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Loan Agreement - The Industrial Development Authority of the City of Moberly, Missouri and Everlast Fitness Manufacturing Corp.

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                                 LOAN AGREEMENT

                                     Between

                      THE INDUSTRIAL DEVELOPMENT AUTHORITY
                        OF THE CITY OF MOBERLY, MISSOURI

                                       And

                           EVERLAST FITNESS MFG. CORP.

                             ----------------------

                            Dated as of March 1, 1996

                             ----------------------

                                   Relating to
                                   $4,250,000
                      The Industrial Development Authority
                        of the City of Moberly, Missouri
                              Variable Rate Demand
                   Private Activity Revenue Bonds, Series 1996
                      (Everlast Fitness Mfg. Corp. Project)

--------------------------------------------------------------------------------
All right,  title and interest of The  Industrial  Development  Authority of the
City of Moberly,  Missouri in this  Agreement  (with the exception of its rights
under  Sections  4.2(c),  5.3 and 6.3 hereof) has been assigned  pursuant to the
Indenture  referred to herein, for the benefit of the owners of, and as security
for payment of, the Bonds of said Issuer described herein.


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                                TABLE OF CONTENTS

Parties......................................................................1
Preamble.....................................................................1

                                    ARTICLE 1

                               DEFINITION OF TERMS

  Section 1.1   Definitions...................................................1

                                    ARTICLE 2

                                 REPRESENTATIONS

  Section 2.1   Representation of the Issuer..................................5
  Section 2.2   Representation of the Borrower ...............................5

                                    ARTICLE 3

               CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS

  Section 3.1   Agreement to Construct and Equip the Project..................6
  Section 3.2   Agreement to Issue Bonds: Application of Bond Proceeds........7
  Section 3.3   Disbursements from the Project Fund...........................7
  Section 3.4   Establishment of Completion Date: Obligation of the Borrower
                to Compete....................................................9
  Section 3.5   Investments..................................................11
  Section 3.6   Arbitrage Certifications.....................................11
  Section 3.7   Cost of Issuance.............................................12

                                    ARTICLE 4

                   LOAN OF BOND PROCEEDS; PAYMENT OBLIGATIONS

  Section 4.1   Loan of Bond Proceeds........................................12
  Section 4.2   Amounts Payable by Borrower..................................12
  Section 4.3   No Defense or Set-off, Unconditional Obligation..............14
  Section 4.4   Assignment and Pledge of Issuer's Rights.....................15
  Section 4.5   No Third Party Beneficiary...................................15


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<PAGE>


                                    ARTICLE 5

                        SPECIAL COVENANTS AND AGREEMENTS

  Section 5.1   Right of Access to the Project...............................15
  Section 5.2   Maintain its Existence:  Conditions Under Which Executions
                Permitted....................................................15
  Section 5.3   Release and Indemnification Covenants........................16
  Section 5.4   Validity and Tax-exempt Status of the Bonds..................17
  Section 5.5   Taxes and Government Charges.................................18
  Section 5.6   Maintenance and Repair; Insurance............................18
  Section 5.7   Financial Reports............................................19
  Section 5.8   Letter of Credit.............................................19
  Section 5.9   Option to Convert to Fixed Rate..............................21
  Section 5.10  Operation of Project.........................................22
  Section 5.11  Qualification in State.......................................22
  Section 5.12  Compliance with Orders, Ordinances, Etc......................22
  Section 5.13  No Warranty by Issuer........................................22
  Section 5.14  Insurance and Condemnation Awards............................22
  Section 5.15  Governmental Approvals.......................................24

                                    ARTICLE 6

                         EVENTS OF DEFAULT AND REMEDIES

  Section 6.1   Events of Default............................................26
  Section 6.2   Remedies on Default..........................................28
  Section 6.3   Agreement to Pay Attorneys' Fees and Expenses................29
  Section 6.4   No Remedy Exclusive..........................................29
  Section 6.5   No Implied Waiver............................................29
  Section 6.6   Notice of Default............................................30

                                    ARTICLE 7

                                   PREPAYMENT

  Section 7.1   Obligation to Prepay.........................................30
  Section 7.2   Option to Prepay.............................................31
  Section 7.3   Redemption of the Bonds......................................31

                                    ARTICLE 8

                                  MISCELLANEOUS

  Section 8.1   Notices......................................................32
  Section 8.2   Assignment By Borrower.......................................32
  Section 8.3   Severability.................................................32

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<PAGE>


  Section 8.4   Execution of Counterparts....................................32
  Section 8.5   Amounts Remaining in any Fund or With Trustee................32
  Section 8.6   Amendments, Changes and Modification.........................32
  Section 8.7   Governing Law................................................32
  Section 8.8   Authorized Borrower Representative...........................33
  Section 8.9   Term of this Agreement.......................................33
  Section 8.10  Binding Effect...............................................33
  Section 8.11  Limited Liability of Officers, Etc...........................33
  Section 8.12  References to Bank, Letter of Credit and Credit Facility.....34

Exhibit A       Project Description

Exhibit B       Description of Project Site



                                       iii

<PAGE>


                                 LOAN AGREEMENT

         THIS LOAN  AGREEMENT  dated as of March 1,  1996,  by and  between  THE
INDUSTRIAL  DEVELOPMENT  AUTHORITY  OF THE CITY OF MOBERLY,  MISSOURI,  a public
corporation of the State of Missouri (the "Issuer"),  and EVERLAST  FITNESS MFG.
CORP., a corporation  duly organized and validly  existing under the laws of the
State of Missouri (the "Borrower");

                              W I T N E S S E T H:
                               - - - - - - - - - -

         WHEREAS,  the Issuer is  empowered  by the  provisions  of Chapter 349,
Revised  Statutes of  Missouri  (1994),  as amended  (the  "Act"),  to issue its
revenue  bonds to finance  "projects"  within the meaning of the Act  (including
manufacturing plants) for the purposes set forth in the Act; and

         WHEREAS,  pursuant to and in accordance with the provisions of the Act,
and at the request of the Borrower,  the Issuer has agreed to issue its Variable
Rate Demand Private Activity Revenue Bonds,  Series 1996 (Everlast  Fitness Mfg.
Corp. Project) in the aggregate principal amount of $4,250,000 (the "Bonds") and
to loan the  proceeds  thereof  to the  Borrower  to defray  the cost of certain
manufacturing  facilities  (the  "Project")  located  in the  City  of  Moberly,
Missouri for ownership and use by the Borrower; and

         WHEREAS,  the Bonds will be secured by (i) an assignment  and pledge of
the Issuer's  rights  under this  Agreement  (except its rights  under  Sections
4.2(c),  5.3 and 6.3 hereof) and (ii) moneys  derived  from  drawings  under the
irrevocable, transferable direct pay letter of credit issued by Chemical Bank, a
New York banking corporation,  in favor of Commerce Bank, National  Association,
as Trustee for the benefit of the owners from time to time of the Bonds, and any
other letter of credit or credit  facility  issued in accordance  with the terms
hereof, and

         WHEREAS,  the execution and delivery of this Agreement have been in all
respects duly and validly authorized by action of the Issuer's governing body;

         NOW, THEREFORE, in consideration of the respective  representations and
agreements herein contained, the parties hereto agree as follows (provided, that
in the  performance  of the  agreements  of the  Issuer  herein  contained,  any
obligation it may thereby incur shall be payable  solely out of the revenues and
receipts derived from this Agreement, the sale of the Bonds, the income from the
temporary investment thereof and moneys derived from any Credit Facility):

                                    ARTICLE 1

                               DEFINITION OF TERMS

         Section 1.1 Definitions.  All words and phrases defined in Article I of
the Indenture shall have the same meanings in this Agreement. Certain terms used
in this Agreement are  hereinafter  defined in this Article I. When used herein,
such terms shall have the meanings  given them by the language  employed in this
Article I defining such terms unless the context clearly indicates otherwise:




<PAGE>


         "Agreement"   means  this  Loan   Agreement,   as  from  time  to  time
supplemented and amended.

         "Authorized Borrower  Representative" means such person at the time and
from  time to time  designated  to act on  behalf  of the  Borrower  by  written
certificate  furnished to the Issuer,  the Bank and the Trustee,  containing the
specimen signature of such person, signed on behalf of the Borrower by the chief
executive officer,  the vice chairman,  any vice president,  the treasurer,  any
assistant  treasurer,  the secretary or any assistant secretary of the Borrower.
Such certificate may designate an alternative or alternatives.

         "Borrower"  means  Everlast  Fitness Mfg.  Corp.,  a  corporation  duly
organized and validly existing under the laws of the State of Missouri,  and any
surviving,  resulting  or  transferee  corporation  as  permitted by Section 5.2
hereof.

         "Completion Date" means the date of completion of the Project.

         "Construction  Period"  means  the  period  between  the  beginning  of
construction  of the Project or the date on which Bonds are first  delivered  to
the purchasers thereof, whichever is earlier, and the Completion Date.

         "Cost of the Project" means the sum of the items  authorized to be paid
from the Project Fund pursuant to the provisions of Section 3.3 hereof.

         "Determination  of Taxability" means a decision by the Internal Revenue
Service or a court of competent  jurisdiction,  as a result of a  proceeding  in
which the Borrower  participates or is given the opportunity to participate,  at
its expense,  from which decision no further right of appeal  exists,  that as a
result of any action  taken,  permitted or omitted to be taken by the  Borrower,
the  interest  payable on the Bonds (or any of the Bonds) is  includable  in the
gross income of any owner  thereof for federal  income tax purposes  (other than
any owner who is a "substantial  user" or a "related  person" within the meaning
of Section 147(a) of the Code and the applicable regulations thereunder).

         "Event of Default" means any  occurrence or event  specified as such in
and defined as such by Section 6.1 hereof.

         "Event of Taxability" means the enactment of legislation,  the issuance
or rendering of a judicial decision or decree, or an order,  ruling,  regulation
or official  statement of general  application of the Department of the Treasury
or of the  Internal  Revenue  Service  of the United  States,  the  issuance  or
revocation of any published ruling or other announcement or procedure of general
application by the Department of the Treasury or the Internal Revenue Service of
the United States,  or the  occurrence of any other act, event or  circumstance,
but in all cases  excluding the  occurrence of a  Determination  of  Taxability,
which, in the opinion of Bond Counsel,  will cause interest income on the Bonds,
or any portion  thereof,  to be includable  either currently or retroactively in
the gross income of any owner  thereof for federal  income tax  purposes  (other
than an owner who is a "substantial user" or "related person' within the meaning
of  Section  147(a)  of the Code  and the  applicable  regulations  thereunder).
Notwithstanding  the  foregoing,  no Event of Taxability  shall occur unless the
Borrower has been afforded the opportunity, at its


                                        2

<PAGE>



expense, to contest any such opinion of Bond Counsel and until the Trustee,  the
Issuer and the Borrower  shall have agreed with such opinion after such contest;
provided,  however, that, such contest must be completed within 180 days of such
opinion of Bond Counsel or, if the Borrower has decided to seek a  determination
by the Internal  Revenue Service or a court of competent  jurisdiction as to the
status of the interest  income on the Bonds,  then no Event of Taxability  shall
occur until a  Determination  of  Taxability  occurs.  Taxes which are or may be
imposed on the interest  payable on the Bonds because such interest is or may be
as a  specific  preference  item  for  individuals  or  corporations  or  as  an
adjustment  item in computing any minimum tax or in computing the  environmental
tax  imposed on certain  corporations  or in  computing  the branch  profits tax
imposed on certain  foreign  corporations  are  examples  of taxes  which do not
result  in the  interest  payable  on the  Bonds  (or  any of the  Bonds)  being
includable  in the gross  income of any owner  thereof  for  federal  income tax
purposes.

         "Manufacturing  Facilities" means  manufacturing  facilities within the
meaning of Section 144(a)(12)(c) of the Code.

         "Mid-Month"  means the  fifteenth  day of any  month,  whether or not a
Business Day.

         "MSRB" means the Municipal Securities Rulemaking Board.

         "NRMSIR" means any information  repository recognized by the Securities
and  Exchange  Commission  as  a  nationally   recognized  municipal  securities
information repository under its Rule 15c2- 12.

         "Obligations"  shall have the same  meaning  herein as in the Letter of
Credit Agreement.

         "Permitted Investments" means:

                  (a)  Bonds  or  other  obligations  of the  United  States  of
         America;

                  (b) Bonds or other  obligations,  the payment of the principal
         and  interest  of which is  unconditionally  guaranteed  by the  United
         States of America;

                  (c)  Obligations  issued or  guaranteed  as to  principal  and
         interest by any agency or person controlled or supervised by and acting
         as an  instrumentality  of the  United  States of America  pursuant  to
         authority granted by the Congress of the United States of America;

                  (d) Securities or receipts  evidencing  ownership interests in
         obligations  or specified  portions  (such as principal or interest) of
         obligations described in (a), (b) or (c) above;

                  (e) Commercial or finance  company paper which is rated either
         P-1 or A-1 or an equivalent by Moody's or S&P (including investments in
         pools or such  commercial or finance company paper owned by the Trustee
         or any affiliate of the Trustee);



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<PAGE>


                  (f)  Obligations  issued  by or on  behalf of any state of the
         United  States of America,  or any  political  subdivision  of any such
         state, which are rated at least A (or an equivalent) by Moody's or S&P;

                  (g) Funds  comprised of obligations  described in (f) above to
         the extent  described  under the  definition  of  "tax-exempt  bond" in
         Treasury Regulation 1.150-1(b),  including any such fund managed by the
         Trustee or any affiliate of the Trustee;

                  (h) Money market funds which are rated  prime-1 or AAAm (or an
         equivalent)  by Moody's or S&P,  including  any such money  market fund
         managed by the Trustee or any affiliate of the Trustee; or

                  (i) Any other  investment not prohibited by the applicable law
         (as evidenced by an opinion of Counsel furnished to the Trustee).

