EXHIBIT 10.7


                                 LOAN AGREEMENT

         THIS AGREEMENT (the "Agreement") is made and entered into this 23rd day
of March,  20043,  by and between  Touchstone  Resources  USA,  Inc., a Delaware
corporation  (f/k/a The Coffee  Exchange,  Inc.) (the  "Borrower")  and  Trident
Growth Fund, LP, a Delaware limited partnership (the "Lender").

                              W I T N E S S E T H :

         WHEREAS, the Borrower has requested that Lender make a loan to Borrower
of up to $2,100,000 (the "Loan"); and

         WHEREAS,  Lender has agreed to make the Loan available to Borrower upon
the terms and conditions hereinafter set forth.

         NOW, THEREFORE, it is agreed as follows:


         SECTION 1.  Definitions.  All of the terms  defined  in this  Agreement
shall  have such  defined  meanings  when used in the other Loan  Documents  (as
hereinafter  defined)  and any  certificates,  reports  or  other  documents  or
instruments  issued under or  delivered  pursuant to this  Agreement  unless the
context shall require otherwise.  For purposes of this Agreement,  the following
terms shall have the following meanings:

         1.1 "Affiliate"  shall mean an entity that is a member of a "controlled
group of  corporations"  (within the meaning of Section  414(b) of the  Internal
Revenue  Code),  an  "affiliated  service  group" (within the meaning of Section
414(m) of the Internal  Revenue  Code),  or a group of trades or business  under
common  control  (within the meaning of Section  414(c) of the Internal  Revenue
Code) that also includes the Borrower as a member.

         1.2  "Agreement"  shall include this Agreement as amended,  modified or
supplemented from time to time.

         1.3 "Authorized  Officer" shall mean the Chief Executive Officer or the
President  of the  Borrower or such other  person  designated  in writing to the
Lender, who is authorized to act on behalf of the Borrower hereunder.

         1.4  "Business  Day"  means a day  upon  which  banks  are open for the
transaction of business of the nature required by this Agreement in Texas.

         1.5  "Capital   Expenditure":   means  any  payment  made  directly  or
indirectly  for the purpose of  acquiring or  constructing  fixed  assets,  real
property or equipment which in accordance with GAAP would be added as a debit to
the fixed  asset  account  of the Person  making  such  expenditure,  including,
without limitation,  amounts paid or payable under any conditional sale or other
title retention agreement or under any lease or other periodic payment

<PAGE>

arrangement which is of such a nature that payment  obligations of the lessee or
obligor  thereunder  would be  required by GAAP to be  capitalized  and shown as
liabilities on the balance sheet of such lessee or obligor.

         1.6 "Cash Flow" means an amount equal to (i) the Borrower' Consolidated
EBITDA,   minus   (ii)  the   Borrower's   Consolidated   non-financed   Capital
Expenditures.

         1.7  "Capital  Lease"  means any lease of property  (real,  personal or
mixed) which,  in accordance  with GAAP,  should be  capitalized on the lessee's
balance sheet or for which the amount of the asset and  liability  thereunder as
if so capitalized should be disclosed in a note to such balance sheet.

         1.8 "Change of Control" means (a) a Change of Ownership; (b) during any
period of twelve consecutive  calendar months,  individuals who at the beginning
of such period constituted the board of directors of the Borrower (together with
any new  directors  whose  election by the board of directors of the Borrower or
whose  nomination for election by the shareholders of Borrower was approved by a
vote of at least  two-thirds  of the  directors  then still in office who either
were directors at the beginning of such period or whose  elections or nomination
for election was  previously so approved)  cease for any reason other than death
or disability to constitute a majority of the directors then in office.

         1.9 "Change of Ownership"  means any person or group of persons  (other
than the Lender  and/or the  shareholders  of the Borrower on the Closing  Date)
shall have  acquired  beneficial  ownership  (within  the  meaning of Rule 13d-3
promulgated  by the  Securities  and Exchange  Commission  under the  Securities
Exchange Act of 1934, as amended) of forty percent (40%) or more  (computed on a
fully diluted  basis) of the issued and  outstanding  shares of capital stock of
Borrower  having the right to vote for the  election  of  directors  of Borrower
under ordinary circumstances.

         1.10 "Closing Date" means the date first set forth above.

         1.11 "Committed  Amount" means the principal amount of $2,100,000 which
Lender has agreed to lend to Borrower as evidenced by the Convertible Note.

         1.12 "Common Stock" shall have the meaning as defined in Section 3.3.

         1.13 DELETED.

         1.14 "Consolidated EBITDA" means, for any Person for any period:

                  (i)  the  consolidated  net  income  of  such  Person  and its
Consolidated  Subsidiaries  for such period (after  Income Taxes)  calculated in
accordance with GAAP, but excluding:

                    (a)  any gain arising from the sale of capital assets,

                    (b)  any gain arising from any write-up of assets,


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<PAGE>

                    (c)  earnings of any other Person,  substantially all of the
                         assets of which have been  acquired  by such  Person or
                         its  Consolidated  Subsidiaries  in any manner,  to the
                         extent that such  earnings  were realized by such other
                         Person prior to the date of such acquisition.

                    (d)  earnings  of any  Person  in which  the  Person  or its
                         Consolidated  Subsidiaries  has an  ownership  interest
                         (other than wholly owned Subsidiaries of such Person ),
                         unless such earnings have actually been received by the
                         Person or its Consolidated  Subsidiaries in the form of
                         cash distributions,

                    (e)  earnings of any Person to which assets of the Person or
                         its  Consolidated  Subsidiaries  shall  have been sold,
                         transferred  or  disposed  of, or into which the Person
                         shall have  merged,  to the extent  that such  earnings
                         arise prior to the date of such transaction,

                    (f)  any gain arising from the acquisition of any securities
                         of such Person or any of its Consolidated Subsidiaries,
                         and

                    (g)  any  extraordinary  gain realized by such Person or any
                         of its Consolidated Subsidiaries during such period.

                  (ii) plus the  following,  but only in each case to the extent
incurred by the Borrower and its  Consolidated  Subsidiaries  during such period
and deducted in the calculation above for such period,

                    (a)  all income and franchise taxes,

                    (b)  all Interest Expense,

                    (c)  all depreciation expense, and

                    (d)  all amortization expense.

         1.15 "Consolidated  Subsidiary" or "Consolidated  Subsidiaries"  means,
for any Person,  any  Subsidiary  or other entity the accounts of which would be
consolidated with those of such Person in its consolidated  financial statements
as of such date in accordance with GAAP.

         1.16 "Current Assets" means, at any particular time, all amounts which,
in conformity  with GAAP,  would be included as current assets on a consolidated
balance  sheet of the Borrower and its  Subsidiaries;  provided  however,  there
shall be excluded  therefrom (a) all prepaid  expenses of every type and nature,
(b) all amounts due from partners,  officers,  stockholders or other Affiliates,
and all loans due from employees, and (c) all deferred charges.

         1.17 "Current  Liabilities"  means, at any particular time, all amounts
(including  deferred taxes) which, in conformity with GAAP, would be included as
current  liabilities  on a  consolidated  balance  sheet of the Borrower and its
Subsidiaries.


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<PAGE>

         1.18  "Current  Ratio"  means the ratio of  Current  Assets to  Current
Liabilities.

