LOAN AGREEMENT

                                      Among


                         GE CAPITAL PUBLIC FINANCE, INC.
                                    as Lender


                                       and


                           BUSINESS FINANCE AUTHORITY
                          OF THE STATE OF NEW HAMPSHIRE
                                    as Issuer


                                       and


                           ELEXSYS INTERNATIONAL, INC.
                                   as Borrower




                          Dated as of December 1, 1996



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


          THIS AGREEMENT DOES NOT CONSTITUTE AN INDEBTEDNESS OF THE STATE OF NEW
HAMPSHIRE OR OF THE ISSUER  EXCEPT TO THE EXTENT  PERMITTED BY NEW HAMPSHIRE RSA
CHAPTER  162-I.  ALL AMOUNTS  OWED  HEREUNDER  ARE PAYABLE ONLY FROM THE SOURCES
EXPRESSLY PROVIDED HEREIN, AND NO PUBLIC FUNDS MAY BE USED FOR THAT PURPOSE.
                -------------------------------------------------




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                                                         ii

                                                  Table of Contents

                                                                                                               Page

<S>      <C>            <C>                                                                                       <C>
ARTICLE I  DEFINITIONS AND EXHIBITS.............................................................................  2
         Section 1.01.  Definitions.............................................................................  2
         Section 1.02.  Exhibits................................................................................  4
         Section 1.03.  Rules of Construction...................................................................  5
         Section 1.04.  Combined Documents......................................................................  5

ARTICLE II  FINANCING OF PROJECT AND TERMS OF LOAN..............................................................  5
         Section 2.01.  Completion of Project...................................................................  5
         Section 2.02.  Loan....................................................................................  6
         Section 2.03.  Interest................................................................................  6
         Section 2.04.  Payments................................................................................  6
         Section 2.05.  Payment on Non-Business Days............................................................  7
         Section 2.06.  Loan Payments To Be Unconditional.......................................................  7
         Section 2.07.  Prepayments.............................................................................  7

ARTICLE III  CONDITIONS PRECEDENT...............................................................................  8

ARTICLE IV  LIMITED OBLIGATION OF ISSUER; RIGHTS OF ISSUER; COVENANTS OF ISSUER................................. 10
         Section 4.01.  Limited Obligation...................................................................... 10
         Section 4.02.  Rights and Duties of Issuer............................................................. 10
         Section 4.03.  Costs and Expenses of Issuer............................................................ 11
         Section 4.04.  Matters to be Considered by Issuer...................................................... 11
         Section 4.05.  Actions by Issuer....................................................................... 12
         Section 4.06.  Indemnification by Borrower............................................................. 12
         Section 4.07.  Covenants of Issuer..................................................................... 12

ARTICLE V  REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER................................................ 12

ARTICLE VI  LETTER OF CREDIT.................................................................................... 15

ARTICLE VII  AFFIRMATIVE COVENANTS OF BORROWER.................................................................. 16
         Section 7.01.  Reporting Requirements.................................................................. 16
         Section 7.02.  Books and Records; Inspection and Examination........................................... 17
         Section 7.03.  Compliance With Laws; Environmental Indemnity........................................... 17
         Section 7.04.  Payment of Taxes and Other Claims....................................................... 18
         Section 7.05.  Maintenance of Project.................................................................. 18
         Section 7.06.  Insurance............................................................................... 18
         Section 7.07.  Preservation of Corporate Existence..................................................... 19
         Section 7.08.  Performance by Lender................................................................... 19

ARTICLE VIII  NEGATIVE COVENANTS OF BORROWER.................................................................... 20
         Section 8.01.  Lien.................................................................................... 20
         Section 8.02.  Sale of Assets.......................................................................... 20
         Section 8.03.  Consolidation and Merger................................................................ 20
         Section 8.04.  Accounting.............................................................................. 20
         Section 8.05.  Transfers............................................................................... 21
         Section 8.06.  Use of the Project...................................................................... 21

ARTICLE IX  [Reserved].......................................................................................... 21

ARTICLE X  ASSIGNMENT AND SELLING............................................................................... 21
         Section 10.01.  Assignment by Lender................................................................... 21
         Section 10.02.  No Sale or Assignment by Borrower...................................................... 22

ARTICLE XI  EVENTS OF DEFAULT AND REMEDIES...................................................................... 22
         Section 11.01.  Events of Default...................................................................... 22
         Section 11.02.  Remedies on Default.................................................................... 23
         Section 11.03.  [Reserved]............................................................................. 24
         Section 11.04.  No Remedy Exclusive.................................................................... 24
         Section 11.05.  Late Charge............................................................................ 24

ARTICLE XII  MISCELLANEOUS...................................................................................... 24
         Section 12.01.  Costs and Expenses of Lender........................................................... 24
         Section 12.02.  Disclaimer of Warranties............................................................... 25
         Section 12.03.  Notices................................................................................ 25
         Section 12.04.  Further Assurance and Corrective Instruments........................................... 25
         Section 12.05.  Binding Effect; Time of the Essence.................................................... 25
         Section 12.06.  Severability........................................................................... 25
         Section 12.07.  Amendments............................................................................. 25
         Section 12.08.  Execution in Counterparts.............................................................. 26
         Section 12.09.  Applicable Law......................................................................... 26
         Section 12.10.  Captions............................................................................... 26
         Section 12.11.  Entire Agreement....................................................................... 26
         Section 12.12.  Usury.................................................................................. 26
         Section 12.13.  Waiver of Jury Trial................................................................... 26

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                                                         30

                                            LOAN AGREEMENT (REAL ESTATE)

Lender:           GE Capital Public Finance, Inc.
                  .........Suite 470
                  .........8400 Normandale Lake Blvd.
                  .........Minneapolis, MN 55437
                  .........Telephone:  (800) 346-3164
                  .........Telecopier:  (612) 897-5601

Issuer:           Business Finance Authority of the State of New Hampshire
                  .........14 Dixon Avenue, Suite 101
                  .........Concord, NH  03301
                  .........Telephone:  (603) 271-2391
                  .........Telecopier:  (603) 271-2396

Borrower:         .........Elexsys International, Inc.
                  .........41 Simon Street
                  .........Nashua, NH 03060
                  .........Telephone:  (603) 886-0066
                  .........Telecopier: (603) 886-9724


         THIS LOAN  AGREEMENT  dated as of December  1, 1996 (this  "Agreement")
among GE Capital Public Finance,  Inc., a Delaware corporation,  as lender (with
its successors and assigns,  "Lender"),  Business Finance Authority of the State
of New Hampshire,  a body corporate and politic as an agency of the State of New
Hampshire (the "State"), as issuer ("Issuer"), and Elexsys International,  Inc.,
a Delaware corporation, as borrower ("Borrower").

         WHEREAS,  Issuer  is  authorized  and  empowered  under the laws of the
State,  including New  Hampshire  RSA Chapter  162-I (the "Act"),  to enter into
financing  documents  and security  documents  with respect to  indebtedness  of
Issuer to be used to finance eligible projects as described in the Act; and

         WHEREAS,  in furtherance of the purposes of the Act, Issuer proposes to
finance  all or a portion of the Project (as  hereinafter  defined)  pursuant to
this Agreement by obtaining a loan from Lender and lending the proceeds  thereof
to Borrower; and

         WHEREAS,  Borrower  proposes to borrow the proceeds of the loan made by
Lender to Issuer upon the terms and  conditions  set forth herein to finance the
Project; and

         WHEREAS,  Borrower  shall make Loan Payments (as  hereinafter  defined)
directly to Lender as assignee of Issuer; and

         WHEREAS,  this  Agreement  shall not be deemed to  constitute a debt or
liability or moral obligation of the State or any political subdivision thereof,
or a pledge  of the  faith  and  credit  or  taxing  power  of the  State or any
political  subdivision  thereof,  but  shall be a special  obligation  of Issuer
payable solely from the Loan Payments payable hereunder by Borrower to Lender as
assignee of Issuer.

         NOW, THEREFORE,  for good and valuable consideration,  receipt of which
is hereby  acknowledged,  and in consideration of the premises contained in this
Agreement, Lender, Issuer and Borrower agree as follows:


                                                     ARTICLE I
                                             DEFINITIONS AND EXHIBITS

         Section 1.01.  DefinitionsDefinitions.  The following terms used herein
will have the  meanings  indicated  below  unless the context  clearly  requires
otherwise:

         "Agreement" means this Agreement, including all exhibits hereto, as any
of the same may be  supplemented or amended from time to time in accordance with
the terms hereof.

         "Bank" means Sanwa Bank California, the issuer of the Letter of Credit.

         "Borrower" means Elexsys International, Inc., a Delaware corporation.

         "Business  Day" means a day other  than a  Saturday  or Sunday on which
banks are generally open for business in New York, New York.

         "Certificate  of  Acceptance"  means a Certificate  of  Acceptance,  in
substantially  the  form  set  forth  as  Exhibit  B  hereto,  whereby  Borrower
acknowledges  receipt in good  condition  of  certain  portions  of the  Project
identified  therein and confirms the date of delivery  thereof and certain other
matters.

         "Code"  means,  collectively,  the Internal  Revenue  Code of 1986,  as
amended, and United States Treasury regulations promulgated thereunder.

         "Default" means an event that, with giving of notice or passage of time
or both, would constitute an Event of Default as provided in Article XI hereof.

         "Determination  of  Taxability"  means any  determination,  decision or
decree by the  Commissioner  of Internal  Revenue,  or any District  Director of
Internal  Revenue  or any court of  competent  jurisdiction,  or an  opinion  of
counsel  qualified  in  such  matters  obtained  by  Lender,  that an  Event  of
Taxability  shall have occurred.  A  Determination  of Taxability  also shall be
deemed to have occurred on the first to occur of the following:

                  (a) the date when Borrower files any  statement,  supplemental
         statement, or other tax schedule,  return or document,  which discloses
         that an Event of Taxability shall have occurred; or

                  (b) the  effective  date of any  federal  legislation  enacted
         after the date of this  Agreement  or  promulgation  of any  income tax
         regulation  or ruling by the  Internal  Revenue  Service that causes an
         Event of Taxability after the date of this Agreement.

         "Escrow Agent" means National City Bank of Minneapolis, as escrow agent
under the Escrow  Agreement,  and its successors and assigns permitted under the
Escrow Agreement.

         "Escrow  Agreement"  means the Escrow Agreement dated as of December 1,
1996,  among  Lender,  Issuer,  Borrower  and Escrow Agent and,  upon  execution
thereof in accordance with the terms of the Escrow Agreement, the Bank.

         "Escrow  Fund"  means the fund  established  and held by  Escrow  Agent
pursuant to the Escrow Agreement.

         "Event of Taxability"  means,  if as the result of any act,  failure to
act or use of the  proceeds  of the Loan,  a change in use of the Project or any
misrepresentation  or  inaccuracy in any of the  representations,  warranties or
covenants  contained in this  Agreement or the Statement as to Tax Exempt Status
by Issuer or Borrower,  or the  enactment of any federal  legislation  after the
date of this  Agreement  or the  promulgation  of any income tax  regulation  or
ruling by the Internal  Revenue  Service after the date of this  Agreement,  the
Interest is or becomes  includable in Lender's  gross income for federal  income
tax purposes.

         "Gross-Up Rate" means, with respect to any Interest payment  (including
payments made prior to the Event of Taxability), the rate necessary to calculate
an additional  payment in an amount sufficient such that the sum of the Interest
payment plus the  additional  payments  would,  after reduced by the federal tax
(including interest and penalties) actually imposed thereon, equal the amount of
the Interest payment.

         "Interest"  means the  portion of any Loan  Payment  designated  as and
comprising interest as shown in Exhibit A hereto.

         "Issuer"  means  the  Business  Finance  Authority  of the State of New
Hampshire, acting as issuer under this Agreement.

         "Issuer's  Service  Charge" means payment to the issuer for its own use
of $20,250, payable on the date of execution and delivery hereof.

         "Lender" means (i) GE Capital Public  Finance,  Inc.,  acting as lender
under this Agreement, (ii) any surviving, resulting or transferee corporation of
GE Capital  Public  Finance,  Inc. and (iii)  except where the context  requires
otherwise, any assignee(s) of Lender.

         "Letter of Credit" means the irrevocable standby letter of credit to be
issued by Bank in the  initial  amount  of  $2,742,727.50  in the form  attached
hereto as Exhibit E,  subject to  reduction  in  accordance  with Article VI and
Schedule 1 hereof.

          "Loan"  means  the loan  from  Issuer  to  Borrower  pursuant  to this
Agreement.

         "Loan Payments" means the loan payments payable by Borrower pursuant to
the provisions of this Agreement as specifically  set forth in Exhibit A hereto.
As provided  in Article II hereof,  Loan  Payments  shall be payable by Borrower
directly to Lender,  as  assignee of Issuer,  in the amounts and at the times as
set forth in Exhibit A hereto.

         "Loan  Proceeds" means the total amount of money to be paid pursuant to
Section  2.02 hereof by Lender to Escrow  Agent for deposit and  application  in
accordance with the Escrow Agreement.

         "Prepayment  Amount" means the amount which  Borrower must pay or cause
to be paid to Lender as  assignee  of  Issuer  in order to prepay  the Loan,  as
provided in Section 2.07  hereof,  such  amounts  being 102% of the  outstanding
Principal at the time of the  prepayment,  plus  accrued  interest and all other
amounts then due and owing hereunder.

         "Principal"  means the portion of any Loan  Payment  designated  as and
comprising principal as set forth in Exhibit A hereto.

         "Project" means the acquisition and renovation of certain manufacturing
facilities  located at 41 Simon  Street,  Nashua,  New  Hampshire  to be used in
connection with the Borrower's  operations  (including,  to the extent permitted
pursuant to the Code without jeopardizing the tax-exempt status of the Interest,
certain  items  originally  financed  through  internal  advances of Borrower in
anticipation of obtaining permanent financing through Issuer).

         The word "Project"  also refers to the facilities  which result or have
resulted from the foregoing activities.

         "Project Costs" means the costs of carrying out the Project,  including
repayment  of external  loans and internal  advances for the same and  including
interest prior to and during construction,  but excluding general administrative
expenses, overhead of the Institution and interest on internal advances.

         "State" means the State of New Hampshire.

         "Statement as to Tax Exempt  Status" means  Borrower's  Statement as to
Tax Exempt Status of the Loan of even date herewith.

         "Substitute  Bank" means the issuer of a  Substitute  Letter of Credit,
which issuer must be acceptable to Lender in its sole discretion.

         "Substitute  Letter of Credit" means an  irrevocable  standby letter of
credit in the form  attached  hereto as  Exhibit E, in the  amount  required  by
Article VI and Schedule 1 hereof, and issued by a Substitute Bank.

                    "UCC"  means the Uniform  Commercial  Code as adopted and in
effect in the State.

         Section 1.02. ExhibitsExhibits. The following schedule and exhibits are
attached hereto and made a part hereof:

         Schedule 1:  Schedule of Letter of Credit Reductions.

         Schedule 2:  Prohibited Assignees.

         Exhibit A: Form of Schedule of Project and Loan Payments describing the
Project and setting forth the Loan Payments and Prepayment Prices.