         "Plans and Specifications" means the plans and specifications  prepared
for the  Project  by the  Borrower,  as  amended  from time to time prior to the
Completion  Date,  which plans and  specifications  are on file at the principal
office of the Borrower and a copy of which has been filed with the Bank.

         "Project"  means those items of machinery,  equipment,  structures  and
related  property  being or to be acquired and  constructed  or installed at the
Project  Site with  proceeds  from the sale of the Bonds or the  proceeds of any
payment by the  Borrower  pursuant  to Section  3.4 of this  Agreement,  as more
particularly described in Exhibit A hereto.

         "Project Site" means the real estate and interests therein constituting
the site of the Project, as described in Exhibit B hereto.

         "Rule  15c2-12"  means  Rule  15c2-12  adopted  by the  Securities  and
Exchange  commission  under the  Securities  Exchange Act of 1934,  as it may be
amended from time to time.

         "SID"  means any  public or  private  information  depository,  if any,
designated by the State as such for purposes of Rule 15c2-12.

         "State" means the State of Missouri.

         "Tax  Agreement"  means the Federal  Income Tax  Compliance  Agreement,
dated the Dated Date, by and among the Issuer, the Borrower and the Trustee,  as
from time to time supplemented and amended.

         The words  "hereof",  "herein",  "hereunder" and other words of similar
import refer to this Agreement as a whole.

         Unless otherwise specified,  references to Articles, Sections and other
subdivisions  of this  Agreement are to the  designated  Articles,  Sections and
other subdivisions of this Agreement as originally executed.



                                        4

<PAGE>


         The titles and headings of the  paragraphs  of this  Agreement  are for
convenience only and shall not define or limit the provisions hereof.

                                    ARTICLE 2

                                 REPRESENTATIONS

         Section  2.1  Representations  of the  Issuer.  The  Issuer  makes  the
following  representations  as the basis for the undertakings on its part herein
contained:

                  (a) The  Issuer is a public  corporation  of the  State,  duly
         organized and validly  existing under the laws and  Constitution of the
         State.

                  (b) Under the  provisions  of the Act and  proceedings  of the
         Issuer,  the  Issuer  has the power  and  authority  to enter  into the
         transactions   contemplated  by,  and  to  execute  and  deliver,  this
         Agreement,  the Tax Agreement, the Indenture and the Bonds and to carry
         out its obligations hereunder and thereunder.

                  (c) None of the execution and delivery of this Agreement,  the
         Indenture,  the Tax Agreement and the Bonds,  the  consummation  of the
         transactions  contemplated  hereby or thereby and the fulfillment of or
         compliance  with  the  terms  and  conditions  of this  Agreement,  the
         Indenture, the Tax Agreement and the Bonds conflicts with or results in
         a breach of the terms,  conditions or provisions of any  restriction or
         any  agreement or  instrument  to which the Issuer is now a party or by
         which it is bound, or constitutes a default under any of the foregoing.

                  (d) The  Bonds are to be issued  under the  Indenture  and the
         payment of the principal of, premium, if any, and interest on the Bonds
         is to be secured under the Indenture by an assignment and pledge to the
         Trustee of all right,  title and  interest of the Issuer in and to this
         Agreement  (except the rights of the Issuer under Sections 4.2(c),  5.3
         and 6.3 hereof) and the Letter of Credit or any other Credit Facility.

                  (e) The Issuer has not assigned or pledged and will not assign
         or pledge its right,  tide or interest in or to this  Agreement,  other
         than to secure the Bonds and as otherwise provided in the Indenture.

                  (f) The  Issuer  has  not  been  notified  of any  listing  or
         proposed listing of it by the Internal Revenue Service as a bond issuer
         whose arbitrage certifications may not be relied upon.

         Section 2.2  Representations  of the Borrower.  The Borrower  makes the
following  representations  as the basis for the undertakings on its part herein
contained:

                  (a) The Borrower is a corporation  duly  organized and validly
         existing under the laws of the State,  is authorized to do business in,
         and is in good standing under the


                                        5

<PAGE>


         laws of,  the  State,  and has the power to enter  into,  and by proper
         corporate action has been duly authorized to execute and deliver,  this
         Agreement and the Tax Agreement.

                  (b) None of the execution  and delivery of this  Agreement and
         the Tax Agreement,  the consummation of the  transactions  contemplated
         hereby or thereby,  and the fulfillment of or compliance with the terms
         and conditions of this Agreement and the Tax Agreement,  conflicts with
         or results in a breach of any of the terms, conditions or provisions of
         any restriction or any agreement or instrument to which the Borrower is
         now a party or by which it is bound, or constitutes a default under any
         of the foregoing, or results in the creation or imposition of any lien,
         charge or encumbrance  whatsoever upon any of the property or assets of
         the Borrower or any subsidiary  thereof (excluding any liens created in
         contemplation of the issuance of the Bonds or otherwise permitted under
         this Agreement or the Indenture).  No condition exists to the knowledge
         of the Borrower which would, upon the execution of the Agreement,  with
         the lapse of time or the giving of notice,  or both, become an Event of
         Default hereunder.

                  (c) The statements, information,  descriptions,  estimates and
         assumptions  contained  in the Tax  Agreement  are  true,  correct  and
         complete  and are  based  upon the best  information  available  to the
         Borrower.

                  (d) The  Borrower  intends to operate  the Project in a manner
         consistent  with the  purposes  of the Act  until the date on which the
         Bonds have been fully paid and are no longer  Outstanding  and knows of
         no reason why the Project will not be so used. If, in the future, there
         is a cessation of such use,  the Borrower  will use its best efforts to
         resume such use or  accomplish  an alternate  use by it or others which
         will be consistent  with the Act. The Borrower  agrees that the actions
         herein  permitted  to be taken  shall  only be taken in such  manner as
         shall not  materially  impair  the  character  or  significance  of the
         Project as furthering the purposes of the Act.

                                    ARTICLE 3

               CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS

         Section 3.1  Agreement  to  Construct  and Equip the  Project.  (a) The
Borrower agrees that it will acquire and construct,  or complete the acquisition
and construction  and  construction of, the Project  substantially in accordance
with the Plans and  Specifications.  In the event that Exhibit A hereto is to be
amended or supplemented in accordance with the provisions of Section 12.1 of the
Indenture,  the Issuer will enter into, and will instruct the Trustee to consent
to, an amendment of or supplement to Exhibit A hereto upon receipt of:

                           (i)  a   certificate   of  an   Authorized   Borrower
                  Representative describing in detail the proposed changes; and

                           (ii) a copy  of the  proposed  form of  amendment  or
                  supplement  to  Exhibit  A hereto  and such  other  documents,
                  certificates and showing as may be


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<PAGE>



                  required by counsel  rendering the opinion described in clause
                  (c) of this paragraph; and

                           (iii) an opinion of Bond  Counsel to the effect  that
                  such amendment  complies with the requirements of this Section
                  3.1,  is in proper  form for  execution  and  delivery  by the
                  Issuer and will not adversely affect the validity of the Bonds
                  or the  exemption  from  federal  income taxes of the interest
                  thereon.

                  (b) The  Borrower  shall  have the  right to enter  into or to
         authorize  the  entering  into of change  orders  with  respect  to the
         Project without  obtaining the Bank's or the Construction  Consultant's
         prior consent,  provided that (i) no such change order will  materially
         change  the gross  square  feet or the  manufacturing  capacity  of its
         Project after completion of construction of the Project, or involve the
         use of  materials  or  equipment  which  will not be at least  equal in
         quality to the  materials  and  equipment  originally  specified  in or
         required by the Plans and  Specifications,  as accepted by the Bank and
         the  Construction  Consultant,  (ii) no such change order  shall,  in a
         single  instance,  result in an  increase  or  decrease  in the cost of
         constructing the Project of more than $20,000,  and (iii) the aggregate
         cost of all such change orders which have not been accepted by the Bank
         and the Construction Consultant shall not, at any given time, result in
         an increase or decrease in the cost of constructing the Project of more
         than  $150,000,  it being agreed that such aggregate  $150,000  maximum
         increase  or  decrease  in the cost of  constructing  the  Project as a
         result of such change  orders  shall not include the cost of any change
         order  entered  into without the prior  acceptance  of the Bank and the
         Construction  Consultant  pursuant to this  paragraph  with  respect to
         which the acceptance of the Bank and the Construction  Consultant shall
         have been  subsequently  obtained.  The  Borrower  shall  also have the
         right,  without  obtaining the Bank's or the Construction  Consultant's
         prior acceptance, to enter into change orders or field changes which do
         not increase or decrease the cost of constructing the Project, provided
         that the  requirements  of clause  (i) of the  preceding  sentence  are
         satisfied with respect  thereto.  The Borrower shall submit to the Bank
         and the  Construction  Consultant  copies of all change orders  entered
         into with  respect to the Project  within  fifteen  (15) days after the
         same  entered  into and  irrespective  of whether the same  require the
         prior acceptance of the Bank and the Construction  Consultant  pursuant
         to this Agreement.

         Section 3.2 Agreement to Issue Bonds: Application of the Bond Proceeds.
To provide  funds to finance the Cost of the Project,  the Issuer agrees that it
will  issue  under  the  Indenture,  sell  and  cause  to be  delivered  to  the
Underwriter,  the Bonds in the aggregate  principal amount of $4,250,000 bearing
interest and maturing as set forth in the  Indenture.  The Issuer will thereupon
deposit the proceeds received from the sale of the Bonds as follows;  (1) in the
Bond Fund, a sum equal to the accrued interest, if any, paid by the Underwriter;
and (2) in the Project Fund, the balance of the proceeds  received from the sale
of the Bonds.

         Section 3.3  Disbursements  from the Project  Fund.  The Issuer  hereby
authorizes and directs the Trustee,  upon the compliance with Section 6.7 of the
Indenture,  to disburse  the moneys in the  Project  Fund to or on behalf of the
Borrower for the following  purposes (but,  subject to the provisions of Section
3.4 and 3.5 hereof, for no other purpose):



                                       7

<PAGE>


                  (a) Payment to the Borrower of such amounts,  if any, as shall
         be  necessary  to  reimburse  the Borrower in full for all advances and
         payments  made by it at any time prior to or after the  delivery of the
         Bonds for  expenditures in connection with the preparation of the Plans
         and Specifications  (including any preliminary study or planning of the
         Project or any aspect thereof) and the  construction and acquisition of
         the Project.

                  (b)  Payment of the initial or  acceptance  fee of the Trustee
         and  the  Tender  Agent,  legal,  financial  and  accounting  fees  and
         expenses, rating agency fees, original issue discount, and printing and
         engraving costs incurred in connection with the authorization, sale and
         issuance of the Bonds, the execution and recording of the Indenture and
         the  preparation  and  recording  or filing of all other  documents  in
         connection  therewith,  and payment of all fees, costs and expenses for
         the preparation of the Agreement,  the Tax Agreement, the Indenture and
         all other  documents in  connection  with the  authorization,  sale and
         issuance of the Bonds;  provided,  however,  that in no event shall the
         Borrower  or the  Issuer  permit  the use of more than  $85,000  of the
         Proceeds of the Bonds (including but not limited to investment earnings
         and  profits) to finance  costs  relating to the  issuance of the Bonds
         within  the  meaning  of  Section  147(g)  of the Code,  including  any
         underwriter's discount or placement agent's fee.

                  (c) Payment for labor,  services,  materials and supplies used
         or furnished in the  construction  and acquisition of the Project,  and
         payment  of  amounts   due  under   contracts   for  the   acquisition,
         construction  and  installation of the Project,  all as provided in the
         Plans and Specifications and work orders therefor.

                  (d)  Payment  of  the  fees,  if  any  ,  for   architectural,
         engineering,  legal, underwriting and supervisory services with respect
         to the Project.

                  (e) To the extent not paid by a contractor for construction or
         installation  with respect to any part of the  Project,  payment of the
         premiums  on all  insurance  required  to be taken  out and  maintained
         during the Construction Period.

                  (f) Payment of the taxes,  assessments  and other charges,  if
         any,  that may become  payable  during  the  Construction  Period  with
         respect  to the  Project,  or  reimbursement  thereof  if  paid  by the
         Borrower.

                  (g) Interest on the Bonds during construction of the Project.

                  (h) Payment of any other costs  which  constitute  part of the
         Cost of the Project in accordance  with generally  accepted  accounting
         principles  and which are  permitted by the Act and will not affect the
         exemption from federal income taxes of interest on any of the Bonds.

         The Borrower covenants and agrees that at all times at least 95% of the
moneys so disbursed  out of the Project Fund,  excluding  amounts used to pay or
reimburse  the  Borrower  for the payment of interest on the Bonds and Letter of
Credit fees to the extent  herein  authorized,  will be used to pay or reimburse
the Borrower for the payment of qualifying  costs of  Manufacturing  Facilities.
The Borrower further covenants and agrees that it will not take any



                                        8

<PAGE>


action or authorize or permit,  to the extent such action is within its control,
any action to be taken  which  would  cause the  interest on the Bonds to become
includable in the federal gross income of the owners of the Bonds, provided that
the Borrower shall not have violated this covenant if the interest on any of the
Bonds  becomes  includable  in the  federal  gross  income  of an owner who is a
"substantial  user" of the Project or a "related  person"  within the meaning of
Section 147(a) of the Code.

         Any  disbursement  request of Proceeds of the Bonds in the Project Fund
for any item not  described  in,  or the cost for  which  item is other  than as
described  in, the Tax  Agreement  which  formed  the basis for the  information
statement  filed in  connection  with the  issuance  of the Bonds as required by
Section 149(e) of the Code shall be accompanied by a certificate from Authorized
Borrower  Representative  to the Trustee  that the average  reasonably  expected
economic life of the Project being financed by the Bonds will not be reduced or,
if such evidence is not presented with the disbursement or at the request of the
Trustee, by an Opinion of Bond Counsel to the effect that such disbursement will
not  adversely  affect the  exclusion  of the  interest  on the Bonds from gross
income for federal income tax purposes under the Code.

