-----BEGIN PRIVACY-ENHANCED MESSAGE-----
Proc-Type: 2001,MIC-CLEAR
Originator-Name: webmaster@www.sec.gov
Originator-Key-Asymmetric:
 MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen
 TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB
MIC-Info: RSA-MD5,RSA,
 HIpYXR3VMbe5r6LRlhQbetkanqSGOZEghVLpSdcUQ0zjd+dlfmdZBIyvMPiDYSDI
 knFAKe/D6X50XbZO8R6V2Q==

<SEC-DOCUMENT>0000910680-02-000213.txt : 20020414
<SEC-HEADER>0000910680-02-000213.hdr.sgml : 20020414
ACCESSION NUMBER:		0000910680-02-000213
CONFORMED SUBMISSION TYPE:	10QSB
PUBLIC DOCUMENT COUNT:		5
CONFORMED PERIOD OF REPORT:	20011231
FILED AS OF DATE:		20020214

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			DRYCLEAN USA INC
		CENTRAL INDEX KEY:			0000065312
		STANDARD INDUSTRIAL CLASSIFICATION:	TELEPHONE & TELEGRAPH APPARATUS [3661]
		IRS NUMBER:				112014231
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			0630

	FILING VALUES:
		FORM TYPE:		10QSB
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-14757
		FILM NUMBER:		02549571

	BUSINESS ADDRESS:	
		STREET 1:		290 NE 68 STREET
		CITY:			MIAMI
		STATE:			FL
		ZIP:			33138
		BUSINESS PHONE:		3057544551

	MAIL ADDRESS:	
		STREET 1:		290 NE 68 STREET
		CITY:			MIAMI
		STATE:			FL
		ZIP:			33138

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	METRO TEL CORP
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10QSB
<SEQUENCE>1
<FILENAME>f779647_3.txt
<DESCRIPTION>FORM 10QSB (12/31/01)
<TEXT>
                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   FORM 10-QSB

[X]     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934
        For the quarterly period ended December 31, 2001

        OR

[  ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
        SECURITIES EXCHANGE ACT OF 1934
        For the transition period from               to

        Commission file number 0-9040

                               DRYCLEAN USA, Inc.
        (Exact name of small business issuer as specified in its charter)

                   DELAWARE                                    11-2014231
      (State of other jurisdiction of                      (I.R.S. Employer)
      incorporation or organization)                       Identification No.)

                    290 N.E. 68 Street, Miami, Florida 33138
                    (Address of principal executive offices)

                                 (305) 754-4551
                           (Issuer's telephone number)

                                 Not Applicable
                                  (Former name)

     Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X. No

     State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: Common Stock, $.025 par value
per share - 6,999,610 shares outstanding as of February 8, 2002.


<PAGE>

<TABLE>
<CAPTION>
DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF  INCOME
- -----------------------------------------------------------------------------------------------------------------
                                               For the six months                        For the three months
                                               ended December 31,                        ended December 31,
                                             2001             2000                       2001             2000
                                                  (Unaudited)                                 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S>                                       <C>             <C>                          <C>            <C>
Sales                                     $  7,622,588    $  8,935,979                 $ 3,799,474    $4,361,503
Franchise and license fees,
   commissions and
   other income                                506,522         536,555                     287,190       195,680
                                          ------------    ------------                 -----------    ----------

Total revenues                               8,129,110       9,472,534                   4,086,664     4,557,183

Cost of goods sold                           5,653,454       6,416,091                   2,662,132     3,162,964
Selling, general and
   administrative expenses                   2,188,989       2,370,839                   1,091,467     1,205,317
Research and development                        34,422          59,522                      13,136        32,850
                                          ------------    ------------                 -----------    ----------
Total operating expenses                     7,876,865       8,846,452                   3,766,735     4,401,131

        Operating income                       252,245         626,082                     319,929       156,052

Other income (expenses)
  Interest income                                5,780          19,942                       1,666         6,190
  Interest expense                             (33,982)        (75,343)                    (14,386)      (37,043)
                                          ------------    ------------                 -----------    ----------
         Total                                 (28,202)        (55,401)                    (12,720)      (30,853)

Earnings before taxes                          224,043         570,681                     307,209       125,199
Provision for income
   taxes                                        89,617         228,272                     122,883        50,080
                                          ------------    ------------                 -----------    ----------

         Net earnings                     $    134,426    $    342,409                 $   184,326    $   75,119
=================================================================================================================
Basic earnings per share                  $        .02    $        .05                 $       .03    $      .01
Diluted earnings per share                $        .02    $        .05                 $       .03    $      .01

Weighted average number
  of shares outstanding
        Basic                                7,000,777       7,001,250                  7,000,303      7,001,250
        Diluted                              7,000,777       7,210,908                  7,000,303      7,157,213
=================================================================================================================
</TABLE>

            See Notes to Condensed Consolidated Financial Statements


                                       2
<PAGE>

<TABLE>
DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

                                                    December 31, 2001             June 30, 2001
                                                    -----------------             -------------
                                                       (Unaudited)
ASSETS
- ------

CURRENT ASSETS
<S>                                                   <C>                           <C>
Cash and cash equivalents                               $   291,796                   $  375,912
Accounts and notes receivable, net                        1,846,003                    2,122,493
Inventories                                               4,179,286                    4,373,519
Current portion of lease receivables                         35,336                       39,494
Refundable income taxes                                                                  257,363
Deferred income taxes                                        69,337                       69,337
Prepaid expenses and other                                  189,471                      190,548
                                                        -----------                   ----------
                        Total current assets              6,611,229                    7,428,666

Lease receivables due after one year                          9,413                        5,238

Equipment and improvements- net of
  accumulated depreciation and
  amortization                                              386,186                      329,511

Franchise, trademarks and other
   intangible assets, net                                   535,063                      551,718
Deferred tax asset                                           12,786                       12,786
                                                        -----------                   ----------

                                                         $7,554,677                   $8,327,919
                                                        ===========                   ==========

</TABLE>

            See Notes to Condensed Consolidated Financial Statements


                                       3
<PAGE>

<TABLE>
<CAPTION>
DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED BALANCE SHEETS

                                                     December 31, 2001             June 30, 2001
                                                     -----------------             -------------
                                                        (Unaudited)
LIABILITIES AND
SHAREHOLDERS' EQUITY

<S>                                                   <C>                             <C>
CURRENT LIABILITIES
Accounts payable and accrued
    expenses                                            $   819,516                   $ 1,474,733
Current portion of bank loan                                320,000                     1,160,000
Line of credit                                                4,306
Customer deposits                                           483,826                       573,298
Income taxes payable                                         33,555
                                                        -----------                   -----------
            Total current liabilities                     1,661,203                     3,208,031

Long term bank loan less current portion                    640,000
                                                        -----------                   -----------

            Total liabilities                             2,301,203                     3,208,031

SHAREHOLDERS' EQUITY
Common stock, $.025 par value;
  15,000,000 shares authorized;
  7,027,500 shares issued and
  outstanding at December 31, 2001 and
  June 30, 2001, respectively, including
  27,890 and 26,250 shares held in treasury
  at December 31, 2001 and June 30, 2001,
  respectively                                              175,688                       175,688
Additional paid-in capital                                2,047,730                     2,048,570
Retained earnings                                         3,030,056                     2,895,630
                                                        -----------                   -----------

Total shareholders' equity                                5,253,474                     5,119,888

                                                        $ 7,554,677                    $8,327,919
                                                        ===========                    ==========

</TABLE>


            See Notes to Condensed Consolidated Financial Statements


                                       4
<PAGE>

<TABLE>
<CAPTION>
DRYCLEAN USA, Inc.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                        Six months ended      Six months ended
                                                                        December 31, 2001     December 31, 2001
                                                                           (Unaudited)           (Unaudited)
                                                                           -----------           -----------
<S>                                                                         <C>                  <C>
Operating activities:
   Net earnings                                                          $   134,426            $   342,409
     Adjustments to reconcile net earnings to net cash
        provided (used) by operating activities:
           Provision for bad debts                                            41,513                172,878
           Depreciation and amortization                                      82,783                 77,791
              Net changes in operating assets and liabilities:
                (Increase) decrease in:
                   Accounts, mortgages and lease receivables                 234,960              (776,494)
                   Inventories                                               194,233              (669,385)
                   Prepaid expenses and other assets                           1,077                61,032
                   Refundable income taxes                                   257,363
                Increase (decrease) in:
                   Accounts payable and accrued expenses                    (655,218)             (238,296)
                   Customer deposits                                         (89,472)              235,558
                   Income taxes payable                                       33,555              (281,944)
                                                                         -----------            -----------
Net cash provided (used) by operating activities                             235,220            (1,076,451)
                                                                         -----------            -----------

Investing activities:
    Capital expenditures                                                    (122,802)              (94,727)
                                                                         -----------            -----------
Net cash used by investing activities                                       (122,802)              (94,727)
                                                                         -----------            -----------

Financing activities
     Payments on term loan                                                  (200,000)             (240,000)
     Borrowings under line of credit                                           4,306               694,503
     Proceeds from exercise of stock options                                                        11,250
     Purchase of treasury stock                                                 (840)
                                                                         -----------            -----------
Net cash (used) provided by financing activities                            (196,534)              465,753
                                                                         -----------            -----------

Net decrease in cash and cash equivalents                                    (84,116)             (705,425)
Cash and cash equivalents at beginning of period                             375,912               982,588
                                                                         -----------            -----------

Cash and cash equivalents at end of period                                 $ 291,796              $277,163
==============================================================================================================

Supplemental information:
      Cash paid for interest                                               $  33,982              $ 75,343
      Cash paid for income taxes                                                                   586,610

</TABLE>

            Notes to the Condensed Consolidated Financial Statements


                                       5
<PAGE>



                                DRYCLEAN USA Inc.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note (1) - General: The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial statements and the instructions to Form 10-QSB
related to interim period financial statements. Accordingly, these condensed
consolidated financial statements do not include certain information and
footnotes required by generally accepted accounting principles for complete
financial statements. However, the accompanying unaudited condensed consolidated
financial statements contain all adjustments (consisting only of normal
recurring accruals) which, in the opinion of management, are necessary in order
to make the financial statements not misleading. The results of operations for
interim periods are not necessarily indicative of the results to be expected for
the full year. For further information, refer to the Company's financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-KSB for the year ended June 30, 2001. The June 30, 2001 balance sheet
information contained herein was derived from the audited consolidated financial
statements included in the Company's Annual Report on Form 10-KSB as of that
date.

Note (2) - New Accounting Pronouncements: In June 2001, the Financial Accounting
Standard Board issued FASB Statements No. 141, Business Combinations (SFAS 141),
and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires
the use of the purchase method of accounting for business combinations initiated
after June 30, 2001. SFAS 141 also requires that the Company recognize acquired
intangible assets apart from goodwill if the acquired intangible assets meet
certain criteria. SFAS 141 applies to all business combinations initiated after
June 30, 2001 and for purchase business combinations completed on or after July
1, 2001. It also requires, upon adoption of SFAS 142, that the Company
reclassify the carrying amounts of intangible assets and goodwill based on the
criteria in SFAS 141.

SFAS No. 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142. The Company's previous
business combinations were accounted for using the purchase method. As of
December 31, 2001, the net carrying amount of other intangible assets was


                                       6
<PAGE>

$535,063. Amortization expense during the six months ended December 31, 2001 and
2000 was $38,556 and $47,174, respectively, and during the three months ended
December 31, 2001 and 2000 was $19,523 and $25,753, respectively. There was no
goodwill at December 31, 2001. Currently, the Company is assessing but has not
yet determined how the adoption of SFAS 141 and SFAS 142 will impact its
financial position and results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). This Statement also amends ARB No. 51,
Consolidated Financial Statements, to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
this Statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. The provisions of this Statement generally are to be applied
prospectively. Currently, the Company is assessing but has not yet determined
how the adoption of SFAS No. 144 will impact its financial position and results
of operations.

Note (3) - Segment Information: The Company's reportable segments are strategic
businesses that offer different products and services. They are managed
separately because each business requires different technology and marketing
strategies. The Company primarily evaluates the operating performance of its
segments based on the categories noted in the table below. The Company has no
sales between segments.



                                       7
<PAGE>

Note (3) continued

Financial information for the Company's business segments is as follows:

<TABLE>
<CAPTION>
                                                    For the six months                      For the three months
                                                    ended December 31,                      ended December 31,
                                                  2001                  2000               2001               2000
                                                            (Unaudited)                           (Unaudited)
- ------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>               <C>                    <C>              <C>
Revenues:
    Commercial and industrial laundry
      and dry cleaning equipment                $   6,830,921     $  7,711,508           $3,383,177       $ 3,908,420

    Manufacturing and sales of
       telephone test equipment                     1,119,422        1,455,369              609,139           547,825
- ------------------------------------------------------------------------------------------------------------------------

    License and franchise operations                  178,767          305,657               94,348           100,938
- ------------------------------------------------------------------------------------------------------------------------
Total revenues                                  $   8,129,110     $  9,472,534           $4,086,664       $ 4,557,183
========================================================================================================================
Operating income (loss)
    Commercial and industrial laundry
       and dry cleaning equipment               $     208,676     $    534,698           $  252,544       $   274,391

    Manufacturing and sales of
         telephone test equipment                     (55,919)        (132,313)              25,290          (165,156)

      License and franchise operations                 99,488          223,697               42,095            46,817
- ------------------------------------------------------------------------------------------------------------------------
Total operating income                          $     252,245     $    626,082           $  319,929       $   156,052
========================================================================================================================

                                                              December 31, 2001              June 30, 2001
                                                                 (Unaudited)
Identifiable assets:
      Commercial and industrial
         laundry and dry cleaning equipment                     $  4,661,119                  $  5,076,391

      Manufacturing and sales of
         telephone test equipment                                  2,116,440                     2,452,098
      License and franchise operations                               777,118                       799,430
- ------------------------------------------------------------------------------------------------------------------------
Total assets                                                    $  7,554,677                  $  8,327,919
========================================================================================================================
</TABLE>

Note (4) - Credit Agreement: In December 2001, the Company entered into a bank
loan agreement to replace its existing bank credit facility. The new facility
consists of a term loan of $960,000 and a revolving credit facility of
$2,225,000, including a $1,000,000 letter of credit subfacility and $250,000
foreign exchange subfacility. Revolving credit borrowings are limited by a
borrowing base of 60% of eligible accounts receivable and 60% of certain, and
50% of other, eligible inventories. Borrowings under the term loan facility and
revolving credit facility bear interest at 2.65% and 2.50% per annum,
respectively, above the Adjusted LIBOR Market Index Rate (1.87% at December 31,
2001), are guaranteed by all of the Company's subsidiaries and are
collateralized by substantially all of the Company's and its subsidiaries'
assets. In connection with entering into the new credit facility, the Company
paid, among other things, a commitment fee of


                                       8
<PAGE>

$5,000 and various transaction costs. The term loan is repayable in equal
monthly installments of $26,667 through December 31, 2004. The line of credit
matures October 30, 2002. At December 31, 2001, there was $4,306 outstanding
under the line of credit. At December 31, 2000, there were no outstanding
borrowings under the Company's predecessor line of credit. The loan agreement
requires maintenance of certain financial ratios and contains other restrictive
covenants. The loan agreement also contains limitations on the extent to which
the Company and its subsidiaries may incur additional indebtedness, guarantee
indebtedness of others, grant liens, sell assets and make investments.



                                       9
<PAGE>

            MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Liquidity and Capital Resources
- -------------------------------

For the six months ended December 31, 2001, cash decreased by $84,116 compared
to a decrease of $705,425 for the six month period ended December 31, 2000.

For the first half of fiscal 2002, operating activities provided cash of
$235,220. Of this amount, $134,426 was provided by net earnings and $82,783 and
$41,513 was provided by non cash expenses for depreciation and amortization and
a provision for bad debts, respectively. Additional cash was provided by a
decrease in accounts, mortgages and lease receivables ($234,960), inventories
($194,233), prepaid expenses ($1,077) and the return of income taxes ($257,363)
along with an increase in income tax payable ($33,555). The cash generated was
partially used to decrease accounts payable and accrued expenses ($655,218) and
decrease customer's deposits ($89,472).

For the first six months of fiscal 2001, operating activities used cash of
$1,076,451, principally to support an increase in accounts, mortgages and lease
receivables ($776,494) and inventories ($669,385) and to reduce accounts payable
and accrued expenses ($238,296) and income taxes payable ($281,944). These uses
were partially offset by the Company's net income of $342,409, non-cash expenses
of $77,791 for depreciation and amortization and a provision for bad debts of
$172,878. Additional cash was provided by an increase in customer's deposits
($235,558) and a decrease in prepaid expenses ($61,032).

Net cash used in investing activities during the first half of fiscal 2002 was
$122,802, principally to purchase equipment ($107,344) and to fund patent work
($15,458). During the six month period ended December 31, 2000, investing
activities used cash of $94,727 to purchase equipment.

Financing activities for the first six months of fiscal 2002 used cash of
$196,534, principally to pay monthly installments on the Company's term loan
($200,000) and to purchase treasury stock ($840) under the Company's stock
repurchase plan authorized by the Board of Directors in fiscal 2001, partially
offset by cash of $4,306 provided by borrowings under the Company's line of
credit. During the same period of fiscal 2001, financing activities provided
cash of $465,753, principally due to the borrowing of $694,503 under the
Company's line of credit and $11,250 from the exercise of stock options. This
was partially offset by monthly installment payments on the Company's term loan
($240,000).

In December 2001, the Company entered into a bank loan agreement to replace its
existing bank credit facility. The new facility consists of a term loan of
$960,000 and a revolving credit facility of $2,225,000, including a $1,000,000
letter of credit subfacility and $250,000 foreign exchange subfacility.
Revolving credit borrowings are limited by a borrowing base of 60% of eligible
accounts receivable and 60% of certain, and 50% of


                                       10
<PAGE>

other, eligible inventories. Borrowings under the term loan facility and
revolving credit facility bear interest at 2.65% and 2.50% per annum,
respectively, above the Adjusted LIBOR Market Index Rate (1.87% at December 31,
2001), are guaranteed by all of the Company's subsidiaries and are
collateralized by substantially all of the Company's and its subsidiaries'
assets. The term loan is repayable in equal monthly installments of $26,667
through December 31, 2004. The line of credit matures October 30, 2002. The loan
agreement also contains limitations on the extent to which the Company and its
subsidiaries may incur additional indebtedness, guarantee indebtedness of
others, grant liens, sell assets and make investments.

The Company believes that its present cash, cash it expects to generate from
operations and cash borrowings available under its $2,250,000 line of credit
will be sufficient to meet its operational needs.

Results of Operations
- ---------------------

Total revenues for the six and three month periods ended December 31, 2001
decreased by $1,343,424 (14.2%) and $470,519 (10.3%), respectively, from the
same periods of fiscal 2001. For the six month period, revenues of the
commercial laundry and dry cleaning segment decreased by $880,587 (11.4%) from
the same six month fiscal 2001 period due to a reduction in sales of most
categories of equipment due to the effects of the downturn in the economy on
hotels and cruise lines, which are significant customers of this segment. For
the three month period, revenues of this segment decreased by $525,243 (13.4%)
from the comparable prior year three month period. Although sales of laundry and
dry cleaning machines also declined during this period, they were partially
offset by revenues from a subsidiary of the Company established in fiscal 2001
to develop new turn-key dry cleaning establishments for resale to third parties.
The Company's license and franchise segment experienced a decrease in revenue of
$126,890 (41.5%) and $6,590 (6.5%) for the six month and three month periods,
respectively, as a result of the opening of a fewer number of licensed and
franchised units. Sales of the Company's telecommunications segment decreased by
$335,947 (23.1%) for the six month period but increased by $61,314 (11.2%) for
the three month period ended December 31, 2001. The decrease for the six month
period was principally due to the general downturn in the telecommunications
market. The gain in the three month period is attributable to sales to certain
telephone operating companies who, unlike in fiscal 2001, had not yet fully
utilized their full year budgets. Sales of telecommunications test equipment for
the third quarter have so far been below expectations and may not improve until
the general telecommunications markets improve.

Cost of goods sold, expressed as a percentage of net sales, increased to 74.2%
for the six month period of fiscal 2002 from 71.8% for the comparable period of
a year ago. The increase was mostly due to the reduction in sales in the
telecommunications segment which affected the segment's ability to absorb fixed
expenses. In addition, the laundry and dry cleaning segment had a lower margin
mix of sales. For the current year three month period, cost of goods sold
decreased to 70.1% from 72.5% of net sales from the


                                       11
<PAGE>

same period of a year ago. This improvement was attributable principally to an
increase in sales, coupled with a reduction in direct labor costs, in the
telecommunication segment. In addition, laundry and dry cleaning sales for the
period included sales of the segment's new environmentally safe GreenJet(TM)
dry-wet cleaning machine which carries a higher gross profit margin.

Selling, general and administrative expenses decreased by $181,850 (7.7%) and
$113,850 (9.4%) for the six and three month periods, respectively, in fiscal
2002 from the comparable periods of fiscal 2001. The decrease for both periods
was due primarily to a substantial reduction in selling and administrative
expenses in the telecommunications segment as that segment was restructured to
offset reductions in sales. This category of expenses remained relatively flat
in the laundry and dry cleaning segment.

Research and development expenses decreased by $25,100 (42.2%) and $19,714
(60.0%) for the six and three month periods, respectively, in fiscal 2002 from
the comparable periods of fiscal 2001. The reduction for both periods was
principally attributable to a reduction in engineering staff at the
telecommunication segment, which offset start-up research and development
expenses in the laundry and dry cleaning segment associated with the segment's
new environmentally safe GreenJet(TM) dry-wet cleaning machine. The expenses for
research and development in fiscal 2001 were solely related to the
telecommunications segment.

Interest income decreased by $14,162 (71.0%) and $4,524 (73.1%) for the six and
three month periods, respectively, of fiscal 2002 from the comparable periods of
fiscal 2001, as a result of fewer outstanding customer leases of laundry and dry
cleaning equipment and a reduction in interest earned on daily bank balances due
to lower average cash balances on hand and lower interest rates.

Interest expense decreased by $41,361 (54.9%) and $22,657 (61.2%) for the six
and three month periods, respectively, in fiscal 2002 from the same periods of
fiscal 2001, mostly due to a reduction in outstanding debt and reduced interest
rates, partially offset by periodic borrowings under the Company's line of
credit.

The effective tax rate used in each of the periods was 40%.

Inflation has not had a significant effect on the Company's operations during
the reported periods.

New Accounting Pronouncements
- -----------------------------

In June 2001, the Financial Accounting Standard Board issued FASB Statements No.
141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other
Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method
of accounting for business combinations initiated after June 30, 2001. SFAS 141
also requires that the Company recognize acquired intangible assets apart from
goodwill if the acquired


                                       12
<PAGE>

intangible assets meet certain criteria. SFAS 141 applies to all business
combinations initiated after June 30, 2001 and for purchase business
combinations completed on or after July 1, 2001. It also requires, upon adoption
of SFAS 142, that the Company reclassify the carrying amounts of intangible
assets and goodwill based on the criteria in SFAS 141.

SFAS No. 142 requires, among other things, that companies no longer amortize
goodwill, but instead test goodwill for impairment at least annually. In
addition, SFAS 142 requires that the Company identify reporting units for the
purposes of assessing potential future impairments of goodwill, reassess the
useful lives of other existing recognized intangible assets, and cease
amortization of intangible assets with an indefinite useful life. An intangible
asset with an indefinite useful life should be tested for impairment in
accordance with the guidance in SFAS 142. SFAS 142 is required to be applied in
fiscal years beginning after December 15, 2001 to all goodwill and other
intangible assets recognized at that date, regardless of when those assets were
initially recognized. SFAS 142 requires the Company to complete a transitional
goodwill impairment test six months from the date of adoption. The Company is
also required to reassess the useful lives of other intangible assets within the
first interim quarter after adoption of SFAS 142. The Company's previous
business combinations were accounted for using the purchase method. As of
December 31, 2001, the net carrying amount of other intangible assets was
$535,063. Amortization expense during the six months ended December 31, 2001 and
2000 was $38,556 and $47,174, respectively, and during the three months ended
December 31, 2001 and 2000 was $19,523 and $25,753, respectively. There was no
goodwill at December 31, 2001. Currently, the Company is assessing but has not
yet determined how the adoption of SFAS 141 and SFAS 142 will impact its
financial position and results of operations.

In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. This Statement addresses financial accounting and
reporting for the impairment or disposal of long-lived assets. This Statement
supersedes FASB Statement No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed Of, and the accounting and
reporting provisions of APB Opinion No. 30, Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions, for the disposal of a segment of a business (as
previously defined in that Opinion). This Statement also amends ARB No. 51,
Consolidated Financial Statements, to eliminate the exception to consolidation
for a subsidiary for which control is likely to be temporary. The provisions of
this Statement are effective for financial statements issued for fiscal years
beginning after December 15, 2001, and interim periods within those fiscal
years. The provisions of this Statement generally are to be applied
prospectively. Currently, the Company is assessing but has not yet determined
how the adoption of SFAS No. 144 will impact its financial position and results
of operations.



                                       13
<PAGE>

Forward Looking Statements
- --------------------------

     Certain statements in this Report are "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995.
Forward-looking

statements are subject to a number of known and unknown risks and uncertainties
that may cause actual results, trends, performance or achievements of the
Company, or industry trends and results, to differ materially from the future
results, trends, performance or achievements expressed or implied by such
forward-looking statements. Such risks and uncertainties include, among others:
general economic and business conditions, as well as industry conditions and
trends, including supply and demand; changes in business strategies or
development plans; the availability, terms and deployment of debt and equity
capital; technology changes; competition and other factors which may affect
prices which the Company may charge for its products and its profit margins; the
availability and cost of the equipment and raw materials purchased by the
Company; relative values of the United States currency to currencies in the
countries in which the Company's customers, suppliers and competitors are
located; availability of qualified personnel; changes in, or the failure to
comply with, government regulation, principally environmental regulations; and
the Company's ability to successfully introduce, market and sell at acceptable
profit margins its new Green Jet(TM) dry cleaning machines. These and certain
other factors are discussed in this Report and from time to time in other
Company reports filed with the Securities and Exchange Commission. The Company
does not assume an obligation to update the factors discussed in this Report or
such other reports.


                                       14
<PAGE>

                                     PART II
                                OTHER INFORMATION


Item 2.       Changes in Securities.
- -------       ----------------------

The  following  is a brief  discussion  of the  Company's  new Loan and Security
Agreement,  dated as of  December  19, 2001 (the "Loan  Agreement"),  with First
Union National Bank (the "Bank"),  the Term Note and the Revolving  Credit Note,
each dated as of December 31, 2001, issued thereunder by the Company in favor of
the Bank and the Guaranty and Security Agreement, dated as of December 19, 2001,
by Steiner-Atlantic  Corp.,  Steiner-Atlantic  Brokerage Company, Inc., DRYCLEAN
USA Development Corp. and DRYCLEAN USA License Corp.,  wholly-owned subsidiaries
of the  Company,  in favor of the Bank,  which are  annexed  hereto as  Exhibits
4.1(a) and 4.1(b),  4.1(c) and 4.1(d),  respectively.  The  discussion  below is
qualified in its entirety by reference to those exhibits.

On December 19, 2001,  the Company  entered into the Loan Agreement to refinance
the  remaining  principal  balance of $960,000 on the then existing term loan of
its wholly-owned subsidiary,  Steiner-Atlantic Corp. ("Steiner"),  from the Bank
which was due in  January  2002,  and to provide a new line of credit to replace
Steiner's  line of credit with the Bank which matured on December 31, 2001.  The
former  term loan and line of credit (as well as any other  indebtedness  of the
Company  or any of its  affiliates)  had  been  guaranteed  by the  Company  and
collateralized  by  substantially  all of Steiner's  and the  Company's  assets,
excluding real estate.

The  Company's new term loan  provided  under the Loan  Agreement of $960,000 is
payable in 36 equal  monthly  installments  of $26,667  beginning on January 31,
2002. The outstanding  principal balance of term loans bears interest at the one
month LIBOR Market Index Rate plus 2.65% per annum.

The new line of revolving  credit provided under the Loan Agreement  enables the
Company to request  borrowings from the Bank of up to $2,250,000  outstanding at
any one time,  on a demand loan basis,  until  October 30, 2002.  The  revolving
credit facility includes a $250,000 foreign exchange subfacility for the purpose
of enabling the Company to hedge currency exposure in connection with its import
activities  through spot foreign exchange and forward  exchange  contracts and a
$1,000,000 letter of credit  subfacility.  Revolving credit loans outstanding at
any one time are  limited  by a  borrowing  base  equal to the sum of (i) 60% of
eligible accounts  receivable (as defined),  plus (ii) 50% of eligible inventory
(as defined) consisting of spare parts, plus (iii) 60% of eligible inventory (as
defined) consisting of equipment, less any outstanding letters of credit and the
value of any outstanding forward and spot transactions.  Outstanding  borrowings
under the revolving  credit facility bear interest at the one month LIBOR Market
Index Rate plus 2.50% per annum.



                                       15
<PAGE>

In connection  with entering into the Loan  Agreement,  the Company paid,  among
other things, a commitment fee of $5,000 and various transaction costs.

The  obligations of the Company and its affiliates to the Bank,  whether arising
under  the  Loan  Agreement  or  otherwise,  are  guaranteed  by  the  Company's
subsidiaries  and are  collateralized  by  substantially  all present and future
assets of the Company and its subsidiaries, excluding real estate.

The Loan Agreement requires,  among other things, the Company to maintain,  on a
consolidated  basis:  (a) a ratio  of (i) the  sum of (1) the  consolidated  net
income  after  tax  for  the  applicable  fiscal  year,  plus  (2)  consolidated
depreciation and amortization for the applicable fiscal year, less (3) dividends
declared  or paid by the  Company  during  the  applicable  fiscal  year to (ii)
current maturities of long-term debt, including capitalized leases but excluding
outstanding  loans  under  the  revolving  credit  facility  at  the  end of the
applicable  fiscal  year,  of at least 1.0 to 1.0 at June 30,  2002 and at least
1.25 to 1.0 at the end of each fiscal year of the Company thereafter;  and (b) a
ratio of consolidated  total  liabilities (as defined) to consolidated  tangible
net worth (as defined) of at least 2.0 to 1.0 at all times. The Company's fiscal
year ends on June 30. The Company may declare or pay dividends or  distributions
and may redeem or otherwise  acquire any stock or other equity interests only to
the extent that such payments would not reasonably likely result in a failure to
maintain such ratios. The Loan Agreement also contains limitations on the extent
to which the Company and its  subsidiaries  may incur  additional  indebtedness,
guarantee indebtedness of others, grant liens, sell assets and make investments.

