation of the Board of Governors of the Federal Reserve System, in
each case as in effect  on the date or dates of such Loan or other  advance  and
such use of proceeds.  Further, no proceeds of any Loan or other advance will be
used to acquire any security of a class which is registered  pursuant to Section
12 of the Securities Exchange Act of 1934.

          6.2.16.  Real Property.  Purchase or acquire any real property without
FINOVA's  prior  written  consent,  a condition of which  consent  shall include
delivery  of  appropriate  environmental  reports  and  analysis,  in  form  and
substance satisfactory to FINOVA and its counsel.

7. DEFAULT AND REMEDIES.

     7.1.  Events of  Default.  Any one or more of the  following  events  shall
constitute an Event of Default under this Agreement:

     (a)  Borrower  fails  to pay  when  due  and  payable  any  portion  of the
Obligations at stated maturity, upon acceleration or otherwise;

     (b) Borrower or any other Loan Party fails or neglects to perform, keep, or
observe any  Obligation  including,  but not  limited  to, any term,  provision,
condition,  covenant  or  agreement  contained  in any  Loan  Document  to which
Borrower or such other Loan Party is a party;

     (c) Any material  adverse  change  occurs in Borrower's  business,  assets,
operations, prospects or condition, financial or otherwise;

     (d) The  prospect of  repayment  of any portion of the  Obligations  or the
value or priority of FINOVA's  security interest in the Collateral is materially
impaired;

     (e) Any portion of Borrower's  assets is seized,  attached,  subjected to a
writ or distress  warrant,  is levied upon or comes into the  possession  of any
judicial officer;

     (f) Borrower shall  generally not pay its debts as they become due or shall
enter into any agreement  (whether  written or oral), or offer to enter into any
agreement,  with all or a  significant  number of its  creditors  regarding  any
moratorium or other indulgence with respect to its debts or the participation of
such  creditors  or their  representatives  in the  supervision,  management  or
control of the business of Borrower;

     (g) Any bankruptcy or other insolvency proceeding is commenced by Borrower,
or any such proceeding is commenced against Borrower and remains undischarged or
unstayed for forty-five (45) days;

     (h) Any notice of lien,  levy or assessment is filed of record with respect
to any of Borrower's assets;

     (i) Any  judgments  are entered  against  Borrower in an  aggregate  amount
exceeding $25,000 in any fiscal year;

     (j) Any  default  shall  occur  under (i) any  material  agreement  between
Borrower and any third party including,  without  limitation,  any default which
would  result in a right by such third party to  accelerate  the maturity of any
Indebtedness of Borrower to such third party, or (ii) any Subordinated Debt;

     (k) Any  representation  or warranty made or deemed to be made by Borrower,
any  Affiliate  or any  other  Loan  Party in any  Loan  Document  or any  other
statement,  document  or  report  made or  delivered  to  FINOVA  in  connection
therewith shall prove to have been misleading in any material respect;

<PAGE>


     (l) Any Prohibited Transaction or Reportable Event shall occur with respect
to a Plan which could have a material adverse effect on the financial  condition
of Borrower;  any lien upon the assets of Borrower in  connection  with any Plan
shall  arise;  Borrower or any of its ERISA  Affiliates  shall fail to make full
payment when due of all amounts  which  Borrower or any of its ERISA  Affiliates
may be  required  to pay to any  Plan or any  Multiemployer  Plan as one or more
contributions  thereto;  Borrower  or any of its  ERISA  Affiliates  creates  or
permits  the  creation of any  accumulated  funding  deficiency,  whether or not
waived; or

     (m) Any  transfer  of  more  than  ten  percent  (10%)  of the  issued  and
outstanding shares of common stock or other evidence of ownership of Borrower.


     NOTWITHSTANDING  ANYTHING TO THE CONTRARY HEREIN, FINOVA RESERVES THE RIGHT
TO CEASE MAKING ANY LOANS DURING ANY CURE PERIOD STATED ABOVE, AND THEREAFTER IF
AN EVENT OF DEFAULT HAS OCCURRED.

     7.2. Remedies.  Upon the occurrence of an Event of Default,  FINOVA may, at
its option and in its sole discretion and in addition to all of its other rights
under the Loan Documents,  cease making Loans,  terminate this Agreement  and/or
declare  all of the  Obligations  to be  immediately  payable in full.  Borrower
agrees  that  FINOVA  shall  also  have all of its  rights  and  remedies  under
applicable law, including,  without limitation,  the default rights and remedies
of a  secured  party  under  the Code,  and upon the  occurrence  of an Event of
Default  Borrower  hereby consents to the appointment of a receiver by FINOVA in
any  action   initiated  by  FINOVA  pursuant  to  this  Agreement  and  to  the
jurisdiction  and venue set forth in Section  9.26 hereof,  and Borrower  waives
notice and posting of a bond in connection  therewith.  Further,  FINOVA may, at
any time, take possession of the Collateral and keep it on Borrower's  premises,
at no cost to FINOVA,  or remove any part of it to such other place(s) as FINOVA
may desire,  or Borrower shall,  upon FINOVA's demand,  at Borrower's sole cost,
assemble the  Collateral  and make it available to FINOVA at a place  reasonably
convenient  to FINOVA.  FINOVA may sell and deliver any  Collateral at public or
private sales, for cash, upon credit or otherwise,  at such prices and upon such
terms as FINOVA  deems  advisable,  at FINOVA's  discretion,  and may, if FINOVA
deems it  reasonable,  postpone  or  adjourn  any sale of the  Collateral  by an
announcement  at the time and place of sale or of such  postponed  or  adjourned
sale  without  giving a new notice of sale.  Borrower  agrees that FINOVA has no
obligation to preserve  rights to the  Collateral or marshall any Collateral for
the benefit of any Person.  FINOVA is hereby granted a license or other right to
use,  without  charge,  Borrower's  labels,  patents,  copyrights,  name,  trade
secrets,  trade  names,  trademarks  and  advertising  matter,  or  any  similar
property,  in completing  production,  advertising or selling any Collateral and
Borrower's rights under all licenses and all franchise agreements shall inure to
FINOVA's  benefit.  Any  requirement  of reasonable  notice shall be met if such
notice is mailed  postage  prepaid to  Borrower  at its address set forth in the
heading  to this  Agreement  at  least  five  (5)  days  before  sale  or  other
disposition. The proceeds of sale shall be applied, first, to all attorneys fees
and other  expenses of sale,  and second,  to the  Obligations  in such order as
FINOVA shall elect,  in its sole  discretion.  FINOVA shall return any excess to
Borrower and  Borrower  shall remain  liable for any  deficiency  to the fullest
extent permitted by law.