         The Borrower  understands that the Tax Agreement may impose  additional
restrictions on withdrawals from the Project Fund, and the Borrower agrees to be
bound by such restrictions, if any.

         All moneys  remaining in the Project Fund after the Completion Date and
after  payment or provision  for payment of all other items  provided for in the
preceding  subsections  (a) to (i),  inclusive,  of this  Section,  shall at the
direction of the Borrower be used in accordance with Section 3.4 hereof.

         Section  3.4  Establishment  of  Completion  Date:  Obligation  of  the
Borrower  to  Complete.   As  soon  as  practicable   after  the  completion  of
construction  of the  Project,  and in any event not more than  ninety (90) days
thereafter,  the Borrower shall furnished to the Trustee a certificate signed by
an Authorized  Borrower  Representative and the Construction  Consultant stating
(i) that  construction  of the  Project  has  been  completed  substantially  in
accordance with the Plans and  Specifications,  (ii) the Completion  Date, (iii)
the Cost of the Project,  (iv) the portion of the Cost of the Project  which has
then been paid and (v) the portion of the Cost of the Project  which has not yet
then been paid. Such certificate may state that it is given without prejudice to
any rights against third parties which exist at the date of such  certificate or
which may subsequently come into being. Moneys (including  investment  proceeds)
remaining in the Project Fund on the date of such  certificate  may be used,  at
the direction of an Authorized Borrower Representative, to the extent indicated,
for one or more of the following purposes:

                  (a) for the payment, in accordance with the provisions of this
         Agreement, of any Cost of the Project not then paid as specified in the
         above-mentioned certificate; or

                  (b) for  transfer  to the Bond  Fund,  but only if, and to the
         extent  that,  the Trustee has been  furnished  with an opinion of Bond
         Counsel to the effect that such  transfer is  permitted  by the Act and
         does not adversely  affect the exemption  from federal  income taxes of
         interest on any of the Bonds; or



                                        9

<PAGE>



                  (c) for  the  redemption  of  Bonds  in  accordance  with  the
         provisions of Section 3.1(e) of the Indenture within 180 days following
         the filing of said completion certificate with the Trustee, such moneys
         to be used only to pay principal of Bonds upon any such redemption.

         Any moneys  (including  investment  proceeds)  remaining in the Project
Fund on the date of the aforesaid  certificate and not set aside for the payment
of the Cost of the Project as specified in (a) above or  transferred to the Bond
Fund  pursuant  to (b) above  shall on such date be placed by the  Trustee  in a
separate and  segregated  escrow  account and used to pay principal of the Bonds
upon the redemption  thereof as provided in (c) above;  provided that,  until so
used such moneys may also be used, at the direction of the Borrower,  for one or
more of the following purposes:

                  (d) to pay all or part of the  price  of  purchasing  Bonds on
         tender,  in the open market or at private  sale, on or before such date
         or dates, for the purpose of cancellation;

                  (e)  for  the   payment   of  the   cost  of  any   additional
         Manufacturing  Facilities,   provided  that  prior  to  such  use  this
         Agreement is amended in  accordance  with Section 3.1 hereof to include
         such  additional  facilities  within the  definition of Project as used
         herein; or

                  (f)      for any other purpose;

provided  that, no moneys on deposit in such escrow  account may be used for any
of the purposes  specified in (d), (e) or (f) of this paragraph unless and until
the  Borrower  delivers to the Trustee an opinion of Bond Counsel upon which the
Trustee  may rely to the effect that such use is  permitted  by the Act and does
not adversely  affect the exemption from federal income taxes of interest on any
of the  Bonds;  and  provided  further  that,  until used for one or more of the
foregoing purposes,  moneys on deposit in such escrow account may be invested in
investments  authorized by the first paragraph of Section 3.5 of this Agreement,
but may not be  invested to produce a yield on such  moneys  (computed  from the
Completion Date and taking into account any investment of such moneys during the
period from the Completion  Date until such moneys were deposited in such escrow
account)  greater than the yield on the Bonds, all as such terms are used in and
determined in accordance  with relevant  provisions of the Code and  regulations
promulgated or proposed thereunder.

         In the event the moneys in the Project  Fund  available  for payment of
the Cost of the Project  should not be  sufficient  to pay the costs  thereof in
full,  the Borrower  agrees to pay  directly,  or to deposit in the Project Fund
moneys  sufficient  to pay,  the costs of  completing  the  Project as may be in
excess of the moneys available therefor in the Project Fund. The Issuer does not
make any warranty, either express or implied, that the moneys which will be paid
into the Project Fund and which, under the provisions of this Agreement, will be
available for payment of the Cost of the Project,  will be sufficient to pay all
the costs which will be incurred in that connection. The Borrower agrees that if
after  exhaustion of the moneys in the Project Fund the Borrower  should pay, or
deposit  moneys in the Project  Fund for the payment of, any portion of the Cost
of the  Project  pursuant to the  provisions  of this  Section,  it shall not be
entitled to any  reimbursement  therefor  from the Issuer,  the Bank or from the
Trustee or from the owners



                                       10

<PAGE>


of any of the Bonds,  nor shall it be entitled to any  diminution of the amounts
payable under Section 4.2 hereof.

         Section 3.5 Investments. Any moneys held as a part of the Project Fund,
the Bond Fund (other  than the Credit  Facility  Account  therein) or the Rebate
Fund shall be invested or  reinvested  by the Trustee,  at the  direction of the
Authorized  Borrower  Representative as provided in Article VII of the Indenture
and  in the  Tax  Agreement,  to  the  extent  permitted  by  law  in  Permitted
Investments.  Any such  investment  may be  purchased  at the offering or market
price thereof at the time of such purchase. The Trustee may Trustee may make any
and all such investments through its own bond department.

         The  investments so purchased shall be held by the Trustee and shall be
deemed  at all  times a part of the fund  for  which  they  were  made,  and the
interest accruing thereon and any profit realized therefrom shall be credited to
such fund and any net losses  resulting from such investment shall be charged to
such fund (on the date on which the proceeds of any such  investment  are needed
for the purposes of such fund) and paid by the Borrower.

         Any  moneys  held as  part  of the  Bond  Purchase  Fund or the  Credit
Facility Account of the Bond Fund shall not be invested.

         The Borrower covenants that any funds (including  investment  proceeds)
on  deposit in the  Project  Fund more than  three  years  after the date of the
delivery of the Bonds will not be invested to produce a yield  greater  than the
yield on the Bonds,  all as such terms are used in and  determined in accordance
with the  regulations  promulgated or proposed under relevant  provisions of the
Code.

         Section 3.6 Arbitrage Certifications.  The Borrower reasonably expects,
based on its  knowledge,  information  and  belief,  and  hereby  certifies  and
represents  to the Issuer and the Issuer  hereby  certifies  that it  reasonably
expects,  that the proceeds of the Bonds will not be used in a manner that would
cause the Bonds to be classified  as "arbitrage  bonds" under Section 148 of the
Code and regulations  prescribed under that Section. The Issuer and the Borrower
jointly and severally certify and covenant with all purchasers and owners of the
Bonds from time to time  outstanding  and with the Bank that,  so long as any of
the Bonds  remain  outstanding,  moneys on  deposit  in any fund or  account  in
connection  with the Bonds,  whether or not such  moneys were  derived  from the
proceeds of the sale of the Bonds or from any other sources, will not be used in
a manner which will cause the Bonds to be  "arbitrage  bonds" within the meaning
of the Code, and any lawful regulations promulgated or proposed thereunder.  The
Borrower covenants for the benefit of the Issuer and the purchasers of the Bonds
and the Bank that all  actions  with  respect to the Bonds  required  by Section
148(f) of the Code shall be taken.  Upon  request of the Issuer or the  Trustee,
the Borrower shall within 25 days after (i) each  anniversary of the Dated Date,
unless the final payment,  whether upon  redemption in whole or at maturity,  of
the Bonds shall have  occurred  prior to such  anniversary,  and (ii) such final
payment,  file with the Trustee a statement  to the effect that the  Borrower is
then in  compliance  with its  covenant  contained  in the  preceding  sentence,
together with supporting calculations;  provided,  however, that if the Borrower
shall  furnish to the Trustee  and the Issuer an opinion of Bond  Counsel to the
effect that no further  action by the Borrower is required  for such  compliance
with respect to the Bonds,  the  Borrower  shall not  thereafter  be required to
delivery any such statements or calculations.



                                       11

<PAGE>


         Section 3.7 Costs of Issuance. The Borrower covenants and agrees to pay
all costs incurred in connection with the issuance of the Bonds,  and the Issuer
shall have no obligation with respect to such costs.

                                    ARTICLE 4

                   LOAN OF BOND PROCEEDS; PAYMENT OBLIGATIONS

         Section 4.1 Loan of Bond Proceeds.  The Issuer  agrees,  upon the terms
and  conditions  in  this  Agreement,  to  lend  to the  Borrower  the  proceeds
(exclusive of accrued interest,  if any) received by the Issuer from the sale of
the Bonds.

         Section 4.2       Amounts Payable by Borrower.

                  (a) The Borrower covenants and agrees to pay to the Trustee as
         a loan  repayment  installment,  on each date provided  below until the
         principal  of,  premium,  if any,  and interest on the Bonds shall have
         been fully paid or provisions  for the payment  thereof shall have been
         made in accordance  with the  Indenture,  in lawful money of the United
         States of  America,  for  deposit in the Bond Fund,  a sum equal to the
         following amounts:

                           (1)  During the Variable Rate Period:

                                    (i) on May 15,  1996 and  June  15,  1996 an
                                    amount equal to one-half (1/2) of the amount
                                    coming due (based on the interest rate(s) in
                                    effect  from the Dated Date of the Bonds) as
                                    interest on the Bonds on July 1, 1996;

                                    (ii) on July 15,  1996 and on the  fifteenth
                                    (15th)  day of  each  month  thereafter,  an
                                    amount  equal  to  one-third  (1/3)  of  the
                                    amount  coming  due  (based on the  interest
                                    rate(s)  in  effect  from the next  previous
                                    Variable Rate Interest  Payment Date) on the
                                    next   succeeding   Variable  Rate  Interest
                                    Payment Date;

                                    (iii) on May 15,  1996 and on the  fifteenth
                                    (15th) day of each month  thereafter  to and
                                    including March 15, 1997, an amount equal to
                                    one-  eleventh  (1/11) of the amount  coming
                                    due as  principal  of the  Bonds on April 1,
                                    1997;

                                    (iv) on April 15, 1997, and on the fifteenth
                                    (15th)  day of  each  month  thereafter,  an
                                    amount  equal to  one-twelfth  (1/12) of the
                                    amount  coming due as principal of the Bonds
                                    on the next succeeding April 1.



                                       12

<PAGE>


                           (2)  During the Fixed Rate Period:

                                    (i)  On the  fifteenth  (15th)  day of  each
                                    month,  an amount equal to the amount coming
                                    due as  interest  on the  Bonds  on the next
                                    succeeding  Fixed Rate Interest Payment Date
                                    divided by the number of Mid-Months from the
                                    Conversion  Date or last previous Fixed Rate
                                    Interest  Payment  Date, as the case may be,
                                    to the next  succeeding  Fixed Rate Interest
                                    Payment Date;

                                    (ii)  on the  fifteenth  (15th)  day of each
                                    month,  an amount equal to the amount coming
                                    due as  principal  on the  Bonds on the next
                                    succeeding  April 1 divided by the number of
                                    Mid-Months  from the Conversion Date or last
                                    previous April 1, as the case may be, to the
                                    next succeeding April 1.

                           (3)  Upon  the  redemption  of  any  Bonds,   on  the
                           fifteenth  (15th) day immediately  preceding the date
                           fixed for  redemption,  to the extent not  already on
                           deposit in the Bond Fund and  available  for  payment
                           thereof,  an amount equal to the redemption  price of
                           the Bonds to be redeemed.

                           (4) On the third  Business  Day before any  principal
                           of,  premium  or  interest  on the  Bonds  is due and
                           payable,  the Trustee will notify the Borrower of the
                           amount on deposit in the Bond Fund and  available for
                           that  payment.  If such amount is not  sufficient  to
                           make that payment,  the Borrower promptly (and in any
                           event  before the date of  principal  of,  premium or
                           interest  on the  Bonds is  payable)  will pay to the
                           Trustee,  in immediately  available funds, the amount
                           of the deficiency. If such amount is in excess of its
                           amount necessary to make that payment,  the amount of
                           the  excess  will  be   credited   against  the  next
                           succeeding monthly payment(s) due from the Borrower.

                           (5) If the  Borrower  shall  fail to pay  any  amount
                           under this Section  4.2(a),  the amount so in default
                           shall continue as an obligation of the Borrower until
                           the amount so in default  shall have been fully paid,
                           and the Borrower agrees to pay the same with interest
                           thereon   until   paid   (to   the   extent   legally
                           enforceable) at a rate equal to the rate borne by the
                           Bonds  from  time to time  from the due date  thereof
                           until paid.

                  (b) In  addition  to the  payments  required to be made by the
         Borrower pursuant to Section 4.2(a) hereof,  the Borrower agrees to pay
         to the Tender Agent amounts  sufficient and at such times as to enabled
         the Tender Agent to pay the purchase price of any Bonds to be purchased
         pursuant  to  Section  4.1 or  Section  4.2 of the  Indenture  on  each
         purchase date of such Bonds as set forth in said Section 4.1 or Section
         4.2, as the case may be. All such payments  shall be made to the Tender
         Agent in lawful  money of the  United  States of  America in federal or
         other  immediately  available  funds at the designated  corporate trust
         office of the Tender  Agent.  Each  payment  pursuant  to this  Section
         4.2(b) shall at all times be  sufficient  to pay the purchase  price of
         any Bonds to be purchased on



                                       13

<PAGE>


         such date  pursuant  to Section  4.1 or Section  4.2 of the  Indenture;
         provided that remarketing proceeds held by the Tender Agent in the Bond
         Purchase  Fund on any such date and  available to pay any such purchase
         price  pursuant to Section  6.11(b)(i) or  6.11(b)(ii) of the Indenture
         shall be credited  against the amount due on such date pursuant to this
         Section  4.2(b) to the extent  available to pay the  purchase  price of
         such Bonds on such date. So long as a Credit  Facility is in effect and
         no wrongful  dishonor  has  occurred  and is  continuing,  the Borrower
         agrees not to  purchase,  and not to permit any Insider of the Borrower
         to purchase, any Bonds except with Available Moneys.