Item 6.       Exhibits and Reports on Form 8-K.
- -------       ---------------------------------

(a)    Exhibits

         4.1(a)  Loan and Security Agreement, dated as of December 19, 2001,
                 from the Company in favor of First Union National Bank.

         4.1(b)  Term Note, dated as of December 19, 2001, from the Company in
                 favor of First Union National Bank.

         4.1(c)  Revolving Credit Note, dated as of December 19, 2001, from
                 the Company in favor of First Union National Bank.

         4.1(d)  Guaranty and Security Agreement, dated as of December 19, 2001,
                 from the Company in favor of First Union National Bank.

(b)    Reports on Form 8-K

         No Reports on Form 8-K were filed during the quarter covered by this
         Report.




                                       16
<PAGE>

                                   SIGNATURES

In accordance with the  requirements of the Exchange Act, the registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


Date: February 14, 2002                       DRYCLEAN USA, Inc.


                                              By: /s/ Venerando J. Indelicato
                                                  ------------------------------
                                                  Venerando J. Indelicato,
                                                  Treasurer and Chief Financial
                                                     Officer



                                       17
<PAGE>

                                  EXHIBIT INDEX
                                  -------------

Exhibit
Number        Description
- ------        -----------


4.1(a)        Loan and Security Agreement, dated as of December 19, 2001,
              from the Company in favor of First Union National Bank.

4.1(b)        Term Note, dated as of December 19, 2001, from the Company in
              favor of First Union National Bank.

4.1(c)        Revolving Credit Note, dated as of December 19, 2001, from
              the Company in favor of First Union National Bank.

4.1(d)        Guaranty and Security Agreement, dated as of December 19, 2001,
              from the Company in favor of First Union National Bank.




                                       18

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>3
<FILENAME>d778867_1.txt
<DESCRIPTION>EXH. 4.1(A) LOAN AND SECURITY AGREEMENT
<TEXT>










                           LOAN AND SECURITY AGREEMENT


                                     BETWEEN


                               DRYCLEAN USA, INC.


                                  ("BORROWER")



                                       AND



                            FIRST UNION NATIONAL BANK


                                   ("LENDER")





                          DATED AS OF DECEMBER 19, 2001



<PAGE>

<TABLE>
<CAPTION>


                                                 TABLE OF CONTENTS

                                                                                               PAGE
<S>      <C>                                                                                     <C>
1.       Definitions; Financial and Other Terms...................................................1
         1.1.        Definitions..................................................................1
         1.2.        Financial Terms..............................................................8
         1.3.        Other Terms..................................................................8
2.       Representations and Warranties...........................................................8
         2.1.        Valid Existence and Power....................................................8
         2.2.        Authority....................................................................8
         2.3.        Condition....................................................................8
         2.4.        Financial Statements.........................................................9
         2.5.        Litigation; Government Regulation............................................9
         2.6.        Agreements, Etc..............................................................9
         2.7.        Authorizations...............................................................9
         2.8.        Title; Collateral............................................................9
         2.9.        Location and Names...........................................................9
         2.10.       Taxes.......................................................................10
         2.11.       Labor Law Matters...........................................................10
         2.12.       Accounts....................................................................10
         2.13.       Use and Location of Collateral..............................................10
         2.14.       Judgment Liens..............................................................10
         2.15.       Intent and Effect of Transactions; Borrower's Solvency......................10
         2.16.       Subsidiaries................................................................11
         2.17.       Hazardous Materials.........................................................11
         2.18.       ERISA.......................................................................11
         2.19.       Investment Company Act......................................................11
         2.20.       Trade Relations.............................................................11
         2.21.       Maintenance of Business and Properties......................................11
         2.22.       Full Disclosure.............................................................11
3.       Loans...................................................................................12
         3.1.        Advances of Loans...........................................................12
         3.2.        The Notes...................................................................12
         3.3.        Notice and Manner of Borrowing..............................................13
         3.4.        Interest....................................................................13
         3.5.        Repayment of Loans..........................................................13
         3.6.        Costs, Fees and Expenses....................................................13
         3.7.        Prepayments.................................................................13
         3.8.        Payments and Computations...................................................14
         3.9.        Facility for Letters of Credit..............................................14
         3.10.       Facility for Foreign Exchange...............................................16
4.       Conditions Precedent to Borrowing.......................................................17
         4.1.        Advance.....................................................................17
         4.2.        Conditions Precedent to Each Advance of a Loan or
                     Issuance of a Letter of Credit or
                     Purchasing Forward Exchange.................................................19
         4.3.        Waiver of Conditions Precedent..............................................20
5.       Covenants of the Borrower...............................................................20
         5.1.        Use of Loan Proceeds........................................................20
         5.2.        Maintenance of Business and Properties......................................20
         5.3.        Insurance...................................................................20
         5.4.        Notice of Default...........................................................21
         5.5.        Inspections.................................................................21
         5.6.        Financial Information.......................................................21
         5.8.        Liens.......................................................................23

                                                  i
<PAGE>

         5.9.        Redemptions.................................................................23
         5.10.       Merger, Sale, Etc...........................................................23
         5.11.       Loans, Guaranties and Other Investments.....................................23
         5.12.       Change in Business..........................................................23
         5.13.       Accounts....................................................................23
         5.14.       Transactions with Affiliates................................................24
         5.15.       No Change in Name or Offices; Removal of Collateral.........................24
         5.16.       No Sale, Leaseback..........................................................24
         5.17.       Margin Stock................................................................24
         5.18.       Payment of Taxes, Etc.......................................................24
         5.19.       Comply with ERISA...........................................................24
         5.20.       Compliance; Hazardous Materials.............................................24
         5.21.       Subsidiaries................................................................24
         5.22.       Compliance with Assignment Laws.............................................24
         5.23.       Further Assurances..........................................................25
         5.24.       Withholding Taxes...........................................................25
         5.25.       Financial Covenants.........................................................25
         5.26.       Lender Account..............................................................25
         5.27.       Fiscal Year; Accounting Method..............................................25
         5.28.       Default on Other Obligations................................................25
         5.29.       SEC Filing..................................................................25
         5.30.       Compliance with Laws........................................................25
         5.31.       Chattel Paper...............................................................25
6.       Default.................................................................................26
         6.1.        Events of Default...........................................................26
         6.2.        Acceleration of the Indebtedness............................................27
         6.3.        Default Rate................................................................28
         6.4.        Rights and Remedies.........................................................28
         6.5.        Application of Proceeds.....................................................29
         6.6.        Appointment of the Lender as the Borrower's Lawful Attorney.................29
         6.7.        Collections; The Lender's Right to Notify Account Debtors
                        and to Endorse Borrower's Name...........................................29

7.       Security Agreement; Collateral..........................................................30
         7.1.        Security Interest...........................................................30
         7.2.        Inspection of Collateral....................................................30
         7.3.        Other Rights................................................................31
         7.4.        Tangible Collateral; Inventory..............................................31
         7.5.        The Lender's Payment of Claims Asserted Against the Collateral..............31
8.       Term of Agreement.......................................................................31
         8.1.        Term and Right to Terminate.................................................31
         8.2.        Effect of Termination.......................................................32
9.       Miscellaneous...........................................................................32
         9.1.        Rights and Remedies Cumulative; Non-Waiver; Etc.............................32
         9.2.        Survival of Representations; Reinstatement of Indebtedness..................32
         9.3.        Expenses; Indemnification...................................................33
         9.4.        Notices.....................................................................33
         9.5.        Successors and Assigns......................................................34
         9.6.        Counterparts; Construction; Gender..........................................34
         9.7.        Powers......................................................................34
         9.8.        Approvals...................................................................34
         9.9.        Indemnification of the Lender...............................................34
         9.10.       Waivers by the Borrower.....................................................34
         9.11.       Lawful Charges; Late Charge.................................................35
         9.12.       Amendment...................................................................35
         9.13.       Severability................................................................35
         9.14.       Entire Agreement............................................................35
         9.15.       Separate Legal Counsel......................................................35
         9.16.       Right of Setoff.............................................................35
         9.17.       Arbitration; Preservation and Limitation of Remedies........................36
         9.18.       GOVERNING LAW; JURISDICTION AND VENUE; WAIVER OF JURY TRIAL.................36
</TABLE>


                                                ii
<PAGE>


                           LOAN AND SECURITY AGREEMENT


         AGREEMENT, dated as of December 19, 2001, between DRYCLEAN USA, INC., a
Delaware corporation (the "Borrower"), and FIRST UNION NATIONAL BANK, a national
banking association (the "Lender");

                              W I T N E S S E T H:

         WHEREAS,    Steiner-Atlantic   Corporation,   a   Florida   corporation
("Steiner-Atlantic")  and Lender are parties to a Loan and  Security  Agreement,
dated as of November 2, 1998,  pursuant to which Lender has made,  and continues
to make loans to the Borrower (the "Existing Facility");

         WHEREAS,  Steiner-Atlantic  is a  wholly-owned  subsidiary of Borrower,
and, as a condition  precedent  to Lender  providing  the  Existing  Facility to
Steiner  Atlantic,  Lender  required  Borrower  to  guaranty  Steiner-Atlantic's
obligations  under the Existing Facility pursuant to the terms and conditions of
a Guaranty and Security Agreement,  dated November 2, 1998, executed by Borrower
in favor of Lender;

         WHEREAS,  Lender has requested,  and Borrower and Steiner-Atlantic have
agreed,   to   change   the   borrowing   relationship   among   the   Borrower,
Steiner-Atlantic and Lender;

         WHEREAS, as a condition  precedent to so agreeing,  Lender has required
Borrower enter into this Agreement.

         In consideration of the mutual covenants herein contained and to induce
the Lender to extend credit to the Borrower, the parties agree as follows:

         1.      Definitions; Financial and Other Terms.
                 ---------------------------------------

                  1.1.  Definitions.  In addition to the terms defined elsewhere
in this Agreement, the following terms shall have the meanings set forth below:

                  "Accounts" means all accounts,  accounts receivable,  contract
rights, notes, bills, acceptances, choses in action, chattel paper, instruments,
documents, and other forms of obligations at any time owing to a Person, and all
"Accounts," as that term is defined in the Code, the proceeds thereof and all of
such Person's rights with respect to any goods represented  thereby,  whether or
not delivered, goods returned by customers and all rights as an unpaid vendor or
lienor,  including rights of stoppage in transit and of recovering possession by
proceedings  including  replevin  and  reclamation,  together  with all customer
lists,  books and records,  ledger and account  cards,  computer  tapes,  disks,
printouts and records,  whether now in existence or hereafter created,  relating
to Accounts.

                  "Account  Debtor"  means any  Person  who is or who may become
obligated to a Person, under, with respect to, or on account of an Account.

                  "Adjusted LIBOR Market Index Rate (Revolving)" means the LIBOR
Market Index Rate plus two and one-half percent (2.50%) per annum.

                  "Adjusted  LIBOR  Market  Index Rate  (Term)"  means the LIBOR
Market Index Rate plus two and  sixty-five one  hundredths  percent  (2.65%) per
annum.

                  "Advance" means the advance of funds under a Revolving  Credit
Loan.
<PAGE>

                  "Advance  Date"  means  the date a  Revolving  Credit  Loan is
advanced hereunder.

                  "Advance  Request"  means  a  request  for  an  Advance  of  a
Revolving  Credit Loan under  Section 3.3,  substantially  in the form as Lender
shall request.

                  "Affiliate"  of a named Person means (a) any Person  owning 5%
or more of the voting stock or rights of such named Person or of which the named
Person  owns  5% or more  of  such  voting  stock  or  rights;  (b)  any  Person
controlling,  controlled by or under common control with such named Person;  (c)
any  officer or  director of such named  Person or any  Affiliates  of the named
Person;  and (d) any family  member of the named Person or any Affiliate of such
named  Person.  For  the  purposes  of  this  definition,  "control"  means  the
possession,  directly  or  indirectly,  to  direct  or cause  the  direction  of
management and policies of such Person, whether through ownership of securities,
by control or otherwise.

                  "Beneficiary"  means the  person who is the  beneficiary  of a
Letter of Credit.

                  "Borrower Collateral" means all property, assets and rights of
the Borrower (other than real estate), wherever located and whether now owned by
Borrower or hereafter acquired, including, but not limited to all of Borrower's:
(a) Inventory;  (b) General Intangibles;  (c) Accounts and Chattel Paper and any
other instrument or intangible  representing payment for goods or services;  (d)
Equipment; (e) Instruments;  (f) Investment Property; (g) Documents; (h) Deposit
Accounts;  (i) Letter of Credit Rights; (j) General Intangibles;  and (k) parts,
replacements,  additions, accessions,  substitutions,  profits, and products and
cash and non-cash proceeds of any of the foregoing (including insurance proceeds
payable by reason of loss or damage  thereto) in any form and wherever  located.
Borrower Collateral shall include all written or electronically recorded records
relating to any such Borrower Collateral and other rights relating thereto.

                  "Borrowing  Base" means the lesser of (i)  $2,250,000  or (ii)
60% of Eligible  Accounts  plus 50% of Eligible  Inventory  consisting  of spare
parts plus 60% of Eligible Inventory consisting of equipment.

                  "Borrowing   Base   Certificate"   means  the  Borrowing  Base
Certificate  substantially in the form of Exhibit A or such other form as Lender
may request.

                 "Business  Day" means a weekday on which  commercial  banks are
open for business in Miami, Florida.

                  "Chattel  Paper" means all writing or writings  which evidence
both a monetary  obligation and a security  interest in or the lease of specific
goods and in  addition  includes  all  property  included in the  definition  of
"chattel paper" as used in the Code.

                  "Closing Date" means the date first above written.

                  "Code"  means the  Uniform  Commercial  Code,  as in effect in
Florida and in any other  jurisdiction,  as  applicable,  from time to time, and
includes without  limitation Article 9 thereof as currently in effect in Florida
and as the same will be in effect as of January 1, 2002.

                  "Collateral"  means all Borrower  Collateral and all Guarantor
Collateral.

                  "Consolidated  Tangible  Total  Assets" means all assets which
would properly be shown on Borrower's  consolidated  balance sheet in accordance
with  GAAP,  less  the  aggregate


                                       2
<PAGE>

amount of such  assets  which  are  General  Intangibles  or are  classified  as
intangible assets in accordance with GAAP.

                  "Consolidated  Tangible Net Worth" means Consolidated Tangible
Total Assets less Consolidated Total Liabilities.

                  "Consolidated  Total  Liabilities" means all liabilities which
would properly be shown on Borrower's  consolidated  balance sheet in accordance
with GAAP,  except  indebtedness  for borrowed money which is  subordinated in a
manner satisfactory to Lender in its sole discretion.

                  "Debt" means all  liabilities of a Person as determined  under
GAAP and all  obligations  which such Person has  guaranteed  or endorsed or for
which such Person is otherwise secondarily or jointly liable, and shall include,
without  limitation (a) all obligations for borrowed money or purchased  assets,
(b) obligations  secured by assets whether or not any personal liability exists,
(c) the capitalized amount of any capital or finance lease obligations,  (d) the
unfunded portion of pension or benefit plans or other similar  liabilities,  (e)
obligations  as a  general  partner,  (f)  contingent  obligations  pursuant  to
guaranties,  endorsements, letters of credit and other secondary liabilities and
(g) obligations for deposits.

                  "Default"  means any event  which with the  passage of time or
the giving of notice or both would become an Event of Default.

                  "Default  Rate"  means a rate  equal to the  lesser of (a) the
Prime  Rate plus five  percent  per annum or (b) the  highest  rate of  interest
allowed by applicable law.

                  "Eligible Accounts" shall mean all genuine, bona fide Accounts
(valued net of the maximum  amount of any discounts or other  reductions) of the
Borrower arising in the ordinary course of Borrower's business from the sale and
delivery of Inventory or the  rendition of services as to which the Lender has a
first priority  perfected Lien subject only to Permitted Liens,  excluding:  (a)
Accounts  outstanding for 91 days or more from the date of invoice; (b) Accounts
owing from any Affiliate of the Borrower; (c) Accounts owed by a creditor of the
Borrower  or which are in dispute or  subject  to any  counterclaim,  deduction,
contra-account or offset;  (d) Accounts owing by any Account Debtor which is not
Solvent;  (e) Accounts arising from a sale on a bill-and-hold,  guaranteed sale,
sale-or-return,  sale-on-approval,  consignment  or  similar  basis  or which is
subject to repurchase,  return,  rejection,  repossession,  loss or damage;  (f)
Accounts owed by an Account Debtor in the State of Minnesota or the State of New
Jersey  (unless  Borrower has  qualified to do business in such State or filed a
current Notice of Business  Activities report in such State); (g) Accounts as to
which  the goods  giving  rise to the  Account  have not been  delivered  to and
accepted by the Account Debtor or the service giving rise to the Account has not
been  completely  performed or which do not represent a final sale; (h) Accounts
owed by the United States of America  unless the Borrower shall have complied to
the Lender's  satisfaction  with the Federal  Assignment  of Claims Act; (i) the
total  Accounts owed by an Account  Debtor and its  Affiliates  exceeds a credit
limit  established  by the  Lender  in its  discretion  (to the  extent  of such
excess); (j) the Account is evidenced by a note or other instrument, (other than
Chattel  Paper) or  reduced  to  judgment;  (k)  Accounts  which,  by  contract,
subrogation,  mechanics'  lien laws or  otherwise,  are subject to claims by the
Borrower's creditors or other third parties or which are owed by Account Debtors
as to whom any creditor of the Borrower (including any bonding company) has lien
rights;  (l) other Accounts for which the validity,  collectibility or amount of
which is  determined in good faith by the Borrower or the Lender to be doubtful;
(m) any Account  for which there is any  discount,  allowance,  claim,  set-off,
counterclaim or Lien which has not been disclosed in writing to the Lender;  (n)
any Account to the extent it is not for a liquidated  amount;  and (o) any other
Account which the Lender,  upon notice to the Borrower,  deems ineligible in its
sole  credit   judgment.   No  Accounts  shall  be



                                       3
<PAGE>

Eligible Accounts if any representation, warranties or covenants herein relating
thereto shall be inaccurate or violated. Unless the Borrower notifies the Lender
in  writing  to the  contrary,  the  Borrower  shall be  deemed  to have  made a
continuing representation and warranty that each Eligible Account has not become
ineligible.  For the purposes of this  definition,  Borrower  shall also include
Steiner-Atlantic Corporation, a Florida corporation.

                  "Eligible  Inventory" shall mean Inventory created or acquired
in the ordinary course of the Borrower's  business  consisting of finished goods
and raw  materials of the  Borrower as to which the Lender has a first  priority
perfected  Lien  subject  only  to  Permitted  Liens,  of  a  kind  usually  and
customarily  sold by the  Borrower  and which is not,  because of  damage,  age,
unmerchantability, obsolescence or any other condition or circumstance, impaired
in condition, value or marketability in the credit judgment of the Lender or the
Borrower,  and which is not,  in the good faith  credit  judgment of the Lender,
deemed  ineligible after notice to the Borrower.  No Inventory shall be eligible
if it is consigned or if it fails to meet all applicable  governmental standards
for its use and sale. No Inventory shall be eligible unless it is located at the
location  of  Borrower  set forth on  Schedule  2.9,  or if it is stored  with a
warehouseman,  bailee or similar party.  Eligible Inventory shall be computed at
the  lesser  of cost or fair  market  value.  No  Inventory  shall  be  Eligible
Inventory if any representation,  warranty,  or covenant herein relating to such
Inventory is inaccurate or violated.  Unless the Borrower notifies the Lender in
writing to the contrary,  the Borrower shall be deemed to have made a continuing
representation  and  warranty  that none of the  Eligible  Inventory  has become
ineligible.  For the purposes of this  definition,  Borrower  shall also include
Steiner-Atlantic Corporation, a Florida corporation.

                  "Equipment" means all furniture,  fixtures,  equipment,  motor
vehicles,  rolling  stock  and  other  tangible  property  of a Person  of every
description, except Inventory, and in addition includes all property included in
the definition of "equipment" as used in the Code.

                  "Event  of  Default"  means  any  event  specified  as such in
Section 6.1,  provided that there shall have been  satisfied any  requirement in
connection  with such  event for the  giving of notice or the lapse of time,  or
both.

                  "Foreign  Exchange  Subfacility"  has the meaning set forth in
Section 3.10.

                  "Forward" shall have the meaning set forth in Section 3.10.

                  "GAAP" shall have the meaning ascribed thereto in Section 1.2.

                  "General  Intangibles" means all intangible  personal property
(including things in action) except Accounts,  Chattel Paper and Instruments (as
defined in the Code),  including all contract  rights,  copyrights,  trademarks,
trade names, service marks, patents, patent drawings,  designs, formulas, rights
to a Person's  name  itself,  customer  lists,  rights to all prepaid  expenses,
marketing expenses,  rights to receive future contracts,  fees,  commissions and
orders  relating in any respect to any  business of a Person,  all  licenses and
permits,  all computer programs and other software owned by a Person, or which a
Person has the right to use,  and all rights  for  breach of  warranty  or other
claims for funds to which a Person may be entitled, and in addition includes all
property  included in the  definition  of "general  intangibles"  as used in the
Code.

                 "Guarantor"  or  "Guarantors"  shall  mean  any  Person  now or
hereafter   guaranteeing,   endorsing  or  otherwise  becoming  liable  for  any
Indebtedness,  including  without  limitation  Steiner-Atlantic  Corporation,  a
Florida  corporation,   Steiner-Atlantic  Brokerage  Company,  Inc.,  a  Florida
corporation, Dryclean USA Development Corp., a Florida corporation, Dryclean USA
License Corp., a Florida corporation.



                                       4
<PAGE>

                  "Guarantor Collateral means all property, assets and rights of
any Guarantor  (other than real estate),  wherever located and whether now owned
by such Guarantor or hereafter  acquired,  including,  but not limited to all of
such  Guarantor's:  (a)  Inventory;  (b) General  Intangibles;  (c) Accounts and
Chattel Paper and any other  instrument or intangible  representing  payment for
goods or services; (d) Equipment; (e) Instruments;  (f) Investment Property; (g)
Documents;  (h)  Deposit  Accounts;  (i) Letter of Credit  Rights;  (j)  General
Intangibles; and (k) parts, replacements,  additions, accessions, substitutions,
profits,  and products and cash and  non-cash  proceeds of any of the  foregoing
(including  insurance  proceeds  payable by reason of loss or damage thereto) in
any form and wherever located. Guarantor Collateral shall include all written or
electronically  recorded records  relating to any such Guarantor  Collateral and
other rights relating thereto.

                  "Guaranty  Agreement"  or  "Guaranty"  shall mean any guaranty
instrument now or hereinafter executed by a Guarantor in favor of Lender.

                  "Indebtedness"  means all obligations now or hereafter owed to
the Lender and/or its Affiliates by the Borrower and/or its Affiliates,  whether
fixed,  contingent or otherwise,  and whether related or unrelated to the Loans,
including, without limitation, amounts owed or to be owed under the terms of the
Loan Documents, or arising out of the transactions described therein, including,
without  limitation,  the  Loans,  Letter  of  Credit  Obligations,  obligations
relating to the Foreign Exchange Subfacility, sums advanced to pay overdrafts on
any  account   maintained  by  the  Borrower  with  the  Lender,   reimbursement
obligations  for  outstanding  letters  of credit  issued at the  request of the
Borrower,  amounts paid by the Lender under letters of credit or drafts accepted
by the  Lender for the  account  of the  Borrower,  together  with all  interest
accruing thereon,  and all fees, costs or expenses payable by Borrower under any
Loan  Document,  including,  but  not  limited  to,  all  costs  of  collection,
reasonable  attorneys' fees, and expenses of or advances by the Lender which the
Lender  pays or  incurs  in  discharge  of  obligations  of the  Borrower  or to
repossess,  protect, preserve, store or dispose of any Collateral,  whether such
amounts are now due or hereafter become due, direct or indirect and whether such
amounts  due  are  from  time to  time  reduced  or  entirely  extinguished  and
thereafter  re-incurred.  The term also includes,  but without  limitation,  the
obligations  of the Borrower  under any Interest Rate Swap Agreement for any and
all "Loss",  "Settlement Amount" and "Unpaid Amounts", as such terms are defined
in such Interest Rate Swap Agreement.

                  "Interest  Rate Swap  Agreement"  means  each and  every  ISDA
Master Agreement,  including all schedules,  confirmations and exhibits thereto,
entered into at any time between Lender and the Borrower,  as such agreement may
be amended or otherwise modified from time to time hereafter.

                  "Inventory"  means all goods,  merchandise  and other personal
property  of a Person  which is held  for  sale or lease or  furnished  or to be
furnished  under a  contract  for  services  or raw  materials,  and all work in
process and  materials  used or consumed or to be used or consumed in a Person's
business,  and in addition,  includes all property included in the definition of
"inventory" as used in the Code.

                  "Letter of Credit" means a Trade Letter of Credit.

                  "Letter of Credit  Agreement" shall mean any form of letter of
credit agreement  utilized from time to time by the Lender (and each Application
by Applicant for a Credit as referenced therein),  it being understood that each
Letter of Credit issued  thereunder or in connection  therewith  shall be issued
pursuant to and subject to the terms and conditions of this Agreement.



                                       5
<PAGE>

                  "Letter  of Credit  Obligations"  shall  mean all  outstanding
obligations incurred by Lender at the request of the Borrower, whether direct or
indirect,  contingent  or  otherwise,  due or not due,  in  connection  with the
issuance  by Lender of Letters of  Credit.  The amount of such  Letter of Credit
Obligations  shall  equal the  maximum  amount  which may be  payable  by Lender
thereupon or pursuant thereto.

                  "LIBOR  Market  Index  Rate  Loan"  means,  at any  time,  any
outstanding  Loan that bears  interest at the  Adjusted  LIBOR Market Index Rate
(Revolving) or Adjusted LIBOR Market Index Rate (Term) at such time.

                  "LIBOR  Market Index  Rate",  for any day, is the rate for one
month U.S.  dollar  deposits as reported on Telerate page 3750 as of 11:00 a.m.,
London  time,  on such  day,  or if such  day is not a  Business  Day,  then the
immediately  preceding  Business  Day  (or if not so  reported,  then  as may be
determined by Lender from another recognized source or interbank quotation).

                  "Lien"   means  any   mortgage  or  deed  of  trust,   pledge,
hypothecation,  assignment,  deposit arrangement,  lien, charge, claim, security
interest,  easement or  encumbrance,  or preference,  priority or other security
agreement  or  preferential   arrangement  of  any  kind  or  nature  whatsoever
(including,  without  limitation,  any lease or title retention  agreement,  any
financing  lease having  substantially  the same  economic  effect as any of the
foregoing,  and the filing of, or agreement  to give,  any  financing  statement
under the UCC or comparable law of any jurisdiction).

                  "Loans" means the Term Loan and the Revolving Credit Loans.

                  "Loan  Documents"  means this  Agreement,  all other  Security
Agreements,  the Notes, all Guaranty Agreements, all Letter of Credit Agreements
(and all agreements and documents executed in connection  therewith),  all UCC-1
financing  statements  required  under this  Agreement  or any of the other Loan
Documents,  all  Interest  Rate  Swap  Agreements,  and  all  other  agreements,
documents and instruments now or hereafter evidencing, describing, guaranteeing,
relating to or securing the Indebtedness.

                  "Material  Adverse Change" means a material  adverse change in
any of: (i) the  condition  (financial  or  otherwise),  business,  performance,
profits, cash flows, operations,  properties or prospects of the Borrower or any
Guarantor;  (ii) the legality,  validity or  enforceability of any Loan Document
which  substantially  deprives  the Lender of the  benefits  thereof;  (iii) the
ability of the Borrower or any Guarantor to repay the Indebtedness or to perform
its  obligations  under any Loan  Document;  (iv) the rights and remedies of the
Lender under the Loan Documents which  substantially  deprives the Lender of the
benefits thereof;  or (v) the Collateral or the Lender's Liens in the Collateral
or the priority of such Liens.

                  "Material   Adverse   Effect"  means  an  effect  that  has  a
reasonable likelihood of resulting in or causing a Material Adverse Change.

                  "Notes" means the Term Note and the Revolving Credit Note.

                  "Permitted Debt" means (a) the Indebtedness;  (b) Debt payable
to suppliers  and other trade  creditors  in the ordinary  course of business on
ordinary and customary  trade terms and which is not past due more than 30 days;
(c) Debt secured by Permitted Liens; (d) Debt which is subordinated in right and
time of payment to all Indebtedness in a manner reasonably  satisfactory in form
and  substance to the Lender;  and (e) such other Debt as the Lender may consent
to in writing from time to time.



                                       6
<PAGE>

                  "Permitted  Liens" means (a) Liens securing the  Indebtedness;
(b) Liens for taxes and other  statutory  Liens,  landlord's  Liens and  similar
Liens arising by operation of law (provided they are subordinate to the Lender's
Liens on Collateral) so long as the obligations secured thereby are not past due
more  than 30 days;  (c)  Liens  described  on  Schedule  1.1  hereto  (if any),
provided,  however,  that no Debt not now  secured  by such Liens  shall  become
secured by such Liens  hereafter  other than Liens  arising by  operation of law
(provided they are  subordinate  to the Lender's  Liens on Collateral)  and such
Liens shall not encumber any other assets;  and (d) purchase  money Liens to the
extent  such  Liens  secure not more than 100% of the  purchase  price of assets
purchased without violating the terms hereof and cover only assets purchased.

                  "Person" means any natural person, corporation, unincorporated
organization, trust, joint stock company, joint venture, association, limited or
general partnership, limited liability company, any government, or any agency or
political subdivision of any government.

                  "Prime  Rate"  shall be (for any day)  that  rate of  interest
announced  by Lender  from time to time as its Prime  Rate and is one of several
interest  rate bases used by Lender.  Lender lends at rates both above and below
its Prime  Rate,  and  Borrower  acknowledges  that  Lender's  Prime Rate is not
represented  or  intended  to be the lowest or most  favorable  rate of interest
offered by Lender.

                  "Revolving  Credit  Loan"  shall have the meaning set forth in
Section 3.1(b).

                  "Revolving  Credit Loan Maturity  Date" shall mean the earlier
of (i)  October 30, 2002 or (ii) the date the Lender  demands  repayment  of the
Revolving  Credit  Loans,  unless  renewed,  extended  or modified in writing by
Lender, in its sole discretion.

                  "Revolving  Credit Note" shall mean the revolving  credit note
referenced in Section 3.2.

                  "Security  Agreement"  means this Agreement as it relates to a
Lien on any or all of the Collateral, and any other mortgage, security agreement
or similar instrument now or hereafter  executed by the Borrower,  any Guarantor
or any other Person  granting the Lender a Lien on any  Collateral to secure the
Indebtedness.