         Exhibit B:  Form of Certificate of Acceptance.

         Exhibit  C: Form of  opinion  of  counsel  to  Borrower  (which  may be
delivered  as  one  or  more  opinions  from  separate  counsel,  provided  that
collectively the form and substance thereof is consistent with Exhibit C).

         Exhibit D:  Form of opinion of bond counsel.

         Exhibit E:  Form of Letter of Credit.

         Exhibit F:  Form of Opinion of Counsel to Bank.

         Section  1.03.  Rules of  ConstructionRules  of  Construction.  (a) The
singular form of any word used herein,  including the terms defined Section 1.01
hereof,  shall include the plural,  and vice versa.  The use herein of a word of
any gender shall include correlative words of all genders.

         (b) Unless otherwise  specified,  references to Articles,  Sections and
other  subdivisions of this Agreement are to the designated  Articles,  Sections
and other  subdivision  of this  Agreement  as  originally  executed.  The words
"hereof,"  wherein,  "hereunder"  and  words  of  similar  import  refer to this
Agreement as a whole.

         (c) The headings or titles of the several  articles and sections  shall
be solely  for  convenience  of  reference  and shall not  affect  the  meaning,
construction or effect of the provisions hereof.

         Section 1.04. Combined DocumentsCombined Documents. This Agreement, the
Escrow  Agreement  and the exhibits  hereto  together  constitute  the Financing
Document  and  the  Security   Document  under  the  Act,  and  as  evidence  of
indebtedness, this Agreement and the exhibits hereto constitute a Bond under the
Act.

                                                    ARTICLE II

                                      FINANCING OF PROJECT AND TERMS OF LOAN

         Section 2.01.  Completion of ProjectCompletion of Project. The Borrower
has acquired the Project site and building  thereon  prior to the  execution and
delivery of this Agreement and will substantially  complete the Project no later
than  September 30, 1997.  Borrower  shall bear the risk of loss with respect to
any loss or claim  relating to any portion of the Project and shall be liable in
respect of its duties and  obligations in accordance  with any contract  entered
into in connection with the Project,  and neither Lender nor Issuer shall assume
any such risk of loss or liability.

         Section 2.02. LoanLoan.  Lender hereby agrees, subject to the terms and
conditions  of this  Agreement,  to  make a loan  to  Issuer  in the  amount  of
$2,700,000;  Issuer hereby  agrees,  subject to the terms and conditions of this
Agreement,  to  borrow  such  amount  from  Lender  and to lend  such  amount to
Borrower;  and Borrower  hereby  agrees to borrow such amount from Issuer.  Upon
fulfillment  of the  conditions  set forth in Article III hereof,  Lender  shall
deposit  the Loan  Proceeds  on behalf of Issuer in the Escrow  Fund to be held,
invested and disbursed as provided in the Escrow Agreement.  Issuer's obligation
to repay the loan from  Lender,  and  Borrower's  obligation  to repay the Loan,
shall  commence,  and  interest  shall  begin to  accrue,  on the date that Loan
Proceeds are deposited in the Escrow Fund.

         Section 2.03.  InterestInterest.  The principal amount of the loan from
Lender to Issuer and the Loan hereunder outstanding from time to time shall bear
interest (computed on the basis of actual days elapsed in a 360-day year) at the
rate of 6.33% per annum.  Interest  accruing  on the  principal  balance of such
loans  outstanding  from time to time shall be payable as  provided in Exhibit A
hereto and upon earlier demand in accordance with the terms hereof or prepayment
in accordance  with Section 2.07 hereof.  Upon the occurrence of a Determination
of Taxability,  (i) Borrower shall,  with respect to future  interest  payments,
begin  making  Loan  Payments  calculated  at the  Gross-Up  Rate and  (ii),  in
addition,  Borrower  shall make  within 30 days of demand of Lender a payment to
Lender sufficient to supplement prior Loan Payments to the Gross-Up Rate.

         Section  2.04.  PaymentsPayments.  Issuer shall pay the  principal  of,
premium, if any in accordance with Section 2.07 hereof, and interest on the loan
from Lender to Issuer,  but only out of the amounts paid by Borrower pursuant to
this  Agreement.  Borrower  shall pay to Lender,  as  assignee  of Issuer,  Loan
Payments,  in the  amounts  and on the dates set forth in  Exhibit A hereto.  As
security  for  its  obligation  to pay  the  principal  of,  premium,  if any in
accordance  with  Section  2.07  hereof,  and  interest on the loan from Lender,
Issuer  assigns to Lender all of Issuer's  right to receive Loan  Payments  from
Borrower  hereunder,  all of Issuer's rights hereunder,  and Issuer  irrevocably
constitutes  and appoints  Lender and any present or future  officer or agent of
Lender  as  its  lawful   attorney,   with  full  power  of   substitution   and
resubstitution,  and in the name of Issuer or  otherwise,  to  collect  the Loan
Payments and any other  payments due  hereunder and to sue in any court for such
Loan  Payments or other  payments,  to  exercise  all rights  hereunder,  and to
withdraw or settle any claims, suits or proceedings pertaining to or arising out
of this Agreement upon any terms; provided,  however, that such assignment shall
not include  Issuer's rights under Article IV and Section 7.06(d) hereof and its
right to notice  pursuant to Section 12.03 hereof.  Such Loan Payments and other
payments shall be made by Borrower directly to Lender, as Issuer's assignee, and
shall be credited against Issuer's payment obligations hereunder.  No provision,
covenant or agreement  contained  in this  Agreement  or any  obligation  herein
imposed on Issuer,  or the breach thereof,  shall  constitute or give rise to or
impose upon Issuer a pecuniary liability,  a charge upon its general credit or a
pledge  of its  general  revenues.  In making  the  agreements,  provisions  and
covenants set forth in this  Agreement,  Issuer has not obligated  itself except
with  respect to the  application  of the Loan  Payments  to be paid by Borrower
hereunder.  All amounts required to be paid by Borrower  hereunder shall be paid
in lawful money of the United States of America in immediately  available funds.
No  recourse  shall be had by Lender  or  Borrower  for any claim  based on this
Agreement  against any director,  officer,  employee or agent of Issuer alleging
personal liability on the part of such person, unless such claim is based on the
willful dishonesty of or intentional violation of law by such person.

         Section 2.05. Payment on Non-Business DaysPayment on Non-Business Days.
Whenever  any  payment to be made  hereunder  shall be stated to be due on a day
which is not a Business  Day,  such  payment may be made on the next  succeeding
Business  Day, and such  extension of time shall in such case be included in the
computation of interest or the fees hereunder, as the case may be.

         Section  2.06.  Loan  Payments To Be  UnconditionalLoan  Payments To Be
Unconditional.  The  obligations of Borrower to make the Loan Payments  required
under this Article II and to make other  payments  hereunder  and to perform and
observe the  covenants  and  agreements  contained  herein shall be absolute and
unconditional in all events, without abatement, diminution, deduction, setoff or
defense for any reason,  including (without  limitation) any damage to or defect
in  the  Project  or  any  accident,  condemnation,  destruction  or  unforeseen
circumstances.  Notwithstanding  any dispute between Borrower and any of Issuer,
Lender,  any vendor or any other person,  Borrower  shall make all Loan Payments
when due and shall not withhold any Loan Payments  pending  final  resolution of
such dispute,  nor shall  Borrower  assert any right of set-off or  counterclaim
against its obligation to make such payments required under this Agreement.

         Section  2.07.   PrepaymentsPrepayments.   (a)  Borrower  may,  in  its
discretion,  prepay the Loan in whole at any time after the third anniversary of
the date hereof by paying the applicable Prepayment Amount.

         (b)  Borrower  shall  prepay  the  Loan in whole or in part at any time
pursuant to Article IX hereof by paying the applicable Prepayment Amount.

         (c) Borrower shall prepay the Loan in full  immediately  upon demand of
Lender after the occurrence and during the continuance of an Event of Default as
set forth in Article XI hereof by paying the applicable Prepayment Amount.

         (d) Borrower shall prepay the Loan in full  immediately  upon demand of
Lender after the  occurrence  of a  Determination  of  Taxability  by paying the
applicable  Prepayment Amount,  plus an amount necessary to supplement the prior
Loan Payments to the Gross-Up Rate.

         (e) Borrower shall prepay the Loan in full  immediately  upon demand of
Lender if the Letter of Credit is not renewed or replaced in accordance with the
provisions of Article VI.

         (f) The Loan shall be repaid in part with funds remaining in the Escrow
Fund upon termination of the Escrow  Agreement,  as provided in Sections 2.03 or
2.04 of the Escrow Agreement, without premium or penalty.

         (g) If Lender or any  assignee of Lender  assigns  this  Agreement to a
competitor of Borrower (whether or not such competitor is listed in Schedule 2),
as  reasonably  determined  by  Borrower,  Borrower  may prepay the Loan in full
without  premium or penalty by paying the  outstanding  principal at the time of
the  prepayment  plus accrued  interest and all other amounts then due and owing
hereunder.

         Upon  any  prepayment  in part of the  Loan,  the  prepayment  shall be
applied first to Interest  accrued  thereon and next to Principal in the inverse
order of maturity.

                                                    ARTICLE III

                                               CONDITIONS PRECEDENT

         Lender's  agreement  to make the  loan to  Issuer  hereunder,  Issuer's
agreement  to accept  the loan and to make the loan to  Borrower  hereunder  and
Lender's  agreement to deposit the Loan  Proceeds in the Escrow  Fund,  shall be
subject to the  condition  precedent  that Lender and Issuer shall have received
all of the  following,  each in form and  substance  satisfactory  to Lender and
Issuer:

         (a) This Agreement, properly executed on behalf of Issuer, Borrower and
Lender, and each of the Exhibits hereto properly completed.

          (b) The Statement as to Tax Exempt Status, properly executed on behalf
of Borrower.

          (c) The  Escrow  Agreement,  properly  executed  on behalf of  Issuer,
Lender, Borrower, Escrow Agent and Bank.

         (d) A certificate of an authorized  officer of Borrower,  certifying as
to (i) the resolutions  authorizing  the execution,  delivery and performance of
this Agreement,  the Escrow  Agreement and the Statement as to Tax Exempt Status
and any related documents,  and (ii) the signatures of the officers or agents of
Borrower authorized to execute and deliver this Agreement,  the Escrow Agreement
and the Statement as to Tax Exempt Status and other instruments,  agreements and
certificates on behalf of Borrower.

          (e) Currently  certified copies of the certificate of incorporation of
Borrower.

         (f) A  Certificate  of  Good  Standing  issued  as to  Borrower  by the
Secretary  of the  State of the  state of  Borrower's  formation,  not more than
thirty (30) days prior to the date hereof.

         (g) A completed  and executed  Form 8038 or evidence of filing  thereof
with the Secretary of Treasury.

         (h) A resolution  or evidence of other  official  action taken by or on
behalf of Issuer to authorize the transactions contemplated hereby.

         (i) Evidence that the financing of the Project has been approved by the
"applicable  elected  representative"  of State after a public hearing held upon
reasonable notice.

         (j) An opinion of counsel to Borrower,  addressed to Lender and Issuer,
substantially  in the form attached  hereto as Exhibit C (which may be delivered
as one or more opinions from separate  counsel,  provided that  collectively the
form and substance thereof is consistent with Exhibit C).

         (k) An  opinion  of bond  counsel,  addressed  to  Lender,  Issuer  and
Borrower, substantially in the form attached hereto as Exhibit D.

          (l) Payment of Lender's  fees,  commissions  and expenses  required by
Section 12.01 hereof.

          (m) Payment of Issuer's  fees,  commissions  and expenses  required by
Section 4.03 hereof.

         (n) A copy of the notice of the name,  address and telephone  number of
Lender, as the institution  providing  construction funds, posted at the Project
site by the Borrower or its agent and certified as to its posting  date,  all in
compliance with New Hampshire RSA 447:12-b.

         (o) A copy of a Phase I environmental audit on the Project site with no
adverse findings and a copy of a Phase II audit, if completed.

          (p) A resolution of the Governor and Council of New  Hampshire  making
the findings required by Section 9 of the Act.

          (q) A no arbitrage  certification  of Issuer  pursuant to Treas.  Reg.
ss.1.148-2(b)(2).

          (r) Any other  documents  or items  reasonably  required  by Lender or
Issuer.

         Lender's  agreement to authorize any disbursement  from the Escrow Fund
shall be subject to the further conditions precedent that on the date thereof:

          (s)  Lender  shall  have  received  each of the items  required  for a
disbursement pursuant to the Escrow Agreement;

         (t) Lender shall have  received in form and substance  satisfactory  to
Lender  invoices and bills of sale relating to the Project,  evidence of payment
thereof  and,  if  applicable,  evidence of official  intent to  reimburse  such
payment as required by the Code;

         (u) the  representations  and warranties  contained in Article V hereof
are correct on and as of the date of such loan, as though made on and as of such
date,  except to the extent  that such  representations  and  warranties  relate
solely to an  earlier  date and  except to the  extent  otherwise  disclosed  in
writing to Lender  specifically  referencing  this paragraph and, in the case of
any such exception, is acceptable to Lender;

         (v) no event has occurred and is continuing,  or would result from such
loan to Issuer or the Loan which constitutes a Default, an Event of Default or a
Determination of Taxability; and

         (w) Lender shall have  received the Letter of Credit  substantially  in
the form of Exhibit E and an opinion of counsel to the Bank substantially in the
form of Exhibit F.

                                                    ARTICLE IV

                                LIMITED OBLIGATION OF ISSUER; RIGHTS OF ISSUER;
                                                COVENANTS OF ISSUER

         Section   4.01.   Limited   ObligationLimited   Obligation.   Under  no
circumstances  shall Issuer be obligated  directly or indirectly to pay costs of
the  Project,  principal of or premium,  if any,  and  interest on the Loan,  or
expenses of operation,  maintenance  and upkeep of the Project  except from Loan
Proceeds,  exclusive of funds received hereunder by Issuer for its own use. This
Agreement  does not  create any debt of the State  with  respect to the  Project
other than a special obligation of Issuer acting on behalf of the State pursuant
to the Act.  Nothing  contained  herein  shall in any way  obligate the State to
raise any  money by  taxation  or use other  public  funds  for any  purpose  in
relation to the  Project.  Neither the State nor Issuer  shall pay or promise to
pay any debt or meet  any  financial  obligation  to any  person  at any time in
relation to the Project except (i) from moneys  received or to be received under
the provisions  hereof or derived from the exercise of Issuer's right hereunder,
other than moneys  received for its own purposes,  or (ii) as may be required by
law other than the  provisions of the Act.  Nothing  contained in this Agreement
shall be construed to require or authorize  Issuer to operate the Project itself
or to conduct any business enterprise in connection therewith.

         Section 4.02.  Rights and Duties of IssuerRights and Duties of Issuer.