         1.19  "Debt"  means,  with  respect  to  any  Person  on  any  date  of
determination  (without  duplication),  (i) all  obligations for borrowed money,
(ii)  all  obligations  evidenced  by  bonds,   debentures,   notes  or  similar
instruments,  (iii)  all  obligations  to pay the  deferred  purchase  price  of
property or services  except  trade  accounts  payable  arising in the  ordinary
course of business  which are paid when due in accordance  with  ordinary-course
payment  terms,  (iv) all  obligations  arising under  acceptance  facilities or
facilities  for the discount or sale of accounts  receivable,  (v) all direct or
contingent  obligations in respect of letters of credit,  (vi) lease obligations
(other than lease  obligations with respect to operating  leases) that have been
(or under GAAP should be) capitalized for financial  reporting  purposes,  (vii)
liabilities  secured (or for which the holder of any  obligations or liabilities
has an existing  right,  contingent or otherwise,  to be so secured) by any Lien
existing on property owned or acquired by that Person and (viii) all guaranties,
endorsements and other contingent  obligations for liabilities or obligations or
the  maintenance  of financial  condition of others,  including  obligations  to
repurchase  or purchase  properties  or to  maintain  or cause to  maintain  any
financial condition.

         1.20 "Default" or "Event of Default" means the occurrence of all or any
of the events  specified in Section 7 and/or set forth in the  Convertible  Note
(as defined below).

         1.21 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.

         1.22 "GAAP" mean generally accepted accounting principles.

         1.23 "Indebtedness"  means with respect to any Person, all indebtedness
of such  Person for  borrowed  money,  all  indebtedness  of such Person for the
acquisition of property other than purchases of products and  merchandise in the
ordinary  course of business,  indebtedness  secured by a lien,  pledge or other
encumbrance on the property of such Person whether or not such  indebtedness  is
assumed,  all  liability of such Person by way of  endorsements  (other than for
collection  or deposit in the ordinary  course of business);  all  guarantees of
Indebtedness  of any  other  Person by such  Person  (including  any  agreement,
contingent  or  otherwise,   to  purchase  any  obligation   representing   such
Indebtedness or property constituting security therefor, or to advance or supply
funds for such purpose or to maintain  working capital or other balance sheet or
income statement condition,  or any other arrangement in substance effecting any
of the foregoing); all leases and other items which in accordance with Generally
Accepted Accounting Principles are classified as liabilities on a balance sheet.

         1.24 "Interest  Expense" means,  with respect to any Person and for any
period (without  duplication),  all interest on that Person's Debt, whether paid
in cash or accrued as a  liability  and  payable in cash  during any  subsequent
period  (including,  without  limitation,  the  interest  component  of  Capital
Leases), as determined by GAAP.

         1.25 "Internal Revenue Code means the Internal Revenue Code of 1986, as
amended.

         1.26 "Liabilities"  mean all liabilities,  obligations and indebtedness
of  any  and  every  kind  and  nature  (including,  without  limitation,  lease
obligations,  accrued  interest,  charges,  expenses,  attorneys' fees and other


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<PAGE>

sums) chargeable to the Borrower and made to or for the benefit of the Borrower,
whether  arising  under this  Agreement or arising  under the Note or any of the
Loan  Documents of the Borrower,  whether  heretofore,  now or hereafter  owing,
arising,  due or payable  from  Borrower  to the Lender and  however  evidenced,
credited,  incurred,  acquired or owing,  whether  primary,  secondary,  direct,
contingent, fixed, or otherwise, including obligation of performance.

         1.27 "Liens" shall have the meaning set forth in Section 3.9.

         1.28 "Loan Amount" means the principal amount of up to $2,100,000 which
Lender has agreed to lend Borrower at Lender's sole option.

         1.29 "Loan Documents" means this Agreement,  the Convertible  Note, the
Pledge  Agreement,  the Warrant,  the  Security  Agreement,  and all  documents,
instruments,  certificates,  reports  and  all  other  written  matters  whether
heretofore,  now, or hereafter  executed by or on behalf of the Borrower  and/or
delivered to Lender in connection herewith.

         1.30 "Convertible  Note" or "Note" means one or more Secured Promissory
Notes, to be executed by the Borrower in favor of the Lender,  substantially  in
the form of Exhibit 1 attached hereto.

         1.31  "Material  Adverse  Effect"  shall have the  meaning set forth in
Section 3.1.

         1.32 "Net Income" or "Net Loss"  means,  with respect to any Person for
any period,  the net income or net loss of such Person  determined in accordance
with GAAP,  after  payment of income Taxes but excluding  any  extraordinary  or
non-recurring items.

         1.33  "Obligation"  shall mean the principal  amount of the Loan,  plus
twelve  percent (12%)  interest per annum paid monthly  (subject to  adjustment)
together  with  such  costs  and  reimbursements  as may be due  under  the Loan
Agreement and the Note.

         1.34  "Pledge  Agreement",  if  any,  means  the  pledge  agreement  of
approximate even date herewith executed by pledgors in favor of the Lender.

         1.35 Intentionally Deleted

         1.36  "Registrable  Securities"  shall mean (i) the Common Stock issued
upon conversion of the  Convertible  Notes, or (ii) any Common Stock issued upon
the  exercise  of the  Warrant,  right or other  security  which  is  issued  in
conjunction with this transaction (i) above by way of stock dividend;  any other
distribution  with respect to or in exchange  for, or in  replacement  of Common
Stock;   stock  split;   or  in  connection   with  a  combination   of  shares,
recapitalization, merger, consolidation or other reorganization.

         1.37 "Person" means an individual,  partnership,  corporation, business
trust, joint stock company,  trust,  unincorporated  organization,  association,
joint venture or a government or agency or political subdivision thereof.


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<PAGE>

         1.38  "Security  Agreement"  means that certain  Security  Agreement of
approximate even date herewith executed by the Borrower in favor of the Lender.

         1.39 "Subsidiary" means any corporation or limited liability company of
which at least a 50% of the outstanding securities having ordinary voting powers
for the election of Board of Directors  (or similar  governing  body) are at the
time owned by Borrower.  As used herein,  the term "Borrower" shall be deemed to
include all of Borrower's Subsidiaries, if any.

         1.40  "Termination  Date" means the earlier of: (a) March 23, 2005; (b)
the  date  of  the  occurrence  and  continuance  of an  Event  of  Default  (as
hereinafter defined);  (c) the date of repayment of the Loan Amount plus accrued
interest;  (d) the date of the  closing of a  secondary  public  offering by the
Borrower  and/or its  shareholders;  or (e) the date of the Change of Control of
the Borrower.

         1.41 "Warrant",  if any means certain warrants of approximate even date
herewith  executed by the  Borrower in favor of the Lender.  Borrower and Lender
agree that the value of the Warrant as of the date hereof is $_____

         SECTION 2. Loan.

         2.1 Committed Loan Amount.  Subject to the terms and conditions of this
Agreement, the Lender agrees to loan to the Borrower $2,1000,000 pursuant to the
terms of the Convertible Note and the other Loan Documents upon the execution of
this Agreement. The Lender shall provide such funds (via check or wire transfer)
to the Borrower  within five (5) business  days of receipt by the Lender of such
Loan  Documents  duly  executed by Borrower,  or within such  shorter  period as
Borrower and Lender mutually agree.  Nothing set forth herein shall prohibit the
Borrower from making  prepayments  without  penalty at any time and from time to
time (subject to prior  conversion  rights).  All provisions of the  Convertible
Note are incorporated herein by reference. Any conflicts between the Convertible
Note and this Loan Agreement  shall be resolved by reference to the  Convertible
Note. Upon execution of this Agreement,  contemporaneous with the funding of the
Loan, Borrower shall promptly pay to the order of the Lender a commitment fee in
the amount of 1.0% and an origination fee of 4.0% of the Committed Amount.  Such
fees shall be applicable to any further lending from Lender to Borrower.

         2.2  Payments of Interest  and  Principal.  Interest on the Loan Amount
shall  accrue at the rate of  twelve  percent  (12%) per annum  from the date of
receipt of funds by  Lender,  and shall be payable  monthly  via wire  transfer.
Unless  earlier  repaid in accordance  with payment  provisions set forth in the
Note,  Borrower shall pay to Lender on the Termination Date the entire principal
amount of the outstanding  Convertible  Notes, via wire transfer,  together with
accrued interest thereon and any fees then owed.