                  "Solvent"  means,  as to any  Person,  that  such  Person  has
capital  sufficient to carry on its business and  transactions  and all business
and  transactions in which it is about to engage and is able to pay its debts as
they mature and owns  property  having a value,  both at fair  valuation  and at
present fair saleable value, greater than the amount required to pay its debts.

                  "Spot" shall have the meaning set forth in Section 3.10.

                  "Subsidiary"  means  any  corporation,  partnership  or  other
Person in which the Borrower,  directly or  indirectly,  owns 50% or more of the
stock, capital or income interests, or other beneficial interests.

                  "Term" shall have the meaning ascribed thereto in Section 8.1.

                  "Term  Loan"  shall  have the  meaning  set  forth in  Section
3.1(a).

                  "Term Loan Maturity Date" shall mean December 30, 2004.

                  "Term Note" means the term note referenced in Section 3.2.



                                       7
<PAGE>

                  "Trade  Letter of Credit" shall mean a letter of credit (sight
or time)  issued by the Lender  for the  account  of the  Borrower  payable to a
supplier of Borrower upon presentation of appropriate supporting documentation.

                  1.2.  Financial  Terms.  All financial terms used herein shall
have  the  meanings  assigned  to  them  under  generally  accepted   accounting
principles  consistently  applied  and  maintained  on a basis for the  Borrower
throughout the period indicated and consistent with the prior financial practice
of the Borrower on a consolidated  basis ("GAAP"),  unless another meaning shall
be specified.

                  1.3. Other Terms.  All other  capitalized  terms  contained in
this Agreement shall, when the context so indicates,  have the meanings provided
for by the  Code to the  extent  the  same  are  used or  defined  therein.  Any
reference  to this  Agreement  or any other  Loan  Document  shall  include  any
amendment,  supplement,  enlargement,  extension,  renewal, restatement or other
modification thereof.

         2.       Representations  and Warranties. In order to induce the Lender
to enter  into this  Agreement  and to make the Loans,  to issue the  Letters of
Credit  and  to  extend  credit   accommodations   under  the  Foreign  Exchange
Subfacility,  the Borrower makes the following  representations  and warranties,
all of which shall survive the execution and delivery of the Loan  Documents and
the making of the Loans and the  issuance  of Letters of Credit  hereunder,  and
shall be deemed to be made on each day on which any Loan is outstanding  (except
to the extent a representation  and warranty is made as of a particular date, in
which case they shall be true and correct as of such date).

                  2.1. Valid Existence and Power. Borrower and each Guarantor is
a  corporation  duly  organized,  validly  existing and in good standing (or its
status is active,  as  applicable),  under the laws of the  jurisdiction  of its
organization  and is duly  qualified  or licensed  to  transact  business in all
places where the failure to be so qualified could reasonably be expected to have
a Material Adverse Effect. Borrower and each Guarantor has the power to make and
perform  the Loan  Documents  executed  by each and all  such  instruments  will
constitute the legal, valid and binding obligations of such Person,  enforceable
in accordance with their respective terms,  except to the extent  enforceability
may be limited by bankruptcy,  fraudulent conveyance,  insolvency, moratorium or
other laws relating to  creditors'  rights  generally and general  principles of
equity.

                  2.2. Authority. The execution, delivery and performance of the
Loan Documents by Borrower and each  Guarantor have been duly  authorized by all
necessary  action of such Person,  and do not and will not violate any provision
of law or regulation,  or any writ, order or decree of any court or governmental
or regulatory authority or agency or any provision of the governing  instruments
of such Person,  and do not and will not, with the passage of time or the giving
of notice, result in a breach of, or constitute a default or require any consent
under, or result in the creation of any Lien, other than Permitted  Liens,  upon
any  property  or  assets  of such  Person  pursuant  to,  any law,  regulation,
instrument  or agreement to which such Person is a party or by which such Person
or its respective properties may be subject, bound or affected.

                  2.3.  Condition.  Other  than as  disclosed  in the  financial
statements  most  recently  delivered  to the Lender,  neither  Borrower nor any
Guarantor has any direct or contingent obligations or liabilities required to be
disclosed  therein  under  GAAP  (including  any  guarantees  or  leases) or any
material  unrealized or anticipated  losses from any commitments  required to be
disclosed therein under GAAP, except for executory contracts.  To the Borrower's
knowledge,  there is no fact which the Borrower has not  disclosed to the Lender
in writing which could reasonably be expected to have a Material Adverse Effect.



                                       8
<PAGE>

                  2.4.  Financial   Statements.   The  financial  statements  of
Borrower and each Guarantor delivered to Lender have been prepared in accordance
with GAAP, contain no material misstatements or omissions, and fairly present in
all material  respects the financial  position,  assets and  liabilities of such
Person as of the respective dates thereof and the results of operations and cash
flows of such Person for the respective periods then ended.

                  2.5. Litigation;  Government Regulation. There are no actions,
suits or proceedings  pending or threatened against or affecting the Borrower or
any Guarantor at law or in equity before any court or administrative  officer or
agency which, if adversely  determined,  could  reasonably be expected to have a
Material  Adverse Effect.  Neither Borrower nor any Guarantor is in violation of
or  in  default  under  any  applicable  statute,  rule,  order,  decree,  writ,
injunction or regulation of any  governmental  body  (including any court),  the
violation  of which could  reasonably  be  expected  to have a Material  Adverse
Effect.

                  2.6. Agreements,  Etc. Neither Borrower nor any Guarantor is a
party to any agreement or instrument or subject to any court order, governmental
decree or any charter or other corporate  restriction  which could reasonably be
expected to have a Material  Adverse Effect.  Neither Borrower nor any Guarantor
is in  default  in the  performance,  observance  or  fulfillment  of any of the
obligations, covenants or conditions contained in any agreement or instrument to
which it is a party,  or any law,  regulation,  decree,  order or the like which
could  reasonably be expected to have a Material  Adverse Effect.  No Default or
Event of Default has occurred.

                  2.7. Authorizations.  All authorizations,  consents, approvals
and licenses  required  under  applicable law or regulation for the ownership or
operation of the property  owned or operated by the Borrower or any Guarantor or
for the  conduct of any  business  in which the  Borrower  or any  Guarantor  is
engaged have been duly issued and are in full force and effect,  and neither the
Borrower nor any Guarantor is in default, nor has any event occurred which, with
the  passage  of time or the  giving of  notice,  or both,  would  constitute  a
default,  under any of the terms or provisions of any part thereof, or under any
order,  decree,  ruling,  regulation  or other  decision  or  instrument  of any
governmental  commission,  bureau  or  other  administrative  agency  or  public
regulatory body having  jurisdiction  over the Borrower or any Guarantor,  which
default is reasonably likely to have a Material Adverse Effect.  Except as noted
herein,  no approval,  consent or  authorization  of, or filing or  registration
with,  any  governmental  commission,  bureau or other  regulatory  authority or
agency is required with respect to the execution, delivery or performance of any
Loan Document by the Borrower or any Guarantor.

                  2.8.  Title;  Collateral.  The Borrower  and/or each Guarantor
have good  title to the  Collateral  and to all of the  assets  set forth in the
financial  statements  most recently  delivered to the Lender (except  Inventory
sold  since the date of such  financial  statements  in the  ordinary  course of
business), free and clear of all Liens, except Permitted Liens. The Borrower and
the Guarantors alone have full ownership rights in all Collateral,  subject only
to Permitted  Liens.  The Liens granted to the Lender herein and pursuant to any
other  Security  Agreement  (a)  constitute  and,  as to  subsequently  acquired
property,  will  constitute,  Liens  under  applicable  law  including,  without
limitation,  the Code,  entitled to all of the rights,  benefits and  priorities
provided by applicable law including,  without limitation, the Code and (b) are,
and as to such  subsequently  acquired  property will be, first priority,  fully
perfected,  superior and prior to the rights of all third persons,  now existing
or hereafter arising,  subject only to Permitted Liens. All of the Collateral is
intended  for use  solely  in the  Borrower's  business.  Except as set forth on
Schedule  2.8, no  Affiliate  of Borrower has any interest in any assets used in
Borrower's business.

                  2.9.  Location  and  Names.  The chief  executive  office  and
principal  place of business of the  Borrower,  where its  business  records are
located,  is the address  designated for notices in Section 9.4. Borrower has no
other places of  business,  except as shown on Schedule


                                       9
<PAGE>

2.9.  Borrower  has not,  during the past five years,  been known as or used any
other corporate, fictitious or trade names or been the subject of any bankruptcy
or similar proceeding.

                  2.10. Taxes.  Neither Borrower nor any Guarantor is delinquent
in  the  payment  of any  taxes  which  have  been  levied  or  assessed  by any
governmental authority against it or its assets. The Borrower and each Guarantor
has timely filed all tax returns which are required by law to be filed, and have
paid all taxes and all other  assessments  or fees levied upon the  Borrower and
any Guarantor or upon its properties to the extent that such taxes,  assessments
or fees have become due.  No  controversy  in respect of taxes is pending or, to
the knowledge of the Borrower, threatened against the Borrower or any Guarantor.
The  Borrower  and  each  Guarantor  has paid all  withholding,  FICA and  other
payments  required by federal,  state or local  governments  with respect to any
wages paid to employees.

                  2.11.   Labor  Law  Matters.   None  of  Borrower's   nor  any
Guarantor's  employees is a member of a labor  union,  and the Borrower is not a
party to or  otherwise  bound by,  or  threatened  with any labor or  collective
bargaining  agreement.  None of the Borrower's nor any Guarantor's  employees is
known to be engaged in organizing  any labor union or other  employee group that
is seeking  recognition as a bargaining  unit. No goods or services have been or
will be produced by the Borrower or any Guarantor in violation of any applicable
labor laws or regulations or in violation of any minimum wage,  wage-and-hour or
other similar laws or regulations. Neither Borrower nor any Guarantor is subject
to any material labor dispute.

                  2.12. Accounts.  Each Account,  instrument,  Chattel Paper and
other  writing  constituting  any portion of the  Collateral  is (a) genuine and
enforceable in accordance  with its terms except for such limits thereon arising
from bankruptcy and similar laws relating to creditors'  rights; (b) not subject
to any defense, setoff, claim or counterclaim of any nature against the Borrower
or any Guarantor (i) for claims not exceeding $50,000 in the aggregate  incurred
in the ordinary course of business or (ii) as to which the Borrower has notified
the Lender in writing; and (c) not subject to any other circumstances that would
impair the validity,  enforceability  or amount of such Collateral  except as to
which the  Borrower  has  notified  the Lender in writing.  Each Account and all
Inventory  included in any Advance  Request or  Borrowing  Base  Certificate  or
calculation  delivered  to Lender as an Eligible  Account or Eligible  Inventory
meets  and  will  meet all  requirements  of an  Eligible  Account  or  Eligible
Inventory, as the case may be.

                  2.13.  Use and  Location  of  Collateral.  The  Collateral  is
located  only,  and  shall  at all  times be kept and  maintained  only,  at the
location or  locations as  described  on Schedule  2.9,  which are (i) owned and
operated  by the  Borrower  and/or  any  Guarantor  (and  for  each  of  which a
mortgagee's  waiver has been delivered in accordance  with Section  4.1(f)),  or
(ii) leased and operated by the Borrower  and/or any Guarantor  (and for each of
which a landlord's  lien waiver has been  delivered in  accordance  with Section
4.1(f)).

                  2.14.  Judgment Liens.  Neither the Borrower nor any Guarantor
nor any of their  assets is  subject  to any unpaid  judgments  (whether  or not
stayed) or any judgment liens in any jurisdiction.

                  2.15. Intent and Effect of Transactions;  Borrower's Solvency.
This Agreement and the transactions contemplated herein are not made or incurred
with intent to hinder,  delay or defraud any Person to whom the  Borrower or any
Guarantor has been, is now, or may hereafter become  indebted.  The Borrower and
each  Guarantor  are Solvent.  After giving  effect to this  Agreement,  and the
transactions  contemplated  hereby (including the uses of proceeds  permitted by
this Agreement), the Borrower and each Guarantor will be Solvent and will not be
left with an unreasonably small capital with which to engage in their businesses
or in any businesses or transactions in which Borrower or any Guarantor  intends
to engage.  This Agreement is not



                                       10
<PAGE>

entered  into with the intent to incur,  or with the belief that the Borrower or
any  Guarantor  would  incur,  debts  that  would be  beyond  Borrower's  or any
Guarantor's ability to pay as such debts mature.

                  2.16.  Subsidiaries.  Borrower has the following Subsidiaries:
Steiner-Atlantic  Corp.,  a  Florida  corporation,  Steiner  Atlantic  Brokerage
Company, Inc., a Florida corporation,  Dryclean USA Development Corp., a Florida
corporation, DryClean USA License Corp., a Florida corporation.

                  2.17.  Hazardous  Materials.  Except as  disclosed on Schedule
2.17, the Borrower's and Guarantors'  properties and  improvements  thereon have
not in the past been used,  are not  presently  being used,  and will not in the
future be used for,  nor does the  Borrower  or any  Guarantor  engage  in,  the
handling, storage, manufacture, disposition, processing,  transportation, use or
disposal of hazardous or toxic  materials,  in any such instance in violation of
applicable environmental laws.

                  2.18.  ERISA.  Neither the Borrower nor any  Guarantor has any
pension, profit-sharing or other benefit plan subject to the Employee Retirement
Income Security Act of 1974, as amended  ("ERISA") or they have furnished to the
Lender true and complete copies of the latest annual report required to be filed
pursuant to Section 104 of ERISA,  with respect to each employee benefit plan or
other plan maintained for employees of the Borrower or any Guarantor and covered
by Title IV of  ERISA (a  "Plan"),  and no  Termination  Event  (as  hereinafter
defined)  with respect to any Plan has occurred  and is  continuing  and no fact
exists  which  might  constitute  grounds  for a  Termination  Event  or for the
appointment  of a trustee to administer  any such plan. For the purposes of this
Agreement,  a  "Termination  Event"  means a  "reportable  event" as  defined in
Section  4043(b)  of ERISA  ("Reportable  Event"),  or the filing of a notice of
intent to terminate  under  Section 4041 of ERISA.  Neither the Borrower nor any
Guarantor  has  any  unfunded  liability  with  respect  to any  such  Plan.  No
"prohibited  transaction"  (as defined under ERISA) has occurred with respect to
any such Plan. Each such Plan has been administered in accordance with ERISA and
the Code.

                  2.19.  Investment  Company  Act.  Neither the Borrower nor any
Guarantor is an "investment company" as defined in the Investment Company Act of
1940, as amended.

                  2.20.  Trade  Relations.  There exists no actual or threatened
termination,  cancellation  or limitation of, or any  modification or change in,
the business  relationship of the Borrower or any Guarantor with any customer or
any group of customers  whose  purchases  individually  or in the  aggregate are
material to the business of the Borrower or any Guarantor,  or with any material
supplier.

                  2.21.  Maintenance  of Business and  Properties.  Borrower and
each Guarantor  shall at all times  maintain,  preserve and protect its property
used or useful in the conduct of its business, and keep the same in good repair,
working  order and  condition,  and from time to time make, or cause to be made,
all material needful and proper repairs, renewals, replacements, betterments and
improvements thereto so that the business carried on in connection therewith may
be conducted  properly and in accordance  with standards  generally  accepted in
businesses  of a similar  type and size at all times,  and  maintain and keep in
full force and effect all licenses and permits  necessary to the proper  conduct
of its business.

                  2.22. Full Disclosure.  The Loan Documents,  together with the
statements  furnished by or on behalf of the Borrower and each  Guarantor to the
Lender  in  connection  with the  Loan  Documents  do not,  contain  any  untrue
statement  of a material  fact or omit a  material  fact  necessary  to make the
statements  contained  therein  or  herein  not  misleading.  To the


                                       11
<PAGE>

Borrower's  knowledge,  there is no fact which the Borrower or any Guarantor has
not  disclosed to the Lender in writing  which might  reasonably  be expected to
have a Material Adverse Effect.

         3.       Loans.

                  3.1. Advances of Loans.

                       (a)  Advance of Term Loan.  Upon the terms and subject to
the  conditions  of this  Agreement and the other Loan  Documents,  and provided
there has not occurred a Default or Event of Default,  the Lender agrees to make
a term loan (the  "Term  Loan") to the  Borrower  on the  Closing  Date,  in the
principal amount of $960,000.  The Lender will disburse the proceeds of the Term
Loan to the Borrower in accordance  with written  instructions  furnished to the
Lender by the Borrower on or before the Closing Date.

                       (b) Advance of Revolving Credit Loans. Upon the terms and
subject to the  conditions of this Agreement and the other Loan  Documents,  and
provided there has not occurred a Default or Event of Default and Lender has not
demanded  repayment  of the  Revolving  Credit  Loans (as defined  herein)  (and
provided a Default or Event of Default would not occur as a result of the making
of a Revolving Credit Loan),  from time to time upon the request of the Borrower
until the  Revolving  Credit Loan  Maturity  Date,  upon  Lender's  receipt from
Borrower of an Advance  Request,  the Lender may,  in its sole  discretion  make
revolving credit loans  ("Revolving  Credit Loans") to Borrower,  provided that,
after  giving to such Advance  Request,  the total  principal  of all  Revolving
Credit Loans  outstanding shall not exceed the Borrowing Base less all Letter of
Credit  Obligations  less  the  total  value  of  outstanding  Forward  and Spot
transactions. Upon the terms and subject to the conditions of this Agreement and
the other Loan Documents,  and provided that there has not occurred a Default or
Event of Default and Lender has not demanded  repayment of the Revolving  Credit
Loans,  the  outstanding  principal  balance of the  Revolving  Credit Loans may
increase and decrease from time to time,  and Advances  thereunder may be repaid
and  reborrowed,  so long as the  total  principal  balance  of all  outstanding
Revolving  Credit Loans does not at any time exceed the Borrowing  Base less all
Letter of Credit  Obligations  less the total value of  outstanding  Forward and
Spot  transactions.  Should  there occur any  overdraft  of any deposit  account
maintained  by the  Borrower  with the  Lender,  the Lender  may, at its option,
disburse  funds  (whether or not in excess of the  Borrowing  Base) to eliminate
such  overdraft  and such  disbursement  shall be deemed an advance of Revolving
Credit  Loan  proceeds  hereunder  entitled  to all of the  benefits of the Loan
Documents.  Nothing herein shall be deemed an authorization of or consent to the
creation of an overdraft in any account or create any obligations on the part of
the Lender.  The Borrower  shall  immediately  repay to the Lender any amount by
which the principal  amount of Revolving  Credit Loans  outstanding  exceeds the
Borrowing  Base less all Letter of Credit  Obligations  less the total  value of
outstanding  Forward  and Spot  transactions.  All  Advances,  whether or not in
excess of the  Borrowing  Base shall be part of the  Revolving  Credit Loans and
Indebtedness,  shall  bear  interest  as  provided  herein,  shall be payable in
accordance  herewith and shall be entitled to all rights and  security  provided
for herein and in the other Loan  Documents.  In determining the Borrowing Base,
the Lender shall have the right from time to time upon notice to the Borrower to
establish and  re-establish  such reserves as it deems  appropriate  in its sole
credit judgment.

                  NOTWITHSTANDING  ANYTHING  TO THE  CONTRARY  SET FORTH IN THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT,  BORROWER SHALL REPAY ALL REVOLVING CREDIT
LOANS IN FULL  IMMEDIATELY  UPON DEMAND OF LENDER,  REGARDLESS OF WHETHER OR NOT
ANY DEFAULT OR EVENT OF DEFAULT HAS OCCURRED OR IS CONTINUING.

                  3.2. The Notes.  The  obligation  of the Borrower to repay (i)
the Term  Loan  shall be  evidenced  by the term  note in the form of  Exhibit C
hereto (the "Term Note") and, (ii)



                                       12
<PAGE>

the Revolving Credit Loan shall be evidenced by the revolving credit note in the
form of Exhibit D hereto (the "Revolving Credit Note");  in each instance,  duly
executed by the Borrower, dated the Closing Date and payable to the order of the
Lender.

                  3.3.  Notice  and  Manner  of  Borrowing.  Upon the  terms and
subject to the conditions hereof, Borrower shall give Lender irrevocable written
notice  ("Advance  Request") of each proposed Advance not later than 11:00 a.m.,
Miami time,  on the same  Business  Day as such  proposed  borrowing.  Each such
notice shall  include or be  accompanied  by a Borrowing  Base  Certificate  and
specify (i) the date of such  Advance,  which shall be a Business  Day, (ii) the
amount to be Advanced,  and (iii)  containing  such other  information as Lender
shall reasonably  request.  Advance Requests  received after 11:00 a.m. shall be
deemed  received on the next Business Day. Once  delivered,  any Advance Request
shall be  irrevocable.  All  obligations  hereunder  and under  the  other  Loan
Documents shall constitute one general obligation of the Borrower.  The interest
rate  applicable to each of the Adjusted  LIBOR Market Index Rate Loans shall be
adjusted  daily as  applicable  to reflect the LIBOR  Market  Index Rate on such
date.

                  3.4  Interest.  All interest  accrued on any Loan shall be due
and payable on each date when all or any amount of the unpaid principal  balance
of  such  Loan  shall  be  due  (whether  by  maturity,  optional  or  mandatory
prepayment,  acceleration or otherwise). Interest on all Loans shall also be due
and payable in arrears  first  Business  Day of each month.  Except as otherwise
expressly  provided herein,  interest on Revolving Credit Loans shall be payable
at a rate per annum equal to the Adjusted  LIBOR Market Index Rate  (Revolving).
Except as otherwise  expressly provided herein,  interest on the Term Loan shall
be payable at a rate per annum equal to the  Adjusted  LIBOR  Market  Index Rate
(Term).

                  3.5  Repayment  of Loans.  The  principal  amount of the Loans
shall be repaid as follows:

                        (a) Term Loan. Borrower shall repay the principal amount
of the  Term  Loan  in  thirty-six  (36)  consecutive  monthly  installments  of
$26,666.67  on the last day of each  month,  commencing  on  January  31,  2002.
Notwithstanding  anything to the contrary set forth herein, the entire remaining
unpaid principal balance of Term Loan shall be repaid on the earlier of the Term
Loan Maturity Date or the date upon which Borrower's  obligations hereunder have
been accelerated upon the occurrence of an Event of Default.

                        (b)  Revolving  Credit Loans.  Borrower  shall repay the
entire  principal  amount of all  Revolving  Credit Loans  immediately  upon the
earliest of (i) the Revolving  Credit Loan Maturity Date, (ii) the  acceleration
of Borrower's  obligations hereunder upon the occurrence of an Event of Default,
(iii) at such time and to the extent that the amount of  Revolving  Credit Loans
outstanding exceeds the amount permitted hereby or (iv) upon DEMAND by Lender.

                  3.6. Costs, Fees and Expenses.  Costs, fees and expenses which
are  payable  pursuant to this  Agreement  or any other Loan  Document  shall be
payable by Borrower to Lender or Lender's designee upon written demand by Lender
to Borrower.  Borrower  irrevocably  authorizes and directs Lender,  at Lender's
option,  to cause all sums payable  hereunder  or under any Loan  Document to be
paid on the date due by  charging  such  payment  as a  Revolving  Credit  Loan.
Without limiting the generality of the foregoing, all such amounts which are not
paid when due hereunder  shall be  Indebtedness  secured by the  Collateral  and
shall bear interest at the Default Rate.

                  3.7.  Prepayments.  Subject to the terms and conditions of any
Interest Rate Swap Agreement,  Borrower may prepay any Loan in whole at any time
or in part from time to


                                       13
<PAGE>

time on any Business Day by notifying Lender by 9:00 a.m., Miami,  Florida time,
on such Business Day, without penalty or premium; provided, however, that

                        (i) each such  prepayment  shall be  accompanied  by the
          payment  of accrued  interest  to the date of such  prepayment  on the
          amount prepaid and shall  designate  whether it is a payment of a Term
          Loan or a Revolving Credit Loan, and

                        (ii) each partial  prepayment  of any Term Loan shall be
          applied to the remaining  scheduled  payments of principal  prepaid in
          the inverse order of their maturities.

                  Notwithstanding  anything to the  contrary set forth herein or
in any Loan Document,  any prepayment will not affect  Borrower's  obligation to
continue  making  payments in connection  with any Interest Rate Swap Agreement,
which will remain in full force and effect, notwithstanding such prepayment.

                  3.8. Payments and Computations.

                       (a) The Borrower  shall make each payment  hereunder  and
under the Notes not later than 12:00 noon, Miami,  Florida time, on the day when
due in lawful money of the United  States of America to the Lender at its office
at Commercial Loan Payment Center, P.O. Box 740502, Atlanta,  Georgia 30374-0502
or such other address as Lender shall designate from time to time.

                       (b) The Borrower hereby  authorizes the Lender, if and to
the extent  payment is not made when due  hereunder or under any Note, to charge
from time to time against the Borrower's  accounts,  if any, with the Lender any
amount so due.

                       (c) All  computations  of  interest  shall be made by the
Lender on the basis of a year of three  hundred  sixty (360) days for the actual
number of days (including the first day but excluding the last day) occurring in
the period for which such interest is payable.

                       (d)  Whenever  any payment to be made  hereunder or under
any Note  shall be stated to be due on a day other  than a  Business  Day,  such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of payment of interest.

                  3.9. Facility for Letters of Credit.

                       (a)  Subject to all of the terms and  conditions  of this
Agreement and the other Loan Documents, and provided there does not then exist a
Default or Event of  Default  and  provided  that no Default or Event of Default
would  result from the  issuance  of a Letter of Credit,  the Lender will issue,
upon the Borrower's written request therefor, from time to time on and after the
Closing Date until the  Revolving  Credit Loan Maturity Date or demand by Lender
of repayment of the  Revolving  Credit  Loans,  Trade  Letters of Credit for the
account of the Borrower,  upon the execution of such documents and agreements as
Lender shall require. In no event shall Letter of Credit Obligations outstanding
at any time hereunder exceed  $1,000,000 in the aggregate.  Subject to the terms
and conditions set forth in this Agreement and the other Loan Documents,  Lender
shall be under no  obligation  to issue any  Letter of Credit on the  Borrower's
behalf if, after giving effect to the requested issuance, the sum of outstanding
Revolving  Credit  Loans  plus all Letter of Credit  Obligations  plus the total
value of outstanding  Forward and Spot  transactions  would exceed the Borrowing
Base.



                                       14
<PAGE>

                       (b) Notwithstanding anything to the contrary set forth in
this Section 3.9,  Lender  shall be under no  obligation  to issue any Letter of
Credit  having a maturity  date or expiry date which is later than the Revolving
Credit Loan  Maturity  Date or which is payable in a currency  other than United
States  Dollars,  Italian  Lira or  Euro-currency  (at such time  Lender  issues
letters of credit generally in Euro-currency).

                       (c) In the event that  Lender  shall make any payment on,
or  pursuant  to, any Letter of Credit,  the  Borrower  shall be  obligated  to,
following notice of such payment by Lender, immediately reimburse Lender for any
such payment.  If the Borrower  does not  reimburse  Lender on the same day that
Lender  provides  such  notice,  the  Lender  shall  have the right (but not the
obligation)  to  make a  Revolving  Credit  Loan  in an  amount  equal  to  such
unreimbursed  portion  of such  payment;  and if Lender  elects not to make such
advance of a Revolving Credit Loan, the entire  unreimbursed amount and fees and
costs shall  continue to be  Indebtedness  secured by the  Collateral  and shall
accrue interest at the Default Rate.

                       (d) In the event that any  Letter of Credit  Obligations,
whether or not then due and payable,  shall for any reason be outstanding on the
date Lender  demands  repayment of the  Revolving  Credit Loans or the Revolving
Credit Loan Maturity  Date, the Borrower will either (i) provide the Lender with
a letter of credit or other guaranty of payment for all then outstanding Letters
of Credit issued by Lender,  satisfactory  to the Lender in its  discretion,  or
(ii) pay to the Lender for the account of Lender cash in an amount  equal to the
maximum  amount then available to be drawn under such Letters of Credit and fees
and costs.  All funds  delivered to the Lender  pursuant to this  subsection (d)
shall be held by Lender for the account of the Borrower.

                       (e) The  Borrower  shall comply with all of the terms and
conditions  imposed  upon the  Borrower  under each  Letter of Credit  Agreement
executed by Borrower.

                       (f) In the event of the Borrower's  failure to pay to the
Lender,  upon demand,  the total amount of liabilities  incurred or sums paid by
the Lender in connection  with any such Letter of Credit,  the Lender shall,  in
addition  to its  rights  under the UCC of the State of  Florida  and under this
Agreement,  be fully  subrogated to the rights of any Beneficiary of the Letters
of Credit with respect to any  obligation  of the  Borrower to such  Beneficiary
discharged with the proceeds of any Letter of Credit

                       (g)  The  Borrower  hereby   unconditionally   agrees  to
reimburse  the  Lender  for the  total  amount  of the sums  paid by  Lender  in
connection  with the  issuance  of any  Letters of Credit or any  additional  or
further liability which may accrue against Lender in connection with the same.

                       (h)  The  Borrower  hereby   unconditionally   agrees  to
indemnify  the  Lender  and hold the Lender  harmless  from any and all  losses,
claims or liabilities  arising from any transactions or occurrences  relating to
Letters  of  Credit  issued  for the  Borrower's  account,  and all  obligations
incurred in connection therewith,  including any loss or claim due to any action
taken or  omitted  by any  Beneficiary  thereof.  The  Borrower's  unconditional
obligation to the Lender shall not be modified or  diminished  for any reason or
in any amount  whatsoever.  The  Borrower  agrees  that any action  taken by the
Lender in connection with a Letter of Credit,  if taken in good faith,  shall be
binding upon the Borrower  and shall not impose any  resulting  liability on the
Lender.

                       (i) In the event that this  Agreement is  terminated  for
any reason by the Borrower or the Lender as herein provided,  the Lender demands
repayment  of the  Revolving  Credit  Loans or there  are any  Letter  of Credit
Obligations  outstanding on the Business Day prior to the Revolving  Credit Loan
Maturity Date, the Lender shall be entitled to charge immediately



                                       15
<PAGE>


the  Borrower's  Revolving  Credit Loan  account  hereunder  or any of its other
accounts with the full amount of any outstanding  Letter of Credit  Obligations,
whether  the  Borrower's  obligations  with  respect  thereto  are  absolute  or
contingent at any time. All funds related to such charge shall be held by Lender
to be applied against Indebtedness. The Lender shall also be entitled to hold an
amount which the Lender may deem  reasonably  necessary to cover possible claims
under any outstanding  Letters of Credit unless and until the Lender is supplied
with an  indemnity  reasonably  satisfactory  to it with respect to any possible
liability  under  such  Letters  of  Credit  or a  release  of  its  liabilities
thereunder.