         (a) Remedies of Issuer.  Notwithstanding any contrary provision in this
Agreement,  Issuer  shall have the right to take any action or make any decision
with respect to  proceedings  for indemnity  against the liability of Issuer and
for collection or reimbursement  from sources other than moneys or property held
under this  Agreement  or subject to the lien  hereof.  Issuer may  enforce  its
rights  under this  Agreement  which have not been  assigned  to Lender by legal
proceedings for the specific  performance of any obligation  contained herein or
for the enforcement of any other appropriate legal or equitable remedy,  and may
recover  damages  caused by any breach by Borrower of its  obligations to Issuer
under this  Agreement,  including  court costs,  reasonable  attorney's fees and
other costs and expenses incurred in enforcing such obligations.

         (b) Limitations on Actions. Issuer shall not be required to monitor the
financial  condition of Borrower or the  physical  condition of the Project and,
unless otherwise  expressly  provided,  shall not have any  responsibility  with
respect to notices,  certificates  or other  documents  filed with it hereunder.
Issuer shall not be required to take notice of any breach or default except when
given notice thereof by Lender.  Issuer shall not be responsible for the payment
of any rebate to the United  States  under IRC ss.  148(f).  Issuer shall not be
required to take any action unless  indemnity  reasonably  satisfactory to it is
furnished  for  expenses or  liability  to be incurred  therein  (other than the
giving of notice).  Issuer,  upon written request of Lender, and upon receipt of
reasonable  indemnity for expenses or liability,  shall  cooperate to the extent
reasonably necessary to enable Lender to exercise any power granted to Lender by
this Agreement.  Issuer shall be entitled to  reimbursement  pursuant to Section
4.03 to the extent that it acts without previously obtaining full indemnity.

         (c)  Responsibility.  Issuer shall be entitled to the advice of counsel
(who may be  counsel  for any  party,  and shall be wholly  protected  as to any
action  taken or omitted to be taken in good faith in reliance  on such  advice.
Issuer  may rely  conclusively  on any  notice,  certificate  or other  document
furnished  to it  under  this  Agreement  and  reasonably  believed  by it to be
genuine. Issuer shall not be liable for any action taken by it in good faith and
reasonably  believed by it to be within the  discretion or power  conferred upon
it, or in good faith  omitted to be taken by it and  reasonably  believed  to be
beyond such  discretion  or power,  or taken by it pursuant to any  direction or
instruction  by which it is governed under this Agreement or omitted to be taken
by it by reason of the lack of direction or instruction required for such action
under this  Agreement,  or be responsible  for the  consequences of any error of
judgment  reasonably  made by it. When any  payment,  consent or other action by
Issuer is called for by this  Agreement,  Issuer may defer such  action  pending
such  investigation  or inquiry or receipt of such  evidence,  if any, as it may
require  in support  thereof.  A  permissive  right or power to act shall not be
construed  as a  requirement  to act, and no delay in the exercise of a right or
power shall affect the subsequent exercise thereof.  Issuer shall in no event be
liable for the  application  or  misapplication  of funds,  or for other acts or
defaults  by any  person or entity  except by its own  directors,  officers  and
employees. No recourse shall be had by Borrower or Lender for any claim based on
this Agreement against any director, officer, employee or agent of Issuer unless
such  claim is based  upon the bad  faith,  fraud or deceit of such  person.  No
covenant, obligation or agreement of Issuer contained in this Agreement shall be
deemed to be a  covenant,  obligation  or  agreement  of any  present  or future
director,  officer,  employee or agent of Issuer in his individual capacity, and
no person  executing this  Agreement  shall be liable  personally  thereon or be
subject to any personal  liability or  accountability  by reason of the issuance
thereof.

         Section 4.03. Costs and Expenses of IssuerCosts and Expenses of Issuer.
Borrower  shall pay when due the  Issuer's  Service  Charge and shall  prepay or
reimburse  Issuer  within  thirty  (30)  days  after  notice  for  all  expenses
(including reasonable attorney's fees) incurred by Issuer in connection with the
execution,  delivery,  performance and enforcement  under this Agreement and all
expenses  reasonably  incurred or advances  reasonably  made in the  exercise of
Issuer's  rights or their  performance of its obligations  hereunder.  Any fees,
expenses,  reimbursements  or other  charges  which  Issuer may be  entitled  to
receive  from the Borrower  hereunder,  if not paid within ten (10) days of when
they are due, shall bear a late charge equal to 5% of the amount overdue, and if
not paid within sixty (60) days, shall bear interest at 12% per annum.

         Section  4.04.   Matters  to  be  Considered  by  IssuerMatters  to  be
Considered by Issuer. In approving,  concurring in or consenting to action or in
exercising any discretion or in making any  determination  under this Agreement,
Issuer may  consider  the  interests  of the  public,  which  shall  include the
anticipated effect of any transaction on tax revenues and employment, as well as
the interests of the other parties  hereto;  provided,  however,  nothing herein
shall be construed as  conferring on any person other than the other parties any
right to notice, hearing or participation in Issuer's consideration, and nothing
in this  section  shall be  construed  as  conferring  on any of them any  right
additional to those conferred elsewhere herein. Subject to the foregoing, Issuer
will  not  unreasonably  withhold  any  approval  or  consent  to be given by it
hereunder.

         Section 4.05.  Actions by IssuerActions by Issuer. Any action which may
be taken by Issuer hereunder shall be deemed  sufficiently taken if taken on its
behalf by its Chairman,  its Vice  Chairman or its Executive  Director or by any
other director, officer or agent whom it may designate from time to time.

         Section 4.06.  Indemnification by  BorrowerIndemnification by Borrower.
Borrower, regardless of any agreement to maintain insurance, shall indemnify and
save harmless, to the fullest extent permitted by law, Issuer and its directors,
officers,  employees and agents from and against (a) any and all claims by or on
behalf of any person arising out of (1) any condition of the Project, or (2) the
acquisition,  construction,  reconstruction,   improvement,  use,  occupancy  or
operation of the Project or any work or anything  whatsoever  done or omitted to
be done  on or  about  the  Project,  or (3)  any  accident,  injury  or  damage
whatsoever to any person occurring on or about the Project, or (4) any breach or
default by Borrower of or in any of its obligations hereunder, or (5) any act or
omission of Borrower or any of its agents, contractors,  servants,  employees or
licensees,  or (6) the offering,  issuance, sale or any resale of this Agreement
or the Loan, but only to the extent permitted by law, and (b) any and all costs,
counsel fees, expenses or liabilities reasonably incurred in connection with any
such claim or any action or proceeding  brought  thereon.  In case any action or
proceeding is brought against Issuer or any such director,  officer, employee or
agent by reason of any such claim,  Borrower upon notice from the affected party
shall resist or defend such action or proceeding.  Subject to the foregoing, the
Issuer shall  cooperate and join with Borrower,  at the expense of Borrower,  as
may be required in connection with any action or defense by Borrower.

         Section 4.07.  Covenants of IssuerCovenants of Issuer.

         Issuer covenants for the benefit of Lender, as follows:

         (a) Issuer will not pledge,  mortgage or assign this Agreement  (except
for the pledge,  mortgage or assignment of rights or privileges  not assigned to
Lender)  or its  duties  and  obligations  hereunder  to  any  person,  firm  or
corporation, except as provided under the terms hereof.

         (b) Issuer will submit or cause to be submitted to the Secretary of the
Treasury a Form 8038 (or other information  reporting statement) at the time and
in the form required by the Code.

                                    ARTICLE V

              REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER

         Borrower  represents,  warrants and covenants for the benefit of Lender
and Issuer, as follows:

         (a) Borrower is a corporation  duly organized,  validly existing and in
good standing under the laws of Delaware, has power to enter into this Agreement
and by proper  action has duly  authorized  the  execution  and delivery of this
Agreement,  the Escrow  Agreement  and the  Statement  as to Tax Exempt  Status.
Borrower  is in good  standing  and is duly  licensed or  qualified  to transact
business  in the  State and in all  jurisdictions  where  the  character  of the
property  owned or leased or the nature of the business  transacted  by it makes
such licensing or qualification necessary.

         (b)  Borrower  has been fully  authorized  to execute and deliver  this
Agreement,  the Escrow Agreement and the Statement as to Tax Exempt Status under
the  terms  and  provisions  of the  resolution  of its  board of  directors  by
appropriate  official approval,  and further represents,  covenants and warrants
that all  requirements  have been met, and procedures  have occurred in order to
ensure  the  enforceability  of this  Agreement,  the Escrow  Agreement  and the
Statement as to Tax Exempt Status and this Agreement,  the Escrow  Agreement and
the  Statement as to Tax Exempt Status have been duly  authorized,  executed and
delivered.

         (c) The  officer  of  Borrower  executing  this  Agreement,  the Escrow
Agreement and the  Statement as to Tax Exempt  Status and any related  documents
has been duly  authorized  to execute and  deliver  this  Agreement,  the Escrow
Agreement and the  Statement as to Tax Exempt Status and such related  documents
under the terms and provisions of a resolution of Borrower's board of directors.

         (d) This  Agreement,  the Escrow  Agreement and the Statement as to Tax
Exempt Status  constitute  valid and legally  binding  obligations  of Borrower,
enforceable  against Borrower in accordance with their respective terms,  except
to the extent  limited by  bankruptcy,  reorganization  or other laws of general
application relating to effecting the enforcement of creditors' rights.

         (e) The execution and delivery of this Agreement,  the Escrow Agreement
and the Statement as to Tax Exempt Status,  the consummation of the transactions
contemplated  hereby and the  fulfillment of the terms and conditions  hereof do
not and will not violate any law,  rule,  regulation or order,  conflict with or
result  in a  breach  of  any of  the  terms  or  conditions  of  any  corporate
restriction  or of any agreement or instrument to which  Borrower is now a party
and do not and will not  constitute  a  default  under any of the  foregoing  or
result in the creation or imposition of any liens,  charges or  encumbrances  of
any nature upon any of the property or assets of Borrower  contrary to the terms
of any instrument or agreement.

         (f) The  authorization,  execution,  delivery and  performance  of this
Agreement  or the Escrow  Agreement  by Borrower do not require  submission  to,
approval of, or other  action by any  governmental  authority  or agency,  which
action with respect to this Agreement or the Escrow Agreement has not been taken
and which is final and non-appealable.

         (g)  There  is  no  action,   suit,   proceeding,   claim,  inquiry  or
investigation,  at law or in equity, before or by any court,  regulatory agency,
public board or body pending or, to the best of Borrower's knowledge, threatened
against or affecting Borrower,  challenging  Borrower's  authority to enter into
this  Agreement or the Escrow  Agreement or to execute and deliver the Statement
as to Tax Exempt  Status or any other action  wherein an  unfavorable  ruling or
finding would adversely affect the enforceability of this Agreement,  the Escrow
Agreement  or the  Statement  as to Tax Exempt  Status or the  exclusion  of the
Interest  from gross  income for federal tax purposes  under the Code,  or would
materially and adversely  affect any of the  transactions  contemplated  by this
Agreement.

         (h) The Project is located in an area properly  zoned for the Project's
current  and  anticipated  use and the Project  will not violate any  applicable
zoning, land use, environmental or similar law or restriction.  The Borrower has
all  licenses  and permits for the  operation  of the  Project  except  building
permits, which the Borrower expects to obtain in the ordinary course.

          (i) The Project is of the type authorized and permitted to be financed
under the Act.

         (j)  Borrower  owns or will own the  Project and intends to operate the
Project or cause the Project to be operated,  as a "project," within the meaning
of the Act,  until the date on which all of the Loan  Payments  have been  fully
paid or the applicable Prepayment Amount has been fully paid.

         (k) Borrower  will not take any action that would cause the Interest to
become  includable  in gross  income of the  recipient  for  federal  income tax
purposes  under the Code,  and Borrower  will take and will cause its  officers,
employees and agents to take all  affirmative  actions  legally within its power
necessary to ensure that the Interest does not become includable in gross income
of the  recipient  for federal  income tax purposes  under the Code  (including,
without  limitation,  the  calculation  and  payment of any rebate  required  to
preserve such exclusion).

         (l) The  Borrower  has  heretofore  furnished  to  Lender  the  audited
financial statement of the Borrower for its fiscal year ended September 30, 1995
and the unaudited  financial statement of the Borrower for the fiscal year ended
September 30, 1996, and those statements fairly present the financial  condition
of the Borrower on the dates thereof and the results of its  operations and cash
flows for the periods then ended and were prepared in accordance  with generally
accepted  accounting  principles.  Since the date of the most  recent  financial
statements,  there  has  been  no  material  adverse  change  in  the  business,
properties or condition (financial or otherwise) of the Borrower.

         (m)  Borrower  has paid or caused to be paid to the proper  authorities
when due all  federal,  state and local  taxes  required  to be  withheld by it.
Borrower has filed all federal,  state and local tax returns  which are required
to be filed, and Borrower has paid or caused to be paid to the respective taxing
authorities all taxes as shown on said returns or on any assessment  received by
it to the extent such taxes have become due.

         (n) Borrower  has or will have good and absolute  title to the Project,
free and clear of all  mortgages,  security  interests,  liens and  encumbrances
except for the security  interest  created for the benefit of the Bank  securing
the Letter of Credit.

         (o) All  financial  and other  information  provided to Lender by or on
behalf  of  Borrower  in  connection  with  Borrower's   request  for  the  Loan
contemplated  hereby is true and  correct in all  material  respects  and, as to
projections,  valuations or pro forma financial statements, present a good faith
opinion as to such projections, valuations and pro forma condition and results.

         (p) Borrower will aid and assist Issuer in  connection  with  preparing
and submitting to the Secretary of the Treasury a Form 8038 (or other applicable
information  reporting  statement)  at the time and in the form  required by the
Code.

         (q) The  representations  contained  in the  Statement as to Tax Exempt
Status are true and correct as of the date hereof. Borrower will comply fully at
all times with the Statement as to Tax Exempt Status, and Borrower will not take
any  action,  or  omit  to  take  any  action,   which,  if  taken  or  omitted,
respectively, would violate the Statement as to Tax Exempt Status.

         (r)  Expenses  for work done by  officers or  employees  of Borrower in
connection  with the Project will be included as a Project Cost, if at all, only
to the extent (i) such persons were  specifically  employed for such  particular
purpose,  (ii) the expenses do not exceed the actual cost thereof and (iii) such
expenses are treated or capable of being treated  (whether or not so treated) on
the books of Borrower as a capital  expenditure  in  conformity  with  generally
accepted accounting principles applied on a consistent basis.

         (s) Any costs  incurred  with  respect to that part of the Project paid
from the Loan Proceeds shall be treated or capable of being treated on the books
of  Borrower as capital  expenditures  in  conformity  with  generally  accepted
accounting principles applied on a consistent basis.

         (t) No part of the Loan Proceeds  will be used to finance  inventory or
rolling  stock or will be used for working  capital or to finance any other cost
not constituting a Project Cost.

         (u) No person other than  Borrower is in occupancy or possession of any
portion of the Project,  except as  described in the  Statement as to Tax Exempt
Status.

         (v) The  Project is land or property  of the  character  subject to the
allowance for depreciation under Section 167 of the Code.

