REVOLVING LOAN AND SECURITY AGREEMENT


         THIS REVOLVING LOAN AND SECURITY  AGREEMENT is dated as of December 21,
1999, and is by and among BALTEK CORPORATION,  a Delaware corporation having its
principal  executive  offices at 10 Fairway Court,  Northvale,  New Jersey 07647
("Baltek") and CRUSTACEA CORPORATION,a Delaware corporation having its principal
executive  offices  at  106  Stonehurst  Court,  Northvale,   New  Jersey  07647
("Crustacea")  (each a "Borrower" and  collectively  the "Borrowers") and SUMMIT
BANK, a banking  institution of the State of New Jersey having an office located
at 250 Moore Street, Hackensack, New Jersey 07602 (the "Bank").

                               W I T N E S S E T H

         WHEREAS, the Borrowers and the Bank desire to enter into this Revolving
Loan and Security Agreement in accordance with the terms hereof.

         NOW,  THEREFORE,  in consideration of the premises and mutual agreement
herein  contained,  and other good and valuable  consideration,  the receipt and
sufficiency of which are hereby acknowledged, the parties hereto do hereby agree
as follows:

         I.       DEFINITIONS

         1.1      Defined Terms. As used in this Agreement,  the following words
                  and terms shall have the following meanings:

         "Account Debtor" shall mean a Person obligated under or with respect to
an Account Receivable.

         "Accounts  Receivable" shall mean, in addition to the definition of the
term  "accounts"  contained in the Code, any and all  obligations of any kind at
any time due and/or owing to Borrowers (including any such obligation that might
be  characterized  or classified  under the Code as accounts,  contract  rights,
chattel paper, general intangibles or otherwise), and all rights of Borrowers to
receive  payment or any other  consideration  whether arising from goods sold or
leased by the Borrowers or services  rendered or otherwise,  whether or not such
right has been earned by performance,  whether  secured or unsecured,  including
without  limitation,  invoices,  contract rights,  accounts  receivable,  notes,
drafts, acceptances, instruments, refunds, including tax refunds, all Contracts,
and all other  debts,  obligations  and  liabilities  in whatever  form owing to
Borrowers  from any person,  firm,  governmental  authority,  corporation or any
other  entity,  all  security and  guaranties  therefor,  all of the  Borrowers'
rights,  in, to and under all  purchase  orders  heretofore,  now or  hereafter,
received by the Borrowers for goods or services,  and all  Borrowers'  rights to
goods sold (whether delivered,  undelivered,  in transit or returned), which may
be represented  thereby,  including all of Borrowers' rights as an unpaid vendor
or lienor, including stoppage in transit, replevin and reclamation,  whether now
existing or hereafter arising,  and all books,  records,  ledger cards and other
tangible and intangible property pertaining to same (including printed copies of

<PAGE>

all  computerized  data,  electronic  machine-readable  media of such data,  and
software  owned  or  licensed  (to the  extent  it can be  freely  assigned)  by
Borrowers.

         "Advances"  shall have the meaning ascribed to such term in Section 2.1
hereof.

         "Agreement"  shall mean this  Revolving  Loan and  Security  Agreement,
together with any and all exhibits, schedules, amendments or supplements hereto.

         "Bank" shall mean Summit Bank,  a banking  institution  of the State of
New Jersey.

         "Bank Costs" shall mean all taxes and insurance  premiums of every kind
and  nature  of  the  Borrowers  paid  by  the  Bank;  all  filing,   recording,
publication,  and search fees  incurred in  connection  with and relating to the
Borrowers paid by the Bank; all reasonable out-of-pocket costs incurred and sums
expended by the Bank,  with or without  suit,  to correct any  default,  to make
advances of principal  and  interest or payments to prior  secured  parties,  to
enforce  any  right or  remedy  of the  Bank,  or in  connection  with any other
provision of any Loan Document,  including  without  limitation,  any reasonable
out-of-pocket  costs  incurred by the Bank with  respect to any other  lender in
connection with the Loan Documents and the  transactions  contemplated  thereby;
all  reasonable  out-of-pocket  costs  incurred  and sums  expended  in  gaining
possession  of,  inspection of,  maintaining,  handling,  reserving,  repairing,
renovating,  storing,  shipping,  finishing,  selling,  preparing for sale,  and
advertising  to sell  the  Collateral,  whether  or not a sale  is  consummated;
reasonable out-of-pocket costs of using, operating, controlling and managing the
Collateral,  including but not limited to rental and licensing costs; reasonable
out-of-pocket costs of collecting and receiving rent, income, revenue, earnings,
issues and profits of the  Collateral;  reasonable  out-of-pocket  costs of suit
incurred by the Bank in enforcing or defending  this Agreement or any other Loan
Document or any portion thereof; all reasonable out-of-pocket costs and expenses
including  reasonable  attorneys'  fees  and  expenses  incurred  by the Bank in
preparing, reviewing, enforcing, amending, modifying,  administering,  defending
or otherwise concerning this Agreement or any other Loan Document or any portion
hereof  or  thereof;  and  whether  or  not  suit  is  brought,  all  reasonable
out-of-pocket  costs  of  arbitration  and  insolvency  proceedings.  Except  as
otherwise  provided  herein,  Bank costs shall not include any costs or expenses
incurred by the Bank which (i) arise in  connection  with the  compliance by the
Bank with any  directive,  order or request of any  federal or state  regulatory
agency or  authority;  and (ii) are not the  result  of, or caused  by,  whether
directly or indirectly,  in whole or in part, any action or inaction on the part
of the Borrowers or any Guarantor.

         "Base Rate" shall mean the rate of interest announced from time to time
by the Bank as its "base rate" or "base lending rate".  This rate of interest is
determined from time to time by the Bank as a means of pricing some loans to its
customers and is neither tied to any external rate of interest or index nor does
it necessarily  reflect the lowest rate of interest actually charged by the Bank
to any particular class or category of customers of the Bank.

         "Base Rate Loans"  collectively  means that portion of the loan earning
interest at the Base Rate minus three-quarters of one percent (3/4 of 1%).

"Borrowers" shall mean Baltek Corporation and Crustacea Corporation;

         "Borrower" means each of the Borrowers individually.
<PAGE>

         "Business Day" means any day other than a Saturday, Sunday or other day
on which  banks  are  authorized  or  required  to be closed in the State of New
Jersey,  and with respect to LIBOR Based Rate Loans,  a day on which dealings in
U.S.  Dollars may be carried on by the Bank in the London  interbank  eurodollar
market.

         "Code" shall mean the Uniform Commercial Code as in effect in the State
of New Jersey.

         "Collateral"  shall have the  meaning  ascribed to such term in Section
3.1 hereof.

         "Collateral  Proceeds  Account" shall have the meaning ascribed to such
term in Section 3.2 hereof.

         "Commitment"  means  the  commitment  of the Bank to make  loans to the
Borrowers in the maximum  aggregate amount of  $12,500,000.00 in accordance with
this Agreement.

         "Contracts"  shall  mean  all  contracts,  instruments,   undertakings,
documents or other  agreements  with respect to the Collateral in or under which
the Borrowers may now or hereafter have any right, title or interest.

         "Default" shall mean any of the events specified in Article VII hereof,
which, with the passage of time or giving of notice or both, would constitute an
Event of Default.

         "Event of Default"  shall mean any of the events  specified  in Article
VII hereof,  provided  that any  requirement  for notice or lapse of time or any
other condition has been satisfied.

         GAAP shall mean generally accepted accounting  principles in the United
States of America as in effect from time to time.

         "Guarantors"  shall  mean  Balsa  Ecuador  Lumber  Corporation,  a  New
Jersey corporation, Balsa  Development  Corporation,  a New Jersey  corporation,
Sanlam Corporation, a New York corporation,  Cryogenic Structures Corporation, a
Delaware corporation,  and each new subsidiary of Baltek and Crustacea organized
under any  federal  or state laws of the  United  States in the  future  (each a
"Guarantor").

         "Guaranty  Agreement" shall mean that certain Guaranty  Agreement dated
the date hereof from the Guarantors in favor of the Bank.

         "Indebtedness"  shall mean  (i)all  items  (other than  capital  stock,
capital  surplus and retained  earnings)  which in accordance with GAAP would be
included in  determining  total  liabilities as shown on the liability side of a
balance sheet as at the date on which  Indebtedness is to be determined and (ii)
whether or not so reflected,  all  indebtedness,  obligations  and  liabilities,
whether unsecured or secured by any Lien, and all capitalized lease obligations.

         "Inventory" shall mean "inventory" as such term is defined in the Code,
and shall include, without limitation,  all goods and other personal property of
the  Borrowers,  held for sale or lease,  or furnished or to be furnished  under
contracts for services, sale or lease, including all goods returned or reclaimed

<PAGE>

from  customers,  and all raw materials,  work in process and materials owned by
the Borrowers and used or consumed or to be used or consumed in its business, or
in the processing, packaging or shipping of the same, and all finished goods and
all assets of a type  classified as Inventory as reflected,  in accordance  with
GAAP,  on the  financial  statements  of the  Borrowers,  whether  now  owned or
hereafter  acquired or in which the Borrowers  now have or hereafter may acquire
any  right,  title or  interest,  and  wherever  located,  whether in transit or
otherwise.

         "LIBOR Based Rate" means the LIBOR Rate plus 150 basis points.

         "LIBOR  Based Rate Loans"  collectively  means that portion of the Loan
bearing interest at the LIBOR Based Rate.

         "LIBOR Rate" means the rate of interest  for  deposits in U.S.  Dollars
for a maturity equal to the Interest  Period  therefor which appears on Telerate
Page 3750 as of 11:00 a.m.,  London time,  on the date that is two Business Days
prior to the commencement of such Interest Period.  If such rate does not appear
on Telerate Page 3750, the rate utilized shall be the rate which appears,  or if
two or more such rates appear, the average (rounded upward, if necessary, to the
next 1/16 of 1%) of the rates which appear,  on the Reuters  Screen LIBO Page as
of 11:00 a.m.,  London time,  on the date that is two Business Days prior to the
commencement of such Interest Period.

         "Lien"  shall mean (a) any lien,  judicial  lien,  assignment,  charge,
conditional sale or other title retention  agreement,  hypothecation,  mortgage,
pledge, or other security interest,  encumbrance or title retention agreement of
any kind, whether legal or equitable, in respect of any property of a Person, or
upon the income,  rents or profits  therefrom;  (b) any arrangement,  express or
implied,  under which any property of a Person is  transferred,  sequestered  or
otherwise  identified  for the purpose of subjecting  the same to the payment of
Indebtedness  or performance of any other  obligation in priority to the payment
of the general  unsecured  creditors of such Person;  (c) any  Indebtedness  for
wages or Indebtedness  arising for any other reason which is unpaid more than 30
days after the same shall have  become  due and  payable  and which,  if unpaid,
might by Section 507 of the Bankruptcy Code or any other law (whether or not the
events or  condition  (other  than the  existence  of such  Indebtedness  or the
initiation of legal proceedings  available generally to unsecured creditors) set
forth in such law,  have  occurred  or been  satisfied)  be given  any  priority
whatsoever over general unsecured  creditors of such Person;  and (d) the filing
of, or any  agreement to give,  any  financing  statement  under the Code or its
equivalent of any jurisdiction.

         "Loan Documents" shall collectively mean this Agreement,  the Note, the
Guaranty  Agreement,   any  Letter  of  Credit  Agreement,   together  with  all
amendments,  supplements,  extensions or  modifications  thereof or replacements
therefor,  and all other  agreements,  documents,  instruments and  certificates
executed and delivered to the Bank in connection therewith.

         "Maturity Date" shall mean September 30, 2000.

         "Note"  shall  have the  meaning  ascribed  to such  term in  Section 2
hereof.

         "Notice Of Conversion Or Continuation"  shall have the meaning ascribed
to such term in Section 2.1(A) hereof.
<PAGE>

         "Obligations"  means all  indebtedness,  obligations and liabilities of
Borrowers to Bank of every kind and description,  direct or indirect, secured or
unsecured,  joint or  several,  absolute  or  contingent,  due or to become due,
including any overdrafts,  whether for payment or  performance,  now existing or
hereafter arising,  whether presently contemplated or not, regardless of how the
same  arise,  or by what  instrument,  agreement  or book  account  they  may be
evidenced,  or whether  evidenced by any instrument,  agreement or book account,
including,  but not limited to all loans  (including  any loan by  modification,
renewal  or  extension),   all  indebtedness  including  any  arising  from  any
derivative  transactions,  all  undertakings  to take or refrain from taking any
action,  all  indebtedness,  liabilities or obligations  owing from Borrowers to
others  which  Bank  may  have  obtained  by  purchase,  negotiation,  discount,
assignment or otherwise; and all interests,  taxes, fees, charges,  expenses and
attorney's fees (whether or not such attorney is a regularly  salaried  employee
of Bank, any parent corporation or any subsidiary or affiliate thereof,  whether
now existing or hereafter  created)  chargeable to Borrowers or incurred by Bank
under  this  Agreement,  or  any  other  document  or  instrument  delivered  in
connection herewith or therewith.