                       (j) As  additional  consideration  for  Lender's  issuing
Letters of Credit for the account of Borrower,  Borrower agrees to such fees and
costs in connection therewith as Lender specifies.

                       (k) All Trade  Letters  of Credit  shall be used only for
the purpose of supporting Borrower's obligations with respect to the purchase of
Inventory or for any other purpose approved in writing by Lender.

                  3.10. Facility for Foreign Exchange.

                       (a) Subject to all of the terms and  conditions set forth
in this  Agreement and the other Loan Documents and provided that there does not
then exist a Default or Event of Default and  provided  that no Default or Event
of Default  would  result from the  Lender's  purchase of foreign  exchange  for
Borrower,  the Lender shall, upon Borrower's  written request,  purchase foreign
exchange (the "Foreign  Exchange  Subfacility") for the Borrower's use from time
to time on and  after the  Closing  Date and until  the  Revolving  Credit  Loan
Maturity  Date,  upon  Borrower's  execution of such documents and agreements as
Lender may request.

                       (b) The Borrower  may request (i) that the Lender  engage
in spot foreign exchange ("Spot") for a value in U.S. Dollars for the purpose of
hedging currency exposure in connection with the Borrower's  import  activities,
and  (ii)  that  the  Lender  enter  into  forward  foreign  exchange  contracts
("Forward") to hedge currency  exposure in connection with the Borrower's import
activities;  provided,  however,  that  neither the amount of Spot nor amount of
Forward  contracts  shall  exceed  $250,000  in the  aggregate  at any one  time
outstanding unless otherwise agreed to in writing by the Lender.  Subject to the
terms and conditions  set forth in this Agreement and the other Loan  Documents,
Lender  shall  be  under  no  obligation  to  enter  into  any  Spot or  Forward
transactions  on  Borrower's  behalf if,  after giving  effect to the  requested
transaction,  the sum of outstanding  Revolving  Credit Loans plus all Letter of
Credit  Obligations  plus  the  total  value  of  outstanding  Forward  and Spot
transactions would exceed the Borrowing Base.

                       (c) Obligations under Spot transactions  shall be due and
payable by Borrower in U.S. Dollar or foreign currency equivalent, whichever the
case may be,  within  two  Business  Days from the date  Borrower  buys the Spot
foreign exchange (the "Spot Value Date"). Obligations under Forward transactions
shall be due and  payable by the  Borrower  in U.S.  Dollar or foreign  currency
equivalent,  whichever  the case may be, on or prior to the maturity date of the
respective  contract  (the "Forward  Value  Date").  The Spot Value Date and the
Forward Value Date shall be  collectively  referred to hereinafter as the "Value
Date".

                       (d) The Borrower hereby gives the Lender the authority to
make  Revolving  Credit  Loans for all  amounts  due  under the Spot or  Forward
transaction on the Value Date.

                       (e) In the event that any Spot or Forward is  outstanding
on the Revolving  Credit Loan Maturity Date, the Borrower will provide or pay to
the Lender for any



                                       16
<PAGE>

settlement  of  outstanding  Spot or  Forwards  either of the  following:  (i) a
standby  letter of credit  acceptable to the Lender or other guaranty of payment
acceptable  to the  Lender;  or (ii) cash  funds to be  directed  into an escrow
account. The amount required of the Borrower in (i) and (ii) shall be determined
by Lender.  Such  determination  shall be the maximum amount  sufficient for any
settlement of outstanding  Spot or Forwards  engaged in or entered into with the
Borrower.

                       (f) The Borrower agrees that Lender's  internal books and
records,   and  any  other  documents   required  by  Lender  to  evidence  such
indebtedness  shall be conclusive  evidence (absent manifest error) with respect
to all repayments  and repayment  dates and of the  Borrower's  indebtedness  to
Lender under the Foreign Exchange Subfacility.

                       (g)  The  Borrower  hereby   unconditionally   agrees  to
indemnify  the  Lender  and hold the Lender  harmless  from any and all  losses,
claims or liabilities  arising from any transactions or occurrences  relating to
the Foreign Exchange Subfacility,  including any loss or claim due to any action
taken or omitted by any third party which is not an Affiliate of the Lender. The
Borrower's  unconditional  obligation  to the Lender  shall not be  modified  or
diminished for any reason or in any amount whatsoever.  The Borrower agrees that
any  action  taken  by the  Lender  in  connection  with  the  Foreign  Exchange
Subfacility,  if taken in good faith,  shall be binding  upon the  Borrower  and
shall  not  impose  any  resulting   liability  on  the  Lender.   The  Borrower
specifically  acknowledges and agrees that all  transactions  hereunder shall be
undertaken solely on the order of, and at and for the risk of the Borrower.  The
Borrower further  acknowledges and understands that Lender may engage in similar
transactions  for its own  account or  provide  similar  facilities  for its own
customers.  The Borrower  recognizes  and  acknowledges  that Lender may, to the
extent  permitted  by law,  engage in  transactions  and take action for its own
account  or  in  the  performance  of  its  duties  to  other  customers,  which
transactions  or action  may differ  from the  transactions  engaged  in, or the
action  taken  (including,  without  limitation,  the  timing and nature of such
transaction or action) with respect to the Borrower's  account.  Nothing in this
Agreement  shall be deemed to impose upon Lender any  obligation  to cause to be
engaged in, for the Borrower's account or the account of any other customer, any
transaction  which Lender may engage in for its own account or recommend for the
account of any other customer.

         4.       Conditions Precedent to Borrowing.

                  4.1.  Advance.   In  addition  to  any  other  requirement  or
condition  precedent set forth  herein,  Lender shall not be required to make an
initial advance on any Loan,  issue an initial Letter of Credit or engage in any
transactions  under the Foreign Exchange  Subfacility,  unless and until, in the
sole  discretion  of Lender,  each of the following  conditions  shall have been
satisfied:

                       (a) Loan Documents. The Borrower, the Guarantors and each
other  party to any Loan  Documents,  as  applicable,  shall have  executed  and
delivered this Agreement, any Interest Rate Swap Agreement, the Letter of Credit
Agreement,  the Term  Note,  the  Revolving  Credit  Note,  each  Guaranty,  any
subordination  agreements,  all Forms UCC-1,  the Notes and other  required Loan
Documents, all in form and substance satisfactory to the Lender.

                       (b) Supporting Documents.  The Borrower shall cause to be
delivered to the Lender the following documents:

                          (i)  A  copy  of  the   Certificate   or  Articles  of
               Incorporation  of the  Borrower  and  each  Guarantor  and a good
               standing or active  status  certificate  of the Borrower and each
               Guarantor, certified by the Secretary of State of each applicable
               state



                                       17
<PAGE>

               of  organization  and each  state in which  such  corporation  is
               qualified to do business;

                          (ii)  Bylaws  of  the  Borrower  and  each  Guarantor,
               certified by an officer thereof;

                          (iii) Incumbency certificate and certified resolutions
               of the board of  directors  of the  Borrower  and each  Guarantor
               authorizing  the execution,  delivery and performance of the Loan
               Documents to which each is a party;

                          (iv) UCC-11  searches and other Lien searches  showing
               no existing Liens on the  Collateral  other than the Liens of the
               Lender and Permitted  Liens,  or except as approved by the Lender
               in its sole and absolute discretion; and

                          (v) a letter to Borrower's and Guarantors' independent
               accountants,  in form and substance  satisfactory  to the Lender,
               authorizing  such accountants to disclose  information  requested
               from time to time by the Lender with  respect to the Borrower and
               Guarantors to the Lender.

                       (c)  Insurance.  The Borrower shall have delivered to the
Lender  satisfactory  evidence of insurance  meeting the requirements of Section
5.3.

                       (d)  Perfection  of  Liens.  UCC-1  financing  statements
executed by the Borrower and each  Guarantor  shall have been duly  executed and
delivered  to  Lender in a form  appropriate  for  recordation  or filing in the
manner and places  required by law to establish,  preserve,  protect and perfect
the interests and rights created or intended to be created by this Agreement and
any  other  Security  Agreement;  and all  taxes,  fees  and  other  charges  in
connection  with the  execution,  delivery  and filing of this  Agreement,  each
Security Agreement and the financing statements shall duly have been paid.

                       (e) Landlord's Waivers;  Mortgagee's  Waivers. The Lender
shall have received, in form and content satisfactory to Lender (i) waivers from
all lessors that might have landlord's  Liens on any Collateral and (ii) waivers
from all  mortgagees of the  Borrower's  and  Guarantors'  premises in which any
Collateral is located.

                       (f) Swap Agreement.  The Borrower shall have executed and
delivered  to the Lender  the  Interest  Rate Swap  Agreement,  if the  Borrower
desires to do so.

                       (g) Taxes and Expenses. All taxes, fees and other charges
in connection with the execution, recordation, filing, registration and delivery
hereof shall have been paid.

                       (h)  Commitment  Fee and  Expenses.  Borrower  shall  pay
Lender at closing a (i) commitment fee of $5,000,  (ii) all reasonable costs and
expenses  incurred  by  Lender  in  connection  herewith,  (iii) an out of state
closing  fee in the amount of $450 and a maritime  closing  fee in the amount of
$580,  and  (iii)  the  fees and  disbursements  of  counsel  to the  Lender  in
connection with this Agreement and the transactions contemplated hereby.

                       (i)  Interim  Financial  Statements.   The  most  current
interim financial statements of Borrower shall have been delivered to Lender and
shall be satisfactory to Lender.



                                       18
<PAGE>

                       (j) SEC  Filings.  All of  Borrower's  filings  with  the
Securities and Exchange  Commission  since  September 30, 2001,  shall have been
received by and shall be satisfactory to Lender.

                       (k) Trade  References.  Borrower shall have provided such
trade and credit  references to Lender as Lender shall  request,  which shall be
satisfactory to Lender.

                  4.2.  Conditions  Precedent  to  Each  Advance  of a  Loan  or
Issuance of a Letter of Credit or Purchasing  Forward  Exchange.  In addition to
any other requirement or condition precedent set forth herein,  Lender shall not
be  required  to make any  advance  of any Loan or issue any Letter of Credit or
enter  into  any Spot or  Forward  transaction  unless  and  until,  in the sole
discretion  of  Lender,  each  of  the  following  conditions  shall  have  been
satisfied:

                       (a) Prior  Conditions.  At or prior to Closing,  Borrower
shall have satisfied (i) all conditions  precedent set forth in Section 4.1, and
(ii) all conditions  precedent set forth  elsewhere in this Agreement and in any
other Loan Document.

                       (b) Advance Request. Borrower shall have delivered to the
Lender an Advance Request and Borrowing Base Certificate and other  information,
in such form and containing such information as Lender shall request.

                       (c) No Default. No Default or Event of Default shall have
occurred  or will occur  upon the making of the  advance,  the  issuance  of the
Letter of Credit in question or enter into any Spot or Forward transaction,  and
Borrower shall have delivered to Lender an officer's  certificate to such effect
which may be incorporated in the advance request.

                       (d)  Correctness of  Representations  and Compliance with
Covenants.  All  representations  and  warranties  made  by  Borrower  and  each
Guarantor  herein or otherwise in writing in connection  herewith  shall be true
and correct in all material  respects  (except  where such  representations  and
warranties are subject to a materiality caveat, in which case they shall be true
and  correct  in  all  respects,  and  except  where  such  representations  and
warranties are made as of a particular  date, in which case,  they shall be true
and correct as of such date) with the same effect as though the  representations
and  warranties  had  been  made on and as of the  proposed  Advance  Date,  and
Borrower  and each  Guarantor  shall  have  delivered  to  Lender  an  officer's
certificate  to such effect which may be  incorporated  in the Advance  Request.
Borrower and each Guarantor shall have complied in all material respects (except
where such  covenants  are subject to a  materially  caveat,  in which case they
shall have been  complied  with in all  respects)  with all of its covenants and
agreements set forth in any Loan Document, and Borrower and each Guarantor shall
have delivered to Lender an officer's  certificate to such effect,  which may be
incorporated in the Advance Request.

                       (e)  No   Injunction,   Etc.   No   action,   proceeding,
investigation,  regulation or legislation shall have been instituted, threatened
or proposed before any court, governmental agency or legislative body to enjoin,
restrain,  or prohibit,  or to obtain damages in respect of, or which is related
to or arises  out of this  Agreement  or the  consummation  of the  transactions
contemplated hereby, or which, in the Lender's reasonable discretion, would make
it inadvisable to consummate any transactions contemplated by this Agreement.

                       (f) No Adverse Change.  There shall have been no Material
Adverse  Change from such condition as it existed on the date of the most recent
financial  statements of the Borrower  delivered to the Lender prior to the date
hereof, and no Material Adverse Effect shall have occurred.



                                       19
<PAGE>

                       (g) Further  Assurances.  Borrower  shall have  delivered
such further documentation, opinions, certificates, agreements and assurances as
Lender may reasonably require.

                  4.3. Waiver of Conditions  Precedent.  If the Lender makes any
Loan or  issues  any  Letter  of  Credit  or  enters  into any  Forward  or Spot
transaction  hereunder  prior  to the  fulfillment  of  any  of  the  conditions
precedent  set forth in this  Section 4, the making of such Loan or the issuance
of such Letter of Credit  shall  constitute  only an  extension  of time for the
fulfillment of such condition and not a waiver  thereof,  and the Borrower shall
thereafter fulfill each such condition promptly.

         5.       Covenants  of the Borrower.  The Borrower covenants and agrees
that from the date hereof and until payment in full of the  Indebtedness  unless
the Lender shall otherwise  consent in writing,  it will comply,  and will cause
each Guarantor to comply, with the following:

                  5.1. Use of Loan Proceeds.  The proceeds of the Loans shall be
used only to finance  working capital of the Borrower and the  Subsidiaries  and
for the purposes  permitted  herein,  including  the payment of all  outstanding
obligations under the Existing  Facility,  and Borrower shall furnish the Lender
all evidence that it may require with respect to such use.

                  5.2.  Maintenance of Business and  Properties.  Borrower shall
and shall cause each  Guarantor to at all times  maintain,  preserve and protect
all  Collateral  and all the remainder of their  respective  properties  used or
useful in the conduct of their  respective  business,  and keep the same in good
repair, working order and condition,  and from time to time make, or cause to be
made,  all  material  needful  and  proper  repairs,   renewals,   replacements,
betterments  and  improvements  thereto  so  that  the  business  carried  on in
connection  therewith may be conducted properly and in accordance with standards
generally  accepted in businesses  of a similar type and size at all times,  and
maintain and keep in full force and effect all licenses and permits necessary to
the proper conduct of their respective businesses.

                  5.3.  Insurance.  Borrower  shall  maintain  (or  cause  to be
maintained) and pay for insurance upon all  Collateral,  wherever  located,  and
otherwise   covering   casualty,   hazard,   workers'   compensation,   business
interruption,  public  liability  and such other risks (as is  customary  in the
businesses  in which  Borrower or any  Guarantor is engaged) and in such amounts
and with such  insurance  companies as shall be reasonably  satisfactory  to the
Lender and in compliance with law. The Borrower and each Guarantor shall deliver
such  certificates  of insurance  to the Lender with loss  payable  endorsements
naming the Lender as loss payee  thereunder in form  reasonably  satisfactory to
the Lender.  Borrower and each Guarantor shall maintain and pay for insurance in
such  amount,  with  such  companies  and in such  form as shall  be  reasonably
satisfactory to the Lender insuring the Borrower and each Guarantor  against any
claims,  suits,  loss or damages suffered by any Person on any property owned or
leased by the Borrower or any  Guarantor and against such other  casualties  and
contingencies  as is customary in the business in which the Borrower is engaged,
and deliver  such  certificates  of  insurance  to the Lender with  satisfactory
endorsements naming the Lender as additional insured thereunder.  Each policy of
insurance  shall  contain a clause  requiring  the insurer to give not less than
thirty (30) days' prior written notice to the Lender before any  cancellation of
the  policies  for any reason  whatsoever  and a clause that the interest of the
Lender  shall  not be  impaired  or  invalidated  by any act or  neglect  of the
Borrower or any Guarantor or the owner of the property nor by the  occupation of
the premises  wherein such property is located for purposes more  hazardous than
are permitted by said policy.  The Borrower  hereby  directs all insurers  under
such  policies  of  insurance  on the  Collateral  to pay all  proceeds  payable
thereunder  directly to the Lender  following an Event of Default.  The Borrower
hereby irrevocably makes, constitutes and appoints the Lender (and all officers,
employees or agents  designated by the Lender) as the Borrower's true and lawful
attorney (and  agent-in-fact) for the purpose of making,  settling and



                                       20
<PAGE>

adjusting  claims under such  policies of  insurance,  endorsing the name of the
Borrower  on any check,  draft,  instrument  or other  item of  payment  for the
proceeds of such  policies of insurance  and for making all  determinations  and
decisions with respect to such policies of insurance;  provided,  however,  that
such  power  shall not be used  until  after the  occurrence  of and  during the
continuation  of an Event of  Default.  Prior to the  occurrence  of an Event of
Default,  neither the Borrower nor any Guarantor will make, settle or adjust any
material  claim without the prior written  consent of the Lender,  which consent
will not be unreasonably  withheld. If the Borrower fails to obtain and maintain
any of the policies of insurance or to pay any premium in whole or in part, then
the Lender may, at the  Borrower's  expense,  without  waiving or releasing  any
obligation or default by the Borrower hereunder, procure the same, but shall not
be required to do so. All sums so disbursed by the Lender,  including attorneys'
fees, court costs, expenses and other charges related thereto,  shall be payable
on demand by the  Borrower  to the Lender and shall be  additional  Indebtedness
hereunder secured by the Collateral.

                  5.4.  Notice of Default.  Borrower shall provide to the Lender
immediate notice of (a) the occurrence of a Default or an Event of Default,  (b)
any material  threatened or pending  litigation or material  changes in existing
litigation  or any  material  judgment  against the  Borrower,  its assets,  any
Guarantor or the assets of any  Guarantor,  (c) any  material  damage or loss to
property  or  material  labor  controversy  with  respect  to  Borrower  or  any
Guarantor,  (d) any notice from taxing authorities as to claimed deficiencies or
any tax  Lien or any  notice  relating  to  alleged  ERISA  violations,  (e) any
Reportable  Event,  as  defined in ERISA,  (f) any  rejection,  return,  offset,
dispute, loss or other circumstance reasonably likely to have a material adverse
effect on the Collateral (or Lender's Lien or priority  therein) or the Borrower
or  any  Guarantor  or  their  respective  businesses,  operations,  conditions,
properties or prospects, (g) any loss or threatened loss of material licenses or
permits,  (h)  any  notice  of any  material  violation  of  any  law,  rule  or
regulations  and (i) the  occurrence of any event which is reasonably  likely to
have a Material Adverse Effect.

                  5.5.  Inspections.  Borrower and each  Guarantor  shall permit
inspections  of the  Collateral  and the  records  pertaining  thereto,  at such
reasonable times and in such manner as may be reasonably  required by the Lender
and shall further permit such inspection, review and audits of its other records
and its  properties  (with  such  frequency  and at such times as the Lender may
reasonably request) by the Lender as the Lender may reasonably deem necessary or
desirable  from time to time. The  reasonable  cost of such audits,  reviews and
inspections shall be borne by the Borrower.

                  5.6. Financial Information.  Borrower shall maintain its books
and records in  accordance  with GAAP and shall  furnish to Lender the following
periodic information in form reasonably satisfactory to Lender:

                  (a) Within forty-five (45) days after the close of each fiscal
quarter, beginning with the current fiscal quarter,  consolidated balance sheets
of the  Borrower  and  each  Guarantor  as of the  close  of such  quarter,  and
consolidated  statements  of  income  and  cash  flows  (along  with  supporting
schedules  and in detail  reasonably  acceptable to Lender) for such quarter and
for that portion of the fiscal year to date then ended,  prepared in  accordance
with  GAAP  (subject  to  ordinary  course,   non-material  audit  and  year-end
adjustments), applied on a basis consistent with that of the preceding period or
containing  disclosure  of the effect on the  financial  position  or results of
operations  of any  change  in the  application  of  accounting  principles  and
practices during the period, and certified by the Chief Financial Officer of the
Borrower; and within thirty (30) days after the close of each quarter, beginning
with the  current  quarter,  agings of  Accounts  of  Borrower  by invoice  date
(including  summary reports as prepared by Borrower) and an inventory listing of
Borrower,  all in such detail and with such supporting schedules and information
as shall be reasonably required by Lender;



                                       21
<PAGE>

                       (b) Within one  hundred  and twenty  (120) days after the
close of each fiscal year of the Borrower and  Guarantors  audited  consolidated
balance sheets of the Borrower and each Guarantor as of the close of such fiscal
year and audited  consolidated  statements  of income and retained  earnings and
cash flows,  for the fiscal year then ended,  prepared in accordance  with GAAP,
applied on a basis  consistent with the preceding year or containing  disclosure
of the effect on financial position or results of operation of any change in the
application  of accounting  principles  and practices  during the year,  and (i)
accompanied  by a report  thereon  (from  Borrower's  and  Guarantors'  existing
independent  certified  public  accounting firm or another  regional or national
accounting  firm  reasonably  acceptable to Lender),  containing an  unqualified
opinion,  without scope limitations imposed by the Borrower, from such firm, and
(ii) within thirty (30) days after delivery of the financial statements required
under this subsection (b), a copy of each "management letter", if any, from such
accountants to the Borrower and Guarantors in connection with such  accountants'
audit and management-prepared  financial projections with respect to next fiscal
year,  in form and  detail  reasonably  acceptable  to  Lender,  along with such
supporting  schedules and other  information  and  certificates  as Lender shall
reasonably request.

                       (c)  Concurrently  with  the  delivery  of the  financial
statements  described in subsection  (b) above,  a certificate  from the firm of
independent certified public accountants that in making their examination of the
financial  statements  of the  Borrower  and  Guarantors,  no  knowledge  of the
occurrence or existence of any Default or any Event of Default, was disclosed by
their  examination or a statement  specifying the nature and period of existence
of any such condition or event;

                       (d)  Concurrently  with  the  delivery  of the  financial
statements  described in subsections  (a) and (b) above, a certificate  from the
Chief  Financial  Officer of the Borrower  certifying to the Lender on behalf of
Borrower that to the best of his knowledge,  Borrower kept, observed,  performed
and fulfilled each and every covenant, obligation and agreement binding upon the
Borrower  and each  Guarantor  contained  in this  Agreement  and the other Loan
Documents,  and that no Default or Event of Default has  occurred or  specifying
any  such  Default  or  Event  of  Default,  together  with  financial  covenant
compliance  worksheet,  in  form  satisfactory  to the  Lender,  reflecting  the
computation  of the  financial  covenants set forth in Section 5.25 hereof as of
the end of the period covered by such financial statements;

                       (e)  Upon  the  Lender's  written  request,   such  other
information  about the  Collateral or the financial  condition and operations of
the Borrower as the Lender may from time to time reasonably request.  The Lender
may reasonably  require more frequent  rendering of the reports and certificates
described in (a) through (d) above.

                       (f) Within  thirty (30) days of the filing  thereof  with
any  governmental  authority,   Borrower  shall  deliver  to  Lender  copies  of
Borrower's and each Guarantor's federal,  state and local income tax returns, as
applicable.

                       (g) Within  forty-five  (45) days after the close of each
month,   beginning  with  the  current  month,  a  Borrowing  Base   Certificate
substantially  in the form of Exhibit A ("Borrowing  Base  Certificate"),  along
with the latest month-end accounts receivable aging report and within forty-five
(45) days after the close of each quarter beginning with the current quarter,  a
current  inventory  listing,  in each  case  certified  as true and  correct  by
Borrower's Chief Financial Officer.

                       (h) Within two  Business  Days after any report or filing
is made with the Securities and Exchange Commission by Borrower,  a copy of such
report or filing.



                                       22
<PAGE>

                       (i)  Within   two   Business   Days  after  any   written
communication is sent to Borrower's shareholders, a copy of such correspondence.

                  5.7. [INTENTIONALLY OMITTED].

                  5.8.  Liens.  Borrower shall not create or permit to exist any
Liens on any of the Collateral, except Permitted Liens.

                  5.9.  Redemptions.  Neither  Borrower nor any Guarantor  shall
purchase,  redeem or otherwise acquire any stock or other equity interests,  and
neither of them shall declare or pay any dividend or  distribution,  in any case
that would be reasonably likely to cause Borrower to not comply at any time with
Section 5.25.

                  5.10.  Merger,  Sale,  Etc.  Borrower and each Guarantor shall
maintain its corporate existence,  good standing and necessary qualifications to
do business,  and shall not, except as expressly agreed to by Lender in writing,
(i) merge or consolidate with or into any Person or acquire all or substantially
all of the assets of, or any equity  interest  of, any  Person,  (ii) permit any
Person  to  transfer  to it,  directly  or  indirectly,  any of its  issued  and
outstanding stock or securities  (except as permitted in Section 5.11), or (iii)
permit the sale, lease, assignment or other disposition of any Collateral or any
of its or any Guarantor's other assets (other than sales of obsolete or worn-out
Equipment and sales of Inventory in the ordinary  course of business  consistent
with past  practices or other than sales of  Equipment  for less than $50,000 in
the aggregate in any fiscal year).

                  5.11.  Loans,   Guaranties  and  Other  Investments.   Neither
Borrower nor any  Guarantor  shall make or permit to exist any advances or loans
to, or guarantee  or become  contingently  liable,  directly or  indirectly,  in
connection with the obligations, leases, stock or dividends of, or own, purchase
or make any commitment to purchase any stock, bonds, notes,  debentures or other
securities of, or any interest in, or make any capital  contributions to (all of
which are  sometimes  collectively  referred  to herein as  "Investments"),  any
Person except for (a) purchases of direct obligations of the federal government,
(b) deposits in commercial  banks, (c) commercial paper of any U.S.  corporation
having at least an A rating by Moody's  Investors  Service,  Inc.  or Standard &
Poor's Corporation,  (d) endorsement of negotiable instruments for collection in
the  ordinary  course of business,  (e)  advances in the ordinary  course of the
Borrower's  business not in the aggregate in excess of $50,000, or (f) overnight
bank repurchase agreements.

                  5.12.  Change in Business.  Neither Borrower nor any Guarantor
shall,  except as  expressly  agreed to in  writing  by  Lender,  enter into any
business  which is  substantially  different  from the business or businesses in
which it is presently engaged.

                  5.13. Accounts. Neither Borrower nor any Guarantor shall sell,
assign or discount any of its Accounts or Chattel Paper or any promissory  notes
or other  Payment  Intangibles  held by it other than the discount of promissory
notes or other  Payment  Intangibles  in the  ordinary  course of  business  for
collection;  and  Borrower  shall  notify  Lender  promptly  in  writing  of any
discount,  offset or other  deductions  not shown on the face of any  Account of
Borrower or any Guarantor  invoice in excess of $50,000 and any dispute over any
Account in excess of $50,000,  and any information known to Borrower relating to
any  material  adverse  change in any Account  Debtor's  financial  condition or
ability to pay its obligations.



                                       23
<PAGE>

                  5.14.  Transactions  with  Affiliates.  Except as set forth on
Schedule 5.14,  neither Borrower or any Guarantor shall,  directly or indirectly
purchase,  acquire or lease any property  from,  or sell,  transfer or lease any
property  to, or  otherwise  deal with,  in the  ordinary  course of business or
otherwise,  any Affiliate in an aggregate amount  exceeding  $50,000 at any time
outstanding; provided, however, that any acts or transactions prohibited by this
Section 5.14 may be performed or engaged in, after written notice to the Lender,
if upon  terms not less  favorable  to the  Borrower  than if no such  Affiliate
relationship existed.

                  5.15.  No Change in Name or  Offices;  Removal of  Collateral.
Neither Borrower nor any Guarantor shall, (a) change its name or the location of
its chief  executive  office or other  office where books or records are kept or
(b) permit  any  Inventory  or other  tangible  Collateral  to be located at any
location other than as specified on Schedule 2.9.

                  5.16. No Sale,  Leaseback.  Neither Borrower nor any Guarantor
shall enter into any sale-and-leaseback or similar transaction.

                  5.17. Margin Stock. Borrower shall not use any proceeds of any
Loan to purchase or carry any margin stock  (within the meaning of  Regulation U
of the Board of Governors of Federal  Reserve System) or extend credit to others
for the purpose of purchasing or carrying any margin stock.

                  5.18.   Payment  of  Taxes,  Etc.  Neither  Borrower  nor  any
Guarantor shall pay before delinquent all of its debts and taxes except that the
Lender shall not unreasonably  withhold its consent to nonpayment of taxes being
actively  contested in good faith and in accordance  with law (provided that the
Lender  may  require  bonding  or other  assurances  of any  amount in excess of
$50,000).

                  5.19. Comply with ERISA.  Borrower and each Guarantor shall at
all times make  prompt  payment of  contributions  required  to meet the minimum
funding  standards set forth in ERISA with respect to any employee benefit plan;
promptly  after the filing  thereof,  furnish to the Lender copies of any annual
report required to be filed under ERISA in connection with each employee benefit
plan;  not withdraw from  participation  in, permit the  termination  or partial
termination  of, or permit the occurrence of any other event with respect to any
employee  benefit plan that could  result in  liability  to the Pension  Benefit
Guaranty Corporation; notify the Lender as soon as practicable of any Reportable
Event and of any  additional  act or condition  arising in  connection  with any
employee benefit plan which the Borrower  believes might constitute  grounds for
the termination  thereof by the Pension Benefit Guaranty  Corporation or for the
appointment  by the  appropriate  United States  district  court of a trustee to
administer such plan; and furnish to the Lender upon the Lender's request,  such
additional  information  about any employee  benefit  plan as may be  reasonably
requested.

                  5.20. Compliance;  Hazardous Materials. Except as disclosed on
Schedule  2.17,  Borrower  and  each  Guarantor  shall  comply  with  all  laws,
regulations,  ordinances and other legal requirements,  specifically  including,
without  limitation,  ERISA,  all  securities  laws  and all  laws  relating  to
hazardous  materials  and the  environment.  Neither  Borrower nor any Guarantor
shall engage in the storage, manufacture, disposition, processing, handling, use
or  transportation  of any hazardous or toxic materials,  not in compliance with
applicable laws and regulations.

                  5.21.  Subsidiaries.  Neither Borrower nor any Guarantor shall
acquire or form any Subsidiary that would result in a Material Adverse Change.