     7.3.  Standards for  Determining  Commercial  Reasonableness.  Borrower and
FINOVA  agree  that  the  following  conduct  by  FINOVA  with  respect  to  any
disposition of Collateral shall conclusively be deemed  commercially  reasonable
(but other conduct by FINOVA, including, but not limited to, FINOVA's use in its
sole discretion of other or different times,  places and manners of noticing and
conducting any disposition of Collateral shall not be deemed unreasonable):  Any
public  or  private  disposition:  (i) as to which on no  later  than the  fifth
calendar  day prior  thereto  written  notice  thereof  is mailed or  personally
delivered to Borrower and, with respect to any public  disposition,  on no later
than the fifth calendar day prior thereto  notice thereof  describing in general
non-specific  terms,  the  Collateral  to be disposed of is published  once in a
newspaper of general circulation in the county where the sale is to be conducted
(provided that no notice of any public or private  disposition  need be given to
the  Borrower or  published  if the  Collateral  is  perishable  or threatens to
decline  speedily  in value  or is of a type  customarily  sold on a  recognized
market);  (ii) which is conducted  at any place  designated  by FINOVA,  with or

<PAGE>


without the  Collateral  being  present;  and (iii) which  commences at any time
between  8:00  a.m.  and  5:00  p.m.  Without  limiting  the  generality  of the
foregoing,  Borrower  expressly  agrees that, with respect to any disposition of
accounts,   instruments  and  general  intangibles,  it  shall  be  commercially
reasonable for FINOVA to direct any prospective  purchaser  thereof to ascertain
directly from Borrower any and all information  concerning the same,  including,
but not limited to, the terms of payment,  aging and  delinquency,  if any,  the
financial  condition  of any  obligor or  account  debtor  thereon or  guarantor
thereof, and any collateral therefor.

8. EXPENSES AND INDEMNITIES 

     8.1.  Expenses.  Borrower covenants that, so long as any Obligation remains
outstanding and this Agreement  remains in effect,  it shall promptly  reimburse
FINOVA for all costs,  fees and expenses  incurred by FINOVA in connection  with
the  negotiation,   preparation,   execution,   delivery,   administration   and
enforcement of each of the Loan  Documents,  including,  but not limited to, the
attorneys' and paralegals' fees of in-house and outside counsel,  expert witness
fees,  lien,  title search and insurance  fees,  appraisal fees, all charges and
expenses  incurred  in  connection  with any and all  environmental  reports and
environmental  remediation activities,  and all other costs, expenses, taxes and
filing  or  recording   fees  payable  in  connection   with  the   transactions
contemplated by this  Agreement,  including  without  limitation all such costs,
fees and  expenses  as FINOVA  shall  incur or for  which  FINOVA  shall  become
obligated  in  connection  with  (i)  any  inspection  or  verification  of  the
Collateral,   (ii)  any  proceeding  relating  to  the  Loan  Documents  or  the
Collateral,  (iii)  actions  taken with respect to the  Collateral  and FINOVA's
security  interest  therein,  including,  without  limitation,  the  defense  or
prosecution of any action involving FINOVA and Borrower or any third party, (iv)
enforcement  of  any  of  FINOVA's  rights  and  remedies  with  respect  to the
Obligations  or Collateral  and (v)  consultation  with  FINOVA's  attorneys and
participation in any workout, bankruptcy or other insolvency or other proceeding
involving any Loan Party or any  Affiliate,  whether or not suit is filed or the
issues are peculiar to federal  bankruptcy or state  insolvency  laws.  Borrower
shall  also pay all  FINOVA  charges  in  connection  with bank wire  transfers,
forwarding  of loan  proceeds,  deposits  of checks and other  items of payment,
returned  checks,  establishment  and maintenance of lockboxes and other Blocked
Accounts,  and all other bank and  administrative  matters,  in accordance  with
FINOVA's  schedule  of bank and  administrative  fees and charges in effect from
time to time.

     8.2. Environmental Matters.

     (a) Definitions.  The following definitions apply to the provisions of this
Section  8.2:  (a) the term  "Applicable  Law" shall  include,  but shall not be
limited  to, all  local,  state  and/or  federal  laws,  rules,  regulations  or
ordinances,  whether currently in existence or hereafter enacted,  which govern,
to the extent  applicable  to the  Property or to Borrower,  (i) the  existence,
cleanup and/or remedy of contamination on real property;  (ii) the protection of
the environment from soil, air or water pollution, or from spilled, deposited or
otherwise emplaced  contamination;  (iii) the emission or discharge of hazardous
substances into the environment;  (iv) the control of hazardous  wastes;  or (v)
the use,  generation,  transport,  treatment,  removal or recovery of  Hazardous
Substances; (b) the term "Hazardous Substance" shall mean (i) any oil, flammable
substance,  explosives,  radioactive materials,  hazardous wastes or substances,
toxic wastes or substances or any other  wastes,  materials or pollutants  which
either pose a hazard to the  Property or to persons on or about the  Property or
cause the Property to be in violation of any  Applicable  Law;  (ii) asbestos in
any form which is or could become friable,  urea  formaldehyde  foam insulation,
transformers or other equipment which contain dielectric fluid containing levels
of  polychlorinated  biphenyls,  or radon gas;  (iii) any chemical,  material or
substance  defined as or included in the  definition of "hazardous  substances,"
"waste," "hazardous wastes," "hazardous materials," "extremely hazardous waste,"
"restricted  hazardous waste," or "toxic  substances" or words of similar import
under any  Applicable  Law; ; (iv) any other  chemical,  material or  substance,
exposure  to which is  prohibited,  limited  or  regulated  by any  governmental
authority  which  may or could  pose a hazard  to the  health  or  safety of the
occupants of the Property or the owners and/or occupants of property adjacent to
or  surrounding  the  Property,  or any other person coming upon the Property or
adjacent property; and (v) any other chemical,  materials or substance which may
or could pose a hazard to the  environment;  and (c) the term  "Property"  shall
mean all real property,  wherever located, in which Borrower or any Affiliate of
Borrower  has any right,  title or  interest,  whether now existing or hereafter
arising, and including, without limitation, as owner, lessor or lessee.

<PAGE>


     (b) Covenants and  Representations.  (1) Borrower  represents  and warrants
that there  have not been  during the  period of  Borrower's  possession  of any
interest in the  Property  and, to the best of its  knowledge  after  reasonable
inquiry,  there have not been at any other times, any activities on the Property
involving,  directly or indirectly, the use, generation,  treatment,  storage or
disposal of any Hazardous  Substances  except in compliance  with Applicable Law
(i) under,  on or in the land  included in the  Property,  whether  contained in
soil,  tanks,  sumps,  ponds,  lagoons,  barrels,  cans or  other  containments,
structures or  equipment,  (ii)  incorporated  in the  buildings,  structures or
improvements   included  in  the  Property,   including  any  building  material
containing  asbestos,  or (iii) used in connection  with any operations on or in
the Property.  (2) Without  limiting the  generality of the foregoing and to the
extent not included within the scope of this Section 8.2(b), Borrower represents
and warrants that it is in full  compliance with Applicable Law and has received
no notice  from any  Person or any  governmental  agency or other  entity of any
violation  by Borrower or its  Affiliates  of any  Applicable  Law. (3) Borrower
shall be solely  responsible  for and agrees to  indemnify  FINOVA,  protect and
defend  FINOVA with counsel  reasonably  acceptable  to FINOVA,  and hold FINOVA
harmless  from and  against  any claims,  actions,  administrative  proceedings,
judgments,  damages,  punitive damages,  penalties,  fines,  costs,  liabilities
(including sums paid in settlements of claims),  interest or losses,  attorneys'
fees  (including any fees and expenses  incurred in enforcing  this  indemnity),
consultant fees, expert fees, and other out-of-pocket costs or expenses actually
incurred by FINOVA (collectively,  the "Environmental  Costs"), that may, at any
time or from time to time,  arise  directly or indirectly  from or in connection
with: (i) the presence,  suspected presence, release or suspected release of any
Hazardous  Substance whether into the air, soil, surface water or groundwater of
or at the Property, or any other violation of Applicable Law, or (ii) any breach
of the foregoing representations and covenants;  except to the extent any of the
foregoing  result  from  the  actions  of  FINOVA,  its  employees,  agents  and
representatives. All Environmental Costs incurred or advanced by FINOVA shall be
deemed  to be made by FINOVA in good  faith  and  shall  constitute  Obligations
hereunder.