                  (c) The  Borrower  also agrees to pay when due,  upon  written
         request, or to promptly reimburse the Issuer for (i) all costs incurred
         by the Issuer in connection  with the financing and  administration  of
         the  Project,  except as may be paid out of the  proceeds of the Bonds,
         including  without  limitation,  any  necessary  expenses  incurred  by
         authorized  officials of the Issuer while engaged in the performance of
         their  duties as such  authorized  officials  of the  Issuer,  (ii) the
         reasonable  fees and expenses of counsel to the Issuer and Bond Counsel
         and (iii) all publication,  filing and recording fees. In the event the
         Borrower  should  fail to make  any of the  payments  required  in this
         Section 4.2(c), the item or installment so in default shall continue as
         an  obligation  of the Borrower  until the amount in default shall have
         been fully paid, and the Borrower  agrees to pay the same with interest
         thereon to the extent permitted by law at the rate of interest borne by
         the Bonds from the due date thereof until paid.

                  (d) The Borrower also agrees to pay to the Bond Registrar, the
         Tender  Agent and the  Trustee (1) the  initial  acceptance  fee of the
         Trustee  and the  Tender  Agent and the costs and  expenses,  including
         reasonable  attorney's  fees,  incurred by the Trustee in entering into
         and executing the Indenture,  and (2) during the term of this Agreement
         (i) an amount  equal to the annual fee of the trustee for the  ordinary
         services of the Trustee, as trustee, rendered and its ordinary expenses
         incurred under the Indenture,  including reasonable attorneys' fees, as
         and when the same become due,  (ii) the fees,  charges and  expenses of
         the Trustee,  the Bond Registrar and the Tender Agent,  as and when the
         same  become  due,  and (iii) the fees,  charges  and  expenses  of the
         Trustee for the  necessary  extraordinary  services  rendered by it and
         extraordinary  expenses  incurred by it under the Indenture,  including
         reasonable attorneys' fees, as and when the same become due.

                  (e) The  Borrower  also  agrees to pay all fees,  charges  and
         expenses  of the  Remarketing  Agent  as they  become  due and  payable
         pursuant to Section 3 of the Remarketing Agreement.

                  Section 4.3 No Defense or Set-off,  Unconditional  Obligation.
         The  obligations  of the  Borrower  to make the  payments  required  in
         Section  4.2(a) and (b) hereof  shall be  absolute  and  unconditional,
         irrespective  of any  defense or any rights of  setoff,  recoupment  or
         counterclaim it might  otherwise have against the Issuer,  the Trustee,
         the Tender Agent, the Paying Agent or the Bond Registrar.  The Borrower
         shall pay net during the term of this Agreement the payments to be made
         under Section  4.2(a) and (b) hereof free of any deductions and without
         abatement,  diminution  or set-off  other than those  herein  expressly
         provided.  Until such time as the  principal of,  premium,  if any, and
         interest on the Bonds shall have been fully paid,  or provision for the
         payment thereof shall have been made in



                                       14

<PAGE>


         accordance  with the Indenture,  the Borrower:  (i) will not suspend or
         discontinue any payments provided for in Section 4.2(a) and (b) hereof;
         (ii) will perform and observe all of its  agreements  contained in this
         Agreement;  and (iii) will not terminate  this Agreement for any cause,
         including,  without  limiting  the  generality  of the  foregoing,  the
         occurrence of any acts or circumstances  that may constitute failure of
         consideration,  destruction  of or  damage to the  Project,  commercial
         frustration of purpose, any change in the tax laws of the United States
         of America or the State or an  political  subdivision  thereof,  or any
         failure of the Issuer, the Trustee, the Tender Agent, the Paying Agent,
         the Bond  Registrar  or the Bank to perform and observe any  agreement,
         whether  express  or  implied,  or any duty,  liability  or  obligation
         arising out of or connected with this  Agreement,  except to the extent
         permitted by this Agreement.

         Section 4.4 Assignment and Pledge of Issuer's  Rights.  As security for
the payment of its Bonds and, on a  subordinate  basis and after payment in full
of the Bonds, all Obligations,  the Issuer will assign and pledge to the Trustee
all right, title and interest of the Issuer in and to this Agreement,  including
the right to receive  payments  hereunder  and  thereunder  (except the right to
receive  payments,  if any,  under Sections  4.2(c),  5.3 and 6.3 hereof and the
rights to make  determinations  and  receive  notices as herein  provided),  and
hereby directs the Borrower to make said payments  directly to the Trustee.  The
Borrower  herewith  assents to such assignment and pledge and will make payments
directly  to the  Trustee  without  defense or set-off by reason of any  dispute
between the Borrower and the Issuer,  the Trustee,  the Tender  Agent,  the Bond
Registrar, the Paying Agent or the Bank.

         Section  4.5 No Third  Party  Beneficiary.  It is  specifically  agreed
between the parties  executing  this Agreement that it is not intended by any of
the provisions of any part of this Agreement to establish in favor of the public
or  any  member  thereof,   other  than  as  expressly  provided  herein  or  as
contemplated  in  this  Agreement,  the  rights  of a  third  party  beneficiary
hereunder,  or to authorize  anyone not a party to this  Agreement to maintain a
suit  for  personal  injuries  or  property  damage  pursuant  to the  terms  or
provisions of this Agreement.  The duties,  obligations and  responsibilities of
the parties to this  Agreement  with  respect to third  parties  shall remain as
imposed by law.

                                    ARTICLE 5

                        SPECIAL COVENANTS AND AGREEMENTS

         Section 5.1 Right of Access to the Project.  The  Borrower  agrees that
during the term of this  Agreement the Issuer,  the Trustee,  the Bank and their
duly authorized  agents shall have the right during regular business hours, with
reasonable notice, to examine and inspect the Project.  The Borrower agrees that
the Issuer,  the Trustee,  the Bank and their duly authorized agents shall have,
subject to such  limitations,  restrictions and requirements as the Borrower may
reasonably prescribe, such rights of access.

         Section 5.2 Maintain its Existence:  Conditions  Under Which Executions
Permitted.  The Borrower  agrees that during the term of this  Agreement it will
maintain its corporate existence,  will not dissolve or otherwise dispose of all
or substantially all of its assets, and will not


                                       15

<PAGE>


consolidate  with or  merge  into  another  corporation  or  permit  one or more
corporations  to  consolidate  with or merge into it unless the  Borrower is the
surviving,  resulting or transferee  corporation,  as the case may be; provided,
that the  Borrower  may,  without  violating  the  agreements  contained in this
Section 5.2,  consolidate with or merge into another domestic corporation (i.e.,
a corporation  incorporated  and existing under the laws of the United States of
America or any state, district or territory thereof) or permit one or more other
domestic corporations to consolidate with or merge into it, or sell or otherwise
transfer to another domestic  corporation all or substantially all of its assets
as an entirety and thereafter dissolve,  provided,  in the event the Borrower is
not the surviving, resulting or transferee corporation, as the case may be, that
the surviving, resulting or transferee corporation (i) is a domestic corporation
as  aforesaid,  (ii) is qualified to do business in the State,  (iii) assumes in
writing all of the  obligations  of the Borrower under this  Agreement,  the Tax
Agreement  and the  Letter of Credit  Agreement  and (iv) has been  approved  in
writing by the Bank.

         Section 5.3       Release and Indemnification Covenants.

                  (a) The Borrower agrees to indemnify and save the Issuer,  its
         directors   officials,   officers,   employees   and  agents  (each  an
         "indemnified  party")  harmless  against  and from all  claims by or on
         behalf of any person,  firm or corporation  arising from the conduct or
         management  of,  or from any work or thing  done  on,  the  Project  or
         relating to the issuance of the Bonds, including but not limited to (i)
         any condition of the Project, (ii) any breach or default on the part of
         the Borrower in the  performance of any of its  obligations  under this
         Agreement,  the  Tax  Agreement  or the  Indenture,  (iii)  any  act of
         negligence  of the  Borrower  or of any  of  its  agents,  contractors,
         servants,  employees or  licensees,  (iv) any act of  negligence of any
         assignee  or lessee of the  Borrower,  or of any  agents,  contractors,
         servants,  employees  or  licensees  of any  assignee  or lessee of the
         Borrower,  (v) any  violation  by the  Borrower  of  state  or  federal
         securities  laws in connection  with the offer and sale of the Bonds or
         any liability  resulting from or related to the issuance or sale of the
         Bonds,  (vi)  any  performance  by any  indemnified  party  of any  act
         required  under this  Agreement,  the Tax Agreement or the Indenture or
         requested by the Borrower; excluding, however, claims occasioned by the
         gross  negligence or willful  misconduct of the  indemnified  party, or
         (vii) any loss or damage to  property  or any injury to or death of any
         person  occurring  on or about or  resulting  from the  Project  or the
         operation  thereof.  The  Borrower  agrees to  indemnify  and save each
         indemnified  party  harmless  from and against  all costs and  expenses
         incurred in or in  connection  with any such claim arising as aforesaid
         or in connection with any action or proceeding brought thereon.  If any
         such claim shall be made or action brought based upon any such claim in
         respect of which  indemnity may be sought  against the  Borrower,  upon
         receipt of notice  promptly  given to the  Borrower in writing from the
         indemnified  party  setting  forth  the  particulars  of such  claim or
         action,  the Borrower  shall assume the defense  thereof  including the
         employment of counsel and the payment of all costs and  expenses.  Each
         indemnified  party shall have the right to employ  separate  counsel in
         any such action and to participate in the defense thereof, but the fees
         and  expenses  of  such  counsel  shall  be  at  the  expense  of  such
         indemnified  party,  unless (A) the employment of such counsel has been
         specifically   authorized   in   writing  by  the   Borrower,   or  (B)
         representation  of both the  indemnified  party and the Borrower by the
         same counsel is inappropriate  by applicable  standards of professional
         conduct which attorneys  maintain in the jurisdiction in which the suit
         shall


                                       16

<PAGE>


         have been instituted due to actual or potential  conflicting  interests
         (it being  understood  that the  Borrower  shall not be liable  for the
         expense of more than one separate counsel representing such indemnified
         party unless  representation  by more than one counsel  shall have been
         specifically authorized in writing by the Borrower).

                  (b) The Borrower  also agrees to pay and to indemnify and hold
         harmless  the  Remarketing  Agent,  the Trustee,  the Bank,  the Tender
         Agent,  the Bond  Registrar,  any person who "controls" the Remarketing
         Agent,  the Bond Registrar,  the Tender Agent,  the Bank or the Trustee
         within the  meaning of Section  15 of the  Securities  Act of 1933,  as
         amended, and any member,  officer,  director,  official and employee of
         the Remarketing  Agent, the Bond Registrar,  the Tender Agent, the Bank
         or the Trustee (collectively called the "Indemnified Parties") from and
         against, any and all claims, damages,  demands,  expenses,  liabilities
         and losses of every kind, character and nature asserted by or on behalf
         of any person arising out of,  resulting  from, or in any way connected
         with, the condition, use, possession,  conduct,  management,  planning,
         design, acquisition, construction,  installation, renovation or sale of
         the  Project or any part  thereof.  The  Borrower  also  covenants  and
         agrees,  at  its  expense,  to  pay,  and to  indemnify  and  save  the
         Indemnified   Parties  harmless  of,  from  and  against,   all  costs,
         reasonable  counsel  fees,  expenses  and  liabilities  incurred in any
         action or  proceeding  brought  by  reason of any such  claim or demand
         subject,  however, to the provisions  contained below in this paragraph
         and  excluding  claims  occasioned  by the gross  negligence or willful
         misconduct of the Indemnified  Parties.  If any action or proceeding is
         brought  against any  Indemnified  Party by reason of any such claim or
         demand,  such Indemnified Party shall immediately  notify the Borrower,
         which  shall  resist and defend any action or  proceeding  on behalf of
         such  Indemnified  Party,  including  the  employment  of counsel,  the
         payment  of all  expenses  and the right to  negotiate  and  consent to
         settlement.  Each  Indemnified  Party  shall  have the  right to employ
         separate  counsel in any such action and to  participate in the defense
         thereof,  but the fees and  expenses  of such  counsel  shall be at the
         expense of such  Indemnified  Parties unless the (A) employment of such
         counsel has been specifically  authorized in writing by the Borrower or
         (B) representation of both the Indemnified  Parties and the Borrower by
         the  same  counsel  is   inappropriate   by  applicable   standards  of
         professional  conduct which attorneys  maintain in the  jurisdiction in
         which the suit shall have been  instituted  due to actual or  potential
         conflicting  interests (it being understood that the Borrower shall not
         be  liable  for  the  expense  of  more  than  one   separate   counsel
         representing any of the Indemnified  Parties unless  representation  by
         more than one  counsel  shall  have  been  specifically  authorized  in
         writing by the  Borrower).  If such separate  counsel is employed,  the
         Borrower  may  join in any  such  suit  for the  protection  of its own
         interests.  The Borrower  shall not be liable for any settlement of any
         such action  effected  without  its  consent,  but if settled  with the
         consent  of the  Borrower  or if  there  be a  final  judgment  for the
         plaintiff in any such action, the Borrower agrees to indemnify and hold
         harmless the Indemnified Parties.

