LOAN AGREEMENT

              This Loan Agreement, made and entered into this 8th  day
         of   March 1996, by and between Citizens Bank and
         Trust Company, of Chillicothe, Missouri, hereinafter "LENDER',
         and Pioneer Railcorp, an Iowa Corporation, Alabama Railroad Co.,
         an Iowa Corporation, and Mississippi Central Railroad Co., a
         Mississippi Corporation, hereinafter collectively "BORROWER" and
         respectively "Pioneer" and "Subsidiaries".
                                      RECITALS
              The parties recite and declare:
              a. BORROWER has requested LENDER to lend to it up to the sum
         of Two Million Five Hundred Thousand Dollars
         ($2,500,000) (the "loan amount") for a line of Credit Loan
         (the "Loan").
              b. LENDER is willing to lend BORROWER up to the sum of Two
         Million Five Hundred Thousand Dollars ($2,500,000)
         on the terms and conditions hereinafter set forth.
              In consideration of the above recitals, the following
         covenants and conditions, and other good and valuable
         consideration, the receipt of which is acknowledged, the parties
         agree as follows:
                                    SECTION ONE
                                    DEFINITIONS
              a. "Borrower" shall mean Pioneer Railcorp, Alabama Railroad
         Co., and Mississippi Central Railroad Co.
              b. "Collateral documents" means all those documents
         securing or perfecting security for the loan.
              C. "It" or 'its", when used to identify Borrower, refers to
         each of Pioneer Railcorp, Alabama Railroad Co., and Mississippi
         Central Railroad Co. and when used to identify Subsidiaries,
         refers to each of Alabama Railroad Co., and Mississippi Central
         Railroad Co.
              d. "Liquidated value" shall mean that value as determined
         by a qualified independent analyst approved by Lender but
         compensated by Borrower, after deduction of all projected
         expenses required to generate sale of assets.
              e. "Loan Amount" means the total credit available
         hereunder, regardless of whether drawn upon or advanced.
              f. "Market Value" shall mean that value as determined by a
         qualified independent analyst approved by Lender but compensated
         by Borrower, taking into account comparable short line sales.
              g. "Permitted liens" means:
                   1. liens for taxes, assessments and similar charges,
              incurred in the ordinary course of business, that are not
              yet due and payable;
                   2. pledges or deposits made in the ordinary course of
              business to secure payment of workers compensation, or to
              participate in any fund in connection with workers
              compensation, unemployment insurance, old-age pensions,
              railroad retirement, employee medical insurance, or other
              social security programs;
                   3. liens of mechanics, materialmen, warehousemen,
              carriers, or other like liens, securing obligations incurred in
              the ordinary course of business, that are not yet due and
              payable; and
                   4. pledges or deposits made in the ordinary course of
              business pursuant to the rights of preferred shareholders.
                                    SECTION TWO
                                     THE LOAN
              a. Disbursement of the Loan.  Advances of the loan within
         the credit limit thereof shall be made by LENDER by crediting the
         BORROWER'S deposit account with LENDER upon presentation to
         LENDER of BORROWER'S written request and instructions, signed by
         the authorized officer or officers of BORROWER.  It is understood
         and agreed, however, that LENDER is not obligated to make
         advances at any time when there has been a default hereunder by
         BORROWER that has not been cured to the satisfaction of LENDER.
              b. The Note.  At the time of making the loan, BORROWER will
         execute and deliver a note to LENDER, in the form of that
         attached as Exhibit "A".
              C. Payments of Principal.  The principal of any advance on
         the Loan of less than Two Hundred Fifty Thousand 
         Dollars ($250,000) shall be repaid in full upon the termination
         of this Loan Agreement.  The principal of any advance on the Loan
         of Two Hundred Fifty Thousand and NOIIOO Dollars ($250,000.00) or
         more shall be amortized, with Interest as hereinafter provided,
         over a seven (7) year period and paid monthly with interest,
         commencing one (1) month from the date of such advancement.
              d. Interest.  Each advance shall bear interest at the 
         initial rate of eleven percent (11%) per annum, adjustable
         quarterly to two and one-half percent (2.5%) over the New York
         Prime Rate limited, however, to a one percent (1%) annual
         increase or decrease, provided, interest shall not be adjusted to
         exceed thirteen and one-half percent (13.5%) as a maximum rate nor
         to reduce below ten percent (10%) per annum.  Interest on any
         advance on the Loan of less than Two Hundred Fifty Thousand
         Dollars ($250,000) shall be payable upon termination of
         this Loan Agreement.  Interest on any advance on the Loan of Two
         Hundred Fifty Thousand Dollars ($250,000) or more
         shall be amortized with principal over a seven (7) year period
         and paid monthly with such amortized principal, commencing one
         (1) month from the date of such advancement.
              e. Term of Loan Agreement.  This loan agreement shall
         extend for a term of one (1) year from the date of its execution.
              f. Fees.  Borrower shall pay to Lender a commitment fee
         equal to one percent (1%) of the loan amount, payable one-half
         percent (1/2%) at the time of loan closing, and payable one-half
         percent (1/2%) at the time of the first advance on the loan amount,
         which latter one-half percent (1/2%) may be a part of such advance.