9. MISCELLANEOUS.

     9.1. Examination of Records; Financial Reporting.

     (a) Examinations.  FINOVA shall at all reasonable times have full access to
and the right to  examine,  audit,  make  abstracts  and copies from and inspect
Borrower's records, files, books of account and all other documents, instruments
and  agreements  relating  to the  Collateral  and the right to check,  test and
appraise  the  Collateral.  Borrower  shall  deliver  to FINOVA  any  instrument
necessary  for FINOVA to obtain  records  from any  service  bureau  maintaining
records for Borrower.  All  instruments  and  certificates  prepared by Borrower
showing the value of any of the Collateral  shall be accompanied,  upon FINOVA's
request,  by copies of related purchase orders and invoices.  FINOVA may, at any
time  after  the  occurrence  of an Event of  Default,  remove  from  Borrower's
premises Borrower's books and records (or copies thereof) or require Borrower to
deliver such books and records or copies to FINOVA.  FINOVA may, without expense
to FINOVA,  use such of  Borrower's  personnel,  supplies and premises as may be
reasonably necessary for maintaining or enforcing FINOVA's security interest.

     (b) Reporting  Requirements.  Borrower shall furnish FINOVA,  upon request,
such  information  and  statements  as FINOVA  shall  request  from time to time
regarding  Borrower's  business affairs,  financial condition and the results of
its operations. Without limiting the generality of the foregoing, Borrower shall
provide  FINOVA with:  (i) FINOVA's  standard form  collateral  and loan report,
daily,  and upon  FINOVA's  request,  copies  of sales  journals,  cash  receipt
journals,  and  deposit  slips;  (ii)  upon  FINOVA's  request,  copies of sales
invoices,  customer  statements and credit memoranda issued,  remittance advices
and reports; (iii) copies of shipping and delivery documents, upon request; (iv)
on or prior to the date set forth on the  Schedule,  monthly  agings  (aged from
invoice date) and  reconciliations of Receivables (with listings of concentrated
accounts),  payables reports,  inventory  reports,  compliance  certificates and

<PAGE>


unaudited  financial  statements  with respect to the prior month  prepared on a
basis consistent with such statements  prepared in prior months and otherwise in
accordance  with  GAAP;  (v)  audited  annual   consolidated  and  consolidating
financial  statements,  prepared  in  accordance  with GAAP  applied  on a basis
consistent  with the most  recent  Prepared  Financials  provided  to  FINOVA by
Borrower, including balance sheets, income and cash flow statements, accompanied
by the unqualified  report thereon of independent  certified public  accountants
acceptable to FINOVA, as soon as available, and in any event, within ninety (90)
days  after  the  end  of  each  of  Borrower's  fiscal  years;  and  (vi)  such
certificates relating to the foregoing as FINOVA may request, including, without
limitation,  a monthly  certificate  from the president and the chief  financial
officer of Borrower  showing  Borrower's  compliance  with each of the financial
covenants set forth in this Agreement,  and stating whether any Event of Default
has  occurred or event which,  with giving of notice or the passage of time,  or
both, would constitute an Event of Default,  and if so, the steps being taken to
prevent or cure such Event of  Default.  All  reports  or  financial  statements
submitted by Borrower  shall be in  reasonable  detail and shall be certified by
the principal financial officer of Borrower as being complete and correct.  

     9.2. Term; Termination.

     (a) Term.  The Initial Term of the Revolving  Credit Loans facility and the
obligation of FINOVA to made advances  with respect  thereto in accordance  with
this Agreement shall be as set forth on the Schedule,  and the Revolving  Credit
Loans facility.

     (b ) Prior  Notice.  FINOVA shall have the right,  in its sole and absolute
discretion, to terminate this Agreement effective at the end of the Initial Term
or at the end of any Renewal  Term by giving  Borrower  written  notice not less
than  sixty  (60)  days  prior to the  effective  date of such  termination,  by
registered or certified mail.

     (c)  Payment  in  Full.  Upon  the  effective  date  of  termination,   the
Obligations shall become immediately due and payable in full in cash.

     (d) Early  Termination;  Termination  Fee. In addition to the procedure set
forth in Section  9.2(b),  Borrower may terminate this Agreement at any time but
only  upon  sixty  (60)  days'  prior  written  notice  and  prepayment  of  the
Obligations.  Upon any such early  termination by Borrower or any termination of
this Agreement by FINOVA upon the  occurrence of an Event of Default,  then, and
in any such event,  Borrower shall pay to FINOVA upon the effective date of such
termination a fee (the "Termination Fee") in an amount equal to the amount shown
on the Schedule.

     9.3.  Recourse to  Security;  Certain  Waivers.  All  Obligations  shall be
payable by Borrower as provided for herein and, in full, at the  termination  of
this Agreement; recourse to security shall not be required at any time. Borrower
waives  presentment and protest of any instrument and notice thereof,  notice of
default and, to the extent  permitted by  applicable  law, all other  notices to
which Borrower might otherwise be entitled.


     9.4. No Waiver by FINOVA.  Neither  FINOVA's failure to exercise any right,
remedy or option under this  Agreement,  any  supplement,  the Loan Documents or
other  agreement  between  FINOVA  and  Borrower  nor any  delay  by  FINOVA  in
exercising  the same  shall  operate as a waiver.  No waiver by FINOVA  shall be
effective  unless in writing  and then only to the extent  stated.  No waiver by
FINOVA shall affect its right to require strict  performance of this  Agreement.
FINOVA's rights and remedies shall be cumulative and not exclusive.

     9.5.  Binding on Successor and Assigns.  All terms,  conditions,  promises,
covenants,  provisions  and  warranties  shall  inure to the benefit of and bind
FINOVA's and Borrower's respective representatives, successors and assigns.

     9.6.  Severability.  If any provision of this Agreement shall be prohibited
or invalid under  applicable  law, it shall be ineffective  only to such extent,
without invalidating the remainder of this Agreement.