         Section 5.4 Validity and Tax-empt Status of the Bonds. The Borrower and
the Issuer  covenant  and agree that  they,  and each of them,  will not take or
authorize or permit any action to be taken and have not taken or  authorized  or
permitted  any action to be taken which  results in  interest  paid on the Bonds
being  included in the gross income of any owner thereof for purposes of federal
income taxation (other than an owner who is a "substantial user" of the


                                       17

<PAGE>


Project or a "related  person"  within the meaning of Section 147(a) of the Code
or  adversely  affects the  validity of the Bonds.  Promptly  after the Borrower
first becomes aware of any Determination of Taxability,  the Borrower shall give
written notice thereof to the Issuer, the Trustee, the Remarketing Agent and the
Bank.

         Section 5.5 Taxes and  Government  Charges.  The Borrower will promptly
pay, as the same become due, all lawful taxes, assessments,  utility charges and
other governmental charges of any kind whatsoever levied or assessed by federal,
state or any  municipal  government  upon or with  respect to the Project or any
part  thereof or any payments  under this  Agreement.  The Borrower  may, at its
expense  and in its own name and behalf or in the name and behalf of the Issuer,
if it is a  necessary  party  thereto,  in good faith  contest  any such  taxes,
assessments  and other  charges  and, in the event of such  contest,  permit the
taxes,  assessments  or other  charges so contested to remain  unpaid during the
period of such contest and any appeal therefrom,  provided that such non-payment
does not  adversely  affect the  payment by the  Borrower  of all other  amounts
required to be paid by it  hereunder  or  adversely  affect the  validity of the
Bonds or the tax-exempt status of the interest thereon.  All taxes,  assessments
and other  charges  levied or imposed with  respect to the Project  shall be the
obligation of the Borrower, and the Issuer shall have no obligation or liability
in that regard.

         Section 5.6  Maintenance and Repair;  Insurance.  (a) The Borrower will
maintain the Project in a reasonably safe and sound operating condition,  making
from time to time all needed repairs thereto.

                  (b) The Borrower shall maintain the following insurance at its
         sole cost and expense:

                           (i)  Insurance  in such  amounts  as the  Bank  shall
                  approve.  which shall not be less than the principal amount of
                  the  Bonds  nor  more  than the  full  insurable  value of the
                  Project,  against  loss and/or  damage to the Project  under a
                  policy  or  policies  covering  such  risks as are  ordinarily
                  insured  against by  companies  owning  similar  manufacturing
                  facilities,  including, without limiting the generality of the
                  foregoing,  fire,  earthquake,   lightning,  windstorm,  hail,
                  explosion,  riot,  riot attending a strike,  civil  commotion,
                  damage  from  aircraft,  smoke and uniform  standard  extended
                  coverage and vandalism and  malicious  mischief  endorsements,
                  limited only as may be provided in the  standard  form of such
                  endorsements at the time in use in the State of Missouri.

                           (ii) Comprehensive general public liability insurance
                  including  blanket  contractual  liability and personal injury
                  liability  (with employee  exclusion  deleted)  protecting the
                  Borrower  against   liability  for  injuries  to  persons  and
                  property  in such  coverage  amounts  and  with  terms  as are
                  normally  carried  by  similar  manufacturing  companies,  and
                  naming the  Issuer,  the Bank and the  Trustee  as  additional
                  insureds, as their respective interests may appear.

                           (iii)  Automobile   insurance   (excluding  collision
                  insurance)  including owned,  non-owned and hired  automobiles
                  protecting  the  Borrower  against  liability  for injuries to
                  persons and  property  with limits as  follows:  for  property
                  damage


                                       18

<PAGE>


                  and for bodily  injury,  $500,000 for each  occurrence and for
                  each year;  with a deductible  amount in each case of not more
                  than $50,000 for each occurrence and not more than $50,000 for
                  each year.

                           (iv) Use and  occupancy  (or  business  interruption)
                  insurance,  covering interruption of the Borrower's operations
                  in  whole  or in  part  by  reason  of the  total  or  partial
                  suspension  of,  or  interruption  in,  the  operation  of the
                  Project,  including  its  rental of  buildings,  caused by the
                  damage to or  destruction of any part of the Project caused by
                  any of the  perils  described  in  paragraph  (i),  with  such
                  exceptions  as are  customarily  imposed  by  insurers,  in an
                  amount  sufficient  to  comply  with  the  requirements  of  a
                  standard 50% gross earnings  business  interruption  form. All
                  policies evidencing  insurance required by this paragraph (iv)
                  shall be carried in the name of in the Borrower, and the names
                  of the Issuer,  the Bank and the  Trustee as their  respective
                  interests may appear,  provided that all losses  thereunder as
                  to the  Borrower  shall  provide for payment  consistent  with
                  Section 5.14 hereof.  the net proceeds of such insurance shall
                  (if  required by Section 5.14 hereof) be deposited in the Bond
                  Fund  under  the  Indenture  to the  extent  necessary  to pay
                  interest on or principal of the Bonds,  as the case may be, as
                  the same become due during the period of  interruption  of the
                  Borrower's operations.  Such deposit shall be credited against
                  the  Borrower's  obligation  to make  such  payments,  and any
                  remaining balance shall be paid to the Borrower.

                           (v) Workers'  compensation  insurance  respecting all
                  employees of the  Borrower,  in such amount as is  customarily
                  carried by like  organizations  engaged in like  activities of
                  comparable size and liability exposure.

         All such  policies  of  insurance  set forth  above  shall be issued by
responsible insurance companies or associations (which companies or associations
may be affiliated with the Borrower)  selected by the Borrower,  permitted under
the laws of the State of  Missouri to assume the risks  covered  thereby and who
shall  have a  minimum  policy  holders  rating  of "A"  per the  latest  rating
publication  of Property and Casualty  Insurers by A.M. Best Company.  Not fewer
than ten (10) days  before the  expiration  of each policy  required  under this
Section  5.6,  the  Borrower  shall  deliver to the Bank  certificates  or other
evidence  satisfactory to the Bank that such policy has been renewed or replaced
and the premium thereon has been paid.

         Section 5.7  Financial  Reports.  The  Trustee and the Issuer  shall be
permitted during regular business hours, upon reasonable notice to the Borrower,
during  the terms of this  Agreement  to  examine  the books and  records of the
Borrower with respect to the Project.

         The Borrower agrees that any such information  furnished to the Trustee
in  accordance  with this  Section  5.7 may be  furnished  by the Trustee to any
Bondholder who so requests.

         Section 5.8       Letter of Credit.

                  (a) On or prior to the  issuance,  sale  and  delivery  of the
         Bonds to the Underwriter pursuant to Section 2.6 of the Indenture,  the
         Borrower  hereby  covenants  and  agrees to obtain  and  deliver to the
         Trustee the initial , irrevocable, transferable, direct pay


                                       19

<PAGE>


         Letter of Credit to be issued by the Bank in favor of the  Trustee  for
         the benefit of the owners from time to time of the Bonds in the form of
         Annex I to the initial Letter of Credit  Agreement.  The initial Letter
         of Credit shall be dated the Dated Date; shall expire on April 15, 1999
         or earlier as  described  in the  Letter of  Credit,  unless  otherwise
         extended in accordance  with the terms and provisions of subsection (b)
         below and the Letter of Credit Agreement, shall be in the amount of (i)
         the aggregate  principal  amount of the Bonds (A) to enable the Trustee
         to pay the principal of the Bonds at maturity, upon call for redemption
         prior to maturity or acceleration, and (B) to enable the Trustee to pay
         the  portion of the  purchase  price of Bonds  tendered or deemed to be
         tendered  to the  Tender  Agent for  purchase,  equal to the  aggregate
         principal  amount  of such  Bonds  plus  (ii) an  amount  equal  to the
         interest to accrue on the Bonds for one hundred and thirteen (113) days
         at a maximum  rate of ten  percent  (10%) per annum  calculated  on the
         basis of a year of 365 days (A) to enable the  Trustee to pay  interest
         accrued  on the Bonds on the dates and in the  manner  set forth in the
         Indenture,  and (B) to enable  the  Trustee  to pay the  portion of the
         portion  of the  purchase  price  of Bonds  tendered  or  deemed  to be
         tendered  to the  Tender  Agent  for  purchase,  equal  to the  accrued
         interest on such Bonds plus (iii) an amount equal to three percent (3%)
         of the aggregate  principal amount of the Bonds to enable to Trustee to
         pay the call premium if the Bonds are called for redemption pursuant to
         Section 3.1(c) of the Indenture.

                  (b) Except as  hereinafter  provided,  at any time  during the
         Variable Rate Period,  the Borrower may, at its option (if provided by,
         and in  accordance  with,  the  terms of the  related  Letter of Credit
         Agreement)  provide  for the  extension  of the term of the  Letter  of
         Credit  then in effect,  if any,  deliver to the  trustee a  substitute
         Letter of Credit as hereinafter  provided or allow the Letter of Credit
         then in effect to expire or terminate in accordance with its terms. The
         term "substitute Letter of Credit" as used herein shall mean any Letter
         of Credit delivered in accordance with the terms hereof, other than (1)
         the  initial  Letter of  Credit  delivered  on the date of the  initial
         delivery  of the Bonds and any (2)  extensions  of, or new  Letters  of
         Credit issued by the issuer of, the Letter of Credit then in effect. If
         the  Borrower  chooses to provide for the  extension of the term of the
         Letter of Credit then in effect,  such extension  shall be for a period
         of at least  one (1) year  after  the  Stated  Termination  Date of the
         existing  Letter  of  Credit  and  shall  provide  that it is to expire
         fifteen (15) days after a Variable Rate Interest  Payment Date, and the
         Borrower shall furnish proof of such extension or a replacement  Letter
         of Credit with terms identical to the existing Letter of Credit (except
         for the Stated  Termination  Date),  in the form of an amendment to the
         Letter of Credit or a replacement Letter of Credit or a notice form the
         Bank of such extension, as provided in the Letter of Credit, evidencing
         such extension, to the Trustee no later than forty-five (45) days prior
         to the Stated Termination Date of the Letter of Credit. If the Borrower
         chooses to provide a substitute Letter of Credit to replace a Letter of
         Credit scheduled to terminate,  to replace an existing Letter of Credit
         at any time  while a Letter of Credit is in effect or at any time while
         no  Letter of Credit is in  effect,  such  substitute  Letter of Credit
         shall be an irrevocable letter of credit in substantially the same form
         and tenor as the  initial  Letter  of Credit in an amount  equal to the
         outstanding  principal  amount of the Bonds plus an amount equal to the
         maximum  interest  to  accrue  on the Bonds  then  Outstanding  for one
         hundred and thirteen  (113) days at a maximum rate of ten percent (10%)
         per annum calculated on the basis of a year of 365 days, plus an amount
         equal to three percent (3%) of the outstanding


                                       20

<PAGE>


         principal amount of the Bonds with administrative provisions reasonably
         satisfactory  to the  Trustee,  but provided to expire at least one (1)
         year after the Stated Termination Date of the existing Letter of Credit
         (or,  if no Letter of  Credit  is then in  effect,  having a term of at
         least one (1) year),  providing  that it is to expire fifteen (15) days
         after a Variable  Rate  Interest  Payment  Date,  and to be issued by a
         commercial  bank and delivered to the Trustee at least two (2) Business
         Days  before the Stated  Termination  Date of the Letter of Credit,  if
         any, then in effect to the Trustee. Simultaneously with the delivery of
         such  substitute  Letter of Credit to the Trustee,  the Borrower  shall
         also provide the Trustee with (i) if such  substitute  Letter of Credit
         is issued by a bank other than a domestic  commercial  bank, an opinion
         or opinions of Counsel  acceptable to the Trustee that no  registration
         of the Bonds or such substitute  Letter of Credit is required under the
         Securities Act of 1933, as amended, nor is the Indenture required to be
         qualified  under the Trust  Indenture Act of 1939, as amended,  (ii) an
         opinion of Counsel  satisfactory to the Trustee to the effect that such
         substitute  Letter of Credit is a valid and  enforceable  obligation of
         the issuer or provider  thereof,  and (iii) an opinion of Bond  Counsel
         that  such  substitute  Letter  of  Credit  is  authorized  under  this
         Agreement,  complies  with the  terms  hereof  and  that the  provision
         thereof  will  not  have an  adverse  effect  on the  exclusion  of the
         interest on the Bonds from the gross  income of the owners  thereof for
         federal  income tax purposes.  If the Borrower shall fail to furnish to
         the Trustee such  opinions  described  above on or before the specified
         date,  the Trustee shall be deemed not to have received the  substitute
         Letter of Credit.  Upon  delivery of a substitute  Letter of Credit and
         the  foregoing  opinions,  the Trustee is  authorized  and  directed to
         surrender the existing Letter of Credit,  if any, then in effect and to
         approve the  cancellation  of the existing  Letter of Credit (by, inter
         alia, completing and delivering to the Bank any appropriate certificate
         to the Letter of  Credit).  The Bonds  shall be  subject  to  mandatory
         tender for purchase  pursuant to Section 4.2 of the Indenture  upon the
         expiration or termination of the Letter of Credit unless such Letter of
         Credit is extended.  The Borrower  hereby  covenants and agrees to give
         the Issuer,  the Trustee,  the Bank and the  Remarketing  Agent written
         notice of its intention to delivery any substitute  Letter of Credit or
         to  terminate  a Letter of Credit or of the  expiration  of a Letter of
         Credit at least  forty-five  (45)  days  prior to the date on which the
         Borrower  expects to  deliver  such  substitute  Letter of Credit or on
         which such termination or expiration is to occur.

                  (c) If the Borrower elects to exercise its option to cause the
         interest  rate  on the  Bonds  to be  converted  to the  Fixed  Rate in
         accordance  with the provisions of Section 5.9 hereof,  the Bonds shall
         not be secured by a Credit Facility  during the Fixed Rate Period,  but
         the Bonds must be rated at least  investment grade by any Rating Agency
         on and after the Conversion Date.