                                   SECTION THREE
                               CONDITIONS PRECEDENT
              The obligation of LENDER to make the loan or to make
         advances thereunder is subject to the following conditions
         precedent:
              a. Documents required for closing.  Except as otherwise         
        hereinafter specifically provided, BORROWER shall have delivered
        to LENDER, prior to disbursement (except for item vii below) of
        the initial advance on the loan (the closing), the following:
                   i. The note (Exhibit "A" attached), signed in proper
              form by the authorized officer of officers of BORROWER;
                   ii. A Pledge Agreement and Assignment in the form as
              that attached hereto as Exhibit "B", together with
              certificates representing the shares pledged and assigned,
              together with a limited stock power in the form of that
              attached hereto as Exhibit "C";
                   iii.  A certified (as of the date of closing) copy of
              resolutions of the respective boards of directors of
              BORROWER authorizing the execution, delivery, and
              performance of this Agreement, the note, the collateral
              documents, and each other document to be delivered pursuant
              hereto;
                   iv. Certified copies (as of date of closing) of
              BORROWER'S respective By-Laws;
                   v. A Certificate (as of date of closing) of BORROWER'S
              respective corporate secretaries as to incumbency and
              signatures of the officers of BORROWER signing this
              Agreement, the Note, the collateral documents, and each
              other document to be delivered pursuant hereto;
                   vi. Copies, certified as of the most recent date
              practicable, by the Secretaries of State of the States of
              incorporation, of BORROWER'S certificates of incorporation,     
              together with a certificate (as of the date of closing) of
              BORROWER'S corporate secretaries to the effect that such
              certificates of incorporation have not been amended since
              the dates of certification;
                   vii.  Certificates, dated not more than 90 days
              following the closing, of the Secretaries of State of the
              States of incorporation, and of each state in which BORROWER
              is qualified as a foreign corporation, as to the good
              standing of BORROWER; and
                   viii.  A written opinion of BORROWER'S counsel, as of
              the date of closing and addressed to LENDER, in form
              satisfactory to LENDER, to the effect that:
                        (A) Pioneer and Subsidiaries are corporations
                   organized, existing, and in good standing under the
                   laws of their respective states of Incorporation
                   (naming such states) and are qualified to transact
                   business and are in good standing in those states where
                   the nature of businesses or property owned by BORROWER
                   requires qualification and, to the knowledge of such
                   counsel, are not required to be qualified as foreign
                   corporations in any other jurisdiction;
                        (B) BORROWER has the power to execute and deliver
                   this Agreement, to borrow money hereunder, to grant the
                   collateral required hereunder, to execute and deliver
                   the note and the collateral documents, and to perform
                   such obligations;
                        (C) All corporate action by BORROWER, all consents
                   and approvals of any persons, necessary to the validity
                   of this Agreement, the note, the collateral documents,
                   and each other document to be delivered, has been duly
                   obtained, and this Agreement, the note, the collateral
                   documents, and such other documents do not conflict
                   with any provisions of the charter or by-laws of
                   BORROWER, of any applicable laws or any other agreement
                   binding BORROWER or its property of which such counsel
                   has knowledge;
                        (D) This Agreement, the note, the collateral
                   documents, and all other agreements to be delivered
                   hereunder have been executed by, and each is valid and
                   binding obligations of, BORROWER enforceable in
                   accordance with its terms;
                        (E) The pledged stock constituting all of the
                   issued and outstanding capital common stock of
                   Subsidiaries, and all pledged stock is fully paid and
                   non-assessable; and
                        (F) Such counsel is without any knowledge of any
                   matters contrary to the representations and warranties
                   contained in Section Five, Paragraph a;
                   ix. A certificate, as of the date of the closing,
                   signed by the presidents or a vice presidents of Pioneer
                   and Subsidiaries, to the effect that:
                        (A) The representations and warranties set forth
                   within Section Five, Paragraph a, are true as of the
                   date of the closing; and
                        (B) No event of default, and no event that with
                   the giving of notice or passage of time, or both, would
                   become such an event of default, has occurred as of
                   such date;
              b. Certain events.  At the time of the closing:
                   i. No event of default shall have occurred and be
              continuing, and no event shall have occurred and be
              continuing that, with the giving of notice or passage of
              time, or both, would be an event of default;
                   ii. No material adverse change shall have occurred in
              the financial condition of BORROWER since the date of this
              Agreement or the closing, as applicable; and
                   iii.  All of the collateral documents shall have
              remained in full force and effect.
              c. Legal Matters.  At the time of the closing, all
         incidental legal matters shall be satisfactory to Cleaveland,
         Macoubrie & Cox, L.L.C., counsel to LENDER.