     9.7. Amendments;  Assignments.  This Agreement may not be modified, altered
or amended,  except by an  agreement  in writing  signed by Borrower and FINOVA.
Borrower may not sell,  assign or transfer any interest in this Agreement or any
other Loan Document, or any portion thereof, including,  without limitation, any

<PAGE>


of Borrower's rights, title, interests, remedies, powers and duties hereunder or
thereunder.   Borrower   hereby  consents  to  FINOVA's   participation,   sale,
assignment,  transfer or other disposition,  at any time or times hereafter,  of
this Agreement and any of the other Loan Documents,  or of any portion hereof or
thereof,  including,  without  limitation,  FINOVA's rights,  title,  interests,
remedies,  powers and duties hereunder or thereunder.  In connection  therewith,
FINOVA may disclose all documents and information  which FINOVA now or hereafter
may have relating to Borrower or Borrower's business.  To the extent that FINOVA
assigns its rights and  obligations  hereunder  to a third  party,  FINOVA shall
thereafter  be released  from such  assigned  obligations  to Borrower  and such
assignment shall effect a novation between Borrower and such third party.

     9.8.  Integration.  This Agreement,  together with the Schedule (which is a
part hereof) and the other Loan Documents,  reflect the entire  understanding of
the parties with respect to the transactions contemplated hereby.

     9.9.  Survival.  All of the  representations  and  warranties  of  Borrower
contained in this Agreement shall survive the execution, delivery and acceptance
of this  Agreement by the parties.  No  termination  of this Agreement or of any
guaranty of the  Obligations  shall  affect or impair the  powers,  obligations,
duties, rights, representations, warranties or liabilities of the parties hereto
and all shall survive such termination.

     9.10. Evidence of Obligations. Each Obligation may, in FINOVA's discretion,
be evidenced by notes or other instruments issued or made by Borrower to FINOVA.
If not so evidenced,  such Obligation  shall be evidenced solely by entries upon
FINOVA's books and records.

     9.11. Loan Requests.  Each oral or written request for a loan by any Person
who purports to be any employee,  officer or authorized  agent of Borrower shall
be made to FINOVA on or prior to 11:00 a.m.,  Pacific  time, on the Business Day
on which the proceeds  thereof are requested to be paid to Borrower and shall be
conclusively presumed to be made by a Person authorized by Borrower to do so and
the  crediting of a loan to  Borrower's  operating  account  shall  conclusively
establish  Borrower's  obligation to repay such loan.  Unless and until Borrower
otherwise  directs  FINOVA in writing,  all loans  shall be wired to  Borrower's
operating account set forth on the Schedule.

     9.12.  Notices.  Any notice  required  hereunder  shall be in  writing  and
addressed  to the  Borrower  and  FINOVA  at their  addresses  set  forth at the
beginning of this Agreement.  Notices  hereunder shall be deemed received on the
earlier of receipt, whether by mail, personal delivery, facsimile, or otherwise,
or upon deposit in the United States mail, postage prepaid.

     9.13. Brokerage Fees. Borrower represents and warrants to FINOVA that, with
respect to the financing transaction herein contemplated,  no Person, other than
Deere Park, is entitled to any brokerage  fee or other  commission  and Borrower
agrees to indemnify and hold FINOVA harmless against any and all such claims.

     9.14.  Disclosure.  No  representation or warranty made by Borrower in this
Agreement,  or in any  financial  statement,  report,  certificate  or any other
document  furnished in connection  herewith  contains any untrue  statement of a
material  fact or  omits  to  state  any  material  fact  necessary  to make the
statements herein or therein not misleading.  There is no fact known to Borrower
or which reasonably should be known to Borrower which Borrower has not disclosed
to FINOVA in writing  with  respect  to the  transactions  contemplated  by this
Agreement  which  materially  and  adversely   affects  the  business,   assets,
operations, prospects or condition (financial or otherwise), of Borrower.

     9.15.  Publicity.  FINOVA is hereby  authorized to issue  appropriate press
releases and to cause a tombstone to be published announcing the consummation of
this transaction and the aggregate amount thereof.

     9.16. Captions.  The Section titles contained in this Agreement are without
substantive meaning and are not part of this Agreement.

     9.17.  Injunctive Relief.  Borrower  recognizes that, in the event Borrower
fails to  perform,  observe  or  discharge  any of its  Obligations  under  this
Agreement,  any  remedy at law may  prove to be  inadequate  relief  to  FINOVA.
Therefore,  FINOVA,  if it so  requests,  shall be  entitled  to  temporary  and
permanent  injunctive  relief in any such case without the  necessity of proving
actual damages.

<PAGE>


     9.18. Counterparts;  Facsimile Execution. This Agreement may be executed in
one or more counterparts,  each of which taken together shall constitute one and
the  same  instrument,   admissible  into  evidence.  Delivery  of  an  executed
counterpart of this Agreement by telefacsimile  shall be equally as effective as
delivery  of a  manually  executed  counterpart  of this  Agreement.  Any  party
delivering an executed counterpart of this Agreement by telefacsimile shall also
deliver a manually  executed  counterpart of this Agreement,  but the failure to
deliver  a  manually  executed   counterpart  shall  not  affect  the  validity,
enforceability, and binding effect of this Agreement.

     9.19. Construction. The parties acknowledge that each party and its counsel
have reviewed this  Agreement  and that the normal rule of  construction  to the
effect that any ambiguities are to be resolved  against the drafting party shall
not be employed in the  interpretation  of this  Agreement or any  amendments or
exhibits hereto.

     9.20.  Time of  Essence.  Time is of the  essence  for the  performance  by
Borrower of the Obligations set forth in this Agreement.

     9.21.  Limitation  of Actions.  Borrower  agrees that any claim or cause of
action by  Borrower  against  FINOVA,  or any of FINOVA's  directors,  officers,
employees,  agents,  accountants  or  attorneys,  based upon,  arising  from, or
relating to this  Agreement,  or any other present or future  agreement,  or any
other transaction  contemplated hereby or thereby or relating hereto or thereto,
or any other matter,  cause or thing whatsoever,  whether or not relating hereto
or thereto,  occurred,  done,  omitted or  suffered to be done by FINOVA,  or by
FINOVA's  directors,  officers,  employees,  agents,  accountants  or attorneys,
whether  sounding in contract or in tort or  otherwise,  shall be barred  unless
asserted by Borrower by the  commencement  of an action or proceeding in a court
of competent jurisdiction by the filing of a complaint within one year after the
first act,  occurrence or omission upon which such claim or cause of action,  or
any part thereof,  is based and service of a summons and complaint on an officer
of FINOVA or any other Person  authorized to accept service of process on behalf
of FINOVA, within 30 days thereafter.  Borrower agrees that such one-year period
of time is a reasonable and sufficient  time for Borrower to investigate and act
upon any such claim or cause of action.  The  one-year  period  provided  herein
shall not be waived,  tolled, or extended except by a specific written agreement
of FINOVA.  This provision  shall survive any termination of this Loan Agreement
or any other agreement.

     9.22.  Liability.  Neither FINOVA nor any FINOVA  Affiliate shall be liable
for any indirect,  special,  incidental or  consequential  damages in connection
with any breach of contract,  tort or other wrong  relating to this Agreement or
the  Obligations  or the  establishment,  administration  or collection  thereof
(including   without   limitation   damages  for  loss  of   profits,   business
interruption,   or  the  like),   whether  such  damages  are   foreseeable   or
unforeseeable,  even if  FINOVA  has been  advised  of the  possibility  of such
damages.  Neither  FINOVA,  nor any  FINOVA  Affiliate  shall be liable  for any
claims,  demands,  losses or damages,  of any kind  whatsoever,  made,  claimed,
incurred or suffered by the Borrower through the ordinary  negligence of FINOVA,
or any FINOVA  Affiliate.  "FINOVA  Affiliate"  shall mean  FINOVA's  directors,
officers,  employees, agents, attorneys or any other Person or entity affiliated
with or representing FINOVA.