         Section 5.9 Option to Convert to Fixed Rate.  The Borrower  shall have,
and is hereby granted, the option to elect to convert the interest rate borne by
the Bonds to the Fixed Rate,  pursuant to the  provisions  of Section 2.2 of the
Indenture,  subject to the terms and conditions  set forth therein.  At the time
of, and as a  condition  to, the  giving of the  notice by the  Borrower  of the
exercise  of its option to convert the  interest  rate borne by the Bonds to the
Fixed Rate,  the Borrower  shall  deliver to the Issuer and the Trustee a letter
from a Rating  Agency  stating that the Bonds will be rated at least  investment
grade by such Rating Agency on and after the Proposed Conversion Date.




                                       21

<PAGE>


         Section  5.10  Operation of Project.  Although the Borrower  intends to
operate,  or cause to be operated,  the Project for its designed  purposes until
the date on which no Bonds are outstanding, the Borrower is not required by this
Agreement to operate, or cause to be operated,  any portion of the Project after
the Borrower shall deem in its discretion  that such continued  operation is not
advisable,  and in  such  event  it is not  prohibited  by this  Agreement  from
selling,  leasing or retiring  all or any such  portion of the  Project.  Unless
otherwise  approved by the Bank in  writing,  the net  proceeds  from such sale,
lease  or other  disposition  shall be  deposited  in the Bond  Fund and used to
redeem or otherwise  retire Bonds on the earliest  date  practicable  after such
deposit.  No such sale, lease or other  disposition of all or any portion of the
Project  shall  reduce or  otherwise  affect the  Borrower's  obligation  to pay
amounts under Section 4.2 hereof.

         The Borrower shall, within thirty (30) days after the delivery thereof,
furnish or cause to be  furnished  to the  Issuer and to the  Trustee a true and
complete  copy of any  deed,  lease  or  other  instrument,  as the case may be,
conveying  any  interest  in the  Project.  The  Borrower  understands  that  in
connection  with any such cessation of operation of the Project,  that it may be
required to redeem the Bonds in accordance  with Section 3.1(f) of the Indenture
and Section 7.1(d) hereof.

         Section  5.11   Qualification   in  State.  The  Borrower  agrees  that
throughout the term of this Agreement it will be qualified to do business in the
State.

         Section  5.12  Compliance  with Orders,  Ordinances,  Etc. The Borrower
agrees that it will use its best efforts  promptly to comply with all  statutes,
codes, laws, acts, ordinances,  orders, judgments, decrees, injunctions,  rules,
regulations, permits, licenses,  authorizations,  directions and requirements of
all  federal,  state,  county,  municipal  and other  governmental  authorities,
foreseen  or  unforeseen,  ordinary or  extraordinary,  which now or at any time
hereafter may be  applicable to the Project or any part thereof,  or to any use,
manner of use or condition of the Project or any part thereof.

         Section  5.13 No  Warranty  by Issuer.  The Issuer  makes no  warranty,
either express or implied, as to the Project of that it will be suitable for the
purposes or needs of the Borrower.

         Section 5.14      Insurance and Condemnation Awards.

                  (a) In the event of damage to, or destruction  of, the Project
         or any  portion  thereof  resulting  from fire or other  casualty,  the
         Borrower promptly will notify the Bank, and, if the net proceeds of any
         insurance  relating  to such damage are not more than  fifteen  percent
         (15%) of the buildings and improvements now or hereafter located on the
         Project Site (as  determined  by a duly  licensed,  reputable and third
         party insurance  adjuster aat the time of such damage or  destruction),
         the Borrower will forthwith  replace,  repair,  reconstruct and restore
         the Project,  as applicable,  to substantially  the same or an improved
         condition or utility  value as existed  prior to the event causing such
         damage and will to the extent  necessary  apply the net proceeds of any
         insurance  relating  to such  damage  received  by the  Borrower to the
         payment  or  reimbursement  of the costs of such  replacement,  repair,
         reconstruction and restoration.

                  In the event the Project or any portion  thereof is  destroyed
         by fire or other casualty and the damage or destruction is estimated to
         exceed fifteen percent (15%) of the


                                       22

<PAGE>


original  cost of  constructing  the Project,  the Borrower  agrees  promptly to
notify the Bank and the Trustee of such event, and the Borrower shall, within 90
days after such damage or  destruction,  elect,  in accordance  with the written
direction of the Bank,  one of the  following  two options by written  notice of
such election to the Trustee.

                           (i) Option A-Repair and Restoration. The Borrower may
                  elect  to use all or part of such  net  proceeds  to  replace,
                  repair,  reconstruct and restore the damaged Project.  In such
                  event the Borrower shall proceed forthwith to replace, repair,
                  reconstruct and restore the damaged  Project to  substantially
                  the same  condition or utility  value as existed  prior to the
                  event  causing such damage or  destruction  and will apply the
                  net  proceeds  of any  insurance  relating  to such  damage or
                  destruction  received  by  the  Borrower  to  the  payment  or
                  reimbursement  of  the  costs  of  such  replacement,  repair,
                  reconstruction and restoration.

                           It is further understood and agreed that in the event
                  the Borrower  shall elect this Option A or is unable to obtain
                  the opinion  required by Option B below,  the  Borrower  shall
                  complete   the   replacement,   repair,   reconstruction   and
                  restoration of the Project, as applicable,  whether or not the
                  net  proceeds of  insurance  received by the Borrower for such
                  purposes are sufficient to pay for the same.

                           The  Borrower  agrees to apply such net  proceeds  so
                  received  solely to the  purposes  specified in such notice of
                  election.

                           (ii) Option  B-Prepayment of Bonds.  The Borrower may
                  elect to have all or part of such net  proceeds  payable  as a
                  result of such damage or destruction applied to the prepayment
                  of the Bonds;  provided that the Borrower supplies the Trustee
                  with an opinion of an  architect  or an engineer  stating that
                  the  property  destroyed  was not  essential to the use of the
                  Project,  and that the  revenues of the  Borrower  will not be
                  materially  adversely affected by such destruction;  provided,
                  however,  no such  opinion  shall  be  required  if all  Bonds
                  Outstanding  are to be  redeemed  and paid.  In such event the
                  Borrower  shall,  in its notice of  election  to the  Trustee,
                  direct the Trustee to deposit such net proceeds or a specified
                  portion  thereof,  when and as received,  in the Bond Fund. If
                  only part of such net proceeds is applied to the prepayment of
                  the bonds,  then the remaining part of such net proceeds shall
                  be applied as provided under Option A above.

                  (b) The  lien  of this  Agreement  shall  terminate  as to the
         Project or any  portion  thereof  condemned  or taken for any public or
         quasi-public  use when title thereto  vests in the party  condemning or
         taking the same (hereinafter referred to as the "condemnation date").

                  In the event such award or insurance  proceeds  exceed fifteen
         percent (15%) of the original  cost of  constructing  the Project,  the
         Borrower shall within 90 days after the termination date or the date on
         which such  insurance  proceeds  are  determined,  whichever  is later,
         elect,  subject to the  written  approval  of the Trustee and the Bank,
         which approval shall not be unreasonably withheld, one of the following
         two options by written notice of such election to Trustee:




                                       23

<PAGE>



                           (i) Option A-Repairs and  Improvements.  The Borrower
                  may elect to use all or part of the net  proceeds of the award
                  made in connection with such condemnation or taking or of such
                  insurance for  replacement of or repairs and  improvements  to
                  the Project, as applicable.

                           The Borrower agrees to apply any such net proceeds so
         received solely to the purposes specified in such notice of election.

                           (ii) Option  B-Prepayment of Bonds.  The Borrower may
                  elect to have all or part of such net  proceeds  payable  as a
                  result of such  condemnation  or  taking or of such  insurance
                  applied  to the  prepayment  of the Bonds;  provided  that the
                  Borrower  supplies the Trustee with an opinion of an architect
                  or an engineer  stating  that the  property  condemned  or the
                  property  interest  lost  because  of the title  defect  which
                  resulted in the realization on such insurance, as the case may
                  be, was not essential to the use of the Project,  and that the
                  Borrower's revenues will not be materially  adversely affected
                  by such  condemnation  or  taking or title  defect;  provided,
                  however,  no such  opinion  shall  be  required  if all  Bonds
                  Outstanding  are to be  redeemed  and paid.  IN such event the
                  Borrower  shall,  in its notice of  election  to the  Trustee,
                  direct  the  Trustee  to deposit  such net  proceeds,  or part
                  thereof,  when and as received, in the Bond Fund. If only part
                  of such net  proceeds  is  applied  to the  prepayment  of the
                  Bonds,  then the remaining  part of such net proceeds shall be
                  applied as provided under Option A above.

                  The Issuer and the Trustee,  at the  Borrower's  sole expense,
         shall  cooperate  with the  Borrower in the handling and conduct of any
         prospective  or pending  condemnation  proceedings  with respect to the
         Project or any part of either.

         Section 5.15  Governmental  Approvals.  The Borrower  covenants that it
will obtain or cause to be obtained  all  necessary  approvals  from any and all
governmental  agencies  requisite to the  construction  and  acquisition  of the
Project,  and that the Project will be  constructed  and acquired in  compliance
with all federal, State and local laws and ordinances and regulations applicable
thereto. The Borrower will obtain or cause to be obtained all required occupancy
permits and licenses from appropriate  authorities authorizing the construction,
occupancy and use of the Project for the purposes  contemplated by the Borrower.
Borrower  will  furnish  the  Bank  with a copy of all such  permits,  licenses,
authorization and other governmental approvals promptly after it receives them.

         Section 5.16      Continuing Disclosure.

                  (a) The  Borrower  intends  that the Bonds will be offered and
         sold in a primary offering that is exempt from the requirements of Rule
         15c2-12 by reason of the  exemption  provided  in  subparagraph  (d)(1)
         thereof.  If interest on the Bonds is converted to a fixed rate, or if,
         for any  other  reason,  an  exemption  from the  requirements  of Rule
         15c2-12  is  not  available,  the  Borrower,  for  the  benefit  of the
         Bondholders, hereby covenants and agrees to provide the information, at
         the times  and to the  information  repositories  and  depositories  as
         described in subsection (b) and (c) below.

                                       24

<PAGE>


                  (b)  Within  120 days  after  the  close of each  fiscal  year
         beginning  with the fiscal year ending  December 31, 1996, the Borrower
         will  furnish  to each  NRMSIR  and  each  SID,  if any,  a copy of the
         financial  statements  of the  Borrower  prepared  in  accordance  with
         generally accepted  accounting  principles by its independent  auditors
         (or  if  not  available  as  of  that  date,  the  unaudited  financial
         statements  of the Borrower  with the audited  financial  statements to
         follow as soon as practicable after they become available.

                  Any financial statements required by this paragraph (b) may be
         incorporated by cross reference to other documents,  including official
         statements  of debt  issues of the  Borrower  that have been filed with
         each NRMSIR or the Securities and Exchange commission, and, in the case
         of a final  official  statement,  that is available  from the MSRB. The
         Borrower  shall  identify  clearly  each  document  provided  by  cross
         reference and the source from which it is available.

                  (c) The Borrower shall send to each NRMSIR or to the MSRB, and
         to each SID, if any, promptly upon the occurrence thereof notice of nay
         of the following events with respect to the Bonds, if material:

                           1.       Principal or interest payment delinquencies;
                           2.       Non-payment related defaults;
                           3.       Unscheduled   draws  on  the  debt   service
                                    reserves reflecting financial difficulties;
                           4.       Unscheduled  draws  on  credit  enhancements
                                    reflecting financial difficulty;
                           5.       Substitution    of   credit   or   liquidity
                                    providers or their failure to perform;
                           6.       Adverse tax opinions or events affecting the
                                    tax exempt status of the Bonds;
                           7.       Modifications of rights of security holders;
                           8.       Bond calls;
                           9.       Defeasances;
                           10.      Release,  substitution,  or sale of property
                                    securing repayment of the Bonds;
                           11.      Changes in the ratings of the Bonds.

                  In addition,  the Borrower  will also provide the SID, if any,
         and each NRMSIR or the MSRB, as promptly as practicable,  notice of any
         failure of the  Borrower to provide the  NRMSIR's  and the SID, if any,
         the annual financial  statements  required by subparagraph (b) above on
         or before the date specified.

                  (d) The Borrower's  obligations  under this Section 5.16 shall
                  terminate upon the payment in full  (including the defeasance)
                  of the Bonds  either at maturity or upon  redemption  prior to
                  maturity.



                                       25

<PAGE>


                                    ARTICLE 6
                         EVENTS OF DEFAULT AND REMEDIES

         Section 6.1 Events of Default.  The occurrence and  continuation of any
one of the following shall constitute an Event of Event of Default hereunder:

                  (a) failure by the  Borrower to pay any amount  required to be
         paid  under  Section  4.2(a)  hereof in the  manner  specified  herein,
         provided,  any failure to make any monthly payment  required by Section
         4.2(a) shall not be a default if the Borrower shall pay and cause to be
         on  deposit  in the Bond Fund the  amounts  required  to be on  deposit
         therein on the first day of  January,  April,  July and October of each
         year during the term of this Agreement; or

                  (b) failure by the Borrower to pay any amounts  required to be
         paid  under  Section  4.2(b)  hereof  on the  dates  and in the  manner
         specified herein; or

                  (c) failure by the Borrower to perform any covenant, condition
         or agreement on its part to be observed or performed in this Agreement,
         other than as  referred  to in  subsections  (a) and (b)  above,  for a
         period of thirty  (30)  days  after  written  notice,  specifying  such
         failure and requesting that it be remedied, is given to the Borrower by
         the Issuer,  the Bank or the Trustee,  unless (i) the Issuer,  the Bank
         and the  Trustee  shall agree in writing to an  extension  of such time
         prior to its  expiration  or (ii) if the failure is such that it can be
         corrected  but not within  such 30- day  period,  corrective  action is
         instituted by the Borrower  within such period and  diligently  pursued
         until such failure is corrected; or

                  (d) the  dissolution  or  liquidation  of the  Borrower or the
         filing by the  Borrower  of a  voluntary  petition  in  bankruptcy,  or
         failure by the Borrower promptly to lift any execution,  garnishment or
         attachment of such  consequence  as will impair its ability to carry on
         its obligations hereunder, or an order for relief under Title 11 of the
         United States Code,  as amended from time to time,  is entered  against
         the Borrower,  or a petition or answer  proposing the entry of an order
         for relief  against the  Borrower  under Title 11 of the United  States
         Code, as amended from time to time, or its reorganization,  arrangement
         or debt readjustment under any present or future federal bankruptcy act
         or any  similar  federal  or state  law shall be filed in any court and
         such petition or answer shall not be discharged within ninety (90) days
         after the filing  thereof,  or the Borrower shall fail generally to pay
         its  debts  as they  become  due,  or a  custodian  (including  without
         limitation a receiver,  trustee,  assignee for the benefit of creditors
         or  liquidator  of  the  Borrower)  shall  be  appointed  for  or  take
         possession of all or a  substantial  part of its property and shall not
         be discharged  within ninety (90) days after such appointment or taking
         possession,  or the  Borrower  shall  consent to or  acquiesce  in such
         appointment or taking possession, or assignment by the Borrower for the
         benefit  of  its  creditors,  or the  entry  by the  Borrower  into  an
         agreement  of  composition  with its  creditors,  or the  adoption of a
         resolution  by the board of  directors of the Borrower or the taking of
         any other corporate  action to file a petition or answer  proposing the
         entry of an order for relief against the Borrower under Title 11 of the
         United   States   Code,   as  amended   from  time  to  time,   or  its
         reorganization,  arrangement or debt readjustment  under any present or
         future federal  bankruptcy act or any similar or state laws;  provided,
         that the term


                                       26

<PAGE>


         "dissolution  or  liquidation  of  the  Borrower",   as  used  in  this
         subsection  (d), shall not be construed to include the cessation of the
         corporate  existence of the Borrower  resulting either from a merger or
         consolidation of the Borrower into or with another domestic corporation
         or a dissolution or liquidation of the Borrower following a transfer of
         all or  substantially  all of its  assets  as an  entirety,  under  the
         conditions permitting such actions contained in Section 5.2 hereof; or

                  (e) any material  warranty,  representation or other statement
         made  by or on  behalf  of the  Borrower  contained  herein,  or in any
         document or certificate furnished by the Borrower in compliance with or
         in reference hereto, is false or misleading in any material respect; or

                  (f) an "event of default" shall occur and be continuing  under
         the Indenture.

         The foregoing  provisions of subsection (c) of this Section are subject
to the limitations  that if by reason of Force Majeure the Borrower is unable in
whole or in part to perform or observe its agreements  under this Loan agreement
other than its  obligation to make  payments  required  hereunder,  the Borrower
shall  not be  deemed in  default  during  the  continuance  of such  inability,
including a reasonable time for the removal of the effect thereof.

         The term "Force Majeure" shall mean, without limitation, the following:

                  (a)  acts  of  God;  strikes,  lockouts  or  other  industrial
         disturbances;  acts of public enemies; orders or restraints of any kind
         of the  government of the United States or of the State or any of their
         departments,  agencies,  political  subdivisions  or officials,  or any
         civil or military authority;  insurrections; civil disturbances; riots;
         epidemics;  landslides;   lightning;  earthquakes;  fires;  hurricanes;
         storms; droughts;  floods; arrests; restraint of government and people;
         explosions; breakage, malfunction or accident to facilities, machinery,
         transmission  pipes or canals;  partial or entire failure of utilities;
         shortages of labor, materials, supplies or transportation; or

                  (b) any cause, circumstance or event not reasonably within the
         control of the Borrower.

         The Borrower  will use its best  efforts to remedy with all  reasonable
dispatch the Force Majeure  preventing the Borrower from performing or observing
its  agreements  under this Loan  Agreement;  provided,  that the  settlement of
strikes, lockouts and other industrial disturbances shall be entirely within the
discretion  of the  Borrower,  and the  Borrower  shall not be  required to make
settlement of strikes, lockouts and other industrial disturbances by acceding to
the demands of the opposing party or parties.

         Section 6.2 Remedies on Default.  Whenever  any Event of Default  shall
have occurred and be continuing hereunder,  the Trustee may take any one or more
of the following remedial steps:

                  (a) The  Trustee  may  exercise  any  right,  power or  remedy
         permitted to it by law, and shall have in particular,  without limiting
         the generality of the foregoing, the right


                                       27

<PAGE>



         to declare the entire  principal  payable under Section  4.2(a) hereof,
         and all unpaid interest accrued thereon to the date of such declaration
         and any premium the Borrower  shall have become  obligated to pay to be
         immediately  due and payable,  if,  concurrently  with or prior to such
         notice,  the unpaid  principal of and all unpaid  accrued  interest and
         premium on the Bonds have  become or have been  declared  to be due and
         payable under the Indenture,  and upon such  acceleration the principal
         payable  under  Section  4.2(a)  hereof,  the unpaid  accrued  interest
         thereon and such  premium  shall  thereupon  become  forthwith  due and
         payable in an amount  sufficient to pay the principal of,  premium,  if
         any,  and  interest  on the Bonds under  Section 9.2 of the  Indenture,
         without  presentment,  demand  or  protest,  all of  which  are  hereby
         expressly  waived.  The Borrower shall forthwith pay to the Trustee the
         entire principal,  premium,  if any, and interest payable under Section
         4.2(a)  hereof.  The  Trustee  shall  waive,  rescind  and  annul  such
         declaration  and the  consequences  thereof,  when any  declaration  of
         acceleration  on the  Bonds has been  waived,  rescinded  and  annulled
         pursuant to and in accordance with Section 9.11 of the Indenture.

                  (b) The Issuer or the Trustee may take whatever  action at law
         or in equity may appear  necessary or desirable to collect the payments
         and other  amounts then due and  thereafter to become due or to enforce
         the performance and observance of any obligation, agreement or covenant
         of the Borrower under this Agreement.

                  (c) Neither the Issuer nor the Trustee may exercise any remedy
         without  the  Bank's  prior  written  consent,  so long as no  wrongful
         dishonor of the Credit Facility has occurred and is continuing,  except
         that  the  Bank may not  direct  the  Trustee's  actions  hereunder  in
         connection with an event of default under Section 9.1(d), (e) or (g) of
         the  Indenture  (to the extent that the event of default  under Section
         9.1(g) results from an Event of Default under Section 6.1(g) hereof) as
         provided in Section 9.13 of the Indenture.

         In case the Issuer or the Trustee  shall have  proceeded to enforce its
rights under this Agreement,  and such proceedings  shall have been discontinued
or  abandoned  for any reason or shall  have been  determined  adversely  to the
Issuer  or the  Trustee,  as the case may be,  then and in every  such  case the
Borrower,  the Issuer and the Trustee  shall be restored  respectively  to their
several positions and rights hereunder,  and all rights,  remedies and powers of
the  Borrower,  the  Issuer and the  Trustee  shall  continue  as though no such
proceeding had been taken.

         In case there shall be pending  proceedings  for the  bankruptcy or for
the  reorganization  of the Borrower  under the federal  bankruptcy  laws or any
other applicable law, or in case a receiver or trustee shall have been appointed
for the property of the Borrower,  or in the case of any other similar  judicial
proceedings  relative to the  Borrower,  or to the  creditors or property of the
Borrower,  the Trustee shall be entitled and empowered,  by intervention in such
proceedings  or  otherwise,  to file and prove a claim or  claims  for the whole
amount owing and unpaid  pursuant to this Agreement and, in case of any judicial
proceedings,  to file such proofs of claim and other  papers or documents as may
be necessary or advisable in order to have the claims of the Trustee  allowed in
such  judicial  proceedings  relative  to the  Borrower,  its  creditors  or its
property,  and to collect and receive  any moneys or other  property  payable or
deliverable  on any such claims,  and to distribute the same after the deduction
of its charges and expenses; and any receiver, assignee or trustee in bankruptcy
or reorganization is hereby authorized to make such


                                       28

<PAGE>


payments  to the  Trustee,  and to pay to  the  Trustee  any  amount  due it for
compensation and expenses,  including  reasonable counsel fees incurred by it up
to the date of such  distribution.  When the Trustee incurs  expenses or renders
services  after the  occurrence of an Event of Default  described in Section 6.1
hereof,  the expenses and  compensation  for services are intended to constitute
expenses of administration under any bankruptcy law.

         Section 6.3 Agreement to Pay Attorneys' Fees and Expenses. In the event
the Issuer or the Trustee  should  reasonably  employ  attorneys  or incur other
expenses for the  collection  of the  payments  due under this  Agreement or the
enforcement  of the  performance or observance of any obligation or agreement on
the part of the Borrower herein  contained,  the Borrower agrees that it will on
demand  therefor  pay to the Issuer or the Trustee the  reasonable  fees of such
attorneys and such other expenses so incurred by the Issuer or the Trustee.

         Section 6.4 No Remedy  Exclusive.  No remedy herein  conferred  upon or
reserved to the Issuer or the Trustee is intended to be  exclusive  of any other
available  remedy or remedies but each and every such remedy shall be cumulative
and shall be in addition to every other  remedy given under this  Agreement  and
the Indenture or now or hereafter existing at law or in equity or by statute. No
delay or  omission  to exercise  any right or power  accruing  upon any Event of
Default  hereunder shall impair any such right or power or shall be construed to
be a waiver thereof,  but any such right and power may be exercised from time to
time and as often as may be deemed expedient.  In order to entitle the Issuer to
exercise any remedy reserved to it in this Article VI, it shall not be necessary
to give any notice other than such notice as may be herein  expressly  required.
Such rights and remedies as are given the Issuer  hereunder shall also extend to
the Trustee and the Bank, and the Trustee,  the Bank and the owners from time to
time of the Bonds shall be deemed third party beneficiaries of all covenants and
agreements herein contained.

         Section 6.5 No Waiver Implied.  In the event any agreement contained in
this Loan Agreement should be breached by either party and thereafter  waived by
the other party, such waiver shall be limited to the particular breach so waived
and shall not be deemed to waive any other breach  hereunder.  No failure by the
Trustee or the Issuer to insist upon the strict  performance  of any term hereof
or to exercise any right, power or remedy consequent upon a breach hereof, shall
constitute  a waiver  of any such term or of any such  breach.  No waiver of any
breach shall affect or alter this Loan  Agreement,  which shall continue in full
force and effect with respect to any other then existing or subsequent breach.

         Section 6.6 Notice of Default.  The  Borrower  shall notify the Trustee
and the Bank  immediately  if it becomes aware of the occurrence of any Event of
Default  hereunder or of any fact,  condition or event which, with the giving of
notice or passage of time or both, would become an Event of Default.



                                       29

<PAGE>


                                    ARTICLE 7

                                   PREPAYMENT

         Section 71.       Obligation to Prepay.

                  (a) Upon the occurrence of a  Determination  of Taxability the
         Borrower shall have, and hereby  accepts,  the obligation to prepay the
         principal  payable under Section 4.2(a) hereof as a whole,  or in part,
         on  any  date  within   ninety  (90)  days  of  the   occurrence  of  a
         Determination  of  Taxability,  for redemption of the Bonds pursuant to
         Section 3.1(c) of the Indenture.  The amount to be prepaid  pursuant to
         this Section 7.1(a) in such event shall be 100% of the principal amount
         of the Bonds to be redeemed pursuant to Section 3.1(c) of the Indenture
         plus accrued interest to the date fixed for redemption.

                  (b)  Upon  the  occurrence  of an  Event  of  Taxability,  the
         Borrower shall have, and hereby  accepts,  the obligation to prepay the
         principal  payable under Section 4.2(a) hereof as a whole,  or in part,
         on any date within ninety (90) days of the date of the occurrence of an
         Event of  Taxability,  for  redemption of the Bonds pursuant to Section
         3.1(d) of the  Indenture.  The  amount to be prepaid  pursuant  to this
         Section  7.1(b) in such event shall be 100% of the principal  amount of
         the Bonds to be redeemed  pursuant to Section  3.1(d) of the  Indenture
         plus accrued interest to the date fixed for redemption.

                  (c) If  proceeds  of the  Bonds,  including  income  from  the
         investment  thereof,  shall remain  unspent after the completion of the
         Project and the payment of all costs of the Project, the Borrower shall
         have,  and hereby  accepts,  the  obligations  to prepay the  principal
         payable under Section  4.2(a) hereof,  in whole or in part,  within one
         hundred  eighty  (180)  days  following  the  filing  of  a  completion
         certificate  in accordance  with Section 3.4 hereof,  for redemption of
         the Bonds pursuant to Section 3.1(e) of the Indenture. The amount to be
         prepaid  pursuant to this Section 7.1(c) in such event shall be 100% of
         the principal  amount of the Bonds to be redeemed plus accrued interest
         to the date fixed for redemption.

                  (d) If the  Borrower  ceases  operation of the Project and the
         Project is not thereafter operated as a "project" within the meaning of
         the Act by an  affiliate of the Borrower or by a purchaser or lessee of
         the  Projects  and  the  Issuer,  by  resolution  duly  adopted  by its
         governing  body,  requests  the  Borrower  to  cause  the  Bonds  to be
         redeemed,  the Borrower shall have, and hereby accepts,  the obligation
         to prepay the principal  payable under Section 4.2(a) hereof,  in whole
         and not in part,  within one hundred eighty (180) days after receipt by
         the Borrower of certified copies of such resolutions, for redemption of
         the Bonds pursuant to Section 3.1(f) of the Indenture. The amount to be
         prepaid  pursuant to this Section 7.1(d) in such event shall be 100% of
         the  principal  amount of the Bonds plus  accrued  interest to the date
         fixed for redemption.