         "Permitted Indebtedness" shall mean:

          (i)     Indebtedness owing to the Bank;

                  (ii) Indebtedness  incurred in favor of trade creditors and in
the  ordinary  course of business  and not more than 90 days  overdue  (unless a
longer period is  consistent  with accepted  trade  practice  provided that such
longer period shall not exceed 120 days or unless being  contested in good faith
and by appropriate proceedings promptly initiated and diligently conducted,  but
only as long as foreclosure,  distraint, sale or other similar proceedings shall
not have been commenced and such reserve or other appropriate provision, if any,
as shall be required by GAAP shall have been provided therefor);

           (iii)  Indebtedness  in respect of taxes,  assessments,  governmental
charges, worker's compensation, levies and claims for labor, materials, supplies
and rentals to the extent  otherwise  permitted  under this  Agreement to remain
unpaid and undischarged;

           (iv) Indebtedness  existing on the date hereof and fully described on
Schedule I attached hereto;

           (v)  Indebtedness  incurred in the ordinary  course of business  with
respect to the purchase by the Borrowers of trucks, cars,  machinery,  equipment
or  computers  (including  capitalized  lease  obligations  associated  with the
acquisition  of  any  such  assets),  provided  that  the  amount  of  any  such
Indebtedness  does not  exceed  the  purchase  price of the asset  acquired  and
provided  further  that the  aggregate  amount of all such  Indebtedness  in any
fiscal year does not exceed $375,000.00.

         "Permitted Liens" shall mean:

             (i) any Lien in favor of the Bank;

             (ii) Liens that exist on the date hereof and are set forth in
Schedule II attached hereto;

             (iii)  Liens for  taxes,  assessments  or  governmental  charges or
levies not yet due or which are delinquent and which are being contested in good
faith and by appropriate proceedings promptly initiated and diligently conducted
for which reserves have been  established  in accordance  with GAAP with respect
thereto  and  as  to  which  foreclosure,   distraint,  sale  or  other  similar
proceedings shall not have been commenced;
<PAGE>

             (iv)   carriers',   warehousemens',    mechanics',   materialmens',
repairmens',  or other like Liens  arising in the  ordinary  course of  business
which  are not  overdue  or which  are  being  contested  in good  faith  and by
appropriate  proceedings  promptly initiated and diligently  conducted for which
reserves have been  established in accordance with GAAP with respect thereto and
as to which foreclosure,  distraint, sale or other similar proceedings shall not
have been commenced;

             (v) pledges or deposits in connection  with workers'  compensation,
workers'  compensation  insurance,   unemployment  insurance  and  other  social
security legislation;

            (vi) deposits to secure the  performance  of bids,  trade  contracts
(other than for borrowed money), statutory obligations, surety and appeal bonds,
performance  bonds  and  other  obligations  of a like  nature  incurred  in the
ordinary course of business;

           (vii)  Liens  created by or  existing  from any  litigation  or legal
proceeding;  provided that the execution or other  enforcement  of such Liens is
effectively  stayed,  the claims secured thereby are being actively contested in
good  faith  by  appropriate  proceedings,  adequate  book  reserves  have  been
established in accordance with GAAP with respect thereto and no Default or Event
of Default arises or is created as a result thereof; and

          (viii) Liens arising in connection with the Indebtedness  described in
paragraph (v) of the  definition of Permitted  Indebtedness,  provided that such
Liens only encumber the assets acquired with the proceeds of such Indebtedness.

         "Person"   shall  mean  any   individual,   corporation,   partnership,
association,  joint stock company,  trust,  unincorporated  organization,  joint
venture, court or government or political subdivision or agency thereof.

         "Proceeds" and "Products" shall have the meaning ascribed to such terms
in the Code and shall  include in any event (i)  whatever is  received  upon any
collection,  exchange,  sale or other  disposition  or refinancing of any of the
Collateral  and any  property  into which any of the  Collateral  is  converted,
whether cash or non-cash  proceeds;  (ii) any and all proceeds of any insurance,
indemnity,  warranty or guaranty payable to the Borrowers from time to time with
respect  to any of the  Collateral;  (iii)  any and all  payments  (in any  form
whatsoever)  made or due  and  payable  to the  Borrowers  from  time to time in
connection  with  any  requisition,   confiscation,   condemnation,  seizure  or
forfeiture  of all or any  part  of the  Collateral  by any  governmental  body,
authority,  bureau or agency (or any Person  acting under color of  governmental
authority); and (iv) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.

         "Tangible Net Worth" as of any date shall mean the excess of the assets
(excluding amounts due from affiliated or related parties) of the Borrowers over
its  liabilities,  all as determined in accordance with GAAP, but excluding from
such assets all items that would be  considered  "intangible  assets" under GAAP
and the amount of any write-up or re-evaluation of any asset.

         1.2 The words "hereof",  "herein", and "hereunder" and words of similar
import when used in this Agreement  shall refer to this Agreement as a whole and
not to any  particular  provision of this  Agreement,  and section,  subsection,
schedule  and  exhibit   references  are  to  this  Agreement  unless  otherwise
specified.
<PAGE>

      II.         REVOLVING LOAN

         2.1 Advances. From time to time, during the period from the date hereof
until the Maturity Date, in the manner  hereinafter set forth, the Borrowers may
borrow from the Bank and,  upon request of the  Borrowers and upon the terms and
conditions  contained herein, the Bank shall lend to the Borrowers a sum or sums
(the "Advances")  which,  when added to the outstanding  principal amount of the
Advances  theretofore  made pursuant to this  Agreement,  will not exceed in the
aggregate at any time the principal amount of $12,500,000.00.

         2.2  Procedure for Advances.  Subject to the terms and  conditions  set
forth herein, the Borrowers may borrow, pay or prepay and reborrow from the Bank
under this Agreement.  Each Advance shall be made upon  telephonic  request from
the Borrowers to the Bank specifying the proposed date of such borrowing and the
principal  amount  thereof  (which notice shall be received by the Bank prior to
12:00 p.m. with respect to any Advance to be made on the same date). On the date
of each such Advance,  upon  fulfillment of the  conditions  precedent set forth
herein,  the Bank  shall  make  available  to the  Borrowers  the amount of such
Advance by transferring such funds to the Borrowers'  account  maintained at the
Bank.

                  (A) The Borrowers  shall have the option (i) to convert at any
time all or any part of its Base Rate  Loans to LIBOR  Based  Rate Loans or (ii)
upon the  expiration  of any Interest  Period  applicable  to a LIBOR Based Rate
Loan,  to continue  all or any portion  thereof as a LIBOR Based Rate Loan or to
convert all or any portion  thereof to a Base Rate Loan.  In order to effect any
of the  foregoing,  the  Borrower  shall  deliver  a  notice  of  conversion  or
continuation  (the "Notice Of Conversion Or Continuation") to the Bank not later
than 12:00 p.m. New York City time (i) at least three Business Days prior to the
requested  conversion or continuation  date with respect to the conversion to or
continuation  of a LIBOR Based Rate Loan or (ii) on the same Business Day of the
proposed  conversion in the case of a conversion of a LIBOR Based Rate Loan to a
Base Rate Loan. A Notice Of  Conversion  Or  Continuation  shall specify (i) the
proposed  conversion/continuation  date, which shall be a Business Day, (ii) the
amount of the Advance which is to be converted or continued, (iii) the nature of
the proposed  conversion or continuation and (iv) in the case of a conversion to
or a continuation of a LIBOR Based Rate Loan, the requested  Interest Period. In
the event the Bank does not receive a Notice Of  Conversion Or  Continuation  in
accordance  with the provisions  hereof with respect to a LIBOR Based Rate Loan,
upon the expiration of the Interest Period  applicable  thereto,  the same shall
automatically be converted to a Base Rate Loan.  Notwithstanding  the provisions
of this Section  2.2(A)  hereof,  (i) each LIBOR Based Rate Loan shall be in the
minimum  amount of  $250,000.00  or integral  multiples of  $10,000.00 in excess
thereof and (ii) if an Event of Default exists hereunder, the Borrower shall not
be entitled to request or convert Base Rate Loans to LIBOR Based Rate Loans.

                  (B) Except as  provided  in Section  2.6 and 2.8  hereof,  the
outstanding daily principal  balance of the Note  representing  LIBOR Based Rate
Loans shall bear interest for the Interest Periods  applicable thereto at a rate
per annum  equal to the LIBOR  Based Rate and the  outstanding  daily  principal
balance of the Note  representing  Base Rate  Loans  shall  bear  interest  at a
floating  rate per annum  equal to the Base  Rate  minus  three-quarters  of one
percent (3/4 of 1%) or, upon the occurrence of an Event of Default,  such higher
rate as provided in the Note.  Interest  shall be  calculated  on the basis of a
360-day year for the actual number of days elapsed. The rate of interest on that
portion of the outstanding  principal amount of the Note  representing Base Rate
Loans shall be adjusted  automatically as of the opening of business on each day

<PAGE>

on which any change in the Base Rate is announced  by the Bank at its  principal
office.  As used herein,  "Interest Period" shall mean either 30, 60 or 90 days,
as  designated  by the  Borrower  in its  request  for an  Advance  or Notice Of
Conversion  Or  Continuation,  with  respect  to each  LIBOR  Based  Rate  Loan;
provided,  however,  that (i) if an Interest Period would otherwise end on a day
which is not a Business Day, such Interest  Period shall be extended to the next
succeeding Business Day unless such Business Day falls in another calendar month
in which case such Interest Period shall end on the next preceding  Business Day
subject to clause (iii) below; (ii) interest shall accrue from and including the
first  day of each  Interest  Period  to,  but  excluding,  the day on which any
Interest Period expires;  (iii) with respect to any Interest Period which begins
on the last Business Day of a calendar  month (or on a day for which there is no
numerically  corresponding day in the calendar month at the end of such Interest
Period),  the Interest  Period shall end on the last  Business Day of a calendar
month and (iv) no Interest Period shall extend beyond the Maturity Date.

         2.3 Note. The indebtedness of the Borrowers to the Bank with respect to
the Advances made from time to time  hereunder shall be evidenced by a revolving
credit  note (the  "Note"),  made  payable to the Bank,  dated the date  hereof,
signed by the Borrowers and delivered to the Bank. All Advances made by the Bank
to the Borrowers  shall be noted by the Bank on the reverse side or last page of
the Note as indicated thereon, and the Bank is authorized to make such notations
which  shall  be  prima  facia  evidence  of the  principal  amount  outstanding
thereunder  at any time,  provided,  however,  that any  failure  to make such a
notation  (or any errors in notation)  shall not limit or  otherwise  affect the
obligation  of the  Borrowers  hereunder  or under the Note,  which is and shall
remain absolute and unconditional.

         2.4 Letters of Credit. Subject to the terms hereof,  Advances under the
Note may be, if requested by the Borrowers,  in the form of payments by the Bank
pursuant  to the terms of  Standby  Letters of Credit or  Commercial  Letters of
Credit for  Borrowers,  (the  "Letter of  Credit").  In the event the  Borrowers
desire to  obtain an  Advance  in the form of a Letter of Credit  the  Borrowers
shall (i) provide the Bank with at least one (1)  Business  Day's prior  written
notice,  (ii)  complete,  execute  and  deliver  to the Bank such  applications,
agreements,  resolutions and/or  certificates as required by the Bank, (iii) pay
to the Bank with respect to Standby Letters of Credit,  any fees and expenses as
required by the Bank in  connection  with such Letters of Credit,  and (iv) take
such other  actions as required by the Bank.  The term of any Standby  Letter of
Credit shall not exceed one year. The maximum  aggregate  amount available to be
drawn plus  unreimbursed  drawings under the terms of Standby  Letters of Credit
shall not exceed the sum of $1,000,000.00.  Notwithstanding  anything  contained
herein to the  contrary (i) no Letter of Credit  shall have an  expiration  date
after the Maturity Date and (ii) the maximum  aggregate amount of all Letters of
Credit outstanding hereunder shall not exceed $1,000,000.00.

                  (1)  Reimbursement.  Upon a drawing with respect to any Letter
of Credit,  the Borrowers  shall be irrevocably  and  unconditionally  obligated
forthwith without presentment, demand, protest or other formalities of any kind,
to reimburse  Bank for any amounts paid with respect to a Letter of Credit.  The
Borrowers hereby  authorize and direct Bank, at the Bank's option,  to debit the
Borrowers'  account in the amount of any payment made with respect to any Letter
of Credit.

                  (2)  Obligations  Absolute.  The  obligation  of  Borrowers to
reimburse Bank for payments made under,  and other amounts payable in connection
with, any Letter of Credit shall be  unconditional  and irrevocable and shall be
paid strictly in accordance with the terms of this Agreement, including, without
limitation, the following circumstances:
<PAGE>

                           (A) any lack of  validity  or  enforceability  of any
Letter of Credit or any agreement;

                           (B) the existence of any claim,  set-off,  defense or
other right which any  Borrower,  any of its  affiliates,  the Bank,  on the one
hand,  may at any time have against any  beneficiary or transferee of any Letter
of Credit (or any Persons for whom any such  transferee  may be acting),  or any
other Person, on the other hand, whether in connection with this Agreement,  the
transactions  contemplated  herein or any unrelated  transaction  (including any
underlying  transaction  between  Borrowers  or any of its  affiliates  and  the
beneficiary of the Letter of Credit);

                           (C)  any  draft,  demand,  certificate  or any  other
document  presented  under  any  Letter  of  Credit  is  alleged  to be  forged,
fraudulent  or invalid in any respect or any  statement  therein being untrue or
inaccurate in any respect;

                           (D)  payment   under  a  Letter  of  Credit   against
presentation of a demand,  draft or certificate or other document which does not
comply with the terms of such Letter of Credit;  provided  that,  in the case of
any  payment by Bank  under any  Letter of  Credit,  the Bank has not acted with
gross  negligence or willful  misconduct  (as determined by a court of competent
jurisdiction)  in  determining  that the demand for payment under such Letter of
Credit complies on its face with any applicable  requirements for a demand under
such Letter of Credit.