                                                     ARTICLE VI

                                                  LETTER OF CREDIT

         Borrower  hereby  agrees to deliver or cause to be  delivered to Lender
the  Letter  of  Credit  as  additional  security  for the  prompt  payment  and
performance  of all of Borrower's  obligations  under this  Agreement.  Borrower
hereby  further agrees to deliver to Lender not later than sixty (60) days prior
to any  scheduled  expiration  date of the  Letter of  Credit or any  Substitute
Letter of Credit (a) evidence  satisfactory to Lender that such Letter of Credit
or Substitute Letter of Credit has been renewed on terms acceptable to Lender or
(b) a Substitute Letter of Credit. If at any time (x) the rating of Bank by LACE
Financial  Corporation  is below "B-" or (y) the rating of a Substitute  Bank is
below the rating B. Borrower shall within 30 days provide to Lender a Substitute
Letter of  Credit.  A  failure  by  Borrower  to fully and  timely  perform  any
obligation  under this Article VI or the failure of Bank or any Substitute  Bank
to fully and timely honor any draft under the Letter of Credit or any Substitute
Letter of Credit,  as the case may be, shall  constitute  an immediate  Event of
Default hereunder.


                                                     ARTICLE VII

                                          AFFIRMATIVE COVENANTS OF BORROWER

         So long as the Loan shall remain unpaid,  Borrower will comply with the
following requirements, unless Lender shall otherwise consent in writing:

         Section 7.01. Reporting  RequirementsReporting  Requirements.  Borrower
will deliver, or cause to be delivered,  to Lender each of the following,  which
shall be in form and detail reasonably acceptable to Lender:

         (a) as soon as  available,  and in any event  within 120 days after the
end of each fiscal year of the  Borrower,  audited  financial  statements of the
Borrower  with  the  unqualified   opinion  of  independent   certified   public
accountants  selected by the  Borrower  and  acceptable  to Lender  which annual
financial  statements  shall include the balance sheet of the Borrower as at the
end of such fiscal year and the related statements of income,  retained earnings
and cash flows of the Borrower for the fiscal year then ended, all in reasonable
detail and prepared in accordance with generally accepted accounting  principles
applied  on a basis  consistent  with the  accounting  practices  applied in the
financial  statements  referred  to  in  Article  V  hereof,   together  with  a
certificate  of the chief  financial  officer of the Borrower  stating that such
financial  statements have been prepared in accordance  with generally  accepted
accounting  principles  applied  on  a  basis  consistent  with  the  accounting
practices reflected in the annual financial  statements referred to in Article V
hereof and that to the best of such officer's knowledge,  there has not occurred
any  Default  or Event of  Default  hereunder;  or if such a Default or Event of
Default  has  occurred  stating in  reasonable  detail  the facts  with  respect
thereto;

         (b) as soon as available  and in any event within 60 days after the end
of each fiscal quarter of the Borrower, an unaudited/internal  balance sheet and
statements of income and retained  earnings of the Borrower as at the end of and
for such  quarter  and for the year to date period  then  ended,  in  reasonable
detail and stating in comparative  form the figures for the  corresponding  date
and periods in the previous  year,  all prepared in  accordance  with  generally
accepted accounting principles applied on a basis consistent with the accounting
practices reflected in the financial  statements referred to in Article V hereof
and  certified  by the chief  financial  officer  of the  Borrower,  subject  to
year-end  adjustments;  and accompanied by a certificate of that officer stating
(i) that  such  financial  statements  have been  prepared  in  accordance  with
generally accepted accounting  principles applied on a basis consistent with the
accounting  practices  reflected  in the  financial  statements  referred  to in
Article V hereof, and (ii) to the best of such officer's knowledge no Default or
Event of Default hereunder not theretofore  reported and remedied and, if such a
Default or Event of Default has occurred so,  stating in  reasonable  detail the
facts with respect thereto;

         (c) immediately  after the commencement  thereof,  notice in writing of
all  material  litigation  and of all  proceedings  before any  governmental  or
regulatory  agency affecting  Borrower of the type described in Article V hereof
or which seek a monetary recovery against Borrower in excess of $100,000;

         (d) as  promptly as  practicable  (but in any event not later than five
(5)  Business  Days)  after an  officer of  Borrower  obtains  knowledge  of the
occurrence  of any  event  that  constitutes  a Default  or an Event of  Default
hereunder,  notice of such occurrence,  together with a detailed  statement by a
responsible officer of Borrower of the steps being taken by Borrower to cure the
effect of such Default or Event of Default;

          (e) promptly upon knowledge thereof, notice of any loss or destruction
of or damage to the Project or of any material adverse change in the Project;

          (f)  promptly  after  the  amending  thereof,  copies  of any  and all
material   amendments  to  its   certificate  of   incorporation,   articles  of
incorporation or bylaws;

          (g) promptly upon knowledge thereof,  notice of any material violation
by Borrower of any law, rule or regulation; and

         (h) promptly upon  knowledge  thereof,  notice of any material  adverse
change in the financial or operating condition of Borrower.

         Section 7.02. Books and Records;  Inspection and  Examination.Books and
Records; Inspection and Examination. Borrower will keep accurate books of record
and account for itself  pertaining  to the Project and  pertaining to Borrower's
business and financial  condition and such other matters as Lender may from time
to time  request in which true and complete  entries will be made in  accordance
with generally accepted  accounting  principles  consistently  applied and, upon
request of Lender, will permit any officer, employee, attorney or accountant for
Lender to audit,  review,  make extracts from, or copy any and all corporate and
financial  books,  records and properties of Borrower at all times (but not more
often than twice per calendar year) during ordinary business hours and following
reasonable  notice to Borrower,  and to discuss the affairs of Borrower with any
of its directors, officers, employees or agents. Borrower will permit Lender, or
its employees, accountants,  attorneys or agents, to examine and copy any or all
of its  records  and to examine  and  inspect  the  Project  at any time  during
Borrower's business hours, following reasonable notice to Borrower.

         Section 7.03. Compliance With Laws;  Environmental  IndemnityCompliance
With  Laws;  Environmental   Indemnity.   Borrower  will  (a)  comply  with  the
requirements of applicable laws and regulations,  the non-compliance  with which
would materially and adversely  affect its business or its financial  condition,
(b) comply with all  applicable  environmental,  hazardous  waste or  substance,
toxic  substance and  underground  storage laws and  regulations  and obtain any
permits, licenses or similar approvals required by any such laws or regulations,
the  failure  to comply  with which or to obtain  would have a material  adverse
effect on the Borrower  and (c) use and keep the Project,  and will require that
others use and keep the Project, only for lawful purposes,  without violation of
any federal,  state or local law,  statute or ordinance  the  violation of which
would have a material  adverse  effect on  Borrower.  Borrower  shall secure all
permits and licenses, if any, necessary for the acquisition and operation of the
Project.  Borrower shall comply in all respects (including,  without limitation,
with respect to the use, maintenance and operation of the Project) with all laws
of the  jurisdictions  in which its operations  involving the Project may extend
and of any legislative,  executive,  administrative  or judicial body exercising
any power or jurisdiction  over the Project or its interest or rights under this
Agreement the failure to comply with which would have a material  adverse effect
on the  Borrower.  Borrower  will  indemnify,  defend and hold Lender and Issuer
harmless  from and against any claims,  loss or damage to which Lender or Issuer
may be  subjected  as a result of any past,  present or future  existence,  use,
handling,  storage,  transportation  or  disposal  of  any  hazardous  waste  or
substance or toxic substance by Borrower or on the Project. This indemnification
shall survive the termination of this Agreement and payment of the  indebtedness
hereunder.

         Section  7.04.  Payment of Taxes and Other  ClaimsPayment  of Taxes and
Other  Claims.  Borrower  will  pay or  discharge,  when  due,  (a)  all  taxes,
assessments  and  governmental  charges  levied or  imposed  upon it or upon its
income or profits,  upon any  properties  belonging  to it  (including,  without
limitation,  the  Project)  or upon  or  against  the  creation,  perfection  or
continuance of the security  interest created pursuant to this Agreement,  prior
to the date on which penalties attach thereto, (b) all federal,  state and local
taxes  required  to be  withheld  by it,  and (c) all  lawful  claims for labor,
materials and supplies  which,  if unpaid,  might by law become a lien or charge
upon any properties of Borrower;  provided,  that Borrower shall not be required
to pay any such tax, assessment,  charge or claim whose amount, applicability or
validity is being contested in good faith by appropriate  proceedings.  Borrower
will pay, as the same respectively come due, all taxes and governmental  charges
of any kind  whatsoever  that may at any time be  lawfully  assessed  or  levied
against or with  respect to the  equipment,  as well as all gas,  water,  steam,
electricity,  heat, power, telephone,  utility and other charges incurred in the
operation, maintenance, use, occupancy and upkeep of the Project; provided, that
Borrower  shall not be required to pay any such tax,  assessment or charge whose
amount,   applicability  or  validity  is  being  contested  in  good  faith  by
appropriate proceedings.

         Section  7.05.   Maintenance  of  ProjectMaintenance  of  Project.  (a)
Borrower shall, at its own expense,  maintain,  preserve and keep the Project in
good repair,  working order and condition,  and shall from time to time make all
repairs and replacements necessary to keep the Project in such condition, and in
compliance with state and federal laws, ordinary wear and tear excepted. Neither
Lender nor Issuer shall have any responsibility in any of these matters,  or for
the making of improvements or additions to the Project.

         (b) Borrower  will defend the Project  against all claims or demands of
all persons (other than the Bank) claiming the Project or any interest therein.

         (c)  Borrower  will keep the  Project  free and  clear of all  security
interests,  liens and encumbrances  except the security interest created for the
benefit of the Bank.

         Section  7.06.  InsuranceInsurance.  (a)  Borrower  shall,  at its  own
expense,  procure and  maintain  continuously  in effect:  (i) public  liability
insurance for personal injuries,  death or damage to or loss of property arising
out of or in any way relating to the Project,  with a coverage limit of not less
than $1,000,000 per occurrence and (ii) insurance against such hazards as Lender
may reasonably  require,  including,  but not limited to, all-risk  casualty and
property  insurance,  in an amount equal to the greater of the full  replacement
cost of the Project or the applicable Prepayment Amount.

         (b)  If  required  by  State  law,   Borrower   shall  carry   workers'
compensation insurance covering all employees on, in, near or about the Project,
and upon request, shall furnish to Lender certificates evidencing such coverage.

         (c) All insurance  policies required by this Article shall be taken out
and maintained with responsible and reputable insurance companies  authorized to
transact  business in the State,  and shall contain a provision that the insurer
shall not cancel or revise coverage  thereunder without giving written notice to
the  insured  parties  at least  thirty  (30) days  before the  cancellation  or
revision  becomes  effective.  No insurance shall be subject to any co-insurance
clause. At the time of execution and delivery of this Agreement,  Borrower shall
provide Lender with evidence satisfactory to Lender of such insurance and, prior
to the  expiration  thereof,  shall provide  Lender  evidence of all renewals or
replacements thereof.

         (d) As among Lender,  Borrower and Issuer,  Borrower  assumes all risks
and liabilities from any cause whatsoever,  whether or not covered by insurance,
for loss or damage to the  Project  and for  injury to or death of any person or
damage to any  property,  whether such injury or death be with respect to agents
or employees of Borrower or of third parties,  and whether such property  damage
be to Borrower's  property or the property of others.  Whether or not covered by
insurance,  Borrower hereby assumes  responsibility  for and agrees to reimburse
Lender  and  Issuer for and will  indemnify,  defend and hold  Lender and Issuer
harmless  from  and  against  all  liabilities,  obligations,  losses,  damages,
penalties,  claims, actions, costs and expenses (including reasonable attorneys'
fees) of whatsoever  kind and nature unless  directly  related to lender's gross
negligence or willful  misconduct,  imposed on, incurred by or asserted  against
Lender or Issuer that in any way relate to or arise out of this  Agreement,  the
transactions contemplated hereby and the Project,  including but not limited to,
(i)  the  acquisition,  operation  and  maintenance  of the  Project,  (ii)  the
condition  of the Project  sold or  otherwise  disposed of after  possession  by
Borrower,  (iii) any  patent or  copyright  infringement,  (iv) the  conduct  of
Borrower, its officers, employees and agents, (v) a breach of Borrower of any of
its  covenants  or  obligations  hereunder,  and (vi) any claim,  loss,  cost or
expense  involving  alleged damage to the  environment  relating to the Project,
including,  but not limited to,  investigation,  removal,  cleanup and  remedial
costs.  All amounts payable by Borrower  pursuant to the  immediately  preceding
sentence shall be paid immediately upon demand of Issuer or Lender,  as the case
may be. This provision shall survive the termination of this Agreement.

         Section  7.07.  Preservation  of  Corporate   ExistencePreservation  of
Corporate Existence. Borrower will preserve and maintain its corporate existence
and all of its rights,  privileges and franchises  necessary or desirable in the
normal  conduct of its  business;  and shall conduct its business in an orderly,
efficient and regular manner.

         Section 7.08.  Performance by  LenderPerformance by Lender. If Borrower
at any time  fails to  perform or observe  any of the  covenants  or  agreements
contained in this Agreement,  and if such failure shall continue for a period of
ten (10) calendar days after Lender gives Borrower written notice thereof (or in
the  case  of the  agreements  contained  in  Sections  7.05  and  7.06  hereof,
immediately  upon the  occurrence  of such failure,  without  notice or lapse of
time),  Lender may, but need not perform or observe such  covenant on behalf and
in the name,  place and stead of Borrower (or, at Lender's  option,  in Lender's
name) and may,  but need not,  upon notice to  Borrower,  take any and all other
actions  which  Lender may  reasonably  deem  necessary  to cure or correct such
failure (including,  without limitation,  the payment of taxes, the satisfaction
of security  interests,  liens or  encumbrances,  the performance of obligations
owed to account  debtors or other  obligors,  the procurement and maintenance of
insurance,  the  execution of  assignments,  security  agreements  and financing
statements,  and the endorsement of  instruments);  and Borrower shall thereupon
pay to Lender on demand  the  amount of all  monies  expended  and all costs and
expenses (including  reasonable  attorneys' fees and legal expenses) incurred by
Lender in  connection  with or as a result of the  performance  or observance of
such  agreements or the taking of such action by Lender,  together with interest
thereon from the date expended or incurred at the lesser of 12% per annum or the
highest rate  permitted by law. To facilitate  the  performance or observance by
Lender of such  covenants  of Borrower,  Borrower  hereby  irrevocably  appoints
Lender,  or the  delegate of Lender,  acting  alone,  as the attorney in fact of
Borrower with the right (but not the duty) from time to time to create, prepare,
complete,  execute,  deliver,  endorse  or file in the  name  and on  behalf  of
Borrower any and all instruments,  documents,  assignments, security agreements,
financing  statements,  applications  for  insurance  and other  agreements  and
writings  required to be obtained,  executed,  delivered or endorsed by Borrower
under this Agreement.

                                                    ARTICLE VIII

                                           NEGATIVE COVENANTS OF BORROWER

         So long as the Loan shall remain unpaid, Borrower agrees that:

         Section 8.01.  LienLien.  The Borrower will not create, incur or suffer
to  exist  any  mortgage,  deed  of  trust,  pledge,  lien,  security  interest,
assignment or transfer upon or of the Project,  except for the security interest
created for the benefit of the Bank securing the Letter of Credit.