     2.23.  Notice of Breach by FINOVA.  Borrower  agrees to give FINOVA written
notice of (i) any  action or  inaction  by FINOVA or any  attorney  of FINOVA in
connection with any Loan Documents that may be actionable  against FINOVA or any
attorney of FINOVA or (ii) any defense to the payment of the Obligations for any
reason,  including, but not limited to, commission of a tort or violation of any
contractual duty or duty implied by law. Borrower agrees that unless such notice
is fully  given as promptly as  possible  (and in any event  within  thirty (30)
days) after Borrower has knowledge, or with the exercise of reasonable diligence
should have had  knowledge,  of any such action,  inaction or defense,  Borrower
shall not assert,  and  Borrower  shall be deemed to have  waived,  any claim or
defense arising therefrom.

     9.24.  Application of Insurance Proceeds.  The net proceeds of any casualty
insurance  insuring  the  Collateral,  after  deducting  all costs and  expenses
(including attorneys' fees) of collection, shall be applied, at FINOVA's option,
either toward  replacing or restoring the  Collateral,  in a manner and on terms
satisfactory  to FINOVA,  or toward  payment of the  Obligations.  Any  proceeds
applied to the payment of Obligations  shall be applied in such manner as FINOVA
may elect. In no event shall such  application  relieve Borrower from payment in
full of all installments of principal and interest which  thereafter  become due
in the order of maturity thereof.

<PAGE>


     9.25.  Power of Attorney.  Borrower  appoints  FINOVA and its  designees as
Borrower's  attorney,  with the power to endorse  Borrower's name on any checks,
notes, acceptances, money orders or other forms of payment or security that come
into  FINOVA's  possession;  to sign  Borrower's  name on any invoice or bill of
lading relating to any Receivable,  on drafts against customers,  on assignments
of Receivables, on notices of assignment,  financing statements and other public
records,  on  verifications  of accounts  and on notices to customers or account
debtors;  to send  requests  for  verification  of  Receivables  to customers or
account  debtors;  after the  occurrence of any Event of Default,  to notify the
post office authorities to change the address for delivery of Borrower's mail to
an address designated by FINOVA and to open and dispose of all mail addressed to
Borrower;  and to do all other  things  FINOVA  deems  necessary or desirable to
carry out the terms of this Agreement. Borrower hereby ratifies and approves all
acts of such attorney.  Neither FINOVA nor any of its designees  shall be liable
for any acts or  omissions  nor for any error of  judgment or mistake of fact or
law while  acting as  Borrower's  attorney.  This power,  being  coupled with an
interest,  is irrevocable  until the  Obligations  have been fully satisfied and
FINOVA's obligation to provide loans hereunder shall have terminated

     9.26. Governing Law; Waivers. THIS AGREEMENT,  INCLUDING WITHOUT LIMITATION
ENFORCEMENT OF THE  OBLIGATIONS,  SHALL BE  INTERPRETED  IN ACCORDANCE  WITH THE
INTERNAL  LAWS (AND NOT THE  CONFLICT  OF LAWS  RULES)  OF THE STATE OF  ARIZONA
GOVERNING CONTRACTS TO BE PERFORMED ENTIRELY WITHIN SUCH STATE.  BORROWER HEREBY
CONSENTS TO THE  EXCLUSIVE  JURISDICTION  OF ANY STATE OR FEDERAL  COURT LOCATED
WITHIN THE COUNTY OF  MARICOPA IN THE STATE OF ARIZONA OR, AT THE SOLE OPTION OF
FINOVA,  IN ANY OTHER COURT IN WHICH  FINOVA SHALL  INITIATE  LEGAL OR EQUITABLE
PROCEEDINGS  AND  WHICH  HAS  SUBJECT  MATTER  JURISDICTION  OVER THE  MATTER IN
CONTROVERSY.  BORROWER  WAIVES ANY OBJECTION OF FORUM NON  CONVENIENS AND VENUE.
BORROWER  FURTHER  WAIVES  PERSONAL  SERVICE OF ANY AND ALL PROCESS UPON IT, AND
CONSENTS  THAT ALL SUCH  SERVICE  OF  PROCESS BE MADE IN THE MANNER SET FORTH IN
SECTION 9.12 HEREOF FOR THE GIVING OF NOTICE.  BORROWER FURTHER WAIVES ANY RIGHT
IT MAY OTHERWISE HAVE TO COLLATERALLY ATTACK ANY JUDGMENT ENTERED AGAINST IT.

     9.27. Mutual Waiver of Right to Jury Trial. FINOVA and Borrower each hereby
waives  the  right to trial by jury in any  action  or  proceeding  based  upon,
arising out of, or in any way  relating to: (i) this  Agreement;  (ii) any other
present or future instrument or agreement between FINOVA and Borrower;  or (iii)
any conduct,  acts or omissions of FINOVA or Borrower or any of their directors,
officers,  employees,  agents,  attorneys or any other persons  affiliated  with
FINOVA or Borrower; in each of the foregoing cases, whether sounding in contract
or tort or otherwise.

     Borrower:
     ORGANIC FOOD PRODUCT, INC.
     Fed. Tax ID # 94-3076294

     By______________________________
         President or Vice President

     [ATTACH NOTARY FOR BORROWER]


     FINOVA:
     FINOVA CAPITAL CORPORATION

     By_______________________________
     Title____________________________


                                       23
<PAGE>

                                  Schedule to
                          Loan and Security Agreement

Borrower: Organic Food Products, Inc.
Address:  550 Monterey Road
          Morgan Hill, CA  95037

Fed Tax ID#: 94-3076294

Date: October 9, 1998

This Schedule forms an integral part of the Loan and Security  Agreement between
the above Borrower and FINOVA Capital  Corporation dated the above date, and all
references  herein and therein to "this  Agreement"  shall be deemed to refer to
said Agreement and to this Schedule.

================================================================================
TOTAL FACILITY (SECTION 2.1):

         $3,500,000

================================================================================
LOANS (SECTION 2.2):

     Revolving  Credit  Loans:  A revolving  line of credit  consisting of loans
     against Borrower's Eligible  Receivables  ("Receivable  Loans") and against
     Borrower's Eligible Inventory ("Inventory Loans") (the Receivable Loans and
     the Inventory  Loans shall be  collectively  referred to as the  "Revolving
     Credit Loans") in an aggregate  outstanding  principal amount not to exceed
     the lesser of (a) or (b) below:

          (a) Three Million Dollars ($3,000,000) (the "Revolving Credit Limit"),
          less any Loan Reserves, or

          (b) the sum of

               (i) an amount equal to eighty  percent (80%) of the net amount of
               Eligible Receivables, less the amount obtained by multiplying the
               net amount of Eligible  Receivables  by the  percentage  by which
               dilution, as reasonably determined by FINOVA, for the twelve (12)
               month  period  ended as of  Borrower's  most  recently  completed
               fiscal quarter exceeded ten percent (10%);plus

               (ii) an amount not to exceed the lesser of:

                    (A)  fifty-five  percent  (55%) of the  value of  Borrower's
                    Eligible  Inventory,  calculated  at the  lower  of  cost or
                    market value and determined on a first-in,  first-out basis,
                    or


<PAGE>


                    (B) Two Million Five Hundred Thousand Dollars  ($2,500,000);
                    less

               (iii) any Loan Reserves.