                           (E) any other  circumstance or happening  whatsoever,
which is similar to any of the foregoing; or

                           (F) the fact  that a Default  or an Event of  Default
shall have occurred and be continuing.

                  (3) Nature of Bank's Duties. The Borrower assumes all risks of
the acts and omissions of, or misuse of any Letter of Credit by the  beneficiary
thereof.  In furtherance and not in limitation of the foregoing,  the Bank shall
not be responsible: (i) for the form, validity,  accuracy,  genuineness or legal
effect of any document by any party in connection  with the  application for and
issuance  of any Letter of Credit,  even if it should in fact prove to be in any
or all respects invalid, inaccurate, fraudulent or forged; (ii) for the validity
or  sufficiency  of any  instrument  transferring  or assigning or purporting to
transfer or assign any Letter of Credit or the rights or benefits  thereunder or
proceeds  thereof,  in whole or in  part,  which  may  prove  to be  invalid  or
ineffective  for any reason;  (iii) for failure of the beneficiary of any Letter
of Credit to comply fully with  conditions  required in order to demand  payment
thereunder;  provided  that,  in the case of any  payment  by the Bank under any
Letter of  Credit,  the Bank has not acted  with  gross  negligence  or  willful
misconduct (as determined by a court of competent  jurisdiction)  in determining
that the demand for  payment  under such  Letter of Credit  complies on its face
with any applicable  requirements for a demand for payment thereunder;  (iv) for
errors  omissions,  interruptions  or delays in  transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise, whether or not they are
in cipher;  (v) for errors in  interpretation  or technical terms;  (vi) for any
loss or delay in the transmission or otherwise of any document required in order
to make a  payment  under  any  Letter of  Credit;  (vii) for the  credit of the
proceeds  of any  drawing  under  any  Letter  of  Credit;  and  (viii)  for any
consequences  arising from causes beyond the control of the Bank as the case may

<PAGE>

be. None of the above shall affect,  impair or prevent the vesting of the Bank's
rights or powers hereunder.

                  (4)  Liability.  In  furtherance  and  extension of and not in
limitation of, the specific  provisions herein above set forth, any action taken
or  omitted  by the Bank under or in  connection  with any Letter of Credit,  if
taken or  omitted in good  faith and  provided  that the Bank has not acted with
gross (not mere)  negligence or willful  misconduct (as determined by a court of
competent jurisdiction in a final non-appealable  judgment),  shall not put Bank
under any resulting liability to any Borrower or any other Person.

         2.5 Interest  Rate.  The Note shall bear interest from the date thereof
on the  outstanding  daily  principal  amount  thereof,  which interest shall be
payable on the dates provided for therein, at a fluctuating rate per annum equal
to the Base Rate minus three quarters of one percent (3/4 of 1%) or at the LIBOR
Based Rate as the case may be.  Interest  shall be  calculated on the basis of a
360-day year for the actual number of days elapsed.  The rate of interest on the
Note for Based Rate Loans shall be adjusted  automatically  as of the opening of
business  on each day on which any change in the Base Rate is  announced  by the
Bank at its principal office.

         2.6  Alternate  Interest  Rate.  If within one Business Day of any date
that the Borrowers  request a LIBOR Based Rate Loan, the Bank shall determine in
its sole discretion that it is unable to quote the requested LIBOR Based Rate or
that it is unable or impossible to fund the requested  LIBOR Based Rate Loan for
the Interest  Period  requested,  the Bank shall promptly notify the Borrower of
such determination and no LIBOR Based Rate Loan shall be made by the Bank on the
borrowing date and/or no Base Rate Loan shall be converted to a LIBOR Based Rate
Loan,  as  applicable.  Upon receipt of such  notification,  the  Borrowers  may
withdraw any  outstanding  request for a LIBOR Based Rate Loan by giving written
notice of withdrawal to the Bank prior to such borrowing date.  Unless withdrawn
in  accordance  with this Section 2.6,  any  outstanding  request for such LIBOR
Based  Rate Loan  shall be deemed to be a request  for a Base Rate Loan in equal
principal amount, and such Base Rate Loan shall be made on such borrowing date.

         2.7  Indemnification  For LIBOR Based Rate Loans. Except as provided in
Section  2.6  hereof,  each  request  for a  LIBOR  Based  Rate  Loan  shall  be
irrevocable  and  binding  upon the  Borrower.  The  Borrowers  hereby  agree to
indemnify  the Bank,  upon  demand by the Bank at any time,  against any and all
actual losses (including any actual loss of profit), costs or expenses which the
Bank may at any time or from time to time sustain or incur as a consequence  of:
(a) any breach by the Borrower of its obligation to borrow on the borrowing date
specified  in any request  for a LIBOR  Based Rate Loan,  (b) any failure by the
Borrowers to pay  punctually on the due date thereof,  any amount payable by the
Borrowers  to the Bank on LIBOR Based Rate Loans,  (c) the  acceleration  of the
time of payment of any of the  Borrowers'  obligations in respect of LIBOR Based
Rate  Loans  in  accordance  with  Article  VI of the  Loan  Agreement,  (d) the
repayment or prepayment of the principal of any of the LIBOR Based Rate Loans on
a date  other  than  the  end of  the  applicable  Interest  Period  or (e)  the
conversion  of a LIBOR  Based Rate Loan to a Base Rate Loan on a date other than
the end of the applicable Interest Period. Such losses,  costs or expenses shall
include,  without  limitation,  (i) any costs  incurred  by the Bank in carrying
funds which were to have been borrowed by the Borrowers or in advancing funds to
cover any overdue principal,  overdue interest or any other overdue sums payable
by the  Borrowers  to the Bank in respect of LIBOR  Based Rate  Loans,  (ii) any
interest  payable  by the Bank to the  lenders of the funds  referred  to in the
immediately  preceding  clause (i), and (iii) any actual losses  (including  any

<PAGE>

actual  loss of profit)  incurred or  sustained  by the Bank in  liquidating  or
re-employing  funds  acquired  from third parties to make any of the LIBOR Based
Rate Loans or to fund or maintain all or any part of the principal of any of the
LIBOR Based Rate Loans.

         2.8 Changes in  Circumstances.  If at any time the Bank  shall,  in the
exercise of its reasonable discretion, determine that:

                  (a) the Bank is unable to obtain funds in the principal amount
specified  in any request  for a LIBOR Based Rate Loan for periods  equal to the
specified Interest Period;

                  (b) the  LIBOR  Based  Rate  does not or will  not  accurately
reflect the cost to the Bank of  obtaining or  maintaining  any LIBOR Based Rate
Loan during any  Interest  Period  despite the  Borrowers'  compliance  with its
obligations under Section 2.9 hereof; or

                  (c) any  change in  applicable  law or  regulation  (or in the
interpretation   thereof  by  any  governmental   authority   charged  with  the
administration or interpretation  thereof) has made or will make it unlawful for
the Bank to make or maintain  any LIBOR Based Rate Loan or to comply with any of
the Bank's obligations in respect of any LIBOR Based Rate Loan;

then, in each case, the Bank may promptly give notice of such determination  and
the  reasons  therefor  to the  Borrowers.  Upon such  notification,  the Bank's
obligations  to make LIBOR  Based Rate Loans shall be  suspended  until the Bank
determines that the circumstances described in subparagraphs (a), (b) and (c) of
this  Section  2.8 have  ceased to exist.  Following  the  Bank's  notice  under
subparagraphs  (b) or (c) of this Section 2.8, all outstanding  LIBOR Based Rate
Loans  shall  be  converted  to Base  Rate  Loans  at the end of the  applicable
Interest  Period;  provided,  however,  that if it  shall  be  unlawful  for the
conversion  of such LIBOR Based Rate Loans to Base Rate Loans to be effective as
of the end of the applicable Interest Period, such conversion shall be deemed to
occur as of the date of such notice by the Bank.

         2.9  Additional  Costs and Expenses.  The Borrowers  recognize that the
cost to the Bank of making or maintaining  LIBOR Based Rate Loans or any portion
thereof may fluctuate,  and the Borrowers  agree to pay to the Bank,  within ten
days after written  demand,  an  additional  amount or amounts as the Bank shall
reasonably  determine will compensate the Bank for additional  costs incurred by
the Bank in  maintaining  LIBOR  Based  Rate Loans or any  portion  thereof as a
result of:

                  (a) the imposition after the date of any LIBOR Based Rate Loan
of, or  changes  after the date of any LIBOR  Based  Rate Loan in,  the  reserve
requirements promulgated by the Board of Governors of the Federal Reserve System
of the United States, including, but not limited to, any reserve on Eurocurrency
Liabilities (as defined in Regulation D of the Board of Governors of the Federal
Reserve System of the United States) at the ratios  provided in such  Regulation
from time to time,  it being  agreed  that the  portion or  portions of the Note
bearing interest at LIBOR Based Rates shall be deemed to constitute Eurocurrency
Liabilities, as defined by the such Regulation, and it being further agreed that
such  Eurocurrency  Liabilities  shall be deemed to be subject  to such  reserve
requirements  without  benefit  of, or credit  for,  prorations,  exceptions  or
offsets  that may be  available  to the  Bank or from  time to time  under  such
regulations and  irrespective of whether the Bank actually  maintains all or any
portion of the reserve;
<PAGE>

                  (b) any change,  after the date of LIBOR  Based Rate Loan,  in
any  applicable  laws,  rules  or  regulations  or  in  the   interpretation  or
administration thereof by any domestic or foreign governmental authority charged
with the  interpretation  or  administration  thereof (whether or not having the
force of law) or by any domestic or foreign court changing the basis of taxation
of payments to the Bank of the  principal of or interest on any LIBOR Based Rate
Loan or any other  payments made  hereunder  (other than taxes imposed on all or
any portion of the overall net income of the Bank),  or  imposing,  modifying or
applying any reserve,  special deposit or similar requirement against assets of,
deposits  with  or for  the  account  of,  credit  extended  by,  or  any  other
acquisition  of funds for loans by the Bank,  or  imposing on the Bank or on the
London  Interbank  market any other  condition  affecting  this Agreement or the
portion or portions of the Note  bearing  interest at LIBOR Based Rates so as to
increase the cost to the Bank of making or maintaining LIBOR Based Rate Loans or
to reduce the amount of any sum  received  or  receivable  by the Bank under the
Note (whether of principal, interest or otherwise); or

                  (c) if after the date of any LIBOR  Based Rate Loan,  the Bank
shall have determined  that the  applicability  of any law, rule,  regulation or
guideline  adopted or arising out of the July 1988 report of the Basle Committee
on  Banking  Regulations  and  Supervisory  Practices  entitled   "International
Convergence of Capital Measurement and Capital Standards", or the adoption after
the date  hereof of any other  law,  rule,  regulation  or  guideline  regarding
capital adequacy,  or any change therein,  or any change in any of the foregoing
or in the  interpretation  or  administration  of any  of the  foregoing  by any
domestic or foreign  governmental  authority,  central bank or comparable agency
charged with the interpretation or administration  thereof, or compliance by the
Bank with any request or directive  regarding  capital adequacy  (whether or not
having  the  force of law) of any such  authority,  central  bank or  comparable
agency,  has or would  have the  effect  of  reducing  the rate of return on the
Bank's  capital as a consequence of the Bank's  obligations  with respect to the
Advances  or under the Note or this  Agreement,  to a level below that which the
Bank could have achieved but for such  adoption,  change or  compliance  (taking
into consideration the Bank's policies with respect to capital adequacy).

                  Any amount or amounts  payable by the  Borrower to the Bank in
accordance with the provisions of this Section 2.9 shall be paid within ten (10)
days of receipt by the Borrowers from the Bank of a statement  setting forth the
amount or amounts due and the basis for the  determination  from time to time of
such amount or amounts.  Failure on the part of the Bank to demand  compensation
for any increased  costs in any Interest Period shall not constitute a waiver of
the Bank's right to demand  compensation for any increased costs incurred during
any such Interest Period or in any other or subsequent or prior Interest Period.

         2.10  Optional  Prepayments.  The  Borrowers  shall  have the  right to
prepay, in whole or in part and without premium or penalty, the Note at any time
and from time to time.  Each optional  prepayment  hereunder shall be applied by
the  Bank to the  Advances  made  hereunder  in such  order  as the  Bank  shall
determine in its sole discretion.

         2.11 Mandatory  Prepayment.  If at any time and for whatever reason the
aggregate   outstanding   principal   amount  of  Advances   hereunder   exceeds
$12,500,000.00,  such excess,  together with accrued interest thereon,  shall be
due and payable by the Borrowers upon receipt by the Borrowers of notice thereof
from the Bank.

         2.12 Method of Payment.  The  Borrowers  shall make each  payment to be
made by it hereunder  and under the Note  (including,  without  limitation,  all

<PAGE>

principal,  interest and option and mandatory  prepayments),  without set-off or
counterclaim,  not later than 3:00 p.m. (New York City time) on the day when due
in lawful  money of the United  States of America and in  immediately  available
funds to the Bank at its  principal  office  set forth on the first page of this
Agreement.

         2.13  Business  Day.  Whenever any payment  hereunder or under the Note
shall be stated as due on any day other than a Business  Day,  the  maturity  of
such payment shall be extended to the next succeeding  Business Day and interest
and all other fees shall accrue during such extension.

         2.14 Maturity  Date.  All amounts  outstanding  under the Note and this
Agreement,  shall be immediately  due and payable on the Maturity Date,  without
any requirement of notice or otherwise.  Notwithstanding the foregoing, the Bank
may, but shall have no  obligation  to,  extend or renew this  Agreement and the
Note upon such terms and provisions as shall be agreeable by the parties hereto.
The   Borrowers   acknowledge   that  the  Bank  shall  have  no  obligation  or
responsibility  to extend or renew this Agreement and the Note regardless of the
financial condition or results of operations of the Borrowers.