         Section 8.02. Sale of AssetsSale of Assets. The Borrower will not sell,
lease, assign,  transfer or otherwise dispose of all or substantially all of its
assets or the Project or any interest in the Project (whether in one transaction
or in a series of transactions).

         Section 8.03.  Consolidation and  MergerConsolidation  and Merger.  The
Borrower will not (a) consolidate  with or merge into any person,  or permit any
other  person to merge into it,  unless (i) the  surviving  entity  assumes  all
obligations of the Borrower hereunder, (ii) no Event of Default has occurred and
is  continuing,  and (iii) the  Lender  receives  an  opinion  of counsel to the
Borrower and an opinion of bond counsel reasonably  acceptable to it relating to
such  transaction,  or (b) acquire  (in a  transaction  analogous  in purpose or
effect to a consolidation or merger) all or substantially  all the assets of any
other person unless (i) no Event of Default has occurred and is continuing,  and
(ii) the Borrower certifies that such acquisition will not result in an Event of
Taxability.

         Section 8.04. AccountingAccounting. The Borrower will not adopt, permit
or  consent  to any  material  change in  accounting  principles  other  than as
required by generally  accepted  accounting  principles.  The Borrower  will not
adopt,  permit or consent to any change in its fiscal  year,  without  the prior
written consent of Lender,  which consent shall be given or withheld in Lender's
reasonable discretion.

         Section 8.05. TransfersTransfers. Subject to Section 8.02, the Borrower
will not in any manner transfer, sell or otherwise dispose (a "Transfer") of any
property  without prior or present  receipt of full and adequate  consideration,
and except for (i) Transfers of property which is, or within the next two fiscal
years  from  the  date  of such  Transfer  is  reasonably  expected  to  become,
inadequate,  obsolete or worn out,  (ii)  Transfers of inventory in the ordinary
course of  business,  (iii)  Transfers  of  non-exclusive  licenses  and similar
arrangements  for the use of property of Borrower made in the ordinary course of
business,  (iv) Transfers which constitute  liquidation of investments,  and (v)
other  Transfers not  otherwise  permitted by this Section 8.05 not exceeding in
the aggregate $500,000 in any fiscal year.

         Section 8.06. Use of the  ProjectUse of the Project.  The Borrower will
not construct,  reconstruct,  improve,  use,  operate or maintain the Project in
violation of any applicable law or in a manner contrary to that  contemplated by
this Agreement.

                                                     ARTICLE IX

                                                     [Reserved]

                                                      ARTICLE X

                                               ASSIGNMENT AND SELLING

         Section  10.01.   Assignment  by   LenderAssignment   by  Lender.  This
Agreement,  and the obligations of Borrower to make payments  hereunder,  may be
assigned and  reassigned in whole to one or more  assignees or  subassignees  by
Lender  at any time  subsequent  to its  execution,  without  the  necessity  of
obtaining  the consent of Issuer or Borrower,  provided,  however,  that no such
assignment or  reassignment  shall be effective  unless and until (a) Issuer and
Borrower shall have received notice of the assignment or reassignment disclosing
the name and address of the assignee or  subassignee,  and (b) in the event that
such  assignment or  reassignment  is made to a bank or trust company as trustee
for holders of certificates  representing interests in this Agreement, such bank
or trust company  agrees to maintain,  or cause to be  maintained,  a book-entry
system by which a record of the names and  addresses  of such  holders as of any
particular  time is kept and  agrees,  upon  request of Issuer or  Borrower,  to
furnish  such  information  to Issuer or  Borrower.  Upon  receipt  of notice of
assignment,  Borrower  will reflect in a book-entry  the assignee  designated in
such notice of assignment,  and shall agree to make all payments to the assignee
designated  in the notice of  assignment,  notwithstanding  any claim,  defense,
setoff  or  counterclaim  whatsoever  (whether  arising  from a  breach  of this
Agreement  or  otherwise)  that Issuer and  Borrower  may from time to time have
against  Lender or the  assignee.  Issuer  and  Borrower  agree to  execute  all
documents,  including  notices of assignment and chattel  mortgages or financing
statements,  which may be  reasonably  requested  by Lender or its  assignee  to
protect their interest in the Project and in this Agreement. Notwithstanding the
foregoing,  Lender shall not assign this  Agreement,  or any  obligation to make
payments hereunder, to a competitor of the Borrower listed in Schedule 2 hereto,
as revised by  Borrower  from time to time not more often than once every  three
(3) months.

         Section 10.02.  No Sale or Assignment by BorrowerNo  Sale or Assignment
by Borrower.  This Agreement and the interest of Borrower in the Project may not
be sold,  assumed,  assigned or encumbered by Borrower without the prior written
consent of Lender.

                                                     ARTICLE XI

                                           EVENTS OF DEFAULT AND REMEDIES

         Section  11.01.  Events of  DefaultEvents  of  Default.  The  following
constitute "Events of Default" under this Agreement:

         (a) failure by Borrower to pay to Lender,  as assignee of Issuer,  when
due any Loan Payment or to pay any other payment  required to be paid  hereunder
and the continuation of such failure for a period of ten (10) days;

          (b)  failure by  Borrower  to  maintain  insurance  on the  Project in
accordance with Section 7.06 hereof;

         (c)  failure by  Borrower  or Issuer to observe  and  perform any other
covenant, condition or agreement of Borrower or Issuer, respectively,  contained
herein  (except as set forth in Article  VI),  in the Escrow  Agreement,  in the
Statement as to Tax Exempt Status or in any other document or agreement executed
in  connection  herewith on its part to be observed or performed for a period of
thirty (30) days after  written  notice is given to  Borrower or Issuer,  as the
case  may be,  specifying  such  failure  and  requesting  that it be  remedied;
provided,  however,  that,  if the  failure  stated  in such  notice  cannot  be
corrected within such 30 day period,  Lender will not unreasonably  withhold its
consent to an  extension  of such time if  corrective  action is  instituted  by
Borrower within the applicable  period and diligently  pursued until the default
is corrected;

         (d)  Initiation  by Issuer of a  proceeding  under any federal or state
bankruptcy  or  insolvency  law seeking  relief under such laws  concerning  the
indebtedness of Issuer;

         (e)  Borrower,  Bank,  or  any  Substitute  Bank  shall  be  or  become
insolvent,  or admit in writing its or his  inability to pay its or his debts as
they mature,  or make an assignment  for the benefit of creditors;  or Borrower,
Bank, or any  Substitute  Bank shall apply for or consent to the  appointment of
any  receiver,  trustee  or  similar  officer  for it or  him or for  all or any
substantial  part of its or his property;  or such receiver,  trustee or similar
officer shall be appointed without the application or consent of Borrower, Bank,
or any Substitute Bank, as the case may be; or Borrower, Bank, or any Substitute
Bank shall institute (by petition,  application,  answer,  consent or otherwise)
any bankruptcy, insolvency,  reorganization,  arrangement, readjustment of debt,
dissolution,  liquidation or similar proceeding relating to it under the laws of
any  jurisdiction;  or any such  proceeding  shall be  instituted  (by petition,
application or otherwise) against Borrower, Bank, or any Substitute Bank; or any
judgment,  writ,  warrant of attachment or execution or similar process shall be
issued or levied against a substantial  part of the property of Borrower,  Bank,
or any Substitute Bank;

         (f) determination by Lender that any representation or warranty made by
Borrower or Issuer  herein,  in the  Statement as to Tax Exempt Status or in any
other  document  executed  in  connection  herewith  was untrue in any  material
respect when made;

         (g) the  occurrence  of a  default  or an event of  default  under  any
instrument,   agreement  or  other  document   evidencing  or  relating  to  any
indebtedness or other monetary  obligation of Borrower (whether  individually or
in the  aggregate)  in an  amount  greater  than  $300,000,  so that a holder or
trustee of such indebtedness accelerates such indebtedness;

         (h) a  default  or an  event  of  default  and  the  expiration  of any
applicable grace or cure period and the receipt of any required notice under any
other agreement between Lender and Borrower unless waived by Lender;

         (i)  failure  by  Borrower  to  fully  and  timely  perform  any of its
obligations  under  Article VI of this  Agreement  or the failure of Bank or any
Substitute  Bank to fully and timely  honor any draft under the Letter of Credit
or any Substitute Letter of Credit, as the case may be;

          (j) this Agreement, or any portion hereof, is determined by a court of
competent jurisdiction to be invalid or unenforceable against the Issuer; or

         (k)  an Event of Taxability shall occur.

         Section 11.02.  Remedies on  DefaultRemedies  on Default.  Whenever any
Event of Default  shall have occurred and be  continuing,  Lender shall have the
right, at its sole option without any further demand or notice,  to take any one
or any  combination  of the  following  remedial  steps  insofar as the same are
available to secured  parties  under Article 9 of the UCC in effect in the State
from time to time and which are otherwise accorded to Lender by applicable law:

         (a) by notice to Borrower,  declare the entire unpaid  principal amount
of the Loan then  outstanding,  all interest  accrued and unpaid thereon and all
amounts payable under this Agreement to be forthwith due and payable,  whereupon
the Loan,  all such accrued  interest  and all such amounts  shall become and be
forthwith due and payable, without presentment,  notice of dishonor,  protest or
further  notice  of any  kind,  all of which  are  hereby  expressly  waived  by
Borrower;

         (b)  without  notice to  Borrower,  draw  upon the  Letter of Credit or
Substitute  Letter of Credit in an amount equal to all amounts due hereunder and
under the Schedule, including the Prepayment Amount.

         (c) proceed by appropriate court action to enforce specific performance
by Borrower of the applicable  covenants of this Agreement or to recover for the
breach thereof, including the payment of all amounts due from Borrower. Borrower
shall pay or repay to Lender or Issuer all costs of such action or court action,
including, without limitation, reasonable attorneys' fees; and

         (d) take  whatever  action at law or in equity may appear  necessary or
desirable to enforce its rights with respect to the Project.  Borrower shall pay
or  repay  to  Lender  or  Issuer  all  costs of such  action  or court  action,
including, without limitation, reasonable attorneys' fees.

         Notwithstanding  any other remedy exercised  hereunder,  Borrower shall
remain obligated to pay to Lender any unpaid portion of the Prepayment Amount.

         Section 11.03.  [Reserved].

         Section 11.04. No Remedy ExclusiveNo Remedy Exclusive. No remedy herein
conferred  upon or reserved to Lender or Issuer is intended to be exclusive  and
every such remedy  shall be  cumulative  and shall be in addition to every other
remedy  given under this  Agreement  or now or  hereafter  existing at law or in
equity.  No delay or omission to exercise any right or power  accruing  upon any
Event of Default  shall  impair any such right or power or shall be construed to
be a waiver  thereof,  but any such right or power may be exercised from time to
time and as often as may be  deemed  expedient.  In order to  entitle  Lender or
Issuer to exercise any remedy  reserved to it in this  Article,  it shall not be
necessary  to give any notice  other than such notice as may be required by this
Article.  All  remedies  herein  conferred  upon or reserved to Lender or Issuer
shall survive the termination of this Agreement.

         Section 11.05.  Late  ChargeLate  Charge.  Any Loan Payment not paid by
Borrower  within ten (10) days of on the due date thereof  shall,  to the extent
permissible  by law, bear a late charge equal to the lesser of five cents ($.05)
per dollar of the delinquent amount or the lawful maximum, and Borrower shall be
obligated to pay the same  immediately  upon receipt of Lender's written invoice
therefor.

                                                     ARTICLE XII

                                                    MISCELLANEOUS

         Section  12.01.  Costs and  Expenses  of  LenderCosts  and  Expenses of
Lender.  Borrower shall pay to Lender,  in addition to the Loan Payments payable
by Borrower hereunder,  such amounts in each year as shall be required by Lender
in payment of any reasonable costs and expenses incurred by Lender in connection
with the execution,  performance or enforcement of this Agreement, including but
not  limited to payment  of all  reasonable  fees,  costs and  expenses  and all
administrative  costs of Lender or Issuer in connection with the Project and the
Loan   (including,   without   limitation,   reasonable   attorneys'   fees  and
disbursements),  fees of auditors or attorneys, insurance premiums not otherwise
paid hereunder and all other direct and necessary administrative costs of Lender
or charges required to be paid by it in order to comply with the terms of, or to
enforce  its  rights  under,   this   Agreement   (but  not  including   general
administrative or overhead expenses of Lender). Such costs and expenses shall be
billed to  Borrower  by  Lender  from time to time,  together  with a  statement
certifying  that the amount so billed has been paid by Lender for one or more of
the items above  described,  or that such  amount is then  payable by Lender for
such items. Amounts so billed shall be due and payable by Borrower within thirty
(30) days after receipt of the bill by Borrower.

         Section 12.02. Disclaimer of WarrantiesDisclaimer of Warranties. LENDER
AND ISSUER MAKE NO WARRANTY OR REPRESENTATION,  EITHER EXPRESS OR IMPLIED, AS TO
THE  VALUE,  DESIGN,  CONDITION,  MERCHANTABILITY  OR FITNESS  FOR A  PARTICULAR
PURPOSE  OR  FITNESS  FOR  USE  OF  THE  PROJECT,   OR  ANY  OTHER  WARRANTY  OR
REPRESENTATION,  EXPRESS OR  IMPLIED,  WITH  RESPECT  HERETO.  In no event shall
Lender or Issuer be liable for any loss or damage in connection  with or arising
out of this Agreement, the Project or the existence, furnishing,  functioning or
Borrower's use of the Project provided for in this Agreement.

         Section 12.03.  NoticesNotices.  All notices,  certificates,  requests,
demands and other  communications  provided  for  hereunder  or under the Escrow
Agreement or the Statement as to Tax Exempt Status shall be in writing and shall
be (a)  personally  delivered,  (b) sent by first class United States mail,  (c)
sent  by  overnight  courier  of  national  reputation,  or (d)  transmitted  by
telecopy,  in each case  addressed to the party to whom notice is being given at
its address as set forth above and, if telecopied,  transmitted to that party at
its  telecopier  number  set forth  above or, as to each  party,  at such  other
address or  telecopier  number as may hereafter be designated by such party in a
written  notice to the other party  complying  as to delivery  with the terms of
this Section. All such notices, requests, demands and other communications shall
be deemed to have been given on (a) the date received if  personally  delivered,
(b) when  deposited in the mail if delivered by mail,  (c) the date sent if sent
by overnight courier,  or (d) the date of transmission if delivered by telecopy.
If notice to Borrower of any intended  action is required by law in a particular
instance,  such notice shall be deemed commercially  reasonable if given (in the
manner  specified in this  Section) at least ten (10) calendar days prior to the
date of intended disposition or other action.

         Section 12.04.  Further  Assurance and  Corrective  Instruments.Further
Assurance and Corrective Instruments. Issuer and Borrower hereby agree that they
will,  from  time to time,  execute,  acknowledge  and  deliver,  or cause to be
executed,   acknowledged   and  delivered,   such  further  acts,   instruments,
conveyances,  transfers and assurances,  as Lender reasonably deems necessary or
advisable for the implementation, correction, confirmation or perfection of this
Agreement  or the  Statement  as to Tax  Exempt  Status and any rights of Lender
hereunder or thereunder.