                                    SECTION FOUR
                                COLLATERAL SECURITY
              a. Composition of the collateral.  The property in which a
         security interest is granted pursuant to the provisions of
         Paragraphs b and c of this Section is collectively called the
         "collateral".  The collateral, together with all of BORROWERIS
         other property of any kind held by LENDER, shall stand as one         
         general, continuing, collateral security for all obligations of
         BORROWER as herein evidenced and contained and may be retained by
         LENDER until all such obligations have been satisfied in full.
             b. Rights in property held by LENDER.  As security for the
         prompt satisfaction of all obligations, BORROWER assigns,
         transfers, and sets over to LENDER all of its right, title, and
         interest in and to, and grants LENDER a lien on and a security
         interest in, all amounts that may be owing from time to time by
         LENDER to BORROWER in any capacity, including, but not limited
         to, any balance or share belonging to BORROWER, or any deposit or
         other account with LENDER, which lien and security interest shall
         be independent of any right of setoff that LENDER may have.
             C. Rights in property held by BORROWER.  As further
         security for the prompt satisfaction of all obligations arising
         under this Agreement, BORROWER pledges and assigns to LENDER all
         outstanding capital common stock of Subsidiaries, consisting of
        300,000 shares of capital common stock of Alabama Railroad Co. and
        1,100,000 shares of capital common stock of Mississippi Central
         Railroad Co.
             d. Rights in property later acquired by BORROWER.  As
         additional security, BORROWER shall grant LENDER a valid first
         lien and security interest, free of other encumbrances, in any
         property acquired wholly or in part with loan proceeds.  BORROWER
         shall notify LENDER at least fifteen (15) days in advance of any
         such intended acquisition.  In the instance loan proceeds are
         used to acquire a short line or other railroad, BORROWER shall     
         acquire the controlling interest therein and may not use loan
         proceeds to purchase a minority interest.
              e. Priority of liens.  The above-stated liens shall be
         first and prior liens except for permitted liens with respect to
         property acquired by BORROWER with loan proceeds.
              f. Financing statements.
                   i. BORROWER will:
                        (A) Join with LENDER in executing such financing
                   statements (including amendments and continuation
                   statements) in form satisfactory to LENDER, as LENDER
                   may from time to time specify;
                        (B) Pay to reimburse LENDER for all costs and
                   taxes of filing or recording the statements in such
                   public offices as LENDER may designate; and
                        (C) Take such other steps as LENDER may direct,
                   including the noting of LENDER'S lien on the collateral
                   and on any certificates of title therefor, to perfect
                   LENDER'S interest in the collateral.
                   ii. In addition to the foregoing, and not in
              limitation thereof:
                        (A) A carbon, photographic, or other reproduction
                   of this Agreement shall be sufficient as a financing
                   statement and may be filed in any appropriate office in
                   lieu thereof; and
                        (B) To the extent lawful, BORROWER appoints LENDER
                   as its limited attorney-in-fact (without requiring         
                   LENDER to act as such) to execute any financing
                   statement in the name of BORROWER, and to perform all
                   other acts that LENDER deems appropriate to preserve
                   and continue its security interest in, and to protect
                   and preserve, the collateral.
                                   SECTION FIVE
                          REPRESENTATIONS AND WARRANTIES
              a. original.  To induce LENDER to enter into this
         Agreement, BORROWER represents and warrants to LENDER as follows:
                   i. Pioneer and Subsidiaries are corporations duly
              organized, validly existing, and in good standing under the
              laws of the states of their incorporation; BORROWER has the
              lawful power to own its properties and to engage in the
              businesses it conducts, and is qualified and in good
              standing as foreign corporations in the jurisdictions
              wherein the nature of the businesses transacted by it or
              property owned by it makes such qualification necessary;
                   ii. BORROWER is not in default with respect to any of
              its existing indebtedness, and the making and performance of
              this Agreement, the note, and the collateral documents will
              not immediately or with the passage of time, or the giving
              of notice, or both;
                        (A) Violate the charter or by-law provisions of
                   BORROWER, or violate any laws or result in a default
                   under any contract, agreement, or agreement to which
                   BORROWER is a party or by which BORROWER or its            
                   property is bound; or
                        (B) Result in the creation or imposition of any
                   security interest in, or lien or encumbrance on, any of
                   the assets of BORROWER, except in favor of LENDER;
                   iii.  BORROWER has the power and authority to enter
              into and perform this Agreement, the note, and the
              collateral documents, and to incur such obligations, and has
              taken all corporate action necessary to authorize the
              execution, delivery, and performance of this Agreement, the
              note, and the collateral documents;
                   iv. This Agreement and the collateral documents are,
              and the note when delivered will be, valid, binding, and
              enforceable in accordance with their respective terms;
                   V. Except as disclosed in Exhibit _, there is no
              pending order, notice, claim, litigation, proceeding, or
              investigation against or affecting BORROWER, whether or not
              covered by insurance, that would materially and adversely
              affect the businesses or prospects of BORROWER if adversely
              determined;
                   vi. BORROWER has good marketable title to all
              collateral offered up to LENDER as security for the loan;
                   vii.  The financial statements, including any schedules
              and notes pertaining thereto, have been prepared in