         2.3 Use of  Proceeds.  The  proceeds  of the Loan  shall be used by the
Borrower in accordance with the provisions of Schedule 2.3 hereof.

         2.4 Conversion. Terms found in the Convertible Note.


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<PAGE>

         SECTION  3.  Representations  and  Warranties.  In order to induce  the
Lender to enter into this Agreement and to make the Loan available, the Borrower
represents   and   warrants  to  the  Lender  as  of  the  Closing  Date  (which
representations  and  warranties  shall  survive the  delivery of the  documents
mentioned herein, and the termination of this Agreement) as follows:

         3.1 Organization.

         (a) The Borrower and each  Subsidiary,  if any, is a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of the
jurisdiction  of its respective  formation,  has the power to own its respective
properties and to carry on its respective  businesses as now being conducted and
is duly qualified to do business in every  jurisdiction  in the United States of
America for which the failure to so qualify would have a material  impact on the
financial  condition,   operations,   business  or  prospects  of  the  Borrower
("Material Adverse Effect").

         (b) Schedule 3.1 sets forth true and complete copies of the Certificate
of Incorporation  and Bylaws,  as in effect on the date hereof,  of the Borrower
and  all  other  corporate  formation  and  governing  documents  of each of the
Subsidiaries.  Except as set forth in Schedule 3.1(b), the Borrower does not own
or control,  directly or  indirectly,  any equity  interest in any  corporation,
company,   limited  liability   company,   association,   partnership,   limited
partnership, joint venture or other entity.

         3.2 Power and  Authority.  The  Borrower is duly  authorized  under all
applicable  provisions of law, its Certificate of Incorporation,  and its Bylaws
to execute,  deliver and perform this Agreement,  the  Convertible  Note and the
other Loan Documents to which it is a party, and all other action on the part of
the Borrower required for the lawful execution, delivery and performance thereof
have been duly taken. This Agreement and the other Loan Documents,  if any, upon
the due execution and delivery thereof,  are valid and enforceable  instruments,
obligations or agreements of the parties,  in accordance  with their  respective
terms,  except as to  enforcement  of creditors  rights  generally.  Neither the
execution of this Agreement and the Loan  Documents,  nor the  fulfillment of or
compliance  with their  provisions  and terms,  conflicts  with,  or has or will
result in a breach of the terms,  conditions or  provisions  of, or constitute a
violation of or default under: (a) any applicable law,  regulation,  order, writ
or decree;  or (b) any agreement or instrument to which the Borrower is a party,
or create any lien,  charge or encumbrance upon any of the property or assets of
any of them pursuant to the terms of any agreement or instrument to which any of
them is a party or by which any of them are bound  except  those in favor of the
Lender expressly created hereunder.

         3.3  Capitalization.  As of  the  date  hereof,  the  total  number  of
authorized  shares of common  stock of the  Borrower  (the  "Common  Stock")  is
50,000,000 of which  50,000,000  shares are issued and outstanding and the total
number of authorized  shares of preferred  stock of the Borrower (the "Preferred
Stock") is 5,000,000 shares, none of which are issued and outstanding.  Borrower
does not  have  any  authorized  shares  of  preferred  stock.  The  outstanding
capitalization  of the  Borrower  as of the date hereof is set forth in Schedule
3.3 annexed hereto.  Except as otherwise disclosed in Schedule 3.3, there are no
warrants, options or preemptive rights authorized or outstanding with respect to
any of the Borrower's capital stock.


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<PAGE>

         3.4 Stock Ownership. The stockholders,  which are reflected on Schedule
3.3, are holders of all of the issued and  outstanding  Common Stock and, except
as   contemplated  by  the  Loan  Documents  and  Schedule  3.3,  there  are  no
commitments,  agreements  or  undertakings  with  respect to the issuance of any
equity or debt securities of the Borrower.

         3.5 Material Liabilities.  The sole outstanding material liabilities of
the Borrower are set forth on Schedule 3.5.

         3.6 Proceeds of  Convertible  Note. The Borrower shall use the proceeds
of the  Convertible  Note solely for those  purposes  set forth on Schedule  2.3
hereof.

         3.7 Registration Rights. Except as set forth in Schedule 3.7, there are
no registration  rights agreements with respect to any of the Borrower's capital
stock.

         3.8  Material  Agreements.  Except  for those  agreements  set forth on
Schedule  3.8  hereof,  there  are no other  material  agreements  to which  the
Borrower is a party.

         3.9 Title to Assets.  Except as set forth in Schedule 3.9, the Borrower
has good and marketable title to all of its properties and assets,  all of which
are free and clear of any and all liens,  mortgages,  pledges,  encumbrances  or
charges of any kind or nature whatsoever (collectively, "Liens").

         3.10  Litigation.  There  are  no  pending  or  threatened  actions  or
proceedings before any court, any state,  provincial or federal regulatory body,
or any self-regulatory organization arbitrator or governmental or administrative
body  or  agency  which  would  have a  Material  Adverse  Effect  or in any way
materially  affect or call into question the power and authority of the Borrower
to enter into or perform this Agreement and the Loan Documents.

         3.11  Taxes.  The  Borrower  has filed all income tax  returns (if any)
required  to be filed by it and all taxes due  thereon  have been  paid,  and no
controversy in respect of additional income taxes, municipal,  state or federal,
of the Borrower is pending or threatened.

         3.12 Agreements or Restrictions Affecting the Borrower. The Borrower is
not a party to or otherwise bound by any contract or agreement or subject to any
restrictions   which  would  have  Material  Adverse  Effect  or  restricts  the
Borrower's  ability to enter into this Agreement or any of the other of the Loan
Documents  or the  Borrower's  ability to effect the  transactions  contemplated
therein and herein.

         3.13  Governmental  Approval.  No  approval  of  any  federal,   state,
municipal or other local governmental  authorities is necessary to carry out the
terms of this Agreement and the Loan Documents, and no consents or approvals are
required in the making or performance of this Agreement and the Loan Documents.

         3.14  Board of  Directors.  The  Board  of  Directors  of the  Borrower
consists Mark Bush and Stephen Harrington..

         3.15 No Untrue Statements. None of this Agreement or the Loan Documents
nor any  other  agreements,  reports,  schedules,  certificates  or  instruments
heretofore or simultaneously  with the execution of this Agreement  delivered to


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<PAGE>

Lender,  contains any  misrepresentation or untrue statement of fact or omits to
state any fact  necessary to make any of such  agreements,  reports,  schedules,
certificates or instruments not misleading.

         3.16 Employee Benefit Plans.

         (a) Borrower has  disclosed to Lender in writing prior to the execution
of the  Agreement and has listed on Schedule  3.16 all Borrower  Benefit  Plans.
Attached to Schedule 3.16 are correct and complete  copies,  in each case of all
Borrower Benefit Plans. For purposes of this Agreement, "Borrower Benefit Plans"
means all pension,  retirement,  profit-sharing,  deferred  compensation,  stock
option,  employee stock  ownership,  severance pay,  vacation,  bonus,  or other
incentive plan, all other written employee agreements or programs,  all medical,
vision,  dental,  or other health plans, all life insurance plans, and all other
employee benefit plans or fringe benefit plans,  including,  without limitation,
"employee  benefit  plans"  as that term is  defined  in  Section  3(3) of ERISA
maintained  by,  sponsored  in whole or in part by, or  contributed  to by,  the
Borrower  or any  of its  Affiliates  for  the  benefit  of  managers,  members,
employees, retirees, dependents, spouses, directors, independent contractors, or
other  beneficiaries  and under which managers,  members,  employees,  retirees,
dependents, spouses, directors,  independent contractors, or other beneficiaries
are  eligible to  participate.  Any of the  Borrower  Benefit  Plans which is an
"employee  welfare  benefit  plan," as that term is defined  in Section  3(l) of
ERISA, or an "employee pension benefit plan," as that term is defined in Section
3(2) of ERISA,  is referred to herein as a "Borrower  ERISA  Plan." Any Borrower
ERISA Plan which is also a "defined  benefit plan" (as defined in Section 414(j)
of the Internal Revenue Code or Section 3(35) of ERISA) is referred to herein as
a "Borrower Pension Plan." Neither Borrower nor any Affiliate has an "obligation
to contribute" (as defined in ERISA Section 4212) to a "multiemployer  plan" (as
defined in ERISA  Sections  4001(a)(3) and  3(37)(A)).  Each  "employee  pension
benefit  plan," as defined  in Section  3(2) of ERISA,  ever  maintained  by the
Borrower or any Affiliate  that was intended to qualify under Section  401(a) of
the  Internal  Revenue  Code and with  respect  to which any  Affiliate  has any
liability, is disclosed as such in Schedule 3.16.

         (b) Borrower has attached to Schedule 3.16 correct and complete  copies
of  the  following  documents:   (i)  all  trust  agreements  or  other  funding
arrangements for such Borrower Benefit Plans  (including  insurance  contracts),
and all amendments thereto; (ii) with respect to any such Borrower Benefit Plans
or amendments, all determination letters, rulings, opinion letters,  information
letters,  or material  advisory opinions issued by the Internal Revenue Service,
the  United  States  Department  of  Labor,  or  the  Pension  Benefit  Guaranty
Corporation after December 31, 1994; (iii) annual reports or returns, audited or
unaudited financial  statements,  actuarial  valuations and reports, and summary
annual reports  prepared for any Borrower  Benefit Plan with respect to the most
recent plan year;  and (iv) the most recent  summary plan  descriptions  and any
material modifications thereto.

           (c) All Borrower  Benefit Plans are in material  compliance  with the
applicable  terms of ERISA,  the Internal Revenue Code, and any other applicable
laws,  the  breach  or  violation  of  which  is  reasonably   likely  to  have,
individually  or in the  aggregate,  a Material  Adverse Effect on the Borrower.
Each Borrower ERISA Plan  currently  maintained by Borrower which is intended to
be qualified  under Section  401(a) of the Internal  Revenue Code has received a
favorable  determination  letter from the Internal Revenue Service, and Borrower
is not  aware of any  circumstances  which  will or could  reasonably  result in
revocation of any such favorable  determination letter. Each trust created under
any Borrower ERISA Plan, which is an "employee  pension benefit plan" as defined
in  Section  3(2) of ERISA,  has been  determined  to be  exempt  from tax under
Section  501(a) of the  Internal  Revenue  Code and Borrower is not aware of any


                                       9
<PAGE>

circumstance  which  will or  could  reasonably  result  in  revocation  of such
exemption.  With respect to each Borrower  Benefit Plan to the best knowledge of
Borrower,  no event has occurred which will or could  reasonably  give rise to a
loss of any intended tax consequences  under the Internal Revenue Code or to any
tax under Section 511 of the Internal  Revenue Code that is  reasonably  likely,
individually or in the aggregate, to have a Material Adverse Effect on Borrower.
There  is no  material  pending  or,  to the  best  knowledge  of the  Borrower,
threatened litigation relating to any Borrower ERISA Plan.

         (d) No  Affiliate  has  engaged in a  transaction  with  respect to any
Borrower  Benefit  Plan that,  assuming the taxable  period of such  transaction
expired as of the date of this  Agreement,  would  subject  any  Affiliate  to a
material tax or penalty  imposed by either Section 4975 of the Internal  Revenue
Code or Section 502(i) of ERISA in amounts which are reasonably  likely to have,
individually or in the aggregate, a Material Adverse Effect on Borrower. Neither
Borrower  nor,  to the  best  of  Borrower's  knowledge,  any  administrator  or
fiduciary  of any Borrower  Benefit Plan (or any agent of any of the  foregoing)
has engaged in any  transaction,  or acted or failed to act in any manner  which
could  subject  Borrower to any direct or indirect  liability  (by  indemnity or
otherwise) for breach of any fiduciary, co-fiduciary, or other duty under ERISA,
where such liability,  individually or in the aggregate, is reasonably likely to
have a Material Adverse Effect on the Borrower.  To its best knowledge,  no oral
or written  representation  or  communication  with respect to any aspect of the
Borrower  Benefit  Plans  has been  made to  employees  of the  Borrower  or any
Affiliate which is not in accordance  with the written or otherwise  preexisting
terms and  provisions of such plans,  where any  liability  with respect to such
representation  or disclosure is  reasonably  likely to have a Material  Adverse
Effect on Borrower.

         (e) Since the date of the most recent  actuarial  valuation,  there has
been (i) no material  change in the  financial  position or funded status of any
Borrower Pension Plan, (ii) no change in the actuarial  assumptions with respect
to any  Borrower  Pension  Plan,  and (iii) no increase  in  benefits  under any
Borrower  Pension Plan as a result of plan  amendments  or changes in applicable
Law,  any  of  which  is  reasonably  likely  to  have,  individually  or in the
aggregate,  a Material Adverse Effect on Borrower.  No Borrower Pension Plan has
an  "accumulated  funding  deficiency"  within the meaning of Section 412 of the
Internal Revenue Code or Section 302 of ERISA. All contributions with respect to
a  Borrower  Pension  Plan have or will be  timely  made and there is no lien or
expected  to be a lien  under  Internal  Revenue  Code  Section  412(n) or ERISA
Section  302(f) or tax under  Internal  Revenue Code Section  4971.  Neither the
Borrower nor any Affiliate has provided, or is required to provide,  security to
a Borrower  Pension Plan pursuant to Section  401(a)(29) of the Internal Revenue
Code. All premiums required to be paid under ERISA Section 4006 have been timely
paid by  Borrower,  except to the extent any  failure  would not have a Material
Adverse Effect on Borrower.

         (f) No liability  under Title IV of ERISA has been or is expected to be
incurred by the Borrower or any  Affiliate  with respect to any defined  benefit
plan currently or formerly maintained by any of them that has not been satisfied
in full (other than liability for Pension Benefit Guaranty Corporation premiums,


                                       10
<PAGE>

which have been paid when due),  except to the extent any failure would not have
a Material Adverse Effect on Borrower.

         (g) The  Borrower and any  Affiliate  have no  obligations  for retiree
health and retiree life benefits  under any of the Borrower  Benefit Plans other
than with respect to benefit coverage mandated by applicable Law.

         (h) Except as disclosed in Schedule 3.16(h),  neither the execution and
delivery of this Agreement nor the consummation of the transactions contemplated
hereby  will,  by  themselves,  (1) result in any  payment  (including,  without
limitation,   severance,   unemployment   compensation,   golden  parachute,  or
otherwise) becoming due to any manager, director or any employee of the Borrower
or Affiliate  under any Borrower  Benefit  Plan or  otherwise,  (2) increase any
benefits otherwise payable under any Borrower Benefit Plan, or (3) result in any
acceleration of the time of payment or vesting of any such benefit.

         (i)  Except as set forth in the  Schedule  3.16(i),  Borrower  does not
maintain or otherwise  pay for life  insurance  policies  (other than group term
life policies on employees)  with respect to any manager,  director,  officer or
employee.  Schedule 3.16(i) lists each such insurance policy and includes a copy
of each  agreement  with a party  other  than the  insurer  with  respect to the
payment,  funding  or  assignment  of such  policy.  To the  best of  Borrower's
knowledge,  neither  Borrower nor any Borrower  Pension Plan or Borrower Benefit
Plan owns any individual or group insurance  policies issued by an insurer which
has been  found to be  insolvent  or is in  rehabilitation  pursuant  to a state
proceeding.

         SECTION 4. Conditions Precedent to Making Loan.

         The  Lender  shall not be  obligated  to make the Loan until all of the
following  conditions have been satisfied by proper  evidence,  execution and/or
delivery  to the  Lender of the  following  items,  all in form,  and  substance
reasonably satisfactory to the Lender:

          (a)  The Convertible Note;

          (b)  This Agreement;

          (c)  The Warrants

          (d)  The  Security  Agreement  and  UCC-1  for  the  Borrower  and any
               Subsidiary;

          (e)  SBA forms

          (f)  Unanimous  consent of the Board of  Directors of the Borrower and
               all  Subsidiaries,  certified by the Secretary of the Borrower as
               of  the  Closing  Date,  approving  or  otherwise  ratifying  the


                                       11
<PAGE>

               transactions  contemplated by this  Agreement,  and approving the
               form of this Agreement and the Loan  Documents,  and  authorizing
               execution, delivery, and performance thereof;

          (g)  Specimen signatures of the officer of the Borrower and Subsidiary
               executing this Agreement and the Loan Documents,  and the officer
               authorized to borrow under the Loan  Documents,  certified by the
               Secretary of the Borrower or Subsidiary;

          (h)  A copy of the Articles of Incorporation, certified by an official
               of the Borrower's  jurisdiction of formation or incorporation and
               further  certified by the  Secretary of Borrower not to have been
               altered or amended since  certification  by such official;  and a
               copy of the Bylaws of the Borrower, certified as true and correct
               by the Secretary of the Borrower;

          (i)  Such  other  instruments,  documents  or items as the  Lender may
               reasonably request;

          (j)  No Event of Default shall have  occurred and be continuing  under
               this Agreement,  the Convertible Note or any other Loan Document,
               nor shall the Borrower be in default under any other  document or
               agreement  to  which  it is a party  or by which it or any of its
               properties or assets are bound; and

          (k)  Payment of the  origination  and  commitment  fees  referenced in
               Section 2.1 hereof.

         SECTION 5. Affirmative Covenants.  The Borrower covenants that, so long
as any portion of the Liabilities remains unpaid and unless the Lender otherwise
consents in writing, it will:

         5.1 Taxes and  Liens.  Promptly  pay,  or cause to be paid,  all taxes,
assessments  and other  governmental  charges  which may  lawfully  be levied or
assessed upon the income or profits of the Borrower, or upon any property, real,
personal or mixed, belonging to the Borrower, or upon any part thereof, and also
any lawful claims for labor, material and supplies which if unpaid, might become
a Lien or charge  against any such  property;  provided,  however,  the Borrower
shall not be required to pay any such tax, assessment,  charge, levy or claim so
long as the validity thereof shall be actively contested in good faith by proper
proceedings; but provided further that any such tax, assessment, charge, levy or
claim  shall be paid or bonded in a manner  satisfactory  to the Lender upon the
commencement of proceedings to foreclose any Lien securing the same.

         5.2 Business and Existence. Do or cause to be done all things necessary
to preserve and to keep in full force and effect any  licenses  necessary to the
business of the Borrower,  its corporate existence and rights of its franchises,
trade names,  trademarks,  and permits  which are  reasonably  necessary for the
continuance of its business;  and continue to engage principally in the business
currently operated by the Borrower.

         5.3 Insurance and Properties.  Keep its business and properties insured
at all times  with  responsible  insurance  companies  and carry  such types and
amounts of insurance as are required by all federal, state and local governments
in the areas which Borrower does business and as are usually carried by entities


                                       12
<PAGE>

engaged  in the  same or  similar  business  similarly  situated.  In  addition,
Borrower shall maintain in full force and effect policies of liability insurance
in amounts at least equal to that currently in effect.

         5.4 Maintain  Property.  Maintain its property in good order and repair
and,  from  time  to  time,  make  all  needed  and  proper  repairs,  renewals,
replacements,  additions and improvements  thereto, so that the business carried
on may be properly and advantageously  conducted at all times in accordance with
prudent  business  management,  and  maintain  annually  adequate  reserves  for
maintenance thereof.

         5.5 True  Books.  Keep true books of record and  account in which full,
true and correct  entries will be made of all of its dealings and  transactions,
and  set  aside  on  its  books  such  reserves  as  may be  required  by  GAAP,
consistently applied, with respect to all taxes,  assessments,  charges,  levies
and claims  referred to in Section 5.1 hereof,  and with respect to its business
in general,  and include such reserves in interim as well as year-end  financial
statements.

         5.6 Pay  Indebtedness to Lender and Perform Other  Covenants.  (a) Make
full and timely payment of the principal of and interest on the Convertible Note
and all other  indebtedness of the Borrower to the Lender,  whether now existing
or hereafter  arising,  including the payment of fees;  and (b) duly comply with
all terms and covenants  contained in this Agreement,  the Convertible Note, the
other Loan Documents and any other instruments and documents given to the Lender
pursuant to this Agreement.

         5.7 Right of Inspection. Permit any person designated by the Lender, at
the  Lender's  expense,  to visit and inspect any of the  properties,  books and
financial reports of the Borrower, all at such reasonable times upon forty-eight
(48) hours prior notice to Borrower,  and as often as the Lender may  reasonably
request, provided the Lender does not interfere with the daily operations of the
Borrower.

         5.8  Observance  of  Laws.  Conform  to  and  duly  observe  all  laws,
regulations  and other  valid  requirements  of any  regulatory  authority  with
respect to the conduct of its business.

         5.9 Borrower's Knowledge of Default. Upon an officer or director of the
Borrower  obtaining  knowledge of, or threat of, an Event of Default  hereunder,
cause such  officer to  promptly,  within no more than ten (10)  business  days,
deliver to the Lender notice thereof  specifying the nature thereof,  the period
of existence thereof, and what action the Borrower proposes to take with respect
thereto.

         5.10 Notice of Proceedings. Upon an officer or director of the Borrower
obtaining  knowledge of any material  litigation,  dispute or proceedings  being
instituted  or  threatened  against  the  Borrower,  or  any  attachment,  levy,
execution or other process being instituted  against any assets of the Borrower,
cause such officer to promptly, within no more than ten (10) business days, give
the  Lender  written  notice  of such  litigation,  dispute,  proceeding,  levy,
execution or other process.

         5.11 Payment of Lender's  Expenses.  If at any time or times hereafter,
Lender employs counsel in connection with the execution and  consummation of the
transactions contemplated by this Agreement or to commence, defend or intervene,
file a petition,  complaint,  answer,  motion or other pleading,  or to take any


                                       13
<PAGE>

action in or with respect to any suit or  proceeding  (bankruptcy  or otherwise)
relating to this Agreement or any other Loan Document,  or any other  agreement,
guaranty,  Convertible Note,  instrument or document  heretofore,  now or at any
time or times  hereafter  executed by Borrower and  delivered  to Lender,  or to
enforce any rights of Lender hereunder whether before or after the occurrence of
any Event of Default, or to collect any of the Liabilities,  then in any of such
events,  all of the reasonable  attorneys' fees arising from such services,  and
any  expenses,  costs  and  charges  relating  thereto,  shall  be  part  of the
Liabilities,  payable on demand.  In connection the initial loan  documentation,
counsel fees shall fees shall not exceed $15,000.

         5.12 Lender's  Representative.  Lender shall have the right to nominate
one member to the  Borrower's  Board of Directors,  and Borrower  shall take all
action necessary to get such nominees  elected  immediately.  Lender's  designee
shall be reimbursed  for all  reasonable  and  customary out of pocket  expenses
relating to his  service on the Board and or any  Committee  thereof,  and shall
receive such compensation,  if any, as shall be commensurate with reimbursements
and payments received by other non-employee directors. Borrower must provide and
keep in  effect  officers'  and  directors'  liability  insurance  for  Lender's
designee  satisfactory  to Lender.  The Lender's  representative  shall agree to
complete a standard Director's and Officer's Questionnaire.