         2.15  Charge.  Without  in  any  way  limiting  any  right  of  offset,
counterclaim  or banker's  lien which the Bank may  otherwise  have at law,  the
Borrowers  hereby  irrevocably  authorize and direct the  Bank to charge against
the  Borrowers'  account or accounts at the Bank an amount or amounts as are due
and payable hereunder to the Bank from time to time.

         2.16  Operating  Account.  The  Borrowers  shall  maintain  their  main
operating  accounts with the Bank,  which shall be charged  automatically by the
Bank on a monthly basis for payments due under the Note.

         2.17 Fees.

                  (a) The  Borrowers  shall pay the Bank on the date hereof,  in
immediately available funds, a fee (the "Closing Fee") of $15,625.00;

                  (b) The Borrowers  agree to pay to the Bank, in arrears (i) on
the last day of January,  April and July 2000 and (ii) on the Maturity  Date, in
immediately  available  funds,  a fee (the  "Unused  Line Fee") of 1/8 of 1% per
annum on the average  daily unused amount of the  Commitment  during the quarter
(or similar period  commencing  with the date hereof or ending with the Maturity
Date) ending on such date. The purpose of calculating  such average daily unused
amount on any date of  determination,  each  Advance  made on such date shall be
considered a use of Bank's  Commitment.  The Unused Line Fee shall be calculated
on the basis of the actual number of days elapsed in a year of 360 days.

         III. SECURITY INTEREST
              -----------------

         3.1      Grant of Security Interest.

                  (a) As collateral security for the prompt and complete payment
and  performance  when due (whether at the stated  maturity,  by acceleration or
otherwise) of all Obligations and in order to induce the Bank to enter into this
Agreement  and,  among  other  things,  make the  Advances to the  Borrowers  as
provided herein, the Borrowers hereby mortgage,  pledge,  hypothecate,  transfer
and grant to the Bank a security  interest in and lien on all of the  Borrowers'

<PAGE>

right,  title  and  interest  in and to the  following,  whether  now  owned  or
hereafter  acquired  (all of which  being  hereinafter  collectively  called the
"Collateral"):

              (i) all Accounts Receivable;

                  (ii) all Inventory;

              (iii) the Collateral Proceeds Account;

                    (iv)  any  and  all  moneys  or  notes  of any  kind  of the
Borrowers,  now or hereafter  held or received by or in transit to the Bank from
or for  the  Borrowers  (including,  without  limitation,  all  moneys  held  or
deposited in any lock box  maintained  at any office of the Bank),  or which may
now or hereafter be in the  possession  of the Bank, or as to which the Bank may
now or  hereafter be in the control or  possession  of, by documents of title or
otherwise, whether for safekeeping, custody, pledge, transmission, collection or
otherwise,  and  any and all  deposits,  general  or  special,  balances,  sums,
proceeds and credits of the  Borrowers,  and all rights and  remedies  which the
Borrowers  might  exercise  with  respect to any of the  foregoing  but for this
Agreement;

              (v) all Proceeds and Products of the foregoing.

                  (b) All Collateral  heretofore,  herein or hereafter  given or
granted  to the  Bank  by  the  Borrowers  shall  secure  payment  of all of the
Obligations. The Bank shall be under no obligation to proceed against any or all
of the  Collateral  before  proceeding  directly  against the  Borrowers  or any
Guarantor.

                  (c) In  addition to the  security  interest of the Bank in the
Collateral as herein  provided,  all of the Obligations  shall be secured by the
Guaranty  Agreement,  in accordance with the respective terms and provisions set
forth therein.

3.2      Rights of the Bank; Limitations on Bank's Obligations.
                  (a) It is expressly  agreed by the  Borrowers  that,  anything
herein to the contrary notwithstanding,  the Borrowers shall remain liable under
each Contract to observe and perform all the  conditions  and  obligations to be
observed and performed by it thereunder,  all in accordance with and pursuant to
the terms and  provisions  of each such  Contract.  The Bank  shall not have any
obligation  or liability  under any Contract by reason of or arising out of this
Agreement  or the  receipt by the Bank of any payment  relating to any  Contract
pursuant  hereto,  nor shall the Bank be required or  obligated in any manner to
perform or fulfill any of the  obligations of the Borrowers under or pursuant to
any Contract, or to make any payment, or to make any inquiry as to the nature or
the  sufficiency  of  any  payment  received  by it or  the  sufficiency  of any
performance by any party under any Contract, or to present or file any claim, or
to take any action to collect or enforce any  performance  or the payment of any
amounts which may have been assigned to it or to which it may be entitled at any
time or times.

                  (b) Each Borrower is  authorized  to collect  amounts owing it
with respect to the Collateral,  provided that the Bank may,  following an Event
of Default,  upon written  notice to the  Borrowers  curtail or  terminate  said
authority.  If required by the Bank,  following  the  occurrence  of an Event of
Default,  any Proceeds,  when collected by the Borrowers,  whether consisting of
checks, notes, drafts, bills of exchange, money orders,  commercial paper of any

<PAGE>

kind  whatsoever,  or other  documents,  received  as  payment in respect of any
Collateral  shall be promptly  deposited by the  Borrowers in precisely the form
received,  except for its endorsement  when required,  in a special bank account
maintained  by  the  Bank  (the  "Collateral  Proceeds  Account"),   subject  to
withdrawal as hereinafter provided, and until so turned over, shall be deemed to
be held in trust by the Borrowers  for and as the Bank's  property and shall not
be commingled with the Borrowers'  other funds.  Such Proceeds,  when deposited,
shall  continue  to be  Collateral  for all of the  obligations  and  shall  not
constitute payment thereof until applied as hereinafter provided. If an Event of
Default shall have occurred and be continuing, the Bank shall, at such intervals
as it shall  determine,  apply  all or any part of the funds on  deposit  in the
Collateral  Proceeds  Account on account of the principal of and/or  interest on
the  Obligations,  the order and method of such  application to be determined by
the Bank in its sole discretion.

                  (c) The Bank  may,  following  the  occurrence  of an Event of
Default,  notify Account Debtors to the effect that the Accounts Receivable have
been  assigned  to the Bank  and that  payments  shall be made  directly  to the
Collateral  Proceeds  Account or as the Bank shall  otherwise  direct.  Upon the
request of the Bank at any time following the occurrence of an Event of Default,
the Borrowers will so notify such Account Debtors and will indicate on all bills
that payments  shall be made directly to the Collateral  Proceeds  Account or as
the Bank shall otherwise direct.  The Bank may in its own name or in the name of
others  communicate  with  Account  Debtors in order to verify  with them to the
Bank's satisfaction the existence, amount and terms of any Accounts Receivable.

                  (d) The Bank shall  have the right to make test  verifications
of the  Accounts  Receivable  in any  manner  and  through  any  medium  that it
considers advisable, and the Borrowers agree to pay the reasonable costs thereof
and to furnish all such  assistance  and  information as the Bank may require in
connection therewith.

                  (e) At any time  and from  time to time  upon  request  by the
Bank, the Borrowers shall forthwith  endorse and deliver to the Bank all chattel
paper, notes and other instruments and negotiable documents in the possession of
the Borrowers.

         IV.      REPRESENTATIONS AND WARRANTIES.
                  -------------------------------

         4. In order to induce the Bank to enter into this  Agreement and, among
other things, make the Advances provided herein, the Borrowers hereby represent,
warrant and agree that:

         4.1 Subsidiaries.  Baltek has no subsidiaries with the exception of the
subsidiaries referred to in Baltek's consolidated  financial statements provided
to the Bank.

         4.2  Organization;   Power;  Qualification.  Each  Borrower  (i)  is  a
corporation duly organized, validly existing and in good standing under the laws
of the  State of  Delaware;  (ii) has the full  power and  authority  to own and
operate its  properties and assets and to carry on the business now conducted by
it; (iii) does not conduct business under any trade name or fictitious name; and
(iv) is  qualified  or  authorized  to do business  and in good  standing in all

<PAGE>

jurisdictions  wherein the character of the property  owned or the nature of the
business  conducted by such Borrower makes such  qualification  or authorization
necessary,  except  such  jurisdictions  in which the lack of  qualification  or
authorization  does not  materially  adversely  affect the business,  results of
operations or financial condition of such Borrower.

         4.3  Authorization  of  Agreement.  Each  Borrower  has full  power and
authority  to execute,  deliver and perform any action which may be necessary or
advisable to carry out the terms of the Loan  Documents;  and each Loan Document
to which the  Borrowers  and is the legal,  valid and binding  obligation of the
Borrowers enforceable in accordance with its terms.

         4.4 No Legal Bar. The execution,  delivery and  performance of the Loan
Documents will not (i) violate any provision of any existing law, statute, rule,
regulation or ordinance, (ii) conflict with, result in a breach of or constitute
a  default  under  (a)  the  certificate  of  incorporation  or  by-laws  of the
Borrowers,  or  (b)  any  order,  judgment,   award  or  decree  of  any  court,
governmental authority,  bureau or agency, or (c) any mortgage,  lease, material
contract or other material agreement or undertaking to which the Borrowers are a
party or by which the Borrowers or any of its properties or assets may be bound;
and (iii) result in the creation or  imposition of any Lien upon or with respect
to any property or asset now or hereafter  acquired by the Borrowers  other than
the Liens created by the Loan Documents.

         4.5 Consent. No consent, license, permit, approval or authorization of,
exemption by, notice to, report to, or registration,  filing or declaration with
any Person is required in connection with the execution,  delivery,  performance
or validity of the Loan  Documents  or the  transactions  contemplated  thereby,
other than filing or recordation of the financing  statements and like documents
in connection with the Liens being granted in favor of the Bank.

         4.6  Compliance  With Law.  Each  Borrower is not in  violation  of any
applicable law, rule, regulation,  statute,  ordinance,  or any order, judgment,
award or decree of any court,  governmental  authority,  bureau or  agency,  the
violation  of which  might have a  materially  adverse  effect on the  business,
assets,  liabilities,  financial  condition,  results of  operation  or business
prospects of said Borrowers.

         4.7 Title to Properties and Assets;  Liens. Except for Permitted Liens,
each  Borrower  has good,  marketable  and legal title to, or a valid  leasehold
interest in, the  properties  and assets as  reflected  on the balance  sheet of
Baltek as at September 30, 1999, delivered to the Bank except such properties or
assets as have been disposed of by the Borrowers  subsequent to the date thereof
in the ordinary  course of business.  All of said  properties  and assets are in
good working order.  The Borrowers do not own, or have any interest in, any real
property  other than its  leasehold  interest  set forth in Schedule II attached
hereto.  Except for financing  statements  naming the Bank as secured party,  or
with respect to Permitted  Liens,  no financing  statement  under the Code as in
effect in any jurisdiction  which names either Borrower as debtor has been filed
in any  jurisdiction,  and the  Borrowers  have not  signed  any such  financing
statement or any security agreement  authorizing any secured party thereunder to
file any such financing statement in any such jurisdiction.

         4.8 No Default.  Neither Borrower is in default in any material respect
in the payment or performance of any of its obligations or in the performance of
any mortgage,  indenture,  lease,  contract or other agreement or undertaking to
which it is a party or by which it or any of its  properties  or  assets  may be

<PAGE>

bound,  and no Default  or Event of  Default  has  occurred  and is  continuing.
Neither Borrower is in default under any material order,  award or decree of any
court, arbitrator,  or governmental authority binding upon or affecting it or by
which any of its  properties  or assets  may be bound or  affected,  and no such
order,  award or decree,  if any,  materially  adversely  affects the ability of
either  Borrower to carry on its business as presently  conducted or, to perform
its obligations under the Loan Documents.

         4.9 No  Litigation.  No litigation,  investigation  or proceeding of or
before any court,  arbitrator or  governmental  authority is currently  pending,
nor, to the knowledge of the Borrowers, threatened, against the Borrowers or any
of its properties and revenues, which, if adversely determined, would materially
adversely  affect the business,  operations,  financial  condition or results of
operations of the Borrowers.

         4.10 No Burdensome  Restrictions.  Neither Borrower is a party to or is
bound by any contract or agreement or instrument nor subject to any  restriction
materially  and  adversely  affecting the  business,  operations,  properties or
financial or other condition of said Borrower.

         4.11 Tax Returns and Payments. All federal, state and other tax returns
of the Borrowers  required by law to be filed have been duly filed or extensions
obtained, and all federal,  state and other taxes,  assessments and governmental
charges or levies upon the Borrowers or any of its properties,  income,  profits
or assets which are due and payable have been paid or provided for,  except such
tax returns the  non-filing  of which,  and such taxes the  nonpayment of which,
would not have a material adverse effect upon the business, assets, liabilities,
financial condition, results of operation or business prospects of the Borrowers
and except for such taxes and  assessments  which the Borrowers are disputing in
good faith and for which the Borrowers have established adequate reserves on its
books for the payment of such disputed taxes or  assessments in accordance  with
GAAP.

         4.12  Financial  Statements.  The Borrowers  have furnished to the Bank
copies of the audited  consolidated  balance  sheet of Baltek as at December 31,
1998,  and the  related  audited  consolidated  statement  of  income,  retained
earnings and changes in cash flows for the 12 months then ended, as certified by
Deloitte & Touche, LLP, independent certified public accountants. Such financial
statements  fairly present the financial  position and results of operations and
changes in cash flows of Baltek on the dates and for the periods then ended,  in
accordance with GAAP,  consistently  applied throughout the periods involved and
show all direct  liabilities and all known contingent  liabilities of a material
nature of Baltek in accordance  with GAAP, as well as  consolidating  statements
for Baltek with a separate column for Crustacea.