         Section 12.05. Binding Effect; Time of the EssenceBinding  Effect; Time
of the  Essence.  This  Agreement  shall  inure to the  benefit  of and shall be
binding  upon  Lender,  Issuer,  Borrower and their  respective  successors  and
assigns. Time is of the essence.

         Section 12.06. SeverabilitySeverability.  In the event any provision of
this Agreement shall be held invalid or  unenforceable by any court of competent
jurisdiction,  such holding  shall not  invalidate or render  unenforceable  any
other provision hereof.

         Section 12.07.  AmendmentsAmendments.  To the extent  permitted by law,
the terms of this Agreement shall not be waived, altered, modified, supplemented
or amended in any manner whatsoever  except by written  instrument signed by the
parties hereto, and then such waiver,  consent,  modification or change shall be
effective only in the specific instance and for the specific purpose given.

         Section 12.08. Execution in CounterpartsExecution in Counterparts. This
Agreement  may be  executed in several  counterparts,  each of which shall be an
original and all of which shall constitute one and the same instrument,  and any
of  the  parties   hereto  may  execute  this  Agreement  by  signing  any  such
counterpart,  provided that only the original marked  "Original:  1 of 8" on the
execution page hereof shall constitute the Bond under the Act.

          Section 12.09.  Applicable  LawApplicable Law. This Agreement shall be
governed by and construed in accordance with the laws of the State.

         Section  12.10.  CaptionsCaptions.  The  captions  or  headings in this
Agreement are for convenience  only and in no way define,  limit or describe the
scope or intent of any provisions or sections of this Agreement.

         Section 12.11. Entire AgreementEntire  Agreement.  This Agreement,  the
Statement as to Tax Exempt Status,  the Escrow Agreement and the exhibits hereto
and thereto  constitute the entire agreement among Lender,  Issuer and Borrower.
There are no understandings,  agreements, representations or warranties, express
or implied,  not specified herein or in such documents  regarding this Agreement
or the Project financed hereby.

         Section 12.12. UsuryUsury. It is the intention of the parties hereto to
comply  with  any  applicable  usury  laws;  accordingly,  it  is  agreed  that,
notwithstanding  any provisions to the contrary in this  Agreement,  in no event
shall this Agreement require the payment or permit the collection of interest or
any amount in the nature of interest or fees in excess of the maximum  permitted
by applicable law.

         Section 12.13. Waiver of Jury TrialWaiver of Jury Trial. LENDER, ISSUER
AND BORROWER HEREBY WAIVE THEIR  RESPECTIVE  RIGHTS TO A JURY TRIAL OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF,  DIRECTLY OR  INDIRECTLY,  THIS
AGREEMENT,  ANY OF THE RELATED DOCUMENTS,  ANY DEALINGS AMONG LENDER,  ISSUER OR
BORROWER RELATING TO THE SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT OR ANY RELATED  TRANSACTIONS,  AND/OR THE  RELATIONSHIP  THAT IS BEING
ESTABLISHED  AMONG  LENDER,  ISSUER AND  BORROWER.  THE SCOPE OF THIS  WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY
COURT (INCLUDING,  WITHOUT LIMITATION,  CONTRACT CLAIMS, TORT CLAIMS,  BREACH OF
DUTY  CLAIMS AND ALL OTHER  COMMON LAW AND  STATUTORY  CLAIMS).  THIS  WAIVER IS
IRREVOCABLE,  MEANING THAT IT MAY NOT BE MODIFIED  EITHER  ORALLY OR IN WRITING,
AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,  RENEWALS, SUPPLEMENTS
OR  MODIFICATIONS  TO THIS  AGREEMENT,  ANY RELATED  DOCUMENTS,  OR TO ANY OTHER
DOCUMENTS  OR  AGREEMENTS  RELATING  TO THE  TRANSACTIONS  CONTEMPLATED  BY THIS
AGREEMENT  OR  ANY  RELATED  TRANSACTIONS.  IN THE  EVENT  OF  LITIGATION,  THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.


<PAGE>


         IN WITNESS WHEREOF,  the parties hereto have executed this Agreement in
their respective  corporate names by their duly authorized  officers,  all as of
the date first written above.


 ......... Lender: GE CAPITAL PUBLIC FINANCE, INC.


 ......... By:/s/  Philip Long
             ----------------             
 ......... Title:  Vice President


 ......... Issuer: BUSINESS FINANCE AUTHORITY
 ......... OF THE STATE OF NEW HAMPSHIRE


 ......... By:/s/ Edward Caron                           
             ----------------
 ......... Chairman


 ......... By:/s/  Jack Donovan
             ------------------ 
 ......... Executive Director


 ......... Borrower: ELEXSYS INTERNATIONAL, INC.

                

 ......... By:/s/  Michael S. Shimada
             ----------------------

 ......... Title:  Principal Financial Officer
                  and Duly Authorized Officer


Original:  ___ of 8.

Trade Names of Borrower, if any:

              None








<PAGE>


                                   Schedule 2

                              Prohibited Assignees


                          [to come from GE and Elexsys]


<PAGE>







                                         A-3

                                Exhibit A to Loan Agreement
                          SCHEDULE OF PROJECT AND LOAN PAYMENTS


<PAGE>





         This Schedule is delivered pursuant to the Loan Agreement,  dated as of
December 1, 1996 (the  "Agreement"),  among GE Capital Public Finance,  Inc., as
Lender ("Lender"),  Business Finance Authority of the State of New Hampshire, as
Issuer ("Issuer"),  and Elexsys  International,  Inc., as Borrower ("Borrower").
All of the provisions of the Agreement are incorporated  herein by reference and
capitalized  terms used herein shall have the  meanings  assigned to them in the
Agreement.

         NEITHER THIS SCHEDULE NOR THE AGREEMENT  CONSTITUTES AN INDEBTEDNESS OF
THE STATE OF NEW  HAMPSHIRE OR OF THE ISSUER  EXCEPT TO THE EXTENT  PERMITTED BY
NEW  HAMPSHIRE  RSA CHAPTER  162-I.  ALL AMOUNTS  OWED  HEREUNDER  AND UNDER THE
AGREEMENT ARE PAYABLE ONLY FROM THE SOURCES EXPRESSLY PROVIDED IN THE AGREEMENT,
AND NO PUBLIC FUNDS MAY BE USED FOR THAT PURPOSE.


1.        The  Project,  as  described  in  Exhibit I attached  hereto,  will be
          located at 41 Simon Street, Nashua, New Hampshire.


2.       The Loan Payment  dates,  the Loan Payment  amounts,  the principal and
         interest  components of each Loan Payment,  and the Prepayment  Amounts
         are as follows:


                                          See Exhibit II attached hereto.


3.        The  disbursement   period  applicable  to  this  Schedule  shall  end
          September 30, 1997.



<PAGE>


                                                      EXHIBIT I



         The   acquisition  of   approximately   4.591  acres  of  land  and  an
approximately  70,000 square foot building and the renovation thereof located at
41 Simon  Street,  Nashua,  New  Hampshire,  to be used by the  Borrower for the
manufacture of circuit boards and assemblies.


<PAGE>


                                                     EXHIBIT II


                                                See Attached Schedule


         The Loan will be repayable  over ten (10) years with monthly  payments.
The first  payment  will be due on  February  1,  1997,  with the 119  remaining
payments due on the first day of each month thereafter. The interest rate on the
Loan shall be 6.33%.


<PAGE>







                                       B-1

                           Exhibit B to Loan Agreement


                        FORM OF CERTIFICATE OF ACCEPTANCE


         I,  the  undersigned,  hereby  certify  that I am the  ____________  of
Elexsys International, Inc. ("Borrower") and, with respect to the Loan Agreement
dated as of December 1, 1996 (the "Agreement") by and among Borrower, GE Capital
Public Finance,  Inc.  ("Lender") and Business Finance Authority of the State of
New Hampshire ("Issuer"), that:

         1. The  portions of the Project  described  in the  attached  Exhibit A
(such   "Portions")   have  been   completed  in  accordance   with   Borrower's
specifications and have been accepted by Borrower.

         2. Borrower has obtained from a reputable  insurance  company qualified
to do business in the State (as defined in the Agreement) insurance with respect
to all risks  required to be covered  thereby  pursuant  to Section  7.06 of the
Agreement.

         3. All of the  representations  and warranties of Borrower contained in
the Agreement are true and correct as of the date hereof and no Default or Event
of Default has occurred thereunder.

         Dated: __________, 19__.


 ......... Borrower: Elexsys International, Inc.



 ......... By:______________________________
 ......... Title:____________________________
 ......... Date:____________________________



<PAGE>







                                       C-3

                           Exhibit C to Loan Agreement


                     FORM OF OPINION OF COUNSEL TO BORROWER



                           ......... December _, 1996



Business Finance Authority
   of the State of New Hampshire
14 Dixon Avenue, Suite 101
Concord, New Hampshire  03301

GE Capital Public Finance, Inc.
Suite 470
8400 Normandale Lake Blvd.
Minneapolis, MN 55437

          Re: Loan  Agreement,  dated as of  December  1, 1996,  by and among GE
          Capital Public Finance, Inc. ("Lender"), Business Finance Authority of
          the State of New Hampshire ("Issuer") and Elexsys International,  Inc.
          ("Borrower")

Ladies and Gentlemen:

         We have  acted as  counsel  to the  Borrower  with  respect to the Loan
Agreement  described above (the "Loan Agreement"),  the Escrow Agreement of even
date  therewith  (the "Escrow  Agreement")  among Lender,  Issuer,  Borrower and
National City Bank of Minneapolis,  as escrow agent, and the Statement as to Tax
Exempt Status of even date therewith (the  "Statement as to Tax Exempt  Status",
and various  related  matters and, in this  capacity,  have reviewed a duplicate
original or certified copy of each of the Agreements  (defined below).  The Loan
Agreement,  the Escrow Agreement,  and the Statement as to Tax Exempt Status may
be referred to herein collectively as the "Agreements").

         We have  examined the  Agreements  and such records,  certificates  and
other documents and have made such other  investigation as we consider necessary
to render this opinion. As to various questions of fact material to our opinion,
we have relied upon  representations  made in or pursuant to the  Agreements and
upon  certificates  of officers of Borrower.  We have assumed the genuineness of
all  signatures  (other than the  signatures  of the officers of Borrower to the
Agreements),  the authenticity of all documents submitted to us as originals and
the conformity to original documents of all documents submitted to us as copies.

         The opinions expressed herein with respect to the enforceability of the
Agreements  are subject to (i) general  principles of equity  including  without
limitation  an  implied  covenant  of good  faith  and  fair  dealing,  and (ii)
bankruptcy,  insolvency,  reorganization,  moratorium or similar laws of general
application  affecting  the rights  and  remedies  of  creditors  heretofore  or
hereafter enacted to the extent that the same may be  constitutionally  applied.
In  addition,  we express  no  opinion  with  respect  to any  provision  of the
Agreements to the extent they provide for recourse to security in the absence of
notice and hearing,  the grant of powers of attorney or indemnification  that is
against public policy.

         References  in this  opinion  to  matters  known to us mean the  actual
knowledge of the partners of this firm  responsible  for preparing  this opinion
after inquiry of appropriate officers of Borrower,  and we have not examined the
docket of any court or agency.

         This opinion is limited to the laws of the State of New  Hampshire  and
the federal laws of the United States.

         Based upon the examination of these and such other documents as we have
deemed relevant, we are of opinion that:

         1.  Borrower has been duly created and is validly  existing and in good
standing  under the laws of the State of  Delaware,  and has the full  power and
authority to own its properties and conduct the business now conducted by it.

          2. Borrower is qualified to do business and is in good standing in the
State of New Hampshire.

         3.  Borrower  has full power and  authority  to execute and deliver the
Agreements  to  which it is a party  and to carry  out the  terms  thereof.  The
Agreements  have been duly and validly  authorized,  executed  and  delivered by
Borrower, are in full force and effect and are the valid and binding obligations
of Borrower,  enforceable in accordance with their  respective  terms (including
against claims of usury).

         4. The consummation of the transactions  contemplated by the Agreements
and the  carrying  out of the terms  thereof will not result in violation of any
provisions of the articles of incorporation or bylaws of the Borrower or, to the
best of our  knowledge,  result in the  violation of any  provision  of, or in a
default under,  any indenture,  mortgage,  deed of trust, or other agreement for
the incurring of indebtedness,  or any judgment, decree, order, statute, rule or
regulation  known  to us to  which  Borrower  is a party  or by  which it or its
property is bound.

         5. To the best of our  knowledge,  there  are no legal or  governmental
actions, suits, proceedings,  inquiries or investigations pending or threatened,
to which  Borrower is or may become a party or of which any property of Borrower
is or may become subject, other than ordinary routine litigation incident to the
kind of business  conducted  by  Borrower  which,  if  determined  adversely  to
Borrower would not,  individually or in the aggregate,  have a material  adverse
effect on the financial position or results of operations of Borrower.

         6. To the best of our  knowledge,  there  are no legal or  governmental
proceedings pending or threatened,  wherein an unfavorable  decision,  ruling or
finding would adversely affect the validity of or security for the Agreements or
the transactions contemplated thereby.

                                                     Very truly yours,


<PAGE>







                                       D-3

                           Exhibit D to Loan Agreement

                         FORM OF OPINION OF BOND COUNSEL


                                December _, 1996


Business Finance Authority
   of the State of New Hampshire
14 Dixon Avenue, Suite 101
Concord, New Hampshire  03301

         We have acted as bond counsel to the Business Finance  Authority of the
State of New Hampshire (the  "Authority")  in connection  with the making by the
Authority of a loan (the  "Loan") to Elexsys  International,  Inc.  ("Borrower")
pursuant to a Loan Agreement, dated as of December 1, 1996 (the "Agreement"), by
and  among GE  Capital  Public  Finance,  Inc.  ("Lender"),  the  Authority  and
Borrower.

         We have  examined  the law and such  certified  proceedings  and  other
papers  as deemed  necessary  to  render  this  opinion,  including  the  Escrow
Agreement,  dated as of December 1, 1996 (the "Escrow Agreement"),  by and among
Lender, the Authority, Borrower and National City Bank of Minneapolis, as escrow
agent (the "Escrow Agent".) Terms used in this opinion and not otherwise defined
shall have the same meanings assigned to them in the Agreement.

         As to  questions  of fact  material  to our opinion we have relied upon
representations  and covenants of the  Authority  and Borrower  contained in the
Agreement,   the  certified  proceedings  and  other  certifications  of  public
officials  furnished  to us, and  certifications  by  officials  of Borrower and
others, without undertaking to verify the same by independent investigation.

         The  Loan is made  pursuant  to the  Agreement.  Under  the  Agreement,
Borrower has agreed to make  payments  sufficient  to pay when due the principal
(including  sinking fund  installments) of, and premium (if any) and interest on
the Loan.  Such  payments  and other moneys  payable to the  Authority or Lender
under the  Agreement,  including  proceeds  derived from any  security  provided
thereunder (collectively, the "Revenues"), and the rights of the Authority under
the Agreement to receive the same (excluding,  however,  certain  administrative
fees,  indemnification  and  reimbursements),  are pledged  and  assigned by the
Authority as security for the repayment of the Lender  pursuant to the Agreement
(the "Lender  Loan").  The Lender Loan is a limited  obligation of the Authority
payable solely from the Revenues.