              accordance with generally accepted accounting principles
              consistently applied, and fully and fairly present the
              financial condition of BORROWER at the dates thereof and the    
              results of operations for the periods covered thereby, and
              there have been no material adverse changes in the
              consolidated financial condition or businesses of BORROWER
              to the date hereof;
                   viii.  As of closing, BORROWER has no material
              indebtedness of any nature, including, but not limited to,
              liabilities for taxes and of any interest or penalties
              relating thereto, except to the extent reflected (in a
              footnote or otherwise) and, reserved against in the December 31,
              1995, financial statements, or any material indebtedness of
              any nature not fully reflected and reserved against in the
               December 31,1996, financial statements;
                   ix. Except as otherwise permitted in this Agreement,
              BORROWER has filed all federal, state, and local tax returns
              and other reports required by law to be filed prior to the
              effective date hereof and that are material to the conduct
              of its businesses; has paid or caused to be paid all taxes,
              assessments, and other governmental charges that are due and
              payable prior to the effective date thereof; and has made
              adequate provision for the payment of such taxes,
              assessments, or other charges accruing but not yet payable;
              and BORROWER has no knowledge of any deficiency or
              additional assessment in a materially important amount in
              connection with any taxes, assessments, or charges, not
              provided for on its books;
                  X. Except as otherwise disclosed in Exhibit _, or 
              except to the extent that the failure to comply would not
              materially interfere with the conduct of the businesses of
              BORROWER, BORROWER has complied with all applicable laws
              with respect to:
                        (A) The conduct of its businesses; and
                        (B) The use, maintenance, and operation of the
                   real and personal properties owned or leased in the
                   conduct of its businesses;
                   xi. No representation or warranty by BORROWER contained
              herein or in any certificate or other document furnished by
              BORROWER pursuant hereto contains any untrue statement of
              material fact or omits to state a material fact necessary to
              make such representations or warranty not misleading in
              light of the circumstances under which it was made;
                   xii.  Each consent, approval or authorization of, or
              filing, registration, or qualification with, any person
              required to be obtained or effected by BORROWER in
              connection with the execution and delivery of this
              Agreement, the note, and the collateral documents, or the
              undertaking or performance of such obligations, has been
              obtained or effected.
                                    SECTION SIX
                               BORROWER'S COVENANTS
              BORROWER covenants and agrees with LENDER that, so long as
         any of its obligations arising under this Agreement remain
         unsatisfied, BORROWER will comply with the following covenants:      
              a. Affirmative covenants.
                   i. BORROWER will use the proceeds of the loan only for
              purposes promotive of its current businesses, specifically
              for the acquisition of assets or entities consistent with
              short line rail operations.
                   ii. BORROWER shall promptly furnish LENDER with true
              and complete copies of all filings made by BORROWER with the
              Securities and Exchange Commission, including particularly,
              but not limited to, copies of all 10 Q filings and all 10 K
              filings, the latter to include: (I) A consolidated statement
              of shareholders' equity and a consolidated statement of
              changes in financial position of BORROWER for such fiscal
              year; (II) consolidated and consolidating income statements
              of BORROWER for such fiscal year; and (III) consolidated and
              consolidating balance sheets of BORROWER as of the end of
              such fiscal year-all in reasonable detail, including all
              supporting schedules and comments-the consolidated statement
              and balance sheet to be audited by independent certified
              public accountant selected by BORROWER and acceptable to
              LENDER (which acceptance shall not be unreasonably
              withheld), and certified by such accountants to have been
              prepared in accordance with generally accepted accounting
              principles consistently applied by BORROWER, except for any
              inconsistencies explained in such certificate.  In addition,
              BORROWER will obtain from such independent certified public
              accountants and deliver to LENDER, within ninety (90) days      
              after the close of each fiscal year, the accountants'
              written statement that, in making the examination necessary
              to their certification, they have obtained no knowledge of
              any event of default by BORROWER, or disclosing all events
              of default of which they have obtained knowledge; provided,
              however, that in making their examination such accountants
              shall not be required to go beyond the bounds of generally
              accepted auditing procedures for the purpose of certifying
              financial statements; LENDER shall have the right, from time
              to time, to discuss BORROWER'S affairs directly with
              BORROWER'S independent certified public accountants after
              written notice to BORROWER and opportunity of BORROWER to be
              present at any such discussion.
                   iii.  BORROWER will maintain its inventory, equipment,
              real estate, and other properties in good condition and
              repair (normal wear and tear excepted); will pay and
              discharge or will cause to be paid and discharged when due,
              the cost of repairs to or maintenance of the same; and will
              pay or cause to be paid all rental or mortgage payments due
              on such real estate.
                   iv. BORROWER will maintain, or cause to be maintained,
              public liability insurance and fire and extended coverage
              insurance on all buildings owned by it exceeding $10,000.00
              in value.  BORROWER will furnish to LENDER such evidence of
              insurance as LENDER may require.
                   v. BORROWER will pay or cause to be paid when due all      
              taxes, assessments, and charges or levies imposed on it or
              on any of its property or that it is required to withhold
              and pay over, except when contested in good faith by
              appropriate proceedings, with adequate reserves therefor
              having been set aside on their books.  But BORROWER shall
              pay or cause to be paid all such taxes, assessments,
              charges, or levies promptly when foreclosure on any lien
              that has attached (or security therefor) appears imminent.
                    vi. BORROWER will maintain and provide evidence to
              Lender's satisfaction, at least annually, of:
                         (A) Market values of Subsidiaries of at least one
                    hundred fifty percent (150%) of loan amount; and
                         (B) Liquidation values of Subsidiaries of at least
                    one hundred ten percent (110%) of loan amount.
                    vii.  BORROWER, within a reasonable time after written
              request therefor, will make available for inspection by
              authorized representatives of LENDER, any of its books and
              records, and will furnish LENDER any information regarding
              its business affairs and financial condition.
                    viii.  BORROWER will collect is accounts and sell its
              inventory only in the ordinary course of business.
                    ix. BORROWER will keep accurate and complete records
              of its accounts, inventory, and equipment, consistent with
              sound business practices.
                    x. BORROWER will give immediate notice to the LENDER of
              any extraordinary event involving it that might materially    
              and adversely affect is operations, financial condition,
              property, or businesses.
                   xi. Within thirty (30) days after LENDER'S request
              therefor, BORROWER will furnish LENDER with copies of
              federal income tax returns filed by BORROWER.
                   xii.  BORROWER will pay when due (or within applicable
              grace periods) all indebtedness due third persons, except
              when the amount is being contested in good faith by
              appropriate proceedings and with adequate reserves therefor
              being set aside on the books of BORROWER.  If BORROWER
              defaults in the payment of any principal (or installment
              thereof) of, or interest on, any such indebtedness, LENDER
              shall have the right, in its discretion, to pay such
              interest or principal for the account of BORROWER and be
              reimbursed by BORROWER on demand.
                   xiii.  BORROWER will notify LENDER immediately if it
              becomes aware of the occurrence of any event of default or
              of any fact, condition, or event that, with the giving of
              notice or passage of time, or both, could become an event of
              default, or of the failure of BORROWER to observe any of its
              undertakings under this Agreement.
                   xiv.  BORROWER will notify LENDER thirty (30) days in
              advance of any change in the location of any of its places
              of business or of the establishment of any new, or the
              discontinuance of any existing, place of business.
                   xv. BORROWER will:

                        (A) Fund all its defined benefit pension plans, if
                   any, in accordance with no less than the minimum
                   funding standards required under ERISA;
                        (B) Furnish LENDER, upon request, promptly after
                   the filing of the same, with copies of all reports or
                   other statements filed with the United States
                   Department of Labor or the Internal Revenue Service
                   with respect to all employee benefit plans; and
                        (C) Promptly advise LENDER of any reportable event
                   or prohibited transaction, as defined in ERISA, with
                   respect to any employee benefit plan.
             b. Negative covenants.
                   i. BORROWER will not change its name, enter into any
             merger, consolidation, reorganization or recapitalization,
             or reclassify its capital stock without prior written
             approval of LENDER, which approval shall not be unreasonably
             withheld.
                   ii. BORROWER will not sell, transfer, lease, or
             otherwise dispose of all, or (except in the ordinary course
             of business) any material part of, its assets.
                   iii.  SUBSIDIARIES will not mortgage, pledge, grant, or
             promote to exist a security interest in or lien on any of
             its assets of any kind, now owned or hereafter acquired,
             except for permitted liens and except for the security
             interest to LENDER herein provided for.
                   iv. SUBSIDIARIES will not become liable, directly or        
          indirectly, as guarantor or otherwise, for any obligation of any
          other person or entity, except for the endorsement of commercial
          paper for deposit or collection in the ordinary course of business.
               v. SUBSIDIARIES will not, except upon prior written approval
          of LENDER, incur, create, assume, or permit to exist any additional
          indebtedness except:
                     (A) The loan;
                     (B) Trade indebtedness incurred in the ordinary course
               of business; and
                     (C) Indebtedness secured by permitted liens.
                     (D) Equipment leases as defined in sub-paragraph ix
               below.
               vi.   SUBSIDIARIES will not declare or pay any dividends, or
          make any other payment or distribution on account of its capital
          stock other than preferred stock, excepting dividends of normal
          operating profits.
               vii.   BORROWER will not form any subsidiary or make any
          investment in, or make any loan in the nature of an investment to,
          another person or entity, of a value in excess of $50,000, except
          for those in the ordinary course of business:
               (A) for the purposes of this Loan Agreement, or
               (B) to entities wholly owned and controlled by BORROWER.
               viii.  BORROWER will not make any loan or advance to any
          officer, shareholder, director, or employee  of  BORROWER,
          except temporary advances in the ordinary course of                
              business, without prior written approval of LENDER, nor
              increase salaries or bonuses to executive and management
              personnel to more than 120% of current levels except
              pursuant to current agreements or contracts as disclosed to
              LENDER.
                   ix. SUBSIDIARIES will not increase any of its lease
              obligations except for new leases on terms equivalent to or
              superior than those commonly found in the market, which new
              leases shall be so certified to Lender by BORROWERS chief
              financial officer(s).  As used in this paragraph, the term
              "lease" means a lease reflected on the consolidated balance
              sheet of Subsidiaries or a lease that should be so reflected
              under generally accepted accounting principles.
                   x. SUBSIDIARIES will not purchase, or otherwise invest
              in or hold, securities, nonoperating real estate, or other
              nonoperating assets, except:
                        (A) Direct obligations of the United States of
                   America;
                        (B) The present investment in any such asset; and
                        (C) Operating assets that hereafter become
                   nonoperating assets.
              Subsidiaries may, however, the foregoing notwithstanding,
              purchase, invest in, or hold, nonoperating real estate or
              interests therein purchased or acquired for reasonable
              prospective inclusion in operations provided that not more
              than $50,000 is expended for such purchase or acquisition       
              annually unless prior written approval for a greater
              expenditure is obtained from LENDER.
                   xi. Subsidiaries will not issue, redeem, purchase, or
              retire any of its capital stock or grant or issue any
              warrant, right, or option pertaining thereto, or other
              security convertible into any of the foregoing, excepting
              the existing rights of preferred shareholders of the
              Mississippi Central Railroad Co.
                   xii.  BORROWER will not prepay any subordinated
              indebtedness, indebtedness for borrowed money, or
              indebtedness secured by any of its assets (except the Loan
              and except indebtedness incurred in the ordinary course of
              business) or enter into or modify any agreement as a result
              of which the terms of payment of any of the foregoing
              indebtedness are waived or modified.
                   xiii.  SUBSIDIARIES will not enter into any sale-
              leaseback transaction.
                   xiv.  SUBSIDIARIES will not acquire any stock in, or all
              or substantially all of the asset of, any other person or
              entity, except as authorized herein.
                   xv.  BORROWER will not furnish LENDER with any
              certificate or other document that will contain any untrue
              statement of material fact or that will omit to state a
              material fact necessary to make it not misleading in light
              of the circumstances under which it was furnished.
                   xvi.  BORROWER will not directly or indirectly apply any  
              part of the proceeds of the loan to the purchasing or
              carrying of any "margin stock" within the meaning of
              Regulation U of the Board of Governors of the Federal
              Reserve System, or any regulations, interpretations, or
              rulings thereunder.
                   xvii.  BORROWER will not, except, upon prior written
              approval of LENDER, make any substantial change in its
              management or in its principal purpose of businesses.
                   xviii.  BORROWER will not use loan proceeds or any
              advancement on the loan, in whole or in part, for payment of
              normal operating expenditures of current businesses.
                                   SECTION SEVEN
                                      DEFAULT
              a. Events of default.  The occurrence of any one or more of
         the following events shall constitute an event of default under
         this Agreement.
                   i. BORROWER shall fail to pay when due any installment
              of principal or interest, or any fee or charge payable
              hereunder, and such failure shall continue for a period of
              thirty (30) days.
                   ii. BORROWER shall fail to observe or perform any other
              obligation to be observed or performed by it hereunder or
              under any of the collateral documents, and this failure
              shall continue for thirty (30) days after: (A) Notice of the
              failure from the LENDER; or (B) the LENDER is notified of
              the failure or should have been so notified pursuant to the     
              provisions of Paragraph a (xiv) of Section Six, whichever is
              earlier.
                   iii.  BORROWER shall fail to pay any indebtedness due to
              any third persons, and this failure shall continue beyond
              any applicable grace period, unless such indebtedness is
              material in nature and is contested in good faith, or
              BORROWER shall suffer to exist any other event of default
              under the Agreement binding BORROWER.
                   iv. BORROWER shall fail to pay when due any sum owing
              to LENDER, or fail to observe or perform in favor of LENDER,
              under any other loan agreement, note or contractual
              undertaking with LENDER, allowing agreed upon grace periods.
                   v. Any financial statement, representation, warranty,
              or certificate made or furnished by BORROWER to LENDER in
              connection with this Agreement, or as inducement to LENDER
              to enter into this Agreement, or in any separate statement
              or document to be delivered hereunder to LENDER, shall be
              materially false, incorrect, or incomplete when made,
              providing, no such false, incorrect or incomplete statement,
              representation, warranty or certificate shall constitute a
              default if such statement, representation, warranty or
              certificate was, when given and thereafter, when relied upon
              by LENDER, truthful to the best knowledge and belief of
              BORROWER.
                   vi. BORROWER shall admit its inability to pay its debts
              as they mature, or shall make an assignment for the benefit    
              of its or any of its creditors.
                   vii.  Proceedings in bankruptcy, or for reorganization
              of BORROWER, or for the readjustment of any of its
              respective debts, under the Bankruptcy Code, as amended, or
              any part thereof, or under any other laws, whether state or
              federal, for the relief of debtors, now or hereafter
              existing, shall be commenced against BORROWER and shall not
              be discharged within sixty (60) days of their commencement,
              or any such proceeding shall be commenced by BORROWER.