                  5.22.  Compliance  with  Assignment  Laws.  Borrower  and each
Guarantor shall, if reasonably  required by the Lender,  comply with the Federal
Assignment of Claims Act and


                                       24
<PAGE>
any other  applicable  law relating to assignment  of  government  contracts and
Accounts arising from the performance thereof.

                  5.23.  Further  Assurances.  Borrower and each Guarantor shall
take such further  action and provide to the Lender such further  assurances  as
may be reasonably  requested by the Lender to ensure  compliance with the intent
of this Agreement and the other Loan Documents.

                  5.24. Withholding Taxes. Borrower and each Guarantor shall pay
as and when due all employee  withholding,  FICA and other payments  required by
federal, state and local governments with respect to wages paid to employees.

                  5.25. Financial  Covenants.  Borrower shall at all times be in
compliance with the following financial covenants:

                       (a) Debt Service  Coverage  Ratio.  As of the last day of
each fiscal year of Borrower, Borrower shall not permit the ratio of (i) the sum
of  consolidated  net  income  after tax for the  fiscal  year then  ended  plus
consolidated  depreciation  and amortization for the fiscal year then ended less
dividends  declared or paid by  Borrower  for the fiscal year then ended to (ii)
current maturities of long-term debt (including capitalized leases and excluding
Revolving Loans) to be less than 1.25 to 1.0; provided, however, that such ratio
shall not be less than 1.00 to 1.0 for the fiscal year 2002 of the Borrower

                       (b) Leverage. Borrower shall not, at any time, permit the
ratio of Consolidated  Total  Liabilities to Consolidated  Tangible Net Worth to
exceed 2.0 to 1.0.

                  5.26.  Lender Account.  Borrower and each Guarantor  shall, at
all times,  maintain with Lender its primary  operating and  depository  account
including cash management accounts.

                  5.27. Fiscal Year; Accounting Method. Neither Borrower nor any
Guarantor  shall change its fiscal year, or change its method of accounting to a
method inconsistent with current practices.

                  5.28. Default on Other  Obligations.  Neither Borrower nor any
Guarantor  shall  default on any material  contract or  obligation  to any other
Person nor shall either of them default in the timely and due performance of any
material  obligation to any other Person relating to  indebtedness  for borrowed
money.

                  5.29.  SEC  Filing.   Borrower  shall  timely  file  with  the
Securities  and  Exchange  Commission  all filings  and reports  required by the
Securities Act of 1933, as amended,  and under applicable law in order for it to
continue to be a public  company,  and no such  filings and reports will contain
any untrue  statement of a material  fact or omit a material  fact  necessary to
make the statement made therein not misleading.

                  5.30. Compliance with Laws. Borrower and each Guarantor shall,
in all material respects, at all times operate their business in accordance with
(and otherwise be in material  compliance  with) all applicable  laws, rules and
regulations.

                  5.31. Chattel Paper.  Neither Borrower,  any Guarantor nor any
of the in  customers  shall  execute  any  security  agreement,  note  or  other
instrument,  agreement or document  evidencing or securing any sale by Borrower,
unless such security agreement, note or other instrument,  agreement or document
constitutes Chattel Paper; and none of Borrower's or any Guarantor's Accounts or
other receivables shall be represented by any security agreement,  note or other
instrument, agreement or document unless it is Chattel Paper.



                                       25
<PAGE>

         6.       Default.

                  6.1. Events of Default. Each of the following shall constitute
an Event of Default:

                       (a) Any  representation  or warranty made by the Borrower
or any Guarantor in any Loan Document or in any certificate or report  furnished
in connection  herewith or therewith  shall have been untrue or incorrect in any
material respect when made (except where such representations and warranties are
subject to a materiality caveat, in which case they shall be true and correct in
all respects,  and except where such  representations and warranties are made as
of a particular date, in which case, they shall be a true and correct as of such
date); or

                       (b) There shall occur any failure by the  Borrower or any
Guarantor in the payment, when due, of any principal of or interest on any Note,
or under any other Loan Document; or Borrower or any Guarantor shall fail to pay
on demand any returned or dishonored  draft,  check or other item which has been
presented to Lender and for which Borrower has received provisional credit; or

                       (c) There shall occur (i) any default by the  Borrower or
any  Guarantor  in the  performance  of any  agreement,  covenant or  obligation
contained  in this  Agreement  or any  other  Loan  Document  not  provided  for
elsewhere  in this  Section 6.1 and such  Default or other  default is not cured
within seven Business Days of notice from Lender,  or (ii) a "Potential Event of
Default" or "Event of Default",  as such terms are defined in the Interest  Rate
Swap Agreement, if an Interest Rate Swap Agreement has been executed; or

                       (d) The  Borrower  or any  Guarantor  shall be in default
under  any Debt  owed to any other  obligee  in an amount in excess of  $50,000,
which default entitles the obligee to accelerate any such Debt or exercise other
remedies with respect thereto; or

                       (e) The Borrower or any Guarantor  shall (i)  voluntarily
liquidate or terminate operations or apply for or consent to the appointment of,
or the taking of possession by, a receiver,  custodian, trustee or liquidator of
Borrower or any Guarantor or of all or of a substantial part of its assets, (ii)
admit in writing its inability,  or be generally unable, to pay its debts as the
debts  become  due,  (iii)  make a general  assignment  for the  benefit  of its
creditors,  (iv) commence a voluntary case under any federal  bankruptcy law (as
now or hereafter in effect),  (v) file a petition  seeking to take  advantage of
any other law relating to bankruptcy, insolvency, reorganization, winding-up, or
composition  or adjustment of debts,  or (vi) take any corporate  action for the
purpose of effecting any of the foregoing; or

                       (f) Without  its  application,  approval  or  consent,  a
proceeding  shall be commenced and remain  undismissed or unstayed for more than
sixty (60) days, in any court of competent jurisdiction,  seeking, in respect of
the Borrower or any Guarantor,  any remedy under any federal  bankruptcy law, or
any law pertaining to liquidation,  reorganization,  dissolution, winding-up, or
composition or  readjustment  of debt, or seeking the  appointment of a trustee,
receiver,  liquidator  or the like with respect to the  Borrower,  or any of its
assets or other like relief  under any law relating to  bankruptcy,  insolvency,
reorganization, winding-up, or composition or adjustment of debts; or

                       (g) Any Lien of the Lender  hereunder  or under any other
Security  Agreement  shall not constitute a perfected first priority Lien in the
Collateral thereby encumbered, subject only to Permitted Liens; or



                                       26
<PAGE>

                       (h) A judgment,  writ of  garnishment  or  attachment  in
excess of $50,000 shall be rendered against the Borrower or any Guarantor or any
of their assets and shall remain undischarged, undismissed and unstayed for more
than twenty (20) days; or

                       (i) The Borrower or any Guarantor is enjoined, restrained
or in any way  prevented by the order of any court or  governmental  entity from
conducting any material part of its business; or

                       (j) The  Borrower  or any  Guarantor  shall  cease  to be
Solvent,  or  ceases  to  conduct  any  material  part  of its  business  as now
conducted; or

                       (k) There shall occur any Material Adverse Change; or

                       (l) A notice  of  lien,  levy or  assessment  is filed of
record with respect to all or any portion of the  Borrower's or any  Guarantor's
assets by the  United  States,  or any  department,  agency  or  instrumentality
thereof, or by any state, county,  municipal or other governmental agency, or if
any taxes or debts in excess of $50,000 owing at any time or times  hereafter to
any one of them  becomes a Lien upon the  Collateral  or any other  asset of the
Borrower and the same is not  dismissed,  released,  discharged,  or bonded in a
manner satisfactory to Lender within ten (10) days after the same becomes a Lien
or, in the case of ad valorem  taxes,  prior to the last day when payment may be
made without penalty; or

                       (m) Any of the Loan Documents for any reason ceases to be
in full force and effect or is declared to be null and void,  or the Borrower or
any Guarantor's  denies that it has any further  liability  (including,  but not
limited to any full or partial  repudiation or revocation of any Guaranty) under
any Loan Document to which it is a party, or gives notice to such effect; or

                       (n) The loss,  suspension or revocation of, or failure to
renew,  any  material  license or permit now held or  hereafter  acquired by the
Borrower or any Guarantor's; or

                       (o) The  occurrence of any of the following  events:  (i)
the  happening  of a  Reportable  Event with  respect  to any profit  sharing or
pension  plan of the  Borrower  governed by ERISA  which has a Material  Adverse
Effect;  (ii) the  termination  of any such plan  which has a  Material  Adverse
Effect;  (iii) the  appointment  of a trustee by an  appropriate  United  States
District  Court to  administer  any such plan;  or (iv) the  institution  of any
proceedings by the Pension  Benefit  Guaranty  Corporation to terminate any such
plan or to appoint a trustee to administer any such plan;

                       (p) The occurrence of any material  casualty or damage to
the Collateral; or

                       (q)  William  Steiner  and  Michael  Steiner  and/or  any
Steiner  family  trust  shall  fail to own  (beneficially  and of record) in the
aggregate,  at least  51% of each  outstanding  class and  series of  Borrower's
equity securities (including all securities convertible into equity securities);
or any Person other than Borrower shall own  (beneficially and of record) any of
any Guarantor's  equity  securities  (including all securities  convertible into
equity securities);

                  6.2.  Acceleration  of the  Indebtedness.  Without  in any way
limiting  the right of the  Lender  to  demand  payment  of any  portion  of the
Indebtedness  (a) upon and  after an Event of  Default  (other  than an Event of
Default specified in Subsections 6.1(e) or (f)), all of the Indebtedness may, at
the option of the Lender,  and without  notice or legal  process of any kind, be
declared,  and immediately shall become, due and payable,  and (b) Borrower upon
and after



                                       27
<PAGE>


the occurrence of an Event of Default  specified in  Subsections  6.1(e) or (f),
all of the  Indebtedness  shall  automatically  become due and payable,  without
demand,  notice  or legal  process  of any kind,  anything  in any Note or other
instrument or document evidencing any such Indebtedness or in the Loan Documents
or in any other  agreement  to the contrary  notwithstanding.  If any Default or
Event of Default occurs,  Lender shall have no obligation to make any additional
advances of Loans or issue or accept additional  Letters of Credit or enter into
any further Spot or Forward transactions.

                  6.3.   Default  Rate.  Upon  the  occurrence  and  during  the
continuation of an Event of Default, all of the Indebtedness shall bear interest
at the Default Rate.

                  6.4. Rights and Remedies. Upon and after the occurrence of any
Event of Default,  the Lender  shall have,  in addition to all other  rights and
remedies  which the  Lender  may have  under  this  Agreement,  the  other  Loan
Documents,  and applicable law, the following rights and remedies,  all of which
may be exercised with or without further notice to the Borrower:  (a) all of the
rights and remedies of a secured  party under  applicable  law; (b) to foreclose
the Liens created under this Agreement and the other Loan Documents or under any
other agreement relating to the Collateral,  by any available judicial procedure
or without judicial process;  (c) to enter any premises where the Collateral may
be located,  through  self-help  and without  judicial  process,  without  first
obtaining a final judgment or giving the Borrower  notice and  opportunity for a
hearing  on the  validity  of the  Lender's  claim,  for the  purpose  of taking
possession or removing the same; and/or (d) to sell, assign, lease, or otherwise
dispose of the Collateral or any part thereof, either at public or private sale,
in lots  or in  bulk,  for  cash,  on  credit  or  otherwise,  with  or  without
representations or warranties, and upon such terms as shall be acceptable to the
Lender,  in its sole discretion,  and the Lender may bid or become the purchaser
at any such  public  sale,  free  from any right of  redemption  which is hereby
expressly waived by the Borrower,  and the Lender shall have the option to apply
or be credited  with the amount of all or any part of the  Indebtedness  against
the purchase price bid by the Lender at any such sale. The Borrower  agrees that
the Lender has no obligation to preserve rights to the Collateral  against prior
Persons or to marshall any Collateral for the benefit of any Person.  The Lender
is  hereby  granted  a  license  or other  right  to use,  without  charge,  the
Borrower's  labels,  patents,  copyrights,  rights  of use of  any  name,  trade
secrets, trade names,  trademarks,  and advertising matter, or any property of a
similar nature, as it pertains to the Collateral,  in completing  production of,
advertising for sale, and selling any Collateral and the Borrower's rights under
all licenses and franchise  agreements shall inure to the Lender's benefit;  and
in each instance, Lender shall only utilize such license after the occurrence of
an Event of Default.  In addition,  the Borrower agrees that in the event notice
is necessary under  applicable law, written notice mailed to the Borrower in the
manner specified herein five (5) days prior to the date of public sale of any of
the  Collateral  or prior to the date  after  which  any  private  sale or other
disposition  of the  Collateral  will  be  made  shall  constitute  commercially
reasonable  notice to the Borrower.  Upon the occurrence of an Event of Default,
the Lender  shall also have the right to seek the  appointment  of a receiver to
take possession of and operate and dispose of Borrower's assets. The Lender may,
at any time during the  continuance  of an Event of Default,  and at  Borrower's
expense,  employ and maintain  custodians at the  Borrower's  premises who shall
have full  authority to protect  Lender's  interests.  Upon the  occurrence  and
during the  continuation  of an Event of Default,  the Borrower  authorizes  the
Lender to collect and set-off and apply  against the  Indebtedness  when due any
cash or deposit accounts in its possession, and any refund of insurance premiums
or any insurance proceeds payable on account of the loss or damage to any of the
Collateral  and  irrevocably  appoints  the  Lender as its  attorney-in-fact  to
endorse any check or draft or take other action  necessary to obtain such funds.
All or any part of the  Collateral  may be  liquidated  and sold by  Lender  for
failure of Borrower to pay any of the Indebtedness, regardless of whether any of
the Loans have been  accelerated or whether the Interest Rate Swap Agreement has
been  terminated  early.  Notwithstanding  anything  to the  contrary  set forth
herein,  Collateral  may be  liquidated  upon



                                       28
<PAGE>

Borrower's failure to pay any Indebtedness on a timely basis, whether or not any
acceleration  has  occurred  or  the  Interest  Rate  Swap  Agreement  has  been
terminated early.

                  6.5.  Application of Proceeds.  After an Event of Default, the
net cash proceeds  resulting from the collection,  liquidation,  sale,  lease or
other  disposition  of the  Collateral  shall be applied  first to the  expenses
(including  all  reasonable  attorneys'  fees) of  retaking,  holding,  storing,
processing  and preparing for sale,  selling,  collecting,  liquidating  and the
like, and then to the satisfaction of all Indebtedness. The Borrower irrevocably
waives  the  right  to  direct  the  application  of any  and all  payments  and
collections  at any time or times  hereafter  received  by the Lender from or on
behalf of the Borrower,  and the Borrower does hereby irrevocably agree that the
Lender shall have the continuing exclusive right to apply and to reapply any and
all such payments and collections received at any time or times hereafter by the
Lender or its agent  against  the  Indebtedness  which is due and payable at the
time of such application,  in such manner as the Lender, in its sole discretion,
may determine, notwithstanding any entry by the Lender upon any of its books and
records.  The Borrower shall be liable to the Lender and shall pay to the Lender
on demand  any  deficiency  which  may  remain  after  such  sale,  disposition,
collection  or  liquidation  of the  Collateral.  The Lender  shall remit to the
Borrower  or the  Person  entitled  thereto  any  surplus  remaining  after  all
Indebtedness  have been paid in full.  If any of the  Collateral  shall  require
repairs,  maintenance,  preparation  or the  like,  or is in  process  or  other
unfinished state, the Lender shall have the right, but shall not be obligated to
perform such  repairs,  maintenance,  preparation,  processing  or completion of
manufacturing  for the purpose of putting the same in such  saleable form as the
Lender  shall deem  appropriate,  but the Lender shall have the right to sell or
dispose of the  Collateral  without such  processing.  The Borrower will, at the
Lender's  request,  assemble  all the  Collateral  and make it  available to the
Lender at places  which the  Lender  may  select,  whether  at  premises  of the
Borrower or  elsewhere,  and will make  available to the Lender all premises and
facilities of the Borrower for the purpose of the Lender's taking  possession of
the Collateral or of removing or putting the Collateral in saleable form.

                  6.6.  Appointment  of  the  Lender  as the  Borrower's  Lawful
Attorney.  The Borrower hereby irrevocably  designates,  makes,  constitutes and
appoints the Lender (and all Persons designated by the Lender) as the Borrower's
true and lawful  attorney (and  agent-in-fact)  and the Lender,  or the Lender's
agent,  may, upon and after the  occurrence  and during the  continuation  of an
Event of Default,  in the  Borrower's or the Lender's  name: (i) exercise all of
the  Borrower's  rights and remedies  with respect to the Accounts and the other
Collateral;  (ii)  take  control,  in any  manner,  of any  item of  payment  or
proceeds;  (iii) prepare,  file and sign the Borrower's name on a proof of claim
in bankruptcy or similar document  against any Account Debtor;  (iv) do all acts
and things necessary, in the Lender's sole discretion, to fulfill the Borrower's
obligations under this Agreement;  (v) endorse the name of the Borrower upon any
of the items of payment or  proceeds  referred to herein and deposit the same to
the account of the Lender on account of the Indebtedness;  (vi) endorse the name
of the Borrower upon any chattel paper, document,  instrument,  invoice, freight
bill, bill of lading or similar  document or agreement  relating to the Accounts
or  Inventory;  (vii)  use the  Borrower's  stationery  and sign the name of the
Borrower  to  verifications  of the  Accounts  and  notices  thereof  to Account
Debtors;  and (viii) use the  information,  recorded on or contained in any data
processing equipment and computer hardware and software relating to the Accounts
and  Inventory to which the  Borrower has access.  All acts of the Lender or its
designee,  except the Lender's or its  designees'  acts of gross  negligence  or
willful  misconduct,  taken pursuant to this Section 6.6 are hereby ratified and
confirmed  and the  Lender or its  designee  shall not be liable for any acts of
omission or commission nor for any error of judgment or mistake of fact or law.

                  6.7. Collections; The Lender's Right to Notify Account Debtors
and to Endorse  Borrower's Name.  Borrower hereby authorizes Lender (i) upon the
occurrence and during the  continuation of a Default or an Event of Default,  to
open  Borrower's  mail and collect  any and all



                                       29
<PAGE>

amounts due to Borrower  from  Account  Debtors;(ii)  after the  occurrence  and
during the  continuation of a Default or an Event of Default,  notify any or all
Account  Debtors that the Accounts  have been assigned to Lender and that Lender
has a security interest  therein;  and (iii) after the occurrence and during the
continuation of a Default or an Event of Default, direct such Account Debtors to
make all payments due from them to Borrower upon the Accounts directly to Lender
or to a lock box designated by Lender.  Lender shall promptly  furnish  Borrower
with a copy of any such notice  sent and  Borrower  hereby  agrees that any such
notice may be sent on  Borrower's  stationery,  in which  event  Borrower  shall
co-sign such notice with Lender.  Borrower  irrevocably  makes,  constitutes and
appoints  Lender  (and all  Persons  designated  by Lender for that  purpose) as
Borrower's true and lawful attorney (and  agent-in-fact)  to endorse  Borrower's
name on any  checks,  notes,  drafts or any  other  payment  relating  to and/or
proceeds  of the  Collateral  which  come into  either  Lender's  possession  or
control.

         7.       Security Agreement; Collateral.

                  7.1. Security Interest.

                       (a) As security  for the payment and  performance  of any
and all of the  Indebtedness  and the  performance of all other  obligations and
covenants of the Borrower hereunder and under the other Loan Documents, absolute
or contingent,  now existing or hereafter arising,  which are now, or may at any
time or times  hereafter  be owing by the  Borrower to the Lender,  the Borrower
hereby  pledges  and  assigns  to the  Lender  and gives and grants the Lender a
continuing and general  security  interest in and Lien upon and right of set-off
against,  all right,  title and  interest of the Borrower in and to the Borrower
Collateral,  whether now owned or hereafter acquired by the Borrower;  provided,
however,  that  notwithstanding  anything to the  contrary  herein,  none of the
Borrower's obligations hereunder shall be secured by real property.

                       (b) At the Lender's request, the Borrower shall cause the
execution  and  delivery  to  the  Lender,  in  form  and  substance  reasonably
satisfactory  to  the  Lender,  of all  such  agreements,  documents,  financing
statements and other writings reasonably  requested by the Lender to perfect and
maintain the perfection  and priority of its security  interests in and Liens on
the Borrower  Collateral and to consummate the other  transactions  contemplated
hereby,  and the  Borrower  shall pay all  filing  fees and  documentary  stamp,
intangible and similar taxes in connection  therewith.  The Borrower irrevocably
designates the Lender as its attorney-in-fact to effectuate the foregoing.

                       (c)  Except  as  herein or by  applicable  law  otherwise
expressly provided,  the Lender shall not be obligated to exercise any degree of
care in connection with any Borrower Collateral,  to take any steps necessary to
preserve any rights in any of the Borrower  Collateral or to preserve any rights
therein  against prior parties.  No  segregation  or specific  allocation by the
Lender of specified  items of Borrower  Collateral  against any liability of the
Borrower  shall  waive  or  affect  any Lien  against  other  items of  Borrower
Collateral or any of the Lender's options, powers or rights under this Agreement
or otherwise arising.

                       (d) All  collateral  which  the  Lender  may at any  time
acquire from any other  source as security  for the payment of any  Indebtedness
shall constitute  cross-collateral for all Indebtedness without apportionment or
designation as to particular Indebtedness, and all Indebtedness shall be secured
by all  such  collateral;  and the  Lender  shall  have the  right,  in its sole
discretion,  to determine  the order in which its rights in or remedies  against
such  collateral  are  to be  exercised  and  which  types  or  portions  of the
collateral are to be proceeded  against and the order of application of proceeds
of Borrower Collateral against particular Indebtedness.

                  7.2. Inspection of Collateral. The Borrower hereby irrevocably
consents  to any act by the Lender or its agents in entering  upon any  premises
for the  purposes of either




                                       30
<PAGE>

(i)  following  reasonable  prior  notice to Borrower  inspecting  the  Borrower
Collateral and making extracts from and copies of any books and records relating
thereto during regular business hours or (ii) taking  possession of the Borrower
Collateral at any time following the occurrence and during the  continuation  of
an Event of Default;  and the Borrower hereby waives its right to assert against
the Lender or its agents any claim based upon  trespass or any similar  cause of
action for entering  upon any  premises  where the  Borrower  Collateral  may be
located.  Following the  occurrence and during the  continuation  of an Event of
Default,   the  Borrower   irrevocably   consents  to  the  Lender's  requesting
information  pertaining  to the  Borrower  from any Person  and to the  Lender's
verifying such or any other information  pertaining to the Borrower,  including,
but not limited to the amount, quality, existence, quantity, value and condition
of any Account or any other Borrower Collateral.

                  7.3. Other Rights. The Borrower  authorizes the Lender without
affecting either the Borrower's or the Lender's  obligations  hereunder or under
any  other  Loan  Document  from  time to time to take  from any  party and hold
additional  collateral or guaranties for the payment of the  Indebtedness or any
part thereof, and to exchange, enforce, substitute or release such collateral or
guaranty of payment of the  Indebtedness  or any part  thereof and to release or
substitute  any endorser or guarantor or any party who has given any Lien on any
collateral as security for the payment of the  Indebtedness  or any part thereof
or any party in any way obligated to pay the Indebtedness or any part thereof.

                  7.4. Tangible Collateral;  Inventory. No Inventory,  Equipment
or other tangible  Borrower  Collateral  shall be commingled  with, or become an
accession  to or part of,  any  property  of any  other  Person  so long as such
property is Collateral.  No tangible Borrower  Collateral is or shall be allowed
to  become  a  fixture.   No  tangible  Collateral  shall  be  stored  with  any
warehouseman, bailee or similar party.

                  7.5.  The  Lender's  Payment of Claims  Asserted  Against  the
Collateral. In the event a Lien, other than a Permitted Lien, is asserted by any
Person  against the  Collateral  and if the Lender has given Borrower five days'
prior  written  notice and Borrower has failed to either (i) satisfy the Lien or
(ii) cause the Lien to be transferred to a bond  acceptable to the Lender,  then
the Lender may at any time after such five-day period in its discretion  without
waiving or releasing  any  obligation,  liability or duty of the Borrower  under
this  Agreement,  the other Loan  Documents  or any Default or Event of Default,
pay,  acquire  and/or accept an  assignment  of such Lien.  All sums paid by the
Lender in respect thereof and all costs, fees and expenses,  including,  without
limitation,  attorneys' fees,  court costs,  expenses and other charges relating
thereto,  which are incurred by the Lender on account thereof, shall be payable,
upon demand, by the Borrower to the Lender and shall be additional  Indebtedness
hereunder secured by the Collateral.

         8.       Term of Agreement.

                  8.1.  Term  and  Right  to  Terminate.  Subject  to the  other
provisions herein, and without prejudice to the Lender's right to DEMAND payment
of any and all Revolving  Credit Loans at any time or times,  the  provisions of
this  Agreement  shall continue in full force and effect until December 30, 2004
(the "Term").  Notwithstanding any term herein to the contrary or any other term
in any of the other Loan  Documents,  the Borrower and the Lender agree that all
Indebtedness   hereunder   shall  be  payable  in  accordance  with  Section  3.
Notwithstanding  any  provision to the contrary set forth in any Loan  Document,
the Lender may terminate the financing arrangements under this Agreement and the
Notes at any time,  upon notice to Borrower  but  without  legal  process of any
kind,  upon the occurrence and during the  continuation  of an Event of Default;
provided,  however,  that the  Lender  shall  retain the right to payment of the
Indebtedness in accordance with Section 3.



                                       31
<PAGE>

                  8.2. Effect of Termination. Without limiting the generality of
the other  provisions  regarding  Default and acceleration  hereunder,  upon the
effective date of termination,  all  Indebtedness to the Lender,  whether or not
incurred under this Agreement  (and  notwithstanding  any term of any other Loan
Document), shall become immediately due and payable,  including, but not limited
to, all Indebtedness (contingent or otherwise) with respect to any Interest Rate
Swap  Agreement  and all Letters of Credit and  Forward  and Spot  transactions.
Notwithstanding  any  provision  to the  contrary  in  any  Loan  Document,  and
notwithstanding  any such  termination,  the obligations of the Borrower and the
rights,  remedies and Liens of the Lender hereunder and under each Loan Document
shall remain in full force and effect until the Indebtedness is indefeasibly and
finally  paid and  discharged  in full and all Letters of Credit and Forward and
Spot  transactions  and the Interest Rate Swap Agreement have been terminated or
canceled  and Lender is released  from all  liability in  connection  therewith;
provided,  however,  that  Lender  shall  promptly  release  its  Liens  in  the
Collateral upon the  indefeasible and final payment and discharge in full of all
Indebtedness.

         9.       Miscellaneous.

                  9.1.  Rights and  Remedies  Cumulative;  Non-Waiver;  Etc. The
enumeration  of the Lender's  rights and remedies set forth in this Agreement is
not  intended to be  exhaustive  and the  exercise by the Lender of any right or
remedy shall not  preclude the exercise of any other rights or remedies,  all of
which shall be cumulative, and shall be in addition to any other right or remedy
given hereunder,  under the Loan Documents or under any other agreement to which
the Borrower and the Lender are now or hereafter  become  parties,  or which may
hereafter exist in law or in equity or by suit or otherwise. No delay or failure
to take  action on the part of the  Lender in  exercising  any  right,  power or
privilege  shall  operate as a waiver  thereof,  nor shall any single or partial
exercise  of any  such  right,  power or  privilege  preclude  other or  further
exercise thereof or the exercise of any other right, power or privilege or shall
be  construed  to be a waiver of any  Event of  Default.  No  course of  dealing
between the Borrower and the Lender or the Lender's employees shall be effective
to change,  modify or discharge any provision of this Agreement or to constitute
a waiver of any Event of Default.  The Lender shall not, under any circumstances
or in any event whatsoever,  have any liability for any error, omission or delay
of any kind  occurring in the  liquidation  of the Collateral or for any damages
resulting  therefrom except damages directly  attributable to the Lender's gross
negligence or willful misconduct.

                  9.2.   Survival   of    Representations;    Reinstatement   of
Indebtedness. All covenants, agreements,  representations and warranties made by
Borrower or any Guarantor in connection herewith shall survive the making of the
Loans hereunder and the delivery of the Notes,  and shall continue in full force
and effect so long as any  Indebtedness  is  outstanding.  The Borrower  further
agrees that to the extent that the  Borrower  makes a payment or payments to the
Lender,  which  payment  or  payments  or  any  part  thereof  are  subsequently
invalidated,  declared  to be  fraudulent  or  preferential,  set  aside  and/or
required  to be repaid to a  trustee,  receiver  or any  other  party  under any
bankruptcy,  insolvency or similar state or federal law, common law or equitable
cause,  then, to the extent of such payment or repayment,  the  Indebtedness  or
part  thereof  intended to be satisfied  shall be revived and  continued in full
force and effect as if such payment had not been received by the Lender.

                  9.3.   Expenses;   Indemnification.   Whether   or   not   the
transactions  contemplated by this Agreement shall be consummated,  the Borrower
will pay or  reimburse  the  Lender  upon  demand  for all  reasonable  expenses
(including,  without  limitation,  reasonable  attorneys' and paralegals'  fees,
costs and expenses)  incurred or paid by the Lender in connection  with: (a) the
preparation,  execution  and  delivery  of  this  Agreement  or the  other  Loan
Documents;  (b) charges for  examiners,  auditors  or similar  Persons  whom the
Lender may engage with respect to rendering  opinions  concerning the Borrower's
or any  Guarantor's  financial  condition  and the  condition  and  value of the
Collateral in accordance with the terms hereof; (c) any arbitration,




                                       32
<PAGE>

litigation,  contest, dispute, suit, proceeding,  enforcement or action (whether
instituted  by the  Lender  or the  Borrower  or any  other  Person)  in any way
relating to the Collateral,  this Agreement or the other Loan Documents,  or the
Borrower's  business  or  affairs;  (d) any attempt to enforce any rights of the
Lender  against the  Borrower or any other  Person which may be obligated to the
Lender by virtue  of this  Agreement  or the  other  Loan  Documents,  including
without  limitation,  the Account Debtors;  (e) any attempt to inspect,  verify,
protect,  collect,  sell,  liquidate or otherwise  dispose of the  Collateral in
accordance with the terms hereof;  (f) the filing and recording of all documents
required  by the  Lender  to  perfect  the  Lender's  Liens  in the  Collateral,
including  without  limitation,  any  documentary  stamp tax or any other  taxes
incurred  because  of such  filing  or  recording;  (g) all  costs  incurred  in
connection with any lockbox; and (h) all costs of modifying or amending any Loan
Document.  The Borrower  shall  indemnify and hold the Lender  harmless from and
against any and all  finder's or  brokerage  fees and  commissions  which may be
payable in connection with the transactions contemplated by this Agreement other
than any fees or commissions of finders or brokers engaged by the Lender. If the
Borrower  should fail to pay any tax or other amount  required by this Agreement
to be paid or which may be necessary to protect or preserve  any  Collateral  or
the Borrower's or Lender's interests  therein,  the Lender may make such payment
and the amount  thereof  shall be payable on demand,  shall bear interest at the
Default  Rate  from the date of  demand  until  paid and  shall be  deemed to be
Indebtedness  entitled  to the benefit and  security of the Loan  Documents.  In
addition,  the Borrower agrees to pay and save the Lender  harmless  against any
liability for payment of any state documentary stamp taxes,  intangible taxes or
similar taxes (including  interest or penalties,  if any) and fees which may now
or hereafter be determined to be payable with respect to the execution, delivery
or  recording  of any  Loan  Document  or the  making  of any  Advance,  whether
originally  thought to be due or not, and  regardless  of any mistake of fact or
law on the part of the Lender or the Borrower with respect to the  applicability
of such tax or fee. The provisions of this Section 9.3 shall survive  payment in
full of the Loans and termination of this Agreement.