         We express no opinion  with  respect to  compliance  by  Borrower  with
applicable legal requirements in connection with the acquisition,  construction,
reconstruction, use, occupancy or operation of the Project.

         Based on our examination,  we are of opinion, as of the date hereof and
under existing law, as follows:

         1. The Authority is a duly created and validly  existing body corporate
and politic as an agency of the State of New  Hampshire  with the power to enter
into and perform the Agreement and the Escrow Agreement.

         2.  Each of the  Agreement  and the  Escrow  Agreement  has  been  duly
authorized,  executed and  delivered by the Authority and is a valid and binding
obligation of the Authority  enforceable upon the Authority.  As provided in New
Hampshire RSA  162-I;7,II,  the Agreement  creates a valid lien on the rights of
the Authority to receive Revenues under the Agreement  (except certain rights to
indemnification, reimbursements and fees).

         3. Under existing law, interest on the Lender Loan is excluded from the
gross income of the owner  thereof for federal  income tax  purposes  except for
interest on the Lender Loan during any period while it is held by a "substantial
user" of the  facilities  financed  with  proceeds  of the  Lender  Loan or by a
"related  person" within the meaning of Section  147(a) of the Internal  Revenue
Code of 1986 (the "Code") and except that  Borrower or others,  by taking action
after the date  hereof  that  causes  the  $10,000,000  limitation  set forth in
Section 144(a)(10) of the Code to be exceeded,  may cause interest on the Lender
Loan to become included in gross income  (retroactive to the date hereof, in the
case of the $40,000,000  limitation) for federal income tax purposes.  It should
be noted that the interest on the Lender Loan is an item of tax  preference  for
purposes of the federal  alternative  minimum  tax  imposed on  individuals  and
corporations.  In addition to the foregoing exceptions, the opinion set forth in
the first  sentence  of this  paragraph  is  subject to the  condition  that the
Authority  and Borrower  comply with all  requirements  of the Code that must be
satisfied  subsequent  to the making of the Lender  Loan in order that  interest
thereon be, or continue to be, excluded from gross income for federal income tax
purposes.  Borrower, and to the extent necessary,  the Authority have covenanted
in the  Agreement  to comply  with such  requirements.  Failure  to comply  with
certain of such  requirements  may cause the inclusion of interest on the Lender
Loan in gross income for federal  income tax purposes to be  retroactive  to the
date of making of the Lender Loan. We express no opinion regarding other federal
tax consequences arising with respect to the Lender Loan.

          4. Under existing statutes, interest on the Lender Loan is exempt from
the New Hampshire personal income tax on interest and dividends.

         It  is  to be  understood  that  the  rights  of  the  Lender  and  the
enforceability  of the  Agreement  and  the  Escrow  Agreement  are  subject  to
bankruptcy,  insolvency,  reorganization,  moratorium  and  other  similar  laws
affecting  creditors'  rights  heretofore  or  hereafter  enacted  to the extent
constitutionally  applicable and that their  enforcement  may also be subject to
the exercise of judicial discretion in appropriate cases.

                                                              Yours faithfully,



<PAGE>







                                       F-1

                           Exhibit F to Loan Agreement


                       FORM OF OPINION OF COUNSEL TO BANK



         (a) The Bank is, and was at all relevant  times,  a duly  organized and
validly  existing  banking  corporation  in good standing  under the laws of the
United States and ___________________________________  with full legal power and
authority to execute,  deliver and to perform all of its  obligations  under the
Letter of Credit.

         (b) The  execution and delivery by the Bank of the Letter of Credit and
the performance by the Bank of its obligations  thereunder are not  inconsistent
with and do not violate the Bank's charter or by-laws.

         (c) The  Letter  of  Credit  has been  duly and  validly  executed  and
delivered by the Bank and constitutes the legal, valid and binding obligation of
the Bank enforceable against the Bank in accordance with its terms, except as to
enforcement  thereof may be limited by any bankruptcy,  insolvency,  moratorium,
reorganization  or other laws relating to or affecting the enforcement of rights
of creditors generally and equitable principles of general applicability.




<PAGE>


                                                                  EXECUTION COPY


                                ESCROW AGREEMENT

                                      Among


                         GE CAPITAL PUBLIC FINANCE, INC.
                                    as Lender

                                       and

                              SANWA BANK CALIFORNIA
                                     as Bank

                                       and

                           BUSINESS FINANCE AUTHORITY
                          OF THE STATE OF NEW HAMPSHIRE
                                    as Issuer

                                       and

                           ELEXSYS INTERNATIONAL, INC.
                                   as Borrower

                                       and

                        NATIONAL CITY BANK OF MINNEAPOLIS
                                 as Escrow Agent


                          Dated as of December 1, 1996




<PAGE>







                                                          8

                                                  ESCROW AGREEMENT

         THIS ESCROW  AGREEMENT  (REAL  ESTATE) is made and  entered  into as of
December 1, 1996,  by and among  National City Bank of  Minneapolis,  a national
banking  association  ("Escrow  Agent"),  GE Capital  Public  Finance,  Inc.,  a
corporation  duly organized and existing under the laws of the State of Delaware
("Lender"),  Sanwa Bank California  ("Bank"),  Business Finance Authority of the
State of New  Hampshire,  a body corporate and politic as an agency of the State
of New  Hampshire  ("Issuer"),  and  Elexsys  International,  Inc.,  a  Delaware
corporation ("Borrower").


                                                      ARTICLE I

                                                      RECITALS


         Section  1.01.  Lender,  Issuer and  Borrower  have entered into a Loan
Agreement  dated as of  December  1, 1996 (the "Loan  Agreement"),  a  duplicate
original of which has been  furnished to Escrow Agent and Bank,  whereby  Lender
and Issuer have agreed to finance for Borrower the acquisition and renovation of
certain   manufacturing   facilities   described  in  the  Loan  Agreement  (the
"Project"),  and  Borrower  has agreed to make Loan  Payments (as defined in the
Loan Agreement) to Lender, as assignee of Issuer, in the manner and on the terms
set forth therein.  As security for the Loan Payments,  Borrower will cause Bank
to issue in favor of Lender an  Irrevocable  Letter  of  Credit  pursuant  to an
Accounts  Receivable Credit Agreement (the  "Reimbursement  Agreement")  between
Borrower and Bank.  This Agreement is not intended to alter or change the rights
and  obligations  of Lender,  Issuer and Borrower under the Loan Agreement or of
Borrower  and  Bank  under  the   Reimbursement   Agreement,   but  is  entirely
supplemental thereto.

         Section 1.02.  The terms  capitalized in this Agreement but not defined
herein shall have the meanings given to them in the Loan Agreement.

         Section  1.03.  Under  the Loan  Agreement,  upon the  satisfaction  of
certain  conditions  precedent,  Lender  shall loan to Issuer  and Issuer  shall
deposit or cause to be deposited with Escrow Agent the sum of $2,700,000,  to be
credited to the Escrow Fund established in Article 2 hereof.  Amounts  deposited
in the Escrow Fund shall be loaned to Borrower  and shall be used by Borrower to
pay the Project Costs (as defined in the Loan Agreement), and, to the extent not
needed for this purpose,  to pay or prepay  Principal  coming due under the Loan
Agreement, all as hereinafter provided.

         Section 1.04. Under the Loan Agreement, Borrower will cause the Project
to be acquired  and  constructed  and to the extent the amounts  deposited  with
Escrow Agent is  insufficient  to complete the Project,  Borrower shall complete
the Project with its own funds.

         Section 1.05. Lender,  Bank, Issuer and Borrower agree to employ Escrow
Agent to receive,  hold,  invest and disburse the moneys paid to Escrow Agent by
Lender as described in Section 1.03,  all as  hereinafter  described;  provided,
however,  that  Escrow  Agent  shall not be  obligated  to assume or perform any
obligation of Lender,  Issuer,  Borrower,  or Bank with respect thereto or under
the Loan Agreement or Reimbursement Agreement by reason of anything contained in
this Agreement.

         Section  1.06.  Each of the  parties has  authority  to enter into this
Agreement,  and has taken all actions  necessary to authorize  the  execution of
this Agreement by the officers whose signatures are affixed hereto.


                                                     ARTICLE II

                                                     ESCROW FUND


         Section  2.01.  Escrow  Agent  shall  establish  a special  escrow fund
designated  as the  "GECPF/BFA/Elexsys  International  Escrow Fund" (the "Escrow
Fund"),  shall keep such Escrow Fund separate and apart from all other funds and
moneys  held by it and shall  administer  such  Escrow  Fund as provided in this
Agreement.

         Section 2.02.  All moneys paid to Issuer by Lender  pursuant to Section
1.03 of this Agreement shall be credited to the Escrow Fund.  Escrow Agent shall
use the  moneys in the Escrow  Fund to pay  Project  Costs,  upon  receipt  with
respect thereto of a Payment Request Form attached hereto as Exhibit A, executed
by Lender, Bank and Borrower,  fully completed and with all supporting documents
described  therein attached thereto and the Letter of Credit.  Upon receipt of a
Payment  Request Form with respect to any Project Costs,  an amount equal to the
Project  Costs as shown  therein  shall be paid directly to the person or entity
entitled to pay as specified therein.

         Section  2.03.  On September  30, 1997,  Escrow Agent shall pay: (a) to
Lender in  prepayment  of the  Loan,  an amount  equal to the  entire  remaining
balance on deposit in the Escrow  Fund,  less the sum of (i) an amount  equal to
the  Project  Costs for which  Escrow  Agent has  received a fully and  properly
completed  Payment Request Form and which has not been paid, and (ii) the amount
of any deposit by Borrower  pursuant to Section 3.04 hereof remaining on deposit
in the Escrow Fund; and (b) to Borrower the entire remaining  balance on deposit
in the Escrow Fund less the amount referred to in clause (a)(i) of this Section.
The amount paid to Lender shall be applied first to interest accrued on the Loan
and next to the  Principal  portion of the Loan Payments in the inverse order of
maturity.

         Section 2.04.  Upon written  notice (a) from Lender or Borrower that an
Event of Default has occurred  under the Loan  Agreement,  (b) from Bank that an
event of default as  occurred  under the  Reimbursement  Agreement,  or (c) from
Borrower that Borrower has determined not to complete the Project,  Escrow Agent
shall  liquidate  all  investments  held in the  Escrow  Fund and  transfer  the
proceeds  thereof  and all other  moneys held in the Escrow Fund to Lender to be
applied first to interest accrued on the Loan and next to the Principal  portion
of the Loan Payments in the inverse order of maturity.

         Section  2.05.   Escrow  Agent  shall  only  be  responsible   for  the
safekeeping  and  investment  of the  moneys  held in the Escrow  Fund,  and the
disbursement  thereof  in  accordance  with  this  Article,  and  shall  not  be
responsible  for  the  authenticity  or  accuracy  of  such   certifications  or
documents,  the application of amounts paid pursuant to such  certifications  by
the persons or entities to which they are paid, or the sufficiency of the moneys
credited to the Escrow Fund to make the payments herein required.


                                                     ARTICLE III

                                          MONEYS IN ESCROW FUND; INVESTMENT


         Section  3.01.  The moneys and  investments  held by Escrow Agent under
this Agreement are irrevocably held in trust for the benefit of Borrower, Issuer
and  Lender,  and such  moneys,  together  with any  income or  interest  earned
thereon, shall be expended only as provided in this Agreement,  and shall not be
subject to levy or  attachment  or lien by or for the benefit of any creditor of
Borrower,  Bank,  Issuer or Lender.  Lender,  Issuer,  Borrower and Escrow Agent
intend that the Escrow Fund  constitute an escrow  account in which Borrower has
no legal or equitable right, title or interest until satisfaction in full of all
conditions  contained  herein and in the Loan Agreement for the  disbursement of
funds by  Escrow  Agent  therefrom.  However,  if the  parties'  intention  that
Borrower  shall have no legal or equitable  right,  title or interest  until all
conditions for  disbursement are satisfied in full is not respected in any legal
proceeding,  the  parties  hereto  intend  that  Lender and Bank have a security
interest in the Escrow Fund,  and such  security  interest is hereby  granted to
Lender and Bank by Borrower, to secure payment of all sums due to Lender, in its
own capacity and assignee of Issuer,  under the Loan  Agreement and all sums due
to Bank under the Reimbursement Agreement. For such purpose, Escrow Agent hereby
agrees to act as agent for  Lender in  connection  with the  perfection  of such
security  interest  and agrees to note,  or cause to be noted,  on all books and
records relating to the Escrow Fund, Lender's interest therein.

         Section 3.02.  Moneys held by Escrow Agent  hereunder shall be invested
and  reinvested  by  Escrow  Agent  upon  order of  Borrower  only in  Qualified
Investments, as defined in Section 3.05. Such investments shall be registered in
the name of Escrow  Agent and held by Escrow  Agent for the  benefit  of Lender,
Bank,  Issuer and  Borrower.  With the  approval of  Borrower,  Escrow Agent may
purchase or sell to itself or any affiliate, as principal or agent,  investments
authorized by this Article.  Such  investments and  reinvestments  shall be made
giving  full  consideration  for the  time at which  funds  are  required  to be
available.

         Section  3.03.  Escrow  Agent shall,  without  further  direction  from
Borrower,  sell such  investments  as and when required to make any payment from
the Escrow Fund. Any income  received on such  investments  shall be credited to
the Escrow Fund.

         Section 3.04.  Escrow Agent shall furnish to Borrower,  Bank and Lender
reports  accounting for all investments and interest and income therefrom.  Such
accounting shall be furnished no less frequently than every three (3) months and
upon request of Lender, Bank or Borrower. None of Lender, Bank, Issuer or Escrow
Agent shall be  responsible  or liable for any loss suffered in connection  with
any  investment of moneys made by Escrow Agent in  accordance  with this Article
(other  than  Escrow  Agent in its  capacity  as  obligor  under  any  Qualified
Investment).  In the event funds in the Escrow Fund are  insufficient to pay the
Project Costs,  Borrower shall deposit  additional funds into the Escrow Fund to
be disbursed in accordance with the provisions hereof, and such additional funds
deposited by Borrower  shall be disbursed  from the Escrow Fund before any other
funds held in the Escrow Fund.

         Section 3.05. As used in this Agreement, the term Qualified Investments
means (a)  securities  which are general  obligations of or are guaranteed as to
the  payment of  principal  and  interest by the United  States of America;  (b)
obligations,  debentures,  notes or other  evidence  of  indebtedness  issued or
guaranteed by any of the  following:  Federal Home Loan Bank System,  Government
National Mortgage  Association,  Farmers Home Administration,  Federal Home Loan
Mortgage  Corporation or Federal Housing  Administration;  (c) commercial  paper
issued by corporations  organized under the laws of a state of the United States
which is rated in the highest rating category by Standard & Poor's Ratings Group
("S&P") or Moody's  Investors  Service,  Inc.; (d) money market funds registered
under the Investment  Company Act of 1940 whose shares are registered  under the
Securities  Act of 1933 and which have a rating of "AAAm-G",  "AAAm" or "AAm" by
S&P; or (e)  certificates  of deposit issued by or other forms of deposit in any
national or state bank to the extent that such deposits are fully insured by the
Federal Deposit Insurance Corporation or any successor agency which is backed by
the full faith and credit of the United  States.  Derivative  products shall not
constitute Qualified Investments.