                  (e)  The  Borrower  shall  have,  and  hereby   accepts,   the
         obligation to prepay the principal  payable under Section 4.2(a) hereof
         prior to each Mandatory  Redemption Date for the mandatory sinking fund
         redemption of the Bonds  pursuant to Section  3.1(g) of the  Indenture.
         The amount to be prepaid  pursuant to this Section 7.1(e) in such event
         shall be 100% of the  principal  amount  of the  Bonds  to be  redeemed
         pursuant to Section  3.1(g) of the Indenture  plus accrued  interest to
         the date fixed for redemption.


                                       30

<PAGE>


                  (f) So long as a  Credit  Facility  is in  effect,  and to the
         extent that Available  Moneys  described in clauses (a), (b) and (c) of
         Section  6.4 of the  Indenture  are not on deposit in the Bond Fund and
         available to repay the principal of and accrued  interest payable under
         this Section 7.1, the Trustee shall,  in accordance with Section 6.4 of
         the  Indenture,  take such actions as are  necessary to realize  moneys
         under such  Credit  Facility  to prepay the  principal  of and  accrued
         interest payable under this Section 7.1 in accordance with the terms of
         such Credit Facility.

         Section 7.2 Option to Prepay.  The Borrower  shall have,  and is hereby
granted,  the option (with consent of the Bank) to prepay the principal  payable
under Section 4.2(a) hereof with respect to the Bonds as a whole, or in part, by
paying to the  Trustee  an amount  sufficient  to redeem all or a portion of the
Bonds then  Outstanding,  in the manner,  at the  redemption  prices  (including
premium,  if any), from the sources and on the dates specified in Section 3.1(a)
and 3.1(b) of the Indenture.  So long as a Credit Facility is in effect,  and to
the extent  that  Available  Moneys  described  in clauses  (a),  (b) and (c) of
Section 6.4 of the  Indenture  are not on deposit in the Bond Fund and available
to prepay the principal of an accrued  interest  payable under this Section 7.2,
the Trustee shall,  in accordance  with Section 6.4 of the Indenture,  take such
actions as are necessary to realize moneys under such Credit  Facility to prepay
the  principal  of and  accrued  interest  payable  under  this  Section  7.2 in
accordance with the terms of such Credit Facility.

         Section 7.3 Redemption of the Bonds.  To perform an obligation  imposed
upon the  Borrower  or to  exercise  an option  granted to the  Borrower by this
Article VII, the Borrower shall give written notice to the Issuer,  the Trustee,
the Bank and the Bond  Registrar,  which notice shall  specify  therein the date
upon which prepayment of the principal payable under Section 4.2(a) hereof (or a
portion thereof) will be made, which date shall be not less than forty-five (45)
days from the date the  notice is  mailed,  and  shall  specify  that all of the
principal  amount  payable  under Section  4.2(a) hereof or a specified  portion
thereof is to be so prepaid.  The Issuer has  directed  the Trustee and the Bond
Registrar  to take  forthwith  all steps  (other than they  payment of the money
required to redeem the Bonds)  necessary under the applicable  provisions of the
Indenture  to effect  the  redemption  of the Bonds  (or a portion  thereof)  in
amounts  equal to the amount of the  principal  so prepaid as  provided  in this
Article VII.

                                    ARTICLE 8

                                  MISCELLANEOUS

         Section  8.1  Notices.  All notices or other  communications  hereunder
shall be  sufficiently  given and shall be deemed given when delivered or mailed
as provided in the Indenture.

         Section 8.2  Assignment By Borrower.  Except as otherwise  permitted in
this Loan  Agreement,  the  Borrower  may not assign its rights and  obligations
under this Loan Agreement  without the consent of the Issuer,  the Trustee,  and
the Bank, and no assignment will relieve the Borrower from primary liability for
any obligations under this Loan Agreement.




                                       31

<PAGE>


         Section 8.3 Severability. If any provision of this Loan Agreement shall
be determined to be  unenforceable  at any time, that shall not affect any other
provision of this Loan Agreement or the  enforceability of that provision at any
other time.

         Section 8.4  Execution  of  Counterparts.  This Loan  Agreement  may be
executed in several counterparts,  each of which will be an original, and all of
them together shall constitute one and the same instrument.

         Section 8.5 Amounts  Remaining in any Fund or With  Trustee.  If, after
full  payment of the Bonds and all fees and  expenses of the Trustee with moneys
paid to or for the account of the Issuer by the Borrower  hereunder,  any moneys
then  remain in any fund  created  under the  Indenture  (other  than the Rebate
Fund),  the Issuer hereby  assigns to the Borrower the amount of any such moneys
and will cause the Trustee to pay such moneys to the  Borrower;  provided,  that
the Trustee first shall request a written  statement from the Bank as to whether
or not the Bank has been  reimbursed  by the  Borrower  for any and all  amounts
owing in respect of such Credit Facility and for all other Obligations under the
Letter of Credit  Agreement.  The amounts remaining in the Bond Fund or the Bond
Purchase Fund shall, upon written notice form the Bank that the Borrower has not
reimbursed  the Bank under the Letter of Credit  Agreement  for any such payment
under the Credit Facility or any such Obligations  (which notice shall state the
unreimbursed  amount of such Obligations),  belong to and be paid to the Bank by
the Trustee to the extent that the Borrower has not so reimbursed the Bank.

         Section 8.6 Amendments, Changes and Modifications.  Except as otherwise
provided in this Agreement or the Indenture,  subsequent to the initial issuance
of the Bonds and  prior to their  payment  in full,  this  Agreement  may not be
effectively  amended,  changed,  modified,  altered or  terminated  without  the
written  consent of the Trustee,  or while a Credit Facility is in effect or any
Obligations are owing to the Bank.

         Section 8.7 Governing Law. This Agreement shall be governed exclusively
by and construed in accordance with the applicable law of the State.

         Section 8.8  Authorized  Borrower  Representative.  Whenever  under the
provisions  of this  Agreement  the  approval of the Borrower is required or the
Borrower is  required  to take some  action at the  request of the  Issuer,  the
Trustee,  the Tender  Agent,  the Bond  Registrar,  the Bank or the  Remarketing
Agent,  such  approval or such  request  shall be given for the  Borrower by the
Authorized  Borrower  Representative,  and the Issuer,  the Trustee,  the Tender
Agent,  the  Bond  Registrar,  the  Bank  and the  Remarketing  Agent  shall  be
authorized to act on any such approval or request and neither party hereto shall
have any complaint  against the other or against the Trustee,  the Tender Agent,
the Bond Registrar,  the Bank or the  Remarketing  Agent as a result of any such
action taken.

         Section 8.9 Term of this  Agreement.  This  Agreement  shall be in full
force and effect from the date  hereof,  and shall  continue in effect until the
payment in full of all  principal  of, and premium,  if any, and interest on the
Bonds,  or provision  for the payment  thereof  shall have been made pursuant to
Article VIII of the Indenture,  all fees,  charges,  indemnities and expenses of
the  Issuer,  the  Trustee,  the  Tender  Agent,  the  Bond  Registrar  and  the
Remarketing Agent have been


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<PAGE>


fully paid or  provision  made for such  payment  (the  payment  of which  fees,
charges,  indemnities and expenses shall be evidenced by a written certification
of the Borrower that it has fully paid all such fees,  charges,  indemnities and
expenses) and all other  amounts due hereunder  have been duly paid or provision
made for such payment. All representations,  certifications and covenants by the
Borrower as to the  indemnification  of various  parties as described in Section
5.3 hereof,  the  payment of fees and  expenses of the Issuer and the Trustee as
described in Section 6.3 hereof, and all matters affecting the tax-exempt status
of the Bonds shall survive the termination of this Agreement.

         Section 8.10 Binding Effect.  This Agreement shall inure to the benefit
of and  shall be  binding  upon the  Issuer,  the  Borrower,  the Bank and their
respective  successors  and  assigns,   subject,  however,  to  the  limitations
contained in Sections 4.4 and 5.2 hereof.

         Section 8.11 Limited Liability of Officers,  Etc. (a) No recourse shall
be had for the payment of the principal of, premium, if any, and interest on the
Bonds or for any  claim  based  thereon  or upon  any  obligation,  covenant  or
agreement  contained  in this  Agreement,  the  Indenture  or the Tax  Agreement
against any past,  present or future member,  officer or employee of the Issuer,
or any member, officer,  employee,  director or trustee of any successor entity,
as such,  either directly or through the Issuer or any successor  entity,  under
any rule of law or equity,  statute or constitution or by the enforcement of any
assessment  or  penalty  or  otherwise,  and  all  such  liability  of any  such
incorporator,  member, officer, employee,  director or trustee as such is hereby
expressly  waived and  released as a condition of and in  consideration  for the
execution of this Agreement and the Indenture and the issuance of the Bonds.

         (b)  Notwithstanding  any other  provision  of this  Agreement  (a) the
Issuer shall not be liable to the Borrower,  the Trustee,  any Bondholder or any
other person for any failure of the Issuer to take action  under this  Agreement
unless the  Issuer  (i) is  reasonably  requested  in writing by an  appropriate
person to take such action,  (ii) is assured of payment of or reimbursement  for
any  expenses  in such  action,  and  (iii)  is  afforded,  under  the  existing
circumstances,  a  reasonable  period to take such  action,  and (b) neither the
Issuer nor any  member,  officer  or  employee  or agent of the Issuer  shall be
liable to the Borrower,  the Trustee, any Bondholder or any other person for any
action taken by the Issuer or by its officers, servants, agents or employees, or
for any failure to take action under this Agreement or the Indenture, except the
Issuer agrees to take or refrain from any action  required by any injunction and
to comply with any final judgment or decree for specific performance.  In acting
under this Agreement,  or in refraining  from acting under this  Agreement,  the
Issuer may,  subject to its  agreement in the preceding  sentence,  conclusively
rely on the advice of its legal counsel.

         Section 8.12 References to Bank,  Letter of Credit and Credit Facility.
At any time  while no Letter of  Credit is in effect  and if at such time  there
shall be no Pledged Bonds  outstanding  and if no Obligations  are then owing to
the Bank,  all  references  herein to the Bank,  the Letter of Credit and Credit
Facility shall be ineffective.  Any provisions  hereof  requiring the consent of
the Bank  shall be  deemed  ineffective  if the Bank has  previously  wrongfully
dishonored  a proper  demand  for  payment  under the  Letter of  Credit,  which
wrongful dishonor is continuing.




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<PAGE>



         IN WITNESS  WHEREOF,  the  Issuer and the  Borrower  have  caused  this
Agreement  to be executed in their  respective  names and attested by their duly
authorized officers and sealed, all as of the date first above written.

                                        THE INDUSTRIAL DEVELOPMENT AUTHORITY
                                        OF THE CITY OF MOBERLY, MISSOURI


                                             By /s/ Illegible
                                                -------------------------------
                                                   President


                                        EVERLAST FITNESS MFG. CORP.


                                             By /s/ Ben Nadorf
                                                -------------------------------
                                                  President




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<PAGE>



                                    EXHIBIT A

                               PROJECT DESCRIPTION


         The  Project  shall  consist  of  the  acquisition,   installation  and
construction of a manufacturing  plant containing  approximately  300,000 square
feet to be used for the  manufacture of fitness  equipment to be located at 1900
Highway DD, Moberly, Missouri.



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<PAGE>


                                    EXHIBIT B

                         DESCRIPTION OF THE PROJECT SITE


A tract of land  situated in the Northwest  Quarter of the Southeast  Quarter of
Section 26, Township 54 North,  Range 14 West,  Randolph County,  Missouri,  and
being more  particularly  described as follows:  Commencing at the South Quarter
point of said  Section 26;  thence along the South line of said Section 26 South
88 degrees 34 minutes 13 seconds  East a distance  of 30.6 feet to a found right
of way marker on the Easterly  right of way of Route DD; thence along said right
of way North 01 degree 13 minutes 50 seconds  East a distance of 1342.65 feet to
the point of beginning of the description herein TOWIT:  Thence along said right
of way North 01 degree 13 minutes 51  seconds  East a distance  of 91.84 feet to
the point of curvature of a tangent curve,  concave to the West, having a radius
of 859.02 feet and a central  angle of 12 degrees 02 minutes 34 seconds;  thence
North along said curve a distance of 180.55 feet;  thence along the East line of
a country  road North 01 degree 42 minutes 53 seconds East a distance of 1060.06
feet to the centerline of the country road;  thence along the centerline of said
county  road South 88 degrees 22 minutes 09 seconds  East a distance  of 1436.91
feet to the Westerly right of way of Buchanan Street Road (50 feet wide); thence
along said Westerly right of way the following  courses and distances,  South 02
degrees 01 minute 25  seconds  West a distance  of 7.27  feet;  thence  South 02
degrees 31 minutes 45 seconds  West a distance of 796.06  feet;  thence South 02
degrees 30 minutes 08  seconds  West a distance  of 303.37  feet to the point of
curvature of a non-tangent curve, concave to the West, having a radius of 338.94
feet, a central angle of 33 degrees 33 minutes 37 seconds, and a chord of 195.70
feet  bearing  South 19 degrees 17 minutes 23 seconds  West;  thence South along
said curve, a distance of 198.53 feet to the point of curvature of a non-tangent
curve, concave to the Southeast, having a radius of 373.49 feet, a central angle
of 05  degrees 33 minutes 48  seconds,  a chord of 36.25 feet  bearing  South 33
degrees 17 minutes 14 seconds West; thence Southwest along said curve a distance
of 36.27 feet;  thence  leaving said Westerly  right of way, North 88 degrees 40
minutes 35 seconds West, a distance of 1322.15 feet to the point of beginning.



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