         4.13 No Adverse  Changes.  Since December 31, 1998, no material adverse
change has occurred in the business, assets,  liabilities,  financial condition,
results of operations or business  prospects of the Borrowers,  and no event has
occurred  or  failed to occur  which  has had or is  likely  to have a  material
adverse  effect  on the  business,  assets,  liabilities,  financial  condition,
results of operations or business prospects of the Borrowers.

         4.14     ERISA.

                  (a) Each Borrower is in  compliance  in all material  respects
with the applicable provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and all regulations issued thereunder; and
<PAGE>

                  (b) No  "employee  benefit  plan",  as defined in Section 3 of
ERISA,  maintained and administered by Borrowers, as from time to time in effect
(the  "Plans"),   nor  any  trusts  created  thereunder,   nor  any  trustee  or
administrator thereof, has engaged in a "prohibited  transaction," as defined in
Section  4975 of the  Internal  Revenue  Code of 1986,  which could  subject the
Borrowers,  any Plan or any such trust, or any trustee or administrator thereof,
or any party  dealing  with any Plan or any such  trust to the tax or penalty on
prohibited  transactions  imposed by said Section 4975. Neither any of the Plans
nor any such trusts  have been  terminated,  nor has there been any  "reportable
event,"  as  defined  in  Section  4043  of  ERISA,  or   "accumulated   funding
deficiency."  Borrowers  have not incurred any liability to the Pension  Benefit
Guaranty Corporation.

         4.15     Federal Reserve Regulations; Use of Proceeds.
Each Borrower is not engaged principally, or as one of its important activities,
in the business of extending  credit for the purpose of  purchasing  or carrying
any margin  stock  (within  the meaning of  Regulations  U and X of the Board of
Governors  of the  Federal  Reserve  System).  No  part  of any of the  Advances
hereunder  shall be used to purchase or carry any such margin stock or to extend
credit to others for the  purpose of  purchasing  or  carrying  any such  margin
stock.  All Advances  hereunder shall be used for working  capital  purposes and
requirements of the Borrowers' operations in the United States.

         4.16 Collateral.

         (a) Each Borrower is (or, in the case of after acquired property,  will
be) the sole owner of each item of Collateral and has good and marketable  title
thereto,  free and clear of any and all Liens  except for  Permitted  Liens.  No
amounts  payable under or in connection with any of the Collateral are evidenced
by promissory  notes,  bonds,  debentures,  chattel  paper or other  instruments
(negotiable or non-negotiable) of any kind.

         (b) No  security  agreement,  financing  statement,  mortgage,  deed of
trust, equivalent security or lien instrument or continuation statement covering
all or any part of the  Collateral is on file or of record in any public office,
except for Permitted Liens.

         (c) This  Agreement  constitutes a valid and  continuing  first lien on
and,  upon the  filing  of a UCC-1  Financing  Statement  in the  office  of the
Secretary of State of New Jersey,  a first  perfected  security  interest in the
Collateral  in  favor  of the  Bank,  prior to all  other  liens,  encumbrances,
security  interests and rights of others  (except for Permitted  liens),  and is
enforceable as such or against  creditors of and purchasers  from the respective
Borrowers.  All action  necessary  or  desirable  to protect  and  perfect  such
security interest in each item of Collateral has been duly taken.

         (d)  Schedule  II  attached  hereto  sets  forth  the  location  of the
Borrowers'  respective  principal place of business which is the place where its
records  concerning  the  Collateral  are kept.  Schedule II also sets forth the
various  locations  at which any  Inventory  may be found  (except  for items in
transit),  including any Inventory which may be held on consignment or under any
field  warehousing  arrangement.  Schedule II further sets forth  whether any of
such  locations are owned by the  respective  Borrowers or leased from any other
Person, and if leased, the name and address of the lessor thereunder.

         (e)  Each  Account  Receivable  is  a  bona  fide,  valid  and  legally
enforceable  obligation  of the Account  Debtor in respect  thereof and does not

<PAGE>

represent a sale on consignment, sale or return, or other similar understanding.
Except as otherwise arising in the ordinary course of business, the right, title
and interest of the  Borrowers in each Account  Receivable is not subject to any
defense,  offset,  counterclaim,  or other claim,  nor have any of the foregoing
been asserted or alleged against the Borrowers as to any Account  Receivable nor
will any of the  foregoing,  whether or not  arising in the  ordinary  course of
business, have a material adverse effect on the business, financial condition or
results of operations  of the  Borrowers or the aggregate  value of the Accounts
Receivable. The amount represented by the Borrowers to the Bank as owing by each
Account  Debtor in respect of the  Accounts  Receivable  is the  correct  amount
actually and unconditionally owing by such Account Debtor thereunder.

         4.17 Accuracy and Completeness of Information. No document furnished or
statement made to the Bank in connection  with the  negotiation,  preparation or
execution of the Loan Documents contains or will contain any untrue statement of
fact or omits or, will omit to state a material fact  necessary in order to make
the  statements  contained  therein  not  misleading.  No fact is  known  to the
Borrowers  which  has had or may in the  future  have (so far as  Borrowers  can
reasonably  foresee) a material  adverse  effect upon the  Borrowers'  business,
assets, liabilities, condition, financial or otherwise, or results of operations
that has not been set forth in the financial statements furnished to the Bank or
other  reports or other  papers or data  otherwise  disclosed  in writing to the
Bank.

         4.18 Year 2000  Compliance.  To the best of Borrowers'  knowledge,  the
advent of the year 2000 shall not adversely affect the Borrowers'  operations or
the performance of its information  technology.  Without limiting the generality
of the  foregoing,  (i) the  hardware  and  sofware  utilized by  Borrowers  are
designed to be used prior to, during, and after calendar year 2000 A.D. and such
hardware and software  will operate  during each such time period  without error
relating to date data,  specifically  including  any error  relating  to, or the
conduct of, date data which represents or references different centuries or more
than one century,  (ii) the hardware and software utilized by Borrowers will not
abnormally end or provide invalid or incorrect results as a result of date data,
and (iii) the hardware and software  utilized by Borrowers have been designed to
provide year 2000 A.D. compatibility,  including date data, century recognition,
leap year, calculations which accommodate same century and multicentury formulas
and date values, and date data interface values that reflect the century.

         V.       COVENANTS

         5. Each Borrower  covenants  and agrees that until all the  Obligations
have  been  satisfied  and  paid in full,  it will  comply  with  the  following
covenants:

         5.1  Preservation  of  Existence.  Each Borrower will do or cause to be
done all things reasonably  necessary to preserve and maintain in full force and
affect its corporate  existence and all contracts,  rights,  licenses,  permits,
franchises  and trade names which in its judgment are necessary or useful to the
proper  conduct of its  business  and shall  qualify and remain  qualified  as a
foreign  corporation and authorized to do business in each jurisdiction in which
the  character of its  properties  or the nature of its business  requires  such
qualification or authorization,  except such  jurisdictions in which the lack of
qualification  or  authorization  does  not  materially   adversely  affect  the
business, results of operations or financial condition of said Borrowers.

         5.2 Nature of Business; Use of Proceeds. The Borrowers will continue to

<PAGE>

be engaged in the business of  manufacturing  and selling  composite  materials,
shrimp farming and importing seafood. NO part of any advances hereunder shall be
used to purchase or carry any margin stock (within the meaning of  Regulations U
and X of the Board of  Governors  of the  Federal  Reserve  System) or to extend
credit to others for the  purpose of  purchasing  or  carrying  any such  margin
stock. All advances hereunder shall be used for working capital purposes and the
requirements of the respective Borrower's operations in the United States.

         5.3  Compliance  with Laws.  Each  Borrower  will comply with all laws,
ordinances,  governmental rules and regulations to which it or its properties or
assets is, or might become  subject  (unless the same shall be contested by such
Borrowers in good faith and by  appropriate  proceedings  and such contest shall
operate to stay any such  non-compliance),  the  noncompliance  with which might
materially  interfere  with the  performance of its  obligations  under the Loan
Documents or with the proper conduct of its business.

         5.4 Maintenance of  Properties.Each  Borrower will maintain or cause to
be maintained in working order and  condition,  ordinary wear and tear excepted,
all of its  assets  and  properties  which are  material  to the  conduct of its
business, and from time to time, make or cause to be made all necessary repairs,
replacements,  additions,  betterments  and  improvements  thereto,  so that the
business carried on in connection  therewith may be properly and  advantageously
conducted at all times.

         5.5  Accounting  Methods.  Each  Borrower  will  maintain  a system  of
accounting  established and  administered in accordance with GAAP, keep adequate
records  and  books  of  account  in  which  complete  entries  will  be made in
accordance with GAAP, make provision in its accounts in accordance with GAAP for
reserves for  depreciation,  obsolescence  and amortization and all other proper
reserves and accruals which in accordance with GAAP should be established.

         5.6 Payment of Taxes and Claims.  Each  Borrower will pay and discharge
promptly (i) all taxes,  assessments and governmental  charges or levies imposed
upon it or upon its income or profits  or upon any of its  properties  or assets
before  the  same  shall  become  delinquent,  (ii)  all  bona  fide  claims  of
materialmen,  mechanics,  carriers,  warehousemen,  landlords, and other similar
persons for labor,  materials,  supplies and rentals which, if unpaid,  might by
law become a Lien or charge upon  Collateral  and (iii) all of its  Indebtedness
and other obligations of whatever nature when due (subject, where applicable, to
grace  periods,  normal  credit terms and to other  forbearance  in the ordinary
course of business);  provided,  however,  that none of the foregoing need to be
paid while being contested in good faith and by appropriate proceedings.

         5.7 Visits and Inspections;  Audits. Each Borrower will permit the Bank
and its agents and representatives, at any time during normal business hours and
upon  reasonable  prior notice,  to (i) visit and inspect the properties of said
Borrower,  (ii)  inspect  and make  extracts  from the books and records of said
Borrower,  and (iii) discuss with said Borrower's principal officers,  employees
and  independent  public  accountants  any and all matters  with  respect to the
business, assets,  liabilities,  financial condition,  results of operations and
business  prospects of said  Borrowers.  Without  limiting the generality of the
foregoing,  the Bank  shall be  permitted  to  conduct  periodic  audits  of the
Borrowers and their respective  businesses and operations in accordance with the
Bank's  normal and  customary  practices.  The parties  agree that the foregoing
audits and  inspections  may be  conducted  between  the  months of January  and
September or at such other time or times as the parties may mutually agree.

         5.8 Information Covenants. Baltek will furnish or cause to be furnished
             ---------------------
the following information to the Bank:
<PAGE>

         As soon as practicable,  and, in any case, within 90 days after the end
of each fiscal year an audited  consolidated  balance  sheet of Baltek as at the
end of such fiscal year and the related  statement of income,  retained earnings
and changes in cash flow for such fiscal year,  setting forth in comparable form
the figures as at the end of and for the  previous  fiscal  year,  certified  by
independent certified public accountants  satisfactory to the Bank by furnishing
copies of Baltek's l0Ks. As soon as practicable,  and in any case within 45 days
of the end of each quarter,  Baltek shall also furnish  quarterly  consolidating
balance sheets with the related statement of income, on such quarterly basis for
Baltek and Crustacea,  certified by the chief  financial  officers of Baltek and
Crustacea,  respectively.  Baltek shall also furnish the Bank copies of its l0Qs
on such quarterly basis.

                   (ii)  Certificate.  At the time the financial  statements are
furnished  pursuant to  subsection;  above,  the Borrowers  shall also furnish a
certificate of the chief  executive  officer or chief  financial  officer of the
Borrowers  stating that no event has occurred which  constitutes a Default or an
Event of  Default  under  any of the  Loan  Documents  or if such an  event  has
occurred,  disclosing  each  such  event  or  failure  and its  nature,  when it
occurred,  whether it is  continuing  and the steps being taken by the Borrowers
with respect to such event or failure.



                    (iv)   Notice of Litigation and Other Matters. Prompt notice
                           --------------------------------------
of:
                                    (1) the  commencement  of any  proceeding or
investigation by or before any governmental body and any action or proceeding in
any  court or  before  any  arbitrator  against  or in any  other  way  relating
adversely to the Borrowers or any of its properties,  assets or business, which,
if  adversely  determined,  would  singly  or when  aggregated  with  all  other
proceedings,  investigations  or action,  materially  and  adversely  affect the
business of operations or financial condition of the Borrowers;

                                    (2)   any   notice    received    from   any
administrative  official  or agency  relating to any order,  ruling,  statute or
other law or  information  which  would  materially  and  adversely  affect  the
operations of the Borrowers;
                                    (3)  any  amendment  of the  certificate  of
incorporation or by-laws of the Borrowers;
<PAGE>

                                    (4) any material adverse change with respect
to  the  business,   assets,  liabilities  financial  condition  or  results  of
operations of the Borrowers; and

                                    (5) any  Default  or Event of Default by the
Borrowers  hereunder or any default under any other material  agreement to which
each Borrower is a party or by which any of its properties may be bound.

         (v)      ERISA.
                  -----

                           (a) As soon as possible, and in any event within 30
days after any executive  officer of the  Borrowers  knows or has reason to know
that any reportable  event (as defined in Section 4043 of ERISA) with respect to
any Plan has occurred,  a statement of the chief financial officer setting forth
details as to such reportable event and the action that the Borrowers propose to
take with respect thereto, together with a copy of the notice of such reportable
event given to the Pension Benefit Guaranty Corporation.

                           (b) Promptly  after  receipt  thereof,  a copy of any
notice the Borrowers may receive from the Pension Benefit  Guaranty  Corporation
relating  to the  intention  of said  Corporation  to  terminate  any Plan or to
appoint a trustee to administer any Plan.

         5.9 Accuracy and  Completeness of Information.  The Borrowers  covenant
that all information,  reports,  statements, and other papers and data furnished
to the Bank pursuant to any provision or term of any of the Loan documents shall
be, at the time the same is so  furnished,  complete and correct in all material
respects.

         5.10 Insurance. The Borrowers shall maintain with financially sound and
reputable  insurance  companies  insurance  policies (i) insuring the  Inventory
against loss by fire, explosion,  theft and such other casualties as are usually
insured against by companies engaged in the same or similar  businesses and (ii)
insuring the  Borrowers  and the Bank against  liability  for bodily  injury and
property damage,  such policies shall name the Bank as an additional insured and
shall be in such form and in such  amounts  and  coverage  as may be  reasonably
satisfactory  to the Bank.  The  Borrowers  shall,  if so requested by the Bank,
deliver  to the Bank as often as the Bank may  reasonably  request a report of a
reputable insurance broker with respect to the insurance on the Collateral.  All
insurance  with  respect  to the  Collateral  shall  (a)  name the Bank as "loss
payee",  (b)  provide  that no  cancellation,  reduction  in amount or change in
coverage thereof shall be effective until at least ten days after receipt by the
<PAGE>

Bank of  written  notice  thereof  and  (c) be  reasonably  satisfactory  in all
material  respects to the Bank. In addition,  the  Borrowers  shall at all times
maintain expropriation  insurance issued by Great Northern Insurance Company (or
other insurance  carrier  acceptable to the Bank) in the amount of not less than
$25,216,000.00  covering  the direct  and  indirect  interests  of Baltek in the
securities,  assets,  business  operations  and  prospects  of its  subsidiaries
operating directly or indirectly in Ecuador and the terms and conditions of such
insurance shall be reasonably satisfactory to the Bank.

         The  Borrowers  shall  give  the  Bank  prompt  notice  of any  and all
insurance  claims made by the Borrowers with respect to the Inventory  which are
in excess of  $25,000.00  and are in dispute or unpaid  unless  such  dispute is
resolved or such claim is paid within 30 days of the date of the claim. Provided
that (i) no Default or Event of Default exists  hereunder and (ii) the amount of
insurance  proceeds  does not  exceed  $25,000.00,  the  Bank  shall  remit  all
insurance  proceeds to the  Borrowers.  If a Default or Event of Default  exists
hereunder or if the amount of insurance  proceeds  exceed  $25,000.00,  the Bank
shall have the right to retain such proceeds as additional  Collateral hereunder
or apply  the same to the  repayment  of any  amounts  owing  under  the Note or
hereunder.

         5.11  Indebtedness.  The  Borrowers  will not  create,  assume,  incur,
guarantee or in any manner become liable,  contingently or otherwise, in respect
of any Indebtedness except for Permitted Indebtedness;  provided,  however, that
the foregoing  provision shall not apply if, concurrently with the incurrence of
such Indebtedness, the proceeds thereof are applied to the complete satisfaction
and payment in full of all Obligations.

         5.12 Liens. The Borrowers will not create,  assume or incur or cause to
be created, assumed or incurred, or permit to exist, any Liens on its properties
or assets except for Permitted  Liens,  and the Borrowers will defend the right,
title and  interest  of the Bank in and to any of the  Borrowers'  rights to the
Collateral  and in and to the Proceeds and Products  thereof  against the claims
and demands of all Persons whomsoever.

         5.13 Sale of Assets; Merger.
              ----------------------

                  The Borrowers shall not (a) sell,  transfer,  assign, lease or
otherwise  dispose of (whether in one  transaction or a series of  transactions)
all or substantially all of its assets (whether now owned or hereafter acquired)
or (b)  consolidate  with or merge  into any other  corporation  or  permit  any
corporation  to merge into it, unless (i) such Borrower is the surviving  entity
of such merger or  consolidation,  (ii) the Bank  receives  pro forma  financial
<PAGE>

statements from an independent  certified public accountant  satisfactory to the
Bank to reflect such merger or consolidation,  and such pro forma statements set
forth in a Tangible  Net Worth of the  Borrowers  which  equals or  exceeds  the
Tangible  Net Worth of the  Borrowers  prior to such event,  (iii) no Default or
Event of  Default  shall  occur as a result of and after  giving  effect to such
event and (iv) the  security  interest  of the Bank in the  Collateral  (and the
priority  position  of the Bank with  respect  thereto)  shall not be  affected,
diminished or impaired in any way.

         5.14 Guarantees.  The Borrowers  shall not guarantee,  endorse,  become
surety  for,  or  otherwise  in  any  way  become  or be  responsible  for,  the
obligations   of  any  other  Person   whether  by  agreement  to  purchase  the
indebtedness  of any other  Person,or  agreement  for the  furnishing  of funds,
directly or indirectly,  for the purpose of payment of indebtedness of any other
Person, other than in connection with Permitted Indebtedness and endorsements of
negotiable  instruments  for deposit or collection in the ordinary course of its
business.

         5.15 Collateral.
              ----------

                  (a) The  Borrowers  will keep and maintain at its own cost and
expense satisfactory and complete records of the Collateral,  including, without
limitation,  a record of all  payments  received  and all credits  granted  with
respect  to the  Collateral  and all other  dealings  with the  Collateral.  The
Borrowers  will mark its books  and  records  pertaining  to the  Collateral  to
evidence the security interest therein granted hereby as the Bank may reasonably
request.  For the Bank's  further  security,  the Borrowers  agree that the Bank
shall have a security  interest in and a Lien upon all of the  Borrowers'  books
and records (including all computer programs, software, discs, drives, printouts
and similar  items)  pertaining to the  Collateral,  and if any Event of Default
shall have occurred and be continuing,  the Borrowers shall promptly deliver and
turn over any such  books and  records,  or copies  thereof,  to the Bank or its
representatives at any time upon demand.

                  (b) Except as  otherwise  permitted  in Section  5.15(e),  the
Borrowers will not sell,  transfer,  lease or otherwise dispose of any or all of
the  Collateral,  or attempt,  offer or  contract to do so,  without the express
prior written consent of the Bank, except for sales or other dispositions or use
of Inventory in the ordinary course of business.

                  (c) The  Borrowers  will  perform  and comply in all  material
respects  with all  obligations  under  all  Contracts  and all  other  material
agreements  to which it is a party  or by  which  it is  bound  relating  to the
Collateral.
<PAGE>

                  (d) The  Borrowers  will not (i) amend,  modify,  terminate or
waive  any  provision  of any  material  Contract  in  any  manner  which  might
materially  adversely affect the value of the Collateral,  (ii) fail to exercise
promptly and  diligently  each and every  material right which it may have under
each material  Contract  (other than any right of  termination) or (iii) fail to
deliver to the Bank a copy of each material demand,  notice or document received
by it relating in any way to any material Contract.

                  (e)  Except as  otherwise  permitted  by this  Agreement,  the
Borrowers  will not grant any  extension  of the time of  payment  of any of the
Accounts  Receivable,  or compromise,  compound or settle the same for less than
the full amount thereof, or release, wholly or partly, any person liable for the
payment thereof,  or allow any credit or discount  whatsoever thereon other than
any may be granted in the normal course of business.

                  (f) The Borrowers will furnish to the Bank, from time to time,
statements and schedules  further  identifying and describing the Collateral and
such other reports in connection  with the Collateral as the Bank may reasonably
request, all in reasonable detail.

                  (g)  The  Borrowers  will  immediately  advise  the  Bank,  in
complete  detail,  (i) of any Lien  asserted  or claim made  against  any of the
Collateral,  (ii) of any material  change in the  composition of the Collateral,
and (iii) of the  occurrence  of any other  event  which  would  have a material
effect on the  aggregate  value of the  Collateral  or on the security  interest
created hereunder.

                  (h) The  Borrowers  will not  change  its  name,  identity  or
corporate structure in any manner which might make any financing or continuation
statement  filed  hereunder  misleading,  nor  will  the  Borrowers  change  its
principal place of business,  recordkeeping  location or remove any of its books
and records or the Inventory to any location other than as set forth in Schedule
II hereto (except as otherwise  permitted in Section 5.15(b) hereof) unless,  in
each case,  the  Borrowers  shall  have  given the Bank at least 30 days'  prior
written notice thereof or shall have delivered to the Bank acknowledgment copies
of financing  statements  recording  such change duly executed and duly filed in
each jurisdiction in which financing statements on Form UCC-1 are required to be
filed in order to perfect the security interest granted by this Agreement in the
Collateral and shall have taken all action necessary or reasonably  requested by
the Bank to amend

<PAGE>

such financing  statement or continuation  statement so that it is not seriously
misleading.

         5.16 Dividends.  Any dividends issued by the Borrowers shall be limited
              ---------
to a maximum of current year Net Income of the respective Borrower.

         5.17 Further Documentation.  At any time and from time to time upon the
Bank's written  request and at the Borrowers'  sole expense,  the Borrowers will
promptly and duly execute and deliver such further documents and instruments and
do such further acts and things as the Bank may  reasonably  request in order to
obtain the full benefits of this Agreement and the Loan documents and the rights
and powers herein and therein granted,  including the filing of any financing or
continuation  statements and amendments  thereto under the Code in effect in any
jurisdiction and any and all other recording documents with respect to the Liens
and security  interests granted to the Bank pursuant to the Loan Documents.  The
Borrowers  also  hereby  authorize  the  Bank  to file  any  such  financing  or
continuation  statement  without the  signature  of the  Borrowers to the extent
permitted by applicable  law. If any amount payable under or in connection  with
any of the Collateral  shall be or become  evidenced by any  promissory  note or
other instrument,  such note or other instrument shall be immediately pledged to
the Bank  hereunder,  duly  endorsed  in a manner  satisfactory  to the Bank and
delivered to the Bank.

         5.18 Bank's Appointment as Attorney-in-Fact.
              --------------------------------------

                  (a) The Borrowers  hereby  irrevocably  constitute and appoint
the Bank, and any officer or agent thereof, with full power of substitution,  as
its true and lawful  attorney-in-fact  with full irrevocable power and authority
in the place and stead of the  Borrowers  and in the name of the Borrowers or in
its own name, from time to time in the Bank's  reasonable  discretion  following
the  occurrence  and  continuance  of an Event of  Default,  for the  purpose of
carrying out the terms of this Agreement, to take any and all appropriate action
and to execute any and all documents and  instruments  which may be necessary to
accomplish the purposes of this Agreement and,  without  limiting the generality
of the  foregoing,  hereby gives the Bank the power and right,  on behalf of the
Borrowers upon written notice to the Borrowers to do the following:

                      (i) upon the  occurrence  and  continuance  of an Event of
Default, to ask, demand, collect, receive and give acquittances and receipts for
any and all  moneys  due and to  become  due  under  or in  connection  with any
Collateral  and, in the name of the Borrowers or its own name or  otherwise,  to
take  possession  of  and  endorse  and  collect  any  checks,   drafts,  notes,
<PAGE>

acceptances  or other  instruments  for the  payment  of  moneys  due  under any
Collateral  and to file any claim or to take any other action or  proceeding  in
any court of law or equity or otherwise  deemed  appropriate by the Bank for the
purpose of collecting any and all such moneys due under any Collateral  whenever
payable; and

                      (ii) upon the occurrence  and  continuance or any Event of
Default  (A) to  direct  any  party  liable  for any  payment  under  any of the
Collateral  to make  payment  of any  and  all  moneys  due  and to  become  due
thereunder  directly  to the Bank or as the Bank shall  direct;  (B) to receive,
open and dispose of all mail  addressed to the  Borrowers  and to notify  postal
authorities to change the address for delivery thereof to such address as may be
designated  by the Bank;  (C) to receive  payment of and receipt for any and all
moneys, claims and other amounts due and to become due at any time in respect of
or arising out of any Collateral;  (D) to sign and endorse and invoices, freight
or express bills, bills of lading, storage or warehouse receipts, drafts against
debtors, assignments,  verifications and notices in connection with accounts and
other documents  relating to the  Collateral;  (E) to commence and prosecute any
suits,  actions  or  proceedings  at law or in equity in any court of  competent
jurisdiction  to collect the  Collateral  or any part thereof and to enforce any
other  right in respect  of any  Collateral;  (F) to defend any suit,  action or
proceeding brought against the Borrowers with respect to any Collateral;  (G) to
settle,  compromise or adjust any suite,  action or proceeding  described  above
and, in connection  therewith,  to give such  discharges or releases as the Bank
may deem  appropriate;  and (H) generally to sell,  transfer,  pledge,  make any
agreement  with respect to or otherwise deal with any of the Collateral as fully
and  completely  as though  the Bank were the  absolute  owner  thereof  for all
purposes,  and to do, at the Bank's option and the  Borrowers'  expense,  at any
time or from time to time, all acts and things which the Bank deems necessary to
protect,  preserve  or  realize  upon the  Collateral  and the  Bank's  security
interest therein, in order to effect the intent of this Agreement,  all as fully
and effectively as the Borrowers might do.

                  (b) The Borrowers  hereby ratify all that said attorneys shall
lawfully  do or cause to be done by virtue  hereof.  This power of attorney is a
power coupled with an interest and shall be irrevocable.

                  (c) The powers  conferred on the Bank  hereunder are solely to
protect the  interests  of the Bank in the  Collateral  and shall not impose any
duty upon it to exercise any such powers. The Bank shall be accountable only for
amounts  that it actually  receives as a result of the  exercise of such powers,
and neither

<PAGE>

it nor any of its officers, employees or agents shall be responsible
to the Borrowers for any act or failure to act, except for its gross  negligence
or willful misconduct.

                  (d) The Borrowers also authorize the Bank at any time and from
time to time  following  an Event of Default  (i) to  communicate  with  Account
Debtors and any party to any Contract with regard to the  assignment of Accounts
Receivable  hereunder and other matters relating thereto and (ii) to execute any
endorsements,  assignments  or other  instruments of conveyance or transfer with
respect to the Collateral.

         5.19  Performance by Bank of Borrowers'  Obligations.  If the Borrowers
fail  to perform or comply with any of its agreements  contained herein, and the
Bank, as provided for by the terms of this  Agreement,  shall perform or comply,
or otherwise cause performance or compliance,  with such agreement, the expenses
of the Bank incurred in connection with such performance or compliance (together
with  interest  thereon at the rate of the Base Rate plus 5% per annum) shall be
payable by the Borrowers to the Bank on demand and shall constitute  obligations
secured hereby.

         5.20  Inter-Company  Loans.  The  Borrowers  shall not,  on a long-term
basis, make any inter-company  loans or downstream or transfer any funds (except
with respect to purchases  and sales in the ordinary  course of business) to any
domestic  parent,  affiliate,  subsidiary or related  entity.  In addition,  the
Borrowers shall not make any  inter-company  loans or downstream or transfer any
funds  (except  with respect to  purchases  and sales in the ordinary  course of
business) to any foreign affiliate, subsidiary or related entity.

         5.21  New  Subsidiaries.  Each of the  Borrowers  shall  give  the Bank
written notice of its intention,  after the date herein,  to create or acquire a
new  subsidiary.  Such notice shall be delivered  within a reasonable  period of
time prior to the effective date of such creation or acquisition. At the request
of the Bank,  the  Borrowers  shall cause any new domestic  subsidiary,  on such
effective  date, to become a Guarantor  under this  Agreement,  and to create in
favor of the Bank, a valid and perfected  first priority Lien on all of such new
domestic  subsidiary's  Accounts  Receivable  and  Inventory,  subject  only  to
Permitted Encumbrances.

         5.22  Acquisitions.  Each  Borrower may purchase or acquire the capital
stock of, or all or  substantially  all of the assets of a business  unit of, or
otherwise  make an  investment  in or loan to a  Person,  or  effect  a  merger,
consolidation or similar business  combination with such Person (each a "Capital
Event"),  provided


<PAGE>

that (i) the business of such Person is substantially related to the business of
the  Borrowers,  (ii) in the case of any such merger,  consolidation  or similar
business combination,  the surviving entity is a Borrower or a subsidiary, (iii)
no Event of Default  shall have  occurred and be  continuing  at the time of the
proposed  Capital Event, and no Event of Default shall occur after giving effect
to the  consummation  of such Capital Event,  and (iv) the aggregate fair market
value  of all  consideration  to be paid  and  all  liabilities  assumed  by the
Borrowers  in  connection  with the propsed  Capital  Event,  together  with the
aggregate fair market value of all cash  consideration  paid and all liabilities
assumed by the Borrowers in connection with the Capital Events consummated after
the Closing Date, shall not exceed $3,000,000.00 in the aggregate.

         VI.      CONDITIONS PRECEDENT

         6.1 Conditions Precedent to Initial Advance. The obligation of the Bank
to make the initial Advance hereunder is subject to the condition precedent that
the Bank shall have  received  each and every one of the  following on or before
the day of such Advance in form and substance satisfactory to the Bank:

                  (a) An originally  executed copy of this Agreement and each of
the other  Loan  Documents,  including  but not  limited  to the Note,  Guaranty
Agreements, UCC-1 Financing Statements and Landlord Waivers;

                  (b) A copy of the certificate of  incorporation  and bylaws of
the  Borrowers,  certified  as a true  copy  of the  Secretary  or an  Assistant
Secretary of the Borrowers;

                  (c) A good standing  certificate with respect to the Borrowers
issued at a recent date by the Secretary of State of the State of New Jersey;

                  (d) A certificate  of the Secretary or an Assistant  Secretary
of the Borrowers certifying the names and true signatures of the officers of the
Borrowers  authorized to sign each of the Loan  Documents to which the Borrowers
is a party;

                  (e) A copy  of  the  resolutions  approved  by  the  Board  of
Directors of the Borrowers  authorizing the execution,  delivery and performance
by the  Borrowers  of each of the Loan  Documents  to which the  Borrowers  is a
party,  certified as a true copy by the  Secretary or an Assistant  Secretary of
the Borrowers;

                  (f)  A written opinion of counsel to the Borrowers;
<PAGE>

                  (g)  Evidence  reasonably  satisfactory  to the Bank  that the
Inventory  is  properly  insured  in  accordance  with  the  provisions  of this
Agreement  and  that the  Collateral  is not  subject  to any  Lien  other  than
Permitted Liens;

                  (h)  Evidence  reasonably  satisfactory  to the Bank  that all
filings,  recordings  and other actions that are necessary or desirable in order
to establish  and perfect the Bank's  security  interest in the  Collateral as a
valid  perfected  first priority  security  interest shall have been or shall be
duly  effected,   including,   without  limitation,   the  filing  of  financing
statements,  the recordation of landlord and/or mortgagee waivers or disclaimers
and the filing or  recordation  of such other  documents  as the Bank shall deem
necessary or desirable,  all in form and substance satisfactory to the Bank, and
all fees,  taxes and other charges relating to such filings and recordings shall
have been paid by the Borrowers; and

                  (i) The  expropriation  insurance  policy  required by Section
5.10 herein;

                  (j) Such other  documents  and  information  as the Bank shall
reasonably request, in form and substance  reasonably  satisfactory to the Bank,
and  all  legal  matters  and  documents   with  respect  to  the   transactions
contemplated by this Agreement shall be satisfactory to counsel for the Bank.

         6.2 Conditions Precedent to Additional Advances. The Bank shall have no
obligation to make any  additional  Advance  subsequent  to the initial  Advance
unless each of the following  conditions  precedent has been either satisfied or
waived prior to or concurrently with the making of such Advance.

                  (a) Each of the Loan  Documents  shall  be in full  force  and
effect.

                  (b) The  representations  and  warranties of the Borrowers set
forth herein shall be true and correct as of the date of each Advance as if made
on and as of such date.

                  (c) No  Default  or  Event  of  Default  has  occurred  and is
continuing as of the date of each Advance.

                  (d)  There is and has been no  adverse  change  in  Borrowers'
financial  condition,  results of  operations or otherwise  which would,  in the
judgment of the Bank, impair the Borrowers'  ability to repay all or any portion
of the Note or any Advance.

<PAGE>

                  (e) No further  action,  including  any filing or recording of
any agreement, document or instrument, is necessary to establish and perfect the
Bank's lien and priority in the Collateral.

         Each  request  for an  Advance  by the  Borrowers  shall  be  deemed  a
representation  and  warranty  by the  Borrowers  that  each  of the  conditions
precedent  set  forth  in  Sections  6.2(a),  (b),  (c),  (d) and  (e) has  been
satisfied,  unless the Bank has waived  satisfaction  of any such  condition  in
writing prior to or concurrently with the making of such Advances, in which case
the representation and warranty of the Borrowers will not be deemed to extend to
that particular condition.

         VII. EVENTS OF DEFAULT
              -----------------

         7. Each of the following shall constitute an Event of Default, whatever
the reason for such event and whether it shall be voluntary or involuntary or be
effected by  operation  of law or pursuant to any judgment or order of any court
or any order, rule or regulation of any governmental body.

         7.1 The Borrowers  fail to make any payment of  principal,  interest or
any other amount  payable under the Note or hereunder when and as the same shall
become due and payable.

         7.2 If any material warranty or representation  made by or on behalf of
the  Borrowers  contained  herein  or in  any of the  Loan  Documents  or in any
document  furnished in compliance or connection with the Loan Documents is false
or  incorrect in any material  respect when made and is  continuing  for 30 days
after written notice thereof to the Borrowers from the Bank.

         7.3 (i) The Borrowers shall default in the performance or observance of
any covenant or agreement set forth in Section 5.1 through and including 5.22 or
(ii) the Borrowers  shall default in the  performance or observance of any other
covenant or agreement  contained in this Agreement  (which is not the subject of
Sections 7.1 above) and such default shall continue unremedied for 30 days after
written notice to the Borrowers from the Bank.

         7.4 If any Event of  Default  shall  occur  under any of the other Loan
Documents (including the expiration of any grace periods provided herein).

         7.5 The Borrowers  shall (i) default in any payment of the principal of
or interest on any  Indebtedness  (other than the Loan) owing to the Bank beyond
the period of grace, if any, provided in the instrument or agreement under which
such

<PAGE>

Indebtedness  was created,  (ii)  default in any payment of the  principal of or
interest on any Indebtedness,  which,  whether individually or together with all
such other  Indebtedness  as to which a default has occurred,  equals or exceeds
$100,000.00  (other than the Loan) beyond the period of grace, if any,  provided
in the instrument or agreement  under which such  Indebtedness  was created;  or
(iii)  default  in the  observance  or  performance  of any other  agreement  or
condition  relating to any such  Indebtedness  or contained in any instrument or
agreement  evidencing,  securing or relating  thereto,  or any other event shall
occur,  the effect of which default or other event is to cause, or to permit the
holder or holders of such  Indebtedness (or a trustee or agent on behalf of such
holder or  holders)  to cause,  with the  giving  of  notice if  required,  such
Indebtedness  to become  due prior to its stated  maturity  and as the result of
such default or event such  indebtedness has been accelerated and become due and
payable prior to its stated maturity.

         7.6 (i) Either  Borrower shall  commence any case,  proceeding or other
action (A) under any  existing  or future law of any  jurisdiction,  domestic or
foreign,  relating  to  bankruptcy,  insolvency,  reorganization  or  relief  of
debtors,  seeking to have an order for  relief  entered  with  respect to it, or
seeking to  adjudicate it  bankrupt or  insolvent,  or  seeking  reorganization,
arrangement,  adjustment, winding-up, liquidation,  dissolution,  composition or
other relief with respect to it or its debts,  or (B) seeking  appointment  of a
receiver,  trustee, custodian or other similar official for it or for all or any
substantial  part  of its  assets,  or  either  Borrower  shall  make a  general
assignment  for the benefit of its  creditors;  or (ii) there shall be commenced
against  either  Borrowers  any  case,  proceeding  or other  action of a nature
referred  to in clause (i) above which (A) results in the entry of a final order
not subject to appeal for relief or any such  adjudication or appointment or (B)
remains undismissed,  undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced  against either Borrower any case,  proceeding or other
action  seeking  issuance of a warrant of  attachment,  execution,  distraint or
similar process against all or any substantial part of its assets, which results
in the entry of an order for any such relief which shall not have been  vacated,
discharged,  or stayed or bonded  pending  appeal  within 60 days from the entry
thereof;  or (iv) either  Borrower shall take any action in  furtherance  of, or
indicating its consent to, approval of, or acquiescence  in, any of the acts set
forth in clauses (i), (ii) or (iii) above.

         7.7 A final  judgment shall be entered  against either  Borrower by any
court for the  payment  of money  which,  together  with all  other  outstanding
judgments  against either Borrower exceeds  $100,000.00 in the aggregate,  which
judgment is not fully

<PAGE>

covered  by  insurance  (without  reservation),  or a warrant of  attachment  or
execution  of similar  process  shall be issued or levied  against  property  of
either  Borrower which  together with other such property  subject to other such
process,  exceeds in value  $100,000.00  in the aggregate and, if within 30 days
after the entry, issue or levy thereof, such judgment,  warrant or process shall
not have been discharged or stayed pending  appeal,  or, if within 30 days after
the expiration of any such stay, such judgment, warrant or process
shall not have been discharged.

         7.8 (i) A reportable  event (as defined in Section 4043 (b) of Title IV
of ERISA) shall have occurred  with respect to any  "employee  benefit plan" (as
defined  in  Section  3 of  ERISA)  maintained  by  either  Borrower  or to  any
multi-employer  plan in which either Borrower  participates  (collectively,  the
"Benefit  Plans")  or any  Benefit  Plan of  either  Borrower  shall  have  been
voluntarily  terminated  as  provided  in  Section  4041(a)  of  ERISA  and  the
guaranteed,  nonfunded,  nonforfeitable  benefits  (as such terms are defined in
Section  4022 of  ERISA)  of any such  Benefit  Plan  that has been  voluntarily
terminated  or with  respect  to which a  reportable  event has  occurred,  when
included in the financial statements of either Borrower on a pro form basis as a
current  liability and as a deduction from net worth,  would cause the Borrowers
to have a negative  net worth;  (ii) A trustee  shall be  appointed  by a United
State  District  Court to  administer  any  Benefit  Plan;  or (iii) the Pension
Benefit  Guaranty  Corporation  shall  institute  proceedings  to terminate  any
Benefit Plan.

         7.9 If either  Borrower  shall commence any action or step with respect
to,  or shall  approve  any plan  of,  any  liquidation  or  dissolution  of the
Borrowers,  unless  provision is  otherwise  made for the payment in full of the
Obligations.

         7.10  If  Baltek  does  not  deliver  on or  before  April  30,  2000 a
landlord's  waiver agreement and consent,  in a form reasonably  satisfactory to
the  Bank,  from the  landlord  of l08  Fairway  Court,  Northvale,  New  Jersey
extending landlord's waiver beyond May 30, 2000.

         VIII. REMEDIES
               --------

         8.1 Upon the  occurrence  of an Event of  Default  set forth in Section
7.6,  the Bank shall have no  obligation  to make any further  Advance,  and all
amounts  outstanding (with accrued interest thereon) and all other amounts owing
under the Note and the other Loan  Documents  shall  immediately  become due and
payable without presentment, demand, protest or notice of any kind, all of which
are hereby expressly waived by the Borrowers.

<PAGE>

         8.2 Upon the  occurrence of any other Event of Default,  the Bank shall
have no  obligation  to make any  further  Advance  and the Bank may declare all
amounts  outstanding (with accrued interest thereon) and all other amounts owing
to it  under  the  Note  and the  other  Loan  Documents  to be due and  payable
forthwith,  whereupon the same shall immediately  become due and payable without
presentment,  demand,  protest  or other  notice of any  kind,  all of which are
hereby expressly waived by the Borrowers.

         8.3 Upon the occurrence of any Event of Default:

                    (i) All  payments  received  by the  Borrowers  under  or in
connection  with any of the  Collateral  shall be held by the Borrowers in trust
for the Bank,  shall be  segregated  from other funds of the Borrowers and shall
forthwith  upon receipt by the Borrowers be turned over to the Bank, in the same
form as received by the Borrowers  (duly  endorsed by the Borrowers to the Bank,
if required); and

                    (ii)  Any and all  such  payments  so  received  by the Bank
(whether  from the Borrowers or  otherwise)  may, in the sole  discretion of the
Bank, be held by the Bank as collateral security for, and/or then or at any time
thereafter  applied in whole or in part by the Bank against,  all or any part of
the  Obligations  in  such  order  as the  Bank  shall  determine  in  its  sole
discretion.  Any balance of such payments  held by the Bank and remaining  after
payment in full of all such Obligations  shall be paid over to the Borrowers or,
if the Bank has knowledge  that another  Person is lawfully  entitled to receive
the same, to such other Person.

         8.4 If any Event of Default shall occur and be continuing, the Bank may
exercise,  in addition to all other  rights and  remedies  granted to it in this
Agreement and in any other Loan  Document,  all rights and remedies of a secured
party under the Code. Without limiting the generality of the foregoing, the Bank
may, without any requirement of notice, set off any and all amounts owing by the
Borrowers  to it  against  any  deposit  account  maintained  in the Bank by the
Borrowers or any other  property of the Borrowers  which may now or hereafter be
in the Bank's possession or control, and such right of setoff shall be deemed to
have been  exercised  immediately  upon such stated or  accelerated  maturity as
aforesaid  even though such set off is not noted on the Bank's  records  until a
later time.  Without  limiting the  generality of the  foregoing,  the Borrowers
expressly  agree that in any such event the Bank,  without demand of performance
or other demand, advertisement or notice of any kind to or upon the Borrowers or
any other Person (all and each of which demands,  advertisements  and/or notices
are hereby expressly waived),  may forthwith collect,  receive,  appropriate and
realize upon the  Collateral,  or any part thereof,  and/or may forthwith  sell,
lease, assign, give option or options to purchase,  or sell or otherwise dispose
of and deliver the  Collateral  (or contract to do so), or any part thereof,  in
one or more parcels at public sale or sales, for cash or on credit or for future
delivery  without  assumption of any credit risk.  The Bank shall have the right
upon any such public sale or sales, to the extent  permitted by law, to purchase
the whole or any part of the Collateral so sold,  free of any right or equity of
redemption  in the  Borrowers  which shall be released.  The  Borrowers  further
agree, at the Bank's  request,  to assemble the Collateral and make it available
to the Bank at places  which the Bank shall  reasonably  select,  whether at the
Borrowers'  premises or elsewhere.  The Bank shall apply the net proceeds of any
such collection,  recovery, receipt,  appropriation,  realization or sale, after
deducting all  reasonable  costs and expenses or every kind incurred  therein or
incidental to the care, safekeeping or otherwise of any or all of the Collateral
or in any way relating to the rights of the Bank hereunder, including reasonable
attorneys' fees and legal expenses,  to the Bank for payment in whole or in part

<PAGE>

of the  Obligations,  in such  order  as  hereinafter  provided,  the  Borrowers
remaining liable for any deficiency remaining unpaid after such application, and
only after  paying over such net  proceeds  and after the payment by the Bank of
any other amount required by any provision of law, need the Bank account for the
surplus,  if any, to the Borrowers.  To the extent  permitted by applicable law,
and, provided,  the Bank shall have acted in good faith, the Borrowers waive all
claims,  damages and demands  against the Bank arising out of the  repossession,
retention or sale of the Collateral.  Subject to the notice provisions otherwise
contained in this  Agreement,  the Borrowers   agree that the Bank need not give
more than 10 days' notice (which notification shall be deemed given when mailed,
postage prepaid,  addressed to the Borrowers at its address set forth in Section
10.1 hereof) of the time and place of any public sale or of the time after which
a private sale may take place and that such notice is reasonable notification of
such  matters.  The  Borrowers  shall remain  liable for any  deficiency  if the
proceeds of any sale or disposition of the  Collateral are  insufficient  to pay
all amounts to which the Bank is entitled,  the Borrowers  also being liable for
the  reasonable  fees of any  attorneys  employed  by the Bank to  collect  such
deficiency.

         8.5 The  Borrowers  also  agree to pay all  Bank  Costs  incurred  with
respect to the collection of any of the  Obligations  and the enforcement of any
of the Bank's rights hereunder.

         8.6 The Borrowers hereby waive (i) presentment,  demand, protest or any
notice (to the extent  permitted by  applicable  law) of any kind in  connection
with this Agreement or any Collateral,

<PAGE>

except as otherwise provided herein,  (ii) all rights to seek from any court any
bond or  security  prior to the  exercise  by the Bank of any  remedy  described
herein, (iii) the benefit of all valuation,  appraisement and exemption laws and
(iv) all rights to demand or to have any marshalling of assets upon any power of
sale granted herein or pursuant to judicial  proceedings or upon any foreclosure
or any enforcement of this Agreement.

         8.7 Without  limiting the  generality of any of the rights and remedies
conferred upon the Bank in this Agreement, the Bank may, after the occurrence of
an Event of Default and to the full extent permitted by applicable law: (i) take
immediate  possession  of the  Collateral,  either  personally  or by means of a
receiver  appointed  by a court of  competent  jurisdiction;  (ii) at the Bank's
option,  use,  operate,  manage and control the Collateral in any lawful manner;
(iii)  collect and  receive all rents,  income,  revenue,  earnings,  issues and
profits  therefrom;  and (iv) maintain,  repair,  renovate,  alter or remove the
Collateral as the Bank may determine in its sole discretion.

         IX. INDEMNIFICATION
             ---------------

         9.1 Indemnification.  The Borrowers agree to pay, reimburse,  indemnify
and hold  harmless,  the Bank, its directors,  officers,  employees,  agents and
representatives  from  and  against  any  and  all  actions,   costs,   damages,
disbursements,  expenses (including  attorneys' fees),  judgments,  liabilities,
losses,  obligations,  penalties and suits of any kind or nature whatsoever with
respect to:

                  (i) the enforcement, of any of the Loan Documents;

                  (ii) the lawful exercise of any right or remedy granted in any
of the Loan  Documents,  the collection or enforcement of any of the Obligations
and the  proof  of  allowability  of any  claim  arising  under  any of the Loan
Documents, whether in any bankruptcy or receivership proceeding or otherwise;

                  (iii) any claim of third parties, and the prosecution or
defense  thereof,  arising out of or in any way  connected  with any of the Loan
Documents; and

                  (iv) any and all recording and filing fees and taxes,  and any
and all liabilities with respect thereto,  or resulting from any delay in paying
stamp and other taxes,  if any, which may be payable or determined to be payable
in connection with the Loan Documents.

<PAGE>
        X. MISCELLANEOUS
           -------------

        10.1      Notice. All notices and other communications
                  ------
given to or made upon any party hereto in connection with this
Agreement shall,  except as otherwise  expressly herein provided,  be in writing
(including  telexed or  telegraphic  communication)  and mailed (by first class,
United States mail,  postage prepaid) telexed,  telegraphed and delivered to the
respective parties, as follows:

         Bank:                      Summit Bank
                                    250 Moore Street
                                    Hackensack, New Jersey 07601
                                    Attn: Richard H. Mady, Vice President

                                    - with a copy to -

                                    Harwood Lloyd
                                    130 Main Street
                                    Hackensack, New Jersey 07601
                                    Attn: Richard W. LeBlancq, Esq.

         Borrowers:                 Baltek Corporation
                                    10 Fairway Court
                                    Northvale, New Jersey 07647
                                    Attn:  Ronald Tassello

                                          and

                                    Crustacea Corporation
                                    10 Fairway Court
                                    Northvale, New Jersey 07647
                                    Attn:  Ronald Tassello

                                    - with a copy to -

                                    Herzfeld & Rubin, P.C.
                                    40 Wall Street
                                    New York, New York 10005
                                    Attn: Bernard J. Wald, Esq.

or to such changed address as may be fixed by notice. All such notices and other
communications   shall,  except  as  otherwise  expressly  herein  provided,  be
effective  when  received by the party to whom properly  addressed,  the written
receipt by any employee of any such party  constituting  sufficient  evidence of
such receipt, in the case of telex or telecopy,  when received,  and in the case
of telegraph, when delivered to the telegraph company, charge prepaid.

                  10.2 No Waiver;  Cumulative  Remedies.  No failure to exercise
and no delay  in  exercising,  on the  part of the  Bank,  any  right,  power or
privilege hereunder,  shall operate as a waiver thereof; nor shall any single or
partial exercise of any right,  power or privilege  hereunder preclude any other
or  further  exercise  thereof  or the  exercise  of any other  right,  power or
privilege.  The rights and  remedies  herein  provided  are  cumulative  and not
exclusive of any right's and remedies provided by law.

<PAGE>

         10.3  Survival  of  Agreements.  All  agreements,  representations  and
warranties made herein, and in any certificates  delivered pursuant hereto shall
survive the execution and delivery of this Agreement and the Note and the making
of any Advances.

         10.4 Amendment.  No modification,  amendment or waiver of any provision
of this Agreement or Note,  nor consent to any departure by the Borrowers  shall
in any event be effective  unless the same shall be in writing and signed by the
party granting such  modification,  amendment or waiver, and then such waiver or
consent shall be effective only in the specific instance and for the purpose for
which given.

         10.5  Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the Borrowers,  the Bank, all future holders of the Note
and their respective  successors and assigns,  except that the Borrowers may not
assign or  transfer  any of its rights  under this  Agreement  without the prior
written consent of the Bank.

         10.6 Severability.  In case any one or more of the provisions contained
in this Agreement or the Note should be invalid, illegal or unenforceable in any
respect,  the validity,  legality and enforceability of the remaining provisions
contained  herein  and  therein  shall not in any way be  affected  or  impaired
thereby.

         10.7 Counterparts. This Agreement may be executed by the parties hereto
on any number of separate  counterparts and all such counterparts taken together
shall constitute one and the same instrument.

         10.8 Governing Law; No Third Party Rights.  This Agreement and the Note
and the rights and obligations of the parties  hereunder and thereunder shall be
governed by and construed  and  interpreted  in  accordance  with the law of the
State of New  Jersey.  This  Agreement  is solely for the benefit of the parties
hereto and their  respective  successors and assigns,  and no other person shall
have any  right,  benefit,  priority  or  interest  in,  under or because of the
existence of, this Agreement.

         10.9 Waiver of Jury Trial. THE BORROWERS HEREBY WAIVE THEIR RIGHTS TO A


<PAGE>

TRIAL BY JURY IN CONNECTION  WITH ANY AND ALL  LITIGATION  INVOLVING THE SUBJECT
MATTER OF THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

         10.10 Joint and Several.  Notwithstanding  anything contained herein to
the contrary,  the  representations,  warranties  and covenants of the Borrowers
contained  in this  Agreement,  and in the  other  Loan  Documents  to which the
Borrowers  are a party are joint and several,  including  but not limited to the
Borrowers' obligations to make payments hereunder and thereunder.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly  authorized  officers as of
the day and year first above written.



ATTEST:                          BALTEK CORPORATION



By:___________________________   By:_____________________________
                                    Name:
                                    Title:


ATTEST:                          CRUSTACEA CORPORATION



By:___________________________   By:_____________________________
                                    Name:
                                    Title:


                                 SUMMIT BANK


                                 By:____________________________
                                     RICHARD H. MADY
                                     Vice President

<PAGE>


                                    Schedules

                                       To

                      Revolving Loan and Security Agreement

                                  by and among

                  Baltek Corporation and Crustacea Corporation

                                       and

                                   Summit Bank


Schedule  I         -      Permitted Indebtedness
Schedule  II        -      Offices and Locations of Inventory




<PAGE>






                       SCHEDULE I - PERMITTED INDEBTEDNESS


-       Toyota Leases

-       Fixed asset financing previously disclosed by the Borrowers to the Bank.

-       Capital Lease of l0 Fairway Court, Northvale, New Jersey.




<PAGE>


                SCHEDULE II - OFFICES AND LOCATION OF INVENTORY

1.       10 Fairway Court
         Northvale, New Jersey

2.       l08 Fairway Court
         Northvale, New Jersey

3.       l06 Stonehurst Court
         Northvale, New Jersey

4.       495 Walnut Street
         Norwood, New Jersey

5.       536 Fayette Street
         Perth Amboy, New Jersey