Document:

LOAN AND SECURITY AGREEMENT

                                     Between

                          TEXTRON FINANCIAL CORPORATION

                                    As Lender

                                       and

                         GALAXY NUTRITIONAL FOODS, INC.

                                   As Borrower

                            Dated as of May 27, 2003

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                                TABLE OF CONTENTS

DEFINITIONS ...........................................................     1-15

ARTICLE I - LOANS, RENEWAL AND TERMINATION ............................       16
     1.1  Revolving Loan Advances .....................................       16
     1.2  Borrowing Procedures ........................................       16
     1.3  Interest ....................................................    16-17
     1.4  Charges to Loan Account .....................................       17
     1.5  Allocation of Payments and Limit of Interest ................       17
     1.6  Renewal and Termination  ....................................    17-18

ARTICLE II - FEES  ....................................................       18
     2.1  Closing Fee  ................................................       18
     2.2  Facility Fee  ...............................................       18
     2.3  Field Examination Fee  ......................................       18
     2.4  Wire Transfer Fee  ..........................................       18
     2.5  Early Termination Fee  ......................................    18-19
     2.6  Costs and Expenses  .........................................       19
     2.7  Unused Line Fee..............................................       19
     2.8  Collateral Monitoring Fee ...................................       19

ARTICLE III - GRANT OF SECURITY INTEREST ..............................       19
     3.1  Grant of Security Interest  .................................       19
     3.2  Continued Priority of Security Interest  ....................    20-21

ARTICLE IV - PROCEEDS OF COLLATERAL, RECEIVABLES
             AND COLLECTIONS  .........................................       21
     4.1  Borrower's Proceeds of Collateral  ..........................       21
     4.2  Collection of Receivables and other Collateral ..............       22

ARTICLE V - REPRESENTATIONS AND WARRANTIES  ...........................       22
     5.1  Existence, Power and Authority; Borrower Affiliates .........    22-23
          (a)  Organization; Qualification  ...........................       22
          (b)  Power  .................................................       23
          (c)  Borrower Affiliates  ...................................       23
          (d)  Capitalization  ........................................       23
          (e)  Business ...............................................       23
     5.2  Compliance with Other Agreements and Applicable Law  ........       23
     5.3  Absence of Litigation  ......................................       23
     5.4  Taxes and Returns  ..........................................       23
     5.5  Lien and Priority and Nature of Certain Collateral ..........    23-24
          (a)  Liens  .................................................    23-24
          (b)  Title  .................................................       24
          (c)  Receivables  ...........................................       24
          (d)  Inventory  .............................................       24

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          (e)  Equipment ..............................................       24
(f)  Real Estate  .....................................................       24
          (g)  Corporate and Fictitious Names  ........................       24
     5.6  Principal Place of Business  ................................       24
     5.7  Environmental Compliance  ...................................       25
     5.8  Proprietary Rights  .........................................       25
     5.9  Trade Names  ................................................       25
     5.10 Employee Relations  .........................................    25-26
     5.11 Employee Pension Benefit Plans  .............................       26
     5.12 Bank Accounts  ..............................................       26
     5.13 Accuracy and Completeness of Information  ...................       26
     5.14 Software License Compliance  ................................       26
     5.15 Investment Company Act; Other Regulations....................       26
     5.17 Survival of Warranties; Cumulative  .........................       26

ARTICLE VI - AFFIRMATIVE COVENANTS  ...................................       27
     6.1  Financial Statements  .......................................    27-28
     6.2  Books and Records  ..........................................       28
     6.3  Additional Documentation  ...................................       28
     6.4  Existence, Name, Organization and Chief Executive
          Office  .....................................................       28
     6.5  Compliance with Laws and Taxes  .............................       28
     6.6  Performance of Obligations  .................................    28-29
     6.7  Reporting as to Revenues, Receivables and Inventory .........    29-30
     6.8  Over-Advance  ...............................................       30
     6.9  Breach or Default  ..........................................       30
     6.10 Maintenance of Assets  ......................................       30
     6.11 Insurance  ..................................................    30-31
     6.12 Use of Proceeds  ............................................       31
     6.13 Disclosure ..................................................       31
     6.14 Further Assurances ..........................................       31
     6.15 Brokerage Commissions .......................................       31
     6.16 FDA and Other Regulatory Bodies Compliance ..................       32

ARTICLE VII - BORROWER'S NEGATIVE COVENANTS  ..........................       32
     7.1  Business, Management and Organization  ......................       32
     7.2  Disposition of Assets  ......................................       32
     7.3  Loans and Guarantees  .......................................       32
     7.4  Capital Expenditures and Investments  .......................    32-33
     7.5  Distributions and Salaries  .................................       33
     7.6  Financial Covenants  ........................................    33-34
     7.7  Change of Control  ..........................................       34
     7.8  Limitation on Indebtedness for Money Borrowed  ..............       34
     7.9  Mergers; Consolidations; Acquisitions  ......................       34
     7.10 Subsidiaries  ...............................................       34
     7.11 Fiscal Year  ................................................       34

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     7.12 Affiliate Transactions ......................................    34-35

ARTICLE VIII - CONDITIONS PRECEDENT  ..................................       35
     8.1  Initial Credit  .............................................    35-37
     8.2  Initial and Subsequent Credit ...............................       37

ARTICLE IX - EVENTS OF DEFAULT; REMEDIES  .............................       37
     9.1  Events of Default  ..........................................    37-39
     9.2  Lender's Remedies  ..........................................    39-40

ARTICLE X - JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS;
            AND GOVERNING LAW  ........................................       40
     10.1 Governing Law; Choice of Forum; Services of Process;
          Jury Trial Waiver  ..........................................    40-41
     10.2 Waiver of Certain Claims and Counterclaims  .................    41-42
     10.3 Indemnification  ............................................       42

ARTICLE XI - MISCELLANEOUS  ...........................................       42
     11.1 Power of Attorney  ..........................................       42
     11.2 Outstanding Revolving Loan Advances  ........................       42
     11.3 Modifications and Course of Dealing  ........................    42-43
     11.4 Assignment and Participation  ...............................       43
     11.5 Delegation of Duties  .......................................       43
     11.6 Notices  ....................................................       43
     11.7 Expenses  ...................................................       43
     11.8 Assignment of Receivables and Inventory  ....................    43-44
     11.9 Binding Effect; Severability  ...............................       44
     11.10 Final Agreement  ...........................................       44
     11.11 Counterparts  ..............................................       44
     11.12 Captions  ..................................................       44
     11.13 Borrower's Representative  .................................       44

Signatures  ...........................................................    45-46

ATTACHMENTS TO LOAN AND SECURITY AGREEMENT:
EXHIBIT A - FORM OF COVENANT COMPLIANCE CERTIFICATE

SCHEDULE 5.1(a) Organization; Qualification
SCHEDULE 5.1(c) Affiliates
SCHEDULE 5.1(d) Capitalization
SCHEDULE 5.1(e) Business of Borrower
SCHEDULE 5.2 Compliance with Other Agreements and Applicable Law
SCHEDULE 5.3 Litigation
SCHEDULE 5.4 Taxes and Returns
SCHEDULE 5.5(a) Permitted Liens
SCHEDULE 5.5(b) Title

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SCHEDULE 5.5(d) Inventory
SCHEDULE 5.5(e) Equipment
SCHEDULE 5.5(f) Real Property
SCHEDULE 5.5(g) Corporate and Fictitious Names
SCHEDULE 5.6 Principal Places of Business; Chief Executive Office
SCHEDULE 5.7 Environmental Compliance
SCHEDULE 5.8 Registered Proprietary Rights
SCHEDULE 5.9 Trade Names
SCHEDULE 5.10 Employee Relations
SCHEDULE 7.8 Permitted Indebtedness
SCHEDULE 7.12 Affiliated/Interest Party Agreements

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                           LOAN AND SECURITY AGREEMENT

                            Dated as of May 27, 2003

    GALAXY   NUTRITIONAL  FOODS,  INC.,  a  Delaware  corporation
("Borrower")  and  TEXTRON  FINANCIAL  CORPORATION,  a   Delaware
corporation ("Lender"), agree as follows:

                                   DEFINITIONS

         As used in this Agreement:

      "Account" or "Accounts"  means all now owned or hereafter  acquired right,
title and interest in all accounts,  as such term is defined in the UCC, and any
and all supporting obligations with respect to any of the foregoing.

    "Account Debtor" means a Person to whom Borrower sells  inventory,  goods or
services in the ordinary course of business,  including without limitation, each
Person who is obligated on a Receivable.

    "Additional Documents" has the meaning set forth in Section 3.2(d).

    "Adjusted  Tangible Net Worth" means,  with respect to Borrower,  the sum of
(i) stockholder's  equity,  including preferred stock,  determined in accordance
with GAAP and (ii)  subordinated  indebtedness  (if  any),  minus the sum of (a)
Intangible  Assets,  (b) all loans or advances  to any  Person,  and (c) prepaid
expenses.

    "Affiliate" means, with respect to a Person,  any Person which,  directly or
indirectly,  is in control of, is controlled by, or is under common control with
such Person. For purposes of this definition, control of a Person shall mean the
power,  direct or  indirect,  (x) to vote 10% or more of the  securities  having
ordinary  voting power for the election of directors of such Person,  or (y) the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction of the management and policies of a Person,  whether through ownership
of voting  securities or  partnership or other voting  interest,  by contract or
otherwise.

       "Agreement"  means  this  Loan  and  Security  Agreement,  including  all
Schedules,  exhibits and other  attachments  hereto, as the same may be amended,
supplemented, extended or restated from time to time.

    "Agreement Date" means the date as of which this Agreement is dated.

    "Annual Facility Fee" means the fee referred to in Section 2.2.

    "Applicable Law" means all applicable provisions of constitutions, statutes,
rules,  regulations and orders of governmental  bodies and orders and decrees of
courts and arbitrators.

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    "Asset  Disposition" means the disposition of any asset owned by Borrower or
any of its Subsidiaries, other than sales of Inventory in the ordinary course of
business.

    "Availability"  means at any time (a) the  amount of the  Borrowing  Base at
such time minus (b) the aggregate principal amount of Revolving Loan Advances.

    "Availability  Reserve" means a reserve based on the requirement that excess
Availability  under the  Revolving  Credit  Facility be in an amount of not less
than $100,000.00.

    "Bankruptcy Code" means the United States Bankruptcy Code, as in effect from
time to time.

    "Board" means the duly elected and serving members of the Board of Directors
of Borrower.

    "Borrower" means Borrower as defined in the preamble.

    "Borrower's Incorporation Certificate" means Borrower's Restated Certificate
of Incorporation  filed December 23, 2002 with the Secretary of State,  State of
Delaware.

    "Borrowing" means a borrowing of Revolving Loan Advances.

    "Borrowing Base" means, with respect to Borrower, an amount in dollars equal
to the  lesser  of (a) the  Revolving  Credit  Limit,  or (b) the  sum,  without
duplication,  of: (i) up to  eight-five  percent  (85%) of the net amount of the
Eligible  Receivables;  plus  (ii) up to sixty  percent  (60%)  of the  Eligible
Inventory not to exceed  $3,500,000.00;  minus (iii) the  Availability  Reserve;
minus (iv) the Dilution Reserve, and minus (v) other Reserves, if any.

    "Borrowing Base Certificate"  means the Borrowing Base Certificate  referred
to in Section 1.2.

    "Business  Day" means any day other than a Saturday,  Sunday or other day on
which banks in Providence, Rhode Island are authorized or required to close.

    "Capital  Expenditures"  means the  aggregate of all  expenditures  made and
liabilities  incurred that, in accordance with GAAP, are required to be included
in or  reflected  by the  property,  plant,  equipment  or similar  fixed assets
accounts.

    "Capitalized  Lease"  means a lease that is required to be  capitalized  for
financial reporting purposes in accordance with GAAP.

      "Change of Control" means the  occurrence of any of the following  events:
(i) the sale or transfer of all or  substantially  all of the assets of Borrower
as an entirety to any Person or related group of Persons other than an Affiliate
or Affiliates of Borrower; or (ii) Borrower is liquidated,  dissolved, or adopts
a plan of liquidation  pursuant to the Bankruptcy  Code or any other  bankruptcy
law.

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    "Closing  Date" means the date of the funding of an initial  Revolving  Loan
Advance under this Agreement.

    "Closing Fee" means the fee referred to in Section 2.1.

    "Collateral" means all of Borrower's assets, including,  without limitation,
all of the following  property and  interests in property of Borrower,  wherever
located and whether now or hereafter existing or now owned or hereafter acquired
or arising: (i) all Receivables;  (ii) all Inventory;  (iii) all Equipment; (iv)
all Contract Rights; (v) all General Intangibles;  (vi) all Investment Property;
(vii) each Deposit  Account and all  certificates  of deposit  maintained with a
bank,  savings and loan association,  credit union or like  organization,  other
than an account  evidenced by a  certificate  of deposit  that is an  instrument
under the UCC;  (viii) all goods and other  property,  whether or not delivered,
(a) the sale or lease of which gives or purports to give rise to any Receivable,
including,  but not  limited  to, all  merchandise  returned  or  rejected by or
repossessed from customers, or (b) securing any Receivable,  including,  without
limitation,  all  rights as an  unpaid  vendor  or  lienor  (including,  without
limitation,  stoppage in transit, replevin and reclamation) with respect to such
goods and other property; (ix) all mortgages,  deeds to secure debt and deeds of
trust on real or personal property, guaranties, leases, security agreements, and
other  agreements and property which secure or relate to any Receivable or other
Collateral,  or are acquired for the purpose of securing and  enforcing any item
thereof;  (x) all documents of title,  policies and  certificates  of insurance,
securities,  chattel  paper  (including  electronic  chattel  paper and tangible
chattel  paper) and other  documents and  instruments;  (xi) all other goods and
personal property,  whether tangible or intangible,  wherever located, including
money,  supporting  obligations,  letters of credit,  and each  Letter-of-credit
right;  (xii) all files,  correspondence,  computer  programs,  tapes, discs and
related data  processing  software  which  contain  information  identifying  or
pertaining  to any of the  Receivables,  or any Account  Debtor,  or showing the
amounts  thereof or payments  thereon or  otherwise  necessary or helpful in the
realization  thereon  or the  collection  thereof;  (xii) any  "commercial  tort
claims"  as that term is  defined in the UCC (as  identified  by the  parties in
writing  from time to time) and (xiv) any and all  products  and proceeds of the
foregoing  (including,  but not limited to, any claim to any item referred to in
this definition, and any claim against any third party for loss of, damage to or
destruction of any or all of, the Collateral or for proceeds  payable under,  or
unearned  premiums with respect to,  policies of  insurance)  in whatever  form,
including,   but  not  limited  to,  cash,  negotiable   instruments  and  other
instruments  for the payment of money,  chattel paper,  security  agreements and
other documents.

    "Contaminant"  means  any  waste,  pollutant,   hazardous  substance,  toxic
substance,  hazardous  waste,  special  waste,  petroleum  or  petroleum-derived
substance or waste, or any constituent of any such substance or waste.

    "Contract  Rights"  means  any  rights  under  contracts  not yet  earned by
performance and not evidenced by an instrument or chattel paper.

    "Covenant Compliance  Certificate" means the Covenant Compliance Certificate
referred to in Section 6.1.

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    "Default"  shall mean an event or condition  the  occurrence of which would,
with the lapse of time or the  giving  of  notice,  or both,  become an Event of
Default.

    "Deposit Account" has the meaning given to it in the UCC.

    "Deposit  Account  Control  Agreement"  means each Deposit  Account  Control
Agreement among Borrower,  Lender and the bank named therein,  pursuant to which
Lender shall have been granted a first  priority  lien and security  interest in
the deposit account more particularly described therein.

    "Dilution Reserve" means the reserve  established by Lender in an amount not
greater than the amount by which  credits,  returns,  discounts  and  allowances
related to the Receivables  exceed five percent (5%) of the  Receivables,  which
shall be effective upon receipt by Lender of the most recently  completed report
of the field  examination  of the books,  records and other  assets of Borrowers
conducted  pursuant  to  Section  3.2 or  under  any  other  provision  of  this
Agreement.

    "Dollar" and "$" means freely transferable United States dollars.

    "Early Termination Fee" means the fee referred to in Section 2.5.

    "EBITDA"  means,  for any period,  the sum of the amounts for such period of
(a) Net Income, (b) Interest Expense, (c) taxes imposed on or measured by income
or excess profits (for such period and without regard to any prior periods), (d)
the amount of all depreciation  and  amortization  allowances and (e) other non-
cash stock compensation expenses and benefits of Borrower.

      "Eligible  Inventory" means that portion of Borrower's  Inventory on which
Lender has a first and  exclusive  perfected  security  interest and that Lender
determines in its sole discretion from time to time,  based on credit  policies,
market  conditions,  Borrower's  business  and  financial  condition  and  other
matters,  is eligible for use in calculating the Borrowing Base. For purposes of
determining the Borrowing Base,  Eligible Inventory shall not include:  (a) work
in process, (b) slow- moving,  obsolete, or discontinued  Inventory,  (c) supply
items, pallets or packaging,  (d) Inventory in the control of a third person for
processing,  storage or otherwise  unless the Borrower  shall have  obtained and
delivered to Lender a bailee or other appropriate  waiver, in form and substance
satisfactory to Lender, the original  documents or other instruments  evidencing
such  Inventory,  or such other  agreements  or other  documents as Lender shall
require in its sole and  absolute  discretion,  (e)  Inventory  of an age within
ninety (90) days of its respective  expiration  dates; (f) consigned  Inventory,
(g)  Inventory  in transit,  (h)  Inventory  held by Borrower for lease or to be
furnished  under a  contract  of  service,  (i)  Inventory  associated  with any
contract  of which  Borrower  has  knowledge  that the  same may be  subject  to
cancellation or a material adverse development, (j) Inventory located other than
at the Orlando  Warehouses,  (k) Inventory  associated  with any contract to the
extent that progress or advance  payments are received  from the Account  Debtor
such that Inventory is identified to such  contract,  or (l) Inventory the value
of  which  may be  otherwise  impaired  as  determined  by  Lender  in its  sole
discretion.  For purposes of this  definition,  Inventory that at any time is or
becomes  Eligible  Inventory,  but which  subsequently  fails to meet any of the
requirements of this definition shall

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cease to be Eligible Inventory (but shall continue to be part of the Collateral)
for so long as the same fails to meets such requirements.

      "Eligible  Receivable"  means any  Receivable of Borrower that consists of
the unpaid portion of the obligation  stated on the invoice issued to an Account
Debtor with respect to Inventory  sold and shipped to or services  performed for
such Account Debtor in the ordinary course of business that Lender determines in
its sole and good faith discretion, based on credit policies, market conditions,
Borrower's business and other criteria,  is eligible.  A Receivable shall not be
an  Eligible  Receivable  unless  such  Receivable  (i) is subject  to  Lender's
perfected first priority  security interest and no other Lien, (ii) is evidenced
by an invoice or other documentary evidence satisfactory to Lender that has been
sent to the Account Debtor,  (iii) is unconditionally due and payable in Dollars
or Canadian currency, and (iv) conforms to the warranties regarding Accounts and
Receivables contained in this Agreement.  Eligible Receivables shall not include
any of the following:

      (a) a  Receivable  that is unpaid  more than  ninety  (90) days  after the
original  invoice date thereof or is Receivable  with payment terms of more than
sixty (60) days from the original invoice date;

      (b) a Receivable  where fifty percent (50%) or more of all  Receivables of
the Account Debtor or an affiliated  group of Account  Debtors (in dollar value)
are not Eligible Receivables pursuant to clause (a) above;

     (c) a Receivable owed by an Account Debtor,  or affiliated group of Account
Debtors,  which is obligated to Borrower respecting  Receivables,  the aggregate
unpaid balance of which exceeds fifteen percent (15%) (unless  otherwise  agreed
to in  writing  by  Lender) of the  aggregate  unpaid  balance of all  otherwise
Eligible  Receivables owed to Borrower at such time by such Account Debtors, but
only to the extent of such excess;

     (d) a Receivable that (i) arises from  uncompleted  performance on the part
of Borrower, (ii) constitutes a progress billing, advance billing, any retention
amount,  or retainage,  (iii) is a guaranteed sale, a sale and return,  or other
repurchase or return  basis;  or (iv) is a "bill and hold" or involves a sale of
goods,  and all such goods have not been  lawfully  shipped and  invoiced to the
Account Debtor (or if requested by Lender, copies of all invoices, together with
all shipping  documents and delivery receipts  evidencing such shipment have not
been  delivered to Lender),  unless such Account  Debtor enters into a "bill and
hold" agreement or similar  agreement with Borrower  acceptable to Lender in its
discretion;

      (e) a Receivable  with  respect to which the Account  Debtor is either (i)
the United States or any department,  agency, or  instrumentality  of the United
States (other than Receivables  with respect to which Borrower has complied,  to
the  satisfaction  of Lender,  with the  Assignment  of Claims  Act of 1940,  as
amended),  or (ii) any state of the United  States  (other than (y)  Receivables
owed by any state that does not have a statutory  counterpart  to the Assignment
of  Claims  Act or (z)  Receivables  owed  by any  state  that  has a  statutory
counterpart to the Assignment of Claims Act as to which Borrower has complied to
Lender's satisfaction);

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     (f) a Receivable  that arises from an Account  Debtor that is a creditor of
Borrower,  has  threatened  or  asserted a right of  setoff,  has  disputed  its
liability  or has made any claim with  respect to its  obligation  to pay,  or a
Receivable that is subject to a levy, prior assignment, claim, Lien, subrogation
right or security  interest,  except that, if such Account  Debtor enters into a
written  set off  agreement  with  Borrower  acceptable  to  Lender  in its sole
discretion,  then, in such case, the amount by which such Receivable  excess the
amount of such offset will be considered eligible;

     (g) a Receivable that is subject to any credit or contra provided, however,
that if the  amount of such  Receivable  exceeds  the  amount of such  credit or
contra, such excess may be considered for eligibility;

      (h)  a  Receivable  that  arises  from  an  Affiliate  of  Borrower  or an
Interested Party;

     (i) a Receivable  that arises from an Account Debtor (i) that is subject to
an Insolvency  Proceeding,  is not solvent or has gone out of business;  (ii) to
whom goods are being shipped on a "cash on delivery" or C.O.D.  basis;  or (iii)
as to which Lender or Borrower are aware of an imminent Insolvency Proceeding or
a material impairment of the financial condition;

      (j) a Receivable  with  respect to which the Account  Debtor is located in
the states of New Jersey,  Minnesota,  or West Virginia (or any other state that
requires a creditor to file a business  activity  report or similar  document in
order to bring suit or enforce its remedies  against such Account  Debtor in the
courts or through any judicial  process of such state),  unless Borrower (i) has
qualified to do business in New Jersey,  Minnesota, West Virginia, or such other
states, (ii) has filed a business activities report with the applicable division
of taxation,  the department of revenue,  or with such other state  offices,  as
appropriate,  for the  then-current  year,  or (iii) is exempt  from such filing
requirement;

      (k) a Receivable that is evidenced by any chattel paper,  promissory note,
payment  instrument  or written  agreement  or arises  from the sale of goods by
Borrower to any Account  Debtor  purchasing  such goods  primarily for personal,
family or household purposes, or on a sale or return or other conditional basis;

      (l) a Receivable  that arises from an Account Debtor whose chief executive
office or place of  organization  is  outside  the  United  States or any of the
following provinces of Canada: Ontario, Alberta, Manitoba, Saskatchewan, British
Columbia,  Prince Edward Island and the Yukon Territory,  unless (i) the payment
for such  Receivable is assured by an  irrevocable  letter of credit  payable in
United States dollars satisfactory to Lender (as to form, substance,  issuer and
domestic  confirming  bank),  the proceeds of which have been assigned to Lender
and the  original  letter of credit has been  delivered  to Lender and  directly
drawable  by  Lender,  or (ii) the  payment  for such  Receivable  is insured by
foreign credit  insurance  acceptable to Lender,  such credit insurance has been
collaterally  assigned to Lender in form satisfactory to Lender,  and Lender has
been named beneficiary with respect thereto;

     (m) a Receivable arising from the delivery of any toolings,  samples, trial
merchandise, promotional or demonstration material; or

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     (n) a Receivable for which Lender has notified Borrower that the Receivable
or the Account Debtor is unsatisfactory  or unacceptable  (which Lender reserves
the right to do in its sole good faith discretion at any time).

For purposes of this  definition,  any Receivable that at any time is or becomes
an  Eligible  Receivable,  but  which  subsequently  fails  to  meet  any of the
requirements of this definition,  shall cease to be an Eligible  Receivable (but
shall  continue to be part of the  Collateral)  for so long as the same fails to
meet such requirements.

      "Environmental Laws" means all federal,  state, local and foreign laws now
or hereafter in effect  relating to pollution or protection of the  environment,
including  laws  relating  to  emissions,  discharges,  Releases  or  threatened
Releases  of  pollutants,  Contaminants,  chemicals,  or  industrial,  toxic  or
hazardous  substances  or  wastes  into  the  environment  (including,   without
limitation,  ambient air,  surface water,  ground water,  or land), or otherwise
relating to the manufacture,  processing, distribution, use, treatment, storage,
disposal,   removal,   transport,  or  handling  of  pollutants,   Contaminants,
chemicals,  or  industrial,  toxic or hazardous  substances  or wastes,  and all
regulations,  notices or demand letters issued, entered, promulgated or approved
thereunder.

    "Equipment" means and includes, all machinery,  apparatus,  equipment, motor
vehicles,  tractors,  trailers,  rolling  stock,  fittings,  fixtures  and other
tangible  personal property (other than Inventory) of every kind and description
used in Borrower's business operations or owned by Borrower or in which Borrower
has an interest, and all parts,  accessories and special tools and all increases
and accessions thereto and substitutions and replacements therefor.

      "ERISA" means the Employee  Retirement  Income Security Act of 1974, as in
effect from time to time.

    "Escrow  Agreement"  means that certain  Escrow  Agreement,  dated as of the
Agreement Date among Lender, Borrower, SouthTrust, Gibraltar Bank, FSB, and each
other party who is a signatory thereto.

     "Event  of  Default"  means  an  event  described  in  Section  9.1  of the
Agreement.

    "FDA" means the Food and Drug Administration.

    "Financing  Statements" means any and all Uniform  Commercial Code financing
statements,  in form and  substance  satisfactory  to Lender,  naming  Lender as
secured party, and Borrower as debtor.

    "Fiscal Quarter" means a fiscal quarter of any Fiscal Year.

    "Fiscal Year" means the fiscal year of Borrower that ends on the last day of
March of each year.

    "Fixed  Charge  Coverage  Ratio"  means,  for any  period,  the ratio of (i)
Borrower's EBITDA minus Unfunded Capital  Expenditures minus taxes actually paid
by Borrower in cash minus  distributions and dividends paid by Borrower in cash,
to (ii) Borrower's Interest Expense

                                       7
<PAGE>

plus scheduled amortization payments (including Capitalized Lease payments) made
by Borrower, in each case for such period.

    "GAAP" means generally accepted accounting  principles  consistently applied
and maintained  throughout the period indicated and, when used with reference to
Borrower or any  Subsidiary  of Borrower,  consistent  with the prior  financial
practices of Borrower.

      "General  Intangibles"  means all of  Borrower's  now  owned or  hereafter
acquired  general  intangibles,  choses in action  and  causes of action and all
other intangible  personal  property of Borrower of every kind and nature (other
than Accounts), including, without limitation, all Proprietary Rights, corporate
or   other   business   records,   inventions,   designs,   blueprints,   plans,
specifications,  goodwill,  computer  software,  customer lists,  registrations,
licenses,  franchises,  tax refund claims,  reversions or any rights thereto and
any other amounts  payable to Borrower from any Plan or other  employee  benefit
plan,   rights  and   claims   against   carriers   and   shippers,   rights  to
indemnification, business interruption insurance and proceeds thereof, property,
casualty or any similar type of insurance and any proceeds thereof,  proceeds of
insurance  covering the lives of key employees on which  Borrower is beneficiary
and any letter of credit, guarantee, claims, security interest or other security
held by or granted to Borrower to secure  payment by an Account Debtor of any of
the Accounts.

    "Governmental  Approvals"  means all  authorizations,  consents,  approvals,
licenses and exemptions of,  registrations and filings with, and reports to, all
governmental  bodies,  whether  federal,  state,  local or foreign  national  or
provincial and all agencies thereof.

      "Indebtedness" of any Person means, without  duplication,  all Liabilities
of such Person,  and to the extent not otherwise  included in  Liabilities,  the
following:  (a) all obligations for Money Borrowed or for the deferred  purchase
price of  property  or  services,  (b) all  obligations  (including,  during the
noncancellable  term of any lease in the nature of a title retention  agreement,
all future  payment  obligations  under such lease  discounted  to their present
value in  accordance  with GAAP)  secured by any Lien to which any  property  or
asset  owned or held by such Person is  subject,  whether or not the  obligation
secured  thereby shall have been assumed by such Person,  (c) all obligations of
other Persons which such Person has guaranteed,  including,  but not limited to,
all obligations of such Person consisting of recourse  liability with respect to
accounts receivable sold or otherwise disposed of by such Person, and (d) in the
case of Borrower (without duplication) all Obligations under the Loan Documents,
provided that  Indebtedness  shall not include unsecured trade payables or trade
credit incurred by Borrower.

    "Initial  Term" means the three (3) year period  commencing on the Agreement
Date.

    "Insolvency  Proceeding"  means any  proceeding  commenced by or against any
Person under any  provision of the  Bankruptcy  Code or under any other state or
federal bankruptcy or insolvency law,  assignments for the benefit of creditors,
formal or informal moratoria, compositions, extensions generally with creditors,
or proceedings seeking reorganization arrangement, or other similar relief.

    "Intangible  Assets" means, with respect to any Person,  that portion of the
book value of all of such Person's  assets that would be treated as  intangibles
under GAAP.

                                       8
<PAGE>

    "Interest  Expense"  means for any period as determined  in conformity  with
GAAP, total interest expense,  whether paid or accrued or due (including without
limitation,  in respect of the Loans and subordinated debt, if any) and payable,
including  without  limitation,  the  interest  component of  Capitalized  Lease
obligations  for such  period,  all bank fees that are in the nature of interest
and (to the extent not  duplicative) net costs under swap, cap or other interest
rate contracts, but excluding amortized loan costs and bank charges.

    "Interest Rate" means a variable rate,  adjusted  monthly on the first (1st)
day of each month during the Initial Term and each  Renewal  Term,  equal to the
Prime Rate plus one and three- quarter percent  (1.75%) per annum  calculated on
the average cash borrowings for the preceding  month. In each case, the Interest
Rate shall not be subject to rebate or proration  upon the  termination  of this
Agreement for any reason.

    "Interested  Party"  means (a) any highly  compensated  employee of Borrower
(that is, any employee  with annual  income equal or greater to the then current
standard set forth in Section 414(q)(1)(B)(i) of the Internal Revenue Code), (b)
any  shareholder  holding 10% or more of the  outstanding  voting  securities of
Borrower, and (c) any director of Borrower.

    "Internal  Revenue  Code" means the  Internal  Revenue  Code of 1986,  as in
effect from time to time.

    "Inventory"  means all  inventory  as such term is  defined  in the  Uniform
Commercial Code and shall include,  without  limitation,  (a) all goods intended
for sale or lease by  Borrower,  for  display  or  demonstration  and all  other
products intended for sale by Borrower to its customer, (b) all work-in-process,
(c) all raw  materials  or other  materials  and  supplies  of every  nature and
description  used or which  might be used in  connection  with the  manufacture,
packing, shipping, advertising,  selling, leasing or furnishing of such goods or
otherwise  used or  consumed  in  Borrower's  business,  and  (d) all  documents
evidencing and general intangibles relating to any of the foregoing.

    "Investment"  means,  with  respect to any Person;  (a) the  acquisition  or
ownership by such Person of any share of capital stock, evidence of Indebtedness
(which shall not include funds on deposit in demand  deposit  accounts) or other
security  issued by any other  Person,  (b) any loan,  advance or  extension  of
credit  to, or  contribution  to the  capital  of, any other  Person,  excluding
advances to employees in the ordinary course of business for business  expenses,
(c) the obligations of any other Person that are guaranteed by such Person,  (d)
any other  investment in any other Person,  and (e) any  commitment or option to
make any of the investments listed in clauses (a) through (d) above.

    "Investment Property" has the meaning given to it in the UCC.

    "Lender"   shall   mean  Textron  Financial  Corporation,   a
Delaware corporation.

    "Letter-of-credit right" has the meaning given to it in the UCC.

    "Liabilities"  of any Person  means all items  (except  for items of capital
stock,   additional  paid-in  capital  or  retained  earnings,   or  of  general
contingency  or deferred tax reserves)  which in  accordance  with GAAP would be
included in  determining  total  liabilities as shown on the

                                       9
<PAGE>

liability  side of a  balance  sheet of such  Person  as at the date as of which
Liabilities are to be determined.

    "Lien" as applied to the property of Borrower or any Person  means:  (a) any
mortgage,  deed to secure  debt,  deed of trust,  lien,  pledge,  charge,  lease
constituting a Capitalized  Lease  obligation,  conditional  sale or other title
retention agreement,  or other security interest,  security title or encumbrance
of any kind in respect of any  property  of such  Person,  or upon the income or
profits  therefrom,  (b) any  arrangement,  express or implied,  under which any
property of such Person is transferred,  sequestered or otherwise identified for
the purpose of subjecting the same to the payment of Indebtedness or performance
of any other  obligation  in priority to the payment of the  general,  unsecured
creditors of such Person,  and (c) the filing of, or any agreement to give,  any
financing  statement under the Uniform  Commercial Code or its equivalent in any
jurisdiction,  excluding informational financing statements relating to property
leased by such Person.

    "Loan Documents" means  collectively this Agreement,  the Security Documents
and each other  instrument,  agreement  or document  executed by Borrower or any
other Person in connection  with this  Agreement,  whether prior to, on or after
the Agreement Date.

    "Loans" means the Revolving Loan Advances.

    "Lockbox"  means each United States Post Office Box specified in the Lockbox
Agreement.

    "Lockbox  Agreement"  means  each  agreement  between  Borrower  and a  bank
concerning the establishment of the Lockbox and related bank deposit account for
the collection of and remittance to Lender of Receivables.

    "Materially   Adverse   Effect"   means   any  act,   omission,   situation,
circumstance,  event or undertaking  which would,  singly or in any  combination
with one or more other acts,  omissions,  situations,  circumstances,  events or
undertakings  have,  or  reasonably  be expected to have, a  materially  adverse
effect  upon  (a)  the  business,  assets,  properties,  liabilities,  financial
condition and results of operations of Borrower and its Subsidiaries  taken as a
whole,  (b) the  value  of the  Collateral,  (c) the  Security  Interest  or the
priority of the Security Interest, (d) the respective ability of Borrower or any
other obligor to perform any material  obligations  under this  Agreement or any
other  Loan  Document  to which it is a party,  or (e) the  legality,  validity,
binding  effect,  enforceability  or  admissibility  into  evidence  of any Loan
Document  or the ability of Lender to enforce  any  material  rights or remedies
under or in connection with any Loan Document.

    "Money  Borrowed"  means, as applied to  Indebtedness,  (a) Indebtedness for
money borrowed,  (b) Indebtedness,  whether or not in any such case the same was
for money borrowed, (i) represented by notes payable, and drafts accepted,  that
represent  extensions  of credit,  (ii)  constituting  obligations  evidenced by
bonds,  debentures,  notes or similar instruments,  or (iii) upon which interest
charges  are  customarily  paid or that was issued or assumed as full or partial
payment for property,  (c)  Indebtedness  that  constitutes a Capitalized  Lease
obligation,  and (d)  Indebtedness  that is such by virtue of clause  (c) of the
definition thereof, but only to the extent

                                       10
<PAGE>

that  the  obligations   guaranteed  are  obligations   that  would   constitute
Indebtedness for Money Borrowed,  provided that Money Borrowed shall not include
unsecured  trade payables and other trade credit incurred in the ordinary course
of business.

    "Net Income" means,  as applied to any Person,  the net income (or net loss)
of such Person for the period in question after giving effect to deduction of or
provision for all operating expenses, all taxes and reserves (including reserves
for  deferred  taxes)  and  all  other  proper  deductions,  all  determined  in
accordance with GAAP, provided that there shall be excluded:  (a) the net income
(or net loss) of any Person  accrued  prior to the date it becomes a  Subsidiary
of, or is merged into or consolidated with, the Person whose Net Income is being
determined or a Subsidiary  of such Person,  (b) the net income (or net loss) of
any  Person in which the  Person  whose Net  Income is being  determined  or any
Subsidiary of such Person has an ownership interest,  except, in the case of net
income,  to the extent that any such income has actually  been  received by such
Person  or  such   Subsidiary   in  the  form  of  cash   dividends  or  similar
distributions,  (c) any  restoration of any contingency  reserve,  except to the
extent  that  provision  for such  reserve  was made out of income  during  such
period, (d) any net gains or losses on the sale or other disposition, not in the
ordinary course of business,  of  Investments,  business units and other capital
assets, provided that there shall also be excluded any related charges for taxes
thereon,  (e) any net gain  arising from the  collection  of the proceeds of any
insurance policy, (f) any write-up of any asset, and (g) any other extraordinary
item.

    "Net  Proceeds"   means  proceeds   received  by  Borrower  or  any  of  its
Subsidiaries in cash from any Asset Disposition (including,  without limitation,
payments under notes or other debt  securities  received in connection  with any
Asset  Disposition),  net of: (a) the  transaction  costs of such  sale,  lease,
transfer  or  other  disposition;  (b)  any  tax  liability  arising  from  such
transaction;  and (c) amounts applied to repayment of  Indebtedness  (other than
the Obligations) secured by a Lien on the asset or property disposed.

    "Notice of Borrowing" means a telephonic or electronic  notice followed by a
confirming  same-day  written notice  requesting a Borrowing,  which is given by
telex or facsimile  transmission in accordance with the applicable provisions of
this  Agreement and which  specifies (i) the amount of the requested  Borrowing,
and (ii) the date of the requested Borrowing.

    "Obligations"  means,  in each case  whether now in  existence  or hereafter
arising,  (a) the  principal  of, and  interest  and  premium,  if any,  on, the
Revolving Loan Advances,  and (b) all  indebtedness,  liabilities,  obligations,
covenants and duties of Borrower to Lender of every kind, nature and description
arising  under  this  Agreement,  or any  of the  other  Loan  Documents,  or in
connection  with the  Revolving  Credit  Facility,  whether  direct or indirect,
absolute or contingent,  due or not due, contractual or tortious,  liquidated or
unliquidated,  and whether or not evidenced by any note,  and whether or not for
the payment of money,  including without limitation,  fees and expenses required
to be paid or reimbursed pursuant to this Agreement.

    "Obligor"  means  Borrower  and any  Person  who  may  now or in the  future
guaranty  the  payment  and  performance  of  the  whole  or  any  part  of  the
Obligations.

                                       11
<PAGE>

    "Orlando Warehouses" means those certain warehouses located at 2441 Viscount
Row,  Orlando,  Florida  and 2901 Titan Row,  Orlando,  Florida,  for which each
landlord has provided a  Landlord's  Waiver and Consent on terms and  conditions
acceptable to Lender.

    "Payable  Reserve"  means a reserve  required by Lender from time to time in
the exercise of its discretion reflecting an amount equal to the sum of accounts
payable over sixty (60) days past due for which no accommodation for payment has
been made by Borrower to the satisfaction of Lenders in its sole discretion.

    "PBGC" means the Pension  Benefit  Guaranty  Corporation  and any  successor
agency.

    "Permitted  Investments"  means  Investments  of Borrower in: (a) negotiable
certificates of deposit or time deposits issued by a state bank or by any United
States bank or trust company having  capital,  surplus and undivided  profits in
excess of  $1,000,000.00;  (b)  obligations  issued or  guaranteed by the United
States of America or any agency or instrumentality thereof which has a remaining
maturity  at the  time of  purchase  of not more  than  one year and  repurchase
agreements relating to the same;(c) commercial paper with maturities of not more
than  180  days  and a  published  rating  of not  less  than A-1 or P-1 (or the
equivalent  rating),   (d)  U.S.  money  market  funds  that  invest  solely  in
obligations  issued or  guaranteed  by the United States of America or an agency
thereof;  (e) loans to  employees  not  prohibited  under  Section  7.3; and (f)
advances or extensions of credit made by Borrower in the ordinary  course of its
business not to exceed $100,000.00 in the aggregate outstanding at any time.

    "Permitted  Liens" means:  (a) Liens securing  taxes,  assessments and other
governmental  charges or levies  (excluding any Lien imposed  pursuant to any of
the  provisions  of ERISA) or the claims of  materialmen,  mechanics,  carriers,
warehousemen or landlords for labor, materials,  supplies or rentals incurred in
the ordinary course of business,  but (i) in all cases only if payment shall not
at the time be  required  to be made,  and (ii) in the case of  warehousemen  or
landlords,  only if such liens are junior to the Security Interest in any of the
Collateral,  (b) Liens  consisting  of deposits or pledges  made in the ordinary
course of business in  connection  with,  or to secure  payment of,  obligations
under workers'  compensation,  unemployment  insurance or similar legislation or
under payment or  performance  bonds,  (c) other Liens on real property owned by
Borrower  in the  nature  of  zoning  restrictions,  easements,  and  rights  or
restrictions  of record  on the use of real  property,  which do not  materially
detract  from the  value of such  property  or  impair  the use  thereof  in the
business of Borrower,  (d) purchase  money Liens,  (e) judgment  Liens that have
been stayed or bonded deposits or pledges made in connection  with, or to secure
payment of, worker's compensation,  (f) unemployment insurance,  old age pension
programs mandated under Applicable Law or other social security; (g) Liens shown
on Schedule 5.5(a), and (h) Liens of Lender arising under this Agreement and the
other Loan Documents.

    "Person"  means any  individual,  limited  liability  company,  corporation,
partnership,  association, trust or unincorporated organization, or a government
or any agency or political subdivision thereof.

    "Plan" means any  employee  benefit plan as defined in Section 3(3) of ERISA
in respect of which Borrower is, or within the  immediately  preceding six years
was, an "employer" as defined in Section 3(5) of ERISA.

                                       12
<PAGE>

    "Prime Rate" means for any month the rate of interest per annum announced or
quoted by  JPMorgan  Chase  Bank on the last day of the  preceding  month as its
prime rate for  commercial  loans,  whether or not such rate is the lowest  rate
charged by  JPMorgan  Chase Bank to its most  preferred  borrower,  and, if such
prime rate for  commercial  loans is  discontinued  by JPMorgan  Chase Bank as a
standard,  a  comparable  reference  rate  designated  by Lender as a substitute
therefor shall be the Prime Rate.

    "Proprietary Rights" means all of Borrower's now owned and hereafter arising
or  acquired  patents,   patent   applications,   inventions  and  improvements,
copyrights,  copyright  applications,  literary  rights,  trademarks,  trademark
applications,  trade names, trade secrets,  service marks, data bases,  computer
software  and  software   systems,   including  the  source  and  object  codes,
information systems,  discs, tapes,  customer lists,  telephone numbers,  credit
memoranda,  goodwill,  licenses,  and other intangible  property,  and all other
rights  under  any  of  the  foregoing,  all  extensions,   renewals,  reissues,
divisions, continuations, and continuations-in-part of any of the foregoing, all
income,  royalties,  damages,  claims and payments  now or hereafter  due and/or
payable under or with respect thereto, including without limitation, damages and
payments  for past and future  infringement  thereof,  and all rights to sue for
past, present and future infringement of any of the foregoing.

      "Receivable"  means and  includes (a) any and all rights to the payment of
money or other forms of consideration of any kind (whether  classified under the
Uniform  Commercial Code as Accounts,  contract rights,  chattel paper,  general
intangibles,  or otherwise)  including,  but not limited to, Accounts,  accounts
receivable,  letters  of credit  and the right to  receive  payment  thereunder,
chattel paper, tax refunds, insurance proceeds,  Contract Rights, notes, drafts,
instruments,  documents,  acceptances,  and all  other  debts,  obligations  and
liabilities in whatever form from any Person,  (b) all guarantees,  security and
Liens for  payment  thereof,  (c) all  goods,  whether  now  owned or  hereafter
acquired,  and whether  sold,  delivered,  undelivered,  in transit or returned,
which may be  represented  by, or the sale or lease of which may have given rise
to, any such right to payment or other debt,  obligation or  liability,  and (d)
all proceeds of any of the foregoing.

    "Regulation  U" means  Regulation U of the Board of Governors of the Federal
Reserve System (or any successor).

    "Release"  means release,  spill,  emission,  leaking,  pumping,  injection,
deposit, disposal, discharge,  dispersal, leaching or migration into the outdoor
environment  or  into  or  out  of  any  property,  including  the  movement  of
Contaminants through or in the air, soil, surface water or groundwater.

    "Remedial  Action" means actions required to (a) clean up, remove,  treat or
in any other way address  Contaminants in the outdoor  environment;  (b) prevent
the Release or threat of Release or minimize the further Release of Contaminants
so they do not migrate or endanger  or  threaten  to endanger  public  health or
welfare or the  outdoor  environment;  or (c) perform  pre-remedial  studies and
investigations and post-remedial monitoring and care.

    "Renewal  Term" means the  extension  of this  Agreement  beyond the Initial
Term, as provided for in Section 1.6.

                                       13
<PAGE>

    "Reportable  Event" has the meaning  set forth in Section  4043(b) of ERISA,
but shall not include a Reportable  Event as to which the  provision  for thirty
(30) days notice to the PBGC is waived under applicable regulations.

    "Reserves"  means reserves  established  against the amount of the Revolving
Loan  Advances,  which  Lender  in the  exercise  of  its  credit  judgment  and
discretion, deems necessary to ensure payment of the Obligations.

    "Revenues" shall mean all money, funds, cash,  proceeds,  or payments of any
kind received by Borrower from all sources,  including without  limitation,  all
proceeds of  Collateral,  including Net Proceeds,  insurance  proceeds,  and all
proceeds  from the sale of Inventory or other  Collateral,  whether  received in
cash, by check, by other instrument, or otherwise.

    "Revolving Credit Facility" means the revolving credit facility  established
under this  Agreement in an aggregate  principal  amount  outstanding at any one
time of  $7,500,000.00  or such lesser or greater amount as shall be agreed upon
from time to time in writing by Lender and Borrower.

    "Revolving Loan Advance" means a revolving loan made to Borrower pursuant to
Section 1.1 and  "Revolving  Loan  Advances"  means more than one Revolving Loan
Advance.

    "SEC" means the Securities and Exchange Commission.

      "Security"  shall  have  the  same  meaning  as in  Section  2(1)  of  the
Securities Act of 1933, as amended.

    "Security  Documents"  means  each  of  the  following:  (a)  the  Financing
Statements,  (b) the  Trademark  Agreement,  (c) each  Deposit  Account  Control
Agreement,  (d) each Lockbox Agreement,  and (e) each other writing executed and
delivered by Borrower or any other Obligor  securing the Obligations or any part
thereof.

    "Security  Interest"  means the  Liens of  Lender  on and in the  Collateral
created or effected  hereby or by any of the  Security  Documents or pursuant to
the terms hereof or thereof.

    "SouthTrust" means SouthTrust Bank.

    "SouthTrust  Collateral"  means the  collateral  in which the  Borrower  has
granted to  SouthTrust  a security  interest  as more  fully  described  in that
certain Security Agreement (Machinery and Equipment) dated as of March 10, 2002,
as it has been and may hereafter be amended, supplemented,  extended or restated
from  time to  time,  and in  which  SouthTrust  has a first  priority  security
interest in accordance with applicable law.

    "SouthTrust  Debt" means those certain term loans of  SouthTrust  secured by
the SouthTrust Collateral.

                                       14
<PAGE>

    "Subsidiary"  means, (a) when used to determine the relationship of a Person
to another Person, a Person of which an aggregate of fifty percent (50%) or more
of the stock of any class or  classes  or fifty  percent  (50%) or more of other
ownership  interests is owned of record or beneficially by such other Person, or
by one or more  Subsidiaries  of such other Person,  or by such other Person and
one or more  Subsidiaries  of such Person,  (i) if the holders of such stock, or
other ownership interests, (A) are ordinarily,  in the absence of contingencies,
entitled  to vote for the  election  of a majority  of the  directors  (or other
individuals  performing similar functions) of such Person, even though the right
so to vote has been suspended by the happening of such a contingency, or (B) are
entitled,  as such  holders,  to vote  for the  election  of a  majority  of the
directors (or individuals  performing similar functions) of such Person, whether
or not the right so to vote exists by reason of the happening of a  contingency,
or  (ii) in the  case  of such  other  ownership  interests,  if such  ownership
interests constitute a majority voting interest,  and (b) when used with respect
to a Plan,  ERISA or a provision of the  Internal  Revenue  Code  pertaining  to
employee benefit plans, any other corporation, trade or business (whether or not
incorporated)  which is under common  control with  Borrower and is treated as a
single  employer  with  Borrower  under  Section  414(b) or (c) of the  Internal
Revenue Code and the regulations thereunder.

      "Termination  Date"  means the  earliest  to occur of:  (a) the end of the
Initial Term,  or such later date as to which the same may be extended  pursuant
to the  provisions of Section 1.6, (b) such date as the  Obligations  shall have
been accelerated  pursuant to the provisions of Section 9.2, or (c) such date as
all  Obligations  shall  have been  irrevocably  paid in full and the  Revolving
Credit Facility shall have been terminated.

    "Termination  Event"  means (a) a Reportable  Event,  or (b) the filing of a
notice of intent to terminate a Plan, or the treatment of a Plan  amendment as a
termination,  under  Section  4041(c)  of  ERISA,  or  (c)  the  institution  of
proceedings to terminate a Plan by the PBGC under Section 4042 of ERISA,  or the
appointment of a trustee to administer any Plan.

    "Trademark  Agreement" means the Patent,  Copyright and Trademark Collateral
Assignment and Security Agreement, dated on or about the Agreement Date, made by
Borrower to Lender.

    "Unfunded Capital  Expenditures" means Capital  Expenditures that are funded
or financed with the proceeds of any Borrowing under this Agreement.

    "Uniform  Commercial Code" or "UCC" means the Uniform  Commercial Code as in
effect from time to time in the state of Rhode Island.

    General. Unless otherwise defined, all terms used in this Agreement that are
defined in the UCC shall have the meaning  give them in the UCC. All terms of an
accounting  nature not  specifically  defined in this  Agreement  shall have the
meaning ascribed them by GAAP. References to any legislation or statute or code,
or to any provision  thereof,  shall include any modification or reenactment of,
or  any  legislative,   statutory  or  code  provision   substituted  for,  such
legislation,  statute or code or  provision  thereof.  References  to any Person
include its successor or permitted substitutes and assigns.

                                       15
<PAGE>

                   ARTICLE I - LOANS, RENEWAL AND TERMINATION

     1.1 Revolving  Loan Advances.  Lender agrees,  for so long as no Default or
Event of Default  exists and  subject  to the terms of this  Agreement,  to make
Revolving  Loan  Advances  to  Borrower  in an  aggregate  amount  at  any  time
outstanding  up to the  amount of the  Borrowing  Base at such  time;  provided,
however,  the aggregate  amount of all Loans  outstanding  at any time shall not
exceed the amount of the Revolving Credit Facility.  It is expressly  understood
and agreed that Lender intends to use the Borrowing Base as a maximum ceiling on
Revolving Loan Advances to Borrower;  provided,  however, that it is agreed that
should the Revolving  Loan Advances ever exceed the ceiling so determined or any
other limitation set forth in this Agreement, such Revolving Loan Advances shall
nevertheless  constitute  Obligations secured by the Security Interest of Lender
and, as such, shall be entitled to all benefits  thereof and security  therefor.
Under the  Revolving  Credit  Facility,  Borrower  from time to time may borrow,
repay,  prepay and reborrow the Revolving Loan Advances pursuant to the terms of
this Agreement.

     1.2  Borrowing Procedures.

           (a) Subject to the provisions of Section 8.1 of this  Agreement,  and
provided  that  there  does not then  exist a  Default  or an Event of  Default,
Borrower  may,  from time to time,  request  that  Lender  make  Revolving  Loan
Advances to  Borrower in  accordance  with the terms of this  Agreement.  Lender
shall fund Borrower's request for Revolving Loan Advances as follows: (i) by the
close of business on the day such request is received if the request is received
prior to 2:00 p.m.  east coast time;  and (ii) by the close of the next Business
Day if the request is received after that time.

          (b)  Each  request  for a  Revolving  Loan  Advance  shall  be made by
transmission  to Lender of a Notice of  Borrowing  and shall,  if  requested  by
Lender or required  pursuant to Section  6.7, be  accompanied  by a complete and
accurate  Borrowing  Base  Certificate,  and shall be confirmed by Borrower with
Lender by telephone;  provided,  that Lender shall at any time have the right to
review and adjust, in the exercise of its reasonable discretion, any calculation
set forth in the Borrowing  Base  Certificate  or the Notice of Borrowing (i) to
reflect  Lender's  reasonable  estimate  of  declines  in  value  of  any of the
Collateral described in such Borrowing Base Certificate,  and (ii) to the extent
such  calculation is not in accordance with this Agreement.  Borrower shall make
no more than one (1) request for Revolving Loan Advances each day.

           (c) Borrower shall reimburse Lender and hold Lender harmless from any
loss or expense that Lender actually  sustains or incurs as a consequence of the
failure of Borrower to borrow  additional Loans after Borrower has requested (or
is deemed to have requested) such additional  Loans,  including any such loss or
expense  arising from the  liquidation  or  re-employment  of funds  obtained by
Lender to maintain the Loans or from fees payable to terminate the deposits from
which such funds were obtained.

     1.3  Interest.

          (a) Interest shall accrue on the outstanding  principal balance of the
Revolving  Loan  Advances at the  Interest  Rate.  All  interest  accrued on the
outstanding principal balance of

                                       16
<PAGE>

the Revolving  Loan Advances shall be calculated on the basis of a year of three
hundred  sixty (360) days and the actual  number of days  elapsed in each month.
Accrued  interest  shall be added to the  outstanding  principal  balance of the
Loans on the first  Business Day of each calendar  month  following the month in
which such interest accrues.

          (b) Upon the  occurrence  and during the  continuation  of an Event of
Default,  the unpaid principal balance of the Revolving Loan Advances shall bear
interest at a per annum rate equal to the Interest  Rate plus three percent (3%)
effective  as of and from the date such  Event of  Default  first  occurred,  as
determined by Lender.

     1.4 Charges to Loan Account. At Lender's option, exercised in Lender's sole
discretion,  Lender may (a) deduct the aggregate amount of principal,  interest,
fees,  costs,  expenses,  and other  charges  and amounts  provided  for in this
Agreement or in any other Loan  Documents from any Revolving Loan Advance on the
due date  thereof,  (b) treat such  amounts as a Revolving  Loan  Advance or (c)
disburse such amount by way of direct payment,  which such disbursement shall be
deemed to be a Revolving Loan Advance.

     1.5  Allocation of Payments and Limit of Interest.  Prior to the occurrence
of an Event of Default,  all Revenues  received by Lender from Borrower shall be
applied  pro  tanto to the  Obligations  as  follows:  first to pay any fees and
expenses then due to Lender under the Loan  Documents,  until paid in full,  and
second, to repay the principal amount of all outstanding  Obligations until paid
in full.  Upon the occurrence and during the continuance of an Event of Default,
all Revenues  received by Lender from Borrower shall be applied pro tanto to the
Obligations  in such manner as Lender shall  determine  in its sole  discretion.
Lender  does not intend to charge  interest  at a rate in excess of the  highest
rate permitted by Applicable Law. Interest on any outstanding  principal balance
shall  be  spread  over  the  entire  period  that  such  principal  balance  is
outstanding.  Any excess  interest  charges  paid by Borrower to Lender shall be
applied to reduce the outstanding principal balance of the Obligations.

     1.6  Renewal and Termination.

          (a)  This  Agreement  shall  expire  on  the  Termination  Date.  This
Agreement  shall be  automatically  renewed for  additional one (1) year periods
upon  expiration of the Initial Term unless  terminated by Lender or Borrower as
provided in this  Section  1.6.  Borrower may  terminate  this  Agreement at the
expiration  of the Initial Term or at the end of each Renewal by giving  written
notice of such  termination  to Lender at least  ninety  (90) days  prior to the
effective date of such  termination,  and, if such termination date is on a date
other than the end of the Initial Term or a Renewal  Term,  by payment to Lender
of the Early  Termination  Fee as provided  in Section  2.5  hereof.  Lender may
terminate this Agreement (i) at the expiration of the Initial Term or at the end
of each  Renewal by giving  written  notice of such  termination  to Borrower at
least ninety (90) days prior to the effective date of such  termination and (ii)
at any time during the existence of an uncured Event of Default.

          (b) Upon the  termination  of this  Agreement for any reason as herein
provided,  Borrower  shall be required to pay,  discharge and satisfy,  no later
than the effective date of such  termination,  the Revolving Loan Advances,  all
accrued and unpaid interest and fees, any Early  Termination  Fee, and all other
non- contingent Obligations outstanding.

                                       17
<PAGE>

          (c)  All   undertakings,   agreements,   covenants,   warranties   and
representations  of  Borrower  contained  in this  Agreement  and the other Loan
Documents shall survive any such  termination,  and Lender shall retain each and
every Security Interest,  and all other rights and remedies of Lender under this
Agreement and the other Loan Documents,  notwithstanding  such termination until
Borrower has paid the amounts described in Section 1.6(b).

          (d)  Notwithstanding  the  payment  in  full  of  the  Revolving  Loan
Advances,  all accrued and unpaid interest and fees, any Early  Termination Fee,
and all  other  non-contingent  Obligations  outstanding,  Lender  shall  not be
required to terminate its Security Interests unless, with respect to any loss or
damage  Lender  may incur as a result  of  dishonored  checks or other  items of
payment  received by Lender from  Borrower or any Account  Debtor and applied to
the Obligations, Lender shall (i) have received a written agreement, executed by
Borrower and by any Person whose loans or other advances to Borrower are used in
whole or in part to satisfy the Obligations,  indemnifying  Lender from any such
loss or damage;  or (ii) have retained  such monetary  reserves and its Security
Interest for such period of time as Lender,  in its reasonable  discretion,  may
deem necessary to protect Lender from any such loss or damage.

                                ARTICLE II - FEES

     2.1 Closing Fee. In order to induce Lender to enter into this Agreement and
to make the  Loans,  Borrower  shall pay a Closing  Fee in  accordance  with the
Escrow  Agreement and Schedule 2 thereto.  The Closing Fee shall be fully earned
by Lender as of the date hereof.

     2.2 Facility Fee. Borrower shall pay to Lender an Annual Facility Fee in an
amount  equal to  $37,500.00  on the first and second  anniversary  date of this
Agreement,  which Annual Facility Fee shall be fully earned by Lender as of each
due date thereof.

     2.3 Field Examination Fee. For each field examination of the books, records
and other  assets of Borrower  performed  by one or more  employees or agents of
Lender,  Borrower shall pay to Lender a field examination fee in an amount equal
to $750.00 (or such other amount as Lender shall  establish from time to time on
notice  to  Borrower)  for each day spent by each such  employee  in  performing
and/or  summarizing  the results of such  examination  (including  all necessary
travel time) plus all reasonable  "out-of- pocket" expenses.  Field examinations
shall be performed by Lender no more frequently than quarterly, and, if Borrower
is in  default,  with such  frequency  as  Lender  shall  determine  in its sole
discretion,  and each field  examination  fee shall be payable  by  Borrower  to
Lender on the date on which each such field examination is performed.

2.4 Wire Transfer Fee. For each wire transfer  initiated by Lender to or for the
benefit of Borrower, Borrower shall pay to Lender a fee of $25.00 or such higher
amount as Lender shall reasonably establish from time to time.

     2.5 Early  Termination  Fee. If for any reason this Agreement is terminated
by  Borrower  prior to the end of the Initial  Term or any Renewal  Term of this
Agreement,  in view of the impracticality and extreme difficulty of ascertaining
actual  damages  and by  mutual  agreement  of the  parties  as to a  reasonable
calculation of lost profits of Lender as a result  thereof,  Borrower  agrees to
pay to Lender, upon the effective date of such termination, an Early

                                       18
<PAGE>

Termination Fee in an amount equal to the following  percentage of the amount of
the  Revolving  Credit  Facility  corresponding  to  the  period  in  which  the
termination date occurs:

      Percentage of Revolving                Period
      -----------------------                ------
          Credit Facility
          ---------------
                3%                From Agreement Date to and
                                  including the first
                                  anniversary of the Agreement
                                  Date
                2%                From the first anniversary of
                                  the Agreement Date to and
                                  including the second
                                  anniversary of the Agreement
                                  Date
                1%                From and after second
                                  anniversary of the Agreement
                                  Date but on or prior to the
                                  Termination Date

    The Early  Termination  Fee shall be  presumed  to be the  amount of damages
sustained by Lender as a result of such early  termination,  and Borrower agrees
that it is reasonable under the circumstances  currently existing.  In addition,
Lender shall be entitled to the Early  Termination  Fee upon the  termination of
this  Agreement  by Lender on account of any Event of  Default  as  provided  in
Section  9.2 or the  occurrence  of an Event of  Default  described  in  Section
9.1(h). The Early Termination Fee shall be deemed included in the Obligations.

     2.6  Costs  and  Expenses.  Borrower  agrees to  reimburse  Lender  for all
reasonable  out-of-pocket  expenses  incurred by Lender in  connection  with the
Loans, including, but not limited to, filing fees, tax, lien and judgment search
fees, fees of outside auditors,  bank fees, outside  attorneys' fees,  allocated
costs of internal counsel, and any other reasonable fees or expenses.

     2.7 Unused Line Fee.  Borrower shall pay to Lender an unused line fee equal
to  one-fourth  of one percent  (0.25%) per annum of the amount of the Revolving
Credit  Facility  not used for cash  Borrowings.  Such  unused line fee shall be
payable  monthly  in arrears  on the first  (1st) day of each  month  during the
Initial Term and each Renewal Term,  and shall be calculated on the average cash
Borrowings  for each  preceding  month,  and shall not be  subject  to rebate or
proration upon the termination of this Agreement for any reason. The Unused Line
Fee shall be deemed included in the Obligations.

     2.8 Collateral  Monitoring  Fee.  Borrower shall pay to Lender a collateral
monitoring  fee in an amount  equal to $1,500 per month  during the term of this
Agreement.  The  collateral  monitoring fee shall be payable on the first day of
each  month.  Each  collateral  monitoring  fee shall be deemed  included in the
Obligations when charged.

                    ARTICLE III - GRANT OF SECURITY INTEREST

     3.1 Grant of Security  Interest.  To secure the  payment,  performance  and
observance of the  Obligations,  Borrower grants and hereby assigns,  mortgages,
and pledges, to Lender all of the Collateral,  and grants to Lender a continuing
security  interest in, and a Lien upon,  and a right of set off against,  all of
the Collateral.

                                       19
<PAGE>

     3.2  Continued Priority of Security Interest.

          (a) The Security  Interest  granted by Borrower  shall at all times be
     valid,  perfected and enforceable against Borrower and all third parties in
     accordance  with  the  terms  of  this  Agreement,   as  security  for  the
     Obligations,  and the  Collateral  shall not be at any time  subject to any
     Liens  that are  prior to,  or on  parity  with or  junior to the  Security
     Interest,  other than Permitted Liens.  Borrower represents and warrants to
     Lender  that none of the lenders  holding a  Permitted  Lien has a security
     interest  in the  Collateral  superior  in  priority  to the Lien of Lender
     granted  under  this  Agreement,  other  than the first  priority  security
     interest of SouthTrust in the SouthTrust Collateral.

          (b) Borrower shall, at its sole cost and expense, take all action that
     may be necessary or desirable, or that Lender may reasonably request, so as
     at all times to maintain the validity, perfection,  enforceability and rank
     of  the  Security  Interest  in  the  Collateral  in  conformity  with  the
     requirements of Section 3.2(a),  or to enable Lender to exercise or enforce
     its rights hereunder.

          (c) Borrower  covenants and agrees with Lender that from and after the
     Agreement Date and until the Termination Date:

          (i) In the event that any Collateral, including proceeds, is evidenced
     by or consists  of  negotiable  collateral  (including  without  limitation
     letters of credit, Letter-of-credit rights, instruments,  promissory notes,
     draft documents or chattel paper (including electronic and tangible chattel
     paper)),  and if and to the extent that  perfection or priority of Lender's
     security  interest is  dependent  on or enhanced by  possession,  Borrower,
     immediately upon the request of Lender,  shall endorse and deliver physical
     possession of such negotiable collateral or chattel paper to Lender.

          (ii)  Borrower  shall  take all steps  reasonably  necessary  to grant
     Lender control of all electronic  chattel paper in accordance  with the UCC
     and all "transferable records" as defined in each of the Uniform Electronic
     Transaction  Act and the  Electronic  Signatures  in  Global  and  National
     Commerce Act; and

          (iii)  If  Borrower  retains   possession  of  any  chattel  paper  or
     instruments with Lender's consent, such chattel paper and instruments shall
     be marked with the  following  legend:  "This  writing and the  obligations
     evidenced  or secured  thereby  are  subject to the  security  interest  of
     Textron Financial Corporation."

          (d) At any time upon the reasonable request of Lender,  Borrower shall
     execute  (or cause to be  executed)  and  deliver  to  Lender,  any and all
     financing statements, original financing statements in lieu of continuation
     statements,  fixture filings,  security agreements,  pledges,  assignments,
     endorsements  of  certificates  of  title,  and all  other  documents  (the
     "Additional  Documents")  upon which  Borrower's  signature may be required
     that  Lender  may  request  in  its  discretion,   in  form  and  substance
     satisfactory to Lender, to perfect and continue the perfection of or better
     perfect  Lender's Liens in the  Collateral  (whether now owned or hereafter
     arising  or  acquired),  and  in  order  to  consummate  fully  all  of the
     transactions contemplated hereby and under the other Loan Documents. To the
     maximum extent permitted by

                                       20
<PAGE>

     Applicable Law,  Borrower  authorizes Lender to execute any such Additional
     Documents in Borrower's  name and  authorizes  Lender to file such executed
     Additional Documents in any appropriate filing office. In addition, on such
     periodic basis as Lender shall  require,  Borrower shall (a) provide Lender
     with a report of all new  patentable,  copyrightable  (other than materials
     commonly  prepared in the ordinary  course of business),  or  trademarkable
     materials  acquired or generated by Borrower  during the prior period,  (b)
     cause to be  prepared,  executed,  and  delivered  to  Lender  supplemental
     schedules  to the  applicable  Loan  Documents  to identify  such  patents,
     copyrights,  and  trademarks  that have been or will be  registered  by the
     Borrower  with  the  appropriate  filing  office  as being  subject  to the
     security  interests  created  thereunder,  and (c)  execute  and deliver to
     Lender  such  documents  as Lender  may  require to  perfect  its  security
     interest in such registered patents,  copyrights, and trademarks.  Borrower
     authorizes  Lender to transmit,  communicate  or, as  applicable,  file any
     financing  statement under the UCC, record,  in-lieu  financing  statement,
     amendment,  correction  statement,   continuation  statement,   termination
     statement or other  instrument  describing  the Collateral as "all personal
     property of Debtor" or "all assets of Debtor" or words of similar effect in
     such  jurisdictions and in such filing offices as Lender may deem necessary
     or desirable in order to perfect any security  interest granted by Borrower
     under  this  Agreement  and the other  Loan  Documents  without  signature.
     Borrower hereby ratifies, to the extent necessary,  Lender's  authorization
     to  file a  financing  statement,  if such  financing  statement  has  been
     pre-filed by Lender prior to the Agreement Date. Prior to repayment in full
     and final discharge of the Obligations, Borrower shall not terminate, amend
     or file a  correction  statement  with respect to any  financing  statement
     filed  pursuant to this  Section  3.2(d)  without  Lender's  prior  written
     consent.

          (e) Borrower shall promptly notify Lender in writing upon incurring or
     otherwise obtaining a commercial tort claim, as that term is defined in the
     UCC,  after the date hereof  against any third party and,  upon  request of
     Lender,  promptly amend Schedule 1 to this Agreement,  authorize the filing
     of additional or amendments to existing  financing  statements  and do such
     other acts or things  that are  necessary  or  desirable  by Lender to give
     Lender a security interest in any such commercial tort claim.

          (f)  Borrower  shall mark its books and  records as directed by Lender
     and as may be necessary or appropriate to evidence, protect and perfect the
     Security  Interest and shall cause its financial  statements to reflect the
     Security Interest.

        ARTICLE IV - PROCEEDS OF COLLATERAL, RECEIVABLES AND COLLECTIONS

     4.1  Borrower's  Proceeds of  Collateral.  Borrower shall pay to Lender all
proceeds of  Collateral,  including Net Proceeds,  immediately  upon  Borrower's
receipt thereof;  except that, Revenues from the SouthTrust  Collateral shall be
paid to SouthTrust  first until the SouthTrust Debt is paid in full and then the
balance,  if any, to Lender.  For  purposes  of  calculating  interest  owing by
Borrower  hereunder,  Lender  shall  apply the  amount of such  Revenues  to the
Obligations  two (2) Business Days following the date upon which Lender receives
such Revenues in immediately available funds.

                                       21
<PAGE>

     4.2  Collection of Receivables and other Collateral.

          (a) Borrower shall establish and maintain,  at its expense, a Lockbox,
in the sole  discretion of Lender,  with such banks as are  acceptable to Lender
pursuant to documentation satisfactory to Lender, in its discretion,  into which
Borrower  shall  promptly  deposit or cause to be deposited all Revenues  (other
than de minimus Revenues directly collected by Borrower at its business premises
in an aggregate  amount not to exceed  $10,000 per month);  provided,  that, not
later  than  one  hundred  eighty  (180)  days of the date of the  initial  Loan
hereunder,  Borrower  shall cause all Revenues to be deposited in the Lockbox at
SouthTrust  and will  discontinue  use of the Lockbox at Regions Bank.  Borrower
shall direct and instruct all of its Account  Debtors to directly  remit to such
Lockbox  all  payments  on  Receivables  and  all  other  payments  constituting
Revenues,  in the  identical  form in which such  payments are made,  whether by
cash, check or other manner of payment.  If,  notwithstanding such instructions,
Borrower  receives any Revenues  directly,  Borrower shall hold such Revenues in
trust as Lender's  trustee and within one (1) Business  Day of receipt  Borrower
shall deposit such Revenues directly into the Lockbox.  Borrower agrees that all
payments  made to the Lockbox or other funds  received and  collected by Lender,
whether in respect of the Receivables, as other Revenues, or otherwise, shall be
subject to Lender's  sole  control and shall be treated as payments to Lender in
respect of the Obligations and therefore shall constitute the property of Lender
to the extent of the amount of the outstanding Obligations.

          (b) Lender or its designee  may, in Lender's sole  discretion,  at any
time during  which an Event of Default  exists,  notify  Account  Debtors of the
Security  Interest and collect  Receivables  directly  from Account  Debtors and
charge the  collection  costs and  expenses  to Borrower  as  additional  Loans.
Whether or not a Default or an Event of Default  has  occurred,  any of Lender's
officers,  employees  or  agents  shall  have  the  right,  at any time or times
hereafter, in the name of Lender, any designee of Lender, or Borrower, to verify
the validity,  amount or any other matter  relating to any  Receivables by mail,
telephone, electronic communication or otherwise. Borrower shall cooperate fully
with  Lender  in  an  effort  to  facilitate  and  promptly  conclude  any  such
verification process.

           ARTICLE V  - REPRESENTATIONS AND WARRANTIES

    Borrower represents and warrants to Lender, as of the date of this Agreement
and at all times that Lender makes Loans to Borrower, as follows:

     5.1   Existence,  Power and Authority; Borrower  Affiliates;
Subsidiaries.

          (a)  Organization;  Qualification.  Borrower  is  a  corporation  duly
organized,  validly  existing  and  in  good  standing  under  the  laws  of its
jurisdiction  of  incorporation,  as identified in Schedule  5.1(a),  having the
corporate power and authority to own its properties and to carry on its business
as now being and  hereafter  proposed  to be  conducted,  and  Borrower  is duly
qualified and authorized to do business in the jurisdictions  listed on Schedule
5.1(a)  and in each  jurisdiction  in which the  nature of its  business  or the
ownership and  characteristics  of its property  requires such  qualification or
authorization,  except  where the  failure to be so  qualified  would not have a
Materially  Adverse Effect.  The jurisdictions in which Borrower is qualified to
do business as a foreign entity are listed on Schedule 5.1(a).

                                       22
<PAGE>

          (b)  Power.  Borrower  has the  right  and  power,  and has  taken all
necessary  action to  authorize  it, to  execute,  deliver  and perform the Loan
Documents in accordance with their respective  terms. Each of the Loan Documents
has been duly executed and delivered by the duly authorized officers of Borrower
and each is,  or each  when  executed  and  delivered  in  accordance  with this
Agreement  will  be,  a  legal,   valid  and  binding  obligation  of  Borrower,
enforceable   against  Borrower  in  accordance  with  its  terms.  All  of  the
transactions  contemplated under the Loan Documents are within Borrower's powers
and are not in  contravention  of law or the terms of  Borrower's  Incorporation
Certificate or Borrower's by-laws, or other organizational documentation, or any
material  agreement  or  undertaking  to which  Borrower  is a party or by which
Borrower  or its  property  is bound,  and does not  result in the  creation  or
imposition of any lien, charge or encumbrance upon any assets of Borrower, other
than the Lien of Lender.

          (c) Borrower Affiliates; Subsidiaries. Except as set forth on Schedule
5.1(c), Borrower has no Affiliates or Subsidiaries.

          (d)  Capitalization.  The  outstanding  shares  of  capital  stock  of
Borrower have been duly and validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 5.1(d), there are no existing warrants, options,
or commitments of any kind or nature convertible into capital stock of any class
of Borrower.

          (e)  Business.  Borrower is engaged  principally  in the  business(es)
described on Schedule 5.1(e).

     5.2 Compliance  with Other  Agreements and  Applicable  Law.  Except as set
forth on Schedule 5.2,  Borrower is not in default under, or in violation in any
respect of, any material agreement,  contract, instrument or other commitment to
which  Borrower is a party or by which  Borrower or its  property is bound,  and
Borrower  is in  compliance  in all  material  respects  with  all  Governmental
Approvals applicable to or required in connection with the conduct of Borrower's
business and affairs,  and Borrower is otherwise in  compliance  in all material
respects with all Applicable Laws.

     5.3 Absence of  Litigation.  Except as set forth on Schedule 5.3, there are
no  actions,   proceedings  or  investigations  pending  or  threatened  against
Borrower,  or any of its assets, which, if adversely determined against Borrower
can  reasonably be expected to have a Materially  Adverse  Effect on the assets,
financial condition or business of Borrower.

     5.4 Taxes and Returns.  Except as set forth on Schedule  5.4,  Borrower has
timely  filed all tax returns  which  Borrower is required by law to file or has
obtained valid  extensions,  and all taxes and other sums related to the payment
of taxes owing by Borrower to any  governmental  authority  have been fully paid
and Borrower  maintains  adequate  reserves to pay such tax  liabilities as they
accrue.

     5.5  Lien Priority and Nature of Certain Collateral.

          (a)  Liens.  Except  for  the  SouthTrust  Collateral,  Lender  has  a
perfected first priority security interest in the Collateral and, except for the
Liens described on Schedule 5.5(a) and the other  Permitted  Liens,  none of the
properties  and assets of Borrower is subject to any Lien. As to the  SouthTrust
Collateral, Lender has a security interest junior to SouthTrust. Other

                                       23
<PAGE>

than the Financing Statements of Lender pursuant to this Agreement, no financing
statement  under the Uniform  Commercial  Code of any state or other  instrument
evidencing  a Lien that  names  Borrower  as debtor  has been filed (and has not
been, or will not upon repayment of outstanding loans from the proceeds from the
Loans  upon or about  the  Closing  Date be,  terminated)  in any state or other
jurisdiction,  and Borrower has not signed any such financing statement or other
instrument or any security agreement authorizing any secured party thereunder to
file any such  financing  statement or  instrument,  except to perfect the Liens
listed on Schedule  5.5(a) and the other  Permitted Liens and those that will no
longer be effective upon  repayment of outstanding  loans from the proceeds from
the Loans on or about the Closing Date. Borrower further represents and warrants
that  since  April  4,  2003,  Borrower  has not  granted  any new  Liens on the
Collateral or authorized  the filing of any financing  statements  other than to
Lender.

          (b) Title. Except as set forth on Schedule 5.5(b),  Borrower has valid
and  legal  title  to or  leasehold  interest  in all  personal  property,  real
property, and other assets used in its business.

          (c) Receivables. Each Eligible Receivable has arisen from the sale and
delivery of goods or from services  rendered by Borrower,  is genuine,  complete
and,  in all  other  respects,  what it  purports  to be,  and is not  otherwise
ineligible under the standards set forth in this Agreement.

          (d)  Inventory.  All Inventory is located on the premises set forth on
Schedule 5.5(d) or is Inventory in transit to one of such  locations,  except as
otherwise  disclosed in writing to Lender.  Borrower has not,  within the twelve
(12) months  preceding  the  Agreement  Date,  located any Inventory at premises
other than those set forth on Schedule 5.5(d).

          (e) Equipment.  All Equipment  currently in use in Borrower's business
is in good  order and  repair in all  material  respects  and is  located on the
premises set forth on Schedule 5.5(e).  Borrower has not, within the twelve-(12)
months  preceding the Agreement  Date,  located any Equipment at premises  other
than those set forth on Schedule 5.5.(e)

          (f) Real Estate.  Borrower owns or leases no real property  other than
that described on Schedule 5.5(f).

          (g) Corporate and Fictitious Names.  Except as otherwise  disclosed on
Schedule  5.5(g),  during the five-year  period  preceding  the Agreement  Date,
neither  Borrower nor any  predecessor of Borrower has been known as or used any
corporate or fictitious  name other than the name of Borrower as first set forth
in this Agreement.

     5.6 Principal Place of Business.  Borrower's  principal  places of business
and, if Borrower has more than one principal place of business, Borrower's chief
executive  office,  are located at the  addresses set forth on Schedule 5.6. All
books and  records  pertaining  to the  Collateral  are kept by  Borrower at its
principal places of business.

                                       24
<PAGE>

     5.7  Environmental Compliance.

          (a) Except as set forth on  Schedule  5.7,  to the best of  Borrower's
knowledge,   Borrower  has  not  Released,  generated,  used,  stored,  treated,
transported,  manufactured, handled, produced or disposed of any Contaminants on
or off its  premises  (whether  or not owned by  Borrower),  in any manner  that
violates  in any  material  respect  any  applicable  Environmental  Laws or any
Governmental  Approvals,  and the business and operations of Borrower  comply in
all material respects with all Environmental Laws and all Governmental Approvals
and similar authorizations.

          (b) Except as set forth on  Schedule  5.7,  to the best of  Borrower's
knowledge  (i)  there is not and has not been any  Remedial  Action  taken  with
respect to any real estate  leased by  Borrower,  (ii) there has not been nor is
there now pending any investigation,  proceeding,  complaint,  order, directive,
claim, citation or notice by any governmental authority or any other person with
respect to any  non-compliance  with or  violation  of the  requirements  of any
Environmental  Laws by  Borrower,  or (iii)  there  has not  been  any  Release,
threatened  or  actual,  of  any  Contaminants,  or  generation,  use,  storage,
treatment, transportation, manufacture, handling, production, or disposal of any
Contaminants,  or any  other  environmental,  health  or  safety  matter,  which
materially  adversely  affects (A) Borrower,  (B) its business,  operations,  or
assets,  or (C) any properties at which Borrower has transported,  or stored any
Contaminants.

          (c) Except as set forth on Schedule  5.7,  Borrower  has no  liability
(contingent or otherwise) with a known Release,  threatened or actual,  from any
real property  owned or leased by Borrower,  or the  generation,  use,  storage,
treatment, transportation, manufacture, handling, production, or disposal of any
Contaminant, on the owned or leased real property.

          (d) All  material  Governmental  Approvals  or similar  authorizations
required to be obtained or filed in connection  with the  operations of Borrower
under any Environmental Laws have been obtained,  and all Governmental Approvals
and  similar  authorizations  are  valid  and in full  force  and  effect in all
respects.

     5.8  Proprietary  Rights.  A  correct  and  complete  schedule  of  all  of
Borrower's  registered  Proprietary Rights is set forth in Schedule 5.8 and none
of the  Proprietary  Rights is subject  to any  licensing  agreement  or similar
arrangement,  except  as set forth on  Schedule  5.8 or as  entered  into in the
ordinary  course of Borrower's  business.  To the best knowledge of Borrower (i)
none of the Proprietary  Rights  infringes on the valid  trademark,  trade name,
copyright,  or patent  right of any other  person or  entity,  and (ii) no other
person's  or entity's  property  infringes  on the  Proprietary  Rights,  in any
material  respect.  The Proprietary  Rights described on Schedule 5.8 constitute
all of the  property  of such  type  necessary  to the  current  conduct  of the
business of Borrower.

     5.9 Trade  Names.  All trade  names or styles  under which  Borrower  sells
Inventory or Equipment or creates  Accounts,  or to which instruments in payment
of Accounts are made payable, are listed on Schedule 5.5(g) and Schedule 5.9.

     5.10  Employee  Relations.  Borrower  has a stable  work force in place and
Borrower is not,  except as disclosed on Schedule 5.10,  party to any collective
bargaining agreement nor has

                                       25
<PAGE>

any labor union been recognized as the  representative of Borrower's  employees,
and Borrower knows of no pending,  threatened,  or  contemplated  strikes,  work
stoppage or other labor disputes involving any of Borrower's employees.

     5.11 Employee  Pension  Benefit Plans.  Each Plan meets the minimum funding
standards of Section 302 of ERISA, if applicable,  and no Termination  Event has
occurred with respect to any Plan of Borrower.

     5.12 Bank  Accounts.  Borrower has provided to Lender in writing a complete
and correct  list of all checking  accounts,  deposit  accounts,  and other bank
accounts maintained by Borrower.

     5.13 Accuracy and  Completeness of  Information.  All  representations  and
warranties set forth in this Article V, and all statements and other information
furnished by or on behalf of Borrower in connection  with this  Agreement or any
of the Loan Documents,  are true and correct in all material respects and do not
omit any material fact;  except that, the  information  certificate  provided by
Borrower   to  Lender   shall  be  deemed   supplemented   and  updated  by  the
representations  and  warranties  set forth in this Article V and the  Schedules
attached hereto.  Each financial statement furnished by or on behalf of Borrower
presents  fairly the  financial  condition  of  Borrower  as of the date of such
statement and for the relevant period(s) then ended.

     5.14 Software License Compliance. Borrower warrants and represents that all
software  used by Borrower on any of Borrower's  computers is either  Borrower's
proprietary  software or is duly  licensed,  maintained and operated in material
compliance with the software owner's license terms and conditions.
     5.15 Investment Company; Other Regulations.  Borrower is not an "investment
company"  or a company  "controlled"  by an  "investment  company",  within  the
meaning of the  Investment  Company  Act of 1940,  as  amended.  Borrower is not
subject to regulations  under any federal or state statute or regulations  which
limits its ability to incur  Indebtedness  or which may otherwise  render all or
any portion of the Obligations unenforceable.

     5.17 Survival of Warranties; Cumulative. All representations and warranties
contained in this Agreement or any of the other Loan Documents shall survive the
execution and delivery of this Agreement, any investigation made by or on behalf
of Lender,  or any  Borrowing  hereunder,  and shall be deemed to have been made
again  to  Lender  on the date of each  additional  Borrowing  or  other  credit
accommodation  under this Agreement,  except to the extent such  representations
and  warranties  expressly  relate  to an  earlier  date  (in  which  case  such
representations  and  warranties  shall have been true and accurate on and as of
such earlier date), and shall be conclusively presumed to have been relied on by
Lender regardless of any investigation made or information  possessed by Lender.
The  representations and warranties set forth in this Agreement and in the other
Loan  Documents  shall be  cumulative  and  shall be in  addition  to any  other
representations  or warranties  which Borrower  shall now or hereafter  give, or
cause to be given, to Lender.

                                       26
<PAGE>

                       ARTICLE VI - AFFIRMATIVE COVENANTS

    Until this Agreement has been terminated and all Obligations  have been paid
in full, Borrower covenants and agrees with Lender as follows:

     6.1 Financial Statements. Borrower shall deliver to Lender:

           (a) for each Fiscal Year,  immediately  upon filing the same with the
SEC,   provided  such  filing  is  not  deemed  late  under  applicable  law  or
regulations,  Borrower's Form 10-K;  provided,  that, if Borrower's Form 10-K is
not filed  within  ninety (90) days  following  the close of each  Fiscal  Year,
Borrower's annual audited financial statements certified by a recognized firm of
certified  public  accountants  acceptable  to Lender as having been prepared in
accordance  with  GAAP and as  presenting  fairly  the  financial  condition  of
Borrower as of the date thereof and for the period then ended, including, income
statement,  balance  sheet,  and  statement  of cash  flow  (and  including  any
management letter to Borrower from such  accountants,  to be delivered not later
than thirty (30) days after such letter is issued);

          (b) for each Fiscal  Quarter  (other than the fourth Fiscal  Quarter),
immediately  upon  filing  the same with the SEC,  provided  such  filing is not
deemed late under applicable law or regulations, Borrower's Form 10-Q; provided,
that, for the fourth Fiscal  Quarter of each Fiscal Year and if Borrower's  Form
10-Q is not filed  within  forty-five  (45) days of any  other  Fiscal  Quarter,
unaudited financial statements,  including income statement,  balance sheet, and
statement of cash flow, for Borrower  prepared in accordance  with GAAP (subject
to the  absence  of notes  and to  annual  audit  adjustment),  certified  by an
Executive  Officer of Borrower as presenting  fairly the financial  condition of
Borrower as of the date thereof and for the period then ended;

           (c) promptly after the filing thereof, a true, correct,  and complete
copy of each material report and registration  statement other than described in
(a) and (b) above,  including  amendments,  and  extensions  filed with the SEC,
including,  without limitation,  each Form 8-K filed by or on behalf of Borrower
with the SEC.

           (d) within ten (10) days of  receipt by  Borrower,  copies of all FDA
and State of Florida inspection reports.

          (e)  upon   Lender's   reasonable   request,   such  other   financial
information,  including,  (i)  within  thirty  (30) days after the close of each
month, reasonably detailed monthly and fiscal year-to-date financial statements,
including income statement,  balance sheet, and statement of cash flow, prepared
in  accordance  with GAAP  (subject to the absence of notes and to annual  audit
adjustment),  certified by the chief executive officer, chief financial officer,
or other  authorized  individual of Borrower as presenting  fairly the financial
condition of Borrower,  which,  for the end of each month,  shall also include a
Covenant  Compliance  Certificate,  in the form of  Exhibit A  attached  hereto,
setting forth a calculation of the financial  covenants described in Section 7.6
below,  and the  status  of all  other  monetary  covenants  set  forth  in this
Agreement,  (ii) at least sixty (60) days prior to the end of Borrower's  Fiscal
Year an annual operating budget showing a projected  income  statement,  balance
sheet and cash flows as of each Fiscal Quarter

                                       27
<PAGE>

for the  forthcoming  Fiscal  Year,  and  (iii)  Receivable  dilution  analyses,
origination reports and default/charge-off reports.

Borrower  may deliver the reports  required  under this Section 6.1 to Lender by
email to the email address(es) provided by Lender from time to time.

     6.2 Books and Records. Borrower shall keep accurate and complete records of
the  Collateral  and permit Lender to: (a) visit during  regular  business hours
Borrower's  business  locations at intervals to be determined by Lender; and (b)
inspect,  audit and make extracts from or copies of Borrower's  books,  records,
journals,  receipts,  computer tapes and disks. All governmental authorities are
authorized to furnish Lender with copies of reports of  examinations of Borrower
made by such parties.  Banks,  Account Debtors and other third parties  (without
waiving  any  attorney-client  privilege)  with whom  Borrower  has  contractual
relationships pertaining to the Collateral or the Loan Documents, are authorized
to furnish Lender with copies of such contracts and related materials. Lender is
authorized,  in its own name or any other  name,  to  communicate  with  Account
Debtors in order to verify the existence, amount and terms of any Receivable.

     6.3 Additional Documentation.  Borrower shall execute and deliver to Lender
all  additional  documents  that  Lender  may,  from  time to  time,  reasonably
determine are necessary or  appropriate  to evidence the Loans or to continue or
perfect Lender's Security Interest in the Collateral.

     6.4 Existence,  Name,  Organization  and Chief Executive  Office.  Borrower
shall  maintain  its  existence  in good  standing  and shall  deliver to Lender
written notice,  at least sixty (60) days in advance,  of any proposed change in
Borrower's state of incorporation, a change in Borrower's name or organizational
identification  number,  a change in the use of any trade name, new trade names,
fictitious name or new fictitious  names,  Borrower's  business  locations,  the
location of Borrower's  principal place of business or chief  executive  office,
the mailing address of Borrower, the location of any Inventory or Equipment,  or
the location of Borrower's  books and records,  and shall execute or cause to be
executed any and all  documents  that Lender  reasonably  requests in connection
therewith,  including,  in the case of any new location of Inventory that is not
owned by Borrower,  the waiver and consent from the lessor of such premises that
is more  particularly  described  in clause (g) of the  definition  of  Eligible
Inventory.

     6.5 Compliance  with Laws and Taxes.  Borrower shall comply in all material
respects  with all  Applicable  Laws.  Borrower  shall pay all real and personal
property   taxes,   assessments   and  charges,   and  all  franchise,   income,
unemployment,  social security,  withholding, sales and all other taxes assessed
against  Borrower or the  Collateral,  at such times and in such manner so as to
avoid any  penalty  from  accruing  against  Borrower or any Lien or charge from
attaching to the  Collateral.  Borrower shall promptly  deliver to Lender,  upon
request, receipted bills evidencing payment of such taxes and assessments.

     6.6  Performance of Obligations.   Borrower shall:

     (a) perform,  in a timely manner,  all of its  obligations  pursuant to all
leases,  mortgages,  deeds of trust or other  agreements to which  Borrower is a
party,  and  shall  pay when due all debt  owed by  Borrower  and all  claims of
mechanics, materialmen, carriers, landlords,

                                       28
<PAGE>

warehousemen  and other like persons,  except only,  and to the extent that, the
amount of any such debt and claims is being  contested by Borrower in good faith
by  appropriate  proceedings  and  Borrower  maintains  on its books  reasonable
reserves therefor in accordance with GAAP;

     (b) with respect to Borrower's  Series A Preferred Stock, (i) notify Lender
immediately  upon (A) determining or receiving any  information  that any one or
more of the "Redemption Events" described in Article Fourth,  Section A(8)(a)(i)
of  Borrower's  Incorporation  Certificate  is reasonably  likely to occur,  has
occurred or, with the passage of time, will occur and (B) receipt of notice of a
redemption event (i.e., a "Holders'  Redemption Notice") from one or more of the
holders  of  Borrower's   Series  A  Preferred   Stock  pursuant  to  Borrower's
Incorporation  Certificate  and (ii)  deliver  to Lender a copy of any  Holder's
Redemption  Notice (as  defined in  Borrower's  Incorporation  Certificate)  via
facsimile; and

      (c) with respect to Borrower's  obligations  owing to Angelo  Morini,  (i)
notify Lender  immediately  upon (A)  determining  that Borrower will default or
otherwise  fail to pay any  amounts  owing to him when due (but in all cases not
less than ten (10) days prior to the date  payment  is due) and (ii)  receipt of
any notice  attempting to accelerate all or part of any such obligations  owing,
(ii) deliver to Lender a copy of any notices of default or other  correspondence
from him  relating to a default or  potential  default in the  obligations,  and
(iii) withhold and not make any further payments to him once an Event of Default
occurs under this Agreement.

     6.7  Reporting as to Revenues, Receivables and Inventory.

     (a) With such  frequency as Lender shall direct,  Borrower shall deliver to
Lender such  information  as Lender shall  request with respect to the Revenues,
Receivables and Inventory, including, but not limited to:

          (i) no later than 5:00 p.m.,  east coast time on the first to occur in
any  given  week of (A) the day on which  Borrower  requests  a  Revolving  Loan
Advance or (B) Wednesday of each week, a weekly Borrowing Base Certificate based
on the Receivables  and Inventory as of the end of the preceding week,  together
with a detailed  summary of sources of all of the Revenues,  including  sales of
Inventory, and credits and collections associated with Receivables;

          (ii) no later than the fifteenth (15th) day of each month, a Borrowing
          Base  Certificate  based upon the  Receivables and Inventory as of the
          end of the preceding  month,  together with a detailed  summary of the
          sources  of all of the  Revenues,  including  sales of  Inventory  and
          credits and collections associated with Receivables, for the preceding
          month;

          (iii) no later than the fifteenth  (15th) day of each month,  detailed
          schedules  showing the aging of Receivables  and  Borrower's  accounts
          payable as of the end of the preceding month;

          (iv) within fifteen (15) days of any change in Interested  Parties,  a
          current list of Interested Parties;

          (v) daily sales and collections reporting;

          (vi) weekly Inventory reporting; and

                                       29
<PAGE>

          (vii) no later than ten (10) days following Lender's request therefor,
          a complete and updated list of  Borrower's  customers,  including  the
          name, address and telephone number of each customer.

     (b) Borrower shall notify Lender promptly if:

          (i) Borrower  enters into a long-term  contract with the United States
of America, and, if requested by Lender,  Borrower shall execute all instruments
and take all steps  necessary  to insure  that all amounts due and to become due
under such long- term contract are properly  assigned to Lender  pursuant to the
Assignment of Claims Act of 1940 or otherwise;

          (ii) Borrower receives  information with regard to any type or item of
Collateral which might have in any way a Materially  Adverse Effect on the value
of the  Collateral  as a whole or the rights and remedies of Lender with respect
thereto; and

          (iii) any accounts due and owing in which amounts in excess of $20,000
are in dispute by any  single  Account  Debtor on an  Eligible  Receivable,  and
Borrower shall explain in detail the reason for the dispute,  all claims related
to the dispute, and the amount in controversy;

     6.8 Over-Advance. If, at any time, the aggregate unpaid principal amount of
any of the Revolving Loan Advances,  including without  limitation,  all amounts
deemed to be Revolving Loan Advances in accordance with Section 1.4, exceeds any
applicable limit set forth in this Agreement,  Borrower shall immediately pay to
Lender the amount of any such excess and all accrued  interest and other charges
owing to Lender with respect thereto.

     6.9 Breach or Default.  Borrower shall notify Lender  immediately  upon the
occurrence of any circumstance  which: (a) makes any  representation or warranty
of Borrower  contained in this Agreement or any other Loan Document incorrect or
misleading in any material respect; or (b) constitutes an Event of Default.

     6.10  Maintenance  of Assets.  Borrower  shall maintain all of its real and
personal  property  currently  in use in  Borrower's  business  in good  repair,
working  order and  condition,  shall make all  necessary  replacements  to such
property so that the value and the operating efficiency of such property will be
preserved,  shall prevent any personal  property from becoming a fixture to real
estate  (unless owned by Borrower and  encumbered by a mortgage,  deed of trust,
security deed or similar agreement in favor of Lender), and will pay or cause to
be  paid  all  rental  or   mortgage   payments   due  on  its  real   property.
Notwithstanding  the  foregoing,  Borrower  shall not be required to maintain or
replace any personal  property  that  Borrower has in good faith  determined  is
obsolete or not useful in the conduct of Borrower's business.

     6.11 Insurance.  Borrower shall procure and continuously maintain: (a) "All
Risk Extended Coverage" property insurance covering Borrower's tangible personal
property  for the  full  replacement  value  thereof;  (b)  "All  Risk  Extended
Coverage" business interruption insurance in an amount acceptable to Lender; (c)
liability  insurance  in an amount  acceptable  to  Lender;  and (d) such  other
customary insurance coverages as are reasonably specified by Lender from time to
time. Each property and business  interruption  insurance policy shall contain a
standard  Lender's Loss Payable  Endorsement in favor of Lender,  providing for,
among  other  things,  thirty  (30) days prior  written  notice to Lender of any
cancellation, non-renewal or

                                       30
<PAGE>

modification of such coverage. Borrower shall deliver to Lender certified copies
of such  policies  and all  required  endorsements,  or other  evidence  of such
insurance  acceptable  to Lender.  All amounts  received by Lender from any such
insurance  policies  may be applied by Lender to the  Obligations.  If  Borrower
fails to procure  required  insurance or such insurance is canceled or otherwise
lapses,  Lender may procure such insurance and add the cost of such insurance to
the principal balance of the Loans.

     6.12 Use of Proceeds.

          (a) Borrower shall use the proceeds of all Revolving Loan Advances and
all other  loans or  accommodations  made by Lender for  Borrower  for legal and
proper business purposes; and

          (b) not use any part of such  proceeds  (i) to purchase or to carry or
reduce or retire or  refinance  any credit  incurred to  purchase or carry,  any
margin stock  (within the meaning of Regulation U or T of the Board of Governors
of the Federal  Reserve  System) or, in any event,  for any purpose  which would
involve a violation of Regulation U, T or X of such Board of Governors, (ii) for
any personal,  family or household purposes, or (iii) for any purpose prohibited
by law or by the  terms  and  conditions  of this  Agreement  or any of the Loan
Documents.

     6.13 Disclosure. Promptly and in no event later than five (5) Business Days
after  obtaining  knowledge  thereof,  Borrower  shall (i) notify  Lender if any
written information, exhibit, or report furnished to Lender contained any untrue
statement of a material fact or omitted to state any material fact  necessary to
make  the  statements   contained   therein  not  misleading  in  light  of  the
circumstances  in which made,  and (ii)  correct any defect or error that may be
discovered therein or in any Loan Document or in the execution,  acknowledgment,
filing, or recordation thereof.

     6.14 Further Assurances. Borrower will promptly cure, or cause to be cured,
defects in the  execution  and delivery of the Loan  Documents  (including  this
Agreement),  resulting  from any act or failure to act by Borrower or any of the
employees or officers thereof.  Borrower,  at its expense, will promptly execute
and deliver to Lender, or cause to be executed and delivered to Lender, all such
other and further documents,  agreements,  and instruments in compliance with or
accomplishment  of  the  covenants  and  agreements  of  Borrower  in  the  Loan
Documents,  including this Agreement,  or to correct any technical  omissions in
the Loan  Documents,  or to obtain any consents that are necessary in connection
with or in  accomplishment  of the covenants and agreements of Borrower,  all as
may be necessary or appropriate  in connection  therewith as may be requested by
Lender.

     6.15  Brokerage  Commissions.  Except as  otherwise  provided in the Escrow
Agreement,  Borrower shall pay any and all brokerage  commission or finders fees
incurred in  connection  with or as a result of Borrower's  obtaining  financing
from Lender under this Agreement. Borrower agrees to indemnify, defend, and hold
Lender  harmless from and against any claim of any broker or finder  arising out
of Borrower's obtaining financing from Lender under this Agreement.

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<PAGE>

     6.16 FDA and Other  Regulatory  Bodies  Compliance.  Borrower  shall on the
Agreement Date and at times until the  Obligations  are paid in full operate its
business in material  compliance  with all applicable  federal,  state and local
laws,   regulations  and  other  requirements  for  companies  involved  in  the
manufacturing,   distribution  or  sale  of  food  products   similar  to  those
manufactured, distributed or sold by Borrower, including, without limitation any
and all applicable (i) FDA rules and regulations, including, without limitation,
those rules and regulations  with respect to product  descriptions,  nutritional
claims,  label formats,  minimum type sizes, content and location of nutritional
information  panels,  nutritional  comparisons,  ingredient  content panels, and
manufacturing  techniques;  (ii) customs regulations;  or (iii) other government
regulations regarding comestibles.

                   ARTICLE VII - BORROWER'S NEGATIVE COVENANTS

    Borrower  covenants and agrees with Lender,  from and after the date of this
Agreement, as follows:

    7.1 Business, Management and Organization.  Borrower shall not: (a) make any
material change in its management,  which includes the following: the removal of
Christopher New, as Chief Executive  Officer of Borrower;  (b) make any material
change in the general nature of the business that Borrower  presently  conducts;
(c) change its name  except  after  first  complying  with  Section  6.4 of this
Agreement;  (d) change its state of  incorporation  except after first complying
with Section 6.4 of this Agreement, or its type of organization (that is, from a
corporation);  or (e)  issue  any  additional  shares  of  Borrower's  Series  A
preferred  stock  other  than  pursuant  to  Article  Fourth,  Section  A(3)  of
Borrower's Incorporation Certificate.

     7.2 Disposition of Assets.  Borrower shall not: (a) encumber the Collateral
in favor of any party other than Lender,  whether  voluntarily or involuntarily,
other than the  Permitted  Liens;  or (b) sell,  consign,  lease or remove  from
Borrower's business locations any of Borrower's assets except that, until Lender
gives  Borrower  notice to the  contrary  during the  existence  of any Event of
Default,  Borrower may (i) sell Inventory in the ordinary course of its business
(any sale or exchange of Inventory in  satisfaction  of indebtedness of Borrower
shall not be deemed a sale of  Inventory in the  ordinary  course of  business);
(ii) sell or  dispose  of  obsolete  assets  that  constitute  Collateral  which
Borrower has determined,  in good faith,  not to be useful in the conduct of its
business  and which,  in any Fiscal Year,  do not have an aggregate  fair market
value in excess of  $100,000.00;  and (iii) sell or dispose of  obsolete  assets
that do not constitute Collateral which Borrower has determined,  in good faith,
not to be useful in the conduct of its business.

     7.3 Loans and  Guarantees.  Borrower  shall not make any loan or contribute
money,  goods or  services  to, or  guaranty  or agree to become  liable for any
obligation  of, any other Person,  including  any  Affiliates of Borrower or any
Interested   Party,   other  than:  (a)  loans  to  employees  of  Borrower  for
reimbursable  expenses  incurred  by such  employees  in the  normal  course  of
Borrower's  business;  (b) other loans to  employees  of Borrower  not to exceed
$25,000.00 in the aggregate  outstanding  at any time; (c) sales of Inventory in
the ordinary course of business; and (d) Permitted Investments.

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<PAGE>

      7.4 Capital Expenditures and Investments. Borrower shall not: (a) make any
Unfunded  Capital  Expenditures in the Fiscal Year ending March 31, 2004, in the
aggregate, in excess of $250,000.00 (but in an amount not to exceed $150,000 for
acquisition and/or upgrade of Borrower's  computer system) or in any Fiscal Year
thereafter,  in  the  aggregate,  in  excess  of  $100,000.00  or (b)  make  any
Investment other than Permitted Investments.

     7.5 Distributions and Salaries. Borrower shall not:

          (a) make any cash dividend, distribution or payment on or with respect
to any shares,  or purchase,  redeem or  otherwise  acquire or retire any of its
stock (except (i) shares acquired on the conversion thereof into other shares of
stock,  (ii) repurchases of stock from former employees or directors of Borrower
under  the  terms  of  applicable  repurchase  agreements  or  otherwise,   such
repurchases  not to exceed in the  aggregate  $50,000.00  in any Fiscal Year; or
(iii)  with  respect  to  Borrower's  Series  A  convertible   preferred  stock,
redemption  of any or all of such stock issued as of the date of this  Agreement
pursuant to and on the terms of subsection (a) of Article Fourth,  Section (A) 8
of Borrower's Incorporation Certificate only (and not pursuant to any other part
of  Article  Fourth,   Section  (A)  8  or  part  of  Borrower's   Incorporation
Certificate)); or

          (b) increase, whether by election, promotion, hiring or otherwise, the
salaries  and other  compensation  paid to  officers  of  Borrower  by more than
fifteen  percent  (15%) in the aggregate in any Fiscal Year from the salary paid
to the same or similar  officers  in the prior  Fiscal Year  fulfilling  same or
similar responsibilities and duties.

     7.6  Financial Covenants.

          (a) Borrower  shall not permit the Fixed Charge  Coverage  Ratio to be
less than 1.00 to 1.00 as of Closing Date and, thereafter, as of the end of each
calendar  month,  for the  immediately  preceding  rolling  twelve month period,
commencing  with the  month  ending  May 31,  2003,  to be less  than the  ratio
specified below set forth opposite such month:

        PERIOD ENDING                         RATIO
        -------------                         -----

    May 31, 2003 through                  1.00 to 1.00
     September 30, 2003
   October 1, 2003 though                 1:15 to 1:00
       March 31, 2004

    April 1, 2004 through                 1:25 to 1:00
     September 30, 2004

  October 1, 2004, through                1:40 to 1:00
       March 31, 2005

April 1, 2005 and thereafter              1:50 to 1: 00

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<PAGE>

           (b) Borrower  shall not permit its Adjusted  Tangible Net Worth as of
the Closing Date to be less than  $11,000,000.00 or, at any time thereafter,  to
be less  than the sum of  $11,000,000.00  plus an amount  equal to  seventy-five
percent (75%) of Net Income for each calendar  month,  commencing with the month
ending  May 31,  2003,  and for each  month  thereafter.  For any  determination
hereunder,  non-cash stock  compensation  expense and benefits shall be excluded
from  shareholders'  equity and Net Income so that such  expenses  and  benefits
shall have a zero effect upon the calculation.
           (c) Borrower's  shall not permit its Trailing  Twelve Month Inventory
Turnover to be less than (i) four times (4x) as of the  Closing  Date and at the
end of each calendar month thereafter through March 31, 2004, commencing May 31,
2003,  and (ii) five times (5x) at the end of April 30, 2004,  and each calendar
month  thereafter,  in  each  instance  as  determined  by  Lender  in its  sole
discretion.   "Trailing   Twelve  Month  Inventory   Turnover"  means,  for  the
immediately   preceding   rolling   twelve  month  period  as  of  the  date  of
determination,  the trailing  twelve (12) month cost of sales less  depreciation
for the applicable period,  divided by the average month-end  Inventory balances
for the current period and the trailing eleven (11) months, calculated as of and
from the Closing Date.

      All amounts  referenced  in this Section shall be determined in accordance
with GAAP.

     7.7  Change of  Control.  Borrower  shall not  cause,  permit,  or  suffer,
directly or indirectly, any Change of Control.

       7.8 Limitation on  Indebtedness  for Money  Borrowed.  Borrower shall not
create or suffer to exist any Indebtedness  for Money Borrowed  except:  (i) the
Indebtedness  for Money  Borrowed by Borrower to Lender under this Agreement and
the Loan Documents;  (ii) Indebtedness for Money Borrowed  outstanding as of the
Closing Date and listed on Schedule 7.8; (iii)  Indebtedness  for Money Borrowed
secured by Permitted  Liens;  (iv) other  Indebtedness  for Money Borrowed in an
aggregate outstanding amount not to exceed $100,000.00; and (v) Indebtedness for
Money  Borrowed in order to  refinance,  but not to  increase  the amount of the
available principal amount of, any of the foregoing.

      7.9 Mergers;  Consolidations;  Acquisitions.  Borrower  shall not merge or
consolidate, or permit any Subsidiary of Borrower to merge or consolidate,  with
any Person;  nor acquire,  or permit any of its Subsidiaries to acquire,  all or
any substantial part of the properties and assets or Securities of any Person.

     7.10  Subsidiaries.  After the Closing Date,  Borrower shall not create any
Subsidiaries, or transfer any assets to any Subsidiary.

     7.11 Fiscal Year.  Borrower shall not change its Fiscal Year
end for accounting purposes.

     7.12 Affiliate/Interested Party Transactions. Borrower shall not enter into
or be a party to any agreement or  transaction  with any Affiliate or Interested
Party except (i)  agreements  disclosed  prior to the Closing Date in Borrower's
SEC filings or as set forth on Schedule 7.12 and other  non-material  agreements
as of the Closing Date, (ii) in the ordinary course of and

                                       34
<PAGE>

pursuant to the reasonable requirements of Borrower's business and upon fair and
reasonable  terms that are no less favorable to Borrower than it would obtain in
a  comparable  arms  length  transaction  with  a  Person  not an  Affiliate  or
Interested  Party  of  Borrower,  and such  agreement  or  transaction  is fully
disclosed  to  Lender,  or (iii) to  raise  equity  for the  purpose  of  paying
dividends or  distributions  or  redeeming  all or part of  Borrower's  Series A
convertible  preferred  stock when and in the amount due pursuant to  Borrower's
Incorporation Certificate.

                       ARTICLE VIII - CONDITIONS PRECEDENT

     8.1 Initial  Credit.  The  obligation  of Lender to extend any credit under
this Agreement,  including the making of the initial  Revolving Loan Advance and
any future Loans, is subject to the fulfillment to Lender's  satisfaction of all
of the following conditions:

          (a) All legal matters  incidental to the extension of credit by Lender
     shall satisfactory to counsel of Lender.

          (b) Lender shall have received, in form and substance  satisfactory to
     Lender, each of the following, duly executed:

               (i)    This Agreement;

               (ii)   The Trademark Agreement;

               (iii)  Borrower's   borrowing   resolutions,   together   with  a
                      secretary's certificate;

               (iv)   UCC-1 Financing Statement(s); (v) An opinion of Borrower's
                      counsel;

               (vi)   Each Deposit Account Control Agreement for Borrower;

               (vii)  The Lockbox Agreement with each of (i) SouthTrust and (ii)
                      Regions Bank;

               (viii) A Processor Agreement with Stueben Foods;

               (ix)   Each other Security Document;

               (x)    A Landlord  Waiver  and  Consent  from each of  Borrower's
                      landlords;

               (xi)   All releases, terminations, agreements and other documents
                      as Lender may request to effect and  evidence  termination
                      of the existing financing arrangements of Borrower and the
                      interests of any other  lender or lenders  pursuant to any
                      such financing  arrangements  in any assets and properties
                      of Borrower;

               (xii)  A Borrowing  Base  Certificate  dated as of the  Agreement
                      Date;

               (xiii) The payoff  letter  from each  existing  lender to be paid
                      from the initial Loan;

               (xiv)  A current list of Interested Parties; and

                                       35
<PAGE>

               (xv)   Such  other  documents  as Lender may  require  under this
                      Agreement.

           (c) Lender shall have  received  evidence of insurance and loss payee
endorsements  and/or  certificates of insurance  naming Lender as loss payee, as
required under this Agreement,  in form and substance satisfactory to Lender, at
Borrower's cost and expense;

           (d) Lender  shall have  completed  a field  review of the records and
other  information  with respect to the  Collateral  as Lender may require,  the
results of which  (including  evidence  of  segregation  and  identification  of
Collateral) shall be satisfactory to Lender in its discretion;

          (e) Lender shall have received and reviewed UCC search results for all
jurisdictions  in which assets of Borrower are located in the United States,  in
form and substance satisfactory to Lender;

           (f)  Lender  shall  have  received  evidence,  in form and  substance
satisfactory  to  Lender,  that  Lender  has a valid  perfected  first  security
interest  in all of the  Collateral  except as  otherwise  permitted  under this
Agreement;

          (g) The  excess  Availability  under the  Credit  Facility,  as of the
Closing Date,  shall not be less than (i)  $750,000.00  after the payment of all
fees and expenses to be paid by Borrower at Closing Date under this Agreement or
the Escrow  Agreement and the  application  of the proceeds of the initial Loans
funded under this Agreement, plus (ii) a Payable Reserve;

          (h) Lender shall have completed its business, legal and collateral due
diligence,  including  a  collateral  audit and review of  Borrower's  books and
records,  contracts with Account Debtors conducted by Lender and verification of
Borrower's  representations  and warranties to the Lender,  the results of which
shall be satisfactory to Lender;

          (i) Lender  shall have  completed  background  checks with  respect to
certain principal owners and managers of Borrower, the results of which shall be
satisfactory to Lender in its sole discretion;

          (j) Lender shall be satisfied  in its sole  discretion  that there are
no offset arrangements  between the Borrower and Account Debtors,  including any
related buy-back agreements;

          (k) No  Default  or  Event  of  Default  shall  have  occurred  and be
continuing;
          (l) All  representations  and warranties of Borrower set forth in this
Agreement shall be true and correct in all material respects;

          (m) The documents  regarding the SouthTrust  Collateral and SouthTrust
Debt shall be in form and substance acceptable to Lender in its discretion;

          (n) The Parties shall have completed or delivered, as applicable,  all
items on the checklist of closing items in connection with this Agreement,  each
to the satisfaction of Lender in its discretion; and

                                       36
<PAGE>

          (o) The Escrow Agreement shall have been executed and delivered by all
parties  thereto,  Borrower shall have disbursed to the Escrow Agent (as defined
in the Escrow  Agreement)  the sums to be paid by Borrower  at Closing,  and the
terms of the Escrow  Agreement  for  disbursement  of the Initial Loan by Lender
shall have been fully satisfied.

     8.2 Initial and  Subsequent  Credit.  The obligation of Lender to make each
extension  of credit  requested  by  Borrower  under this  Agreement,  including
without  limitation,  the initial  Revolving  Loan  Advance  and any  subsequent
Revolving  Loan  Advance  shall  be  subject  to  the  fulfillment  to  Lender's
satisfaction of all of the following conditions:

          (a) The representations and warranties contained in this Agreement and
in each of the other Loan  Documents  shall be true in all material  respects on
and as of the  date of the  signing  of this  Agreement  and on the date of each
extension  of credit or the  making  of any  Loans by  Lender  pursuant  to this
Agreement,  with the same effect as though such  representations  and warranties
had been made on and as of each such date,  and on each such  date,  no Event of
Default,  and no condition,  event or act which with the giving of notice or the
passage  of time or both  would  constitute  an Event  of  Default,  shall  have
occurred and be continuing or shall exist.

          (b) Lender shall have received all  additional  documents  that Lender
may require in connection  with such extension of credit,  in form and substance
satisfactory to Lender.

          (c) There shall be no material adverse change, as determined by Lender
in its  discretion,  since  December 31,  2002,  in the  financial  condition or
business of Borrower,  nor any material decline,  as determined by Lender in its
discretion,  in the market value of any  Collateral or a substantial or material
portion thereof or of the assets of Borrower.

          ARTICLE IX     - EVENTS OF DEFAULT; REMEDIES

     9.1 Events of Default.  The  occurrence  or existence of any one or more of
the following  events or conditions,  whether  voluntary or  involuntary,  shall
constitute an Event of Default:

           (a) Borrower  fails to pay when due (whether due at stated  maturity,
on demand,  upon  acceleration  or  otherwise)  any  installment  of  principal,
overadvance,  interest,  premium,  if any, and fees on any of the Revolving Loan
Advances, or otherwise owing under this Agreement;

          (b) Borrower fails to pay any of the other Obligations on the due date
thereof  (whether  due at stated  maturity,  on  demand,  upon  acceleration  or
otherwise)  and such failure shall  continue for a period of ten (10) days after
Lender's giving Borrower written notice thereof;

           (c)  Borrower  fails or  neglects  to  perform,  keep or observe  any
covenant  contained in this Agreement or the other Loan Documents  (other than a
covenant which is dealt with specifically elsewhere in this Section 9.1) and the
breach of such other  covenant in this  Agreement or the other Loan Documents is
not cured within ten (10) days after the sooner to occur of  Borrower's  receipt
of written  notice of such breach from Lender or the date on which such  failure
or neglect first becomes known to any officer of Borrower; provided, that if the
cure of such  failure or neglect  cannot be  effected  within  such ten (10) day
period, and Borrower is

                                       37
<PAGE>

diligently  attempting to cure such failure or neglect,  then such 10-day period
shall be extended up to another  twenty  (20) days so long as the  extension  of
such 10-day  period will not have a Materially  Adverse  Effect as determined by
Lender in its discretion;

           (d) Any  representation or warranty made by or on behalf of Borrower,
or other  information  provided  by or on  behalf of  Borrower  to  Lender,  was
incorrect  or  misleading  in any  material  respect  at the time it was made or
provided;

           (e)  Borrower   defaults  and  such  default   continues  beyond  any
applicable grace or cure period:  (i) under the terms of the SouthTrust Debt; or
(ii) as  primary or  secondary  obligor,  in the  payment  of any  principal  or
interest on any  Indebtedness for Money Borrowed (other than the Obligations) in
excess of $50,000.00  or, if such  Indebtedness  is payable on demand,  Borrower
fails to pay such  Indebtedness  upon demand;  or (iii) in the observance of any
covenant,  term or condition contained in any agreement evidencing,  securing or
relating to any  Indebtedness for Money Borrowed (other than the Obligations) in
excess of  $50,000.00,  if the effect of such default is to cause,  or to permit
any other party to such  Indebtedness to cause, all or part of such Indebtedness
to become due before its stated maturity;  or (iv) under the terms of Borrower's
Incorporation  Certificate  for  the  payment  of  dividends,  distributions  or
redemption amounts to the holder(s) of Borrower's Series A preferred stock;

           (f) A writ of attachment, garnishment execution, distraint or similar
process  in  excess of  $50,000.00  is issued  against  Borrower,  or any of its
properties  except  for any  such  writ of  attachment,  garnishment  execution,
distraint or similar  process that is subject to a bonafide  dispute by Borrower
and is properly  contested by appropriate  proceedings  promptly  instituted and
diligently conducted, or which is not paid, released,  dismissed, or transferred
to bond within thirty (30) days thereafter;

           (g)  Lender  determines,   in  its  reasonable  discretion,   that  a
Materially Adverse Effect has occurred;

           (h) Borrower becomes  insolvent or bankrupt;  makes an assignment for
the  benefit  of  creditors  or  consents  to the  appointment  of a trustee  or
receiver; a trustee or a receiver is appointed for Borrower or for a significant
portion  of  Borrower's   assets;   bankruptcy,   reorganization  or  insolvency
proceedings are instituted by Borrower; reorganization or insolvency proceedings
are  instituted  against  Borrower and are not dismissed  within sixty (60) days
after the institution thereof; or if any of the foregoing occurs with respect to
any other Person liable for any of Borrower's obligations owing to Lender;

           (i) Any  judgment  or order  for the  payment  of money in  excess of
$50,000.00,  individually,  or in excess of $100,000.00 in the aggregate for all
such judgments or orders, is entered against Borrower,  unless the same shall be
(i) fully  covered by insurance  and the issuer of the  applicable  policy shall
have  acknowledged full coverage in writing within thirty (30) days of judgment,
or (ii) vacated,  stayed,  bonded,  paid or discharged within a period of thirty
(30) days from the date of such judgment or order;

           (j) Any Loan  Document is  terminated  other than as provided  for in
this Agreement or in such Loan Document or becomes void or unenforceable, or any
Security

                                       38
<PAGE>

Interest in any portion of the Collateral  other than  Equipment  ceases to be a
valid and perfected first priority security interest,  other than as a result of
the Permitted  Liens;  or any Security  Interest in any portion of the Equipment
ceases to be a second priority security interest;

           (k)  Borrower  conceals,  removes,  or  permits  to be  concealed  or
removed, any of its assets with the intent to hinder, delay or defraud Lender or
any of Borrower's other creditors;

          (l) Any loss,  theft,  damage or destruction of any item of Collateral
or other property of Borrower which has a Materially Adverse Effect;

           (m) There is filed against Borrower or other Person liable for any of
Borrower's  Obligations any civil or criminal  action,  suit or proceeding under
any federal or state racketeering  statute (including,  without limitation,  the
Racketeer  Influenced and Corrupt  Organization Act of 1970), which action, suit
or  proceeding  could result in the  confiscation  or forfeiture of any material
portion of the Collateral;

           (n) Any  Termination  Event  with  respect  to any  Plan  shall  have
occurred;  or a decision  shall have been made by  Borrower or any member of the
"controlled  group of  corporations"  (as defined in Section  1563(a)(4)  of the
Internal  Revenue  Code  determined  without  regard  to  Sections  1563(a)  and
(e)(3)(c)  of such Code) of which  Borrower  is a party,  to  terminate,  file a
notice of termination with respect to, or withdraw from, any Plan; and

           (o) Any  default,  event of  default,  or breach  occurs  under lease
agreement(s) for the Orlando Warehouses, or either one of them.

     9.2 Lender's  Remedies.  In addition to any other rights and remedies  that
Lender may have,  upon the occurrence and during the  continuance of an Event of
Default, Lender may:

          (a) Without notice to, or demand upon, Borrower:

          (i) discontinue making any further Revolving Loan Advances;

          (ii) terminate this Agreement;

          (iii) declare all Obligations to be immediately due and payable;

          (iv) take possession of all or any portion of the Collateral, wherever
  located,  and enter on any of the premises  where any of the Collateral may be
  and  remove,  repair  and  store  any of the  Collateral  until  it is sold or
  otherwise  disposed of (Lender shall have the right to store,  without charge,
  all or any portion of the Collateral at any of Borrower's business locations);

          (v) use, without charge,  Borrower's  Proprietary Rights,  advertising
  materials,  or any property of a similar  nature,  in advertising for sale and
  selling any of the Collateral; and

          (vi)  renew,  modify  or  extend  any  Receivable,  grant  waivers  or
  indulgences  with respect to any  Receivable,  accept partial  payments on any
  Receivable,  release,  surrender or substitute any security for payment of any
  Receivable, or compromise with, or release, any party liable on any Receivable
  in such a manner as Lender may, in its sole  discretion  deem  advisable,  all
  without affecting or diminishing Borrower's Obligations to Lender.

                                       39
<PAGE>

          (b) With notice to Borrower:

          (i)  require  Borrower,   at  Borrower's   expense,  to  assemble  the
  Collateral and make the Collateral available to Lender at locations reasonably
  convenient to Lender and Borrower; and

          (ii) sell or otherwise dispose of all or any portion of the Collateral
  at public  or  private  sale for cash or  credit,  with such  notice as may be
  required by law (in the absence of any contrary  requirement,  Borrower agrees
  that ten (10) days prior notice of a public or private sale of the  Collateral
  is reasonable), in lots or in bulk, all as Lender, in its sole discretion, may
  deem advisable. Lender shall have the right to conduct any such sales, without
  charge,  at  Borrower's  business  locations.  Lender may  purchase all or any
  portion of the  Collateral at public sale and, if permitted by law, at private
  sale and,  in lieu of actual  payment of the  purchase  price,  may offset the
  amount of such price against the outstanding amount of the Loans and any other
  amounts owing from Borrower to Lender.  Proceeds realized from the sale of any
  Collateral  will be  applied in the  following  order:  (a) to the  reasonable
  costs,  expenses and attorneys' fees incurred by Lender in connection with the
  collection,  acquisition,  protection and sale of the  Collateral;  (b) to any
  accrued and unpaid  interest  owing from  Borrower  to Lender;  and (c) to any
  other  amounts owing from  Borrower to Lender.  Borrower  agrees that Borrower
  will remain fully liable for any deficiency owing to Lender after the proceeds
  of the  Collateral  have been applied to the Loans and all other amounts owing
  from Borrower to Lender.

          (c) If any of the  Collateral  shall require  repairing,  maintenance,
  preparation,  or the like, or is in process or other unfinished state,  Lender
  shall  have the  right,  but not the  obligation,  to repair or  perform  such
  maintenance,  preparation,  processing or completion of manufacturing to place
  the same in such  saleable  condition  as Lender shall deem  appropriate,  but
  Lender  shall  have the right to sell or dispose  of such  Collateral  with or
  without such processing.

                         ARTICLE X - JURY TRIAL WAIVER;
                  OTHER WAIVERS AND CONSENTS; AND GOVERNING LAW

     10.1  Governing  Law; Choice of Forum; Service  of  Process;
Jury Trial Waiver.

          (a)  The  provisions  of  this  Agreement  shall  be  governed  by and
construed  in  accordance  with the laws of the State of Rhode  Island,  without
reference to applicable conflict of law principles.

          (b)  Borrower  and  Lender  irrevocably  consent  and  submit  to  the
non-exclusive  jurisdiction  of  Rhode  Island  Courts  in  connection  with the
resolution  of any  disputes  relating  to  this  Agreement  or the  other  Loan
Documents. Borrower irrevocably waives any objection based on venue or forum non
conveniens  with respect to any action  instituted  therein  arising  under this
Agreement or any of the other Loan  Documents,  or in any way connected  with or
related  or  incidental  to the  dealings  of the  parties  in  respect  of this
Agreement or the other Loan  Documents  or the  transactions  related  hereto or
thereto, in each case whether now existing or

                                       40
<PAGE>

hereafter  arising,  and whether in contract,  tort,  equity or  otherwise,  and
agrees that any dispute with respect to any such matters  shall be heard only in
the courts described above (except that Lender shall have the right to bring any
action or proceeding against Borrower or its property in the courts of any other
jurisdiction  which Lender deems necessary or appropriate in order to realize on
the Collateral or otherwise enforce its rights against Borrower or its property.

          (c) Borrower  waives  personal  service of any and all process upon it
and  consents  that all such service of process may be made by  registered  mail
(return receipt  requested)  directed to Borrower at the address set forth below
and service so made shall be deemed to be completed five (5) Business Days after
the same  shall  have been so  deposited  in the United  States  mails.  Nothing
contained  in this  Agreement  shall  affect the right of Lender to serve  legal
process by any other manner permitted by law.

          (d)  BORROWER  AND LENDER EACH HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY
OF ANY CLAIM, DEMAND,  ACTION OR CAUSE OF ACTION ARISING UNDER THIS AGREEMENT OR
ANY OF THE OTHER  LOAN  DOCUMENTS  OR IN ANY WAY  CONNECTED  WITH OR  RELATED OR
INCIDENTAL  TO THE DEALINGS OF THE PARTIES TO THIS  AGREEMENT IN RESPECT OF THIS
AGREEMENT  OR THE OTHER LOAN  DOCUMENTS OR THE RELATED  TRANSACTIONS,  INCLUDING
WITHOUT  LIMITATION,  THE  OBLIGATIONS  OF  BORROWER,  THE  COLLATERAL,  OR  ANY
INSTRUMENT,  DOCUMENT OR GUARANTY DELIVERED  PURSUANT TO THIS AGREEMENT,  OR THE
VALIDITY, PROTECTION, INTERPRETATION,  ADMINISTRATION, COLLECTION OR ENFORCEMENT
OF THIS  AGREEMENT OR ANY OF THE OTHER LOAN  DOCUMENTS,  WHETHER NOW EXISTING OR
HEREAFTER ARISING, WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE.  BORROWER AND
LENDER EACH HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION
SHALL BE DECIDED BY COURT TRIAL  WITHOUT A JURY AND THAT  BORROWER OR LENDER MAY
FILE AN  ORIGINAL  COUNTERPART  OF THIS  AGREEMENT  WITH ANY  COURT  AS  WRITTEN
EVIDENCE  OF THE  CONSENT OF THE PARTIES TO THE WAIVER OF THEIR RIGHT TO A TRIAL
BY JURY.

          (e) Borrower  hereby  releases and  exculpates  Lender,  its officers,
employees  and  designees,  and Lender shall not have any  liability to Borrower
(whether in contract, tort, equity or otherwise) for losses suffered by Borrower
in connection with, arising out of, or in any way related to the transactions or
relationships  contemplated  by this  Agreement,  or any act,  omission or event
occurring  in  connection  herewith,  unless  it is  determined  by a final  and
non-appealable  judgment or court order binding on Lender,  that the losses were
the  result  of acts or  omissions  constituting  gross  negligence  or  willful
misconduct.  In any such litigation,  Lender shall be entitled to the benefit of
the rebuttable presumption that it acted at all times in good faith and with the
exercise  of  ordinary  care  in the  performance  by it of the  terms  of  this
Agreement.

     10.2 Waiver of Certain Claims and  Counterclaims.  In no event shall Lender
have any liability to Borrower for lost profits or other special, consequential,
incidental,  exemplary or punitive  damages in connection with this Agreement or
any of the other  Loan  Documents  or the  transactions  contemplated  hereby or
thereby,  and  Borrower  expressly  waives  any and all right to assert any such
claims. Borrower further waives all rights to interpose any claims, deductions,

                                       41
<PAGE>

setoffs,  recoupment,  or  counterclaims  of any nature  (other than  compulsory
counterclaims)  in any action or proceeding with respect to this Agreement,  the
Obligations,  the Collateral or any matter arising  therefrom or relating hereto
or  thereto.  No officer of Lender has any  authority  to waive,  condition,  or
modify the provisions of this section.

     10.3  Indemnification.  Borrower hereby agrees to indemnify,  save and hold
harmless  Lender and its directors,  officers,  agents,  attorneys and employees
from and against:  (i) the use or contemplated use of the proceeds of any of the
Revolving Loan Advances,  any transaction  contemplated by this Agreement or the
other Loan Documents,  or any  relationship  with Borrower or any other party to
this Agreement or the other Loan  Documents;  (ii) any of the claims reserved by
Borrower's  existing  lenders being paid with the initial Loan by Lender as more
particularly  set forth in the  applicable  payoff  letter  between such lender,
Borrower,  and Lender;  (iii) any administrative or investigative  proceeding by
any governmental agency arising out of or related to a claim, demand,  action or
cause of action described in clause (i) above; and (iv) any and all liabilities,
losses,   costs  or  expenses   (including   reasonable   attorneys'   fees  and
disbursements  and  other  professional  services)  that any  party  indemnified
hereunder suffers or incurs as a result of any foregoing claim,  demand,  action
or cause of action; provided, however, that no such indemnitee shall be entitled
to  indemnification  for any loss caused by its own gross  negligence or willful
misconduct. Any obligation or liability of Borrower to any such indemnitee under
this section shall survive the  expiration or  termination of this Agreement and
the repayment of the Loans and performance of all Obligations.

                           ARTICLE XI - MISCELLANEOUS

     11.1 Power of  Attorney.  Borrower  irrevocably  appoints  Lender,  and any
person designated by Lender, as Borrower's true and lawful  attorney-in-fact to:
(a) endorse for  Borrower,  in Lender's or Borrower's  name,  any draft or other
order for the payment of money payable to Borrower;  and (b) execute and file or
submit for  recording,  in Lender's or  Borrower's  name,  Financing  Statements
describing the Collateral. Lender shall not be liable to Borrower for any action
taken by Lender or its  designee  under  this power of  attorney,  except to the
extent  that  such  action  was  taken by  Lender  in bad  faith  or with  gross
negligence or willful misconduct. Borrower agrees that a carbon, photographic or
other  reproduction  of a Financing  Statement or this Agreement may be filed by
Lender as a Financing Statement.

     11.2 Outstanding Revolving Loan Advances.  The outstanding principal amount
of, and accrued  interest on, the Revolving  Loan Advances and the Interest Rate
applicable  to the Revolving  Loan Advances from time to time,  shall be, at all
times,  ascertained  from the records of Lender and shall be  conclusive  absent
manifest error.

     11.3  Modifications and Course of Dealing.  This Agreement  constitutes the
entire  agreement of Borrower and Lender  relative to the subject matter hereof.
No  modification  of or supplement to this Agreement shall bind Lender unless in
writing and signed by an authorized  officer of Lender.  The enumeration in this
Agreement of Lender's  rights and remedies is not intended to be exclusive,  and
such rights and remedies are in addition to and not by way of  limitation of any
other rights or remedies that Lender may have under the Uniform  Commercial Code
or other  Applicable Law. No course of dealing and no delay or failure of Lender
to exercise any right,  power or privilege  under any of the Loan Documents will
affect any other or

                                       42
<PAGE>

future  exercise  of such right,  power or  privilege.  The  exercise of any one
right,  power or privilege shall not preclude the exercise of any others, all of
which shall be cumulative.

     11.4 Assignment and Participation.  Borrower may not assign or transfer any
of its rights or delegate any of its obligations  under this Agreement or any of
the other  Loan  Documents.  Lender  shall  have the  right,  from time to time,
without  notice to Borrower,  to sell,  assign or otherwise  transfer all or any
part of its interest in this Agreement,  the other Loan Documents, and the Loans
to any other  party,  or enter into  participation  arrangements  with any other
party.   Borrower  authorizes  Lender  to  deliver  to  potential  assignees  or
participants   Borrower's  financial   information  and  all  other  information
delivered  to  Lender  in  furtherance  of or  pursuant  to the  terms  of  this
Agreement.

     11.5 Delegation of Duties.  Lender may execute any of its duties under this
Agreement  or the  other  Loan  Document  by or  through  agents,  employees  or
attorneys-in-fact.  Lender  shall  not be  responsible  for  the  negligence  or
misconduct of any agent or  attorney-in-fact  selected by Lender as long as such
selection was made without gross negligence or willful misconduct.

     11.6 Notices.  Except as otherwise  provided  herein,  whenever any notice,
demand,  request or other  communication shall or may be given to or served upon
any party by any other  party,  or whenever  any party  desires to give or serve
upon any other party any communication with respect to this Agreement, each such
communication  shall be in  writing  and shall be  deemed  to have been  validly
served,  given or delivered (a) upon the earlier of actual  receipt and five (5)
Business Days after  deposit in the United States mail,  registered or certified
mail,  return  receipt  requested,   with  proper  postage  prepaid,   (b)  upon
transmission,  when sent by telecopy  or other  similar  facsimile  transmission
(with such  telecopy or  facsimile  promptly  confirmed by delivery of a copy by
personal  delivery or United  States mail as otherwise  provided in this Section
11.6), (c) one (1) Business Day after deposit with a reputable overnight courier
with all  charges  prepaid  or (d) when  hand-delivered,  all of which  shall be
addressed  to the party to be  notified  and sent to the  address  or  facsimile
number  indicated  in the  signature  page to this  Agreement  or to such  other
address (or facsimile  number) as may be  substituted  by notice given as herein
provided.

     11.7 Expenses. Borrower agrees to pay, and to hold Lender harmless from and
against,  all reasonable  out-of-pocket  expenses  incurred by Lender (including
fees and costs incurred by in-house  counsel) in connection with any amendments,
waivers  or  consents  relating  to  this  Agreement  or any of the  other  Loan
Documents.  Borrower  further  agrees  to pay any  reasonable  fees,  costs,  or
expenses  incurred by Lender arising in connection with Lender's  enforcement or
preservation  of its rights under this Agreement or any other Loan Document,  or
in the collection of any of the Loans, including without limitation,  attorneys'
fees (including fees and costs incurred by in-house  counsel),  expert fees, and
legal costs.  Borrower  also agrees to pay or reimburse  Lender for the costs of
conducting an appraisal of Borrower's Inventory.

     11.8  Assignment  of  Receivables  and  Inventory.  This  Agreement  may be
supplemented  by separate  assignments of Receivables and Inventory and, if such
assignments are executed, the rights and interests given by Borrower pursuant to
such  assignments  shall be in addition to, and not in limitation of, the rights
and security  interests given by Borrower under this Agreement.  Lender will not
be responsible for the safekeeping of any Inventory delivered to Lender, for the
collection  of proceeds  of any of the  Collateral,  or for losses of  collected
proceeds held by Borrower in trust for Lender.

                                       43
<PAGE>

     11.9 Binding  Effect;  Severability.  This Agreement shall not be deemed to
create any right in any party  except as provided  herein and shall inure to the
benefit of, and be binding  upon,  the  successors  and assigns of Borrower  and
Lender.  All of  Borrower'  obligations  under this  Agreement  are absolute and
unconditional  and shall not be subject to any offset or  deduction  whatsoever.
The provisions of this Agreement are intended to be severable.  If any provision
of this  Agreement is held invalid or  unenforceable  in whole or in part,  such
provision   will  be   ineffective   to  the  extent  of  such   invalidity   or
unenforceability  without in any manner effecting the validity or enforceability
of the remaining provisions of this Agreement.

     11.10 Final  Agreement.  This  Agreement  and the other Loan  Documents are
intended  by  Borrower  and  Lender to be the  final,  complete,  and  exclusive
expression of the agreement between them. This Agreement  supersedes any and all
prior oral or written  agreements  relating to the  subject  matter  hereof.  No
modification, rescission, waiver, release, or amendment of any provision of this
Agreement  or any  provision of any of the other Loan  Documents  shall be made,
except by a written  agreement signed by Borrower and a duly authorized  officer
of Lender.

     11.11  Counterparts.  This  Agreement  may be  executed  in any  number  of
counterparts, and by Lender and Borrower in separate counterparts, each of which
shall be an original,  but all of which shall taken together  constitute one and
the same  agreement.  The parties  hereby  acknowledge  and agree that facsimile
signatures  of this  Agreement  shall have the same force and effect as original
signatures.

     11.12  Captions.   The  captions   contained  in  this  Agreement  are  for
convenience of reference only, are without substantive meaning and should not be
construed to modify, enlarge, or restrict any provision.

     11.13  Borrower's  Representative.  Borrower hereby appoints and authorizes
its Chief Financial Officer to act as its  representative and agent hereunder to
issue   notices  and  other   communications   on  its  behalf  (the   "Borrower
Representative").  Notwithstanding any provision herein to the contrary,  Lender
agrees  that  any  notice  or  other  communication   issued  by  an  authorized
representative on behalf of Borrower  Representative  shall be acknowledged as a
notice or other communication  properly issued by Borrower and that it shall not
recognize  any notice or other  communication  that was not  issued by  Borrower
Representative or its authorized  representative as a properly authorized notice
or other communication from Borrower.

     The undersigned,  pursuant to due authority,  have caused this Agreement to
be executed as of the date set forth above.

                         [SIGNATURES BEGIN ON NEXT PAGE]

                                       44
<PAGE>

                                [SIGNATURE PAGE]

                                 BORROWER:

                                 GALAXY NUTRITIONAL FOODS, INC.

                                 By: /s/ Christopher J. New
                                 Name: Christopher J. New
                                 Title: Chief Executive Officer

                                 2441 Viscount Row
                                 Orlando, FL 32809
                                 Facsimile: (407) 854-0472
                                 Attention: Chief Executive Officer
                                            and Chief Financial Officer

                                 Baker & Hostetler LLP
With a copy to:                  200 South Orange Avenue
                                 Suite 2300
                                 Orlando, Florida 32801
                                 Facsimile: (407) 841-0168
                                 Attention: Jeffrey E. Decker

                                       45
<PAGE>

                                [SIGNATURE PAGE]

                                 LENDER:

                                 TEXTRON FINANCIAL CORPORATION

                                 By: _____________________________
                                 Name:  __________________________
                                 Title:  _________________________

                                 11575 Great Oaks Way
                                 Suite 210
                                 Alpharetta, GA 30022
                                 Attn: SVP-ABLG Portfolio
                                 Management
                                 Facsimile:  (770) 360-1672

               with a copy to:   Steven M. Schott, Esq.
                                 Textron Financial Corporation
                                 11575 Great Oak Way
                                 Suite 210
                                 Alpharetta, GA  30022
                                 Facsimile:  (770) 360-1458

                                       46
<PAGE>

        ACKNOWLEDGMENT OF GALAXY NUTRITIONAL FOODS, INC.

STATE OF         )
                 )  ss:
COUNTY OF        )

     Before me, a Notary  Public in and for said  County and State,  on this day
personally  appeared  _______________________________,  known  to me  to be  the
person whose name is subscribed to the foregoing  instrument,  who  acknowledged
that he/she  executed  said  instrument as his or her free and voluntary act and
the  free  and  voluntary  act  of  Galaxy   Nutritional  Foods,  Inc.,  as  the
____________ of said Company.

     Given under my hand and Notarial Seal this _____ day of May 2003.

                              ________________________________________
                              Notary Public, State of Florida

                              ________________________________________
                              Printed, typed or stamped name of Notary Public

My commission expires:

                                       47
<PAGE>

                                    EXHIBIT A

                     FORM OF COVENANT COMPLIANCE CERTIFICATE

                                       48
<PAGE>PATENT, COPYRIGHT AND TRADEMARK COLLATERAL SECURITY AGREEMENT

      THIS  PATENT, COPYRIGHT AND TRADEMARK COLLATERAL SECURITY
AGREEMENT (the "Agreement") is made as of the 27th day of  May,
2003   between  GALAXY  NUTRITIONAL  FOODS,  INC.,  a  Delaware
corporation  ("Borrower") and TEXTRON FINANCIAL CORPORATION,  a
Delaware  corporation  ("Lender"). All  capitalized  terms  not
otherwise  defined  herein  shall have  the  meanings  ascribed
thereto in the Loan Agreement (as this term is defined below).

                           RECITALS

     A.   Borrower and Lender have entered into that certain Loan
and  Security Agreement dated as of even date herewith,  pursuant
to  which Lender has agreed to extend credit to Borrower  in  the
maximum amount of $7,500,000 (as amended, restated, modified  and
supplemented from time to time, the "Loan Agreement").

      B.    In  order  to induce Lender to enter  into  the  Loan
Agreement  and the transactions contemplated thereby,  and  as  a
condition thereto, Borrower is required to execute and deliver to
Lender this Agreement and pursuant hereto to assign and grant  to
Lender  a  security  interest in and to all of Borrower's  right,
title,  and interest in the Intellectual Property Collateral  (as
defined below).

      NOW,  THEREFORE, in consideration of the foregoing and  for
other   good   and  valuable  consideration,  the   receipt   and
sufficiency of which are hereby acknowledged, the parties  hereto
agree as follows:

     1.   As used in this Agreement:

      (a)   "Copyrights" means and includes, in each case whether
now existing or hereafter arising, all of Borrower's right, title
and  interest in and to (i) all copyrights, rights and  interests
in   copyrights,   works  protectable  by  copyright,   copyright
registrations  and copyright applications; (ii) all  renewals  of
any  of  the foregoing; (iii) all income, royalties, damages  and
payments  now or hereafter due and/or payable under  any  of  the
foregoing, including, without limitation, damages or payments for
past  or  future infringements of any of the foregoing; (iv)  the
right to sue for past, present and future infringements of any of
the  foregoing; and (v) all rights corresponding to  any  of  the
foregoing throughout the world.

      (b)  "Patents" means and includes, in each case whether now
existing or hereafter arising, all of Borrower's right, title and
interest   in  and  to  (i)  any  and  all  patents  and   patent
applications,  (ii)  inventions and  improvements  described  and
claimed   therein,  (iii)  reissues,  divisions,   continuations,
renewals,  extensions  and  continuations-in-part  thereof,  (iv)
income,  royalties, damages, claims and payments now or hereafter
due  and/or  payable  under and with respect thereto,  including,
without  limitation,  damages and payments for  past  and  future
infringements  thereof, (v) rights to sue for past,  present  and
future  infringements thereof, and (vi) all rights  corresponding
to any of the foregoing throughout the world.

      (c)   "Trademarks" means and includes in each case  whether
now  existing  or  hereafter arising, all of  Borrower's  rights,
title  and  interest in and to (i) trademarks (including  service
marks),  trade  names and trade styles and the registrations  and
applications  for registration thereof and the  goodwill  of  the
business  symbolized  by the trademarks,  (ii)  licenses  of  the
foregoing,  whether  as  licensee  or  licensor,  (iii)  renewals
thereof,  (iv)  income, royalties, damages and  payments  now  or
hereafter  due  and/or payable with respect  thereto,  including,
without  limitation, damages, claims and payments  for  past  and
future infringements thereof, (v) rights to sue for past, present
and  future infringements thereof, including the right to  settle
suits involving claims and demands for royalties owing, and  (vi)
all  rights corresponding to any of the foregoing throughout  the
world.

      (d)  "Other Assets", means Borrower's intellectual property
and/or  proprietary materials other than Copyrights, Patents  and
Trademarks,    including   without   limitation,    formulations,
manufacturing procedures, quality control procedures and  product
specifications   relating  to  any  products   sold   under   the
Copyrights, Patents, and Trademarks

      (e)   "Intellectual Property Collateral" means collectively
the Copyrights, Other Assets, Patents, and Trademarks.

      2.    As  collateral security for the prompt  and  punctual
payment  and performance of the Obligations by Borrower  and  for
the  prompt  performance  by  Borrower  of  its  obligations  and
undertakings  under  this Agreement, Borrower  hereby  grants  to
Lender, its successors and assigns, a security interest in all of
the  Intellectual  Property  Collateral,  whether  now  owned  or
hereafter  acquired  by Borrower, and hereby pledges,  mortgages,
and hypothecates the Intellectual Property Collateral to Lender.

     3.   Borrower covenants, warrants and represents that:

          (a)   Set  forth on Schedule A attached hereto  is  a
true  and  complete  list of all of the  Intellectual  Property
Collateral that is subject to current registrations or  pending
applications  for  registration in the United States  Copyright
Office, the United States Patent and Trademark Office, and  any
other  government  or  public office or agency  of  the  United
States of America or other jurisdictions.

          (b)   Borrower is the sole and exclusive owner of all
of  the Intellectual Property Collateral, free and clear of all
liens  and  encumbrances, except for (i) the security  interest
created  by  this Agreement and the other Loan Documents,  (ii)
the   security  interest  of  FINOVA  Mezzanine  Capital,  Inc.
described  in Exhibit A hereto and of FINOVA Capital Coporation
pursuant to an agreement dated November 14, 2001, and (iii) the
licenses  issued  by  Borrower in and to Intellectual  Property
Collateral set forth on Schedule 5.8 of the Loan Agreement.

          (c)   Except  for  the  security interest  of  FINOVA
Mezzanine  Capital, Inc. described in Exhibit A hereto  and  of
FINOVA  Capital  Coporation  pursuant  to  an  agreement  dated
November  14,  2001,  Lender  has  a  first  priority  security
interest in the Intellectual Property Collateral.

          (d)   Borrower will take actions to defend Borrower's
right,  title and interest in and to its Intellectual  Property
Collateral  against the claims of third parties,  except  where
the  failure to do so would not have or be reasonably  expected
to have a Materially Adverse Effect.

          (e)   The Intellectual Property Collateral set  forth
on  Schedule A is subsisting and has not been adjudged  invalid
or  unenforceable, in whole or in part, and  Borrower  has  not
received  any  claim  by  any third  party  that  any  of  such
Intellectual Property Collateral is invalid or unenforceable.

          (f)   Execution,  delivery and  performance  of  this
Agreement  by  Borrower  does not (i) violate,  conflict  with,
result  in  a breach of, constitute a default under, result  in
the   termination  of,  or  result  in  the  creation  of   any
encumbrances upon any of the Intellectual Property  Collateral,
under  any agreement to which Borrower is a party or  by  which
Borrower is bound, or (ii) violate any laws, rules, regulations
or  orders  applicable  to  any of  the  Intellectual  Property
Collateral.

          (g)   Borrower has used, and will continue to use for
the duration of this Agreement, reasonably consistent standards
of  quality  in its manufacture of the products sold  under  or
utilizing any of the Intellectual Property Collateral.

          (h)   Borrower  will  not  grant  to  any  Person  an
exclusive  license for any territory in the  United  States  of
America  or  Canada  for all or any part  of  the  Intellectual
Property Collateral.

          (i)   Borrower  shall  take any  and  all  reasonable
actions  as are necessary or appropriate to properly  maintain,
protect,   preserve,  care  for,  and  enforce   any   of   the
Intellectual    Property   Collateral,    including,    without
limitation,  payment when due of such fees,  taxes,  and  other
expenses  which  shall be incurred or which shall  accrue  with
respect to any of the Intellectual Property Collateral.

          (j)   If  Lender  deems it necessary  to  perfect  or
continue  perfection of Lender's interest in  the  Intellectual
Property  Collateral  conveyed hereunder,  Borrower  shall  (a)
cause  this  Agreement to be properly recorded with the  United
States Patent and Trademark Office, the United States Copyright
Office, and any other government or public office or agency  of
the  United  States  of  America, as applicable,  and  (b)  for
Intellectual  Property  Collateral  registered  in  the  United
States  or  Canada  (and upon Lender's request  in  such  other
jurisdictions),  will  execute  and  deliver  to  Lender   such
documents  as  Lender  may  require  to  perfect  its  security
interest in registered Intellectual Property Collateral.

          (k)  All information heretofore or herein supplied in
writing  to Lender by or on behalf of Borrower with respect  to
any  of  the  Intellectual Property Collateral is accurate  and
complete in all material respects.

          (l)   With  respect  to the Master  Distribution  and
License  Agreement effective May 22, 2003 between Borrower  and
Fromageries  Bel S.A. ("Bel License Agreement"), Borrower  will
not  (i) increase the Territory (as defined therein) to include
any  countries in addition to the specific countries  described
in  clause (i), (ii) and (iii) of Section 1.3 thereof  or  (ii)
otherwise  materially  amend, modify, supplement  or  otherwise
change  the  terms, conditions or parameters of  the  agreement
except  as  contemplated  in the Bel License  Agreement  as  in
effect  on  May  22, 2003.  The foregoing will not  prevent  or
prohibit the Borrower from negotiating, establishing the  terms
and   conditions  of,  and  entering  into  the   manufacturing
agreement contemplated by the Bel License Agreement.

      4.    Borrower  hereby grants to Lender and its  employees,
representatives  and  agents the right to  visit  during  regular
business  hours  any  of Borrower's plants  and  facilities  that
manufacture,  inspect or store products that are  sold  utilizing
any  of the Intellectual Property Collateral, and to inspect  the
products  and quality control records relating thereto,  provided
that  Lender  shall  not interfere with the daily  operations  of
Borrower.  Borrower shall do any and all acts required by  Lender
to ensure Borrower's compliance with Section 3(g) above.

      5.   Borrower agrees that, until all of the Obligations  of
Borrower  under the Loan Documents shall have been  satisfied  in
full,  Borrower will not (a) sell, assign, transfer or sublicense
the  Intellectual  Property Collateral or any of  its  rights  or
interests  therein other than to:  (i) Lender,  (ii)  Fromageries
Bel  S.A.  pursuant  to or as contemplated  by  the  Bel  License
Agreement or the manufacturing agreement contemplated thereunder,
and  (iii) parties to whom Borrower has granted licenses  in  the
ordinary course of its business on market terms or with the prior
written  consent of Lender or (b) enter into any other  agreement
which  is  inconsistent  with Borrower's  obligations  hereunder,
without the prior written consent of Lender.

      6.    If, before the Obligations of the Borrower shall have
been  satisfied in full, Borrower shall obtain rights to any  new
Intellectual   Property  Collateral,  the  provisions   of   this
Agreement shall automatically apply thereto.  Borrower shall give
Lender  prompt  written  notice of any new Intellectual  Property
Collateral which shall become subject to registrations or pending
applications  for  registration in the  United  States  Copyright
Office,  the  United Patent and Trademark Office, and  any  other
government  or  public office or agency of the United  States  of
America  or  other jurisdictions and will execute and deliver  to
Lender  such  documents  as Lender may  require  to  perfect  its
security   interest  in  any  registered  Intellectual   Property
Collateral.

      7.    Borrower authorizes Lender to modify this Agreement
by  amending Schedule A to include any new registrations and/or
applications  pending for any Intellectual Property  Collateral
without the necessity of Borrower's approval of or signature to
such  amendment, and Borrower shall do all such other acts  (at
its own expense) deemed reasonably necessary or appropriate  by
Lender  to  implement or preserve Lender's  interests  therein.
All representations and warranties of Borrower set forth herein
shall  be deemed to be restated by Borrower as of the  date  of
any  such  amendment of or supplement to Schedule A  with  full
force and effect as though made on such date.

      8.    If  any Event of Default shall have occurred  and  be
continuing,  Lender shall have, in addition to all  other  rights
and  remedies given by this Agreement, those allowed by  law  and
the  rights and remedies of a Lender under the Uniform Commercial
Code  as  enacted  in  any applicable jurisdiction  and,  without
limiting the generality of the foregoing, Lender may immediately,
without demand of performance and without other notice (except as
set  forth next below) or demand whatsoever to Borrower,  all  of
which  are  hereby  expressly waived, and without  advertisement,
sell  at  public  or private sale or otherwise realize  upon,  in
Providence, Rhode Island, or elsewhere, all or from time to  time
any part of the Intellectual Property Collateral, or any interest
which  Borrower  may have therein, and after deducting  from  the
proceeds  of  sale  or  other disposition  of  any  part  of  the
Intellectual  Property  Collateral all  expenses  (including  all
reasonable expenses for broker's fees and legal services),  shall
apply  the  residue  of  such proceeds  to  the  payment  of  the
Obligations  of  Borrower. Any remainder of  the  proceeds  after
payment in full of the Obligations of Borrower shall be paid over
to  Borrower. Written notice of any sale or other disposition  of
any  part of the Intellectual Property Collateral shall be  given
to  Borrower  at  least  ten (10) days before  the  time  of  any
intended  public or private sale or other disposition thereof  is
to  be  made,  which Borrower hereby agrees shall  be  reasonable
notice  of such sale or other disposition.  At any such  sale  or
other  disposition, Lender may, to the extent  permissible  under
applicable  law, purchase the whole or any part  of  any  of  the
Intellectual Property Collateral sold.

      In  addition, upon the occurrence of an Event  of  Default,
Lender   shall  have,  and  Borrower  hereby  grants  to  Lender,
effective  under this Agreement and the other Loan  Documents,  a
fully-paid-up, right and license to make, use, practice, and sell
(or  license  or  otherwise transfer) the  Intellectual  Property
Collateral,  for  the exclusive purpose of,  and  to  the  extent
necessary and sufficient for, the full and complete enjoyment and
exercise  of  and  realization upon  the  rights,  remedies,  and
interests of Lender pursuant to this Agreement and the other Loan
Documents.   Except  for  the exclusive  territorial  license  of
Intellectual   Property  Collateral  granted   by   Borrower   to
Fromageries  Bel  S.A.  and such other licenses  of  Intellectual
Property  Collateral for exclusive territories not prohibited  by
this  Agreement,  the  license  granted  by  Borrower  to  Lender
hereunder is worldwide.

      9.    Subject to the terms of the Loan Agreement,  at  such
time as Borrower shall completely satisfy all of the Obligations,
this  Agreement  shall  terminate and Lender  shall  execute  and
deliver   to   Borrower   all  deeds,  assignments,   termination
statements   under  the  Uniform  Commercial  Code,   and   other
instruments  as  may be necessary or proper to  release  Lender's
security   interest  in  the  Intellectual  Property  Collateral,
subject  to any disposition thereof which may have been  made  by
Lender pursuant hereto.

      10.  Any and all fees, costs and expenses, of whatever kind
or  nature,  including the reasonable attorneys' fees  and  legal
expenses  incurred  by Lender in connection with  preparation  of
this  Agreement and all other documents relating hereto  and  the
consummation of this transaction, the filing or recording of  any
documents (including all taxes in connection therewith) in public
offices,  the  payment or discharge of any taxes,  counsel  fees,
maintenance   fees,   encumbrances   or   otherwise   protecting,
maintaining  or preserving any part of the Intellectual  Property
Collateral,  or  in  defending  or  prosecuting  any  actions  or
proceedings  arising  out  of  or related  to  any  part  of  the
Intellectual  Property Collateral, shall be  borne  and  paid  by
Borrower on demand by Lender and until so paid shall be added  to
the  principal amount of the Obligations and shall bear  interest
at the highest rate prescribed in the Loan Agreement.

      11.  Borrower shall not knowingly abandon or dedicate  to
the  public  any  of the Intellectual Property Collateral,  nor
knowingly  do  any act nor omit to do any act if  such  act  or
omission is of a character that tends to cause or contribute to
the  abandonment or dedication to the public of any part of the
Intellectual  Property  Collateral,  without  the  consent   of
Lender, which consent shall not be unreasonably withheld.

      12.   In the event of the occurrence of an Event of Default
under the Loan Agreement, Borrower hereby authorizes and empowers
Lender  to make, constitute and appoint any officer or  agent  of
Lender  as  Lender  may select, in its exclusive  discretion,  as
Borrower's  true and lawful attorney-in-fact, with the  power  to
endorse  Borrower's name on all applications,  documents,  papers
and   instruments  necessary  for  Lender  to  use  any  of   the
Intellectual  Property  Collateral, or  to  grant  or  issue  any
exclusive  or non-exclusive license under any of the Intellectual
Property  Collateral to anyone else, or necessary for  Lender  to
assign,  pledge, convey or otherwise transfer title in or dispose
of  any  of the Intellectual Property Collateral to anyone  else.
Borrower hereby ratifies all that such attorney shall lawfully do
or  cause  to  be done by virtue hereof. This power  of  attorney
shall   be  irrevocable  until  this  Agreement  shall  terminate
pursuant to the terms herein.

     13.  If Borrower fails to comply with any of its obligations
hereunder, Lender may perform such obligations in Borrower's name
or  in  Lender's  name, but at Borrower's expense,  and  Borrower
hereby  agrees  to  reimburse Lender in full  for  all  expenses,
including  reasonable  attorneys' fees,  incurred  by  Lender  in
protecting,  defending and maintaining any  of  the  Intellectual
Property Collateral.

      14.   This Agreement is supplemental to the Loan Agreement,
and  in no event shall this Agreement, or the recordation of this
Agreement or any other documents in connection herewith with  the
United  States  Patent and Trademark Office,  the  United  States
Copyright  Office, or any other government or  public  office  or
agency  of  the  United States of America,  adversely  effect  or
impair,  in  any way or to any extent, the other Loan  Documents,
and  the security interest of Lender in the Collateral (including
the  Intellectual Property Collateral) pursuant to the other Loan
Documents. Any and all rights and interests of Lender in  and  to
the Intellectual Property Collateral (and any and all obligations
of Borrower with respect to the Intellectual Property Collateral)
provided  herein, or arising hereunder or in connection herewith,
shall  only supplement and be cumulative and in addition  to  the
rights  and interests of Lender (and the obligations of Borrower)
in, to, or with respect to the Collateral (including Intellectual
Property  Collateral)  provided  in  or  arising  under   or   in
connection with the other Loan  Documents.

      15.  No course of dealing between Borrower and Lender,  nor
any failure to exercise, nor any delay in exercising, on the part
of  Lender, any right, power or privilege hereunder or under  the
Loan  Agreement shall operate as a waiver thereof; nor shall  any
single  or  partial  exercise of any right,  power  or  privilege
hereunder  or  thereunder preclude any other or further  exercise
thereof or the exercise of any other right, power or privilege.

     16.  All of Lender's rights and remedies with respect to any
of  the  Intellectual  Property Collateral,  whether  established
hereby or by the Loan Agreement, or by any other agreements or by
law  shall  be  cumulative  and may be  exercised  singularly  or
concurrently.

      17.   Notices  that are required to be delivered  hereunder
shall  be sufficient if in writing and sent to the addresses  set
forth  in  the Loan Agreement, in the manner and within the  time
specified in the Loan Agreement.

      18.  The provisions of this Agreement are severable, and if
any  clause  or provision shall be held invalid and unenforceable
in  whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect only such clause or  provision,  or
part  thereof, in such jurisdiction, and shall not in any  manner
affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.

      19.   This Agreement is subject to modification only  by  a
writing signed by the parties, except as provided in Section 7.

      20.  The benefits and burdens of this Agreement shall inure
to  the  benefit of and be binding upon the respective successors
and permitted assigns of the parties.

      21.  The validity and interpretation of this Agreement  and
the  rights  and obligations of the parties shall be governed  by
the  laws  of  the  State of Rhode Island, without  reference  to
applicable conflict of law principles.

     22.   This  Agreement  may  be executed  in  one  or  more
counterparts, each of which when executed shall be deemed to be
an  original  but all of which taken together shall  constitute
one  and the same agreement. The parties hereby acknowledge and
agree  that  facsimile signatures of this Agreement shall  have
the same force and effect as original signatures.

                [Signatures on Following Page]

<PAGE>

      IN  WITNESS  WHEREOF, the undersigned have  executed  and
delivered this Agreement as of the date set forth above.

ATTEST                           BORROWER:

                                 GALAXY NUTRITIONAL FOODS, INC.

/s/ LeAnn Hitchcock              By: /s/ Christopher J. New

Name: LeAnn Hitchcock            Name: Christopher J. New

[CORPORATE SEAL]                 Title: Chief Executive Officer

                                 LENDER:

                                 TEXTRON FINANCIAL CORPORATION

                                 By:
                                 _______________________________
                                 Name:  ________________________
                                 Title:  _______________________

                          SCHEDULE A
               Intellectual Property Collateral

(A)  TRADEMARKS/SERVICEMARKS

     GCC = Galaxy Cheese Company
     GFC = Galaxy Food Company
     GNF = Galaxy Nutritional Foods
     FMC = Finova Mezzanine Capital
                         REGISTRATIONS

TRADEMARK          COUNTRY    REGISTRATION REGISTRATION  CLAS
Owner                         DATE         NUMBER        S
Security Interest
Formagg            United     04/03/84     1272946       29
O = GCC            States
SI = FMC

Formagg            Canada     03/01/85     TMA300386     29
O = GFC

Formagg            France     06/07/1984   1275120       29
O = GCC

Formagg            Japan      08/31/94     2691896       31
O = GCC

Formagg            United     02/25/87     B1217447      29
O = GCC            Kingdom

Galaxy Nutritional United     06/11/02     2577980       29
Foods              States
O = GNF
SI = FMC

Galaxy Nutritional United     04/29/02     2560390       40
Foods              States
O = GNF
SI = FMC

G and Design       United     02/01/00     2314619       40
O = GFC            States
SI = FMC

Labella's and      United     10/09/84     1299683       29
Design             States
O = GCC
SI = FMC
Lite Bakery        United     10/07/97     2102820       30
O = GFC            States
SI = FMC
                          SCHEDULE A
               INTELLECTUAL PROPERTY COLLATERAL
                           (cont'd)

The Lite Bakery    United     10/21/97     2106432       30
and Design         States
O = GFC
SI = FMC

Lite & Less and    United     04/18/00     2343029       29
Design             States
O = GFC
SI = FMC

Pizza and Dessert  United     09/18/98     2189242       35
that Doesn't Hurt  States
O = GFC
SI = FMC

Soyco              Australi   11/12/01     894748        29
                   a
Soyco              United     01/12/93     1745941       29
O = GFC            States
SI = FMC

Soyco and Design   United     08/17/93     1788315       29
O = GFC            States
SI = FMC

Soymage            United     01/05/96     1744693       29
O = GFC            States
SI = FMC

Soy Singles        United     06/24/97     2074712       29
O = GFC            States
SI = FMC

Veggie Nature's    Australi   11/12/01     894749        29
Alternative to     a
Milk
O = GNF

Veggie Nature's    United     12/17/02     2662329       29
Alternative to     States
Milk & Design
O = GNF

Veggy Singles      United     06/03/97     2068151       29
O = GFC            States
SI = FMC

Veggie Slices      Australi   11/12/01     894750        29
O = GNF            a
                          SCHEDULE A
               INTELLECTUAL PROPERTY COLLATERAL
                           (cont'd)

Veggie Slices      United     10/29/02     2641674       29
O = GFC            States

Veggie Slices &    Japan      02/21/03     4646851       29
Design
O = GNF
Veggie Slices      Japan      02/21/03     4644850       29
Nature's
Alternative to
Cheese & Design
O = GNF

Wholesome Valley   United     02/01/00     2314726       29
O = GFC            States
SI = FMC

                         APPLICATIONS

TRADEMARK          COUNTRY   APPLICATION   APPLICATION  CLASS
                             DATE          NUMBER

Galaxy Nutritional Australi  11/12/01      894747       29
Foods              a
O = GNF

Galaxy Nutritional United    02/01/01      76/204595    35
Foods              States
O = GNF
SI = FMC

Galaxy Nutritional United    02/19/03      76/491198    29
Foods              States
O = GNF

Galaxy Nutritional United    02/19/03      76/491197    29
Foods              States
O = GNF

Galaxy Nutritional United    02/18/03      76/491199    29
Foods and Design   States
O = GNF

Galaxy Nutritional United    02/19/03      76/491272    40
Foods              States
O = GNF

                          SCHEDULE A
               INTELLECTUAL PROPERTY COLLATERAL
                           (cont'd)

Galaxy Nutritional United    02/07/02      76/367873    29
Foods Veggie       States
O = GNF

G (Stylized        United    02/19/02      76/491273    40
Design)            States
O = GNF

G (Stylized        United    02/19/03      76/491274    29
Design)            States
O = GNF

Ultra Smoothie     United    08/29/02      76/445746    32
O = GNF            States

Ultra Smoothie     United    04/01/03      76/506079    29
O = GNF            States

Ultra Smoothie     United    04/01/03      76/502629    29
O = GNF            States

Ultra Smoothie and United    09/04/02      76/446486    32
Design             States
O = GNF

Veggie Slices      Japan     08/23/01      76635/2001   29
O = GNF

Veggie Slices      Japan     08/23/01      76633/2001   29
Nature's
Alternative to
Cheese
O = GNF

Wild Strings       United    09/16/02      76/450007    29
O = GNF            States

B)  PATENTS

     None

C)   COPYRIGHTS

     None

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00052-of-00352.parquet"}]]