Document:

EXHIBIT 10.29

LOAN AND SECURITY AGREEMENT

LOAN AND SECURITY  AGREEMENT  (the  "Agreement"),  dated  October 9, 2003,  (the
"Effective   Date")  by  CREATIVE   BAKERIES,   INC.,  a  New  York  corporation
("Creative")  and J.M.  SPECIALTIES,  INC.,  A NEW  JERSEY  CORPORATION  ("JMS")
(Creative  and  JMS  are  collectively  referred  to as  the  "Borrowers"),  and
Fairfield Gourmet Food Corp. ("Lender"), a New Jersey corporation.

                              W I T N E S S E T H:

            WHEREAS, pursuant to this Agreement, the Lender has agreed to make a
loan to the  Borrowers  upon the terms and subject to the  conditions  set forth
herein;

            WHEREAS, Borrowers executed certain Secured Promissory Note in favor
of  Lender,  dated  October 9, 2003 (the  "Note"),  in the  principal  amount of
$250,000; and

            WHEREAS,  it is a condition to the  obligation of the Lender to make
the loan to the Borrowers under the Note, that the Borrowers shall have executed
and delivered this Agreement to the Lender.

            NOW THEREFORE,  in  consideration  of the premises and to induce the
Lender to accept the Note, and to make the loan to the Borrowers,  the Borrowers
hereby agree with the Lender as follows:

                                    ARTICLE I
                                    THE LOAN

         1.1.  The  Loan.  Subject  to  the  terms  and  conditions  hereinafter
provided,  Lender shall lend to Borrowers Two Hundred Fifty Thousand  ($250,000)
Dollars (the "Loan"), for the purposes indicated below :

                The Loan shall be used only for Borrowers operating requirements
and for no other  purpose  including  but not  limited  to  payment  of debt not
incurred in ordinary course of Borrowers' business.

         1.2. The Note. The Loan shall be evidenced by the Note substantially in
the form  attached  hereto as Exhibit  1.2,  which Note shall be executed by the
Borrowers as of the Effective  Date.  Every term  contained in the Note shall be
deemed incorporated into this Agreement. To the extent any provision of the Note
shall be  deemed  to be  inconsistent  with the  provisions  of this  Agreement,
however, the provisions of this Agreement shall control.

         1.3.   Interest

                1.3.1.  The  outstanding  principal  balance of the Loan and any
other  obligations  arising under this Agreement shall bear interest at the rate
of Thirteen  percent (13%) per annum.  Any unpaid interest shall be added to the
outstanding principal balance of the Loan and shall bear interest as well.

                1.3.2. Interest on the Loan shall be payable by the Borrowers to
the Lender on December  31, 2003,  March 31, 2004,  June 30, 2004 and August 31,
2004.

                1.3.3.  The  "Interest  Rate  Factor"  shall  be  calculated  by
dividing the annual  interest rate of 13% by 360 days and then  multiplying  the
resulting  quotient by the Number of Elapsed Days.  The "Number of Elapsed Days"
for the Interest due on December 31, 2003,  shall be determined by the number of
days from the date of this  Agreement up until and including  December 31, 2003.
For  Interest due on March 31, 2004,  June 30,  2004,  and August 31, 2004,  the
"Number of Elapsed Days" shall be determined  respectively by the number of days
from  the last  day of the  previous  quarter  (excluding  such  last day of the
previous  quarter),  up until and  including  the date upon  which the  Interest
Payment is due.

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                1.3.4.  The "Interest"  shall be calculated by  multiplying  the
applicable Interest Rate Factor by the outstanding principal balance of the Loan
as of  the  date  each  Interest  payment  is  due,  unless  there  has  been  a
modification  of the  principal  balance  during  such  period,  in which  event
interest will be calculated based on outstanding balances from time to time.

                1.3.3.  Borrowers shall pay interest on any overdue  installment
of principal and/or interest for the period for which such payment is overdue at
the rate of eighteen percent (18%) per annum.  Nothing contained herein shall be
deemed to require  the  payment of  interest  at a rate in excess of the maximum
rate  permitted by applicable  law. In the event that the amount  required to be
paid  hereunder for any period  exceeds the maximum rate  permitted by law, such
amounts  shall be  automatically  reduced for such  period to the  maximum  rate
permitted by applicable law.

                1.3.4.  The  Borrowers  shall  compensate  the Lender,  upon the
Lender's  delivery of a written demand  therefore to the Borrowers (which demand
shall,  absent  manifest  error, be final and conclusive and binding upon all of
the parties hereto) for all reasonable losses, expenses and liabilities that the
Lender sustains as a consequence of any default by the Borrowers in repaying the
Loan or any other  amounts  owing  hereunder  when required by the terms of this
Agreement.

                1.3.5.  In addition to interest  Borrowers shall pay to Lender a
fee of  one-percent  (1%) of the  Loan,  (Two  Thousand  Five  Hundred  [$2,500]
Dollars), in consideration for Lender making the Loan to Borrowers.

         1.4.  Repayment  of  Principal.  Except as  otherwise  provided in this
Agreement,  repayment of  principal  shall be due and payable in one lump sum on
August 31, 2004 (the "Due Date").

         1.5. Prepayment. The Borrowers may prepay up to Sixty Two Thousand Five
Hundred  ($62,500)  Dollars  in  principal  on each  date that  interest  is due
pursuant to this  Agreement,  without  penalty or premium in which case any such
prepayments shall be deducted from the outstanding principal balance of the Loan
for any Interest  payments due thereafter.  Borrowers may also prepay all of the
principal  of the  Loan at any  time  provided  such  prepayment  shall  include
interest  calculated to the date of  prepayment  plus fifty (50%) percent of the
interest that would have been earned had the Loan not been prepaid from the date
of such  prepayment  to the Due Date (the "Yield  Maintenance  Payment").  It is
acknowledged that the Yield Maintenance Payment is intended to compensate Lender
for utilizing its credit in order to make the Loan to Borrowers and is not to be
deemed additional interest for any purpose.  The Yield Maintenance Payment shall
also be due in the event of a prepayment as a result of acceleration of the Loan
as a result of an Event of Default (See Section 1.6).

         1.6.  Acceleration.   Notwithstanding  the  other  provisions  of  this
Agreement,  immediately  upon the occurrence of any Event of Default (as defined
in Section 5.1) and during any continuance  thereof,  the Lender may declare the
Loan, all interest  thereon and all other amounts and obligations  payable to be
forthwith due and payable to the Lender or may take any other action as provided
in Section 5.2 and 5.3 of this Agreement.

         1.7.  Payment  Procedures.  All payments  made by Borrowers  under this
Agreement shall be made to the Lender at its office at the address  indicated in
Section  7.3 and shall be made in U.S.  dollars.  All  payments  received by the
Lender shall be applied  first to fees and  expenses  (if any),  then to accrued
interest,  then to the Yield Maintenance Payment and lastly, to unpaid principal
in accordance  with the terms of this  Agreement.  To the extent not  previously
repaid,  all principal and interest  outstanding  with respect to the Loan, plus
any accrued but unpaid expenses and fees or other obligations arising under this
Agreement, shall be due and payable in full on the "Due Date."

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                                   ARTICLE II
                                   COLLATERAL

         2.1. Collateral.  Borrowers hereby pledge,  assign and grant to Lender,
as  security  for the  performance  of this  Agreement,  the Note and any  other
documents  executed  in  connection  herewith  (the "Loan  Documents"),  and the
repayment  of  the  Loan  and  for  all  other  indebtedness,   liabilities  and
obligations  of Borrowers  (primary,  secondary,  direct,  contingent,  related,
unrelated,  sole,  joint or several) due or to become due to Lender or which may
be contracted for or acquired hereafter  (collectively,  the  "Obligations"),  a
security  interest under the Uniform  Commercial Code in effect in the States of
New  Jersey  and  New  York in all  Accounts,  Inventory,  General  Intangibles,
(including  but not  limited  to trade  names,  brand  names  (such as  Brooklyn
Cheesecake), recipes and customer lists), Chattel Paper, Instruments,  Documents
and  Equipment  (whether or not  constituting  fixtures) and any other asset now
owned or hereafter  acquired by  Borrowers,  together with all cash and non-cash
proceeds,  products,   distributions,   additions,  accessions,   substitutions,
exchanges and replacements thereof, (collectively, the "Collateral").

         2.2.  Further  Assurances.  Borrowers  shall from time to time promptly
take all actions (and execute, deliver and record all instruments and documents)
necessary or  reasonably  appropriate  or  requested  by Lender,  to perfect and
protect any security  interest  granted or purported to be granted  hereby or to
enable  Lender to exercise  and enforce its rights and remedies  hereunder  with
respect to any of the Collateral.

         2.3.  Attorney-In-Fact.  Borrowers hereby irrevocably appoint Lender as
its attorney-in-fact,  in the name of Borrowers or otherwise,  from time to time
in Lender's  discretion  and at  Borrowers'  expense,  to take any action and to
execute,  deliver and record any  instruments or documents which Lender may deem
necessary or  advisable  in order to perfect and protect any  security  interest
granted or  purported to be granted  hereby or to enable  Lender to exercise and
enforce its rights and remedies  hereunder with respect to any of the Collateral
including,  without limitation,  financing or continuation  statements under the
Uniform  Commercial  Code,  and  amendments  thereto.  Lender  shall not, in its
capacity as such attorney-in-fact,  be liable for any acts or omissions, nor for
any error of judgment or mistake of fact or law,  but only for gross  negligence
or willful  misconduct.  All  authorizations  and agencies herein contained with
respect to the collateral are irrevocable powers coupled with an interest.

                                   ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

     Borrowers hereby make the following  representations and warranties,  which
shall be  continuing  in nature and  remain in full  force and effect  until the
Obligations are satisfied in full:

         3.1.  Existence  and  Power.  Creative  and JMS are  corporations  duly
organized,  validly existing and in good standing in all material respects under
the laws of the jurisdiction of their  respective  incorporation or organization
and have all  requisite  power and authority to own and operate their assets and
to conduct  their  business  as now or  proposed  to be carried on, and are duly
qualified,  licensed  and in good  standing to do business in all  jurisdictions
where their ownership of property or the nature of their business  requires such
qualification  or  licensing.  Borrowers  have the full power and  authority  to
execute, deliver and perform this Agreement, the Note, financing statements, and
all other agreements, instruments, and documents evidencing or securing the Loan
(collectively as "Loan Documents").

         3.2.  Authorization  and  Enforceability.   Borrowers  have  been  duly
authorized to execute, deliver and perform the Loan Documents by all appropriate
action of their  respective  Boards of Directors or otherwise as may be required
by law,  charter or other  organizational  documents or agreements.  Each of the
Loan  Documents,  when executed and delivered by Borrowers,  will constitute the
legal, valid and binding obligation of Borrowers, enforceable in accordance with
their respective terms.

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         3.3.  No  Defaults  or  Violations.  There  does not exist any Event of
Default  (as that term is defined in Section  5.1) under this  Agreement  or any
material  default  or  violation  by  Borrowers  of or under  any of the  terms,
conditions or  obligations  of: (a) Creative and JMS articles or  certificate of
incorporation,  regulations  or  bylaws  or other  organizational  documents  as
applicable;  (b) any  indenture,  mortgage,  deed of trust,  franchise,  permit,
contract,  agreement,  or other instrument to which Creative and JMS are a party
or by  which  they or any of  their  properties  may be  bound;  or (c) any law,
regulation,  ruling, order,  injunction,  decree, condition or other requirement
applicable  to or imposed  upon  Borrowers  by any law,  or by the action of any
court or other governmental authority or agency; and the execution, delivery and
performance  of the Loan  Documents  will not  result  in any  such  default  or
violation, nor are any approvals, authorizations, licenses, waivers or consents,
governmental (foreign,  federal, state or local) or non-governmental,  under the
terms of contracts or otherwise,  required to be obtained by Borrowers by reason
of or in connection with their execution, delivery and performance of any of the
Loan Documents.  Notwithstanding anything else to the contrary contained in this
Agreement or any Loan Document, Lender acknowledges that Borrowers have informed
Lender  that (i)  Borrowers  may be in default of their  lease and that they are
proceeding in good faith to renegotiate a new lease or amendments to the present
lease with its landlord,  (ii) Borrowers pay their  creditors on a 90 day basis,
and (iii) Creative is in default of a certain warrant for the issuance of shares
of stock of Creative.  The existence of items (i),  (ii),  and (iii) above shall
not constitute a breach or an Event of Default with respect to this Agreement or
any of the Loan  Documents,  but anything  resulting from the existence of these
items,  including but not limited to the institution of litigation by Borrower's
landlord,  a creditor or the beneficiary of the warrant may constitute a default
under this Agreement if provided for by Article V hereof.