                  9.4. Notices.  Any notice or other communication  hereunder to
any party hereto shall be by hand delivery,  facsimile transmission,  nationally
recognized  overnight  courier for next  business day delivery or  registered or
certified mail and unless otherwise provided herein shall be deemed to have been
received when  delivered  personally or three days after deposit in such mail or
with  such  courier  postage  prepaid,  addressed  to the  party at its  address
specified below (or at any other address that the party may hereafter specify to
the other parties in writing):

         The Lender:                First Union National Bank
                                    Portfolio Management Group
                                    4299 N.W. 36th Street, 4th Floor
                                    Miami Springs, Florida 33166
                                    Fax: (305) 883-4198

         With a copy to:            Stearns Weaver Miller Weissler
                                    Alhadeff & Sitterson, P.A.
                                    Suite 2200
                                    150 West Flagler Street
                                    Miami, Florida  33130
                                    Attention: Stuart D. Ames, Esquire
                                    Fax:  (305) 789-3395

         The Borrower:              Dryclean USA, Inc.
                                    290 68th Street
                                    Miami, Florida 33138


                                       33
<PAGE>

                                    Fax : (305) 751-4903
                                    Attn: Michael Steiner

                  9.5.  Successors and Assigns.  This Agreement shall be binding
upon and shall inure to the benefit of the  Borrower  and the Lender,  and their
respective successors and assigns; provided that the Borrower may not assign any
of its  rights or duties  hereunder  without  the prior  written  consent of the
Lender and any such assignment  made without such consent will be void.  Nothing
in this Agreement or any other Loan Document  shall prohibit or restrict  Lender
from pledging or assigning the Loan Documents,  including the Collateral, to any
Federal Reserve Bank in accordance with applicable law.

                  9.6. Counterparts; Construction; Gender. This Agreement may be
executed  in any  number of  counterparts  and by  different  parties  hereto in
separate  counterparts,  each of which when so executed and  delivered  shall be
deemed an original and all of which when taken together shall constitute but one
and the same instrument. Any telecopied version of a signature shall be deemed a
manually  executed and delivered  original.  This  Agreement  shall be construed
without any presumption that it be construed  against the party causing it to be
drafted.  All references in this Agreement or any of the other Loan Documents to
the  masculine,  feminine or neuter gender shall include all such genders unless
the context clearly indicates otherwise. Each representation, warranty, covenant
and agreement set forth in any Loan Document  shall be construed  independently.
The parties  acknowledge  that a Default or an Event of Default  shall be deemed
continuing  until  cured,  as  determined  by  Lender  in  accordance  with this
Agreement or any other Loan Document.

                  9.7. Powers.  All powers of attorney granted to the Lender are
coupled  with  an  interest  and  are  irrevocable  until  all  indebtedness  is
irrevocably paid in full and Lender has no further obligations hereunder.

                  9.8.  Approvals.  If this Agreement  calls for the approval or
consent of the Lender,  such approval or consent may be given or withheld in the
sole credit judgment of the Lender.

                  9.9.  Indemnification  of the  Lender.  From and at all  times
after the date of this  Agreement,  and in addition to all of the Lender's other
rights and remedies against the Borrower, the Borrower agrees to hold the Lender
harmless from, and to indemnify the Lender against, all losses,  damages,  costs
and  expenses  (including,   but  not  limited  to,  reasonable  attorneys'  and
paralegals'  fees, costs and expenses)  incurred or paid by the Lender,  whether
direct, indirect or consequential, as a result of or arising from or relating to
any suit, action or proceeding by any Person,  whether  threatened or initiated,
asserting a claim for any legal or equitable remedy against any Person under any
statute or  regulation,  including,  but not  limited  to, any  federal or state
securities or tax laws, or under any common law or equitable cause or otherwise,
arising from or in connection with the  negotiation,  preparation,  execution or
performance of, or the financing  transactions  contemplated  by, this Agreement
and the other Loan Documents or the Lender's furnishing of funds to the Borrower
pursuant   to  this   Agreement;   provided,   however,   that   the   foregoing
indemnification  shall not protect the Lender from loss, damage, cost or expense
directly  attributable to the Lender's willful  misconduct or gross  negligence.
All of the foregoing losses,  damages, costs and expenses of the Lender shall be
payable by the Borrower upon demand by the Lender, as the case may be, and shall
be additional Indebtedness hereunder secured by the Collateral.

                  9.10.  Waivers by the Borrower.  Except as otherwise  provided
for in this Agreement,  the Borrower waives (a) presentment,  demand and protest
and notice of presentment, protest, non-payment, maturity and all other notices;
(b) notice prior to taking  possession or control of the  Collateral or any bond
or security which might be required by any court prior to allowing the Lender to
exercise any of its remedies; and (c) the benefit of all valuation,



                                       34
<PAGE>

appraisement  and exemption  laws.  The Borrower  consents to all  extensions of
time,  renewals  and  postponements  of time of payment with respect to any Loan
Document  from time to time prior to or after the end of the Term or any Default
or Event of Default,  without  notice,  consent or  consideration  to any of the
foregoing.

                  9.11. Lawful Charges;  Late Charge.  Notwithstanding  anything
herein to the  contrary,  if at any time the  interest  rate  applicable  to the
Loans,  together  with all fees,  charges and other amounts which are treated as
interest on the Loans under applicable law (collectively  the "Charges"),  shall
exceed the maximum lawful rate (the "Maximum Rate") which may be contracted for,
charged, taken, received or reserved by the Lender in accordance with applicable
law,  the rate of interest  payable in respect of the Loans,  together  with all
Charges payable in respect  thereof,  shall be limited to the Maximum Rate, and,
to the extent  lawful,  the interest and Charges that would have been payable in
respect of the Loans but were not payable as a result of the  operation of these
provisions shall be cumulated and the interest and Charges payable to the Lender
in respect of other  Indebtedness  or periods shall be increased  (but not above
the Maximum Rate therefor) until such cumulated  amount,  together with interest
thereon at the Adjusted  LIBOR Market Index Rate  (Revolving)  or Adjusted LIBOR
Market Rate Index (Term),  as applicable,  to the date of repayment,  shall have
been  received by the Lender.  A late charge of five percent (5%) of any payment
required  hereunder  shall be imposed on each and every  payment,  including the
final payment due hereunder,  not received by the Lender within 10 days after it
is due.  The late  charge is not a  penalty,  but  liquidated  damages to defray
administrative  and related  expenses due to such late payment.  The late charge
shall be  immediately  due and payable and shall be paid by the  Borrower to the
Lender  without  notice or demand.  This  provision for a late charge is not and
shall not be deemed a grace  period,  and Lender has no  obligation  to accept a
late payment.  Further,  the acceptance of a late payment shall not constitute a
waiver of any Default or other default then existing or thereafter arising under
any Loan Document.

                  9.12.  Amendment.  This Agreement and the other Loan Documents
cannot be amended,  changed,  discharged  or terminated  orally,  but only by an
instrument in writing signed by the Lender and the Borrower.

                  9.13.  Severability.  In the  event  any  one or  more  of the
provisions  contained in this Agreement or in any other Loan Document  should be
held invalid,  illegal or unenforceable in any respect,  the validity,  legality
and  enforceability  of the remaining  provisions  contained  herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in  good-faith  negotiations  to replace the invalid,  illegal or  unenforceable
provisions with valid  provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

                  9.14.   Entire   Agreement.   This  Agreement  and  the  other
documents, certificates and instruments referred to herein constitute the entire
agreement  between the parties and  supersede  and rescind any prior  agreements
relating to the subject matter hereof.  In the event of any conflict between the
terms of any other Loan Document and the terms of this  Agreement,  the terms of
this Agreement shall govern.

                  9.15. Separate Legal Counsel. Borrower and each Guarantor have
been  represented  by its own  legal  counsel  (and not that of the  Lender)  in
connection with the negotiation and documentation of the Loan Documents.

                  9.16.  Right of  Setoff.  If an Event of  Default  shall  have
occurred and be continuing, the Lender is hereby authorized at any time and from
time to time, to the fullest  extent  permitted by law, to set off and apply any
and all deposits (general or special,  time or demand,  provisional or final) at
any time held and other  indebtedness  at any time owing by the



                                       35
<PAGE>

Lender to or for the credit or the  account of the  Borrower  against any of and
all the  obligations  of the  Borrower  now or  hereafter  existing  under  this
Agreement and other Loan  Documents,  irrespective  of whether or not the Lender
shall have made any demand under this Agreement or such other Loan Documents and
although such obligations may be unmatured.  The rights of the Lender under this
Section  9.16 are in  addition to other  rights and  remedies  (including  other
rights of setoff) which the Lender may have.

                  9.17.  Arbitration;  Preservation  and Limitation of Remedies.
Upon demand of any party hereto, whether made before or after institution of any
judicial proceeding, any dispute, claim or controversy arising out of, connected
with or  relating to this  Agreement  or any other Loan  Documents  ("Disputes")
between  parties to this Agreement  shall be resolved by binding  arbitration as
provided herein.  Institution of a judicial proceeding by a party does not waive
the right of that party to demand arbitration  hereunder.  Disputes may include,
without limitation, tort claims, counterclaims,  disputes as to whether a matter
is subject to arbitration,  claims brought as class actions, claims arising from
Loan  Documents  executed in the future,  or claims  arising out of or connected
with the transaction reflected by this Agreement. Arbitration shall be conducted
under and governed by the Commercial  Financial Disputes  Arbitration Rules (the
"Arbitration  Rules") of the American  Arbitration  Association  (the "AAA") and
Title 9 of the U.S.  Code.  All  arbitration  hearings shall be conducted in the
city in which the office of Lender first stated above is located.  The expedited
procedures  set  forth in Rules 51 et seq.  of the  Arbitration  Rules  shall be
applicable  to  claims of less  than  $1,000,000.  All  applicable  statutes  of
limitation shall apply to any Dispute.  A judgment upon the award may be entered
in any court  having  jurisdiction.  The panel  from which all  arbitrators  are
selected  shall be  comprised  of  licensed  attorneys.  The  single  arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general  jurisdiction,  state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single  arbitrator
may be a licensed  attorney.  Notwithstanding  the foregoing,  this  arbitration
provision  does not apply to disputes under or related to the Interest Rate Swap
Agreement.  Notwithstanding  the preceding binding arbitration  provisions,  the
parties agree to preserve,  without diminution,  certain remedies that any party
hereto may employ or exercise  freely,  independently  or in connection  with an
arbitration  proceeding or after an arbitration  action is brought.  The parties
shall  have the  right to  proceed  in any court of  proper  jurisdiction  or by
self-help to exercise or prosecute the following  remedies,  as applicable:  (i)
all rights to foreclose  against any real or personal property or other security
by exercising a power of sale granted under Loan  Documents or under  applicable
law or by judicial  foreclosure and sale,  including a proceeding to confirm the
sale;  (ii) all  rights  of  self-help  including  peaceful  occupation  of real
property and collection of rents,  set-off,  and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief,  sequestration,  garnishment,  attachment,  appointment  of receiver and
filing  an  involuntary  bankruptcy  proceeding;  and (iv)  when  applicable,  a
judgment by  confession  of judgment.  Preservation  of these  remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute.  The parties agree that they shall not have a remedy of
punitive or exemplary  damages against the other in any Dispute and hereby waive
any right or claim to punitive or  exemplary  damages they have now or which may
arise in the  future in  connection  with any  Dispute  whether  the  Dispute is
resolved by arbitration or judicially.

                  9.18.  GOVERNING LAW;  JURISDICTION AND VENUE;  WAIVER OF JURY
TRIAL.   SUBJECT  TO  THE  TERMS  OF  SECTION  9.17,  THIS  AGREEMENT  SHALL  BE
INTERPRETED, AND THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED, IN
ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW PROVISIONS) OF
THE STATE OF  FLORIDA.  SUBJECT  TO THE TERMS OF  SECTION  9.17,  AS PART OF THE
CONSIDERATION  FOR NEW VALUE THIS DAY RECEIVED,  THE BORROWER HEREBY CONSENTS TO
THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN DADE



                                       36
<PAGE>

COUNTY,  STATE OF FLORIDA,  AND CONSENTS  THAT ALL SERVICE OF PROCESS BE MADE BY
REGISTERED OR CERTIFIED  MAIL DIRECTED TO THE BORROWER AT THE ADDRESS  STATED IN
SECTION 9.4 AND SERVICE SO MADE SHALL BE DEEMED TO BE COMPLETED UPON THE EARLIER
OF ACTUAL  RECEIPT  THEREOF  OR THREE DAYS  AFTER  DEPOSIT IN THE UNITED  STATES
MAILS, PROPER POSTAGE PREPAID. SUBJECT TO THE TERMS OF SECTION 9.17, EACH OF THE
BORROWER AND THE LENDER HEREBY IRREVOCABLY AND  UNCONDITIONALLY  WAIVES TRIAL BY
JURY IN ANY SUIT OR  PROCEEDING  ARISING OUT OF OR RELATED TO THIS  AGREEMENT OR
THE OTHER LOAN  DOCUMENTS.  SUBJECT TO THE TERMS OF SECTION  9.17,  THE BORROWER
WAIVES ANY OBJECTION  WHICH THE BORROWER MAY HAVE BASED ON LACK OF  JURISDICTION
OR IMPROPER VENUE OR FORUM NON  CONVENIENS TO ANY SUIT OR PROCEEDING  INSTITUTED
BY THE LENDER UNDER THIS  AGREEMENT OR THE OTHER LOAN  DOCUMENTS IN ANY STATE OR
FEDERAL COURT LOCATED  WITHIN DADE COUNTY,  FLORIDA AND CONSENTS TO THE GRANTING
OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. SUBJECT
TO THE TERMS OF SECTION  9.17,  NOTHING IN THIS  SECTION  9.18 SHALL  AFFECT THE
RIGHT OF THE LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER  PERMITTED BY LAW
OR AFFECT THE RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING  AGAINST THE
BORROWER  OR ITS  PROPERTY  IN THE  COURTS OF ANY OTHER  JURISDICTION  WHICH HAS
JURISDICTION OVER THE BORROWER OR ITS PROPERTY.  SUBJECT TO THE TERMS OF SECTION
9.17, THIS PROVISION IS A MATERIAL  INDUCEMENT FOR THE LENDER TO ENTER INTO THIS
AGREEMENT  AND THE OTHER  LOAN  DOCUMENTS,  MAKE THE LOANS AND  EXTEND THE OTHER
FINANCIAL ACCOMMODATIONS CONTEMPLATED HEREUNDER AND THEREUNDER.

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


                                         DRYCLEAN USA, INC.



                                         By:  /s/ Michael Steiner, Pres.
                                              ----------------------------------
                                              Michael Steiner, President




                                         FIRST UNION NATIONAL BANK,
                                         a national banking association



                                         By:  /s/ Steve Leth
                                              ----------------------------------
                                              Steve Leth, Vice President



                                       37
<PAGE>


                               INDEX OF SCHEDULES



         Schedule 1.1      Permitted Liens

         Schedule 2.8      Affiliates' Assets

         Schedule 2.9      Locations

         Schedule 2.17     Environmental Compliance

         Schedule 5.14     Affiliated Transactions



                                INDEX OF EXHIBITS


         Exhibit A         Borrowing Base Certificate

         Exhibit B         Intentionally omitted

         Exhibit C         Term Note

         Exhibit D         Revolving Credit Note





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>4
<FILENAME>d778887_1.txt
<DESCRIPTION>EXH. 4.1(B) TERM NOTE
<TEXT>
                                    TERM NOTE


$960,000.00
                                                         As of December 19, 2001


         FOR VALUE  RECEIVED,  the  undersigned,  DRYCLEAN USA, INC., a Delaware
corporation  (the  "Borrower"),  promises  to pay to the  order of  FIRST  UNION
NATIONAL BANK, a national banking association (the "Lender"), and its successors
and assigns,  the  principal  sum of Nine Hundred and Sixty  Thousand and 00\100
Dollars  ($960,000.00),  which sum was  advanced  by the Lender to the  Borrower
pursuant  to,  and in  accordance  with the terms  of,  the Loan  Agreement  (as
hereinafter  defined),  the  provisions  of which  are  incorporated  herein  by
reference.

         All  principal  shall  be paid  on such  date  and in such  amounts  as
provided in the Loan  Agreement.  Both  principal  and  interest  hereunder  are
payable  in lawful  money of the  United  States to the  Lender at its office as
Lender shall  designate  from time to time.  The Borrower  also  unconditionally
promises to pay  interest on the unpaid  principal  amount of this Note for each
day from the date hereof until repaid in full as provided in the Loan Agreement.
Interest  shall be  payable at the rate or rates per annum set forth in the Loan
Agreement.

         Notwithstanding  anything  herein to the  contrary,  if at any time the
interest rate applicable to the Term Loan,  together with all fees,  charges and
other  amounts  which are treated as interest on the Term Loan under  applicable
law  (collectively  the  "Charges"),  shall exceed the maximum  lawful rate (the
"Maximum  Rate")  which may be  contracted  for,  charged,  taken,  received  or
reserved by the Lender in accordance  with  applicable law, the rate of interest
payable  in  respect  of the Term Loan,  together  with all  Charges  payable in
respect thereof, shall be limited to the Maximum Rate and, to the extent lawful,
the  interest  and Charges  that would have been  payable in respect of the Term
Loan but were not payable as a result of the operation of these provisions shall
be cumulated  and the  interest and Charges  payable to the Lender in respect of
other Indebtedness or periods shall be increased (but not above the Maximum Rate
therefor)  until such cumulated  amount,  together with interest  thereon at the
Adjusted LIBOR Market Index Rate(Term) to the date of repayment, shall have been
received by the Lender.

         For the purposes of this Note:

         "Loan Agreement" shall mean the Loan and Security  Agreement,  dated as
of the date hereof,  by and between the Borrower and the Lender, as the same may
be hereafter amended, supplemented, extended, modified, amended or restated from
time to time.

         "Term Loan" shall mean the Term Loan made by the Lender pursuant to the
Loan Agreement.

         All other capitalized terms used in this Note without  definition shall
have the meanings ascribed to such terms in the Loan Agreement.

         The  Borrower,  for itself and its  successors  and assigns,  expressly
waives presentment for payment,  demand, protest and notice of demand, notice of
dishonor and notice of  nonpayment  and all other  notices and consents that the
Lender may release or surrender,  exchange or substitute any collateral security
now held or which may  hereafter  be held as  security  for the  payment of this
Note.

         This Note is the Term Note and  evidences  the Term Loan and is secured
in  accordance  with the terms of, and is entitled to the  benefits of, the Loan
Agreement,  including those terms related to


<PAGE>
the acceleration of the maturity of this Note upon the occurrence of an Event of
Default.  Payment of this Note is secured by the  Collateral as described in the
Loan Agreement.

         In the event that this Note shall at any time after  maturity be placed
with an attorney for collection,  the Borrower agrees to pay, in addition to the
entire  unpaid  principal  balance and interest due  hereunder,  all  collection
costs,   including  reasonable  attorneys'  fees,  incurred  by  the  Lender  in
collecting the indebtedness due hereunder.

         Upon  demand  of  any  party  hereto,  whether  made  before  or  after
institution  of any  judicial  proceeding,  any  dispute,  claim or  controversy
arising  out of,  connected  with or  relating  to this Note and any other  Loan
Document ("Disputes") between or among parties to this Note shall be resolved by
binding arbitration as provided herein.  Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration  hereunder.
Disputes may include, without limitation, tort claims,  counterclaims,  disputes
as to  whether a matter is  subject  to  arbitration,  claims  brought  as class
actions,  claims arising from Loan Documents  executed in the future,  or claims
arising  out of or  connected  with  the  transaction  reflected  by this  Note.
Arbitration  shall be conducted  under and governed by the Commercial  Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association  (the "AAA") and Title 9 of the U.S. Code. All arbitration  hearings
shall be  conducted in the city in which the office of Lender first stated above
is  located.  The  expedited  procedures  set  forth  in Rule 51 et seq.  of the
Arbitration  Rules shall be  applicable to claims of less than  $1,000,000.  All
applicable statutes of limitations shall apply to any Disputes.  A judgment upon
the award may be entered in any court having jurisdiction.  The panel from which
all  arbitrators  are selected  shall be comprised  of licensed  attorneys.  The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction,  state or federal, of the state where
the hearing will be conducted or if such person is not  available to serve,  the
single  arbitrator may be a licensed  attorney.  Notwithstanding  the foregoing,
this  arbitration  provision does not apply to disputes under or related to swap
agreements. Notwithstanding the preceding binding arbitration provisions, Lender
and Borrower agree to preserve,  without  diminution,  certain remedies that any
party herein may employ or exercise freely,  independently or in connection with
an arbitration proceeding or after an arbitration action is brought.  Lender and
Borrower shall have the right to proceed in any court of proper  jurisdiction or
by self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose  against any real or personal property or other security
by exercising a power of sale granted under Loan  Documents or under  applicable
law or by judicial  foreclosure and sale,  including a proceeding to confirm the
sale;  (ii) all  rights  of  self-help  including  peaceful  occupation  of real
property and collection of rents,  set-off,  and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief,  sequestration,  garnishment,  attachment,  appointment  of receiver and
filing  an  involuntary  bankruptcy  proceeding;  and (iv)  when  applicable,  a
judgment by  confession  of judgment.  Preservation  of these  remedies does not
limit the power of an arbitrator to grant similar remedies that may be requested
by a party in a Dispute.  Lender and  Borrower  agree that they shall not have a
remedy of punitive  or  exemplary  damages  against the other in any Dispute and
hereby waive any right or claim to punitive or  exemplary  damages they have now
or which may arise in the future in  connection  with any  Dispute  whether  the
Dispute is resolved by arbitration or judicially.

         SUBJECT TO THE TERMS OF THE IMMEDIATELY PRECEDING PARAGRAPH,  THIS NOTE
SHALL BE  INTERPRETED,  AND THE RIGHTS AND  LIABILITIES  OF THE  PARTIES  HERETO
DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS)  OF THE STATE OF  FLORIDA.  SUBJECT TO THE TERMS OF THE  IMMEDIATELY
PRECEDING  PARAGRAPH,  AS  PART OF THE  CONSIDERATION  FOR NEW  VALUE  THIS  DAY
RECEIVED,  THE  BORROWER  HEREBY  CONSENTS TO THE  JURISDICTION  OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN MIAMI-DADE COUNTY,  STATE OF FLORIDA,  AND CONSENTS
THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED  MAIL DIRECTED TO


                                       2
<PAGE>

THE  BORROWER AT THE ADDRESS  STATED IN SECTION  9.4 OF THE LOAN  AGREEMENT  AND
SERVICE  SO MADE  SHALL BE DEEMED TO BE  COMPLETED  UPON THE  EARLIER  OF ACTUAL
RECEIPT  THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,  PROPER
POSTAGE PREPAID.  SUBJECT TO THE TERMS OF THE IMMEDIATELY  PRECEDING  PARAGRAPH,
EACH OF THE  BORROWER  AND THE LENDER  HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
NOTE OR THE  OTHER  LOAN  DOCUMENTS.  SUBJECT  TO THE  TERMS OF THE  IMMEDIATELY
PRECEDING  PARAGRAPH,  THE BORROWER  WAIVES ANY OBJECTION WHICH THE BORROWER MAY
HAVE BASED ON LACK OF  JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO
ANY SUIT OR  PROCEEDING  INSTITUTED  BY THE LENDER  UNDER THIS NOTE OR THE OTHER
LOAN DOCUMENTS IN ANY STATE OR FEDERAL COURT LOCATED WITHIN  MIAMI-DADE  COUNTY,
FLORIDA AND  CONSENTS TO THE  GRANTING OF SUCH LEGAL OR  EQUITABLE  RELIEF AS IS
DEEMED  APPROPRIATE  BY THE  COURT.  SUBJECT  TO THE  TERMS  OF THE  IMMEDIATELY
PRECEDING  PARAGRAPH,  NOTHING IN THIS  PARAGRAPH  SHALL AFFECT THE RIGHT OF THE
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF THE LENDER TO BRING ANY ACTION OR  PROCEEDING  AGAINST THE  BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH HAS JURISDICTION OVER
THE BORROWER OR ITS PROPERTY.  THIS  PROVISION IS A MATERIAL  INDUCEMENT FOR THE
LENDER TO ENTER INTO THIS NOTE AND THE OTHER LOAN DOCUMENTS,  MAKE THE LOANS AND
EXTEND THE OTHER FINANCIAL ACCOMMODATIONS CONTEMPLATED HEREUNDER AND THEREUNDER.


         IN WITNESS WHEREOF, the Borrower has caused this Note to be executed in
its corporate name by its duly authorized corporate officer as to the date first
above written.

                                        DRYCLEAN USA, INC.,



                                        By: /s/ Michael Steiner, Pres.
                                            -------------------------------
                                            Michael Steiner, President





                                       3

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>5
<FILENAME>d778851_1.txt
<DESCRIPTION>EXH. 4.1(C) REVOLVING CREDIT NOTE
<TEXT>
                              REVOLVING CREDIT NOTE


$2,250,000.00
                                                         As of December 19, 2001


         FOR VALUE  RECEIVED,  the  undersigned,  DRYCLEAN USA, INC., a Delaware
corporation  (the  "Borrower"),  promises  to pay to the  order of  FIRST  UNION
NATIONAL BANK, a national banking association (the "Lender"), and its successors
and assigns, the principal sum of Two Million Two Hundred Fifty Thousand Dollars
and no/100  ($2,250,000.00)  or, if less,  the aggregate  unpaid  balance of all
Revolving Credit Loans (as hereinafter  defined) at any time outstanding made by
the Lender to the Borrower pursuant to, and in accordance with the terms of, the
Loan  Agreement  (as   hereinafter   defined),   the  provisions  of  which  are
incorporated herein by reference.

         All  principal  shall be paid on the  earlier of DEMAND or October  30,
2002  (unless  renewed,  extended or modified in writing by Lender,  in its sole
discretion),  or earlier as provided in the Loan  Agreement.  Both principal and
interest  hereunder  shall be paid in lawful  money of the United  States to the
Lender at its office as Lender shall  designate  from time to time. The Borrower
also unconditionally  promises to pay interest on the unpaid principal amount of
this Note for each day from the date hereof  until repaid in full as provided in
the Loan  Agreement.  Interest  shall be paid at the rate or rates per annum set
forth in the Loan Agreement.

         Notwithstanding  anything  herein to the  contrary,  if at any time the
interest rate applicable to any Revolving  Credit Loan,  together with all fees,
charges and other amounts which are treated as interest on such Revolving Credit
Loan under applicable law (collectively the "Charges"), shall exceed the maximum
lawful rate (the "Maximum  Rate") which may be contracted for,  charged,  taken,
received or reserved by the Lender in accordance  with  applicable law, the rate
of interest payable in respect of such Revolving Credit Loan,  together with all
Charges payable in respect thereof, shall be limited to the Maximum Rate and, to
the extent  lawful,  the  interest  and Charges  that would have been payable in
respect of such  Revolving  Credit  Loan but were not payable as a result of the
operation of these  provisions  shall be cumulated  and the interest and Charges
payable  to the Lender in respect  of other  Revolving  Credit  Loans or periods
shall be  increased  (but not  above  the  Maximum  Rate  therefor)  until  such
cumulated  amount,  together with interest  thereon at the Adjusted LIBOR Market
Index Rate(Revolving) to the date of repayment,  shall have been received by the
Lender.

         For the purposes of this Note:

         "Loan Agreement" shall mean the Loan and Security  Agreement,  dated of
even date herewith,  by and between the Borrower and the Lender, as the same may
be hereafter amended, supplemented or restated from time to time.

         "Revolving  Credit Loans" shall mean the Revolving Credit Loans made by
the Lender pursuant to the Loan Agreement.



<PAGE>

         All other capitalized terms used in this Note without  definition shall
have the meanings ascribed to such terms in the Loan Agreement.

         The  Borrower,  for itself and its  successors  and assigns,  expressly
waives presentment for payment,  demand, protest and notice of demand, notice of
dishonor and notice of  nonpayment  and all other  notices and consents that the
Lender may release or surrender,  exchange or substitute any collateral security
now held or which may  hereafter  be held as  security  for the  payment of this
Note.

         This Note is the  Revolving  Credit Note and  evidences  the  Revolving
Credit  Loans  made  by the  Lender  pursuant  to  the  provisions  of the  Loan
Agreement,  and is secured in  accordance  with the terms of, and is entitled to
the  benefits  of, the Loan  Agreement,  including  those  terms  related to the
acceleration  of the  maturity of this Note upon the  occurrence  of an Event of
Default.  Payment of this Note is secured by the  Collateral as described in the
Loan Agreement.

         In the event that this Note shall at any time after  maturity be placed
with an attorney for collection,  the Borrower agrees to pay, in addition to the
entire  unpaid  principal  balance and interest due  hereunder,  all  collection
costs,   including  reasonable  attorneys'  fees,  incurred  by  the  Lender  in
collecting the indebtedness due hereunder.

         Upon  demand  of  any  party  hereto,  whether  made  before  or  after
institution  of any  judicial  proceeding,  any  dispute,  claim or  controversy
arising  out of,  connected  with or  relating  to this Note and any other  Loan
Document ("Disputes") between or among parties to this Note shall be resolved by
binding arbitration as provided herein.  Institution of a judicial proceeding by
a party does not waive the right of that party to demand arbitration  hereunder.
Disputes may include, without limitation, tort claims,  counterclaims,  disputes
as to  whether a matter is  subject  to  arbitration,  claims  brought  as class
actions,  claims arising from Loan Documents  executed in the future,  or claims
arising  out of or  connected  with  the  transaction  reflected  by this  Note.
Arbitration  shall be conducted  under and governed by the Commercial  Financial
Disputes Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association  (the "AAA") and Title 9 of the U.S. Code. All arbitration  hearings
shall be  conducted in the city in which the office of Lender first stated above
is  located.  The  expedited  procedures  set  forth  in Rule 51 et seq.  of the
Arbitration  Rules shall be  applicable to claims of less than  $1,000,000.  All
applicable statutes of limitations shall apply to any Disputes.  A judgment upon
the award may be entered in any court having jurisdiction.  The panel from which
all  arbitrators  are selected  shall be comprised  of licensed  attorneys.  The
single arbitrator selected for expedited procedure shall be a retired judge from
the highest court of general jurisdiction,  state or federal, of the state where
the hearing will be conducted or if such person is not  available to serve,  the
single  arbitrator may be a licensed  attorney.  Notwithstanding  the foregoing,
this  arbitration  provision does not apply to disputes under or related to swap
agreements. Notwithstanding the preceding binding arbitration provisions, Lender
and Borrower agree to preserve,  without  diminution,  certain remedies that any
party herein may employ or exercise freely,  independently or in connection with
an arbitration proceeding or after an arbitration action is brought.  Lender and
Borrower shall have the right to proceed in any court of proper  jurisdiction or
by self-help to exercise or prosecute the following remedies, as applicable: (i)
all rights to foreclose  against any real or personal property or other security
by exercising a power of sale granted under

                                       2
<PAGE>

Loan  Documents or under  applicable  law or by judicial  foreclosure  and sale,
including  a  proceeding  to  confirm  the sale;  (ii) all  rights of  self-help
including peaceful occupation of real property and collection of rents, set-off,
and peaceful  possession of personal  property;  (iii) obtaining  provisional or
ancillary remedies  including  injunctive  relief,  sequestration,  garnishment,
attachment,  appointment  of  receiver  and  filing  an  involuntary  bankruptcy
proceeding;  and (iv) when  applicable,  a judgment by  confession  of judgment.
Preservation  of these  remedies  does not limit the power of an  arbitrator  to
grant similar remedies that may be requested by a part in a Dispute.  Lender and
Borrower  agree  that  they  shall not have a remedy of  punitive  or  exemplary
damages  against the other in any Dispute and hereby waive any right or claim to
punitive or exemplary  damages they have now or which may arise in the future in
connection  with any Dispute  whether the Dispute is resolved by  arbitration or
judicially.

         SUBJECT TO THE TERMS OF THE IMMEDIATELY PRECEDING PARAGRAPH,  THIS NOTE
SHALL BE  INTERPRETED,  AND THE RIGHTS AND  LIABILITIES  OF THE  PARTIES  HERETO
DETERMINED, IN ACCORDANCE WITH THE INTERNAL LAWS (AS OPPOSED TO CONFLICTS OF LAW
PROVISIONS)  OF THE STATE OF  FLORIDA.  SUBJECT TO THE TERMS OF THE  IMMEDIATELY
PRECEDING  PARAGRAPH,  AS  PART OF THE  CONSIDERATION  FOR NEW  VALUE  THIS  DAY
RECEIVED,  THE  BORROWER  HEREBY  CONSENTS TO THE  JURISDICTION  OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN MIAMI-DADE COUNTY,  STATE OF FLORIDA,  AND CONSENTS
THAT ALL SERVICE OF PROCESS BE MADE BY REGISTERED OR CERTIFIED  MAIL DIRECTED TO
THE  BORROWER AT THE ADDRESS  STATED IN SECTION  9.4 OF THE LOAN  AGREEMENT  AND
SERVICE  SO MADE  SHALL BE DEEMED TO BE  COMPLETED  UPON THE  EARLIER  OF ACTUAL
RECEIPT  THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,  PROPER
POSTAGE PREPAID.  SUBJECT TO THE TERMS OF THE IMMEDIATELY  PRECEDING  PARAGRAPH,
EACH OF THE  BORROWER  AND THE LENDER  HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY
WAIVES TRIAL BY JURY IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATED TO THIS
NOTE OR THE  OTHER  LOAN  DOCUMENTS.  SUBJECT  TO THE  TERMS OF THE  IMMEDIATELY
PRECEDING  PARAGRAPH,  THE BORROWER  WAIVES ANY OBJECTION WHICH THE BORROWER MAY
HAVE BASED ON LACK OF  JURISDICTION OR IMPROPER VENUE OR FORUM NON CONVENIENS TO
ANY SUIT OR  PROCEEDING  INSTITUTED  BY THE LENDER  UNDER THIS NOTE OR THE OTHER
LOAN DOCUMENTS IN ANY STATE OR FEDERAL COURT LOCATED WITHIN  MIAMI-DADE  COUNTY,
FLORIDA AND  CONSENTS TO THE  GRANTING OF SUCH LEGAL OR  EQUITABLE  RELIEF AS IS
DEEMED  APPROPRIATE  BY THE  COURT.  SUBJECT  TO THE  TERMS  OF THE  IMMEDIATELY
PRECEDING  PARAGRAPH,  NOTHING IN THIS  PARAGRAPH  SHALL AFFECT THE RIGHT OF THE
LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE
RIGHT OF THE LENDER TO BRING ANY ACTION OR  PROCEEDING  AGAINST THE  BORROWER OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH HAS JURISDICTION OVER
THE BORROWER OR ITS PROPERTY.  THIS  PROVISION IS A MATERIAL  INDUCEMENT FOR THE
LENDER TO ENTER INTO THIS NOTE AND THE OTHER LOAN DOCUMENTS,  MAKE THE LOANS AND
EXTEND THE OTHER FINANCIAL ACCOMMODATIONS CONTEMPLATED HEREUNDER AND THEREUNDER.



                                       3
<PAGE>


         IN WITNESS WHEREOF, the Borrower has caused this Note to be executed in
its corporate name by its duly authorized corporate officer as to the date first
above written.


                                        DRYCLEAN USA, INC.,



                                        By: /s/ Michael Steiner, Pres.
                                            --------------------------
                                            Michael Steiner, President




                                       4

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4
<SEQUENCE>6
<FILENAME>d778853_1.txt
<DESCRIPTION>EXH. 4.1(D) GUARANTY AND SECURITY AGREEMENT
<TEXT>
                         GUARANTY AND SECURITY AGREEMENT


         THIS GUARANTY AND SECURITY  AGREEMENT is dated as of December 19, 2001,
from  each  of  the  undersigned   (each  a  "Guarantor"  and  collectively  the
"Guarantors"),  in  favor of First  Union  National  Bank,  a  national  banking
association (the "Lender").

                              W I T N E S S E T H:

         WHEREAS,  DryClean USA, Inc., a Delaware  corporation  ("Dryclean") and
Lender have  entered into a Loan and  Security  Agreement,  dated as of the date
hereof (as at any time amended, modified or supplemented, the "Loan Agreement").

         WHEREAS,  each Guarantor is a wholly-owned  subsidiary of Dry Clean and
each  Guarantor  will derive  direct and  indirect  economic  benefits  from the
financings to be made by Lender pursuant to the Loan Agreement.

         WHEREAS,  in  connection  with the  making of the Loans  under the Loan
Agreement and as a condition  precedent  thereto,  Lender is requiring that each
Guarantor shall have executed and delivered this Guaranty.

         NOW,  THEREFORE,  in  consideration  of the premises and the covenants,
agreements,  terms and conditions  contained  herein,  the parties hereto hereby
agree as follows:


         SECTION 1    DEFINITIONS.

         1.1 Defined Terms.  For purposes of this  Guaranty,  in addition to (i)
the terms defined in the Loan  Agreement,  which shall be used herein as defined
therein if not separately  defined herein,  and (ii) the terms defined elsewhere
in this  Guaranty,  the following  terms shall have the meanings set forth below
(such meanings to be equally applicable to both the singular and plural forms of
the terms defined):

         "Guaranty"   or  "this   Guaranty"   shall   include  all   amendments,
modifications and supplements hereto and restatements  hereof and shall refer to
this  Guaranty and  Security  Agreement as the same may be in effect at the time
such reference becomes operative.

         1.2 Terms.  All other terms contained in this Guaranty shall,  when the
context so indicates,  have the meanings  provided for by the Code to the extent
the same are used or defined therein.

<PAGE>

         SECTION 2    THE GUARANTY

         2.1  Guaranty  of  Indebtedness  of  Borrower.  Each  Guarantor  hereby
unconditionally guarantees to Lender, and its successors, endorsees, transferees
and assigns, the prompt payment (whether at stated maturity,  by acceleration or
otherwise) and performance of the Indebtedness.  Each Guarantor agrees that this
Guaranty is a guaranty of payment and  performance  and not of  collection,  and
that its  obligations  under  this  Guaranty  shall  be  primary,  absolute  and
unconditional, irrespective of, and unaffected by:

                  (a) the genuineness,  validity, regularity,  enforceability or
         any  future  amendment  of,  or  change  in  this  Guaranty,  the  Loan
         Agreement, any other Loan Document or any other agreement,  document or
         instrument  to which  Borrower  and/or any  Guarantor  is or are or may
         become a party;

                  (b) the absence of any action to enforce  this  Guaranty,  the
         Loan  Agreement or any other Loan  Document or the waiver or consent by
         Lender with respect to any of the provisions thereof;

                  (c) the  existence,  value or  condition  of,  or  failure  to
         perfect its Lien  against,  any  security for the  Indebtedness  or any
         action,  or the  absence of any  action,  by Lender in respect  thereof
         (including, without limitation, the release of any such security); or

                  (d) any other action or  circumstances  which might  otherwise
         constitute  a legal or  equitable  discharge  or defense of a surety or
         guarantor;

it being agreed by each Guarantor that its obligations under this Guaranty shall
not be discharged  until the payment and  performance  and discharge in full, of
the  Indebtedness.  Each Guarantor  shall be regarded,  and shall be in the same
position,  as principal debtor with respect to the Indebtedness.  Each Guarantor
expressly  waives all rights it may have now or in the future under any statute,
or at common  law, or at law or in equity,  or  otherwise,  to compel  Lender to
proceed in respect of the Indebtedness against Borrower,  any other guarantor or
any other Person or against any security for the payment and  performance of the
Indebtedness before proceeding against, or as a condition to proceeding against,
any Guarantor.  Each Guarantor  agrees that any notice or directive given at any
time to  Lender  which  is  inconsistent  with  the  waiver  in the  immediately
preceding sentence shall be null and void and may be ignored by Lender,  and, in
addition,  may not be  pleaded  or  introduced  as  evidence  in any  litigation
relating  to this  Guaranty  for the reason that such  pleading or  introduction
would be at variance with the written terms of this Guaranty,  unless Lender has
specifically  agreed  otherwise in writing.  It is agreed between each Guarantor
and Lender that the  foregoing  waivers  are of the  essence of the  transaction
contemplated  by the Loan  Documents  and that,  but for this  Guaranty and such
waivers, Lender would decline to make the Loans under the Loan Agreement.

         2.2 Demand by Lender.  In  addition  to the terms of the  Guaranty  set
forth in section 2.1 hereof,  and in no manner  imposing any  limitation on such
terms,  it is  expressly  understood  and agreed that,  if the then  outstanding
principal  amount  of the  Indebtedness  (together  with  all  accrued  interest
thereon) is declared to be, or otherwise  becomes,  immediately due and payable,
then,



                                       2
<PAGE>


Guarantor shall, upon demand in writing therefor by Lender to any Guarantor, pay
to  Lender  in  immediately  available  federal  funds  the  entire  outstanding
Indebtedness  due and owing to  holder  or  holders  of the  Indebtedness.  Such
payment by any Guarantor shall be credited and applied upon the  Indebtedness to
an  account  designated  by Lender or at the  address  set forth  herein for the
giving of notice to Lender  or at any other  address  that may be  specified  in
writing from time to time by Lender.

         2.3  Enforcement  of  Guaranty.  In no  event  shall  Lender  have  any
obligation  (although  Lender is  entitled,  at its  option) to proceed  against
Borrower,  any  other  guarantor  or any other  Person  or any real or  personal
property pledged to secure the Indebtedness before seeking satisfaction from any
Guarantor,  and Lender may proceed,  prior or subsequent  to, or  simultaneously
with, the  enforcement of Lender's  rights  hereunder,  to exercise any right or
remedy  which it may have  against  any  property as a result of any Lien it may
have as security for all or any portion of the Indebtedness.

         2.4 Waiver. In addition to the waivers contained in section 2.1 hereof,
each  Guarantor  waives,  and agrees that it shall not at any time insist  upon,
plead or in any manner  whatever  claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, marshalling of assets or redemption laws,
or exemption,  whether now or at any time  hereafter in force,  which may delay,
prevent or otherwise  affect the performance by any Guarantor of its obligations
under,  or the  enforcement by Lender of, this Guaranty.  Each Guarantor  hereby
waives diligence,  presentment and demand (whether for non-payment or protest or
of  acceptance,  maturity,  extension  of time,  change in nature or form of the
Indebtedness,  acceptance  of further  security,  release  of further  security,
composition  or  agreement  arrived at as to the amount of, or the terms of, the
Indebtedness,  notice of adverse change in Borrower's financial condition or any
other fact which  might  materially  increase  the risk to any  Guarantor)  with
respect to any of the  Indebtedness  or all other demands  whatsoever and waives
the benefit of all  provisions of law which are or might be in conflict with the
terms of this Guaranty. Each Guarantor represents,  warrants and agrees that, as
of the date of this  Guaranty,  its  obligations  under  this  Guaranty  are not
subject to any offsets or defenses  against Lender or Borrower of any kind. Each
Guarantor  further agrees that its obligations  under this Guaranty shall not be
subject to any counterclaims,  offsets or defenses against Lender or Borrower of
any kind which may arise in the future.

         2.5 Benefit of Guaranty.  The  provisions  of this Guaranty are for the
benefit of Lender and its successors,  transferees,  endorsees and assigns,  and
nothing herein contained shall impair, as between Borrower, on the one hand, and
Lender, on the other hand, the obligations of Borrower under the Loan Agreement.
In the event all or any part of the  Indebtedness  is  transferred,  endorsed or
assigned by Lender to any Person or Persons,  any  reference to "Lender"  herein
shall be deemed to refer equally to such Person or Persons.

         2.6  Modification  of Loans,  Etc. If Lender  shall at any time or from
time to time, with or without the consent of, or notice to, any Guarantor:

                  (a) change or extend the manner, place or terms of payment of,
         or renew or alter all or any portion of, the Indebtedness;



                                       3
<PAGE>

                  (b) take any  action  under or in  respect  of any of the Loan
         Documents in the exercise of any remedy,  power or privilege  contained
         therein or available  to it at law,  equity or  otherwise,  or waive or
         refrain from exercising any such remedies, powers or privileges;

                  (c) amend, modify or restate in any manner whatsoever,  any of
         the Loan Documents;

                  (d) extend or waive the time for any  Guarantor's,  Borrower's
         or other  Person's  performance  of,  or  compliance  with,  any  term,
         covenant or agreement on its part to be performed or observed under any
         of the Loan  Documents,  or waive such  performance  or  compliance  or
         consent  to a failure  of,  or  departure  from,  such  performance  or
         compliance;

                  (e) take and hold any  additional  security or collateral  for
         the payment of the Indebtedness  guaranteed  hereby or sell,  exchange,
         release,  dispose of, or otherwise  deal with,  any  property  pledged,
         mortgaged or conveyed,  or in which Lender has been granted a Lien,  to
         secure any indebtedness of any Guarantor or Borrower to Lender;

                  (f)  release  anyone  who may be liable in any  manner for the
         payment of any amounts owed by any Guarantor or Borrower to Lender;

                  (g)  modify or  terminate  the terms of any  intercreditor  or
         subordination  agreement pursuant to which claims of other creditors of
         any  Guarantor  or Borrower are  subordinated  to the claims of Lender;
         and/or

                  (h) apply any sums by whomever paid or however realized to any
         amounts  owing by any Guarantor or Borrower to Lender in such manner as
         Lender shall determine in its sole discretion;

then Lender shall not incur any liability to any Guarantor  pursuant hereto as a
result  thereof,  and no such action shall impair or release the  obligations of
any Guarantor under this Guaranty.

         2.7 Reinstatement.  This Guaranty shall remain in full force and effect
and  continue  to be  effective  in the event that any  petition  is filed by or
against  Borrower,  any  Guarantor or any other  guarantor  for  liquidation  or
reorganization, in the event that Borrower or any Guarantor becomes insolvent or
makes an assignment for the benefit of creditors or in the event that a receiver
or trustee is  appointed  for all or any  significant  part of  Borrower's,  any
Guarantor's or any other guarantor's  assets, and shall continue to be effective
or be reinstated,  as the case may be, if at any time payment and performance of
the Indebtedness, or any part thereof, is, pursuant to applicable law, rescinded
or reduced in amount,  or must  otherwise  be  restored  or  returned by Lender,
whether as a "voidable preference",  "fraudulent conveyance",  or otherwise, all
as though such payment or  performance  had not been made. In the event that any
payment, or any part thereof, is rescinded,  reduced,  restored or returned, the
Indebtedness shall be reinstated and deemed reduced only by such amount paid and
not so rescinded, reduced, restored or returned.



                                       4
<PAGE>

         2.8      Waiver of Subrogation, Etc.

                  (a) If, pursuant to applicable law, any Guarantor,  by payment
or otherwise, becomes subrogated to all or any of the rights of Lender under any
of the Loan  Documents,  the rights of Lender to which such  Guarantor  shall be
subrogated  shall  be  accepted  by  such  Guarantor  "as is"  and  without  any
representation  or  warranty  of any kind by Lender,  express or  implied,  with
respect  to the  legality,  value,  validity  or  enforceability  of any of such
rights, or the existence,  availability,  value,  merchantability or fitness for
any particular purpose of any Guarantor Collateral and shall be without recourse
to Lender.

                  (b) If Lender,  under applicable law,  proceeds to realize its
benefits  under  any of the  Loan  Documents  giving  Lender  a  Lien  upon  any
Collateral,  whether  owned by Borrower,  any  Guarantor or by any other Person,
either by judicial  foreclosure or by non-judicial  sale or enforcement,  Lender
may, at its sole option, determine which of its remedies or rights it may pursue
without affecting any of its rights and remedies under this Guaranty. If, in the
exercise of any of its rights and remedies, Lender forfeits any of its rights or
remedies, including its right to enter a deficiency judgment against Borrower or
any other Person, whether because of any applicable laws pertaining to "election
of  remedies"  or the like,  each  Guarantor  hereby  consents to such action by
Lender and  waives any claim  based  upon such  action,  even if such  action by
Lender shall result in a full or partial loss of any rights of subrogation which
any  Guarantor  might  otherwise  have had but for such  action by  Lender.  Any
election of remedies  which  results in the denial or impairment of the right of
Lender to seek a  deficiency  judgment  against  Borrower  shall not  impair any
Guarantor's obligation to pay the full amount of the Indebtedness.  In the event
that Lender bids at any  foreclosure  or  trustee's  sale or at any private sale
permitted by law or any of the Loan  Documents,  Lender may bid all or less than
the  amount of the  Indebtedness  and the amount of such bid need not be paid by
Lender  but  shall be  credited  against  the  Indebtedness.  The  amount of the
successful  bid at any such  sale,  whether  Lender  or any  other  party is the
successful bidder,  shall be conclusively  deemed to be the fair market value of
the  subject  collateral  and the  difference  between  such bid  amount and the
remaining  balance of the  Indebtedness  shall be conclusively  deemed to be the
amount of the Indebtedness guaranteed under this Guaranty,  notwithstanding that
any  present  or future law or court  decision  or ruling may have the effect of
reducing the amount of any deficiency  claim to which Lender might  otherwise be
entitled but for such bidding at any such sale.

         2.9 Continuing Guaranty.  Each Guarantor agrees that this Guaranty is a
continuing  guaranty and shall remain in full force and effect until the payment
and performance in full of the Indebtedness; provided, however, that if any sums
paid to and applied by Lender toward the Indebtedness are thereafter required to
be repaid to Borrower or to any Affiliate, or to any trustee,  receiver or other
person,  by  reason of the  application  of the  Bankruptcy  Code,  the  Uniform
Fraudulent  Transfer  Act  or  any  other  law  relating  to  creditors'  rights
generally, then this Guaranty shall be reinstated, ab initio, as if such portion
of the Indebtedness had never been paid.

         2.10  Fraudulent  Conveyance.  Notwithstanding  any  provision  of this
Guaranty to the contrary,  it is intended that this Guaranty,  and any liens and
security  interests  granted by each  Guarantor  to secure  this  Guaranty,  not
constitute a "Fraudulent  Conveyance"  (as defined  below).  Consequently,  each
Guarantor  agrees  that if this  Guaranty,  or any liens or  security  interests
securing



                                       5
<PAGE>

this Guaranty,  would,  but for the  application of this sentence,  constitute a
Fraudulent  Conveyance,  this Guaranty and each such lien and security  interest
shall be valid and  enforceable  only to the maximum extent that would not cause
this  Guaranty or such lien or  security  interest to  constitute  a  Fraudulent
Conveyance, and this Guaranty shall automatically be deemed to have been amended
accordingly at all relevant times. For purposes hereof,  "Fraudulent Conveyance"
means a fraudulent  conveyance  under Section 548 of the  "Bankruptcy  Code" (as
hereinafter defined) or a fraudulent conveyance or fraudulent transfer under the
provisions of any applicable fraudulent conveyance or fraudulent transfer law or
similar law of any state,  nation or other  governmental unit, as in effect from
time to time.

         SECTION 3    SECURITY FOR THE OBLIGATIONS.

         3.1  Security  Interest  in the  Guarantor  Collateral.  To secure  the
payment and performance of any and all of the  Indebtedness  and the performance
of all obligations and covenants of each Guarantor hereunder and under the other
Loan Documents, absolute or contingent, now existing or hereafter arising, which
are now,  or may at any time or times  hereafter  be owing by any  Guarantor  to
Lender,  each  Guarantor  hereby pledges to Lender and gives and grants Lender a
continuing and general  security  interest in and Lien upon and right of set-off
against,  all right,  title and interest of each  Guarantor in and to all of the
Guarantor Collateral,  whether now owned or hereafter acquired by any Guarantor;
provided,  however,  that  notwithstanding  anything to the  contrary  set forth
herein, none of any Guarantor's  obligations  hereunder shall be secured by real
property.

         3.2  Disclosure  of  Security  Interest.   Each  Guarantor  shall  make
appropriate  entries  upon its  financial  statements  and its books and records
disclosing  Lender's  Liens  and  security  interests  in all  of the  Guarantor
Collateral.

         3.3 Supplemental  Documentation.  At Lender's  request,  each Guarantor
shall  cause  the  execution  and  delivery  to  Lender,  in form and  substance
satisfactory to Lender, of all such agreements,  documents, financing statements
and other  writings  requested by Lender to perfect and maintain the  perfection
and priority of its security interests in and Liens on the Guarantor  Collateral
and to consummate the other transactions contemplated hereby, and each Guarantor
shall pay all filing fees and documentary stamp, intangible and similar taxes in
connection   therewith.   Guarantor   irrevocably   designates  Lender  as  it's
attorney-in-fact to effectuate the foregoing.

         3.4 Inspection.  Each Guarantor hereby irrevocably  consents to any act
by Lender or its agents in entering  upon any premises  during  normal  business
hours for the purposes of either (i)  inspecting  the Guarantor  Collateral  and
making  extracts  from and copies of any books and records  relating  thereto or
(ii) taking  possession  of the Guarantor  Collateral at any time  following the
occurrence of an Event of Default; and each Guarantor hereby waives its right to
assert against Lender or its agents any claim based upon trespass or any similar
cause of action for entering upon any premises  where the  Guarantor  Collateral
may be located.  Each  Guarantor  irrevocably  consents  to Lender's  requesting
information  pertaining  to any  Guarantor  from  any  Person  and  to  Lender's
verifying such or any other information pertaining to any Guarantor,  including,
but not limited to the amount, quality, existence, quantity, value and condition
of any Account of any Guarantor or any other Guarantor Collateral.



                                       6
<PAGE>

         3.5  Cross-Collateralization.  All  collateral  which Lender may at any
time  acquire  from  any  other  source  as  security  for  the  payment  of any
Indebtedness  shall constitute  cross-collateral  for all  Indebtedness  without
apportionment or designation as to particular Indebtedness, and all Indebtedness
shall be secured by all such collateral; and Lender shall have the right, in its
sole  discretion,  to  determine  the order in which its  rights in or  remedies
against such  collateral  are to be exercised and which types or portions of the
collateral are to be proceeded  against and the order of application of proceeds
of collateral against particular Indebtedness.

         3.6  Collections;  Lender's  Right to  Notify  Account  Debtors  and to
Endorse any Guarantor's  Name. Each Guarantor hereby  authorizes Lender (a) upon
the occurrence and during the  continuation of a Default or an Event of Default,
to open  each  Guarantor's  mail  and  collect  any and all  amounts  due to any
Guarantor  from Account  Debtors;  (b) after the  occurrence  of a Default or an
Event of Default,  notify any or all Account Debtors that the Accounts have been
assigned  to Lender and that  Lender has a security  interest  therein;  and (c)
after the  occurrence  of a Default or an Event of Default,  direct such Account
Debtors to make all  payments due from them to any  Guarantor  upon the Accounts
directly to Lender or to a lock box designated by Lender.  Lender shall promptly
furnish such  Guarantor  with a copy of any such notice sent and such  Guarantor
hereby agrees that any such notice may be sent on such  Guarantor's  stationery,
in which event such  Guarantor  shall  co-sign  such notice  with  Lender.  Each
Guarantor  irrevocably  makes,  constitutes and appoints Lender (and all Persons
designated  by Lender  for that  purpose)  as each  Guarantor's  true and lawful
attorney (and  agent-in-fact)  to endorse each  Guarantor's  name on any checks,
notes,  drafts or any other payment relating to and/or proceeds of the Guarantor
Collateral which come into either Lender's possession or control.

         3.7 Preservation of Rights in Guarantor Collateral. Except as herein or
by applicable law otherwise expressly provided, Lender shall not be obligated to
exercise any degree of care in connection with any Guarantor Collateral, to take
any steps necessary to preserve any rights in any of the Guarantor Collateral or
to preserve any rights therein against prior parties. No segregation or specific
allocation  by Lender of  specified  items of Guarantor  Collateral  against any
liability of any Guarantor shall waive or affect any Lien against other items of
Guarantor  Collateral  or any of Lender's  options,  powers or rights under this
Guaranty or otherwise arising.

         3.8 Other Rights.  Each Guarantor  authorizes  Lender without affecting
either any Guarantor's or Lender's obligations hereunder or under any other Loan
Document from time to time to take from any party and hold additional collateral
or guaranties for the payment of the  Indebtedness  or any part thereof,  and to
exchange,  enforce, substitute or release such collateral or guaranty of payment
of the  Indebtedness  or any part  thereof  and to  release  or  substitute  any
endorser or guarantor or any party who has given any Lien on any  collateral  as
security for the payment of the Indebtedness or any part thereof or any party in
any way obligated to pay the Indebtedness or any part thereof.

         3.9 Tangible Guarantor Collateral;  Inventory. No Inventory,  Equipment
or other tangible collateral shall be commingled with, or become an accession to
or part of,  any  property  of any  other  Person  so long as such  property  is
Guarantor Collateral. No tangible Guarantor Collateral is or shall



                                       7
<PAGE>

be allowed to become a fixture. No tangible Guarantor Collateral shall be stored
with any warehouseman, bailee or similar party.

         3.10  Lender's   Payment  of  Claims  Asserted  Against  the  Guarantor
Collateral. In the event a Lien, other than a Permitted Lien, is asserted by any
Person against the Guarantor Collateral and if Lender has given a Guarantor five
days' prior written  notice and such  Guarantor has failed to either (i) satisfy
the  Lien or (ii)  cause  the Lien to be  transferred  to a bond  acceptable  to
Lender, then Lender may at any time after such five-day period in its discretion
without waiving or releasing any obligation, liability or duty of such Guarantor
under  this  Guaranty,  the other  Loan  Documents  or any  Default  or Event of
Default, pay, acquire and/or accept an assignment of such Lien. All sums paid by
Lender in respect thereof and all costs, fees and expenses,  including,  without
limitation,  attorneys' fees,  court costs,  expenses and other charges relating
thereto, which are incurred by Lender on account thereof, shall be payable, upon
demand,  by each  Guarantor  to  Lender  and  shall be  additional  Indebtedness
hereunder secured by the Guarantor Collateral.

         SECTION 4.   COVENANTS OF GUARANTOR.

         Each Guarantor covenants and agrees that from the date hereof and until
payment in full of the  Indebtedness  unless Lender shall  otherwise  consent in
writing, each Guarantor:

         4.1 Compliance with Loan Documents. Shall, and shall cause Borrower to,
comply with all terms,  conditions,  covenants and  agreements  set forth in the
Loan Documents.

         4.2 Insurance.  Shall maintain and pay for insurance upon all Guarantor
Collateral,  wherever located, and otherwise covering casualty, hazard, workers'
compensation,  business interruption,  public liability and such other risks and
in such  amounts  and with  such  insurance  companies  as  shall be  reasonably
satisfactory  to Lender and in compliance with law. Each Guarantor shall deliver
such certificates of insurance to Lender with loss payable  endorsements  naming
Lender as loss payee thereunder in form reasonably  satisfactory to Lender. Each
Guarantor  also agrees to maintain and pay for  insurance  in such amount,  with
such  companies and in such form as shall be reasonably  satisfactory  to Lender
insuring each Guarantor  against any claims,  suits, loss or damages suffered by
any Person on any  property  owned or leased by any  Guarantor  and against such
other casualties and  contingencies as is customary in the business in which any
Guarantor is engaged,  and deliver such certificates of insurance to Lender with
satisfactory  endorsements naming Lender as additional insured thereunder.  Each
policy of insurance  shall  contain a clause  requiring  the insurer to give not
less  than  thirty  (30)  days'  prior  written  notice  to  Lender  before  any
cancellation  of the  policies for any reason  whatsoever  and a clause that the
interest of Lender shall not be impaired or invalidated by any act or neglect of
any Guarantor or the owner of the property nor by the occupation of the premises
wherein such property is located for purposes more  hazardous than are permitted
by said policy.  Each Guarantor  hereby directs all insurers under such policies
of insurance on the Guarantor  Collateral to pay all proceeds payable thereunder
directly  to  Lender  following  an  Event of  Default.  Each  Guarantor  hereby
irrevocably makes, constitutes and appoints Lender (and all officers,  employees
or agents  designated by Lender) as each  Guarantor's  true and lawful  attorney
(and  agent-in-fact)  for the purpose of making,  settling and adjusting  claims
under such  policies of



                                       8
<PAGE>

insurance,  endorsing the name of any Guarantor on any check, draft,  instrument
or other item of payment for the proceeds of such  policies of insurance and for
making  all  determinations  and  decisions  with  respect to such  policies  of
insurance;  provided, however, that such power shall not be used until after the
occurrence of and during the  continuation of an Event of Default.  Prior to the
occurrence  of an Event of  Default,  Each  Guarantor  will not make,  settle or
adjust any material  claim  without the prior written  consent of Lender,  which
consent will not be unreasonably  withheld. If any Guarantor fails to obtain and
maintain  any of the  policies of insurance or to pay any premium in whole or in
part, then Lender may, at such Guarantor's expense, without waiving or releasing
any obligation or default, procure the same, but shall not be required to do so.
All sums so  disbursed  by  Lender,  including  attorneys'  fees,  court  costs,
expenses and other charges related  thereto,  shall be payable on demand by each
Guarantor to Lender and shall be additional  Indebtedness  hereunder  secured by
the Guarantor Collateral.