                   viii.  A receiver or trustee shall be appointed for
              BORROWER or for any substantial part of its respective
              assets, or any proceedings shall be instituted for the
              dissolution or the full or partial liquidation of BORROWER,
              and the receiver or trustee shall not be discharged within
              sixth (60) days of his or her appointment, or the
              proceedings shall not be discharged within sixty (60) days
              of their commencement, or BORROWER shall discontinue
              business or materially change the nature of its businesses.
                   ix. BORROWER shall suffer a final judgment or final
              judgments for payment of money aggregating in excess of
              Twenty-Five Thousand Dollars ($25,000) and shall
              not discharge the same within a period of ninety (90) days,
              unless, pending further proceedings, execution has not been
              commenced or, if commenced, has been effectively stayed.
                   x. A judgment creditor of BORROWER shall obtain
              possession of any of the collateral by any means, including,
              but without limitation, levy, distraint, replevin, or self-
              help, providing such action represents a material part of
              collateral.
                   xi. Any obliges of subordinated indebtedness shall fail
              to comply with the subordination provisions of the
              instruments evidencing the subordinated indebtedness.
              b. Acceleration.  Immediately, and without notice, on the
         occurrence of an event of default specified in Paragraphs a(v)
         through a (viii) of this Section, or at the option of LENDER if
         LENDER shall reasonably deem itself insecure, or on the
         occurrence of any other event of default, but only on written
         notice, all obligations, whether hereunder or otherwise, shall
         immediately become due and payable without further action of any
         kind.
              C. Remedies.  After any acceleration, as provided in
         Paragraph b of this Section, LENDER shall have, in addition to
         the rights and remedies given to it by this Agreement, the note,
         and the collateral documents, all those rights and remedies
         allowed by all applicable laws, including, but not limited to,
         the Uniform Commercial Code as enacted in any jurisdiction in
         which any collateral may be located.  Without limiting the
         generality of the foregoing, LENDER, immediately and without
         demand of performance and without other notice-except as
         specifically required by this Agreement or the collateral
         documents-or any demand whatsoever to BORROWER, all of which are
         hereby expressly made, and, without advertisement, may sell at       
          public or private sale, or otherwise realize on, in Chillicothe,
          Missouri, or elsewhere, the whole, or from time to time, any part
          of the collateral, or any interest that BORROWER may have
          therein.  After deducting from the proceeds of sale or other
          disposition of the collateral all expenses, including all
          reasonable expenses for legal services, LENDER shall apply such
          proceeds towards the satisfaction of the obligations.      Any
          remainder of the proceeds after satisfaction in full of the
          obligations shall be distributed as required by applicable laws.
          Notice of any sale or other disposition shall be given to
          BORROWER at least fifteen (15) days before the time of any
          intended public sale or of the time after which any intended
          private sale or other disposition of the collateral is to be
          made, which BORROWER hereby agrees shall be reasonable notice of
          such sale or other disposition.  BORROWER agrees to assemble, or
          cause to be assembled, at its own expense the collateral at such
          place or places as LENDER shall designate.  At any such sale or
          other disposition, LENDER, to the extent permissible under
          applicable laws, may purchase the whole or any part of the
          collateral, free from any right of redemption on the part of
          BORROWER, which right is hereby waived and released.  Without
          limiting the generality of any of the rights and remedies
          conferred on LENDER under this paragraph, LENDER, to the full
          extent permitted by applicable laws, may:
                    i. Enter on the premises of BORROWER, exclude
               therefrom BORROWER or any affiliate, and take immediate        
              possession of the collateral, either personally or by means
              of a receiver appointed by a court of competent
              jurisdiction;
                   ii. At LENDER'S option, use, operate, manage, and
              control the collateral in any manner;
                   iii.  Collect and receive all rents, income, revenue,
              earnings, issues, and profits) and
                   iv. Maintain, repair, renovate, alter, or remove the
              collateral as LENDER may determine in its discretion.
                                   SECTION EIGHT
                             CONSTRUCTION OF AGREEMENT
              The provisions of this Agreement shall be in addition to
         those of any guaranty, pledge, security agreement, note, or other
         evidence of liability held by LENDER, all of which shall be
         construed as complementary to each other.  Nothing herein
         contained shall prevent LENDER from enforcing any or all other
         notes, guaranty, pledge, or security agreements in accordance
         with their respective terms.
                                   SECTION NINE
                                FURTHER ASSISTANCE
              From time to time, BORROWER shall execute and deliver to
         LENDER such additional documents and will provide such additional
         information as LENDER may reasonably require to carry out the
         terms of this Agreement and be informed of BORROWER'S status and
         affairs.                                        
                                    SECTION TEN
                         ENFORCEMENT AND WAIVER BY LENDER
              LENDER shall have the right at all times to enforce the
         provisions of this Agreement and the collateral documents in
         strict accordance with their terms, notwithstanding any conduct
         or custom on the part of LENDER in refraining from so doing at
         any time or times.  The failure of LENDER at any time or times to
         enforce its rights under such provisions, strictly in accordance
         with the same, shall not be construed as having created a custom
         in any way or manner contrary to specific provisions of this
         Agreement or as having in any way or manner modified or waived
         the same.  All rights and remedies of LENDER are cumulative and
         concurrent, and the exercise of one right or remedy shall not be
         deemed a waiver or release of any other right or remedy.
                                  SECTION ELEVEN
                                EXPENSES OF LENDER
              BORROWER, on demand, will reimburse LENDER for all expenses,
         including the reasonable fees and expenses of legal counsel for
         LENDER, incurred by LENDER in connection with the preparation,
         administration, amendment, modification, or enforcement of this
         Agreement and the collateral documents, and the collection or
         attempted collection of the note.
                                  SECTION TWELVE
                                      NOTICE
              Any notices or consents required or permitted by this
         Agreement shall be in writing and shall be deemed delivered if       
         delivered in person, or, if sent, by certified mail, postage
         prepaid, return receipt requested, or telegraph, as follows,
         unless such address is changed by written notice.
              a. If to BORROWER: ATTN: Guy Brenkman, 1318 South Johanson
              Rd., Peoria, Illinois, 61607.
              b. If to LENDER: ATTN: Andrew Coffelt, P.O. Box 50,
              Chillicothe, Missouri, 64601.
                                 SECTION THIRTEEN
                          WAIVER AND RELEASE BY BORROWER
              To the maximum extent permitted by applicable laws,
         BORROWER:
              a. Waives (i) protest of all commercial paper at any time
         held by the LENDER on which the BORROWER is in any way liable;
         and (ii) notice of acceleration and of intention to accelerate,
         and notice and opportunity to be heard, after acceleration,
         exercised by LENDER of the remedies of self-help, set off, or of
         other summary procedures committed by any applicable laws or by
         any agreement with BORROWER, and, except when required hereby or
         by any applicable laws, notice of any other action taken by
         LENDER; and
              b. Releases LENDER and its officers, attorneys, agents, and
         employees from all claims for loss or damage caused by any act or
         omission on the part of any of them, except wilful misconduct.
                                 SECTION FOURTEEN
                                  GOVERNING LAW
              It is agreed that this Agreement shall be governed by,          
          construed, and enforced in accordance with the laws of the State
          of Missouri.
                                     SECTION FIFTEEN
                                     BINDING EFFECT
                This Agreement shall inure to the benefit of, and shall be
          binding on, the respective successors and permitted assigns of
          the parties.
                                     SECTION SIXTEEN
                                       ASSIGNMENT
                BORROWER has no right to assign any of its rights or
          obligations under this Agreement without the prior, express, and
          written consent of LENDER, which consent shall not be withheld
          unreasonably.  LENDER shall not market the Loan on an individual
          basis.
                                    SECTION SEVENTEEN
                                    ENTIRE AGREEMENT
                This Agreement shall constitute the entire Agreement between
          the parties and any prior understanding or representation of any
          kind preceding the date of this Agreement shall not be binding on
          either party except to the extent incorporated in this Agreement.
                                    SECTION EIGHTEEN
                               MODIFICATION OF AGREEMENT
                Any modification of this Agreement or additional obligation
          assumed by either party in connection with this Agreement shall
          be binding only if evidenced in writing signed by each party or
          an authorized representative of each party.
                                            
                                  SECTION NINETEEN
                                   ATTORNEYS FEES
              In the event any action is filed in relation to this
         Agreement, the unsuccessful party in the action shall pay to the
         successful party, in addition to all sums that either party may
         be called on to pay, a reasonable sum for the successful party's
         attorney fees.
                                   SECTION TWENTY
                                 PARAGRAPH HEADINGS
              The titles to the paragraphs of this Agreement are solely
         for the convenience of the parties and shall not be used to
         explain, modify, simplify, or aid in the interpretation of the
         provisions of this Agreement.
                                 SECTION TWENTY-ONE
                                    SEVERABILITY
              In any provision of this Agreement shall be held invalid
         under any applicable laws, such invalidity shall not affect any
         other provision of this Agreement that can be given effect
         without the invalid provision, and, to this end, the provisions
         of this Agreement are severable.
                                 SECTION TWENTY-TWO
                                    COUNTERPARTS
              This Agreement may be executed in any number of
         counterparts, each of which shall be deemed to be an original,
         but all of which together shall constitute but one and the same
         instrument.
                                         
                                SECTION TWENTY-THREE
                                        SEAL
              This Agreement is intended to take effect as an instrument
         under seal.
              IN WITNESS WHEREOF, each party has caused this Agreement to
         be executed by an authorized representative on the date indicated
         above.

                                  Citizens Bank and Trust Company

                                  By: /s/ Andy B. Coffelt, V.P.
                                    
                                  Pioneer Railcorp

                                  By: /s/ Guy L. Brenkman, CEO
                                      
                                  Alabama Railroad Co.

                                  By: /s/ Guy L. Brenkman, President  

                                  Mississippi Central Railroad Co.

                                  By: /s/ Guy L. Brenkman, President