         3.4.  Financial  Statements.  Borrowers  have delivered or caused to be
delivered  to Lender  their most recent  balance  sheet,  income  statement  and
statement of cash flows as of June 30, 2003 (the  "Financial  Statements").  The
Financial  Statements are true,  accurate and complete in all material  respects
and  fairly  present  the  financial  condition,  cash flow and the  results  of
Borrowers'  operations  as of the  respective  dates thereof and for the periods
therein  referred  to, all in  accordance  with  generally  accepted  accounting
principles  in effect  from time to time  ("GAAP"),  consistently  applied  from
period to period  subject in the case of interim  statements to normal  year-end
adjustments and excluding  disclosures  normally required by GAPP.  Borrowers do
not have any  liabilities or  obligations  of any nature  (whether or not of the
nature  required to be reflected in a balance sheet prepared in accordance  with
GAAP) that are not reflected on the  Financial  Statements  (including,  without
limitation,  any liabilities relating to environmental,  occupational and health
matters or ERISA)  except for current  liabilities  (within the meaning of GAAP)
which  have been  incurred  since the date  thereof  in the  ordinary  course of
business and consistent in nature and amount with Borrowers'  operating history.
Notwithstanding anything else to the contrary contained in this Agreement or any
Loan  Document,  Lender  acknowledges  that  Borrower has  informed  Lender that
Borrower  has  incurred  liabilities  as set forth on  Schedule  4.2.1,  and the
existence  of such debt shall not  constitute a breach or an Event of Default of
this Agreement or any of the Loan Documents.

         3.5. No Material  Adverse  Change.  Since the date of their most recent
Financial  Statements,  Borrowers  have not suffered any damage,  destruction or
loss,  and no event or condition  has occurred or exists,  which has resulted or
could result in a material adverse change in its business,  assets,  operations,
financial condition or results of operation.

         3.6.  Title  to  Assets;   Existing  Liens.  Borrowers  have  good  and
marketable title to their assets,  free and clear of all liens and encumbrances,
except for (a) current taxes and assessments not yet due and payable,  (b) liens
and  encumbrances,  if any,  reflected  or noted in their most recent  Financial
Statements,  (c) assets  disposed of by  Borrowers  since the date of their most
recent Financial Statements in the ordinary course of business,  consistent with
past practice, and (d) the liens and encumbrances described on Schedule 3.6.

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         3.7.  Litigation.  Except as set forth in  Schedule  3.7,  there are no
actions,  suits,  proceedings or governmental  investigations pending or, to the
knowledge of Borrowers, threatened, against Borrowers or any of their properties
which could result in a material adverse change in Borrowers' business,  assets,
operations,  financial  condition or results of operations and there is no basis
known to Borrowers for any action, suit, proceeding or investigation which could
result in such a material adverse change.

         3.8. Tax Returns. Borrowers have filed all returns and reports that are
required to be filed by them in connection with any federal, state or local tax,
duty or charge levied,  assessed or imposed upon them or any of their properties
or  that  they  are  required  to  withhold  and  pay  over  including,  without
limitation,  unemployment,  social  security and similar taxes,  and all of such
taxes have been paid or adequate reserves therefore have been set aside or other
provisions therefore have been made.

         3.9.  Intellectual  Property.  Borrowers own or are licensed to use all
patents,  patent rights,  trademarks,  trade names,  service marks,  copyrights,
intellectual  property,  technology,  know-how and  processes  necessary for the
conduct of their business as currently conducted that are material to Borrowers'
condition (financial or otherwise),  business or operations. Lender acknowledges
that the names "Brooklyn Cheesecake Company,  Inc." and "Brooklyn Cheesecake and
Desserts  Company" are not registered or protected  under state or federal laws,
but Borrowers represent that they have instituted the process of registering and
trade  marking said names,  and  Borrowers  covenant  that they will pursue said
process with diligence.

         3.10. INTENTIONALLY LEFT BLANK.

         3.11.  Disclosure.  None  of the  Loan  Documents  contain  any  untrue
statement of material fact or omit to state a material  fact  necessary in order
to make the statements contained in the Loan Documents not misleading.  There is
no fact known to Borrowers which materially and adversely  affects or, so far as
Borrowers can now foresee,  might  materially  and adversely  affect  Borrowers'
business,  assets,  operations,  financial condition or results of operation and
which have not  otherwise  been fully set forth in this  Agreement  or otherwise
disclosed in writing to Lender.

         3.12.  Places of Business.  The locations of Borrowers' chief executive
office  and other  places of  business  are shown on  Schedule  3.12.  Borrowers
covenant  not to  establish  any new,  or  discontinue  any  existing,  place of
business without giving Lender at least 30 days' prior notice.

         3.13.  Capital  Structure.  Schedule  3.13 sets  forth  the  respective
authorized capital stock of Borrowers, the issued and outstanding shares of such
stock, and the 5% or greater owners thereof.  There are no options,  warrants or
other  rights  outstanding  to purchase  any such shares  except as indicated on
Schedule 3.13.

         3.14. Subsidiaries,  Affiliates, and Other Investments. Except as shown
on Schedule 3.14,  Borrowers have no subsidiaries or affiliates  (other than its
own  shareholders);  nor do Borrowers have any investment in any other person or
entity.

                                   ARTICLE IV
                                    COVENANTS

         4.1.  Affirmative  Covenants.  Borrowers  agree  that  from the date of
execution  of this  Agreement  until  the  Obligations  are  satisfied  in full,
Borrowers  shall (and shall cause each of its  majority-owned  subsidiaries,  if
any, to):

                  4.1.1.  Payments of Taxes and Other Charges. Pay and discharge
when due all taxes,  assessments,  charges, levies and other liabilities imposed
upon  Borrowers,  their income,  profits,  properties or business,  except those

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which currently are being contested in good faith by appropriate proceedings and
for  which  Borrowers  shall  have set aside  adequate  reserves  or made  other
adequate provisions acceptable to Lender in its sole discretion.

                  4.1.2.   Maintenance  of  Existence,   Operation  and  Assets;
Inspection.  Do all things  necessary to maintain,  renew and keep in full force
and effect their respective organizational existence and all rights, permits and
franchises  necessary  to enable them to continue  their  business;  continue in
operation in substantially  the same manner as at present;  conduct business and
enter  into  transactions  only in the  ordinary  course,  consistent  with past
practice; keep their properties in good operating condition and repair; make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto; and permit  representatives of Lender to inspect Borrowers'  properties
and its books and records and to make extracts therefrom at all reasonable times
during normal business hours.

                  4.1.3.  Insurance.  Keep their assets insured with responsible
insurance  companies  against  those risks and in such  amounts as are  commonly
insured against by companies in similar businesses and owning similar assets. At
Lender's request,  Borrowers shall have Lender named as loss payee on all hazard
insurance  policies  covering the  Collateral  and shall have Lender named as an
additional insured on liability policies. Borrowers shall deliver to Lender such
certificates,  endorsements,  and other evidence of such insurance as Lender may
reasonably request.

                  4.1.4.  Compliance with Laws.  Comply materially with all laws
applicable  to  Borrowers  and to the  operation  of their  respective  business
(including,  without  limitation,  any statute,  rule or regulation  relating to
employment  practices and employee benefits and to  environmental,  occupational
and health standards and controls).

                  4.1.5.  Financial  Reports.  Deliver  promptly such  financial
statements  and  reports as Lender may  reasonably  request  including,  without
limitation,  annual  financial  statements  audited or reviewed  by  independent
certified public accountants, quarterly interim financial statements prepared by
Borrowers'  management  and within ten (10) days after the end of each  calendar
month,  a monthly  statement of cash flow and accounts  receivable  certified as
accurate  by the CEO of  Borrowers.  All  such  financial  data  shall  be true,
accurate  and  complete  in all  material  respects  and  shall be  prepared  in
accordance  with GAAP  consistently  applied,  subject,  in the case of  interim
statements,  to normal year-end  adjustments and excluding  disclosures normally
required by GAAP.

                  4.1.6. Additional Reports.  Provide prompt notice to Lender of
the  occurrence of any of the  following  (together  with a  description  of the
action which Borrowers propose to take with respect  thereto):  (a) any Event of
Default  or  potential  Event of  Default  hereunder  or  under  any of the Loan
Documents, (b) any litigation filed by or against Borrowers, (c) any event which
might  result in a  material  adverse  change in  Borrowers'  business,  assets,
operations,  financial condition or results of operation;  and provide to Lender
any other reports reasonably requested thereby.

                  4.1.7.  Use of Proceeds.  Use of the proceeds of the Loan only
for the purposes specified in Section 1.1 above.

                  4.1.8.  Indemnification.  Borrowers  agree to pay, and to hold
Lender harmless from, any and all  liabilities,  costs and expenses  (including,
without limitation,  reasonable legal fees and expenses) (i) with respect to, or
resulting  from,  any delay in paying any and all  excise,  sales or other taxes
which may be payable or  determined  to be  payable  with  respect to any of the
Collateral, (ii) with respect to, or resulting from, any delay in complying with
any  requirement  of  law  applicable  to  any of the  Collateral  or  (iii)  in
connection  with any of the  transactions  contemplated by this Agreement or the
Loan Documents.  In any suit,  proceeding or action brought by Lender to enforce
the provisions of this Agreement, Borrowers will save, indemnify and keep Lender
harmless from and against all expense,  loss or damage suffered by reason of any
defense, set off, counterclaim,  recoupment or reduction or liability whatsoever
of the account of  Borrowers or obligor  thereunder,  arising out of a breach by

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Borrowers of any  obligation  thereunder or arising out of any other  agreement,
indebtedness  or  liability  at any time owing to or in favor of such account of
Borrowers or obligor or its successors.

                  4.1.9.  Further  Identification of Collateral.  Borrowers will
furnish to Lender from time to time statements and schedules further identifying
and  describing  the  Collateral  and such other reports in connection  with the
Collateral as Lender may reasonably request, all in reasonable detail.

                  4.1.10  Notices.  Borrowers will advise Lender,  in reasonable
detail,  at its address set forth  below,  (i) of any  encumbrance  on, or claim
asserted against,  any of the Collateral and (ii) of the occurrence of any other
event which could  reasonably be expected to have a material  adverse  effect on
the aggregate value of the Collateral or on the encumbrances created hereunder.

         4.2.  Negative  Covenants.  Borrowers  covenant and agree that from the
date of execution of this Agreement until the Obligations are satisfied in full,
Borrowers shall not (and shall cause each of its majority-owned subsidiaries, if
any, not to), without Lender's prior written consent:

                  4.2.1.  Indebtedness.  Except as provided in Schedule 4.2.1 of
this Agreement,  maintain,  create or incur any  indebtedness for borrowed money
other than the Loan and any subsequent indebtedness to Lender,

                  4.2.2.  Liens and  Encumbrances.  Except for liens in favor of
Lender create,  assume or permit to exist any mortgage,  pledge,  encumbrance or
other security interest or lien upon any assets now owned or hereafter  acquired
by Borrower.  Notwithstanding  anything  else to the contrary  contained in this
Agreement or any of the Loan Documents,  (i) Borrowers may lease equipment under
which the lessor of such  equipment  may  maintain a  security  interest  in the
equipment  leased,  and (ii)  Borrowers may purchase  equipment  under which the
seller of such  equipment  may  maintain a security  interest  in the  equipment
purchased  by the  Borrowers,  provided  that for  purchases  of equipment in an
amount greater than Ten Thousand  ($10,000)  Dollars,  Borrowers must obtain the
prior written  consent of the Lender,  which  consent shall not be  unreasonably
withheld.

                  4.2.3. Guarantees.  Guarantee,  endorse or become contingently
liable for the  obligations of any person or entity,  except in connection  with
the  endorsement  and deposit of checks in the  ordinary  course of business for
collection.

                  4.2.4.  Merger;  Disposition  of Assets.  Merge or consolidate
with or into any person or entity or lease, sell,  transfer or otherwise dispose
of any material assets,  whether now owned or hereafter acquired,  other than in
the normal course of business and consistent with past practices.

                  4.2.5.  Change in Business,  Management or Ownership.  Make or
permit any material change in the nature of Borrower's business as carried on as
of the date hereof or make any other major  decisions  which effect the business
of Borrower other than day to day operation decisions.

4.2.6.  Dividends  and Other  Distributions.  Declare or pay any dividends on or
make any  distribution  with respect to any class of its capital stock or equity
or ownership interest, or repurchase, redeem, retire or otherwise acquire any of
its capital stock or equity.

                  4.2.7.  Investments.  Purchase or hold beneficially any stock,
other  securities or evidence of  indebtedness or make any loans or advances to,
or make any investment or acquire any interests in, any other person or entity

                  4.2.8.  Related  Party  Loans.  Repay  any  loans  payable  to
officers, shareholders or directors of Borrowers.

For so long as no Event of Default has occurred,  notwithstanding  anything else
to the contrary  contained in this Agreement or any of the Loan  Documents,  the
Borrower may pay to (i) Ronald L. Schutte the "Minimum  Amount Due," or past due
amounts  thereof,  as required under the American  Express Business Capital Line
and in connection with the Revolving  Credit Note to Ronald L. Schutte listed in

                                                                               7
<PAGE>

Schedule 4.2.1 and (ii) Anthony  Merante the "Minimum  Payment Due," or past due
amounts  thereof,  as required  under the Fleet  Business  Credit Express and in
connection with the Revolving  Credit Note to Anthony Merante listed in Schedule
4.2.1.

                                    ARTICLE V
                                     DEFAULT

         5.1.  Events of Default.  Events of default (an "Event of Default") are
as follows:

                  5.1.1.  Any  material  default in the Note or any of the other
Loan Documents.

                  5.1.2   (a) Borrowers fail to make any payment of principal or
                  interest payable under this Agreement or Loan  Documents  when
                  due; or

                          (b) Borrowers fail to fully perform any material term,
                  condition or obligation as provided in this  Agreement or Loan
                  Documents  that  remains  uncured for five (5)  business  days
                  after notice from Lender of such default; or

                          (c)   Creative   or  JMS   file  for   bankruptcy   or
                  reorganization,  are  generally  not  paying  their  debts  in
                  accordance with past business practice, make an assignment for
                  the benefit of  creditors,  a trustee or receiver is appointed
                  over  Creative  or JMS or any of their  property,  bankruptcy,
                  liquidation or other similar  proceedings is commenced against
                  Creative  or JMS,  or a writ or warrant or similar  process is
                  issued against Creative or JMS or their property; or

                          (d) Creative or JMS no longer remain a corporation  in
                  good standing in the State of its organization, or

                          (e) The death,  disability,  resignation or removal of
                  Ronald L. Schutte ("Schutte"),  as CEO of Borrowers, unless in
                  the case of death or  disability  there  exists  "Key  Man" or
                  disability  insurance  policies with proceeds  utilized to pay
                  all amounts due the Lender within a reasonable period of time.
                  In addition, the Lender must be named as an additional insured
                  and/or beneficiary on such policies, or

                          (f) The  inability  of  Borrowers  to pay any of their
                  debts (in accordance with past business  practice) or taxes as
                  they become due, or

                          (g) The filing of a summary  proceeding  by Borrowers'
                  landlord  or of any  lawsuit  in  excess  of  $20,000  against
                  Creative  and/or JMS that is not  removed or bonded  within 15
                  days of institution of such lawsuit, or

                          (h) Sales fall below $600,000 in any calendar quarter,
                  or (i) Cash and accounts receivable are below $125,000.

         5.2.  Remedies on Default:

                  5.2.1.  Proceeds.  If an Event of Default under this Agreement
shall occur and be  continuing or if any portion of the  Obligations  has become
due and remain unpaid and if so requested by Lender (a) all proceeds received by
Borrowers  consisting of cash, checks and other near-cash items shall be held by
Borrowers in trust for Lender,  and shall,  forthwith upon receipt by Borrowers,
be turned over to Lender in the exact form received by Borrowers  (duly endorsed
by Borrowers to Lender, if required), and (b) any and all such proceeds received
by Lender  (whether from Borrowers or otherwise)  may, in the sole discretion of
Lender, be held by Lender for its own benefit as collateral security for, and/or
then or at any time  thereafter may be applied by Lender against the Obligations
(whether  matured or  unmatured),  such  application to be in such manner as set
forth in the Note and  Borrowers  waive any right of offset  they may  otherwise
have. Any balance of such proceeds  remaining after the  Obligations  shall have
been paid in full and Lender shall have no further  obligations  or  commitments
under the Note shall be paid over to Borrowers or to whomsoever  may be lawfully
entitled to receive the same.

                                                                               8
<PAGE>

                  5.2.2.  Remedies. If any Event of Default under this Agreement
shall  have  occurred  and be  continuing  or from and  after  the date that any
portion  of the  Obligations  has  become  due and  remains  unpaid,  Lender may
exercise in addition to all other  rights and  remedies  granted to them in this
Agreement and in any Loan Documents,  evidencing or relating to the Obligations,
all rights and remedies of a secured party under the UCC.  Without  limiting the
generality  of the  foregoing,  in the  event  of such an Event  of  Default  as
described in the preceding  sentence,  Lender,  without demand of performance or
other demand, presentment,  protest, advertisement or notice of any kind (except
any notice  required by law referred to below) to or upon Borrowers or any other
person (all and each of which demands, defenses,  advertisements and notices are
hereby waived) may in such circumstances forthwith collect, receive, appropriate
and realize upon the Collateral, or any part thereof, and/or may forthwith sell,
lease,  assign, give option or options to purchase,  or otherwise dispose of and
deliver  the  Collateral  or any  part  thereof  (or  contract  to do any of the
foregoing)  in one or more  parcels at public or private  sale or sales,  at any
exchange,  broker's  board or office of Lender or elsewhere  upon such terms and
conditions as it may deem  advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without  assumption of any credit risk.
Lender  shall have the right upon any such  public  sale or sales,  and,  to the
extent  permitted by law,  upon any such private sale or sales,  to purchase the
whole or any part of the  Collateral  so sold,  free of any  right or  equity of
redemption which right or equity is hereby waived or released. Borrowers further
agree, at Lender's request,  and to the extent that Borrowers are able to do so,
to assemble  the  Collateral  and make it  available  to Lender at places  which
Lender shall  reasonably  select,  whether at Borrowers'  premises or elsewhere.
Lender shall apply the net proceeds of any such collection,  recovery,  receipt,
appropriation,  realization or sale,  after  deducting all reasonable  costs and
expenses of every kind incurred therein or incidental to the care or safekeeping
of any of the  Collateral or in any way relating to the Collateral or the rights
of Lender hereunder,  including, without limitation,  reasonable attorneys' fees
and  disbursements,  to the payment in whole or in part of the  obligations,  in
such  manner as is set forth in the Note and only  after  such  application  and
after the payment by Lender of any other  amount  required by any  provision  of
law, including, without limitation,  Section 9-504(1)(c) of the UCC, need Lender
account for surplus, if any, to Borrowers. To the extent permitted by applicable
law,  Borrowers  waive all claims,  damages  and demands it may acquire  against
Lender  arising  out of the  exercise  by them of any rights  hereunder.  If any
notice of a proposed sale or other  disposition of Collateral  shall be required
by law, such notice shall be deemed  reasonable and proper if given at least ten
(10) days before such sale or other  disposition.  Borrowers shall remain liable
for any  deficiency  if the  proceeds  of any sale or other  disposition  of the
Collateral  are   insufficient   to  pay  the   obligations  and  the  fees  and
disbursements of any attorneys employed by Lender to collect such deficiency.

                  5.2.3. No Subrogation. Notwithstanding any payment or payments
made by Borrowers hereunder, or any set off or application of funds of Borrowers
by Lender,  or the receipt of any  amounts by Lender with  respect to any of the
Collateral,  Borrowers  shall not be  entitled  to be  subrogated  to any of the
rights of Lender  against any other  collateral  security held by Lender for the
payment of the  Obligations  until all amounts owing to Lender on account of the
Obligations or commitments  under the Note have been paid in full. If any amount
shall be paid to Lender on account of such  subrogation  rights at any time when
all of the  Obligations  shall not have been paid in full,  such amount shall be
held by  Borrowers  in trust for Lender,  and shall,  forthwith  upon receipt by
Borrowers,  be turned  over to Lender in the exact form  received  by  Borrowers
(duly  endorsed by Borrowers to Lender,  if required) to be applied  against the
Obligations,  whether  matured or unmatured,  in such manner as set forth in the
Note, this Agreement and the Loan Documents.

                  5.2.4. Appointment to Borrowers Board of Directors.  Within 10
days  after a default  under the Loan  Documents,  Creative  and JMS shall  take
actions  to cause the  removal  and/or  resignation  of a  sufficient  number of
directors and to replace such directors  with directors  nominated by the Lender
in order that there shall be a majority of directors on their respective  Boards
of Directors  that are  nominated by the Lender,  provided  that nominees of the
Lender are  qualified to serve as directors  and there  remains on the Boards of
Directors  a  sufficient  number  of  independent  directors  in  order to be in
compliance  with law.  It is  acknowledged  that this  provision  is intended to
facilitate Lender's execution on the Collateral if an Event of Default occurs.

                                                                               9
<PAGE>

                                   ARTICLE VI
                               DISPUTE RESOLUTION

         6.1. Resolution of Disputes.

                  6.1.1.  Jurisdiction;  Process. The parties hereto irrevocably
submit  to the  non-exclusive  jurisdiction  of any New  Jersey  state or United
States  Federal Court sitting in New Jersey over any suit,  action or proceeding
arising out of or relating to this Agreement.

         The parties hereto further  consent to process being served in any such
suit,  action or proceeding by mailing a certified copy thereof,  return receipt
requested,  to said party at its respective  address referred to in Section 7.3.
Each party agrees that such service shall be deemed in every  respect  effective
service of process upon it in any such suit,  action or proceeding and shall, to
the full extent permitted by law, be taken and held to be valid personal service
upon and  personal  delivery to it.  Nothing in this  paragraph  shall affect or
limit  any right to serve  process  in any  manner  permitted  by law,  to bring
proceedings in the courts of any jurisdiction or to enforce in any lawful manner
a judgment obtained in any other jurisdiction.

         Borrowers  irrevocably  waive, to the full extent permitted by law, any
objection  which it may have to the laying of venue of any such suit,  action or
proceeding  brought in any such  court any claim  that any such suit,  action or
proceeding has been brought in an inconvenient  forum. So long as this Agreement
remains in effect,  Borrowers will at all times have an authorized  agent in New
Jersey upon whom process may be served in any action or  proceeding  arising out
of or relating to this Agreement.

                  6.1.2.  Performance  Pending  Resolution.  Each party shall be
required  to  continue  to perform  its  respective  obligations  under the Loan
Documents  pending  final  resolution  of any Dispute,  unless to do so would be
impossible or impracticable under the circumstances.

                                   ARTICLE VII
                                  MISCELLANEOUS

         7.1. Expenses.  Borrowers shall pay to Lender or at Lender's direction,
upon  execution  of this  Agreement,  and  otherwise  on  demand,  all costs and
expenses incurred by Lender in connection with (a) the preparation,  negotiation
and closing of this Agreement, Loan Documents and any related documents, and any
modifications  hereto or thereto,  it being agreed that  reimbursement  for said
legal  fees  incurred  by Lender  exclusive  of  disbursements  shall not exceed
$5,000, and (b) instituting,  maintaining, preserving, enforcing and foreclosing
the  security  interest  in any  of the  Collateral,  whether  through  judicial
proceedings,  arbitration  or  otherwise,  or in  defending or  prosecuting  any
actions,  arbitrations  or  proceedings  arising  out  of or  relating  to  this
Agreement or the Loan Documents including,  without limitation,  reasonable fees
and expenses of counsel,  expenses for auditors,  appraisers  and  environmental
consultants, lien searches, recording and filing fees and taxes.

         7.2.  Amendments,  Indulgences,  Etc.  No  amendment  or  waiver of any
provision of this  Agreement nor consent to any  departure by Borrower  herefrom
shall in any event be  effective  unless the same shall be in writing and signed
by Lender, and then such amendment, waiver or consent shall be effective only in
the specific  instance and for the specific  purpose for which given. No failure
or delay on the part of Lender in the  exercise of any right,  power,  or remedy
under  this  Agreement  or any of the  other  Loan  Documents  shall  under  any
circumstances  constitute  or be deemed to be a waiver  thereof,  or prevent the
exercise thereof in that or any other instance.

         7.3.  Notices.  All  notices  given  hereunder  shall be in writing and
deemed validly given (a) three (3) business days after sent, postage prepaid, by

                                                                              10
<PAGE>

certified mail, return receipt  requested,  (b) one (1) business day after sent,
charges  paid by the  sender,  by Federal  Express  Next Day  Delivery  or other
guaranteed delivery service,  (c) when confirmation of transmission by facsimile
during normal  business hours is received,  or (d) when delivered by hand,  upon
delivery,  in each case to the intended  recipient at its address shown below or
to such other  address,  or in care of such other person,  as either party shall
hereafter specify to the other from time to time by due notice:

         If to Borrowers
                        J.M. Specialties, Inc. Creative Bakeries, Inc.
                        20 Passaic Avenue Fairfield, New Jersey 07004
                        Attention: Ron Schutte
                        Fax No.: (973) 808-0203

         cc:            Vincent LeVoci, Esq.
                        1590 Paulding Avenue
                        Bronx, NY 10462-3166
                        Fax No.:  (212) 898-0492

         If to Lender:
                        Fairfield Gourmet Food Corp.
                        12 Commerce Road
                        Fairfield, NJ 07004
                        Attn:  Ari Margulies
                        Fax No.:  (973) 882-6998

         cc:            Larry Frenkel, Esq.
                        28 Arcadian Drive
                        Wesley Hills, NY 10977
                        Fax (845) 364-8299

         7.4.  Interpretation.  Except as otherwise  indicated,  all  agreements
defined herein refer to the same as from time to time amended or supplemented or
the terms thereof waived or modified in accordance  herewith and therewith.  Any
provision hereof found to be illegal,  invalid or  unenforceable  for any reason
whatsoever  shall not affect the  legality,  validity or  enforceability  of the
remainder hereof. In this Agreement, in the computation of a period of time from
a specified  date to a later  specified  date,  the word "from"  means "from and
including" and the words "to" and "until" each means "to but excluding."  Unless
otherwise expressly provided,  the word "including" does not limit the preceding
words or terms.

         7.5.  Entire  Agreement.   This  Agreement,   and  all  agreements  and
instruments  to be delivered  by the parties  pursuant  hereto or in  connection
herewith,  represent the entire understanding of the parties with respect to the
subject  matter  hereof,  and  supersede  all other  prior  and  contemporaneous
agreements and  understandings,  both written and oral, between the parties with
respect to the subject matter hereof.

         7.6.  Governing  Law.  This  Agreement  shall be binding upon and shall
inure to the benefit of the parties hereto and their  respective  successors and
assigns, and construed and interpreted according to the laws of the State of New
Jersey.

         7.7.  Counterparts.  This  Agreement  may be  executed  in one or  more
counterparts,  all of which taken  together  shall  constitute  one and the same
instrument.

         7.8.  Continuing  Security  Interest.  This  Agreement  shall  create a
continuing  security  interest in the  Collateral and shall remain in full force
and effect until the payment in full of the  obligations  and all other  amounts
payable under this  Agreement  and the Loan  Documents.  Upon any  assignment or
transfer by Lender,  the transferee  shall thereupon  become vested with all the
benefits in respect  thereof  granted to Lender  herein or  otherwise.  Upon the
payment in full of the  Obligations  and all other  amounts  payable  under this
Agreement,  the security  interest granted hereby shall terminate and all rights
to the Collateral shall revert to Borrowers.  Upon any such termination,  Lender
will, at Borrowers' expense, execute and delivery to Borrowers such documents as
Borrowers shall reasonably request to evidence such termination.

                                                                              11
<PAGE>

         7.9 Limitation on Duties Regarding Preservation of Collateral. Lender's
sole duty with respect to the custody,  safekeeping and physical preservation of
the Collateral in its  possession,  under Section 9-207 of the UCC or otherwise,
shall  be to deal  with it in the same  manner  as  Lender  deals  with  similar
property  for its own  account.  Neither  Lender,  nor any of  their  respective
directors,  officers, employees or agents shall be liable for failure to demand,
collect or realize  upon all or any part of the  collateral  or for any delay in
doing so or shall be under any  obligation  to sell or otherwise  dispose of any
Collateral upon the request of Borrowers or otherwise.

         7.10. Paragraph Headings. The paragraph headings used in this Agreement
are for  convenience  of reference  only and are not to affect the  construction
hereof or be taken into consideration in the interpretation hereof.

IN WITNESS  WHEREOF,  the parties  have  executed or caused to be executed  this
Agreement as of the day and year first above written.

Borrowers:

                               J.M. Specialties, Inc., A New Jersey Corporation

                               By:
                                   ---------------------------------------
                                   Ronald L. Schutte
                                   Title: Chief Executive Officer & President

                               Creative Bakeries, Inc.

                               By:
                                   ---------------------------------------
                                   Ronald L. Schutte
                                   Title: Chief Executive Officer

Lender:

                               Fairfield Gourmet Food Corp.

                               By:
                                   ---------------------------------------
                                   Ari Margulies
                                   Title: President

STATE OF NEW JERSEY, COUNTY OF                               S S :
On the   day of       in the year
before me, the undersigned, personally appeared        Ronald L. Schutte

personally known to me or proved to me on the basis of satisfactory  evidence to
be the individual(s)  whose name(s) is (are) subscribed to the within instrument
and  acknowledged  to me that  he/she/they  executed  the same in  his/her/their
capacity(ies),  and that by  his/her/their  signature(s) on the instrument,  the
individual(s),  or the  person  upon  behalf of which the  individual(s)  acted,
executed the instrument.

---------------------------------------------------
(signature and office of individual taking acknowledgment)

                                                                              12
<PAGE>

                             SECURED PROMISSORY NOTE
                                  (THE "NOTE")

October 9, 2003
                          $250,000

            A. TERMS OF LOAN

      FOR       VALUE RECEIVED,  CREATIVE BAKERIES, INC., A NEW YORK CORPORATION
                ("CREATIVE")   AND  J.M.   SPECIALTIES,   INC.,   A  NEW  JERSEY
                CORPORATION ("JMS") (CREATIVE AND JMS ARE COLLECTIVELY  REFERRED
                TO AS THE  "BORROWERS"),  with  offices  at 20  Passaic  Avenue,
                Fairfield,  New Jersey 07004,  jointly and severally promises to
                pay to the order of FAIRFIELD  GOURMET FOOD CORP.,  a New Jersey
                Corporation (the "LENDER"), at 12 Commerce Road, Fairfield,  New
                Jersey 07004, or at such other place as the Lender may designate
                in writing,  the  principal  sum of TWO HUNDRED  FIFTY  THOUSAND
                DOLLARS ($250,000), (the "Loan").

1. INTEREST; PREPAYMENT.

       (a)      Borrower  will  pay  interest  on the  unpaid  principal  amount
                hereof,  computed  on the  basis of the  actual  number  of days
                elapsed in a 360-day  year,  at a rate  which  shall be equal to
                thirteen percent (13.00%) per annum (the "Interest Rate").

       (b)      The  "Interest  Rate Factor" shall be calculated by dividing the
                annual interest rate of 13% by 360 days and then multiplying the
                resulting quotient by the Number of Elapsed Days. The "Number of
                Elapsed  Days" for the Interest due on December 31, 2003,  shall
                be  determined  by the  number  of days  from  the  date of this
                Agreement up until and including December 31, 2003. For Interest
                due on March 31, 2004,  June 30, 2004,  and August 31, 2004, the
                "Number of Elapsed Days" shall be determined respectively by the
                number  of  days  from  the  last  day of the  previous  quarter
                (excluding  such last day of the previous  quarter) up until and
                including  the date upon which the Interest  Payment is due. The
                "Interest"  shall be calculated by  multiplying  the  applicable
                Interest Rate Factor by the outstanding principal balance of the
                Loan as of the date each  Interest  payment is due unless  there
                has been a  modification  of the principal  balance  during such
                period  (such as by a payment) in which event  interest  will be
                calculated based on the outstanding  balances from time to time.
                Interest on the Loan shall be due and  payable on  December  31,
                2003, March 31, 2004, June 30, 2004 and August 31, 2004 provided
                such day is a Business Day ("Business Day").  Business Day shall
                mean any day other than  Saturday,  Sunday,  or any other day on
                which  commercial  banks  located in the State of New Jersey are
                required  or  authorized  by  law  to be  closed  for  business.
                Borrower  will  pay  interest  on  any  overdue  installment  of
                principal  or  interest  for the  period for which  overdue,  on
                demand,  at a rate equal to eighteen percent (18.00%) per annum.
                In no  event  shall  interest  exceed  the  maximum  legal  rate
                permitted by law. All payments, including insufficient payments,
                shall be credited, regardless of their designation by Borrowers,
                first to collection expenses due hereunder,  then to outstanding
                late charges, then to interest due and payable but not yet paid,
                then  to  the  Yield  Maintenance   Payment  (if  any)  and  the
                remainder,  if any, to  principal.  All payments by Borrowers or
                any endorser of this Note on account of  principal,  interest or
                fees  hereunder  shall be made in  lawful  money  of the  United
                States of America.

                                                                              13
<PAGE>

       (c)      Prepayment.  The  Borrowers may prepay up to (Sixty Two Thousand
                Five  Hundred  ($62,500)  Dollars in principal on each date that
                interest is due pursuant to this  Agreement,  without penalty or
                premium.  Borrowers  may also prepay all of the principal of the
                Loan at any time provided such prepayment shall include interest
                calculated to the date of prepayment plus fifty (50%) percent of
                the  interest  that would have been earned had the Loan not been
                prepaid from the date of such  prepayment to the Due Date of the
                Loan (the "Yield Maintenance Payment").  It is acknowledged that
                the Yield  Maintenance  Payment is intended to compensate Lender
                for  utilizing its credit in order to make the Loan to Borrowers
                and is not to be deemed additional interest for any purpose. The
                Yield  Maintenance  Payment  shall also be due in the event of a
                prepayment as a result of  acceleration  of the Loan as a result
                of an Event of Default.

         2.  DUE DATE.  The Loan together with interest as provided herein shall
be due on August 31, 2004 (the "Due Date").

                B. REPRESENTATIONS AND WARRANTIES

         3. Borrowers represents and warrant to the Lender that:

       (a)      The Note is legal,  valid, and contains  binding  obligations of
                Borrowers  enforceable  against Borrowers in accordance with its
                terms,  except as  enforcement  may be  limited  by  bankruptcy,
                insolvency,   moratorium  or  other  similar  laws  relating  to
                creditors'  rights generally and except that the availability of
                equitable remedies,  including specific performance,  is subject
                to the  discretion  of the court  before  which  any  proceeding
                therefor may be brought.

       (b)      Borrowers are not in default in the  performance,  observance or
                fulfillment of any of the obligations,  covenants, or conditions
                contained in any agreement or instrument to which it is a party,
                except  where such  default  would not have a  material  adverse
                effect on the assets,  liabilities  or  financial  condition  of
                Borrowers (a "Material Adverse Effect").

       (c)      There is no pending or threatened  action or proceeding  against
                or affecting Borrowers before any court, governmental agency, or
                arbitrator which is reasonably likely to , in any one case or in
                the aggregate,  have a Material Adverse Effect or materially and
                adversely  affect the  ability  of  Borrowers  to perform  their
                obligations under this Note.

                C. EVENTS OF DEFAULT

         4. If any of the following events shall occur and be continuing:

        (a)     Borrowers  shall  fail to  make  any  payment  of  principal  or
                interest on this Note when due;

        (b)     Borrowers  shall be in material  default in the  performance  or
                observance of any covenant or agreement  contained  herein or in
                the Loan and Security  Agreement  securing  this Loan  following
                five (5) business days' written notice thereof;

                                                                              14
<PAGE>

       (c)      Any representation or warranty made by or on behalf of Borrowers
                in this Note,  or in the Loan and  Security  Agreement or in any
                other  agreement,  instrument,  or  statement  delivered  to the
                Lender by or on behalf of  Borrowers  shall at any time prove to
                have been incorrect when made in any material respect;

       (d)      Creative or JMS no longer remain  corporations  in good standing
                in the state of their respective organization;

       (e)      The  death,  disability,  resignation  or  removal  of Ronald L.
                Schutte ("Schutte"),  as CEO of Borrowers, unless in the case of
                death  or  disability  there  exists  "Key  Man"  or  disability
                insurance policies with proceeds utilized to pay all amounts due
                the Lender within a reasonable period of time. In addition,  the
                Lender must be named as an additional insured and/or beneficiary
                on such policies;

       (f)      The  inability  of  Borrowers  to pay  any  of  their  debts  in
                accordance  with past business  practice or taxes as they become
                due;

       (g)      The filing of any lawsuit in excess of $20,000 against  Creative
                and/or  JMS that is not  removed  or  bonded  within  15 days of
                institution of such lawsuit;

       (h)      Sales fall below $600,000 in any calendar quarter;

       (i)      Cash and accounts receivable are below $125,000;

       (j)      Any judgment against Creative or JMS or any attachment,  levy or
                execution  against  any of  their  properties  for any  material
                amount   shall  remain   unpaid,   or  shall  not  be  released,
                discharged,  dismissed,  stayed or fully  bonded for a period of
                fifteen (15) days or more after its entry, issue or levy, as the
                case may be;

       (k)      Creative  or JMS shall  make an  assignment  for the  benefit of
                creditors, a trustee,  receiver or liquidator shall be appointed
                for either of them or for any of their property; or

       (l)      The commencement of any proceedings by Creative or JMS under any
                bankruptcy,  reorganization,  arrangement  of debt,  insolvency,
                readjustment of debt,  receivership,  liquidation or dissolution
                law or  statute  or the  commencement  of any  such  proceedings
                without the consent of Borrower and such involuntary proceedings
                shall continue undischarged for a period of sixty (60) days;

       then,  and in any such  event,  (with  each of the  foregoing  events  to
       constitute  an "EVENT OF  DEFAULT"),  the Lender may  declare  the entire
       unpaid  principal  amount of this Note and all  interest and fees accrued
       and unpaid hereon to be immediately  due and payable,  whereupon the same
       shall  become and be  forthwith  due and  payable,  without  presentment,
       demand,  offset,  protest or notice of any kind,  all of which are hereby
       expressly waived by Borrowers.

                                D. MISCELLANEOUS

5.     GOVERNING  LAW.  This  Note  shall  be  governed  by,  and  construed  in
       accordance  with, the laws of the State of New Jersey,  without regard to
       its rules on conflicts of laws.

6.     NOTICES,  ETC.  All notices and other  communications  provided for under
       this  Note  shall  be  in  writing  (including  telegraphic,  telex,  and
       facsimile  transmissions)  and mailed or transmitted or delivered,  if to
       Borrowers,  at Borrower's  address  indicated  above (fax (973) 808-0203)
       with a copy to Vincent  LeVoci,  Esq. 1590  Paulding  Avenue,  Bronx,  NY
       10462-3166  (fax (212)  898-0492),  and if to the Lender,  at its address
       indicated above (fax (973) 882-6998), with a copy to Larry Frenkel, Esq.,
       28 Arcadian Drive, Wesley Hills, New York 10977, (fax (845) 364-8299) or,
       as to each party,  at such other  address as shall be  designated by such

                                                                              15
<PAGE>

       party in a written  notice to the other  party  complying  as to delivery
       with the terms of this  paragraph.  Except as otherwise  provided in this
       Note, all such notices and  communications  shall be effective  either on
       receipt  if  delivered  by  hand,   telegraphic,   telex  and   facsimile
       transmissions,  or three (3) Business  Days  following  deposit,  postage
       fully paid, in the mails by certified mail.

7.     NO WAIVER.  No  failure or delay on the part of the Lender in  exercising
       any right,  power, or remedy hereunder shall operate as a waiver thereof;
       nor shall any single or partial  exercise  of any such right,  power,  or
       remedy preclude any other or further  exercise thereof or the exercise of
       any other  right,  power,  or remedy  hereunder.  The rights and remedies
       provided  herein  are  cumulative,  and are not  exclusive  of any  other
       rights,  powers,  privileges,  or remedies, now or hereafter existing, at
       law or in equity or otherwise.

8.     COSTS AND EXPENSES.  Borrowers  shall  reimburse the Lender for all costs
       and expenses incurred by the Lender and shall pay the reasonable fees and
       disbursements of counsel to the Lender in connection with the preparation
       of this Secured  Promissory Note and any documents related thereto with a
       maximum amount of $5,000 plus disbursements, and shall also pay all costs
       including  reasonable  fees  incurred  by  Lender in  enforcement  of the
       Lender's  rights  hereunder.  Borrowers  shall also pay any and all taxes
       (other  than  taxes on or  measured  by net  income of the holder of this
       Note)  incurred or payable in connection  with the execution and delivery
       of this Note.

9.     AMENDMENTS.  No  amendment,  modification,  or waiver of any provision of
       this Note nor consent to any  departure by Borrowers  therefrom  shall be
       effective  unless the same  shall be in writing  and signed by the Lender
       and then such waiver or consent  shall be effective  only in the specific
       instance  and for the specific  purpose for which it is given.  Borrowers
       hereby waive  demand,  presentment,  notice of  dishonor,  and protest of
       nonpayment  and  agree  that any  time and from  time to time and with or
       without  consideration,  Lender may, without notice to or further consent
       of  Borrowers,  and without in any manner  releasing,  or  affecting  the
       obligations of Borrowers: (a) release, surrender, waive, add, substitute,
       settle, exchange,  compromise,  modify, extend, or grant indulgences with
       respect to (i) this Note,  and (ii) all or any part of any  collateral or
       security   for  this  Note;   and  (b)  grant  any   extension  or  other
       postponements of the time of payment hereof.

10.    SUCCESSORS AND ASSIGNS. This Note shall be binding upon Borrowers and its
       heirs,  legal  representatives,  successors and permitted assigns and the
       terms hereof shall inure to the benefit of the Lender and its  successors
       and permitted assigns,  including subsequent holders hereof. This Note is
       freely  transferable  and  assignable  by the Lender and each  subsequent
       holder hereof and any reference to Lender herein shall be deemed to refer
       to any  subsequent  transferee or assignee of this Note.  Notwithstanding
       the foregoing, Borrowers may not assign their rights or obligations under
       this Note whether by voluntary assignment or transfer,  operation of law,
       or otherwise without the consent of Lender.

11.    SEVERABILITY.  The  provisions  of this  Note are  severable,  and if any
       provision shall be held invalid or  unenforceable  in whole or in part in
       any jurisdiction,  then such invalidity or unenforceability  shall not in
       any manner affect such provision in any other  jurisdiction  or any other
       provision of this Note in any jurisdiction.

12.    ENTIRE AGREEMENT.  This Note sets forth the entire agreement of Borrowers
       and the Lender with  respect to this Note and may be  modified  only by a
       written instrument executed by Borrower and the Lender.

13.    HEADINGS.  The  headings  herein are for  convenience  only and shall not
       limit or define the meaning of the provisions of this Note.

                                                                              16
<PAGE>

14.    JURISDICTION;  SERVICE OF PROCESS.  Borrowers agree that in any action or
       proceeding  brought  on or in  connection  with  this  Note (i) the state
       courts of the State of New Jersey,  or (in a case involving  diversity of
       citizenship)  the United  States  District  Court in Newark,  New Jersey,
       shall have jurisdiction of any such action or proceeding, (ii) service of
       any  summons  and  complaint  or  other  process  in any such  action  or
       proceeding  may be made by the Lender upon  Borrowers  by  registered  or
       certified mail directed to Borrowers at their address  referenced herein,
       Borrowers  hereby  waiving  personal  service  thereof,  and (iii) within
       thirty (30) days after such mailing  Borrowers  shall appear or answer to
       any summons and complaint or other process,  and should Borrowers fail to
       appear to answer  within said thirty (30) day period,  it shall be deemed
       in default and  judgment may be entered by the Lender  against  Borrowers
       for the amount as demanded in any summons or complaint  or other  process
       so served.

15.    WAIVER OF THE RIGHT TO TRIAL BY JURY.  Borrowers hereby irrevocably waive
       the  right  to  trial  by  jury  in any  action,  proceeding,  claim,  or
       counterclaim,  whether in contract or tort,  at law or in equity,  in any
       manner connected with this note or any transactions hereunder.

       IN WITNESS  WHEREOF,  Borrowers  have caused this Note to be executed and
delivered as of the day and year and at the place first above written.

                               CREATIVE BAKERIES, INC.

                               --------------------------------------------
                               By:  Ronald Schutte, Chief Executive Officer

                               J.M. SPECIALTIES, INC., A NEW JERSEY
                               CORPORATION

                               ---------------------------------------
                               By:  Ronald L. Schutte, CEO & President

                                                                              17GK INTELLIGENT SYSTEMS, INC.

                             2004 STOCK OPTION PLAN

      1.  Purposes  of the Plan.  The  purposes  of the Plan are to attract  and
retain the best available personnel for positions of substantial responsibility,
to provide additional  incentive to Employees and Consultants and to promote the
success of the  Company's  business  through  the  issuance  of  options,  stock
purchase rights,  other stock-based awards, and other benefits.  Options granted
under the Plan may be Incentive  Stock Options or  Nonstatutory  Stock  Options.
Stock purchase rights may also be granted under the Plan

      2. Definitions. As used herein, the following definitions shall apply:

            a.  "Administrator"  means  the  Board  or  any  of  its  Committees
appointed pursuant to Section 4 of the Plan to administer the Plan.

            b.  "Award"  means any award or benefit  granted to any  participant
under the Plan,  including,  without  limitation,  the grant of  Options,  Stock
Purchase Rights, and other Stock-based awards and other benefits.

            c. "Board" means the Board of Directors of the Company.

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

            e. "Committee" means a Committee appointed by the Board of Directors
in accordance with Section 4 of the Plan.

            f. "Common Stock" means the Common Stock of the Company.

            g. "Company" means GK Intelligent Systems, Inc.

            h. "Consultant" means any person,  including an advisor,  who is not
an Employee but is engaged by the Company or any Parent or  Subsidiary to render
services and is compensated  for such services,  and any director of the Company
whether  compensated  for such services or not provided that if and in the event
the Company  registers any class of any equity security pursuant to the Exchange
Act, the term  Consultant  shall  thereafter  not include  directors who are not
compensated for their services or are paid only a director's fee by the Company.

            i.  "Disability"  means,  with  respect  to an  Optionee,  that  the
Optionee has any medically  determinable physical or mental impairment which can
be  expected  to result in death or which has lasted or can be  expected to last
for a continuous  period of not less than twelve (12) months,  and which renders
the Optionee unable to engage in any substantial  gainful activity.  An Optionee
shall not be considered to have a Disability unless Optionee  furnishes proof of
the  existence  thereof  in such  form  and  manner,  and at such  time,  as the
Administrator may require,  and the  Administrator  determines in its discretion

<PAGE>

that  the  Optionee  has  such  a  medically  determinable  physical  or  mental
impairment.

            j.   "Employee"   means  any  person  who  is   determined   by  the
Administrator  to be a common  law  employee  of the  Company  or any  Parent or
Subsidiary  of the Company.  With respect to any entity for which the Company or
any  Parent  of  Subsidiary  of the  Company  is a  single  owner  and  which is
disregarded  as  an  entity   separate  from  its  owner  pursuant  to  Treasury
Regulations Section  301.7701-3,  any person who determined by the Administrator
to be a common law employee of that entity shall be treated as an Employee.

            k.  "Exchange  Act" means the  Securities  Exchange Act of 1934,  as
amended.

            l. "Fair Market  Value" means,  as of any date,  the value of Common
Stock determined as follows:

            i. If the Common Stock is listed on any  established  stock exchange
      or a national  market system  including  without  limitation  the National
      Market  System of the National  Association  of Securities  Dealers,  Inc.
      Automated Quotation  ("NASDAQ") System, its Fair Market Value shall be the
      closing  sales price for such stock on the date of  determination  (or the
      closing  bid,  if no sales were  reported,  as quoted on such  exchange or
      system for the last market trading day prior to the time of determination)
      as  reported  in The Wall  Street  Journal  or such  other  source  as the
      Administrator deems reliable;

            ii. If the Common  Stock is quoted on the NASDAQ  System (but not on
      the National  Market System  thereof) or regularly  quoted by a recognized
      securities  dealer but selling  prices are not  reported,  its Fair Market
      Value shall be the mean  between the high bid and low asked prices for the
      Common Stock on the date of determination or;

            iii. In the absence of an  established  market for the Common Stock,
      the Fair Market Value  thereof  shall be  determined  in good faith by the
      Administrator.

            m.  "Incentive  Stock Option" means an Option which is treated as an
incentive  stock option within the meaning of Section 422 of the Code. An Option
shall only be treated as an Incentive Stock Option pursuant to the Plan if it is
originally  designated as an Incentive Stock Option in the Option Agreement.  An
Option originally designated in an Option Agreement as an Incentive Stock Option
may  nonetheless be treated as a Nonstatutory  Stock Option if the Option at any
time after  grant  fails to meet to  requirements  for  incentive  stock  option
treatment under Section 422 of the Code.

            n.  "Nonstatutory  Stock  Option"  means an  Option  which is not an
Incentive  Stock Option.  An Option which is designated as a Nonstatutory  Stock
Option in the Option Agreement pursuant to which the Option was granted shall in
all events be treated as a  Nonstatutory  Stock Option.  Furthermore,  an Option

<PAGE>

originally  designated as an Incentive  Stock Option may  subsequently  become a
Nonstatutory  Stock  Option  upon the  Option  subsequently  failing to meet the
requirements for incentive stock option under Section 422 of the Code.

            o. "Officer"  means a person who is an officer of the Company within
the  meaning  of Section 16 of the  Exchange  Act and the rules and  regulations
promulgated thereunder.

            p. "Option" means a stock option granted pursuant to the Plan.

            q.  "Option  Agreement"  has the  meaning  set forth in  Section  18
hereof.

            r. "Optioned Stock" means the Common Stock subject to an Option or a
Stock Purchase Right.

            s. "Optionee" means an Employee or Consultant who receives an Option
or Stock Purchase Right, other Stock-based award, or other benefit.

            t. "Parent" means a "parent  corporation,"  whether now or hereafter
existing, as defined in Section 424(e) of the Code.

            u. "Plan" means this 2004 Stock Option Plan, as amended from time to
time in accordance with the terms hereof.

            v.  "Restricted  Stock" has the meaning  set forth in Section  11(a)
hereof.

            w. "Restricted  Stock Purchase  Agreement" has the meaning set forth
in Section 11(a) hereof.

            x.  "Share"  means a share  of the  Common  Stock,  as  adjusted  in
accordance with Section 12 below.

            y. "Stock  Purchase  Right" means the right to purchase Common Stock
pursuant to Section 11 below.

            z. "Stock  Purchase  Right  Agreement"  has the meaning set forth in
Section 18 hereof.

            aa.  "Subsidiary" means a "subsidiary  corporation,"  whether now or
hereafter existing, as defined in Section 424(f) of the Code.

            bb.  "Ten  Percent  Shareholder"  means a person who, at the time an
Option is granted, owns, or is deemed within the meaning of Section 422(b)(6) of
the Code to own,  stock  possessing  more  than ten  percent  (10%) of the total
combined  voting  power  of all  classes  of  stock  of the  Company  (or of its
Subsidiary or parent (within the meaning of Section 424(e) of the Code)).

<PAGE>

      3. Stock Subject to the Plan. Subject to adjustment pursuant to Section 12
of the Plan, and effective as of April 5, 2004, the maximum  aggregate number of
shares which may be issued  pursuant to the Plan is 30,000,000  shares of Common
Stock.  Such  number of shares of  Common  Stock may be issued  under  this Plan
pursuant to Incentive Stock Options,  Nonstatutory Stock Options, Stock Purchase
Rights, other Stock-based awards, other benefits, or any combination thereof, so
long as the aggregate  number of shares so issued does not exceed such number of
shares, as adjusted.  The shares may be authorized,  but unissued, or reacquired
Common Stock. If an Option should expire or become  unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated,  become available for
future grant under the Plan.

      4. Administration of the Plan.

            a. Initial Plan Procedure. Prior to the date, if any, upon which the
      Company   becomes   subject  to  the  Exchange  Act,  the  Plan  shall  be
      administered by the Board or a committee appointed by the Board.

            b. Plan  Procedure  After the Date,  if any,  Upon Which the Company
      Becomes Subject to the Exchange Act.

                  i. Administration With Respect to Directors and Officers. With
            respect  to  grants  of  Options,   Stock  Purchase  Rights,   other
            Stock-based  awards,  or other  benefits,  to Employees who are also
            officers or directors of the Company, the Plan shall be administered
            by (A) the Board if the Board may  administer the Plan in compliance
            with Rule 16b-3  promulgated under the Exchange Act or any successor
            thereto  ("Rule  16b-3") with respect to a plan  intended to qualify
            thereunder as a discretionary plan, or (B) a committee designated by
            the  Board  to  administer  the  Plan,   which  committee  shall  be
            constituted  in such a manner as to permit  the Plan to comply  with
            Rule 16b-3 with respect to a plan intended to qualify  thereunder as
            a discretionary plan. Once appointed,  such Committee shall continue
            to serve in its designated  capacity until otherwise directed by the
            Board.  From  time to time the Board  may  increase  the size of the
            Committee and appoint  additional  members  thereof,  remove members
            (with or without  cause) and  appoint  new  members in  substitution
            therefor, fill vacancies,  however caused, and remove all members of
            the Committee and  thereafter  directly  administer the Plan, all to
            the extent  permitted by Rule 16b-3 with respect to a plan  intended
            to qualify thereunder as a discretionary plan.

                  ii.  Multiple  Administrative  Bodies.  If  permitted  by Rule
            16b-3, the Plan may be administered by different bodies with respect
            to  directors,  non-director  officers and Employees who are neither
            directors nor officers.

                  iii.  Administration  With  Respect to  Consultants  and Other
            Employees. With respect to grants of Options, Stock Purchase Rights,
            other  Stock-based  awards,  or  other  benefits,  to  Employees  or
            Consultants  who are neither  directors nor officers of the Company,
            the Plan shall be  administered  by (A) the Board or (B) a committee

<PAGE>

            designated by the Board,  which  committee  shall be  constituted in
            such a manner as to satisfy the legal  requirements  relating to the
            administration  of incentive stock option plans, if any, of Delaware
            corporate and  securities  laws, of the Code,  and of any applicable
            stock  exchange  (the  "Applicable  Laws").  Once  appointed,   such
            Committee  shall continue to serve in its designated  capacity until
            otherwise  directed  by the  Board.  From time to time the Board may
            increase the size of the  Committee and appoint  additional  members
            thereof,  remove  members  (with or without  cause) and  appoint new
            members in substitution  therefor,  fill vacancies,  however caused,
            and remove all  members of the  Committee  and  thereafter  directly
            administer the Plan,  all to the extent  permitted by the Applicable
            Laws.

                  iv.  Administration  With  Respect  to  Directors  Who Are Not
            Employees. With respect to grants of Options, Stock Purchase Rights,
            other Stock-based awards, or other benefits to directors who are not
            Employees,  the Plan shall be administered by (A) the Board or (B) a
            committee  designated by the Board;  provided that any policy of the
            Company concerning grants of Options,  Stock Purchase Rights,  other
            Stock-based  awards, or other benefits to non-Employee  directors as
            director compensation shall be approved by a majority of the members
            of the Board who are either Employees of the Company or non-Employee
            directors who have waived their right to receive such compensation.

            c. Powers of the  Administrator.  Subject to the  provisions  of the
Plan and in the case of a Committee,  the specific duties delegated by the Board
to such  Committee,  and subject to the  approval of any  relevant  authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:

                  i. to determine the Fair Market Value of the Common Stock,  in
            accordance with Section 2(k) of the Plan;

                  ii. to select the  Consultants  and Employees to whom Options,
            Stock Purchase Rights,  other Stock-based  awards, or other benefits
            may from time to time be granted hereunder;

                  iii. to determine whether and to what extent Options and Stock
            Purchase Rights or any combination thereof are granted hereunder;

                  iv. to  determine  the number of shares of Common  Stock to be
            covered by each such award granted hereunder;

                  v. to  approve  forms of  agreement  for use  under  the Plan,
            including  without  limitation,  Stock  Purchase  Right  Agreements,
            Restricted Stock Purchase  Agreements and Option  Agreements,  which
            forms need not be the same for any Optionee;

<PAGE>

                  vi. to determine the terms and  conditions,  not  inconsistent
            with the terms of the Plan,  of any Option,  Stock  Purchase  Right,
            other  Stock-based  awards,  or other  benefits  granted  hereunder,
            including without limitation  establishing vesting schedules for the
            exercise  of  Options  which  are  based  upon the  passage  of time
            performing services for the Company,  meeting specified  performance
            criteria or any other standards as may be determined  appropriate by
            the Administrator;

                  vii.  to  determine  whether and under what  circumstances  an
            Option may be settled in cash instead of Common Stock;

                  viii.  to reduce the exercise  price of any Option to the then
            current  Fair Market  Value if the Fair  Market  Value of the Common
            Stock covered by such Option shall have declined  since the date the
            Option was granted;

                  ix. to  determine  the terms and  restrictions  applicable  to
            Stock  Purchase  Rights  and  the  Restricted   Stock  purchased  by
            exercising such Stock Purchase Rights; and

                  x. to  interpret  the Plan,  establish,  amend and rescind any
            rules and  regulations  relating to the Plan, to determine the terms
            and provision of any  agreements  entered into pursuant to the Plan,
            and to make  all  other  determinations  that  may be  necessary  or
            advisable for the administration of the Plan.

            d. Effect of Administrator's  Decision.  Whether explicitly provided
elsewhere in this Plan with respect to any matter, all decisions, determinations
and interpretations of the Administrator  provided in this Plan shall be made in
the Administrator's sole and absolute discretion, and shall be final and binding
on all Optionees and any other holders of any Options,  Stock  Purchase  Rights,
other Stock-based awards, or other benefits.

      5. Eligibility.

            a.  Nonstatutory  Stock  Options  and Stock  Purchase  Rights may be
granted  to  such   Employees  and   Consultants  as  may  be  selected  by  the
Administrator.  Incentive  Stock Options may be granted to such Employees as may
be selected by the  Administrator and may in no event be granted to someone who,
on the date of grant, is not an Employee. An Employee or Consultant who has been
granted an Option or Stock Purchase Right may, if otherwise eligible, be granted
additional  Options,  Stock Purchase Rights,  other Stock-based awards, or other
benefits.

            b. Each Option shall be designated in the Option Agreement as either
an Incentive Stock Option or a Nonstatutory Stock Option.  Notwithstanding  such
designations,  to the extent that the aggregate Fair Market Value (determined as
of the date of grant of the Option) of the shares of Option  Stock with  respect
to which Options initially designated as Incentive Stock Options are exercisable
for the first time by any Optionee  during any calendar year (under all plans of

<PAGE>

the Company or any Parent or Subsidiary)  exceeds $100,000,  such excess Options
shall be treated as Nonstatutory Stock Options.

            c. For purposes of Section  5(b),  Incentive  Stock Options shall be
taken into account in the order in which they were granted,  and the Fair Market
Value of the Shares shall be  determined  as of the time the Option with respect
to such Shares is granted.

            d. The Plan  shall not  confer  upon any  Optionee  any  right  with
respect to  continuation  of  employment  or  consulting  relationship  with the
Company,  nor  shall  it  interfere  in any way  with  his or her  right  or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.

            e. Non-Uniform  Determinations.  The Administrator's  determinations
under the Plan (including  without  limitation  determinations of the persons to
receive  awards,  the form,  amount  and  timing of such  awards,  the terms and
provisions  of such  awards  and the  agreements  evidencing  same)  need not be
uniform and may be made by it  selectively  among  persons who  receive,  or are
eligible  to receive,  awards  under the Plan,  whether or not such  persons are
similarly situated.

            f. Newly Eligible Employees.  The Administrator shall be entitled to
make such rules, regulations,  determinations and awards as it deems appropriate
in respect of any Employee who becomes  eligible to  participate  in the Plan or
any portion thereof after the commencement of an award or incentive period.

            g. Leaves of Absence.  The  Administrator  shall be entitled to make
such rules,  regulations and  determinations  as it deems  appropriate under the
Plan in  respect of any leave of absence  taken by the  recipient  of any award.
Without  limiting the generality of the foregoing,  the  Administrator  shall be
entitled  to  determine  (i)  whether  or not any such  leave of  absence  shall
constitute a termination  of employment  within the meaning of the Plan and (ii)
the  impact,  if any,  of any such  leave of  absence  on awards  under the Plan
theretofore made to any recipient who takes such leave of absence.

      6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 19 of the Plan. It shall  continue in effect
for a term of ten (10) years unless  sooner  terminated  under Section 15 of the
Plan.

      7. Term of Option. The term of each Option shall be the term stated in the
Option  Agreement;  provided,  however,  that the term shall be no more than ten
(10) years from the date of grant thereof.  However, in the case of an Incentive
Stock Option granted to a Ten Percent  Shareholder  the term of the Option shall
be five (5) years from the date of grant  thereof or such shorter term as may be
provided in the Option Agreement.

      8. Option Exercise Price and Consideration.

<PAGE>

      a. The per share  exercise  price for the Shares to be issued  pursuant to
exercise of an Option shall be such price as is determined by the Administrator;
t 12 provided  however,  that with respect to any Incentive  Stock  Option,  the
price shall be:

                  i. no less than 110% of the Fair Market Value per Share on the
            date of grant, if granted to a Ten Percent Shareholder;

                  ii. no less than  100% of the Fair  Market  Value per Share on
            the date of grant,  if granted to a person  other than a Ten Percent
            Shareholder.

            b. The  consideration  to be paid for the  Shares to be issued  upon
exercise of an Option,  including the method of payment,  shall be determined by
the  Administrator  (and,  in the case of an Incentive  Stock  Option,  shall be
determined  at the time of grant)  and may  consist  entirely  of (1) cash,  (2)
check,  (3)  promissory  note,  (4) other Shares which (x) in the case of Shares
acquired  upon  exercise of an Option either have been owned by the Optionee for
more than six months on the date of surrender or were not acquired,  directly or
indirectly,  from the  Company,  and (y) have a Fair Market Value on the date of
surrender  equal to the aggregate  exercise price of the Shares as to which said
Option shall be exercised,  (5) delivery of a properly  executed exercise notice
together with such other  documentation as the  Administrator and the broker, if
applicable,  shall  require to effect an exercise of the Option and  delivery to
the Company of the sale or loan proceeds  required to pay the exercise price, or
(6)  any  combination  of the  foregoing  methods  of  payment.  In  making  its
determination as to the type of consideration to accept, the Administrator shall
consider if  acceptance  of such  consideration  may be  reasonably  expected to
benefit the Company.

      9. Exercise of Option.

            a.  Procedure  for  Exercise;  Rights as a  Shareholder.  Any Option
granted  hereunder  shall be exercisable at such times and under such conditions
as determined by the Administrator,  including performance criteria with respect
to the Company and/or the Optionee,  and as shall be permissible under the terms
of the Plan.

                  i. An Option may not be exercised for a fraction of a Share.

                  ii. An Option  shall be deemed to be  exercised  when  written
            notice of such  exercise has been given to the Company in accordance
            with the terms of the Option  Agreement  by the person  entitled  to
            exercise  the Option and full payment for the Shares with respect to
            which the Option is exercised has been received by the Company. Full
            payment  may, as  authorized  by the  Administrator,  consist of any
            consideration  and method of payment allowable under Section 8(b) of
            the Plan. Until the issuance (as evidenced by the appropriate  entry
            on the books of the Company or of a duly  authorized  transfer agent
            of the Company) of the stock certificate  evidencing such Shares, no
            right  to  vote  or  receive  dividends  or any  other  rights  as a
            shareholder   shall  exist  with  respect  to  the  Optioned  Stock,
            notwithstanding  the exercise of the Option. The Company shall issue

<PAGE>

            (or  cause  to be  issued)  such  stock  certificate  promptly  upon
            exercise of the Option. No adjustment will be made for a dividend or
            other right for which the record date is prior to the date the stock
            certificate is issued, except as provided in Section 12 of the Plan.

                  iii.  Exercise  of an Option in any manner  shall  result in a
            decrease in the number of Shares which  thereafter may be available,
            both for purposes of the Plan and for sale under the Option,  by the
            number of Shares as to which the Option is exercised.

            b. Withholding  Taxes.  Whenever the Company proposes or is required
to issue or transfer  shares of Common Stock under the Plan,  the Company  shall
have the  right to  require  the  grantee  to remit  to the  Company  an  amount
sufficient  to  satisfy  any  federal,   state  and/or  local   withholding  tax
requirements  prior to the delivery of any certificate or certificates  for such
shares.  Alternatively,  the Company may issue or transfer such shares of Common
Stock net of the number of shares  sufficient  to satisfy  the  withholding  tax
requirements.  For withholding tax purposes, the shares of Common Stock shall be
valued on the date the withholding obligation is incurred.

      t 12 c. Termination or Lapse of Options Issued to Employees. The following
provisions  of this  Section  9(c) and Section  9(e) shall apply to every Option
unless the Option  Agreement  explicitly  specifies that such  provisions do not
apply to the Option evidenced by that Option Agreement. Any portion of an Option
which is not otherwise  exercisable as of the date of an Optionee's  termination
of employment with the Company and any Parent or Subsidiary  shall terminate and
not be  exercisable.  Any portion of an Option which was  exercisable  as of the
date of termination of any such employment  shall be exercisable  following such
termination  of employment  only as  hereinafter  provided in this Section 9(c),
subject to Section 9(e).

                  i.  Termination  of  Employment;  Generally.  In the  event of
            termination  of an  Optionee's  employment  with the Company and any
            Parent or Subsidiary under any situation not described in paragraphs
            2) or 3) of this Section 9(c),  the Optionee may exercise any Option
            to  the  extent  the  Option  was  exercisable  as of  the  date  of
            termination  of  employment  until the  earlier of the date which is
            three (3) months after the date of  termination of employment or the
            expiration  the  term  of the  Option  as set  forth  in the  Option
            Agreement,  whereupon  the Option shall  terminate  and no longer be
            exercisable.   For  purposes  of  this  paragraph,   a  transfer  of
            employment  relationship  between  or  among  the  Company  and/or a
            related  entity shall not be deemed to constitute a cessation of the
            employment  relationship  with  the  Company  or any of its  related
            entities. For purposes of this paragraph,  with respect to Incentive
            Stock  Options,  employment  shall be deemed to  continue  while the
            Optionee is on military  leave,  sick leave or other bona fide leave
            of absence  (as  determined  by the  Administrator).  The  foregoing
            notwithstanding,  employment  shall not be deemed to continue beyond
            the first 90 days of such leave, unless the Optionee's  reemployment
            rights are guaranteed by statute or by contract.

<PAGE>

                  ii. Disability of Optionee.  In the event of termination of an
            Optionee's  employment with the Company and any Parent or Subsidiary
            due to  Disability,  the  Optionee  may  exercise  any Option to the
            extent the Option was  exercisable  as of the date of termination of
            employment until the earlier of the date which is twelve (12) months
            from the date of such  termination  or the expiration of the term of
            the  Option  as set forth in the  Option  Agreement,  whereupon  the
            Option shall terminate and no longer be exercisable.

                  iii.  Death of  Optionee.  In the event of  termination  of an
            Optionee's  employment with the Company and any Parent or Subsidiary
            as a result of the death of an Optionee, the Option may be exercised
            to the extent the  Option  was  exercisable  as of the date of death
            until the  earlier of the date which is twelve  (12) months from the
            date of death or the  expiration  of the term of the  Option  as set
            forth in the Option Agreement,  whereupon the Option shall terminate
            and no longer be exercisable.

            d. Termination of Options issued to Consultants. The conditions upon
which an  Option  granted  to a  Consultant  will  terminate  as a result of the
Consultants'  termination  of  services to the  Company,  whether as a result of
death, disability,  voluntary termination,  termination for cause, or nonrenewal
of any  consulting  agreement,  shall be as  determined  by the  Company and the
Consultant  at the time of  grant  of the  Option  as set  forth  in the  Option
Agreement.

            e. Termination of Options due to Termination for Cause. In the event
an Optionee is terminated as an Employee or Consultant for cause,  as determined
by the Administrator in its sole discretion,  or breaches any agreement with the
Company,  before  or  after  termination,  including  any  noncompete  covenant,
confidentiality agreement, or employment agreement, then any Options held by the
Optionee shall immediately terminate.  As used herein, "cause" shall mean fraud;
dishonesty;  negligence;  willful  misconduct  in the  performance  of a persons
duties as an Employee or  Consultant;  commission of a felony;  commission of an
act of moral turpitude (e.g. theft, embezzlement and the like) which in the good
faith determination of the Administrator, is materially injurious to the Company
or any  Parent or  Subsidiary;  inattention  to or  substandard  performance  of
duties;  failure  to  perform a properly  assigned  duty;  failure to follow the
lawful  written  policies,  rules or  directives of the Company or any Parent of
Subsidiary which failures, in the good faith determination of the Administrator,
are materially  injurious to the Company or any Parent or Subsidiary;  violating
any restrictive  covenant in favor of the Company or any Parent of Subsidiary or
any other  material  breach of any  employment or consulting  agreement with the
Company or any Parent or Subsidiary.

            f. Rule 16b-3.  Options  granted to persons subject to Section 16(b)
of the  Exchange  Act must  comply  with  Rule  16b-3  and  shall  contain  such
additional  conditions or restrictions as may be determined by the Administrator
to be required  thereunder to qualify for the maximum  exemption from Section 16
of the Exchange Act with respect to Plan transactions.

<PAGE>

            g. Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

      10.  Non-Transferability of Options and Stock Purchase Rights. Options and
Stock  Purchase  Rights  may  not  be  sold,  pledged,  assigned,  hypothecated,
transferred,  or disposed of in any manner  other than by will or by the laws of
descent  or  distribution  and may be  exercised,  during  the  lifetime  of the
Optionee, only by the Optionee.

      11. Stock Purchase Rights.

            a. Rights to Purchase.  Stock  Purchase  Rights may be issued to any
Employee or Consultant.  After the  Administrator  determines that it will offer
Stock Purchase  Rights under the Plan, it shall advise the offeree in writing of
the terms,  conditions  and  restrictions  related to the offer,  including  the
number of Shares that such person shall be entitled to purchase, the price to be
paid, and the time within which such person must accept such offer,  which shall
in no event  exceed  sixty (60) days from the date upon which the  Administrator
made the  determination  to grant the Stock Purchase  Right.  The offer shall be
accepted by  execution  of a  restricted  stock  purchase  agreement in the form
determined by the Administrator ("Restricted Stock Purchase Agreement").  Shares
purchased  pursuant to the grant of a Stock  Purchase Right shall be referred to
herein as "Restricted Stock")

            b. Repurchase Option. Unless the Administrator determines otherwise,
the  Restricted  Stock Purchase  Agreement  shall grant the Company a repurchase
option  exercisable  upon  the  voluntary  or  involuntary  termination  of  the
purchaser's  employment  with the  Company  for any reason  (including  death or
Disability).   The  purchase  price  for  Shares  repurchased  pursuant  to  the
Restricted  Stock  Purchase  Agreement  shall be the original  price paid by the
purchaser and may be paid by cancellation  of any  indebtedness of the purchaser
to  the  Company.  The  repurchase  option  shall  lapse  at  such  rate  as the
Administrator may determine.

            c. Other Provisions.  The Restricted Stock Purchase  Agreement shall
contain such other terms,  provisions and conditions not  inconsistent  with the
Plan as may be  determined  by the  Administrator  in its  sole  discretion.  In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.

            d.  Rights  as a  Shareholder.  Once  the  Stock  Purchase  Right is
exercised,  the  purchaser  shall  have  the  rights  equivalent  to  those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized  transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.