         5.13 Financial Reporting.  The Borrower shall provide to Lender audited
annual  financial  statements,  audited  by  mutually  agreed  upon  independent
certified public accounting firm. Said financial statements shall be prepared in
accordance  with GAAP,  consistently  applied,  and shall be delivered to Lender
within  ninety  (90) days after the close of the  Borrower's  fiscal  year.  The
report of the  auditor  that  accompanies  the  financial  statements  shall not
contain any  qualifications  or limitations.  The Borrower's fiscal year ends on
December 31, and shall not be changed  without the prior written  consent of the
Lender.  The  Borrower  shall  provide  to Lender  unaudited  monthly  financial
statements  (including  month to date and year to date actual to prior  periods)
and a report in the form of Exhibit 2, both  presented in accordance  with GAAP,
consistently  applied,  and shall be delivered to Lender within twenty-five (25)
days after the close of the Borrower's month. If such financial are not deliverd
by the 25th day,  the  Borrower  shall pay a late fee of $500 per day until they
are  delivered.  Borrower  shall  also  deliver  any  other  reports  reasonably
requested by Lender.

         5.14  Financial  Covenants.  As  of  the  date  hereof  and  until  the
Termination Date, the Borrower must maintain the following ratios:

         (a) CASH INTEREST  COVERAGE.  Until the Termination  Date, the Borrower
shall  maintain a  Consolidated  EBITDA  ratio,  based on any of the  Borrower's
quarterly  financial  statements  (as  determined on the last day of each fiscal
quarter  for  the  immediately  preceding  quarter),  of  2.0  or  greater.  The
Consolidated  EBITDA ratio is defined as Consolidated EBITDA divided by Interest
Expense (Consolidated EBITDA / Interest Expense).

         (b) CASH FLOW COVERAGE RATIO. The ratio of (a) the Borrower's Cash Flow
to (b) the sum of (i) the Borrower's consolidated Interest Expense plus (ii) the
Borrower's scheduled payments of principal (including the principal component of
Capital  Leases)  to be  paid  during  the  12  months  following  any  date  of
determination  shall at all times  exceed  (1) 1.5 to 1.0.  Compliance  with the


                                       14
<PAGE>

ratio  will be  tested  as of the last day of each  month,  with  Cash  Flow and
Interest Expense being calculated for the twelve months then ended.

         (c) CURRENT  RATIO.  The Borrower will at all times  maintain a Current
Ratio of not less than 1.5 to 1.0.  The Current  Ratio shall be  calculated  and
tested quarterly as of the last day of each fiscal quarter of the Borrower.

         (d) ACTUAL  VERSUS  BUDGET.  The  Borrower  shall on a quarterly  basis
achieve 75 percent of its budgeted  revenue and income.  Budget numbers shall be
those  delivered  to  Lender  contemporaneously  herewith  and then on an annual
calendar basis.

         5.15 Certificate of Covenant  Compliance On the last day of each March,
June,  September and December,  the Borrow will issue a Certificate  of Covenant
Compliance,  executed by either the Chief  Executive  Officer or Chief Financial
Officer in the form of Schedule 5.16 attached hereto.  If the Borrower is not in
compliance with the covenants specified in Sections 5 and 6 herein, the Borrower
will modify the Certificate of Covenant  Compliance by stating the exception and
providing a detailed explanation of the non-compliance.


         SECTION 6. Negative Covenants.  The Borrower covenants and agrees that,
so long as any portion of the  Liabilities  remains unpaid and unless the Lender
otherwise gives its prior written consent, it will not, directly or indirectly:

         6.1 Mortgages,  Liens, Etc. Incur,  create,  assume or permit to exist,
any Lien  (other than the liens set forth in Schedule  3.9),  mortgage,  pledge,
security  interest,  encumbrance,  lien or charge of any kind,  including  liens
arising under conditional sales or other title retention  agreements upon any of
its assets or properties of any character  other than in the ordinary  course of
business,   without  the  prior  written  consent  of  the  Lender.  Lender  may
subordinate  its security  position to a senior lender under  documentation  and
terms acceptable to Lender.

         6.2 Capital Expenditures. Make or become committed to make, directly or
indirectly, any capital expenditures (including written limitation,  capitalized
leases)  amounting to in excess of $50,000 in the  aggregate,  without the prior
written consent of the Lender.

         6.3 Loans and Investments. Lend or advance money, credit or property to
any Person, or invest in (by capital contribution or otherwise),  or purchase or
repurchase the stock or indebtedness  or assets or properties of any Person,  or
agree to do any of the foregoing, other than in the ordinary course of business,
without the prior written consent of the Lender.

         6.4 Guarantees. Assume, endorse or otherwise become or remain liable in
connection  with the  obligations  (including  accounts  payable)  of any  other
Person, other than in the ordinary course of business.

         6.5 Sale of Assets, Dissolution,  Etc. Transfer, sell, assign, lease or
otherwise  dispose  of  any of its  properties  or  assets,  or  any  assets  or
properties  necessary or desirable for the proper  conduct of its  business,  or
transfer,  sell,  assign or otherwise  dispose of any of its  Convertible  Note,
accounts,  or  contract  rights  to any  Person,  or  change  the  nature of its
business,  wind-up,  liquidate  or dissolve,  or agree to any of the  foregoing,


                                       15
<PAGE>

other than in the ordinary course of business, without the prior written consent
of the Lender.

         6.6 Intentionally Omitted

         6.7  Compensation.  The Borrower must not increase the  compensation of
any of its officers or consultants  making more than $150,000 per year, hire any
relative of any officer, director or shareholder of the Borrower, or pay a bonus
to any such person.

         6.8  Indebtedness.  Incur,  create,  assume or  permit  to  exist,  any
indebtedness  or  obligation  or enter  into or  extend  or amend  any  material
agreement or lease in excess of $100,000,  without the prior written  consent of
Lender.

         6.9 Intentionally Omitted

         6.10 Intentionally Omitted


         SECTION 7. Events of Default.

         7.1  Defaults.  Each of the  following  shall  constitute  an  event of
default (an "Event of Default")  hereunder:  (a) the failure to pay when due any
principal  or  interest   hereunder  or  under  the  Convertible  Note  and  the
continuance  of such failure for a period of ten (10) business days  thereafter;
(b) any other  violation  by the  Borrower of any  recital,  funding  condition,
representation,  warranty,  covenant or agreement contained in this Agreement or
in any of the Loan  Documents;  or any violation by the Borrower of any recital,
funding condition, representation,  warranty, covenant or agreement contained in
any other  document  or  agreement  to which the  Borrower  and the  Lender  are
parties;  (c) any change in the  majority  of the Board of  Directors  or of the
management  or in the  control  of the  Borrower  which is not  contemplated  in
Section 5.12 herein or previously approved by the advance written consent of the
Lender; (d) execution of any agreement,  letter,  memorandum of understanding or
similar  document  relating  to the  transfer,  disposition  or  sale  of all or
substantially  all of the assets of the Borrower to anyone  without the approval
of the Lender;  (e) an assignment  for the benefit of creditors by the Borrower;
(f) an  application  for the  appointment  of a receiver or  liquidator  for the
Borrower or any of its material assets;  (g) an issuance of an attachment or the
entry of a judgment against the Borrower in excess of $50,000;  (h) a default by
the Borrower with respect to any other  indebtedness in excess of $50,000 due to
the Lender;  (i) the making or sending of a notice of intended  bulk sale by the
Borrower;  (l)  the  issuance  of  a  determination  by  a  court  of  competent
jurisdiction that one or more Loan Documents or one or more material  provisions
of any Loan Document is unenforceable,  or the issuance of an injunction against
the  enforcement of any such Loan Document or material  provision;  (m) upon the
reasonable  determination  by the Lender that there has been a Material  Adverse
Effect;  and (n) the  occurrence of an Activity  Event of Default (as defined in
Section 8.6  herein).  Upon the  occurrence  of any of the  foregoing  Events of
Default,  the Convertible  Note and the Loan will be considered to be in default
and the entire unpaid principal sum hereof, together with accrued interest, will
at the option of the holder thereof become  immediately due and payable in full.
Upon  the  occurrence  of an  Event  of  Default,  the  Borrower  agrees  to pay


                                       16
<PAGE>

reasonable  collection costs and expenses,  including reasonable attorneys' fees
and  interest  (cash only,  not stock) at the lesser of: (i) 18% per annum (cash
only, not stock) or (ii) the maximum rate allowed under applicable law, from the
date of the default at the maximum rate  permitted by law computed on the unpaid
principal balance.

         SECTION 8. SBIC Provisions.  The Borrower  acknowledges that the Lender
is a small  business  investment  company  licensed by the United  States  Small
Business Administration, and makes the following representations, warranties and
covenants to Lender:

         8.1 Small Business Concern. The Borrower represents and warrants to the
Lender that the Borrower,  taken together with its "affiliates" (as that term is
defined  in 13 C.F.R.  ss.121.103),  is a "Small  Business  Concern"  within the
meaning of 15 U.S.C.  ss.662(5),  that is Section  103(5) of the Small  Business
Investment Act of 1958, as amended (the "Act"), and the regulations  thereunder,
including 13 C.F.R.  ss.107, and meets the applicable size eligibility  criteria
set forth in 13 C.F.R.  ss.121.301(c)(1)  or the industry  standard covering the
industry in which the  Borrower is  primarily  engaged as set forth in 13 C.F.R.
ss.121.301(c)(2).  Neither the  Borrower nor any of its  subsidiaries  presently
engages  in any  activities  for which a small  business  investment  company is
prohibited from providing funds by the SBIC Act, including 13 C.F.R. ss.107.

         8.2 Small  Business  Administration  Documentation.  On or  before  the
Closing Date, Lender shall have received SBA Form 480 (Size Status  Declaration)
and SBA Form 652  (Assurance  of  Compliance)  which  have  been  completed  and
executed by the Borrower,  and SBA Form 1031 (Portfolio Finance Report), Parts A
and B of which have been completed by the Borrower (the "SBA Documents").

         8.3   Inspection.   The   Borrower   will  permit  the  Lender  or  its
representatives,  at Borrower's  expense,  and examiners of the SBA to visit and
inspect  the  properties  and assets of the  Borrower,  to examine  its books of
account  and  records,  and to discuss  the  Borrower's  affairs,  finances  and
accounts with the Borrower's officers, senior management and accountants, all at
such reasonable times as may be requested by the Lender or SBA.

         8.4 Informational Covenant. Within sixty (60) days after the end of the
fiscal year of the Borrower,  the Borrower will furnish or cause to be furnished
to Lender information  required by the SBA concerning the economic impact of the
Lender's investment,  for (or as of the end of ) each fiscal year, including but
not limited to,  board  minutes,  information  concerning  full-time  equivalent
employees;  Federal, state and local income taxes paid; gross revenue; source of
revenue growth;  after-tax profit and loss; and Federal,  state and local income
tax  withholding.  Such  information  shall be  forwarded  by Borrower on a form
provided by the Lender.  The Borrower also will furnish or cause to be furnished
to the  Lender  such other  information  regarding  the  business,  affairs  and
condition  of the  Borrower  as the  Lender  may  from  time to time  reasonably
request.

         8.5 Use of Proceeds.  Subject to Section  2.3,  the Borrower  certifies
that it will use the proceeds  from the Loan for the purposes and in the amounts
set forth on Schedule  2.3. The Borrower will deliver to the Lender from time to
time promptly  following the Lender's  request,  a written report,  certified as
correct by an officer,  verifying  the purposes  and amounts for which  proceeds
from the Loan have been  disbursed.  Subject to Section 2.3,  the Borrower  will


                                       17
<PAGE>

supply to the Lender such  additional  information  and  documents as the Lender
reasonably  requests  with respect to its use of  proceeds,  and will permit the
Lender to have  access  to any and all  Borrower  records  and  information  and
personnel as the Lender deems necessary to verify how such proceeds have been or
are being used,  and to assure that the proceeds have been used for the purposes
specified on Schedule 2.3.

         8.6 Activities and Proceeds.

         (a)  Neither  the  Borrower  nor any of its  affiliates  (as defined in
above) will engage in any  activities or use directly or indirectly the proceeds
from the Loan for any purpose for which a small business  investment  company is
prohibited from providing funds by the SBIC Act, including 13 C.F.R. ss.107.

         (b) Without  obtaining  the prior written  approval of the Lender,  the
Borrower will not change within one (1) year of the Closing Date the  Borrower's
business  activity  from that  described on Schedule 8.6 to a business  activity
which a small business  investment company is prohibited from providing funds by
the SBIC Act. The Borrower agrees that any such changes in its business activity
without  such prior  written  consent of the Lender will  constitute  a material
breach of the  obligations  of the Borrower  under this  Agreement  and the Loan
Documents (an "Activity Event of Default").

         SECTION 9. Miscellaneous.

         9.1 Registration Rights.

         (a) Intentionally deleted

         (b) If at any time after the date  hereof,  the  Borrower  shall file a
registration  statement  relating to any of its  securities,  it will notify the
Lender in writing and, upon the Borrower's  request,  will include the offer and
sale of Registrable Securities in such registration statement. In the event that
the Borrower fails include  Registrable  Securities in a piggy back statement as
required herein, the Borrower shall give notice demanding a registration and 105
days  after the  notice  the  Borrower  shall  prepare  and file a  registration
statement  with the SEC with  respect  to such  Registrable  Securities.  If the
Borrower  fails to file within said time period,  then, at the option of Lender,
for each full  calendar  month  that the  Registrable  Securities  are not fully
registered,  Borrower shall Borrower shall issue 0.1 % of its common shares then
outstanding  computed  on a fully  diluted  basis per day until the  shares  are
registered.

         (c)  Whenever  required  to  include  Registrable   Securities  in  any
registration  or to  effect  the  registration  of  any  Registrable  Securities
pursuant to this Agreement,  the Borrower shall, as  expeditiously as reasonably
possible prepare and file with the SEC a registration  statement with respect to
such  Registrable  Securities  and use its absolute best lawful efforts to cause
such  registration  statement to become  effective,  and use its  absolute  best
efforts to keep such registration statement effective until all such Registrable
Securities have been distributed.  In addition,  the Borrower shall use its best
lawful  efforts  to  register  and  qualify  the  securities   covered  by  such
registration  statement  under  such other  securities  or Blue Sky laws of such
jurisdictions as shall be reasonably requested by the Lender,  provided that the
Borrower shall not be required in connection therewith or as a condition thereto


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<PAGE>

to qualify as a broker-dealer  in any states or  jurisdictions or to do business
or to file a  general  consent  to  service  of  process  in any such  states or
jurisdictions.

         (d) All expenses,  other than  underwriting  discounts and  commissions
incurred in connection the registrations contemplated herein, including, without
limitation,  all  registration,  filing and  qualification  fees,  printers' and
accounting  fees, fees and  disbursements  of counsel for the Borrower,  and the
reasonable fees and  disbursements of one counsel for the selling Lender,  shall
be borne by the Borrower.

         (e)  Subject  to the terms and  conditions  of this  Agreement  and the
Convertible  Notes,  the right to cause the  Borrower  to  register  Registrable
Securities  pursuant  to  this  Agreement  may  be  assigned  by  Lender  to any
transferee  or assignee of such  securities;  provided  that said  transferee or
assignee  is a  transferee  or  assignee  of at least five  percent  (5%) of the
Registrable Securities.

         9.2  Computation  of Interest and Payment and  Prepayment of Principal.
Interest on the Convertible Note shall be computed on the basis of a year of 365
days and paid  monthly.  If any  principal  amount  under the  Convertible  Note
becomes due and payable on other than a Business Day, the maturity thereof shall
be extended to the next  succeeding  Business Day and interest on such principal
shall be payable at the then applicable rate during such extension period.

         9.3  Waiver of  Default.  The  Lender  may,  by  written  notice to the
Borrower,  at any  time  and  from  time  to  time,  waive  any  default  in the
performance or observance of any condition, covenant or other term hereof or any
Event of Default which shall have occurred  hereunder and its consequences.  Any
such waiver shall be for such period and subject to such  conditions as shall be
specified in any such notice.  In the case of any such waiver,  the Borrower and
the Lender shall be restored to their former  position and rights  hereunder and
under the other Loan  Documents,  and any Event of  Default  so waived  shall be
deemed to be cured and not  continuing;  but no such waiver  shall extend to any
subsequent or other Event of Default, or impair any right consequent thereon.

         9.4 Amendments and Waivers. The Lender and the Borrower may, subject to
the provisions of this section, from time to time, enter into written agreements
supplemental  hereto for the purpose of adding any  provisions to this Agreement
or the other Loan  Documents  or changing or waiving in any manner the rights or
requirements  of the  Lender  or of the  Borrower  hereunder.  Any such  written
supplemental agreement or waiver shall be binding upon the Borrower and Lender.

         9.5 Notices. Except in cases where it is expressly herein provided that
such notice,  request or demand is not effective  until received by the party to
whom  it is  addressed,  all  notices,  requests  and  demands  to or  upon  the
respective  parties  hereto under this  Agreement  and all other Loan  Documents
shall be deemed to have been given or made when  deposited in the mail,  postage
prepaid by registered or certified mail, return receipt requested,  addressed as
follows or to such other  address as may be hereafter  designated  in writing by
the respective parties.


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<PAGE>

               The Borrower:    Touchstone Resources USA, Inc.
                                111 Presidential Blvd., Suite 158
                                Bala Cynwyd, PA 19004
                                Fax 610 771 0238

               The Lender:      Trident Growth Fund, LP
                                700 Gemini
                                Houston, Texas 77058
                                Attention:  Larry St. Martin
                                Phone: (281) 488-8484
                                Fax:   (281) 488-8404

         9.6 No Waiver;  Cumulative Remedies.  No waiver of any provision hereof
shall be deemed to operate  as a waiver of any other  provision  hereof.  In the
event that the Borrower  shall be deemed to have waived any provision  hereof at
any  time,  such  waiver  shall  not be  deemed  to have  extended  to any other
provision  hereof at the time such waiver was deemed to have  occurred or at any
other time.  No failure to exercise and no delay in  exercising,  on the part of
Lender,  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
and in the other Loan Documents provided are cumulative and not exclusive of any
rights or remedies provided by law.

         9.7  Survival  of  Agreements.  All  agreements,   representations  and
warranties  made  herein  shall  survive  the  execution  and  delivery  of this
Agreement  and the other Loan  Documents  and the  making  and  renewal of loans
hereunder and the termination of this Agreement and the other Loan Documents.

         9.8 Governing  Law. This  Agreement and the legal  relations  among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Texas without  regard to its  conflicts of law doctrine,  except to
the extent that the General Corporation Law of the State of Delaware governs the
corporate  governance  of the Company.  Each of the parties  hereto  irrevocably
consents to the  jurisdiction  of the federal and state courts located in Dallas
County, the State of Texas.

         9.9  Enforceability  of  Agreement.  Should  any  one  or  more  of the
provisions of this Agreement be determined to be illegal or  unenforceable as to
one or more of the  parties,  all other  provisions  nevertheless  shall  remain
effective and binding on the parties hereto,  up to the full amount permitted by
law.

         9.10 Usury Savings Clause.  Notwithstanding any other provision herein,
in the event that the aggregate  interest rate charged under the Loan Documents,
including  all charges or fees in connection  therewith  deemed in the nature of
interest,  exceeds the maximum legal rate,  then the Lender shall have the right
to make such adjustments as are necessary to reduce the aggregate  interest rate
to the maximum legal rate. The Borrower waives any right to prior notice of such
adjustment  and further  agrees that such  adjustment  may be made by the Lender
subsequent to notification from the Borrower that the aggregate interest charged


                                       20
<PAGE>

exceeds the maximum legal rate.  There are no unwritten oral  agreement  between
Borrower and Lender.

         9.11 Execution of  Counterparts.  This Agreement may be executed in any
number of  counterparts,  each of which  shall be deemed  to be an  original  as
against  any party  whose  signature  appears  thereon,  and all of which  shall
together constitute one and the same instrument.

         9.12  Stamp or Other  Taxes.  The  Borrower  agrees  to pay any and all
documentary,  intangible  stamp or excise  taxes  now or  hereafter  payable  in
respect to this  Agreement  and the other  Loan  Documents  or any  modification
thereof,  and shall hold the Lender harmless with respect thereto.  The Borrower
further  agrees  that Lender may deduct  from any  account of the  Borrower  the
amount of any such documentary or intangible stamp or tax payable,  the decision
of the Lender as to the amount thereof to be conclusive, absent manifest error.

         9.13 Intentionally deleted

         9.14 Fees and Expenses. The Borrower shall reimburse the Lender for all
past and future fees and expenses  (including but not limited to the origination
and commitment fee, reasonable  out-of-pocket costs, legal expenses (as detailed
above),  offering fees,  advisory and consulting fees,  travel and communication
expenses,  and reproduction  costs) incurred in connection with the Loan. ("Fees
and  Expenses").  Fees and  Expenses  incurred  through the Closing  Date by the
Borrower  will be netted  against  the  initial  proceeds  received  under  this
Agreement.  Fees and Expenses  incurred  after the Closing Date shall be paid by
the Borrower within 30 days of receipt from Lender of an invoice  itemizing such
Fees and  Expenses.  Fees and  Expenses  incurred  hereof to an affiliate of the
Lender shall be included with the Borrower's Liabilities.

         9.15  Assignability.  This Agreement  shall inure to the benefit and be
binding upon the parties  hereto and their  respective  successors and permitted
assigns.  This Agreement and the  Convertible  Note will not be  assignable,  in
whole or in part,  by the  Borrower,  without the prior  written  consent of the
Lender.  This Agreement may be assigned or transferred,  in whole or in part, by
the Lender upon written  notice to the  Borrower.  A change in control of either
party shall be deemed to be an  assignment.  Any purported  assignment  effected
without such consent shall be null and void.

         9.16  Complete  Agreement.   This  Agreement   constitutes  the  entire
agreement  between the parties and supersedes all  agreements,  representations,
warranties,  statements,  promises and  understanding,  whether oral or written,
with respect to the subject matter hereof.

IN WITNESS WHEREOF, the Borrower and the Lender have caused this Agreement to be
duly  executed  by their duly  authorized  officers,  all as of the day and year
first above written.


                                       21
<PAGE>

WITNESS:                                       TRIDENT GROWTH FUND, LP
                                               By: TRIDENT MANAGEMENT, LLC, its
                                                   GENERAL PARTNER

                                               By: /s/ Scott Cook
-----------------------------------                -----------------------------
Name:                                              Scott Cook, Authorized Member





WITNESS:                                       TOUCHSTONE RESOURCES USA, INC.




                                               By: /s/ Stephen P. Harrington
-----------------------------------                    ------------------------
Name:                                                  Stephen P. Harrington
                                                       Chairman



                                       22
<PAGE>


                                   ATTACHMENTS


Exhibit 1                 Form of Convertible Note
Exhibit 2                 Financial Summary

Schedule 2.3              Use of Proceeds
Schedule 3.1              Organization
Schedule 3.1(b)           Subsidiaries
Schedule 3.3              Outstanding Equity Rights
Schedule 3.5              Material Liabilities
Schedule 3.8              Material Agreements
Schedule 3.9              Certain Liens
Schedule 3.16             Employee Benefit Plans
Schedule 5.15             Certificate of Covenant Compliance
Schedule 8.6              Business Activity



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