     Term  Loans:  one or more  term  loans  against  the  value  of  Borrower's
     machinery,  equipment  and/or real estate  ("Term  Loans") in an  aggregate
     outstanding  principal  amount not to exceed Five Hundred  Thousand Dollars
     ($500,000);  provided,  that  the  Terms  Loans,  if any,  shall be in such
     amounts and on such terms as are set forth on separate  promissory notes of
     Borrower  from time to time,  each in form and  substance  satisfactory  to
     FINOVA in its sole discretion.
================================================================================

INTEREST AND FEES (SECTION 2.6):

     Revolving  Interest Rate.  Borrower shall pay FINOVA  interest on the daily
     outstanding  balance of  Borrower's  Revolving  Credit Loans at a per annum
     rate of the  Revolver  Margin (as defined  herein) in excess of the rate of
     interest announced publicly by Citibank,  N.A., (or any successor thereto),
     from time to time as its "prime  rate" (the " Prime Rate") which may not be
     such institution's  lowest rate. The interest rate chargeable  hereunder in
     respect of the Revolving  Credit Loans  (herein,  the  "Revolving  Interest
     Rate") shall be increased or decreased,  as the case may be, without notice
     or demand of any kind,  upon the  announcement  of any  change in the Prime
     Rate.  Each change in the Prime Rate shall be  effective  hereunder  on the
     first day following the  announcement of such change.  Interest charges and
     all other fees and charges  herein shall be computed on the basis of a year
     of 360 days and  actual  days  elapsed  and shall be  payable  to FINOVA in
     arrears on the first day of each month. The "Revolver  Margin" shall be two
     and one half percent (2.5%); provided,  however, that (A) if for the fiscal
     year ending June 30, 1999,  Earnings Before Interest,  Taxes,  Depreciation
     and Amortization  for such fiscal year,  exceed Six Hundred Eighty Thousand
     Dollars  ($680,000),  the  Revolver  Margin  shall be reduced  one  quarter
     percent  (.25%),  effective as of the date that FINOVA receives the audited
     financial  statements  for such  fiscal year and  determines,  based on its
     review of such  financial  statements,  that such  financial  test has been
     satisfied,  so long as no Event of  Default  exists  as of the date of such
     determination,  and  (B) if for the  fiscal  year  ending  June  30,  2000,
     Earnings Before  Interest,  Taxes,  Depreciation  and Amortization for such
     fiscal  year,  exceed One Million  Eight  Hundred  Fifty  Thousand  Dollars
     ($1,850,000),  the  Revolver  Margin  shall be reduced one quarter  percent
     (.25%) from the  Revolver  Margin then in effect,  effective as of the date

<PAGE>


     that FINOVA receives the audited financial  statements for such fiscal year
     and determines, based on its review of such financial statements, that such
     financial  test has been satisfied so long as no Event of Default exists as
     of the date of such determination;  provided, further, however, that if (A)
     for the fiscal  year ending June 30,  2000,  Borrower  does not satisfy the
     financial  test  specified in the  preceding  proviso,  but did satisfy the
     financial  test for the fiscal year ending June 30, 1999,  specified in the
     preceding  proviso,  then effective as of the date that FINOVA receives the
     audited  financial  statements  for the  June  30,  2000,  fiscal  year and
     determines,  based on its review of such  financial  statements,  that such
     financial test was not satisfied,  the Revolver  Margin shall be readjusted
     to two and one half percent  (2.50%) or (B) for the June 30,  2000,  fiscal
     year Borrower does not deliver the audited  financial  statements  for such
     fiscal year within the time period  required  hereunder,  and the  Revolver
     Margin had been  reduced in  accordance  with the  preceding  proviso,  the
     Revolver  Margin shall be  readjusted  to two and one half percent  (2.50%)
     effective  as of the date  that  Borrower  is in  breach  of its  financial
     statements delivery requirement.


     Term  Interest  Rate:  Borrower  shall  pay  FINOVA  interest  on the daily
     outstanding  balance  of the Term  Loans at a per annum rate of two and one
     half  percent  (2.5%)  in  excess  of the Prime  Rate.  The  interest  rate
     chargeable  hereunder  in  respect  of the Term  Loans  (herein,  the "Term
     Interest  Rate")  shall  be  increased  or  decreased,  as the case may be,
     without notice or demand of any kind,  upon the  announcement of any change
     in the  Prime  Rate.  Each  change  in the Prime  Rate  shall be  effective
     hereunder  on the first day  following  the  announcement  of such  change.
     Interest charges and all other fees and charges herein shall be computed on
     the  basis of a year of 360 days  and  actual  days  elapsed  and  shall be
     payable  to FINOVA in  arrears  on the  first  day of each  month.  Minimum
     Interest  Charge.  With respect to each Loan Year or portion thereof during
     the term of this  Agreement  (excluding  the  calendar  month in which this
     Agreement is executed), Borrower shall also pay FINOVA, on the first day of
     the next  Loan  Year,  as a minimum  charge,  the  amount by which  accrued
     interest  pursuant to the  Revolving  Interest  Rate section above for such
     Loan Year or portion  thereof is less than  Seventy-Five  Thousand  Dollars
     ($75,000) (the "Minimum Interest Charge").  Notwithstanding  the occurrence
     of any Event of Default  hereunder  or  termination  of this  Agreement  by
     FINOVA as a result  thereof,  the Minimum  Interest Charge shall be paid by
     Borrower for the unexpired  portion of the Initial Term or any Renewal Term
     of this  Agreement as of the date of termination of the Initial Term or the
     Renewal Term, as applicable.

     Collateral  Monitoring  Fee. At the closing of this  transaction and on the
     first day of each calendar  month  thereafter,  Borrower shall pay FINOVA a
     collateral   monitoring   fee  of  Seven  Hundred   Fifty  Dollars   ($750)
     ("Collateral Monitoring Fee"); provided,  however, that Borrower agrees and
     acknowledges  that each Loan Year a full year's fee shall be deemed  earned
     at the beginning of the respective  Loan Year.

     Closing  Fee. At the  closing of this  transaction,  Borrower  shall pay to
     FINOVA a closing fee in an amount  equal to one  percent  (1%) of the Total
     Facility  ("Closing  Fee"),  which shall be deemed fully earned on the date
     such payment is due.


<PAGE>


     Annual Renewal Fee. On the first anniversary of the date of this Agreement,
     and on each  subsequent  anniversary  of said date, if this Agreement is in
     effect,  Borrower shall pay FINOVA a renewal fee in the amount of Seventeen
     Thousand Five Hundred Dollars ($17,500) ("Annual Renewal Fee"), which shall
     be deemed fully earned on the date due and shall be non-refundable.

     Unused Line Fee. With respect to each calendar  month,  or portion  thereof
     during the term of this Agreement,  Borrower shall  unconditionally  pay to
     FINOVA a fee equal to  one-half  of one  percent  (0.50%)  per annum of the
     difference  between  the  Revolving  Credit  Limit  and the  average  daily
     outstanding  balance of the  Revolving  Credit Loans during such month,  or
     portion  thereof  ("Unused Line Fee"),  which fee shall be  calculated  and
     payable monthly,  in arrears,  and shall be due and payable,  commencing on
     the first Business Day of the Borrower's first calendar month following the
     Closing Date and  continuing  on the first  Business  Day of each  calendar
     month thereafter.

     Examination Fee. Borrower agrees to pay to FINOVA an examination fee in the
     amount of Six Hundred  Dollars ($600) per person per day in connection with
     each audit or examination of Borrower performed by FINOVA prior to or after
     the date  hereof,  plus all  costs  and  expenses  incurred  in  connection
     therewith (the "Examination  Fee").  Without limiting the generality of the
     foregoing,  Borrower shall pay to FINOVA an initial  Examination  Fee in an
     amount  equal to Six Hundred  Dollars  ($600) per person per day,  plus all
     costs  and  expenses  incurred  in  connection   therewith.   Such  initial
     Examination Fee shall be deemed fully earned at the time of payment and due
     and  payable  upon the closing of this  transaction,  and shall be deducted
     from any good faith deposit paid by Borrower to FINOVA prior to the date of
     this Agreement.

================================================================================

CONDITIONS OF CLOSING (SECTION 4.1):

     The obligation of FINOVA to make the initial  advance  hereunder is subject
     to the fulfillment,  to the satisfaction of FINOVA and its counsel, of each
     of the following  conditions,  in addition to the  conditions  set forth in
     Sections 4.1 and 4.2 above:

     (a)  Minimum  Excess  Availability  (Section  4.1(b)).  Not less than Three
     Hundred Fifty Thousand Dollars  ($350,000),  assuming that (i) all accounts
     payable  outstanding:  are within thirty (30) days from their invoice date,
     and (ii)  all  grower  accounts  payable  and  co-packer  accounts  payable
     balances are fully reserved as Loan Reserves.


<PAGE>


     (b) Lease,  Landlord's,  Warehousemen's  and Co-Packers'  Consents (Section
     4.1(j)). Location(s):

          550-B Monterey Road
          Morgan Hill, CA  95037

          1852 Monterey Road
          San Jose, CA  95150

          2955 State Road
          Croydon, PA  19021

          274 Kearney
          Watsonville, CA  95075

          950 S. Sanborn Road
          Salinas, CA  93902

          128 Oberlin Street
          Claremont, CA  91711

          901 Packer Street
          Atwater, CA  95301

          400 D'Arcy Parkway
          Lathrop, CA  95330

          8250 Industrial Avenue
          Roseville, CA  95678

          South Williams St.
          Gevena, IN  46740

          4667 E. Date Avenue
          Fresno, CA  93725

          1117 K Street
          Sanger, CA  93657

          760 Epperson Drive
          City of Industry, CA  91748

          13805 Llagas Avenue
          San Martin, CA  95046

<PAGE>



          5010 Eucalyptus Avenue
          Chino, CA  91710

          2140 Pine Street
          Ceres, CA  95037

          270 N. Mill Road
          Vineland, CA  08360

          2482 Freedom Boulevard
          Watsonville, CA  95076

          2425 Whipple Road
          Hayward, CA  94544

          6300 S. Watt
          Sacramento, CA  95829

          7110 N. Washoe
          Firebaugh, CA  93622

     (c) No Material Adverse Change (Section 4.1(s)). No material adverse change
     has occurred in the Borrower's business,  operations,  financial condition,
     or assets or in the prospect of repayment of the Obligations since June 30,
     1998.

     (d) Validity and Support Agreements (Section 4.1(a)).  James F. Swallow and
     David J.  O'Gorman  shall  each  have  delivered  a  Validity  and  Support
     Agreement in favor of FINOVA,  and in form and  substance  satisfactory  to
     FINOVA.

     (e) Reference Checks.  FINOVA shall have received  satisfactory  results of
     customer, vendor and credit reference checks with respect to Borrower.

     (f) Background Checks. FINOVA shall have received  satisfactory  background
     reports on James F. Swallow and David J. O'Gorman.

     (g) Recent Financial  Statements.  Borrower shall have delivered  unaudited
     financial statements for the months of July and August 1998.

     Borrower shall cause the  conditions  precedent set forth in Section 4.1 of
     this  Agreement and set forth above in this  Schedule to be satisfied,  and
     shall provide  evidence to FINOVA that all such  conditions  precedent have
     been satisfied, on or before October 9, 1998.


<PAGE>


================================================================================

BORROWER INFORMATION:

Borrower's State of Incorporation (Section 5.1):  California

Borrower's copyrights, patents trademarks, and licenses (Section 5.5):

Millina's Finest           Trademark Reg. No. 2,147,800
Parrot Brand               Trademark Reg. No. 2,146,445
Napa Valley Springs        Trademark Reg. No. 1,755,623
Sunny Farms                Trademark Reg. No. 1,776,701
Pacific Rim                Trademark Reg. No. 1,700,735
Pacific Rim Design         Trademark Reg. No. 1,888,762
Fictitious Names/Prior Corporate Names  (Section 5.2):

    Prior Corporate Names:  S & D Foods, Inc. (until December 27, 1995)
                            Garden Valley Naturals, Inc. (from December 27, 1995
                            to June 28, 1996)

    Fictitious Names:       None

Borrower Locations (Section 5.16):

        550-B Monterey Road
        Morgan Hill, CA  95037

        1852 Monterey Road
        San Jose, CA  95150

        2955 State Road
        Croydon, PA  19021

        274 Kearney
        Watsonville, CA  95075

        950 S. Sanborn Road
        Salinas, CA  93902

        128 Oberlin Street
        Claremont, CA  91711


<PAGE>


        901 Packer Street
        Atwater, CA  95301

        400 D'Arcy Parkway
        Lathrop, CA  95330

        8250 Industrial Avenue
        Roseville, CA  95678

        4667 E. Date Avenue
        Fresno, CA  93725

        1117 K Street
        Sanger, CA  93657

        760 Epperson Drive
        City of Industry, CA  91748

        13805 Llagas Avenue
        San Martin, CA  95046

        5010 Eucalyptus Avenue
        Chino, CA  91710

        2140 Pine Street
        Ceres, CA  95037

        270 N. Mill Road
        Vineland, CA  08360

        2482 Freedom Boulevard
        Watsonville, CA  95076

        2425 Whipple Road
        Hayward, CA  94544

        6300 S. Watt
        Sacramento, CA  95829

        7110 N. Washoe
        Firebaugh, CA  93622


<PAGE>


Borrower's Federal Tax Identification Number (Section 5.16):  94-3076294

Permitted Encumbrances (Section 1.1): None, other than the option to acquire the
      Napa Valley Springs trademark that is held by California Bottling Company.

================================================================================

FINANCIAL COVENANTS  (SECTION 6.1.13):

                        Borrower   shall  comply  with  all  of  the   following
                        covenants.  Compliance shall be determined as of the end
                        of each month or quarter (as determined by FINOVA in its
                        sole  discretion),   except  as  otherwise  specifically
                        provided below:

Current Ratio.          Borrower  shall  maintain a ratio of  Current  Assets to
                        Current Liabilities of not less than .5 to 1.0 as of the
                        last day of each fiscal quarter of Borrower;

EBITDA.                 Borrower shall maintain Earnings Before Interest, Taxes,
                        Depreciation  and Amortization of not less than (i) Five
                        Hundred Fifty Thousand Dollars ($550,000) for the fiscal
                        year  ending  June 30,  1998,  and (ii) One  Million Two
                        Hundred  Thousand  Dollars  ($1,200,000)  for the fiscal
                        year ending June 30, 2000.

Net Earnings.           Borrower  shall  maintain net  earnings,  calculated  in
                        accordance  with  GAAP,  of not less  than  One  Hundred
                        Thousand  Dollars  ($100,000)  for each  fiscal  year of
                        Borrower.

================================================================================

NEGATIVE COVENANTS (SECTION 6.2):

Employee Advances:      Borrower  shall  not  make  any  loans  or  advances  to
                        Employees  except in the ordinary course of business and
                        consistent   with  past  practices  of  Borrower  in  an
                        aggregate amount not exceeding at any time Five Thousand
                        Dollars ($5,000). Existing Guaranties: None.

Capital Expenditures:   Borrower shall not make or incur any Capital Expenditure
                        if, after giving effect thereto, the aggregate amount of
                        all Capital  Expenditures by Borrower in any fiscal year
                        (beginning  with the fiscal year  ending June 30,  1999)
                        that are not  financed  by  FINOVA  under  the Term Loan
                        would exceed ($50,000).

Compensation:           Borrower  shall  not pay total  compensation,  including
                        salaries,   withdrawals,   fees,  bonuses,  commissions,
                        drawing accounts and other payments, whether directly or
                        indirectly,  in money or  otherwise,  during  any fiscal
                        year  to  all of  Borrower's  executives,  officers  and
                        directors  (or any  relative  thereof)  in an  amount in
                        excess of one  hundred  fifteen  percent  (115%) of such
                        total  compensation  paid in the  immediately  preceding
                        fiscal year.


<PAGE>


Indebtedness:           Borrower  shall not create,  incur,  assume or permit to
                        exist  any  Indebtedness   (including   Indebtedness  in
                        connection with Capital Leases) in excess of Twenty-Five
                        Thousand   Dollars   ($25,000)   other   than   (i)  the
                        Obligations,  (ii) trade payables and other  contractual
                        obligations  to suppliers and customers  incurred in the
                        ordinary course of business and (iii) other Indebtedness
                        existing on the date of this  Agreement and reflected in
                        Exhibit A attached hereto (other than  Indebtedness paid
                        on the  date  of this  Agreement  from  proceeds  of the
                        initial advances hereunder).

================================================================================

REPORTING REQUIREMENTS (SECTION 9.1):

     1.   Borrower shall provide FINOVA with monthly agings aged by invoice date
          and  reconciliations of Receivables within ten (10) days after the end
          of each month.

     2.   Borrower  shall provide  FINOVA with monthly  accounts  payable agings
          aged  by  invoice  date,  outstanding  or  held  check  registers  and
          inventory  certificates  within  ten (10)  days  after the end of each
          month.

     3.   Borrower  shall provide  FINOVA with monthly (i)  perpetual  inventory
          reports for the Inventory valued on a first-in, first-out basis at the
          lower of cost or market (in accordance  with GAAP) (ii) reports on the
          types,  amounts,  and  locations of  Inventory  at warehouse  and cold
          storage  locations,  and (iii)  such  other  inventory  reports as are
          reasonably requested by FINOVA, all within ten (10) days after the end
          of each month.

     4.   Borrower  shall  provide  FINOVA  with  monthly  unaudited   financial
          statements within thirty (30) days after the end of each month.

     5.   Borrower   shall  provide   FINOVA  with  audited   consolidated   and
          consolidating  fiscal financial  statements  within one hundred twenty
          (120) days after the end of each  fiscal  year,  as more  specifically
          described in Section  9.1(b)  hereof,  and with an opinion issued by a
          Certified Public Accountant which is acceptable to FINOVA.

     6.   Borrower shall provide FINOVA with annual operating budgets (including
          income statements,  balance sheets and cash flow statements, by month)
          for the upcoming fiscal year of Borrower within thirty (30) days prior
          to the end of each fiscal year of Borrower.

     7.   Borrower's  balance  sheets for purposes of the definition of Prepared
          Financials shall be as of June 30, 1998.
<PAGE>

================================================================================

TERM (SECTION 9.2):

     The initial term of this Agreement shall be three (3) year(s) from the date
     hereof  (the  "Initial  Term") and shall be subject to  successive  renewal
     periods  of one (1) year  each  (each,  a  "Renewal  Term")  by  FINOVA  in
     accordance  with Section 9.2(b),  unless earlier  terminated as provided in
     Section 7 above or elsewhere in this Agreement.

================================================================================

TERMINATION FEE (SECTION 9.2):

     (A) Revolving Credit Loans Facility.  The Termination Fee applicable to the
     Revolving Credit Loans facility  provided for in Section 9.2(d) shall be an
     amount equal to the following percentage of the Revolving Credit Limit:

     (i) three percent (3%), if such early termination occurs on or prior to the
     first anniversary of the date of this Agreement;

     (ii) two percent  (2%),  if such early  termination  occurs after the first
     anniversary  of the date of this  Agreement  but on or prior to the  second
     anniversary of the date of this Agreement.

     (iii) one percent (1%), if such early  termination  occurs after the second
     anniversary of the date of this Agreement.

     (B) Term Loans.  The  Termination Fee applicable to the Term Loans provided
     for in Section 9.2(d) shall be equal to:

     (i) three  percent (3%) of the amount  prepaid if such  prepayment  is made
     during the Loan Year beginning on the Closing Date;

     (ii) two  percent  (2%) of the amount  prepaid if such  prepayment  is made
     during the Loan Year  beginning  on the first  anniversary  of the  Closing
     Date; and

     (iii) one percent  (1%) of the amount  prepaid if such  prepayment  is made
     during the Loan Year  beginning  on the second  anniversary  of the Closing
     Date.

<PAGE>

================================================================================

DISBURSEMENT (SECTION 9.11):

     Unless and until Borrower  otherwise  directs FINOVA in writing,  all loans
     shall be wired to Borrower's following operating account:

     ________________________________________________________
     ________________________________________________________


================================================================================

Borrower:                                   FINOVA:                 
                                                                                
ORGANIC FOOD PRODUCTS, INC.                 FINOVA CAPITAL                      
                                            CORPORATION                         
                                                                                
By_______________________________           By_______________________________   
    President or Vice President             Title_____________________________  
                                                                                
                                            


[Attach Notary Provision for Borrower]