                                                     ARTICLE IV

                                      ESCROW AGENT'S AUTHORITY; INDEMNIFICATION


         Section  4.01.  Escrow  Agent may act in  reliance  upon any writing or
instrument  or signature  which it, in good faith,  believes to be genuine,  may
assume the validity and accuracy of any statement or assertion contained in such
a writing or instrument,  and may assume that any person  purporting to give any
writing, notice, advice or instructions in connection with the provisions hereof
has been  duly  authorized  to do so.  Escrow  Agent  shall not be liable in any
manner for the sufficiency or correctness as to form,  manner and execution,  or
validity of any instrument deposited with it, nor as to the identity,  authority
or right of any person  executing the same;  and its duties  hereunder  shall be
limited to those specifically provided herein.

         Section  4.02.  Unless  Escrow Agent is  determined  to be negligent or
liable for  misconduct  with  regard to its duties  hereunder,  Borrower  hereby
agrees to indemnify  Escrow Agent and hold it harmless  from any and all claims,
liabilities,  losses,  actions, suits or proceedings at law or in equity, or any
other expense, fees or charges of any character or nature, which it may incur or
with which it may be  threatened  by reason of its acting as Escrow  Agent under
this Agreement;  and in connection therewith,  to indemnify Escrow Agent against
any and all  expenses,  including  reasonable  attorneys'  fees  and the cost of
defending any action,  suit or  proceeding or resisting any claim.  Escrow Agent
shall  be  vested  with  a  lien  on  all  property   deposited   hereunder  for
indemnification,  for reasonable  attorneys'  fees,  court costs,  for any suit,
interpleader or otherwise,  or any other reasonable expenses, fees or charges of
any  character  or nature,  which may be incurred  by Escrow  Agent by reason of
disputes  arising  among  Borrower,  Issuer,  Bank and Lender as to the  correct
interpretation of the Loan Agreement or this Agreement and instructions given to
Escrow Agent hereunder, or otherwise, with the right of Escrow Agent, regardless
of the instructions  aforesaid,  to hold the said property until and unless said
additional expenses, fees and charges shall be fully paid.

         Section  4.03.  If  Borrower,  Issuer,  Bank  or  Lender  shall  be  in
disagreement about the  interpretation of the Loan Agreement,  the Reimbursement
Agreement  or this  Agreement,  or about  the  rights  and  obligations,  or the
propriety of any action  contemplated  by Escrow Agent  hereunder,  Escrow Agent
may, but shall not be required to, file an  appropriate  civil action to resolve
the  disagreement.  Escrow Agent shall be indemnified by Borrower for all costs,
including reasonable  attorneys' fees, in connection with such civil action, and
shall be fully protected in suspending all or part of its activities  under this
Agreement until a final judgment in such action is received.

         Section  4.04.  Escrow Agent may consult with counsel of its own choice
and shall have full and complete  authorization  and protection with the opinion
of such counsel.  Escrow Agent shall otherwise not be liable for any mistakes of
facts or errors of  judgment,  or for any acts or  omissions  of any kind unless
caused by its negligence or misconduct.


                                                      ARTICLE V

                                             ESCROW AGENT'S COMPENSATION

         Borrower  hereby  agrees to pay Escrow  Agent as  compensation  for the
services  to be  rendered  hereunder  the fees and other  amounts  described  in
Exhibit B hereto and will pay and/or reimburse Escrow Agent upon request for all
expenses,  disbursements  and advances,  including  reasonable  attorneys' fees,
incurred or made by it in connection with carrying out its duties hereunder.


                                                     ARTICLE VI

                                               CHANGE OF ESCROW AGENT


         Section  6.01.  A national  banking  association  located in the United
States or a state bank or trust company  organized  under the laws of a state of
the United States, qualified as a depository of public funds, may be substituted
to act as Escrow  Agent  under this  Agreement  upon  agreement  of the  parties
hereto.  Such  substitution  shall  not  be  deemed  to  affect  the  rights  or
obligations of the parties.  Upon any such substitution,  Escrow Agent agrees to
assign to such substitute Escrow Agent its rights under this Agreement.

         Section  6.02.  Escrow Agent or any successor may at any time resign by
giving  mailed notice to Borrower,  Issuer,  Bank and Lender of its intention to
resign and of the proposed date of  resignation,  which shall be a date not less
than thirty (30) days after such notice is deposited  in the United  States mail
with  postage  fully  prepaid,  unless  an  earlier  resignation  date  and  the
appointment  of a  successor  Escrow  Agent  shall have been or are  approved by
Borrower, Issuer, Bank and Lender.

         Section 6.03.  Escrow Agent may appoint an agent to exercise any of the
powers, rights or remedies granted to Escrow Agent under this Agreement,  and to
hold title to property or to take any other  action  which may be  desirable  or
necessary.


                                                     ARTICLE VII

                                              ADMINISTRATIVE PROVISIONS


         Section 7.01.  Escrow Agent shall keep complete and accurate records of
all moneys received and disbursed under this Agreement, which shall be available
for inspection by Borrower, Issuer, Bank or Lender, or the agent of any of them,
at any time during regular business hours.

         Section 7.02. All notices,  certificates,  requests,  demands and other
communications  provided  for  hereunder  shall be in  writing  and shall be (a)
personally  delivered,  (b) sent by first class United States mail,  (c) sent by
overnight  courier of national  reputation,  or (d) transmitted by telecopy,  in
each case addressed to the party to whom notice is being given at its address as
set forth below and, if telecopied,  transmitted to that party at its telecopier
number set forth above or, as to each party, at such other address or telecopier
number as may hereafter be  designated by such party in a written  notice to the
other party  complying as to delivery with the terms of this  Section.  All such
notices, requests, demands and other communications shall be deemed to have been
given on (a) the date received if personally  delivered,  (b) when  deposited in
the mail if delivered by mail,  (c) the date sent if sent by overnight  courier,
or (d) the date of transmission if delivered by telecopy.

         Section  7.03.  This  Agreement  shall be  construed  and  governed  in
accordance with the laws of the State of New Hampshire.

         Section 7.04. Any  provisions of this Agreement  found to be prohibited
by law shall be ineffective  only to the extent of such  prohibition,  and shall
not invalidate the remainder of this Agreement or the Loan Agreement.

         Section  7.05.  This  Agreement  shall be binding upon and inure to the
benefit  of  the  parties  and  their   respective   successors   and   assigns.
Specifically,  as used  herein the term  "Lender"  means any person or entity to
whom Lender has assigned its right to receive  payments under the Loan Agreement
and any  payments due to Lender  hereunder  from after the date when a duplicate
original of such assignment is filed with Escrow Agent.

         Section 7.06. This Agreement may be simultaneously  executed in several
counterparts,  each  of  which  shall  be an  original  and all of  which  shall
constitute but one and the same Agreement.

         Section 7.07.  This  Agreement  shall  terminate upon  disbursement  by
Escrow Agent of all moneys held by it hereunder.

         Section 7.08. This Agreement  (and, with respect to Lender,  Issuer and
Borrower,  together with the Loan Agreement) constitutes the entire agreement of
the parties relating to the subject matter hereof.

         Section  7.09.  The  Bank  may  become  a party  to this  Agreement  by
executing and delivering a counterpart  signature  page.  Pending such execution
and delivery this Agreement shall be a binding agreement among the parties other
than the Bank.

         [REMAINDER OF PAGE INTENTIONALLY BLANK; EXECUTION PAGE FOLLOWS]


<PAGE>


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


GE CAPITAL PUBLIC FINANCE, INC.,             NATIONAL CITY BANK OF
Lender                                       MINNEAPOLIS, Escrow Agent


By:/s/  Philip Long                          By: (Illegible)
   ----------------                              
Title:  Vice President                       Title:Assistant Vice President

Address: 8400 Normandale Lake Blvd.          Address:651 Nicollet Mall
         Suite 470                           Minneapolis, MN  55402
         Minneapolis, MN 55437               Telephone: (612) 897-8372
         Telephone: (800) 346-3146           Telecopier:(612) 904-8898
         Telecopier:(612) 897-5601



BUSINESS  FINANCE  AUTHORITY OF              ELEXSYS INTERNATIONAL, INC.
THE STATE OF NEW HAMPSHIRE, Issuer           Borrower

Borrower


By:/s/  Jack Donovan                         By:/s/ Michael Shimada           
   ------------------                           -------------------
Title:  Executive Director                   Title:  Principal Financial Officer
                                                     and Duly Authorized Officer

Address: 14 Dixon Avenue, Suite 101          Address:41 Simon Street
         Concord, NH  03301                          Nashua, NH  03060
Telephone:        (603) 271-2391             Telephone:        (603) 886-0066
Telecopier:       (603) 271-2396             Telecopier:       (603) 886-9724


SANWA BANK CALIFORNIA, Bank


By:______________________________
Title:___________________________

Address: 220 Almaden Boulevard
         San Jose, CA 95113
Telephone:        (408) 297-6500
Telecopier:       (408) 292-4092




<PAGE>







                                                         A-4

                          Exhibit A to Escrow Agreement

                                            FORM OF PAYMENT REQUEST FORM

                                           Payment Request Form No. _____


         Elexsys  International,  Inc.,  as  borrower  ("Borrower")  under  that
certain Loan Agreement dated as of December 1, 1996 (the "Loan  Agreement"),  by
and among Business Finance  Authority of the State of New Hampshire  ("Issuer"),
GE Capital  Public  Finance,  Inc.  ("Lender")  and  Borrower,  hereby  requests
National City Bank of  Minneapolis,  as escrow agent ("Escrow  Agent") under the
Escrow  Agreement  dated as of December 1, 1996 (the "Escrow  Agreement")  among
Escrow Agent, Lender,  Issuer,  Borrower and Sanwa Bank California ("Bank"),  to
make  payment from the Escrow Fund (as defined in the Escrow  Agreement)  to the
following party or parties, at the addresses set forth below:

                                        Cost of Issuance
                         Amount to      or Project
Payee     Address        be paid        Description
-----     -------        ---------      ----------------


         In connection  therewith,  the  undersigned  officer of Borrower hereby
certifies as follows:



<PAGE>



                           1. All of the  provisions  of the Loan  Agreement are
         incorporated  herein by reference and capitalized terms used herein and
         not  defined  shall  have  the  meanings  assigned  to them in the Loan
         Agreement.


                           2. The Project  subject to this Payment  Request Form
         comprises a portion of the Project described in the Loan Agreement, and
         has been inspected and accepted by Borrower.

                           3. The  payments  to be made to the  payees set forth
         above are for either the costs of issuance or Project  Costs  described
         above, or reimbursement to Borrower therefor, and the payments have not
         been the basis for a prior request which has been paid,  and the amount
         remaining in the Escrow Fund is sufficient to pay the remaining Project
         Costs.

                           4. The payment or  requisition is for work actually
          performed or materials  or property  actually  supplied to the Project
          site prior to the date hereof.

                           5. All of Borrower's  representations,  covenants and
         warranties  contained in the Loan  Agreement  were true and accurate in
         all material respects as of the date made, and remain true and accurate
         in all material  respects as of the date of this Payment  Request Form,
         and  Borrower  has  fully  and  satisfactorily  performed  all  of  its
         covenants and obligations to date required under the Loan Agreement. No
         Default or Event of Default has occurred under the Loan Agreement.

                           6.  This  request  for  payment  contains  no items
          representing payment on account of any retained percentage entitled to
          be retained by Borrower at the date hereof.

                           7. The undersigned has reviewed the provisions of the
         Statement as to Tax Exempt Status,  and the payment of this requisition
         will not result in any proceeds of the obligation evidenced by the Loan
         Agreement being expended in contradiction of the provisions thereof and
         representations made therein.

                           8.  Attached  hereto  as  Attachment  A are  invoices
         and/or bills of sale relating to the Project and, if such invoices have
         been paid by Borrower, evidence of payment thereof.

                           9. If this Payment  Request Form relates to the final
         disbursement  from the Escrow Fund,  attached hereto as Attachment B is
         an executed  Certificate of Acceptance in the form required by the Loan
         Agreement.

                           10.  Attached  hereto as Attachment C is an insurance
          certificate in the form required by the Loan Agreement.

                           11. All contractors,  subcontractors and suppliers of
         materials,  property  for the Project or labor have been paid for their
         share of work,  materials  or  property  through  the date of the prior
         Payment Request Form (if any).

                           12. The payment or  reimbursement  requested  by this
         Payment   Request   Form  will  be  disbursed  in  payment  of,  or  is
         reimbursement  for the  Borrower's  prior payment of, work performed or
         completed on, or materials or property  supplied for the Project by the
         contractors, subcontractors or suppliers listed in Attachment D hereto.

                           13. All amounts  previously  requested  and disbursed
         from the Escrow Fund for  payment of  contractors,  subcontractors  and
         suppliers of materials and labor have been so applied.

                           14. This request does not request  reimbursement  for
         any  payment  or  payments  for  any  obligations  originally  paid  or
         incurred, for federal income tax purposes, before September 25, 1996.

                           15.  Borrower  understands  that Lender is relying on
          the  certifications  herein  with  regard  to and in  connection  with
          approving the disbursement requested hereby.

                           16. Attached hereto as Attachment E is an appropriate
         endorsement or  continuation of the title  insurance  policy  delivered
         pursuant to the Reimbursement Agreement increasing the coverage of such
         policy to an  amount at least  equal to the  amount  specified  in such
         paragraph   less  the  amount   remaining  in  the  Escrow  Fund  after
         disbursement of the current requisition.

                           17. Attached hereto as Exhibit F are partial releases
         of mechanics'  liens  through the date of the last payment  request (if
         any) by  those  contractors,  subcontractors,  suppliers  and  laborers
         having received  payments for work on or materials or property supplied
         to the Project in excess of $5,000.00.

                           18.  Attached  hereto  as  Exhibit G is a copy of the
         notice of the  anticipated  funding date for the advance  posted on the
         Project  site by Borrower or its agent and  certified as to its posting
         date by Borrower,  all in  compliance  with New Hampshire RSA 447:12-b,
         and such other evidence as may reasonably be required by Lender or Bank
         of Borrower's compliance with New Hampshire RSA 447:12-a and b.

                           19.  Borrower  has  satisfied  all of the  conditions
          contained  in  Article  III of the Loan  Agreement  and the  Letter of
          Credit has been delivered to Lender.


ELEXSYS INTERNATIONAL, INC.


By ______________________________________
Title_____________________________________

Date:

APPROVED BY LENDER:

GE CAPITAL PUBLIC FINANCE, INC.


By ______________________________________
Title_____________________________________

Date:

APPROVED BY BANK:

SANWA BANK CALIFORNIA


By ______________________________________
Title_____________________________________

Date: