Document:

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Exhibit 10.1

COMMERCIAL LOAN AND SECURITY AGREEMENT

         THIS IS A COMMERCIAL LOAN AND SECURITY AGREEMENT made this 1st day of
October 2003, by and among:

         STANFORD FINANCIAL GROUP COMPANY, a Florida corporation having its
principal corporate office at 5050 Westheimer, Houston, TX 77056 (hereinafter
referred to as the "Lender"), and SUPERIOR GALLERIES, INC., a Delaware
corporation with a place of business at 9478 W. Olympic Blvd., Beverly Hills,
California 90212 (hereinafter referred to as the "Borrower").

         THE PARTIES HERETO DO HEREBY AGREE AS FOLLOWS (reference being hereby
made to SECTION 10 below for the definition of certain capitalized terms used
herein):

SECTION 1.        THE LOAN, ADVANCES, INTEREST, SECURITY INTEREST, FINANCING
                  STATEMENTS, COLLATERAL, SUBORDINATIONS.

         1.1      LOAN AUTHORIZATION

         Subject to all the terms and conditions of this Agreement, including
the preconditions to loan advances as herein provided and so long as there
exists no Event of Default nor any event which with the passage of time, the
giving of notice or both would constitute an Event of Default, Lender will make
available to the Borrower a revolving Commercial Loan in the principal amount of
SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($7,500,000) (referred to herein as
the "Loan") which Borrower shall use for borrowing against its inventory and
providing loans to Borrower's customers secured by collateral property consigned
to Borrower for auction or otherwise in Borrower's possession, custody and
control. Advances under the Loan shall be made in minimum amounts of $100,000
for each advance. The Loan shall be evidenced by a Commercial Note in the form
of SCHEDULE "A" attached hereto and made a part hereof (referred to herein as
the "Note"). The aforesaid Note and advances thereunder may be continued or
extended by mutual agreement of the parties; provided, however, the parties
acknowledge that Lender is under no obligation to extend the Loan and whether or
not to continue or extend the Loan is in the Lender's sole and absolute
discretion. Notwithstanding the above provisions, the security interest granted
to Lender in the Collateral as herein defined shall not in any way be limited to
such amount or be dependent upon the use to which such funds are put but shall
at all times fully secure the Obligations (as hereinafter defined).

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         1.2      OBLIGATIONS

         It is specifically agreed by Borrower and Lender that in the event that
further financial accommodations of any type, including, but not limited to,
letters of credit, coverage of overdrafts and the like are now or hereafter
extended by Lender to Borrower that the parties intend that this Instrument
shall govern any and all such financial accommodations. An extension of the
foregoing, all advances now or hereafter made by Lender to Borrower pursuant to
this Agreement and/or any of the Documents or any renewal or extensions thereof
or otherwise, whether or not evidenced by notes, and all liability whether now
existing or hereafter arising, absolute or contingent, direct or indirect with
respect to or under letters of credit, banker's acceptances or guarantees now or
hereafter established by Lender pursuant to this Agreement, together with all
other obligations and indebtedness of every kind and nature, whether now
existing or hereafter arising, absolute or contingent, direct or indirect, under
or pursuant to this Agreement or any of the Documents or otherwise, of Borrower
and/or the Guarantors to Lender, to the extent the same are outstanding from
time to time, are sometimes collectively referred to herein as the
"Obligations".

         1.3      INTEREST

         All amounts outstanding from time to time under the Note shall bear
interest at a per annum rate equal to a daily average of the Prime Rate as
reported in the Wall Street Journal. Upon the occurrence of an Event of Default,
interest shall accrue for the period of time for which any payment was due,
during any applicable grace or cure period, and at all times while such default
shall continue at a rate of five percent (5%) per annum greater than the rate
then in effect. In the event that the total amount of any payment required under
any of the Notes is not received by Lender within five (5) days after its due
date, Borrower shall pay to Lender a late charge equal to five percent (5%) of
any such late payment.

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         1.4      REPAYMENT

                  (a)      The Note shall provide that the payment of interest
                           only for the actual number of days elapsed in each
                           payment period on the daily outstanding principal
                           balance shall be due and payable in monthly payments
                           in arrears on the 10th day of each month commencing
                           November 10, 2003 and continuing on the tenth (10th)
                           day of each month thereafter until the entire
                           outstanding principal balance and accrued interest
                           has been paid in full.

                  (b)      For all advances for which Collateral is provided
                           hereunder, Borrower shall repay said advances in full
                           upon disposition of the Collateral, "disposition"
                           being defined as follows: (i) for auctions, the
                           settlement date for the auction or whenever the
                           Collateral is shipped, whichever is later; (ii) for
                           dealer inventory financing, when Borrower receives
                           good funds from the dealer; (iii) for loans to
                           Borrower itself, when Borrower receives good funds
                           from the buyer(s) of the Collateral. Borrower agrees
                           that it shall repay all advances in full upon
                           dispositions of the Collateral that was pledged to
                           secure such advances in strict accordance with this
                           Section 1.4(b) within ten (10) business days after
                           such dispositions of Collateral and that any failure
                           to pay any such advances in full shall be an Event of
                           Default hereunder.

                  (c)      Notwithstanding anything herein, the entire
                           outstanding principal balance and accrued and unpaid
                           interest thereon shall be due and payable on October
                           1, 2004 unless said maturity date shall be extended
                           in writing by Lender in accordance with this
                           Agreement.

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         Payment of principal or interest shall be deemed received by Lender
         only upon receipt of good funds as determined by Lender.

         1.5      LIMITATION ON USE OF FUNDS

         Borrower may use advances of proceeds of the Loan only for (a) loans
against Borrower's inventory; and (b) making secured loans to third parties.
Borrower agrees that to the extent any funds are made available to it under this
Agreement, they shall be used in strict accordance with the policies set forth
in SCHEDULE "B" hereof, and that a material violation by Borrower of any such
policy, which violation is not cured within ten (10) days after written notice
of same is given by Lender to Borrower, shall be an Event of Default hereunder.
Borrower agrees, at its sole expense, to engage an independent accounting firm
to conduct a quarterly independent compliance audit with respect to its
obligations hereunder, and to timely provide the results of said audit to
Lender.

         1.6      SECURITY

         (a) UCC SECURITY INTEREST. As security for the performance of
Borrower's Obligations pursuant to this Agreement, and the other Documents,
Borrower hereby mortgages, pledges and assigns to Lender, and gives and grants
to Lender a security interest in all of its right, title and interest in and to
the items and types of property described or referred to below, whether now
owned or hereafter acquired, and the proceeds and products thereof (all of which
property is herein collectively called the "Collateral"), which security
interest has and shall remain first and prior to all other security interests
therein and which Collateral shall remain free and clear of all mortgages,
pledges, security interests, liens and other encumbrances and restrictions on
the transfer thereof, except as specifically set forth in Subsection (b) hereof
and in SCHEDULE "D" attached hereto:

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         (i) THIRD-PARTY-OWNED INVENTORY

                  All inventories of every kind owned by third parties,
         presently existing or hereafter acquired, wherever located, including
         all goods intended for auction sale or owned by third parties, against
         which Borrower has loaned funds and which serve as collateral therefor,
         and all contract rights with respect to any of the same and all
         documents representing any of the same, all whether now or hereafter in
         Borrower's possession or in which Borrower may now have or may
         hereafter acquire any interest, all whether now existing or hereafter
         arising (the "Third-Party-Owned Inventory"). The security interest in
         the Third-Party-Owned Inventory shall continue in all Collateral
         described in this paragraph (except goods sold as provided in Section
         9-307(1) of the Uniform Commercial Code), notwithstanding the sale,
         exchange or other disposition hereof by Borrower (sale, exchange or
         other disposition of any of said Collateral is NOT authorized by
         Lender, other than sale in the ordinary course of business).

         (ii) BORROWER-OWNED INVENTORY

                  All items of Borrower's wholesale and retail inventory,
         presently existing or hereafter acquired, wherever located, and all
         contract rights with respect to any of the same and all documents
         representing any of the same, all whether now owned or hereafter
         acquired by Borrower or in which Borrower may now have or may hereafter
         acquire any ownership interest, all whether now existing or hereafter
         arising (the "Borrower-Owned Inventory"). The security interest in the
         Borrower-Owned Inventory shall continue in all Collateral described in
         this paragraph (except goods sold as provided in Section 9-307(1) of
         the Uniform Commercial Code), notwithstanding the sale, exchange or
         other disposition hereof by Borrower (sale, exchange or other
         disposition of any of said Collateral is NOT authorized by Lender,
         other than sale in the ordinary course of business).

         (iii) NOTES AND LIENS

                  All promissory notes and related loan and security documents
         relating to or evidencing any loans made by Borrower, whether presently
         existing or hereafter acquired by Borrower, or in which Borrower may
         now have or may hereafter acquire any interest, including without
         limitation, any ownership interest or security or collateral interest,
         all whether now existing or hereafter arising.

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         (iv) DOCUMENTS

                  All documents and instruments relating to any and all loans
         made by Borrower, whether presently existing or hereafter acquired by
         Borrower in which Borrower may now have or may hereafter acquire any
         interest, including without limitation, any ownership interest or
         security or collateral interest, all whether now existing or hereafter
         arising.

         (v) RECORDS

                  All books, records and other documents of every nature
         relating to the above described types of property, including, without
         limitation, all tapes, cards, discs, cassettes, papers, documents and
         computer software in the possession or control of Borrower, any
         Affiliate of them, all whether now owned or hereafter acquired by
         Borrower or in which Borrower now has or may hereafter acquire any
         interest, including without limitation, any ownership interest or
         security or collateral interest, all whether now existing or hereafter
         arising.

         (vi) INSURANCE POLICIES

                  All rights in, to and under policies of insurance on said
         Inventory, including claims or rights to payment and proceeds
         heretofore or hereafter arising therefrom, with respect to the herein
         described types of property, all whether now owned or hereafter
         acquired by Borrower or in which Borrower may now have or may hereafter
         acquire any interest, including without limitation, any ownership
         interest or security or collateral interest, all whether now existing
         or hereafter arising.

         (vii) PROCEEDS AND PRODUCTS

                  All proceeds and all products of all Collateral described
         above.

         (b)   PRIORITY OF WES ENGLISH SECURITY INTEREST

         Lender acknowledges and agrees that the Estate of Wes English
("English") continues to have a first priority security interest over the
Borrower-Owned Inventory and all other assets described in Subsections
(a)(iii)-(vii) hereof relating to said Borrower-Owned Inventory, until and to
the extent that any sums are due from Borrower to English under a Secured
Revolving Line of Credit Agreement dated as of August 8, 2002, as amended by a
Renewal and Modification Agreement dated September 30, 2003. Borrower reaffirms
that the provisions of Subsection (a) hereof, including the grant of a first
priority security interest to Lender, shall apply immediately to Borrower's
Third-Party-Owned Inventory and all other assets described in Subsections
(a)(iii)-(vii) relating to said Third-Party-Owned Inventory. Borrrower
represents and warrants that (i) when and if the English first priority security
interest is terminated, Borrower shall execute whatever document Lender deems
necessary to confirm that Lender is succeeding to the first priority position on
all assets described in Subsection (a) hereof; (b) Borrower shall place all
funds received from Lender under this Agreement in an account separate from the
account(s) in which proceeds of the sale of Borrower-Owned Inventory is
deposited; (c) during the pendency of this Agreement Borrower shall not, without
Lender's express written consent, increase the principal amount of its
indebtedness to English or enter into any agreement with English giving English
any additional rights of any kind with respect to Borrower's assets or property.

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         1.7      FINANCING STATEMENTS

         Borrower is concurrently herewith executing and delivering to Lender
financing statements pursuant to the provisions of the Uniform Commercial Code
with respect to the collateral in which Lender has been granted a security
interest by Borrower pursuant to the provisions of this Agreement and the other
Documents. Borrower hereby agrees to execute any and all further documents
deemed necessary by Lender, in its sole discretion, to perfect its security
interest in the Collateral and authorizes the Lender to file any and all further
documents deemed necessary by Lender, in its sole discretion, to perfect its
interest in the Collateral, including without limitation, any UCC financing
statements.

         1.8      SUBORDINATION OF DIGENOVA DEBT

         Borrower shall cause it Chairman Silvano DiGenova to execute and
deliver to Lender at Lender's request a Subordination Agreement (the
"Subordination") of his subordinating to the Loan, and the right of the Lender
to receive payments under the Loan, any and all indebtedness owed by the
Borrower to him.

         B. Said Subordination Agreement may provide that so long as there shall
be no Event of Default, Borrower shall be authorized to pay the regular
installment of interest and principal payable on such subordinated debt in the
ordinary course of business.

         1.9      INSURANCE ON THE COLLATERAL

         Borrower is contemporaneously with the execution hereof delivering to
Lender a Certificate or Certificates of Insurance (and shall deliver the
originals of the policies referred to herein upon request of Lender), respecting
hazard (including, but not limited to, fire and extended coverage including "
all risk"), liability, loss of rental and flood (if any of the Borrower's
tangible assets are located on premises in a special flood hazard area), with
coverage for the fair market value at the time of a loss of the Collateral and
in an amount of at least Two Million ($2,000,000.00) Dollars with no
co-insurance. Borrower shall further be required to provide evidence to Lender
of adequate property insurance for all Collateral, which shall list the Lender
as loss payee as its interests may appear.

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SECTION 2.        REPRESENTATIONS AND WARRANTIES

Borrower hereby represents and warrants to Lender that:

         2.1      INCORPORATION AND QUALIFICATION

         Borrower is a corporation duly organized and validly existing and in
good standing under the laws of Delaware, has the corporate power to own its
assets and conduct its business as it is now being conducted and is qualified to
do business in each jurisdiction wherein the nature of the business conducted by
it or the property owned or held under lease by it make such qualification
necessary.

         2.2      CAPITALIZATION, BUSINESS AND SUBSIDIARIES

         Except as disclosed on SCHEDULE "F" attached hereto and made a part
hereof, Borrower does not own stock of any other corporation, active or
inactive. The information set forth on SCHEDULE "G" attached hereto with respect
to Borrower and as to Borrower's authorized, issued and outstanding capital
stock, all of which stock has been duly authorized and validly issued and is
fully paid and non-assessable, the holders of such stock, the officers, the
directors, the principal and other places of business, the place where its
Inventory, Equipment and Records of its Accounts are kept, and Borrower's
present business activities and status, is complete and accurate. Borrower
neither has a place of business nor maintains or stores any of the Collateral at
any location other than those set forth in SCHEDULE "G" attached hereto.

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         2.3      CORPORATE AUTHORIZATION

         Borrower has the corporate power to execute, deliver, and carry out the
terms and provisions of this Agreement and the other Documents to which it is a
party and has taken all necessary corporate and legal action with respect
thereto (including, without limitation, obtaining any consent of stockholders
required by law or its Articles of Incorporation or By-Laws), and this Agreement
and such other Documents to which it is a party have been duly authorized,
executed and delivered by it and constitute its valid, legal and binding
agreement and obligation in accordance with the terms thereof and Lender is
entitled to the benefits thereof in accordance with such terms.

         2.4      FINANCIAL STATEMENTS

         There have been furnished to Lender financial statements of Borrower
described or referred to in SCHEDULE "H" attached hereto and made a part hereof.
Each such financial statement, including the comments and notes contained
therein, fairly presents the financial position of the entity or business to
which such statement applies at the date thereof and the results of its
operations for the period purported to be covered thereby. Each such financial
statement has been prepared in conformity with Generally Accepted Accounting
Principles applied on a consistent basis throughout all periods involved,
subject, in the case of unaudited statements, to normal year-end audit
adjustments.

         2.5      INDEBTEDNESS

         Borrower has no material outstanding indebtedness except for
liabilities reflected in said financial statements and liabilities incurred
since the date thereof to trade creditors in the ordinary course of business
and/or except as described or set forth in SCHEDULE "I" attached and made a part
hereof and has performed and complied with all of the terms of such Indebtedness
and all instruments and agreements relating thereto and no default exists as of
the date hereof nor does there exist any state of facts which would after notice
or lapse of time, or both, constitute a default under or with respect to any
such Indebtedness, instruments or agreements.

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         2.6      TITLE TO PROPERTIES AND ASSETS; LIENS, ETC.

         Borrower has good and marketable title to its properties and assets,
including, but not limited to the Collateral, free and clear of any mortgage,
pledge, lien, lease, encumbrance or charge other than those set forth on
SCHEDULE "J" attached hereto and made a part hereof, with respect to assets (if
any) other than the Collateral. No financing statement under the Uniform
Commercial Code which names Borrower as debtor has been filed in any state or
other jurisdiction which covers the Collateral and has not been terminated.
Borrower has not signed any such financing statement or any security agreement
authorizing any mortgagee or secured party thereunder to file any such financing
statement on the Collateral or its assets except in connection herewith or as
set forth on SCHEDULE "J" attached hereto with respect to assets other than the
Collateral. Borrower is not a consignor or lessee under any consignment
agreement or lease agreement, except as described in SCHEDULE "J" attached
hereto.

         2.7      PATENTS, TRADEMARKS, ETC.

         Borrower owns or holds licenses for the use of or has the right to use
all patents, trademarks, service marks, trade names, copyrights and rights
necessary for the conduct of its business as now conducted and as contemplated,
including those identified in SCHEDULE "K" attached hereto and made a part
hereof.

         2.8      LITIGATION, ETC.

         Except as set forth in SCHEDULE "L" attached hereto and made a part
hereof, there are no actions, proceedings or investigations pending or to the
knowledge of Borrower threatened (or any basis therefor known to it) which,
either in any case or in the aggregate, might result in any material adverse
change in Borrower's business, prospects, profits, properties, liabilities,
operations, or conditions (financial or otherwise), or which might affect its
ability to perform this Agreement or any other Documents executed by it.

         2.9      CHANGES IN CONDITION

         Since the date of the financial statements referred to in SCHEDULE "H"
there has been no material adverse change, by reason of any matter or cause
whatsoever, in Borrower's business, prospects, profits, properties, liabilities,
operations or condition (financial or otherwise).

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         2.10     TAX RETURNS AND PAYMENTS

         All tax returns and reports required by law to be filed by Borrower
have been duly filed or the time for filing has been extended and all taxes,
assessments, fees and other governmental charges (U.S., foreign, state or local
or other) upon Borrower or upon any of its properties, assets, income or
franchises, which are due and payable have been paid. To the best of Borrower's
knowledge the provisions on Borrower's books respectively, regarding income
taxes for all fiscal periods to date are adequate according to Generally
Accepted Accounting Principles.

         2.11     COMPLIANCE WITH INSTRUMENTS, CHARTER AND LAW

         Borrower is in full compliance with and is not in violation or default
of any term or provision of (a) its charter, Certificate of Incorporation or
by-laws, if a corporation, (b) any loan agreement, debt instrument, mortgage or
indenture, (c) any other material contract, agreement or instrument, (d) any
judgment, decree or order, nor has it, he or she been notified of any violation
of any statute, rule or regulation including but not limited to the Occupational
Safety and Health Act and the Employee Retirement Income Security Act ("ERISA"),
and the regulations issued by the Department of Environmental protection and (e)
any licensing or governmental requirement. The execution, delivery, performance
of, and compliance with this Agreement or any of the other Documents will not
result in any such violation or default or be in conflict with any such term or
provision or result in the creation of any mortgage, lien, encumbrance or charge
upon any of Borrower's properties or assets except in favor of Lender and there
is no such term or provision which materially adversely affects or in the future
may materially adversely affect its business, prospects, profits, properties,
liabilities, operations or condition (financial or otherwise) or its ability to
perform this Agreement or any of the other Documents executed by Borrower. All
material contracts, agreements, mortgages, indentures, instruments, judgments,
decrees and orders to which Borrower is a party or which are effective against
it are listed in SCHEDULE "M" attached except entered into in the normal course
of business.

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         2.12     GOVERNMENTAL CONSENTS, ETC.

         No consent, approval or authorization of or designation, declaration or
filing with any governmental authority, federal, foreign or other is required in
connection with the execution and delivery of this Agreement or the Documents or
the consummation of any transaction contemplated hereby or thereby by Borrower.

         2.13     SOLVENCY

         Borrower is solvent, having assets of a value which exceeds the amount
of its and his liabilities and is able to and will be able to meet its debts as
they mature and has adequate capital to conduct the business in which it is
engaged and is about to engage.

         2.14     CHANGE OF NAME, ETC.

         Except as set forth on SCHEDULE "N" attached hereto and made a part
hereof, Borrower has not within five (5) years changed its name, been a party to
any consolidation or merger, acquired all or a substantial portion of the assets
of any Person or purchased any of its or his assets included in the Collateral
from a Person not in the business of selling such assets.

         2.15     FULL DISCLOSURE

         The financial statements referred to in Section 2.4 hereof do not, nor
does this Agreement or any Schedule hereto or any other Document, certificate or
statement furnished to Lender by Borrower in connection with this Agreement,
contain any untrue statement of a material fact or omit to state a fact
necessary in order to make the statements contained therein and herein not
misleading. Borrower is not aware of any fact which materially adversely affects
or in the future may materially and adversely affect its business, prospects,
profits, properties, liabilities, operations or condition (financial or
otherwise), or its ability to perform this Agreement or any other Document
executed by it, which has not been set forth or referred to herein or in a
certificate or statement furnished to Lender by it.

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         2.16     NO EVENT OF DEFAULT

         No Event of Default or event or condition that with the passage of time
or giving of notice or both might become an Event of Default has occurred or
exists.

SECTION 3.       AFFIRMATIVE COVENANTS

         Except with the prior written consent of Lender, Borrower covenants and
agrees that so long as there is outstanding any portion of the Loan, or any
agreement of Lender to make advances to Borrower, it will comply or cause
compliance with the following provisions:

         3.1      PUNCTUAL PAYMENT

         Borrower will duly and punctually pay all principal, interest, charges
and other items included in the Loan which is owing by it in accordance with the
provisions hereof and of the other Documents.

         3.2      PROMPT PAYMENT OF TAXES, MORTGAGES, LEASES AND INDEBTEDNESS

         Borrower will promptly pay and discharge, or cause to be paid and
discharged, on the date due so as to prevent the accruing of interest thereon,
all lawful taxes, assessments, and governmental charges or levies imposed upon
items of the Collateral owned by it, or in which it has an interest or upon its
income, profits, property or business or of any of its Subsidiaries. Borrower
will promptly pay or cause to be paid when due (or in conformity with customary
trade terms) all of its other Indebtedness incident to its operations and will
promptly pay and perform all of its obligations under leases of real and
personal property and under material contracts and will promptly notify Lender
of any default or notice of alleged default received with respect to any such
Indebtedness, lease or contract.

         3.3      CONDUCT OF BUSINESS

         Borrower will do all things necessary to preserve, renew and keep in
full force and effect and in good standing, its current corporate existence,
qualification and any franchises, licenses, patents, trademarks and items
necessary to continue its business. It will maintain its properties and assets
in good order and repair, all in compliance with applicable federal, state, and
local judgments, decrees, orders, statutes, rules and regulations, including but
not limited to state and federal environmental regulations and those of the
Occupational Safety and Health Administration.

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         3.4      INSURANCE

         Borrower will maintain insurance in amounts, coverage and with insurers
satisfactory to Lender with respect to the Collateral owned by it, or in which
they have an interest and their other properties and business against loss or
damage to the extent that property of similar character is usually so insured by
other companies engaged in a similar business. Without limiting the foregoing,
such insurance shall include (a) liability insurance in such amounts and
covering such risks as Lender may reasonably require, (b) all worker's
compensation and other employees' liability insurance as may be required by law,
and (c) property insurance with respect to the items of the Collateral
constituting tangible personal property and fixtures, and with respect to the
other properties both real and personal, including, if necessary, flood
insurance, to the full extent of the insurable value thereof, and covering such
risks as Lender may reasonably require. All of Borrower's property insurance
policies, with respect to the Collateral shall contain loss payable and/or
mortgagee clauses in form and substance reasonably satisfactory to Lender,
naming Lender as loss payee as appropriate and providing (i) that all proceeds
thereunder shall be payable to Lender as its interests may appear, and (ii) that
such insurance shall not be affected by any act or neglect of the insured or
owner of the property described in said policy, and (iii) that such policy and
loss payable clause may not be canceled, amended or terminated unless Lender has
received written notice thereof at least thirty (30) days' prior to the
effective date of such cancellation, amendment or termination. Borrower will
furnish a certificate with respect to the insurance at the time which is in
force pursuant to this Section 3.4, specifying the amount and character of
coverage, identifying the insurers and certifying as to no default in the
payment of current premiums thereon and will furnish Lender with original or
duplicate original copies of all policies. All insurance proceeds for any
occurrence or any series of related occurrences which exceed $10,000.00 and
which are subject to a security interest under this Agreement may, upon Lender's
request, in Lender's sole and absolute discretion, be paid to Lender and shall
be applied by Lender to the payment of any of the principal, whether or not due,
or interest or such other obligation or Indebtedness which constitutes a part of
the Loan as Lender may determine in its sole discretion. Proceeds of $10,000.00
or less shall be payable to Borrower for general corporate purposes. Borrower
does hereby grant Lender an Irrevocable Power of Attorney and appoint Lender as
its attorney-in-fact (said power of Attorney being coupled with an interest) for
the sole purpose of executing, negotiating and signing any drafts, checks,
instruments or documents to carry out the terms hereof.

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         3.5      ACCOUNTING FINANCIAL STATEMENTS AND OTHER INFORMATION

         Borrower will maintain a system of accounts established and
administered in accordance with Generally Accepted Accounting Principles
consistently applied. Borrower will deliver or cause to be delivered to Lender:

         FINANCIAL REPORTS
         -----------------

         (i) as soon as available and in any event within forty-five (45) days
         after the end of each of the first three (3) fiscal quarters of each
         fiscal year financial statements of Borrower including a balance sheet
         as of the end of period, and statements of income for the period(s)
         that have been included as part of the consolidated financial statement
         disclosure of Borrower's SEC Form 10-Q filing which has been reviewed
         by Borrower's appointed independent accounting firm, along with
         statements of cash flows for that period. In connection with the
         financial statements presented by the Borrower, an officer, on behalf
         of the Borrower, will provide written representation that there is no
         knowledge of an Event of Default or an event that with notice or lapse
         of time or both could constitute and Even of Default, has occurred and
         is continuing or if in the opinion of said individual an Event of
         Default or such an event has occurred and is continuing a statement as
         to the nature thereof and the action which the Borrower propose to take
         with respect thereto (the provision for such a statement herein shall
         in no way be construed as a consent to the existence of such an Event
         of Default and of the granting of time to cure);

         (ii) as soon as available and in any event within one hundred twenty
         (120) days after the end of each fiscal year, financial statements of
         Borrower including a balance sheet as of the end of the fiscal year,
         and statements of income for the year(s) that have been included as
         part of the consolidated financial statement disclosure of Borrower's
         SEC Form 10-K filing and which has been audited by Borrower's appointed
         independent accounting firm, and statements of cash flow for that
         period. In connection with the financial statements presented by the
         Borrower, an officer, on behalf of Borrower, will provide written
         representation that there is no knowledge of an Event of Default or an
         event that with notice or lapse of time or both could constitute an
         Event of Default, has occurred and is continuing or if in the opinion
         of such accounting firm such an Event of Default has occurred and is
         continuing, a statement as to the nature thereof (the provisions for
         such a statement herein shall in no way be construed as a consent to
         the existence of such an Event of Default or the granting of time to
         cure).

                                       15
<PAGE>

         (iii) within ten (10) days of filing thereof copies of all federal and
         state income tax returns for Borrower.

         (iv) such financial information from Borrower as shall reasonably be
         requested by Lender.

         (v) as soon as reasonably practicable, upon reasonable request of
         Lender such other data and information (financial and otherwise)
         bearing upon or related to Borrower's financial condition, results of
         operations, assets and/or Borrower's projections of cash flow and
         profit and loss, all as Lender from time to time, may reasonably
         request.

         (vi) within fifteen (15) days after the end of each calendar month, a
         list of the Borrower's aged accounts receivable and a complete list of
         its inventory duly certified by the chief financial officer of Borrower
         and such other information relating to Accounts as Lender shall request
         at such times as Lender shall request upon such forms and using such
         procedures as Lender shall reasonably require.

         3.6      INSPECTION.

         Borrower will permit Lender and any authorized representatives of
Lender, at Lender's sole cost and expense and upon reasonable notice to
Borrower, to visit and inspect any of its offices or any of its or his
Affiliates, including all items of Collateral and its and their books and
records, including books and records relating to Accounts (and to make extracts
therefrom), and to discuss its and their affairs, finances and accounts, with
its and their employees with Borrower's consent, all at such times during normal
business hours and as often and continuously as may be reasonably requested by
Lender.

         3.7      NOTICE OF CERTAIN EVENTS AND CHANGES

         As soon as reasonably practicable after becoming aware of any
condition, event or state of facts which constitutes a default of this Agreement
or which, after notice or lapse of time, or both, would constitute such a
default, Borrower will give written notice to Lender specifying the nature and
period of existence thereof. Borrower will promptly give Lender written notice
of any condition, event or state of facts which causes or may cause material
loss or depreciation in the value of the Collateral and of the commencement or
threat of any action, proceeding or investigation, or the occurrence or
existence of any other event, matter or cause whatsoever, which either in any
case or in the aggregate results or might result in any material adverse change
in its business, prospects, profits, properties, operations or condition
(financial or otherwise). Borrower will give Lender written notice of any change
in its place or places of business, any change of location of any item of the
Collateral having a book value in excess of $50,000.00, except as items of
Collateral may be moved in the ordinary course of business.

                                       16
<PAGE>

         3.8      APPLICATION OF PROCEEDS

         Borrower agrees that it will apply the funds provided to it pursuant to
this Agreement in accordance with the terms of this Agreement. Without limiting
the generality of the foregoing, Borrower agrees that it will not, directly or
indirectly, apply any part of such proceeds to the purchasing or carrying of any
"margin stock" within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System, or for any use which will cause a violation of any
other regulation of the Board of Governors of the Federal Reserve System or of
any regulations, interpretations or rulings thereunder.

         3.9      GOVERNMENTAL NOTICES

         As soon as reasonably practicable upon the issuance thereof, Borrower
and each of the Guarantors will send to Lender a copy of all orders issued by
any federal, state or municipal regulatory authority under any laws or
regulations adopted thereby, which, if enforced, would have a material adverse
effect upon its condition whether financial, operating, or otherwise, and
further, Borrower will as soon as reasonably practicable send to Lender copies
of all reports or other materials filed by it with or issued to it by the U.S.
Securities and Exchange Commission, and all reports, notices or statements sent
by Borrower to its stockholders.

         3.10     MAINTENANCE OF PROPERTY AND COLLATERAL

         Borrower shall maintain its properties and the Collateral in good
repair, working order and condition and make all needed and proper repairs,
renewals, replacements, additions or improvements thereto and immediately notify
Lender of any event causing loss or depreciation in the value of the Collateral
and the amount of such loss or depreciation. Borrower shall defend the
Collateral against all claims and demands of all persons at any time claiming
the same or any interest therein, and in the event Lender's Security Interest in
the Collateral or a part thereof would be impaired by an adverse decision, allow
Lender to contest or defend any such claim or demand in Borrower's name, at
Borrower's reasonable cost, charge and expenses, and pay to Lender upon demand
all costs and expenses, including without limitation, attorney's fees incurred
by Lender in connection therewith.

                                       17
<PAGE>

         3.11     PAYMENT OF EXPENSES

         Borrower shall pay to Lender on demand any and all reasonable expenses
including attorney's fees incurred or expended by Lender in preparation of this
Agreement and all related agreements, instruments and documents in making or
processing the Loan in the collection or attempted collection of the
Obligations, and in protecting and/or enforcing the rights of Lender against
Borrower, in sustaining and/or enforcing the Security Interest and other liens,
if any, granted to Lender hereunder and under all related agreements,
instruments and documents.

SECTION 4.        NEGATIVE COVENANTS

         Except with the prior express written consent of Lender, Borrower
covenants and agrees that so long as there is outstanding any portion of the
Loan, or so long as this Agreement has not been terminated if there is no amount
outstanding under the Loan, it will not:

         4.1      LIENS

         Directly or indirectly, create, incur, assume or permit to exist any
mortgage, lien, charge or encumbrance on or pledge or deposit of or conditional
sale, lease or other title retention agreement with respect to any Collateral,
whether now owned or hereafter acquired, or be bound by or subject to any
agreement or option to do so, provided that the foregoing restrictions shall not
apply to:

         (a) liens for taxes, assessments or governmental charges or levies the
         payment of which is not at the time required by Section 3.2;

         (b) liens incurred or deposits made in the ordinary course of business
         in connection with worker's compensation or unemployment insurance or
         to secure the performance of tenders, statutory obligations, surety and
         appeal bonds, performance and return-of-money bonds and other similar
         obligations (exclusive of obligations for the payment of borrowed
         money);

         (c) liens, charges and encumbrances related to the conduct of its
         business or the ownership of its or his properties or assets which are
         not incurred in connection with the borrowing of money and which in the
         aggregate are not material;

         (d) statutory or common law possessory liens for charges incurred in
         the ordinary course of business the payment of which is not yet due;

         (e) the mortgages, liens and encumbrances referred to or described in
         SCHEDULES "D" AND "J" attached hereto;

         (f) liens created hereunder;

                                       18
<PAGE>

         4.2      RESTRICTIONS ON INDEBTEDNESS

         Directly or indirectly, create, incur, assume, guarantee, agree to
purchase or repurchase, pay or provide funds in respect of, or otherwise become
or be or remain liable, contingently, directly or indirectly, with respect to
any Indebtedness other than:

         (a) Indebtedness hereunder;

         (b) Current liabilities for trade and other obligations incurred in the
         ordinary course of its business not as a result of borrowing;

         (c) presently existing indebtedness specifically described in SCHEDULE
         "I" attached hereto, none of which shall be prepaid without Lender's
         prior written consent.

         (d) Indebtedness in respect of endorsements made in connection with the
         deposit of items for credit or collection in the normal and ordinary
         course of business.

         4.3      RESTRICTIONS ON INVESTMENTS, LOAN, ETC.

         Purchase or otherwise acquire or own any stock or other securities or
Indebtedness of any other Person, or make or permit to be outstanding any loan
or advance or capital contribution to any other Person, other than:

         (a) presently outstanding Loan, advances and investments described in
         SCHEDULES "H" AND "I" attached hereto;

         (b) Indebtedness of customers for merchandise sold or services rendered
         in the ordinary course of business;

         (c) Indebtedness pursuant to Third Party Loans made in accordance with
         the policies listed in Schedule B; and

         (d) investments in bills or bonds issued by the government of the
         United States of America and/or Certificates of Deposit issued by a
         bank having a net worth of at least $50,000,000.00 and/or securities
         issued by and purchased from Lender.

         4.4      STOCK ISSUANCE, DIVIDENDS, DISTRIBUTIONS, REDEMPTIONS AND
                  DIRECTORS' FEES

         Issue any additional shares of stock, directly or indirectly, declare,
order, pay, make or set apart any sum or property for the redemption,
retirement, purchase or other acquisition, direct or indirect, of any shares of
its stock of any class now or hereafter outstanding or for the payment of any
dividends on any of such stock, except for quarterly dividends payable
concurrently with payments to Lender under Section 9 hereof, or pay any
directors' fees.

                                       19
<PAGE>

         4.5      SALE OF ASSETS AND COLLATERAL, CONSOLIDATION, MERGER,
                  ACQUISITION OF ASSETS

         Directly or indirectly, sell, abandon or otherwise dispose of the
Collateral or any part thereof, except for sales of Inventory in the ordinary
course of Borrower' business, or replacement with Collateral of like value and
quality, or indirectly or indirectly sell, abandon or otherwise dispose of all
or any portion of its properties or assets or consolidate with or merge into any
other corporation, or permit any other corporation to consolidate with or merge
into it or acquire all or a substantial portion of the assets of another Person
or form or acquire any Subsidiary.

         4.6      TRANSACTIONS WITH AFFILIATES

         Enter into any transaction with any Affiliate other than in the
ordinary course of business and on terms not less favorable to it than are at
the time available to it from any Non-Affiliate, except as otherwise authorized
by this Agreement.

         4.7      PARTNERSHIPS, JOINT VENTURES, OTHER BUSINESSES

         Create or participate in the creation of any partnership, joint
venture, corporation, or other entity (including but not limited to any
subsidiaries) or engage in any business other than the business presently
conducted by it, except in the ordinary course of business.

         4.8      SUBORDINATE DEBT PAYMENTS

         Pay principal or interest on Subordinate Debt (present or future)
except as authorized in this Agreement.

         4.9      EXPENDITURES FOR CAPITAL ASSETS

         Make any expenditure for capital assets (other than for routine repairs
and maintenance which are not required to be capitalized as hereinafter set
forth) unless, immediately after giving effect thereto the aggregate amount
expended or to be expended on account of all such expenditures by the Borrower
in any fiscal year commencing with the current fiscal year of Borrower would not
exceed the amount of $100,000.00. The following shall be deemed to be
expenditures for capital assets as subject to the limitations of this Section
4.10:

                                       20
<PAGE>

         a. Expenditures for acquisition, major repairs and maintenance which,
in accordance with generally accepted accounting principles, are or should be
capitalized; and

         b. All lease rentals and other amounts payable under leases entered
into after the date hereof whether "true leases" or finance leases other than
renewals and extensions of leasing existing on the date hereof and all amounts
payable under contracts or arrangements for the purchase of property for payment
of the purchase price for such property as deferred in whole or in part.

         4.10     CHANGES IN LOCATIONS, NAME, ETC.

         Borrower shall not (i) change the location of its chief executive
         office, (ii) permit any Inventory to be kept at a location other than
         that specified in Schedule G, (iii) change its name, existence as a
         corporation, jurisdiction of incorporation or formation, or corporate
         structure to such an extent that any financing statement filed by
         Lender in connection with this Agreement would become seriously
         misleading, unless it shall give prior written notice as soon as
         practicable thereof and prior to effecting any such change takes such
         steps as Lender may deem necessary or advisable to continue the
         perfection and priority of the security interest granted pursuant
         hereto.

SECTION 5.        EVENTS OF DEFAULT

         If any one or more of the following events ("Events of Default") shall
occur:

         (a) If Borrower shall fail to make payment of any part or installment
         of principal or interest of the Loan or Obligations when any such
         payment shall be due and payable, whether at any stated maturity or by
         demand, acceleration or otherwise; or

         (b) If Borrower shall be in default in the performance of or compliance
         with any other term, covenant or condition applicable to it contained
         in this Agreement or contained in any other Documents, and shall have
         failed to cure such default for thirty (30) days after receipt of
         written notice from the Lender.

         (c) If any representation or warranty made by or on behalf of Borrower
         in this Agreement or in the Schedules hereto, or in any of the other
         Documents, or in connection with the transactions contemplated hereby
         and thereby shall be false or incorrect in any material respect; or

                                       21
<PAGE>

         (d) If Borrower shall default in the payment of any Indebtedness for
         borrowed money, including, but not limited to, the indebtedness which
         is referred to in SCHEDULE "I" attached hereto or shall default with
         respect to any of the terms of any evidence of such Indebtedness or of
         any indenture or other agreement relating thereto, or if Borrower shall
         commit any material breach or be in default under any contract set
         forth in SCHEDULE "M" attached hereto; or

         (e) If Borrower shall make an assignment for the benefit of creditors,
         or shall admit in writing an inability to pay debts as they become due,
         or shall file a voluntary petition in bankruptcy, or shall be
         adjudicated a bankrupt or insolvent, or shall file any petition or
         answer seeking for itself any reorganization, arrangement, composition,
         readjustment, liquidation, dissolution, or similar relief under any
         present or future statute, law or regulation, or shall file any answer
         admitting or shall fail to deny the material allegations of a petition
         filed against it for any such relief, or shall seek or consent to or
         acquiesce in the appointment of any trustee, receiver or liquidator of
         itself or of all or any substantial part of its properties, or its
         directors or majority stockholders shall take any action looking to its
         dissolution or liquidation, or it shall cease doing business as a going
         concern; or

         (f) If, within ninety (90) days after the commencement of any
         proceeding against Borrower seeking any reorganization, arrangement,
         composition, readjustment, liquidation, dissolution or similar relief
         under any present or future statute, law or regulation, such proceeding
         shall not have been dismissed, or if, within ninety (90) days after the
         appointment, without its consent or acquiescence of any trustee,
         receiver or liquidator of itself or himself or of all or any
         substantial part of its properties, such appointment shall not have
         been vacated;

         (g) If an event of default shall occur under a Third Party Loan and is
         continuing or an event which pursuant to the provisions of the Third
         Party Loan Documents with the lapse of time and/or notice specified
         therein would become such an event of default has occurred and is
         continuing;

         then, and in any such event, in addition to its rights and remedies
         under this Agreement, the other Documents and any other instruments,
         Lender may at its option declare the Note and Obligations or any
         portion thereof to be immediately due and payable, whereupon the same
         shall forthwith mature together with interest accrued thereon and
         together with any and all costs of collection, including, but not
         limited to, reasonable attorney's fees without notice and without
         presentment, demand or protest, all of which are hereby waived.

                                       22
<PAGE>

SECTION 6. PAYMENT TERMS. Payment of all sums due hereunder shall, unless
prepaid pursuant to the Note thereof, shall become due and shall be payable on
demand, but if no demand be made, on or before October 1, 2004. Borrower shall
make each payment of principal of, and interest on, the Loan and of fees and all
other amounts payable by Borrower under this Agreement, in good funds no later
than 5:00 p.m. (Eastern time) on the date when due and payable, without
condition or deduction for any counterclaim, defense, recoupment or setoff, in
Federal or other funds immediately available to Lender at its address referred
to herein and in the Note. All payments received by Lender after 5:00 p.m.
(Eastern time) shall be deemed to have been received by Lender on the next
succeeding Business Day. If the date for any payment of principal is extended by
operation of law or otherwise, interest thereon at the then applicable rate,
shall be payable for such extended time. Notwithstanding the foregoing, upon the
occurrence and continuance of an Event of Default, all sums due hereunder shall,
at the option of the Lender, become immediately due and payable upon written
notice to Borrower.

SECTION 7.       REMEDIES, PROVISIONS RE: COLLATERAL, ETC.

         In the event of an occurrence of an Event of Default, Lender:

         (a) may proceed to protect and enforce its rights if Lender deems
necessary to do so by suit in equity, action at law or other appropriate
proceedings, whether for the specific performance of any agreement contained
herein or in any other Document, or for an injunction against a violation of any
of the terms hereof or thereof, or in aid of the exercise of any right, power or
remedy granted thereby or by law, equity or otherwise.

         (b) without limitation of any rights and remedies of Lender as a
secured party under the Uniform Commercial Code and any rights or remedies set
forth in any of the Documents, Lender shall have all of the following rights and
remedies with respect to the Collateral or any portion thereof:

                                       23
<PAGE>

                  (i) Lender may, at any time and from time to time, with or
         without judicial process and the aid or assistance of others,
         reasonably enter upon any premises in which any of the Collateral may
         be located and, without resistance or interference by Borrower or any
         of the Guarantors, take possession of the Collateral and/or dispose of
         any part or all of the Collateral on any such premises; and/or require
         Borrower to assemble and make available to Lender at the expense of
         Borrower any part or all of the Collateral at any place or time
         designated by Lender which is reasonably convenient to Borrower and
         Lender; and/or remove any part or all of the Collateral from any
         premises on which any part may be located for the purpose of effecting
         sale or other disposition thereof; and/or sell, resell, lease, assign
         and deliver, grant options for or otherwise dispose of any or all of
         the Collateral in its then condition or following any commercially
         reasonable preparation or processing, at public or private sale or
         proceedings, by one or more contracts, in one or more parcels, at the
         same or different times, with or without having the Collateral at the
         place of sale or other disposition, for cash and/or credit and upon any
         reasonable and customary terms, at such place(s) and time(s) and to
         such Persons as Lender shall deem best, all without demand for
         performance or any notice or advertisement whatsoever, except that the
         owner of the items to be sold shall be given fifteen (15) business
         days' written notice of the place and time of any public sale or of the
         time after which any private sale or other intended disposition is to
         be made, which notice Borrower hereby agrees shall be reasonable notice
         thereof. If any of the Collateral is sold by Lender upon credit or for
         future delivery, Lender shall not be liable for the failure of the
         purchaser to pay for same and in such event Lender may resell such
         Collateral. Lender may buy any part or all of the Collateral at any
         public sale and if any part or all of the Collateral is of a type
         customarily sold in a recognized market or is of the type which is the
         subject of widely distributed in standard price quotations Lender may
         buy at private sale and may make payment therefor by application of all
         or a part of the Loan.

                                       24
<PAGE>

                  (ii) Lender shall apply the cash proceeds from any sale or
         other disposition of the Collateral FIRST, to the reasonable expenses
         of retaking, holding, preparing for sale, selling, leasing and
         otherwise disposing of such Collateral, to reasonable attorneys' fees
         and all legal expenses, travel and other expenses which are to be paid
         or reimbursed to Lender pursuant hereto or pursuant to the other
         Documents, SECOND, to all accrued interest, fees and charges
         outstanding with respect to the Loan, THIRD, to all other outstanding
         portions of the Loan, FOURTH, if there is any surplus to any other
         secured parties having an interest in the Collateral known to Lender in
         accordance with their interests, and FIFTH, if there is any surplus to
         the Borrower; provided, however, that Borrower shall remain liable with
         respect to unpaid portions of the Loan.

                  (iii) Any of the proceeds of the Collateral received by
         Borrower or any of the Guarantors after demand by Lender for repayment
         of all or any part of the Loan, shall not be commingled with any other
         of its property but shall be segregated, held by it or him in trust as
         the exclusive property of Lender, and it will immediately deliver to
         Lender the identical checks, monies, or other proceeds of Collateral.

                  (iv) At its option, Lender may pay for insurance on the
         Collateral and taxes, assessments or other charges which Borrower fails
         to pay in accordance with the provisions hereof or of any related
         agreement, instrument or document and may discharge any security
         interest or lien upon the Collateral. No such payment or discharge of
         any such security interest or lien shall be deemed to constitute a
         waiver by Lender of the violation of any covenant by Borrower as a
         result of the Borrower's failure to make any such payment or Borrower's
         suffering of any such security interest or lien. Any payment made or
         expense incurred by Lender pursuant to this or any other provisions of
         this Agreement shall be added and become a part of the Obligations of
         Borrower to Lender, shall bear interest at a rate per annum as provided
         for in the Note, and shall be payable on demand.

                                       25
<PAGE>

SECTION 8.        CUMULATIVE REMEDIES; NO WAIVERS, ETC.

         No right, power or remedy granted to Lender in this Agreement or in the
other Documents is intended to be exclusive, but each shall be cumulative and in
addition to any other rights, powers or remedies referred to in this Agreement,
in the other Documents or otherwise available to Lender at law or in equity; and
the exercise or beginning of exercise by Lender of any one or more of such
rights, powers or remedies, shall not preclude the simultaneous or later
exercise by Lender of any or all of such other rights, powers or remedies. No
waiver by, nor any failure or delay on the part of Lender in any one or more
instances to insist upon strict performance or observance of one or more
covenants or conditions hereof, or of the other Documents shall in any way be,
or be construed to be, a waiver thereof or to prevent Lender's rights to later
require the strict performance or observance of such covenants or conditions, or
otherwise prejudice Lender's rights, powers or remedies.

SECTION 9.        PARTIAL INVALIDITY; WAIVERS

         (a) If any term or provision of this Agreement or any of the other
Documents or the application thereof to any Person or circumstance shall, to any
extent, be invalid or unenforceable by reason of any applicable law, the
remainder of this Agreement and the other Documents, or application of such term
or provision to Persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Agreement and the other Documents shall be valid and be
enforced to the fullest extent permitted by law. To the full extent, however,
that the provisions of any such applicable law may be waived, they are hereby
waived by Borrower to the end that this Agreement and the other Documents shall
be deemed to be valid and binding obligations enforceable in accordance with
their terms.

         (b) To the extent permitted by applicable law, Borrower hereby waives
presentment, demand, protest, notice of protest, notice of default or dishonor,
notice of payments and non-payments, or of any default.

         (c) BORROWER HEREBY WAIVES ALL RIGHTS TO NOTICE, JUDICIAL HEARING OR
PRIOR COURT ORDER TO WHICH EACH MIGHT OTHERWISE HAVE THE RIGHT UNDER ANY FEDERAL
OR STATE STATUTE OR REGULATION IN CONNECTION WITH THE OBTAINING BY THE LENDER OF
ANY PREJUDGMENT REMEDY BY REASON OF THIS LOAN AND SECURITY AGREEMENT, OR BY
REASON OF BORROWER'S OBLIGATIONS OR ANY RENEWALS OR EXTENSIONS OF THE SAME.
BORROWER ALSO WAIVES ANY AND ALL OBJECTION WHICH IT MIGHT OTHERWISE ASSERT, NOW
OR IN THE FUTURE, TO THE EXERCISE OR USE BY LENDER OF ANY RIGHT OF SET-OFF,
REPOSSESSION OR SELF HELP AS MAY PRESENTLY EXIST UNDER STATUTE OR COMMON LAW.

                                       26
<PAGE>

SECTION 10. DEFINITIONS

         As used herein, the following terms have the following meanings:

         AFFILIATE: with reference to any Person, any director, officer or
employee of such Person, any corporation, association, firm or other entity in
which such Person has a direct or indirect substantial interest or by which such
Person is directly or indirectly controlled or is under direct or indirect
substantial common control with such Person. For purposes of this Agreement,
Borrower and all Guarantors are Affiliates of one another.

         COLLATERAL:   the meaning specified in Section 1.6.

         DOCUMENTS: this Agreement, the Demand Note, the Collateral Assignment
of Notes and Liens, the Guaranty, UCC-1 Financing Statements, the
Subordinations, and all other instruments and documents heretofore, now or
hereafter executed and delivered pursuant to this Agreement or pursuant to any
of the aforesaid documents.

         FINANCIAL STATEMENTS: the reports, statements and other information to
be delivered to Lender pursuant to Section 3.5.

         FISCAL YEAR:  a twelve (12) month year ending with June 30th.

         INDEBTEDNESS: as applied to a Person, (a) all items, except items of
capital stock or of surplus or of unappropriated retained earnings or of amounts
accrued for deferred income taxes if in compliance with Section 3.2, which in
accordance with Generally Accepted Accounting Principles would be included in
determining total liabilities as shown on the liability side of a balance sheet
of such person as at the date of which Indebtedness is to be determined, (b) all
indebtedness secured by any mortgage, pledge, lease, lien or conditional sale or
other title retention agreement existing on any property or asset owned or held
by such person subject thereto, whether or not such indebtedness shall have been
assumed, and (c) all indebtedness of others which such Person has directly or
indirectly guaranteed, endorsed, discounted or agreed contingently or otherwise
to purchase or repurchase or otherwise acquire, or in respect of which such
Person has agreed to supply or advance funds (whether by way of loan, stock
purchase, capital contribution or otherwise) or otherwise to become liable
directly or indirectly with respect thereto.

         LENDER:  the meaning specified on page 1.

         LOAN:  the meaning specified in Section 1.1.

         OBLIGATIONS:  the meaning specified in Section 1.2.

         PERSON: a corporation, an association, a partnership, an organization,
a business, an individual or a government or political subdivision thereof or
any governmental agency.

                                       27
<PAGE>

         SUBSIDIARY: with reference to any Person, is a corporation, or similar
association or entity of which not less than a majority of the outstanding
shares of the class or classes of stock, have by the terms thereof ordinary
voting power to elect a majority of the directors, managers or trustees of such
corporation, association or entity, of which are at the time owned or
controlled, directly or indirectly, by such Person or by a Subsidiary of such
Person.

         THIRD PARTY LOAN DOCUMENTS: the Loan and Security Agreement, the Demand
Note, the Guaranty, UCC-1 Financing Statements, and all other instruments and
documents heretofore, now or hereafter executed and delivered pursuant to any
Third Party Loans made by Borrower or pursuant to any of the aforesaid
documents.

SECTION 11.       EXPENSES

         Borrower agrees to indemnify and save Lender harmless from, and to pay
or reimburse Lender for, all reasonable charges, costs, damages, liabilities and
expenses, including, without limitation, reasonable attorneys' fees, if any,
incurred by Lender in defending or protecting the security interests and liens
granted pursuant to this Agreement or the other Documents, or the priority of
any thereof, or in the performance of any obligation of Borrower in connection
with the Collateral or in the attempted enforcement or enforcement of this
Agreement or the other Documents, or in the collection or attempted collection
of any of the obligations owing under any thereof, or in the realization or
attempted realization upon the Collateral.

SECTION 12.       FURTHER ASSURANCES; POSSESSION OF COLLATERAL; CUSTODIANS

         Borrower will deliver to Lender such financing statements and other
instruments constituting or evidencing items of the Collateral as may be
reasonably requested by Lender to better assure it with respect to the security
interests granted to it pursuant to this Agreement and the other Documents. To
the extent permitted by applicable law, Borrower hereby authorizes Lender to
execute and file, in the name of Borrower, financing statements which Lender in
its sole discretion deems necessary to further perfect the security interests
granted under this Agreement and the other Documents.

SECTION 13.       SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES, ETC.

         All agreements, representations and warranties contained herein or made
in writing by or on behalf of Borrower, in connection with the transactions
contemplated hereby shall survive the execution and delivery of this Agreement
and the other Documents shall survive any investigation at any time made by
Lender and any disposition of the Loan by Lender and, to the extent applicable,
shall be deemed to be made a new by each of them each time an advance is made
pursuant hereto or pursuant to the other Documents. All statements contained in
any certificate or other instrument delivered by or on behalf of Borrower
pursuant hereto or in connection with the transactions contemplated hereby shall
be deemed representations and warranties made hereunder.

SECTION 14.       FAILURE TO PERFORM

         If Borrower shall fail to observe or perform any of the covenants
hereof, Lender may pay such reasonable amount or incur reasonable liabilities to
remedy or attempt to remedy any such failure, and all such payments made and
liabilities incurred shall be for the account of Borrower and shall be in
Lender's sole discretion or shall be withdrawn from Borrower's accounts
maintained with Lender.

                                       28
<PAGE>

SECTION 15.       NOTICES, ETC.

         All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to be duly delivered upon actual receipt
if by facsimile or over night courier, and five (5) days after mailing if by
first class registered mail, return receipt requested :

         (a) if to Lender:

         Lender:           Stanford Financial Group Company
                           5050 Westheimer
                           Houston, TX 77056

         with a copy to:

                           Robert Kramer, Esq.
                           c/o Stanford Financial Group Company
                           5050 Westheimer
                           Houston, TX 77056

         or at such other address as may have been furnished in writing by
         Lender to Borrower; or (b) if to Borrower:

         Borrower:         Superior Galleries, Inc.
                           9478 W. Olympic Blvd.
                           Beverly Hills, California 90212

         with a courtesy copy to:

                           Armen Vartian, Esq.
                           805 Duncan Place
                           Manhattan Beach, California 90266

         or at such other address as may have been furnished in writing by
         Borrower to Lender.

SECTION 16.       AMENDMENTS AND WAIVERS

         Neither this Agreement nor any other Document nor any term hereof or
thereof may be changed, waived, discharged or terminated except by a writing
signed by the party to be charged.

                                       29
<PAGE>

SECTION 17.       TERM

         The term of this Agreement and the other Documents shall be from the
date hereof and continue until all amounts due hereunder are paid in full. Any
expiration or termination of this Agreement shall not affect any rights of
Lender under this Agreement or under the other Documents and upon any such
expiration or termination Borrower shall be obligated to forthwith pay all of
the Loan and Borrower shall continue to be bound by all of the provisions of
this Agreement until all of the Loan shall have been paid in full.

SECTION 18.       CONDITIONS PRECEDENT

         18.1 The obligation of the Lender to make the Loan and advances to be
made by it hereunder is subject to the following conditions precedent;

         (a) APPROVAL OF LENDER COUNSEL

         All legal matters incident to the transactions hereby contemplated
shall be satisfactory to counsel for the Lender.

         (b) PROOF OF CORPORATE ACTION

         The Lender shall have received certified copies of all corporate action
taken by the Borrower to authorize the execution and delivery of this
Agreementand the notes and borrowing hereunder, and such other papers as the
Lender or its counsel shall reasonably request.

         (c) CORPORATE DOCUMENTS AND OPINIONS

         Borrower is furnishing to Lender a certificates of good standing of the
state of its incorporation, resolutions, incumbency certificates, and other
documents which it acknowledges are being relied upon by Lender, and such other
documents are to be in the form and of the content as may be satisfactory to
Lender and its counsel.

         (d)  LOAN DOCUMENTS

          Receipt by Lender of the Note fully executed by Borrower, fully
executed UCC-1 Financing Statements and other material documents required by
Lender.

         (e)  INSURANCE

         Receipt by Lender of the policies of insurance in compliance with
Section 1.10.

                                       30
<PAGE>

         (f)  OPINION OF COUNSEL

         The Lender shall have received from Counsel for the Borrower a written
opinion, satisfactory to the Lender and its counsel with reference to the
matters stated in Section 2.1 through 2.17 hereof and further to the effect that
(i) the making and performance by the Borrower of this Agreement and the other
Documents have been duly authorized by all necessary corporate action and this
Agreement and the other Documents upon execution and delivery will constitute
legal, valid and binding obligations of the Borrower enforceable according to
their terms; (ii) that the Note and Other Documents have been duly authorized
and when executed will constitute a legal, valid and binding obligations of the
Borrower enforceable in accordance with their terms; and (iii) that except as
otherwise may be set forth in said opinion letter, to the best of said counsel's
knowledge upon inquiry of Borrower, and upon examination of its office files,
the execution and delivery of each of the afore stated Agreements and other
Documents will not constitute a default under any bank loan or credit agreement
or other agreement or instrument to which the Borrower is a party.

         (g) REPRESENTATIONS AND WARRANTIES

         The Representations and Warranties contained in Section 2 herein shall
be true on and as of the date of closing.

         (h) COLLATERAL

         Receipt by Lender of any of the Collateral where possession by Lender
is necessary to perfect its security interest therein.

         18.2 The obligation of the Lender to make each subsequent advance to be
made by it hereunder is subject to the conditions precedent that:

                                       31
<PAGE>

         (a) NO EVENT OF DEFAULT

         No Event of Default specified in Section 5 hereof, and no event which
pursuant to the provisions of Section 5 with the lapse of time and/or notice
specified therein would become such an Event of Default, has occurred and is
continuing; and

         (b)  NO MATERIAL ADVERSE CHANGE

         There has been no material adverse change in the consolidated financial
condition of the Borrower or any of the Guarantors and its or his consolidated
subsidiaries; and

         (c)  REPRESENTATIONS AND WARRANTIES

         The Representations and Warranties contained in Section 2 are true and
correct.

The Lender shall have received a certificate of the CEO and CFO of the Borrower
certifying as of the date of the current advance that (i) no Event of Default
specified in Section 5 hereof exists or is continuing, (ii) no material change
has taken place with regard to its financial condition as represented to the
Lender and (iii) the Representations and Warranties contained in Section 2 are
still true and correct.

         18.3 By delivering the Note and each other Document to the Lender and
receiving the Loan and advances, the Borrower represents that no Event of
Default specified in Section 5 hereof exists or is continuing and no material
change has taken place with regard to its financial condition as represented to
the Lender.

         18.4 LOAN ADMINISTRATION.

                  Advances made under the Loan shall be as follows:

                  (a)      A request for an Advance shall be made by Borrower
                           giving Lender notice of its intention to borrow, in
                           which notice Borrower shall specify the amount of the
                           proposed borrowing and the proposed borrowing date,
                           not later than 2:00 p.m. Eastern time five (5)
                           business days prior to the proposed borrowing date;
                           provided, however, that no such request may be made
                           at a time when there exists an Event of Default.

                  (b)      Borrower hereby authorizes Lender to disburse the
                           proceeds of each revolving credit advance requested
                           by wire transfer to such bank account as may be
                           agreed upon by Borrower and Lender from time to time
                           or elsewhere if pursuant to written direction from
                           Borrower.

                                       32
<PAGE>

                  (c)      All revolving credit advances and other extensions of
                           credit to or for the benefit of Borrower shall
                           constitute one general Obligation of Borrower and
                           shall be secured by Lender's lien upon all of the
                           Collateral.

                  (d)      Lender shall enter all revolving credit advances as
                           debits to a loan account in the name of the Borrower
                           and shall also record in said loan account all
                           payments made by Borrower on any Obligations and all
                           proceeds of Collateral which are indefeasibly paid to
                           Lender, and may record therein, in accordance with
                           customary accounting practice, other debits and
                           credits, including interest and all charges and
                           expenses properly chargeable to Borrower. All
                           payments and collections shall be applied first to
                           fees, costs and expenses due and owing under the
                           Documents, then to interest due and owing under the
                           Documents, and then to principal outstanding under
                           the Loan.

                  (e)      Lender will account to Borrower monthly with a
                           statement of Revolving Credit Loans, charges and
                           payments made pursuant to this Agreement, and such
                           accounting rendered by Lender shall be deemed final,
                           binding and conclusive upon Borrower unless Lender is
                           notified by Borrower in writing to the contrary
                           within thirty (30) days of the date each accounting
                           is mailed to Borrower. Such notices shall be deemed
                           an objection to those items specifically objected to
                           therein.

                  (f)      Borrower shall establish one or more bank accounts
                           for deposits of advances made under the Loan and for
                           deposits of repayments of Third Party Loans, and
                           shall assign such accounts to Lender. Borrower shall
                           not deposit advances from Lender or repayments from
                           borrowers under Third Party Loans into any other
                           accounts.

SECTION 19.       SETOFF.

         Borrower hereby gives Lender a security interest in, and a right of
set-off for the Loan upon or against, all the deposits, credits, Collateral, and
property of Borrower, now or hereafter in the possession or control of Lender or
in transit to it. Lender may at any time apply or set-off the same, or any part
thereof, to any Loan even though unmatured.

                                       33
<PAGE>

SECTION 20.       MISCELLANEOUS

         (a) This Agreement and each other document granting Lender a security
interest in the Collateral is a security agreement within the meaning of the
Uniform Commercial Code. Where any provision in this Agreement refers to action
to be taken by any Person, or which such Person is prohibited from taking, such
provision shall be applicable whether such action is taken directly or
indirectly by such Person. To the extent there is any inconsistency between the
terms of this Agreement and any of the other Documents, this Agreement shall
control. All of the terms of this Agreement and the other Documents shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, executors, administrators, successors and assigns of the parties hereto,
whether so expressed or not, and by any other holder or holders at the time of
the Loan or any part thereof. The headings in this Agreement are for the
purposes of reference only and shall not limit or otherwise affect any of the
terms hereof. This Agreement may be executed in two (2) or more counterparts,
each of which shall be deemed an original, and by the several parties hereto in
separate counterparts, but all of which together shall constitute one and the
same instrument.

         (b) This Agreement is among the Lender and the Borrower only and shall
not be relied upon by any third party. Without limiting the foregoing, Lender
shall have no liability to any third party whatever (including without
limitation Borrower or anyone conducting business with any of the foregoing) in
the event Lender for any reason and at any time determines not to advance sums
under the Note and/or for any reason or otherwise exercises its rights under
this Agreement and/or the other Documents.

         (c) The security interests granted hereby extends to the Collateral,
whether acquired before or after the commencement of a case under the Bankruptcy
Reform Act of 1978.

         Section 21. CHOICE OF LAW; CONSENT TO JURISDICTION. THIS AGREEMENT AND
         THE NOTE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
         LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ANY OTHERWISE APPLICABLE
         PRINCIPLES OF CONFLICTS OF LAWS. IF ANY ACTION ARISING OUT OF THIS
         AGREEMENT OR THE NOTE IS COMMENCED BY LENDER IN THE STATE COURTS OF THE
         STATE OF TEXAS OR IN THE U.S. DISTRICT COURT FOR THE SOUTHERN DISTRICT
         OF TEXAS, BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY SUCH
         COURT IN ANY SUCH ACTION AND TO THE LAYING OF VENUE IN THE STATE OF
         TEXAS. ANY PROCESS IN ANY SUCH ACTION SHALL BE DULY SERVED IF MAILED BY
         REGISTERED MAIL, POSTAGE PREPAID, TO BORROWER AT THE ADDRESS DESCRIBED
         IN SECTION 15 HEREOF. ANY MATTERS AFFECTING THE ENFORCEMENT OR
         INTERPRETATION OF LENDER'S SECURITY INTEREST IN THE COLLATERAL SHALL
         (TO THE EXTENT NOT GOVERNED BY TEXAS LAW PURSUANT TO THE AGREEMENT SET
         FORTH HEREIN) BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
         OF THE STATE OF DELAWARE OR CALIFORNIA, AS APPLICABLE.

                                       34
<PAGE>

         IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement on the day first above mentioned.

SIGNED, SEALED AND DELIVERED
IN THE PRESENCE OF:
                                             BORROWER:
                                             SUPERIOR GALLERIES, INC.

                                             By:
----------------------------                    --------------------------------
                                                Silvano DiGenova
                                                Its Chairman, Duly Authorized

                                             LENDER
                                             STANFORD FINANCIAL GROUP COMPANY

                                             By:
----------------------------                    --------------------------------

                                                  Its:

                                       35
<PAGE>

SCHEDULE A TO COMMERCIAL LOAN AND SECURITY AGREEMENT

                                 COMMERCIAL NOTE

$7,500,000.00                                                    OCTOBER 1, 2003

Beverly Hills, California
-------------------------

         FOR VALUE RECEIVED, ON DEMAND, the undersigned, (hereinafter referred
to as "Maker") promises to pay to the order of Stanford Financial Group Company
(hereinafter referred to as "Lender"), at its office at 5050 Westheimer,
Houston, TX 77056, or at such other place as the Lender shall from time to time
designate in writing, ON DEMAND the principal sum of SEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS AND NO CENTS ($7,500,000.00) or such principal portion thereof
as shall be outstanding under an Agreement entered into herewith between Maker
and Lender, with interest from the date hereof, computed on a 360 day year, on
so much of said principal sum as shall from time to time be outstanding, at the
daily average of the Prime Rate as reported in the Wall Street Journal, together
with all its reasonable costs, expenses and attorney's fees incurred or charged
in any action or proceeding for collection of said debt or in any litigation
arising from or concerning said debt or in foreclosing or otherwise recovering
on any mortgage or security interest securing said debt or in protecting or
sustaining the lien and/or priority of any such mortgage or security interest .
Said interest shall be payable at the aforesaid rate, or at the rate in effect
as hereinafter provided, whether before or after maturity, by acceleration or
otherwise, or whether or not judgment has been obtained, and after judgment, on
the full amount of said judgment, at the greater of the legal rate or the rate
then in effect hereunder.

         From the date hereof interest on the daily outstanding principal
balance for the actual number of days elapsed in each payment period shall be
due and payable in monthly payments in arrears commencing November 10, 2003 and
continuing on the 10th day of each month thereafter until the entire outstanding
principal balance and accrued and unpaid interest thereon has been paid in full.
All principal and interest evidenced by this Note, if not sooner paid, or
demanded, shall be due and payable on October 1, 2004 without the necessity of
demand or notice. All payments of principal or interest shall be considered
received by Lender upon receipt of good funds as defined by Lender's financial
depository.

                                       36
<PAGE>

         This Note is subject in all respects to the terms and conditions of a
certain Loan and Security Agreement of even date by and among, INTER ALIA, Maker
and Lender (the "Loan Agreement"), including without limitation Events of
Default as defined therein.

         It is agreed that time is of the essence of this Note, and that in the
event of default in the payment of any such installment of principal and/or
interest for a period of five (5) days after the same is due and payable or upon
default under any of the terms, conditions and/or provisions contained in this
Note or upon the occurrence of an Event of Default under the Loan Agreement,
then, and in any of said events, the unpaid remaining principal balance of this
indebtedness together with all accrued and unpaid interest thereon and all other
amounts due hereunder shall immediately become due and payable, at the option of
Lender without the necessity for demand or notice; and any failure to exercise
said option shall not constitute a waiver of the right to exercise the same at
any other time. If any such default shall occur, then, interest shall accrue, on
and after the first day of said default, for the period for which any such
payment was due, and during such period of five (5) days or other expired
applicable cure period, and at all times while such default continues, on all
principal and due and unpaid interest, at a rate five percent (5%) per annum
higher than the rate above stated and said interest shall be due and payable on
the first day of each month while any such default exists.

         Maker shall pay a late charge equal to five percent (5%) of any
installment not paid within five (5) days of the due date thereof.

         Maker reserves the right to prepay this note in full or in part at any
time without any prepayment penalty.

         Any deposits, securities or other property of the Maker, (exclusive of
deposits, securities or other property held by the undersigned in a fiduciary
capacity for the benefit of others) which are at anytime within Lender's
possession or control may be held and treated as collateral security for the
payment of this note, and Lender shall have a lien thereon and right to setoff
the same against any sums due hereunder.

         Notwithstanding any provisions of this Note, in the event that the rate
of interest charged hereunder shall at any time exceed the maximum rate allowed
by law, the interest rate payable hereunder shall be deemed to be the maximum
rate allowed by law and any payments in excess of the maximum rate allowed by
law shall be deemed principal payments and applied against the principal balance
hereof.

                                       37
<PAGE>

         The Maker hereby agrees that the loan evidenced by the within note is a
"commercial transaction" as defined by California Law.

         Upon failure to pay the indebtedness secured hereby in full at
maturity, whether stated or by acceleration, Lender is authorized and empowered
to sell the whole or any part of the Collateral then held by it in such manner
as Lender sees fit and is consistent with applicable law. Sale of part of the
Collateral shall not exhaust Lender's power of sale, but sales may be made from
time to time until all the Collateral is sold, or until the debts hereby secured
are paid in full. Lender shall receive the proceeds of such sale or sales and
shall apply those proceeds in the order stipulated in the relevant provisions of
the California Commercial Code. If this Note is placed in the hands of an
attorney for collection or is collected in whole or in part through any judicial
or arbitral proceedings, Maker agrees to pay Lender's attorney's fees and costs.

         THE MAKER HEREBY WAIVES ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR
COURT ORDER IN CONNECTION WITH ANY AND ALL PREJUDGMENT REMEDIES THE HOLDER
HEREOF MAY BECOME ENTITLED TO BY VIRTUE OF ANY DEFAULTS OR PROVISIONS OF THE
NOTE SECURING THE SAME.

         THE MAKER WAIVES A TRIAL BY JURY IN ANY ACTION WITH RESPECT TO THIS
NOTE AND AS TO ANY ISSUE ARISING RELATING TO THIS NOTE OR TO THE INSTRUMENTS
SECURING THIS NOTE.

         TO INDUCE LENDER TO ENTER INTO THE COMMERCIAL LOAN TRANSACTION
EVIDENCED BY THIS NOTE AND SECURITY AGREEMENT, MAKER AGREES THAT THE SAID
TRANSACTION IS COMMERCIAL AND NOT A CONSUMER TRANSACTION AND WAIVES ANY RIGHT OF
MAKER TO NOTICE AND HEARING, JURY TRIAL AND THE POSTING OF BOND BY LENDER UNDER
ANY STATUTE OR STATUTES AFFECTING PREJUDGMENT REMEDIES AND AUTHORIZED LENDER'S
ATTORNEY TO ISSUE A WRIT FOR PREJUDGMENT REMEDIES WITHOUT A COURT ORDER PROVIDED
THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER.

Presentment, protest and notice are hereby waived.

                                    SUPERIOR GALLERIES, INC.

                                    By:    /S/  SILVANO DIGENOVA
                                           ----------------------------------
                                             Silvano DiGenova
                                             Its President, Duly Authorized

                                       38
<PAGE>

SCHEDULE B - Policies and Procedures

LOAN POLICY AND PROCEDURES

MISSION STATEMENT:

The objective of the Loan Policy and Procedures is to establish credit standards
and collection procedures to give reasonable assurance of repayment, together
with providing rare coin dealers and collectors various financing vehicles for
the rare coin business. At the same time, these financing programs will provide
Superior Galleries, Inc. (Superior) and its principal stockholder, Stanford
Venture Capital Holding, Inc., (Stanford) the opportunity to enjoy a reasonable
return on their investments. Superior will be required to maintain satisfactory
records for all transactions to allow a review by Stanford as part of that
firm's internal audit program.

Superior will act as both an auctioneer and lender by providing loans in the
form of auction advances, dealer inventory loans, and purchased inventory
advances. The funds available for these programs will be provided through,
initially, a $7,500,000 line of credit with Stanford.

OVERVIEW:

         LOAN APPROVAL AUTHORITY
         -----------------------

The Board of Directors of Superior will establish loan approval authority. The
authority will be reviewed at least annually. Individual authority will be
provided to the parties involved in writing.

         COLLATERAL DEFINED
         ------------------

Loans in this program will be secured by acceptable collateral defined as: gold,
silver, copper, aluminum, nickel and other metal rare coins of domestic, foreign
or ancient origin or mintage and U. S. Currency.

         ADDITIONAL COLLATERAL
         ---------------------

Additional collateral may be taken in a form that provides an acceptable level
of protection for the customer's liability. The primary vehicle for such
protection would include additional acceptable collateral as defined above,
marketable securities, cash or liens on marketable California real estate. The
requirement to obtain additional collateral will be determined by the CEO or
CFO. The reasons for taking collateral could include an indication that the
borrower either has limited or diminished financial capacity, a poor credit
history, or unsubstantiated income. Loans to borrowers with any of these
elements should be carefully evaluated and the reasons documented in the
customer's credit file.

         GUARANTEES
         ----------

Guarantees will be required when the borrowing entity is a corporation, LLC,
LLP, partnership or certain Trusts. In the case of a trust, California law
presumes that every trust is revocable unless the trust agreement specifically
states that it is irrevocable.

                                       39
<PAGE>

         CREDIT CRITERIA
         ---------------

Credit criteria will be established based upon the borrowers' credit history,
past credit experience with Superior, reputation in the industry, and overall
financial strength. Those borrowers with favorable credit factors and a positive
previous relationship with Superior will be eligible for pre-approved credit
lines. The lines must be reviewed at each renewal date, but no less than
annually, and have their credit evaluation conducted by authorized Superior
personnel. All new information along with the previous history will be evaluated
by the credit authorizing persons. All weaknesses in the credit history or
financial strength must be thoroughly explained in a memorandum in the credit
file approved by the CEO or CFO. The following documentation will be required to
be properly completed:

         o        Loan Checklist and Approval Form
         o        Loan Application
         o        Sales and collection history
         o        Personal and corporate credit reports
         o        Credit verification information
         o        Financial information required by the lending officer

On all loans or advances the borrower's credit criteria will be evaluated before
any approval is given. All credit evaluation material will be maintained in the
borrower's credit file. The credit file for each borrower will contain all of
the information required for the determination of credit worthiness as well as
the executed loan documents.

Inventory loans will be made to Superior Galleries, Inc. However, no loans or
lines will be available to related parties or affiliated companies of Superior
Galleries, Inc.

         INSURANCE
         ---------

Superior will maintain or require as necessary adequate insurance coverage
satisfactory to Stanford for all directors, officers, employees, independent
contractors and merchandise held as collateral. Stanford will be named on all
policies as a "co-insured" party.

COLLATERAL CONTROL:

Internal collateral control and the authenticity of the collateral will be the
responsibility of senior Superior management with monthly reports provided to
Stanford.

         RECEIVING AND HANDLING COLLATERAL
         ---------------------------------

Collateral received will be handled on the premises at the direction of the
Inventory Control Manager under the supervision of the Director of Operations.
All collateral when not locked in the vault will at all times be under the
control of at least two persons. The Director of Operations will designate the
persons who will verify all merchandise received for this program. All
merchandise received with accompanying documentation will be presented to either
the CEO, Auction Division Consultant, or in their absence the CFO, for review
with the authorized receiving employee. Once reviewed the authorized receiving
employee with the Inventory Control Manager and/or his/her designee will prepare
and issue a sequentially numbered Collateral Receipt dated and time stamped, and
signed by the two persons receiving and storing collateral. The first copy of
the Collateral Receipt will be retained in the vault in alpha order and will
designate the specific location within the vault where the collateral is held.
The second copy will be given to the customer as their receipt, and the third
copy will be maintained in the customer's credit file.

                                       40
<PAGE>

Once collateral has been received and logged in, the Inventory Control Manager
is responsible for its safekeeping and tracking. All collateral not in process
of grading, transport, lot viewing (on premise or at a secure trade show
location) or auction is to remain in the vault in a locked safe, with access
limited to only those authorized by management. An inventory log maintained in
the vault will be used to control the movement of collateral. Collateral must be
segregated in separate safes in the vault for Superior owned, consigned items,
and for assigned collateral under this program.

Any two of the following persons TOGETHER have the authority to open the main
vault door, collateral vaults, and remove collateral for grading, cataloging,
photographing, listing, trade show transport, or transporting to the original
owner or a potential customer:

         CEO
         Auction Division Consultant
         Director of Numismatics
         Director of Operations
         Director of Marketing
         Inventory Control Manager
         Inventory Control Specialist
         Operations Specialist

External collateral control is covered by specific insurance guidelines that
will be adhered to whenever property involved in this program is removed from
the premises. When collateral in this program is to be moved offsite for any
reason, either the CEO or CFO will outline the requirements under the insurance
policies then in effect. If the collateral is being moved by individuals, they
will sign a document indicating that they understand and will comply with the
insurance requirements. This statement will be acknowledged by either the CEO or
CFO.

         COLLATERAL VALUATION
         --------------------

The collateral held is to be valued by the CEO or the Auction Division
Consultant no less than monthly and always based upon no more than the "30 day
wholesale liquidation value." In addition, the CFO or his/her designee who does
not have vault access authority will make a collateral inspection on a surprise
and sample basis at least twice monthly.

Authority for valuing collateral in this program is based upon the amount of the
proposed loan and is as follows:

         CEO - unlimited
         Auction  Division Consultant - to $199,999 and with the Director of
                  Numismatics to $499,999.
         Director of Numismatics - with a 50% LTV to $99,999 and with the
                  Director of Numismatics (Independent Contractor) to $199,999.
         Director of Numismatics (Independent Contractor) - with a 50% to
                  $49,999 and with the Director of Numismatics to $199,999.

                                       41
<PAGE>

         MARGIN CALLS
         ------------

Similar to "margin calls", on occasion, all Superior customers under this
program will be required to provide additional collateral or cash payments to
maintain their accounts within advance limits established at the inception of
the line or loan. Evaluation for margin calls may occur whenever it is deemed
necessary by senior management to protect the collateral position of the
company. The borrower will have no more than five (5) business days to meet the
call.

         AUDITS
         ------

Audits are to be performed on a quarterly basis by a qualified CPA firm
acceptable to Superior and Stanford. The auditing firm, in conjunction with
Superior and Stanford, will develop and establish the standards for the audits
that will include compliance with the policies and procedures. An integral part
of the audit will be to perform an independent collateral evaluation to confirm
the accuracy of the monthly internal evaluations. Auditors are to maintain
records satisfactory to Superior and Stanford of the due diligence performed on
all appraisers utilized. In addition, a different appraiser is to be selected
from the approved list by the audit firm to perform an appraisal on at least
every third appraisal. Written results of the audits will be presented DIRECTLY
to Superior's Audit Committee and Stanford no more than thirty days (30) after
completion of the audit.

GUIDELINES:

         LOAN APPLICATIONS
         -----------------

Potential borrowers will be required to complete a loan application identifying
the type of financing needed, the amount, background information of the
responsible parties, addresses, phone and fax numbers, email addresses, etc. New
applications will be required no less than annually from all borrowers. The
purpose for this is to allow Superior personnel the opportunity to assess the
borrower's qualifications in the rare coin business and determine the ability
and likelihood of prompt debt repayment. Marginal borrowers may qualify, but
advance rates would be less than standard and set at the discretion of the chief
financial officer.

         LOAN TO VALUE
         -------------

All loans and advances on this program will be limited to a maximum loan to
value (LTV) of seventy percent (70%), sixty-five percent (65%) for Auction
Advances of $500,000 or more, based on the "30-day wholesale liquidation value."
For purposes of these loans and advances, defined as the estimated cash price
that would be paid by a rare coin dealer at wholesale level within a 30-day
period.

         TYPES OF LOANS AND ADVANCES
         ---------------------------

                  AUCTION ADVANCES
                  ----------------

Auction Advances to any borrowing, entity including related or affiliated
parties, are limited in amount to $1,000,000 secured by assigned collateral.
Notes will be drawn "On Demand and if No Demand Due on the Auction Settlement
Date" that will be no more than 45 days after the auction date. This line will
be used for large inventory purchases that are specifically designated for sale
at the next auction.

                                       42
<PAGE>

                  INVENTORY LOANS
                  ---------------

Inventory Loans are limited to an aggregate amount of $1,500,000 to Superior,
including related or affiliated parties, secured by assigned collateral and/or
accounts receivable when the collateral has been sold on terms. Repayment is due
in 90 days or less or the collateral will be sold at the next auction date, at
which time repayment will be due at the auction settlement date. One 90-day
renewal will be allowed for an Inventory Loan. Inventory loans may not be
"flipped" to any other form of loan or advance under this program.

                  DEALER LOANS
                  ------------

Dealer Loans to a borrower, or a related or affiliated party, will be limited to
$500,000 secured by assigned collateral, except when combined with an Auction
Advance the total liability may not exceed $1,000,000. These loans will have a
non-renewable 180-day maturity, interest payable monthly, minimum 1% origination
fee, and collateral must be held by Superior.

                  INTEREST RATES
                  --------------

The CEO AND CFO will determine interest rates on loans in this program based
upon criteria including but not limited to State and Federal laws, market
conditions, operating costs and borrower credit worthiness. They will also
establish default rates, related costs and terms that will be imposed on all
loans in default.

SUPPORTING FINANCIAL DATA:

                 FINANCIAL INFORMATION REQUIREMENTS
                 ----------------------------------

Financial statements may be required from individuals or entities that apply for
a loan or line of credit. These documents lend credence to the borrowers'
financial stability and capacity to pay a loan from sources other than the
collateral should the collateral fail to yield sufficient funds to pay the debt
in full.

Complete tax returns with all applicable schedules may be required to be
obtained to assist in identifying all the borrowers' sources of income.

The CEO or CFO, when the borrower has a pre-existing satisfactory lending and/or
credit relationship, may waive the financial statements and income tax
requirements.

Credit reports will also be a requirement with nothing less than a favorable
payment history substantiated by a 650 FICO score, or that of another recognized
credit scoring organization score equivalent to but not less than the FICO score
minimum. No derogatory credit history should be reflected, i.e., 30 days late,
foreclosures, repossessions, collection accounts, charge-offs, tax liens,
judgments or bankruptcies. When disclosed derogatory information exists the
borrower may be required to provide satisfactory explanations that may mitigate
their impact on a credit decision by Superior. The CEO AND CFO may modify the
acceptable FICO score on a case-by-case basis, and in doing so document the
credit file of the borrower involved. Other than exceptions to the established
FICO score minimum, either the CEO or CFO must approve exceptions to this policy
in writing.

                                       43
<PAGE>

At the option of lender with adequate loan authority a UCC-3 may not be ordered
on loans under $100,000. Where the credit worthiness of the potential borrower
is in doubt, the CEO, CFO, Auction Division Consultant, or Director of
Operations may request a UCC-3 on loans in any amount.

                 CREDIT FILES
                 ------------

Credit files containing all documentation will be maintained in a locked,
fireproof filing cabinet under the control of the Operations Officer. The
Operation Officer may designate the person(s) authorized to control the files.

DOCUMENTS:

Prior to any loan or advance all documents connected therewith will be reviewed
and approved for completeness by the appropriate operations personnel and the
person or persons with sufficient lending authority (considering total liability
of the borrower) to approve the credit, loan or advance. Approved loan documents
will include but not be limited to the following:

         o        Note
         o        Broadform Security Agreement
         o        UCC-1
         o        UCC-3 (before and after filing the UCC-1)
         o        Assignment
         o        Guarantee
         o        Specific Pledge Agreement
         o        Checklist
         o        Appraisal
         o        Corporate Resolution to Borrow
         o        Corporate Resolution to Guarantee
         o        LLC Resolution to Borrow
         o        LLP Resolution to Borrow
         o        Evidence of good standing for Corporate borrowers
         o        Copy of the Partnership Agreement
         o        Trust Authorization to Borrow, Pledge Assets or Guarantee
         o        First page, the page or pages that authorize the trust to
                  borrow and hypothecate trust assets, and the signature page.
                  However, California law prohibits lenders from demanding a
                  copy of trust agreements. If the borrowing party refuses to
                  provide these pages, a Certificate of Trust would be
                  acceptable.

If real estate is to be pledged in support of loans or lines of credit, then the
following documents will be required:

                                       44
<PAGE>

     Residential Real Estate:

         o        Trust Deed
         o        Preliminary Title Report
         o        Final Title Policy (A Limited Coverage Policy may be
                  acceptable in some instances)
         o        Appraisal (A Desktop or Drive-by may be acceptable)
         o        Fire Insurance Coverage
         o        Flood Certificate
         o        Flood Insurance, if applicable.
         o        Property Inspection

         Commercial Real Estate:

All items for residential real estate plus the following:

         o        EPA Questionnaire
         o        Phase I, if necessary
         o        Rent Roll (If applicable)
         o        Liability Coverage

COLLECTION OF LOANS IN DEFAULT:

The CFO is responsible for all collections of loans declared in default. Loan
receivable reports will be prepared for daily review by the CEO and CFO and
other officers designated by the CFO. A specific course of action to effect
collection will be developed in writing and implemented by the CFO for any
uncollected loan within five days of when it became due. Stanford will be
notified of all delinquencies within ten (10) days by the CFO. Documentation of
all collection efforts will be made a part of the borrower's credit file. The
Audit Committee will be responsible for monitoring all collection efforts.

AMENDMENTS TO THE LOAN POLICY AND PROCEDURES:

Proposed amendments to the Loan Policy and Procedures will be submitted in
writing by management to Stanford for written approval and then to the Audit
Committee for approval and recommendation to the Board of Directors for final
approval.

                                       45
<PAGE>

SCHEDULE C - N/A

SCHEDULE D - Security Interests

The Estate of John Wesley English

On August 8, 2002 the Borrower converted two temporary working capital loans
totaling $2.5 million from John Wesley English ("English") into a line of credit
by executing a Secured Revolving Line of Credit Agreement ("LOC"). The LOC bears
interest at the prime rate plus 7% per annum and is secured by a first position
lien on all substantially all assets of the Company. The LOC was due on
September 9, 2002 and was extended to October 15, 2002. In November 2002, upon
the death of English the LOC became asset of the Estate of John Wesley English
("English Estate"). The Borrower and the English Estate are finalizing a
renegotiation of the LOC that includes the relinquishment of the first position
lien to Stanford Financial Group Company on all accounts receivable including
trade accounts receivable, auction receivables, auction advances and the
underlying consigned inventory that has been assigned as collateral to the
Borrower. The balance of the LOC at September 30, 2003 was $2.5 million.

Silvano A. DiGenova

On April 10, 2002 the Borrower converted existing debt due to Silvano A.
DiGenova ("DiGenova"), the Borrower's chief executive officer and a principal
stockholder into a $1,000,000 secured subordinated note (`Secured Note") bearing
interest at rate of 9% per annum. The note is secured by the Borrower's accounts
receivable and inventory. The Secured Note is subordinated to the English Estate
and will be subordinated to the Lender. The Secured Note currently provides for
quarterly principal repayments of $50,000 to commence on September 30, 2003. No
principal payments have been made. The balance of the Secured Note at September
30, 2003 was $1.0 million.

SCHEDULE E - N/A

SCHEDULE F - Ownership in Other Corporations

The Borrower owns 100% of the common shares of Superior Galleries Beverly Hills,
Inc."(SGBH"), a Nevada Corporation. As of July 1, 2003, SGBH was inactive and
the corporation will be dissolved by December 31, 2003.

                                       46
<PAGE>

SCHEDULE G - Capital Structure and Business Locations

Capital Structure - Please see attached SEC Form 10-KSB for the year ended June
30, 2003 filed on September 17, 2003 page F-4

Business Locations including Collateral Locations:

Location of inventory, equipment, records of accounts and collateral
9478 West Olympic Blvd
Ground Floor
Beverly Hills, CA 90212

Location of a portion of the Borrower's art inventory
3444 Via Lido
Newport Beach, CA 92663

Location of a portion of the Borrower's art inventory
32001 South Pacific Coast Highway
Laguna Beach, CA 92651

SCHEDULE H - Financial Statements

Please see attached SEC Form 10-KSB for the year ended June 30, 2003 filed on
September 17, 2003 pages F-1 to F-44

SCHEDULE I - Indebtedness

Please see attached SEC Form 10-KSB for the year ended June 30, 2003 filed on
September 17, 2003 pages F-3, F-4, F-22 to F-25

SCHEDULE J - Title to Properties and Assets; Liens, etc.

See SCHEDULE D and please see attached SEC Form10-KSB for the year ended June
30, 2003 filed on September 17, 2003 pages F-3, F-4, and F-20 to F-25

SCHEDULE K - Patents, Trademarks, etc. - N/A

SCHEDULE L - Litigation - N/A

SCHEDULE M - Compliance with Instruments, Charter and Law

Please see attached SEC Form 10-KSB for the year ended June 30, 2003 filed on
September 17, 2003 pages 35 exhibits 10.1, 10.2 and 10.3, F-3, F-4, F-22 to
F-25, F-35 to F-39

SCHEDULE N - Change of name, etc.

Please see attached SEC Form 10-KSB for the year ended June 30, 2003 filed on
September 17, 2003 pages 34 exhibits 2.1, 3.1 and 3.2.

                                       47<PAGE>

Exhibit 10.2

                                 COMMERCIAL NOTE
$7,500,000.00                                                    OCTOBER 1, 2003

Beverly Hills, California
-------------------------

         FOR VALUE RECEIVED, ON DEMAND, the undersigned, (hereinafter referred
to as "Maker") promises to pay to the order of Stanford Financial Group Company
(hereinafter referred to as "Lender"), at its office at 5050 Westheimer,
Houston, TX 77056, or at such other place as the Lender shall from time to time
designate in writing, ON DEMAND the principal sum of SEVEN MILLION FIVE HUNDRED
THOUSAND DOLLARS AND NO CENTS ($7,500,000.00) or such principal portion thereof
as shall be outstanding under an Agreement entered into herewith between Maker
and Lender, with interest from the date hereof, computed on a 360 day year, on
so much of said principal sum as shall from time to time be outstanding, at the
daily average of the Prime Rate as reported in the Wall Street Journal, together
with all its reasonable costs, expenses and attorney's fees incurred or charged
in any action or proceeding for collection of said debt or in any litigation
arising from or concerning said debt or in foreclosing or otherwise recovering
on any mortgage or security interest securing said debt or in protecting or
sustaining the lien and/or priority of any such mortgage or security interest .
Said interest shall be payable at the aforesaid rate, or at the rate in effect
as hereinafter provided, whether before or after maturity, by acceleration or
otherwise, or whether or not judgment has been obtained, and after judgment, on
the full amount of said judgment, at the greater of the legal rate or the rate
then in effect hereunder.

         From the date hereof interest on the daily outstanding principal
balance for the actual number of days elapsed in each payment period shall be
due and payable in monthly payments in arrears commencing November 10, 2003 and
continuing on the 10th day of each month thereafter until the entire outstanding
principal balance and accrued and unpaid interest thereon has been paid in full.
All principal and interest evidenced by this Note, if not sooner paid, or
demanded, shall be due and payable on October 1, 2004 without the necessity of
demand or notice. All payments of principal or interest shall be considered
received by Lender upon receipt of good funds as defined by Lender's financial
depository.

         This Note is subject in all respects to the terms and conditions of a
certain Loan and Security Agreement of even date by and among, INTER ALIA, Maker
and Lender (the "Loan Agreement"), including without limitation Events of
Default as defined therein.

         It is agreed that time is of the essence of this Note, and that in the
event of default in the payment of any such installment of principal and/or
interest for a period of five (5) days after the same is due and payable or upon
default under any of the terms, conditions and/or provisions contained in this
Note or upon the occurrence of an Event of Default under the Loan Agreement,
then, and in any of said events, the unpaid remaining principal balance of this
indebtedness together with all accrued and unpaid interest thereon and all other
amounts due hereunder shall immediately become due and payable, at the option of
Lender without the necessity for demand or notice; and any failure to exercise
said option shall not constitute a waiver of the right to exercise the same at
any other time. If any such default shall occur, then, interest shall accrue, on
and after the first day of said default, for the period for which any such
payment was due, and during such period of five (5) days or other expired
applicable cure period, and at all times while such default continues, on all
principal and due and unpaid interest, at a rate five percent (5%) per annum
higher than the rate above stated and said interest shall be due and payable on
the first day of each month while any such default exists.

                                       1
<PAGE>

         Maker shall pay a late charge equal to five percent (5%) of any
installment not paid within five (5) days of the due date thereof.

         Maker reserves the right to prepay this note in full or in part at any
time without any prepayment penalty.

         Any deposits, securities or other property of the Maker, (exclusive of
deposits, securities or other property held by the undersigned in a fiduciary
capacity for the benefit of others) which are at anytime within Lender's
possession or control may be held and treated as collateral security for the
payment of this note, and Lender shall have a lien thereon and right to setoff
the same against any sums due hereunder.

         Notwithstanding any provisions of this Note, in the event that the rate
of interest charged hereunder shall at any time exceed the maximum rate allowed
by law, the interest rate payable hereunder shall be deemed to be the maximum
rate allowed by law and any payments in excess of the maximum rate allowed by
law shall be deemed principal payments and applied against the principal balance
hereof.

         The Maker hereby agrees that the loan evidenced by the within note is a
"commercial transaction" as defined by California Law.

         Upon failure to pay the indebtedness secured hereby in full at
maturity, whether stated or by acceleration, Lender is authorized and empowered
to sell the whole or any part of the Collateral then held by it in such manner
as Lender sees fit and is consistent with applicable law. Sale of part of the
Collateral shall not exhaust Lender's power of sale, but sales may be made from
time to time until all the Collateral is sold, or until the debts hereby secured
are paid in full. Lender shall receive the proceeds of such sale or sales and
shall apply those proceeds in the order stipulated in the relevant provisions of
the California Commercial Code. If this Note is placed in the hands of an
attorney for collection or is collected in whole or in part through any judicial
or arbitral proceedings, Maker agrees to pay Lender's attorney's fees and costs.

         THE MAKER HEREBY WAIVES ALL RIGHTS TO NOTICE AND PRIOR COURT HEARING OR
COURT ORDER IN CONNECTION WITH ANY AND ALL PREJUDGMENT REMEDIES THE HOLDER
HEREOF MAY BECOME ENTITLED TO BY VIRTUE OF ANY DEFAULTS OR PROVISIONS OF THE
NOTE SECURING THE SAME.

         THE MAKER WAIVES A TRIAL BY JURY IN ANY ACTION WITH RESPECT TO THIS
NOTE AND AS TO ANY ISSUE ARISING RELATING TO THIS NOTE OR TO THE INSTRUMENTS
SECURING THIS NOTE.

         TO INDUCE LENDER TO ENTER INTO THE COMMERCIAL LOAN TRANSACTION
EVIDENCED BY THIS NOTE AND SECURITY AGREEMENT, MAKER AGREES THAT THE SAID
TRANSACTION IS COMMERCIAL AND NOT A CONSUMER TRANSACTION AND WAIVES ANY RIGHT OF
MAKER TO NOTICE AND HEARING, JURY TRIAL AND THE POSTING OF BOND BY LENDER UNDER
ANY STATUTE OR STATUTES AFFECTING PREJUDGMENT REMEDIES AND AUTHORIZED LENDER'S
ATTORNEY TO ISSUE A WRIT FOR PREJUDGMENT REMEDIES WITHOUT A COURT ORDER PROVIDED
THE COMPLAINT SHALL SET FORTH A COPY OF THIS WAIVER.

                                       2
<PAGE>

Presentment, protest and notice are hereby waived.

                                         SUPERIOR GALLERIES, INC.

                                         By:    /S/  SILVANO DIGENOVA
                                                --------------------------------
                                                  Silvano DiGenova
                                                  Its President, Duly Authorized

                                       3

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