<PAGE>

      12. Other Awards

            a. Other  Stock-Based  Awards.  Other awards,  valued in whole or in
part by reference  to, or otherwise  based on,  shares of Stock,  may be granted
either alone or in addition to or in  conjunction  with any awards  described in
this Plan for such  consideration,  if any,  and in such amounts and having such
terms and conditions as the Board may determine.

            b. Other  Benefits.  The Board shall have the right to provide types
of  benefits  under the Plan in addition to those  specifically  listed,  if the
Board believe that such  benefits  would further the purposes for which the Plan
was established.

      13. Adjustments Upon Changes in Capitalization or Change in Control.

            a. Changes in Capitalization. If the shares of Common Stock shall be
subdivided  or combined  into a greater or smaller  number of shares,  or if the
Company  shall  issue  any  shares of Common  Stock as a stock  dividend  on its
outstanding  Common Stock, the number of shares of Option Stock deliverable upon
the  exercise  of an  Option  or Stock  Purchase  Right  shall be  appropriately
increased or decreased  proportionately,  and appropriate  adjustments  shall be
made in the purchase price per share to reflect such subdivision, combination or
stock dividend, all as determined by the Administrator in its discretion. Except
as expressly  provided herein,  no issuance by the Company of shares of stock of
any class, or securities  convertible  into shares of stock of any class,  shall
affect,  and no adjustment by reason  thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option,  Stock  Purchase
Right, other Stock-based awards, or other benefits. Upon the happening of any of
the events described in this paragraph, the class and aggregate number of shares
set forth in Section 3 hereof  shall also be  appropriately  adjusted to reflect
such events.  The Administrator  shall determine the specific  adjustments to be
made under this paragraph.

            b.  Change  in  Control.  In  the  event  of  (1) a  dissolution  or
liquidation of the Company,  (2) a merger or  consolidation in which the Company
is not the surviving  corporation  (other than a merger or consolidation  with a
wholly-owned  subsidiary,  a  reincorporation  of  the  Company  in a  different
jurisdiction,  or other  transaction in which there is no substantial  change in
the stockholders of the Company or their relative stock holdings and the Options
granted  under this Plan are  assumed,  converted  or replaced by the  successor
corporation,  which  assumption  will be binding on Optionees),  (3) a merger in
which the Company is the surviving  corporation but after which the stockholders
of the Company immediately prior to such merger (other than any stockholder that
merges,  or which owns or controls  another  corporation  that merges,  with the
Company in such  merger)  cease to own their  shares or equity  interests in the
Company), (4) the sale of substantially all of the assets of the Company; or (5)
the acquisition, sale, or transfer of more than 50% of the outstanding shares of
the Company by tender offer or similar  transaction  (any of the foregoing shall
be referred to as a "Corporate  Transaction"),  any or all outstanding  Options,
Stock  Purchase  Rights,  other  Stock-based  awards,  or other  benefits may be
assumed,  converted or replaced by the  successor  corporation  (if any),  which

<PAGE>

assumption,  conversion or replacement will be binding on all Optionees.  In the
alternative,  the successor corporation may substitute equivalent Options, Stock
Purchase  Rights  other  Stock-based   awards,  or  other  benefits  or  provide
substantially similar consideration to Optionees as was provided to stockholders
(after taking into account the existing  provisions of the Options and the Stock
Purchase  Rights).  In the event such successor  corporation (if any) refuses to
assume or substitute such Options,  as provided  above,  pursuant to a Corporate
Transaction  described  in this  paragraph,  then any  Options,  Stock  Purchase
Rights,  other  Stock-based  awards,  or other  benefits which are not exercised
prior to the  consummation  of the  Corporate  Transaction  shall  terminate  in
accordance  with the  provisions  of this  Plan.  In the  event  of a  Corporate
Transaction, the Administrator is authorized, in its sole discretion, but is not
obligated,  to waive any vesting  schedule in some or all of the Options,  Stock
Purchase Rights,  other  Stock-based  awards,  or other benefits,  such that the
vesting of any such Options and Stock Purchase Rights be accelerated so that all
or part of the  previously  unvested  portion of such  Options,  Stock  Purchase
Rights, other Stock-based awards, or other benefits are exercisable prior to the
consummation of such Corporate  Transaction at such times and on such conditions
as the Administrator  determines.  In addition, the Administrator is authorized,
but not  obligated,  at the time  any  Options,  Stock  Purchase  Rights,  other
Stock-based  awards,  or other  benefits  is  granted  or  thereafter,  to grant
Optionees  the right to receive a cash payment equal to the  difference  between
the exercise price of the Options,  Stock  Purchase  Rights,  other  Stock-based
awards,  or other  benefits  and the price per share of the Common Stock paid in
connection with the Corporate  Transaction on such terms and conditions that the
Administrator may approve at the time.

      14. Time of Granting Options and Stock Purchase Rights.  The date of grant
of an Option,  Stock Purchase Right, other Stock-based awards, or other benefits
shall,  for all  purposes,  be the date on which  the  Administrator  makes  the
determination  granting such Option or Stock Purchase  Right, or such other date
as is  determined by the  Administrator.  Notice of the  determination  shall be
given to each Employee or Consultant to whom an Option,  Stock  Purchase  Right,
other  Stock-based  awards,  or other benefits is so granted within a reasonable
time after the date of such grant.

      15. Amendment and Termination of the Plan.

            a.  Amendment  and  Termination.  The Board  may at any time  amend,
      alter,  suspend or  discontinue  the Plan,  but no amendment,  alteration,
      suspension or discontinuation  shall be made which would impair the rights
      of any  Optionee  under any grant  theretofore  made,  without  his or her
      consent. In addition, to the extent necessary and desirable to comply with
      Rule 16b-3 under the  Exchange Act or with Section 422 of the Code (or any
      other applicable law or regulation, including the requirements of the NASD
      or an established  stock exchange),  the Company shall obtain  shareholder
      approval  of any Plan  amendment  in such a manner and to such a degree as
      required.

            b.  Effect  of  Amendment  or  Termination.  Any such  amendment  or
      termination of the Plan shall not affect Options,  Stock Purchase  Rights,
      other  Stock-based  awards,  or other  benefits  already  granted and such
      Options and Stock Purchase Rights shall remain in full force and effect as

<PAGE>

      if this Plan had not been amended or terminated,  unless  mutually  agreed
      otherwise between the Optionee and the Administrator, which agreement must
      be in writing and signed by the Optionee and the Company.

      16.  Conditions  Upon  Issuance  of  Shares.  Shares  shall  not be issued
pursuant to the exercise of an Option,  Stock Purchase Right,  other Stock-based
awards,  or other benefits  unless the exercise of such Option or Stock Purchase
Right and the issuance and delivery of such Shares pursuant thereto shall comply
with  all  relevant  provisions  of  law,  including,  without  limitation,  the
Securities Act of 1933, as amended,  the Exchange Act, the rules and regulations
promulgated  thereunder,  and the  requirements of any stock exchange upon which
the Shares may then be listed,  and shall be further  subject to the approval of
counsel for the Company with respect to such compliance.

            As a condition to the exercise of an Option,  Stock Purchase  Right,
other  Stock-based  awards, or other benefits the Company may require the person
exercising  such Option or Stock  Purchase Right to represent and warrant at the
time of any  such  exercise  that  the  Shares  are  being  purchased  only  for
investment and without any present  intention to sell or distribute  such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.

            The Company shall be under no obligation to any person  receiving an
Award  under the Plan to  register  for  offering  or resale or to  qualify  for
exemption  under the  Securities  Act,  or to  register  or qualify  under state
securities laws, any shares of Common Stock,  security or interest in a security
paid or issued under, or created by, the Plan, or to continue in effect any such
registrations or qualifications if made. The Company may issue  certificates for
shares  with such  legends  and subject to such  restrictions  or  transfer  and
stop-transfer  instructions  as  counsel  for the  Company  deems  necessary  or
desirable for compliance by the Company with federal and state securities laws.

      17. Reservation of Shares. The Company, during the term of this Plan, will
at all  times  reserve  and keep  available  such  number  of Shares as shall be
sufficient to satisfy the requirements of the Plan.

            The inability of the Company to obtain authority from any regulatory
body having jurisdiction,  which authority is deemed by the Company's counsel to
be necessary  to the lawful  issuance  and sale of any Shares  hereunder,  shall
relieve the Company of any  liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.

      18. Agreements.  The grant of any Option shall be evidenced by the Company
and the Optionee  entering into a written  agreement (an "Option  Agreement") in
such form as the Administrator  shall from time to time approve.  The grant of a
Stock Purchase Right shall be evidenced by written  agreement (a "Stock Purchase
Right Agreement") in such form as the  Administrator  shall approve from time to
time.  The  grant of any  other  Stock-based  award or  other  benefit  shall be
evidenced in such form as the Administrator shall approve from time to time.

<PAGE>

      19.  Shareholder  Approval.  Continuance  of the Plan  shall be subject to
approval by the  shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted.  Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.

      20.  Information  to  Optionees  and  Purchasers.  The Company  shall make
available to each Optionee and to each  individual who acquired  Shares pursuant
to the Plan,  during the  period  such  Optionee  or  purchaser  has one or more
Options,  Stock Purchase Rights,  other  Stock-based  awards,  or other benefits
outstanding,  and, in the case of an individual who acquired  Shares pursuant to
the Plan,  during the period such individual owns such Shares,  copies of annual
financial  statements.  The  Company  shall  not be  required  to  provide  such
statements to key employees  whose duties in connection  with the Company assure
their access to equivalent information.

      21. Certain Tax Matters.

            a. The  Administrator  may require  the holder of any Option,  Stock
      Purchase Right,  Option Stock, other Stock-based awards, or other benefits
      to remit to the Company,  regardless  of when such  liability  arises,  an
      amount sufficient to satisfy any Federal,  state and local tax withholding
      requirements  associated with such Stock Right. The Administrator  may, in
      its  discretion,  permit the holder of a Stock  Right to satisfy  any such
      obligation by having withheld from the shares (or where applicable,  cash)
      to be  delivered  to the  holder  of upon  exercise  of an Option or Stock
      Purchase Right a number of shares (or, where  applicable,  amount of cash)
      sufficient to meet any such withholding requirement.

            b. If a  Participant  makes an election  under  Section 83(b) of the
      Code with respect to the  acquisition of any Option Stock,  or disposes of
      Option  Stock  acquired  pursuant to the  exercise of an  Incentive  Stock
      Option in a transaction  deemed to be a  disqualifying  disposition  under
      Section 421 of the Code,  then,  within  thirty (30) days of such  Section
      83(b) election or disqualifying disposition,  the Participant shall inform
      the Company of such actions.

      22. Miscellaneous

            a. Upon receipt of any shares of Common Stock under the Plan, if the
Company requires its shareholders to enter into a shareholders  agreement at the
time of their  acquisition of Common Stock,  then, as a condition to the receipt
of shares under the Plan, the  Administrator  may require the holder of an Award
to execute and deliver to the Company a shareholders  agreement in substantially
the form in use at the time of exercise or receipt of shares.  This  requirement
shall not apply if either:  (i) the holder of the Award has previously  executed
and delivered such shareholder agreement, it is in effect at the time the holder
of Award receives the shares,  and the  shareholders  agreement  would cover the
shares received under the Plan; or (ii) such shareholders agreement is no longer
in effect with respect to other holders of Common Stock.

<PAGE>

            b. The  Administrator  may, in its discretion,  subject any Award to
repurchase rights provisions.  The terms and conditions of any repurchase rights
will be established by the Administrator in its sole discretion and shall be set
forth in the agreement  representing  the Award. To ensure that shares of Common
Stock  subject to a repurchase  right under this Section 22(b) will be available
for repurchase,  the Administrator may require the holder of an Award to deposit
the certificate or certificates  evidencing such shares with an agent designated
by the  Administrator  under the terms and  conditions  of escrow  and  security
agreements approved by the Administrator.

            c. The  Administrator  may,  in its  discretion,  subject  any Award
consisting of Common Stock to right of first refusal  provisions.  The terms and
conditions of any right of first refusal  provisions  will be established by the
Administrator in its sole discretion and set forth in the agreement representing
the Award.

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