         4.3 Liens.  Shall not create or permit to exist any Liens on any of the
Guarantor Collateral or its other assets, except Permitted Liens.


         SECTION 5    EVENTS OF DEFAULT.

         The  occurrence  of any  one or  more  of the  following  events  shall
constitute an "Event of Default":

                  (a) Any Guarantor fails to pay any portion of the Indebtedness
when due and payable or declared due and  payable,  or fails to remit or deposit
items or funds as required by the terms of this Guaranty; or

                  (b) Any  Guarantor  fails or neglects  to observe,  perform or
comply  with  any  other  term,  provision,  condition,  covenant,  warranty  or
representation contained in this Guaranty, or the other Loan Documents or in any
other  agreement  now existing or  hereafter  executed  evidencing,  securing or
relating in any way to the  Indebtedness  or the  obligations  of any  Guarantor
hereunder,  which is required to be observed,  performed or complied with by any
Guarantor,  in any such  instance  after the  passage  of any  applicable  grace
period; or

                  (c) A Default or an Event of Default  (as such term is defined
in the Loan Agreement) shall occur.


         SECTION 6         RIGHTS AND REMEDIES AFTER EVENT OF DEFAULT.

         6.1 Rights and Remedies.  Upon and after the occurrence of any Event of
Default,  Lender shall have, in addition to all other rights and remedies  which
Lender may have under this Guaranty,  the other Loan  Documents,  and applicable
law, the following  rights and remedies,  all of which may be exercised  with or
without further notice to any Guarantor: (a) all of the rights and remedies of a
secured  party under the Code and  applicable  law; (b) to  foreclose  the Liens
created  under this  Guaranty  and the other Loan  Documents  or under any other
agreement  relating  to the  Guarantor



                                       9
<PAGE>

Collateral, by any available judicial procedure or without judicial process; (c)
to enter any premises  where the Guarantor  Collateral  may be located,  through
self-help and without judicial process, without first obtaining a final judgment
or giving any Guarantor  notice and opportunity for a hearing on the validity of
Lender's  claim,  for the purpose of taking  possession or removing the same, or
require  each  Guarantor  to  assemble  the  Guarantor  Collateral  and  make it
available to Lender at a place to be designated  by Lender;  and/or (d) to sell,
assign,  lease,  or otherwise  dispose of the  Guarantor  Collateral or any part
thereof,  either at public or private  sale,  in lots or in bulk,  for cash,  on
credit or otherwise, with or without representation or warranties, and upon such
terms as shall be acceptable to Lender,  in its sole discretion,  and Lender may
bid or become the  purchaser  at any such  public  sale,  free from any right of
redemption which is hereby expressly waived by each Guarantor,  and Lender shall
have the  option to apply or be  credited  with the amount of all or any part of
the Indebtedness owing to Lender against the purchase price bid by Lender at any
such sale.  Lender may, if it deems it reasonable,  postpone or adjourn any sale
of the Guarantor Collateral from time to time by an announcement at the time and
place of such postponed or adjourned sale,  without being required to give a new
notice of sale. Each Guarantor  agrees that Lender has no obligation to preserve
rights to the  Guarantor  Collateral  against  prior  Persons or to marshall any
Guarantor  Collateral for the benefit of any Person.  Lender is hereby granted a
license or other right to use, without charge, each Guarantor's labels, patents,
copyrights,  rights of use of any name, trade secrets, trade names,  trademarks,
and advertising  matter,  or any property of a similar nature, as it pertains to
the Guarantor Collateral, in completing production of, advertising for sale, and
selling any Guarantor  Collateral and each Guarantor's rights under all licenses
and franchise  agreements  shall inure to Lender's  benefit.  In addition,  each
Guarantor  agrees that in the event notice is necessary  under  applicable  law,
written notice mailed to such Guarantor in the manner  specified herein five (5)
days  prior to the date of public  sale of any of the  Guarantor  Collateral  or
prior to the date  after  which any  private  sale or other  disposition  of the
Guarantor  Collateral  will be made  shall  constitute  commercially  reasonable
notice to any  Guarantor.  Upon the  occurrence  of an Event of Default,  Lender
shall  also  have the  right  to seek  the  appointment  of a  receiver  to take
possession of and operate and dispose of any Guarantor's assets.  Lender may, at
any time during the continuance of an Event of Default,  and at each Guarantor's
expense,  employ and maintain custodians at such Guarantor's  premises who shall
have full  authority to protect  Lender's  interests.  Upon the  occurrence  and
during the continuation of an Event of Default, each Guarantor authorizes Lender
to collect and set-off and apply against the  Indebtedness  when due any cash or
deposit accounts in its possession,  and any refund of insurance premiums or any
insurance  proceeds  payable  on  account  of the loss or  damage  to any of the
Guarantor  Collateral and irrevocably appoints Lender as its attorney-in-fact to
endorse any check or draft or take other action  necessary to obtain such funds.
All or any part of the Guarantor Collateral may be liquidated and sold by Lender
for  failure of any  Guarantor  to pay any of the  Indebtedness,  regardless  of
whether any of the Loans have been accelerated or whether the Interest Rate Swap
Agreement has been terminated  early.  Notwithstanding  anything to the contrary
set forth herein, Guarantor Collateral may be liquidated upon Borrower's failure
to pay any  Indebtedness on a timely basis,  whether or not any acceleration has
occurred or the Interest Rate Swap Agreement has been terminated early.

         6.2  Application of Proceeds.  After an Event of Default,  the net cash
proceeds  resulting  from  the  collection,  liquidation,  sale,  lease or other
disposition of the Guarantor  Collateral  shall be applied first to the expenses
(including  all  reasonable  attorneys'  fees) of  retaking,  holding,  storing,



                                       10
<PAGE>

processing  and preparing for sale,  selling,  collecting,  liquidating  and the
like,  and  then to the  satisfaction  of all  Indebtedness,  application  as to
particular  Indebtedness  or against  principal  or  interest  to be in Lender's
absolute discretion. With limiting the generality of any other provision herein,
each  Guarantor  shall be liable to Lender and shall pay to Lender on demand any
deficiency  which  may  remain  after  such  sale,  disposition,  collection  or
liquidation  of the Guarantor  Collateral.  With limiting the  generality of any
other  provision  herein,  Lender shall forthwith remit to such Guarantor or the
Person entitled  thereto any surplus  remaining after all  Indebtedness has been
paid  in  full.  If any of  the  Guarantor  Collateral  shall  require  repairs,
maintenance,  preparation  or the like,  or is in  process  or other  unfinished
state, Lender shall have the right, but shall not be obligated,  to perform such
repairs,  maintenance,  preparation,  completion of manufacturing or processing,
for the purpose of putting the same in such  saleable  form as Lender shall deem
appropriate, but Lender shall have the right to sell or dispose of the Guarantor
Collateral  without any such repairs,  maintenance,  preparation,  completion of
manufacturing or processing.  Each Guarantor will, at Lender's request, assemble
(as soon as reasonably  practicable)  all the Guarantor  Collateral  and make it
available to Lender at places which Lender may select,  whether at premises of a
Guarantor  or  elsewhere,  and will make  available  to Lender all  premises and
facilities of each  Guarantor for the purpose of Lender's  taking  possession of
the Guarantor  Collateral or of removing or putting the Guarantor  Collateral in
saleable form.

         6.3  Appointment  of  Lender  as  Guarantor's  Lawful  Attorney.   Each
Guarantor hereby irrevocably designates,  makes, constitutes and appoints Lender
(and all  Persons  designated  by  Lender) as each  Guarantor's  true and lawful
attorney (and  agent-in-fact) and Lender, or Lender's agent, may, upon and after
the occurrence of an Event of Default,  without notice to any Guarantor,  and at
such time or times  thereafter as Lender or said agent, in its sole  discretion,
may determine,  in each  Guarantor's or Lender's name: (i) demand payment of the
Accounts;  (ii)  enforce  payment  of the  Accounts,  by  legal  proceedings  or
otherwise;  (iii)  exercise  all of any  Guarantor's  rights and  remedies  with
respect to the  collection of the  Accounts;  (iv) settle,  adjust,  compromise,
extend  or renew the  Accounts;  (v)  settle,  adjust  or  compromise  any legal
proceedings  brought to collect the  Accounts;  (vi) if permitted by  applicable
law, sell or assign the Accounts  upon such terms,  for such amounts and at such
time or times as  Lender  deems  advisable;  (vii)  discharge  and  release  the
Accounts;  (viii)  prepare,  file and sign each  Guarantor's  name on a proof of
claim in  bankruptcy  or similar  document  against  any  Account  Debtor;  (ix)
prepare,  file and sign each Guarantor's name on any notice of Lien,  assignment
or satisfaction of Lien or similar document in connection with the Accounts; (x)
do all acts and things  necessary,  in Lender's sole discretion,  to fulfill any
Guarantor's  obligations  under  this  Guaranty;  (xi)  endorse  the name of any
Guarantor upon any chattel paper, document,  instrument,  invoice, freight bill,
bill of lading or similar  document or  agreement  relating  to the  Accounts or
Inventory;  (xii)  use any  Guarantor's  stationery  and  sign  the  name of any
Guarantor  to  verifications  of the  Accounts  and  notices  thereof to Account
Debtors; (xiii) use the information recorded, other than classified information,
on or  contained in any data  processing  equipment  and  computer  hardware and
software  relating to the Accounts and  Inventory  to which each  Guarantor  has
access;  (xiv) take control,  in any manner,  of any item of payment or proceeds
referred to in section 3.6 hereof;  (xv) endorse the name of any Guarantor  upon
any item of payment or  proceeds  referred  to in section 3.6 hereof and deposit
the same to the  account  of Lender on account  of the  Indebtedness;  and (xvi)
endorse any  Guarantor's  name upon any  chattel  paper,  document,  instrument,
invoice,  freight bill, bill of lading or similar document or agreement relating
to the  Accounts  or



                                       11
<PAGE>

Inventory. All acts of Lender or its designee, except Lender's and its designees
acts of gross negligence or willful  misconduct,  taken pursuant to this section
6.3 are hereby  ratified and confirmed  and Lender or its designee  shall not be
liable for any acts of omission or  commission  nor for any error of judgment or
mistake  of fact  or law.  This  power,  being  coupled  with  an  interest,  is
irrevocable by each Guarantor until all Indebtedness is paid in full.

         6.4 Rights and Remedies Cumulative; Non-Waiver; Etc. The enumeration of
Lender's  rights and remedies  set forth in this  Guaranty is not intended to be
exhaustive  and the exercise by Lender of any right or remedy shall not preclude
the exercise of any other rights or remedies,  all of which shall be cumulative,
and shall be in addition to any other right or remedy given hereunder, under the
Loan Documents or under any other agreement between each Guarantor and Lender or
which may now or hereafter exist in law or in equity or by suit or otherwise. No
delay or failure to take action on the part of Lender in  exercising  any right,
power or privilege  shall operate as a waiver  thereof,  nor shall any single or
partial exercise of any such right, power or privilege preclude other or further
exercise thereof or the exercise of any other right, power or privilege or shall
be  construed  to be a waiver of any  Event of  Default.  No  course of  dealing
between any  Guarantor  and Lender or Lender's  employees  shall be effective to
change,  modify or discharge  any  provision of this Guaranty or to constitute a
waiver of any Event of Default.  Lender shall not, under any circumstances or in
any event whatsoever, have any liability for any error, omission or delay of any
kind occurring in the liquidation of the Guarantor Collateral or for any damages
resulting  therefrom  except  damages  directly  attributable  to Lender's gross
negligence or willful misconduct.

         SECTION 7         PAYMENT OF EXPENSES

         Provided  same  shall  not  have  previously  been  paid  by  Borrower,
Guarantors shall pay or reimburse Lender upon demand for all reasonable expenses
(including, without limitation,  reasonable attorneys' and paralegals' expenses)
incurred or paid by Lender in  connection  with:  (a) any  litigation,  contest,
dispute,  suit,  proceeding  or  action  (whether  instituted  by  Lender or any
Guarantor or any other Person) in any way relating to the Guarantor  Collateral,
this Guaranty or the other Loan Documents, or Borrower's, any Guarantor's or any
other guarantor's  business or affairs; (b) any attempt to enforce any rights of
Lender or any participant against any Guarantor or any other Person which may be
obligated  to Lender by virtue of this  Guaranty  or the other  Loan  Documents,
including without limitation,  the Account Debtors;  (c) any attempt to inspect,
verify, protect,  collect, sell, liquidate or otherwise dispose of the Guarantor
Collateral;  (d) the filing and recording of all documents required by Lender to
perfect  Lender's  Liens  in  the  Guarantor   Collateral,   including   without
limitation,  any  documentary  stamp tax or any other taxes incurred  because of
such filing or recording.



                                       12
<PAGE>

         SECTION 8         MISCELLANEOUS.

         8.1 Survival of Agreements. All agreements, covenants,  representations
and  warranties  contained  herein  or made in  writing  by or on behalf of each
Guarantor in connection with the transactions  contemplated hereby shall survive
the  execution  and delivery of this  Guaranty and the other Loan  Documents and
shall  continue  in  full  force  and  effect  so long  as any  Indebtedness  is
outstanding.  No termination or cancellation  (regardless of cause or procedure)
of this  Guaranty  shall in any way  affect or impair the  powers,  obligations,
duties,  rights and liabilities of the parties hereto in any way with respect to
(a)  any  transaction  or  event   occurring   prior  to  such   termination  or
cancellation,  (b)  the  Guarantor  Collateral,  or (c)  any of any  Guarantor's
undertakings, agreements, covenants, warranties and representations contained in
this  Guaranty  and  the  other  Loan  Documents  and  all  such   undertakings,
agreements,   covenants,  warranties  and  representations  shall  survive  such
termination or  cancellation.  Each Guarantor  further agrees that to the extent
that each such Guarantor makes a payment or payments to Lender, which payment or
payments  or any part  thereof  are  subsequently  invalidated,  declared  to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver or any other party under any bankruptcy, insolvency or similar state or
federal law, common law or equitable cause,  then, to the extent of such payment
or repayment, the Indebtedness or part thereof intended to be satisfied shall be
revived and  continued  in full force and effect as if such payment had not been
received by Lender.

         8.2 Notices.  Any notice or other communication  hereunder to any party
hereto shall be by hand delivery, facsimile transmission,  nationally recognized
overnight courier for next business day delivery or registered or certified mail
and unless otherwise  provided herein shall be deemed to have been received when
delivered  personally  or three  days  after  deposit  in such mail or with such
courier postage prepaid,  addressed to the party at its address  specified below
(or at any  other  address  that the party may  hereafter  specify  to the other
parties in writing):

         Guarantor:                 Steiner-Atlantic Corp.
                                    290 68th Street
                                    Miami, Florida 33138
                                    Facsimile: (305) 751-4903

         Guarantor:                 Steiner-Atlantic Brokerage Company, Inc.
                                    290 68th Street
                                    Miami, Florida 33138
                                    Facsimile: (305) 751-4903

         Guarantor:                 Dryclean USA Development Corp..
                                    290 68th Street

         Guarantor:                 Dryclean USA License Corp.
                                    290 68th Street


                                       13
<PAGE>

                                    Miami, Florida 33138
                                    Facsimile: (305) 751-4903

         Lender:                    First Union National Bank
                                    Portfolio Management Group
                                    4299 N.W. 36th Street, 4th Floor
                                    Miami Springs, Florida 33166
                                    Facsimile: (305) 883-4198

         With a copy to:            Stearns Weaver Miller Weissler
                                    Alhadeff & Sitterson, P.A.
                                    150 West Flagler Street, Suite 2200
                                    Miami, Florida  33130
                                    Attention: Stuart D. Ames, Esq.
                                    Facsimile:  (305) 789-3395

         8.3  Indemnification of Lender. From and at all times after the date of
this  Guaranty,  and in addition to all of Lender's  other  rights and  remedies
against any Guarantor,  each Guarantor  agrees to hold Lender harmless from, and
to indemnify Lender against, all losses, damages, costs and expenses (including,
but not  limited to,  reasonable  attorneys'  and  paralegals'  fees,  costs and
expenses)  incurred by Lender from and after the date  hereof,  whether  direct,
indirect  or  consequential,  as a result of or arising  from or relating to any
suit,  action or  proceeding  by any Person,  whether  threatened  or initiated,
asserting a claim for any legal or equitable remedy against any Person under any
statute or  regulation,  including,  but not  limited  to, any  federal or state
securities  laws,  or under any  common  law or  equitable  cause or  otherwise,
arising from or in connection with the  negotiation,  preparation,  execution or
performance of, this Guaranty and the other Loan Documents;  provided,  however,
that the foregoing indemnification shall not protect a Lender from loss, damage,
cost or expense  directly  attributable to such Lender's  willful  misconduct or
gross negligence.  All of the foregoing losses,  damages,  costs and expenses of
Lender shall be payable by each Guarantor upon demand by Lender, as the case may
be, and shall be  additional  Indebtedness  hereunder  secured by the  Guarantor
Collateral.

         8.4 Assignment.  This Guaranty shall be binding upon and shall inure to
the benefit of each Guarantor and Lender,  and their  respective  successors and
assigns; provided that each Guarantor may not assign any of its rights or duties
hereunder  without the prior written  consent of Lender and any such  assignment
made without such consent shall be void. Nothing in this Guaranty shall prohibit
or restrict Lender from pledging or assigning the Loan Documents,  including the
Guarantor Collateral,  to any Federal Reserve Bank in accordance with applicable
law.

         8.5 Amendment. This Guaranty cannot be amended, changed,  discharged or
terminated  orally,  but only by an instrument  in writing  signed by Lender and
each Guarantor.

         8.6  Severability.  To the extent any  provision  of this  Guaranty  is
prohibited  by  or  invalid  under  applicable  law,  such  provision  shall  be
ineffective  to  the  extent  of  such   prohibition   or



                                       14
<PAGE>

invalidity,  without  invalidating  the  remainder  of  such  provision  or  the
remaining provisions of this Guaranty.

         8.7  Entire   Agreement.   This  Guaranty  and  the  other   documents,
certificates and instruments  referred to herein constitute the entire agreement
between the parties and supersede and rescind any prior  agreements  relating to
the  subject  matter  hereof;  provided,   however,  that,  notwithstanding  the
foregoing,  this  Guaranty  shall not be deemed to modify,  supersede,  rescind,
revoke or otherwise  diminish the terms or conditions  of any other  guaranty or
similar arrangement executed by any Guarantor in favor of Lender.

         8.8 Binding  Effect.  All of the terms of this  Guaranty  and the other
Loan Documents,  as the same may from time to time be amended,  shall be binding
upon,  inure to the benefit of and be enforceable  by the respective  successors
and assigns of Guarantors  and Lender.  This  provision,  however,  shall not be
deemed to modify section 8.5.

         8.9 Captions.  The captions to the various  sections and subsections of
this  Guaranty have been  inserted for  convenience  only and shall not limit or
affect any of the terms hereof.

         8.10 Conflict of Terms.  The provisions of the other Loan Documents and
any  Schedule  thereto  are  incorporated  in this  Guaranty  by this  reference
thereto.  Except as otherwise  provided in this Guaranty and except as otherwise
provided  in the  other  Loan  Documents,  if any  provision  contained  in this
Guaranty is in conflict with, or  inconsistent  with, any provision of the other
Loan Documents, the provision contained in this Guaranty shall control.

         8.11 Injunctive Relief. Each Guarantor recognizes that in the event any
Guarantor  fails to perform,  observe or  discharge  any of its  obligations  or
liabilities  under this  Guaranty,  any remedy of law may prove to be inadequate
relief to Lender.  Each  Guarantor  therefore  agrees that Lender,  if Lender so
requests,  shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.

         8.12 Further  Assurances.  At any time, and from time to time, upon the
written request of Lender, and at the sole expense of Guarantors, each Guarantor
will promptly and duly execute and deliver any and all such further  instruments
and  documents  and take such  further  actions  as Lender may  reasonably  deem
desirable to obtain the full  benefits of this  Guaranty.  Each  Guarantor  also
hereby  authorizes  Lender  to file any  additional  financing  or  continuation
statements  without the  signature of any  Guarantor to the extent  permitted by
law.

         8.13 Separate Legal Counsel. Each Guarantor has been represented by its
own legal  counsel (and not that of Lender) in connection  with the  negotiation
and documentation of the Loan Documents.

         8.14 Counterparts;  Construction; Gender. This Guaranty may be executed
in any  number of  counterparts  and by  different  parties  hereto in  separate
counterparts,  each of which when so executed and  delivered  shall be deemed an
original and all of which when taken together  shall  constitute but one and the
same  instrument.  Any  telecopied  version  of a  signature  shall be  deemed



                                       15
<PAGE>

a manually  executed and delivered  original.  This Guaranty  shall be construed
without any presumption that it be construed  against the party causing it to be
drafted.  All  references in this Guaranty or any of the other Loan Documents to
the  masculine,  feminine or neuter gender shall include all such genders unless
the context clearly indicates otherwise. Each representation, warranty, covenant
and agreement set forth in any Loan Document  shall be construed  independently.
The parties  acknowledge  that a Default or an Event of Default  shall be deemed
continuing  until cured,  as determined by Lender,  in accordance with the terms
hereof and the other Loan Documents.

         8.15 Powers.  All powers of attorney granted to Lender are coupled with
an interest and are  irrevocable,  until all Indebtedness is irrevocably paid in
full and Lender has no further obligations to make any Loans.

         8.16  Approvals.  If this Guaranty calls for the approval or consent of
Lender,  such  approval  or consent  may be given or withheld in the sole credit
judgment of Lender.

         8.17 Arbitration;  Preservation and Limitation of Remedies. Upon demand
of any party hereto,  whether made before or after  institution  of any judicial
proceeding,  any dispute, claim or controversy arising out of, connected with or
relating  to this  Guaranty  or any  other  Loan  Documents  ("Disputes"),  this
Guaranty  shall  be  resolved  by  binding   arbitration  as  provided   herein.
Institution of a judicial proceeding by a party does not waive the right of that
party to demand arbitration hereunder. Disputes may include, without limitation,
tort  claims,  counterclaims,  disputes  as to  whether a matter is  subject  to
arbitration, claims brought as class actions, claims arising from Loan Documents
executed  in the  future,  or  claims  arising  out  of or  connected  with  the
transaction reflected by this Guaranty. Arbitration shall be conducted under and
governed  by  the  Commercial   Financial   Disputes   Arbitration   Rules  (the
"Arbitration  Rules") of the American  Arbitration  Association  (the "AAA") and
Title 9 of the U.S.  Code.  All  arbitration  hearings shall be conducted in the
city in which the office of Lender first stated above is located.  The expedited
procedures  set  forth in Rules 51 et seq.  of the  Arbitration  Rules  shall be
applicable  to  claims of less  than  $1,000,000.  All  applicable  statutes  of
limitation shall apply to any Dispute.  A judgment upon the award may be entered
in any court  having  jurisdiction.  The panel  from which all  arbitrators  are
selected  shall be  comprised  of  licensed  attorneys.  The  single  arbitrator
selected for expedited procedure shall be a retired judge from the highest court
of general  jurisdiction,  state or federal, of the state where the hearing will
be conducted or if such person is not available to serve, the single  arbitrator
may be a licensed  attorney.  Notwithstanding  the foregoing,  this  arbitration
provision  does not apply to disputes under or related to any Interest Rate Swap
Agreement.  Notwithstanding  the preceding binding arbitration  provisions,  the
parties agree to preserve,  without diminution,  certain remedies that any party
hereto may employ or exercise  freely,  independently  or in connection  with an
arbitration  proceeding or after an arbitration  action is brought.  The parties
shall  have the  right to  proceed  in any court of  proper  jurisdiction  or by
self-help to exercise or prosecute the following  remedies,  as applicable:  (i)
all rights to foreclose  against any real or personal property or other security
by exercising a power of sale granted under Loan  Documents or under  applicable
law or by judicial  foreclosure and sale,  including a proceeding to confirm the
sale;  (ii) all  rights  of  self-help  including  peaceful  occupation  of real
property and collection of rents,  set-off,  and peaceful possession of personal
property; (iii) obtaining provisional or ancillary remedies including injunctive
relief,  sequestration,  garnishment,  attachment,  appointment  of receiver and
filing  an  involuntary



                                       16
<PAGE>

bankruptcy  proceeding;  and (iv) when  applicable,  a judgment by confession of
judgment.  Preservation  of  these  remedies  does  not  limit  the  power of an
arbitrator  to grant  similar  remedies  that may be  requested  by a party in a
Dispute.  The  parties  agree that they shall not have a remedy of  punitive  or
exemplary damages against the other in any Dispute and hereby waive any right or
claim to punitive or  exemplary  damages they have now or which may arise in the
future in  connection  with any  Dispute  whether  the  Dispute is  resolved  by
arbitration or judicially.

         8.18  GOVERNING  LAW;  JURISDICTION  AND VENUE;  WAIVER OF JURY  TRIAL.
SUBJECT TO THE TERMS OF SECTION 8.17,  THIS GUARANTY SHALL BE  INTERPRETED,  AND
THE RIGHTS AND LIABILITIES OF THE PARTIES HERETO DETERMINED,  IN ACCORDANCE WITH
THE INTERNAL  LAWS (AS OPPOSED TO CONFLICTS OF LAW  PROVISIONS)  OF THE STATE OF
FLORIDA.  SUBJECT TO THE TERMS OF SECTION 8.17, AS PART OF THE CONSIDERATION FOR
NEW VALUE THIS DAY RECEIVED,  EACH GUARANTOR HEREBY CONSENTS TO THE JURISDICTION
OF ANY  STATE OR  FEDERAL  COURT  LOCATED  WITHIN  MIAMI-DADE  COUNTY,  STATE OF
FLORIDA,  AND  CONSENTS  THAT ALL  SERVICE OF PROCESS BE MADE BY  REGISTERED  OR
CERTIFIED  MAIL DIRECTED TO EACH  GUARANTOR AT THE ADDRESS STATED IN SECTION 8.2
AND SERVICE SO MADE SHALL BE DEEMED TO BE  COMPLETED  UPON THE EARLIER OF ACTUAL
RECEIPT  THEREOF OR THREE DAYS AFTER DEPOSIT IN THE UNITED STATES MAILS,  PROPER
POSTAGE PREPAID. SUBJECT TO THE TERMS OF SECTION 8.17, EACH GUARANTOR AND LENDER
HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY  WAIVES  TRIAL  BY JURY IN ANY SUIT OR
PROCEEDING  ARISING  OUT OF OR  RELATED  TO  THIS  GUARANTY  OR THE  OTHER  LOAN
DOCUMENTS.  SUBJECT  TO THE TERMS OF SECTION  8.17,  EACH  GUARANTOR  WAIVES ANY
OBJECTION  WHICH  EACH  GUARANTOR  MAY  HAVE  BASED ON LACK OF  JURISDICTION  OR
IMPROPER VENUE OR FORUM NON  CONVENIENS TO ANY SUIT OR PROCEEDING  INSTITUTED BY
LENDER UNDER THIS  GUARANTY OR THE OTHER LOAN  DOCUMENTS IN ANY STATE OR FEDERAL
COURT LOCATED WITHIN MIAMI-DADE COUNTY,  FLORIDA AND CONSENTS TO THE GRANTING OF
SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY THE COURT. SUBJECT TO
THE TERMS OF SECTION  8.17,  NOTHING IN THIS SECTION 8.18 SHALL AFFECT THE RIGHT
OF LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER  PERMITTED BY LAW OR AFFECT
THE RIGHT OF LENDER TO BRING ANY ACTION OR  PROCEEDING  AGAINST ANY GUARANTOR OR
ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH HAS JURISDICTION OVER
ANY  GUARANTOR  OR ITS  PROPERTY.  SUBJECT  TO THE TERMS OF SECTION  8.17,  THIS
PROVISION IS A MATERIAL  INDUCEMENT  FOR LENDER TO ENTER INTO THIS  GUARANTY AND
THE  OTHER  LOAN  DOCUMENTS,  MAKE THE  LOANS AND  EXTEND  THE  OTHER  FINANCIAL
ACCOMMODATIONS CONTEMPLATED HEREUNDER AND THEREUNDER.




                                       17
<PAGE>

         IN WITNESS  WHEREOF,  each  Guarantor  has  caused  this  Guaranty  and
Security  Agreement to be executed and sealed in its corporate  name by its duly
authorized corporate officer as of the date first above written.


                                   STEINER-ATLANTIC CORP., a Florida corporation


                                   By:      /s/ Michael Steiner, Pres.
                                      ------------------------------------------
                                            Michael Steiner, President



                                   STEINER-ATLANTIC  BROKERAGE COMPANY,  INC., a
                                   Florida corporation


                                   By:      /s/ Michael Steiner, Pres.
                                      ------------------------------------------
                                            Michael Steiner, President



                                   DRYCLEAN  USA  DEVELOPMENT  CORP.,  a Florida
                                   corporation


                                   By:      /s/ Michael Steiner, Pres.
                                      ------------------------------------------
                                            Michael Steiner, President



                                   DRYCLEAN   USA  LICENSE   CORP.,   a  Florida
                                   corporation


                                   By:      /s/ Michael Steiner, Pres.
                                      ------------------------------------------
                                            Michael Steiner, President


Accepted and acknowledged by:

FIRST UNION NATIONAL BANK


By: /s/ Steve Leth
    ------------------------------------------
    Steve Leth, Vice President




                                       18

</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
