Exhibit 10.42


CLOSING ITEM NO.:  A-12





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                            SPURLOCK ADHESIVES, INC.

                                       TO

                COUNTY OF SARATOGA INDUSTRIAL DEVELOPMENT AGENCY

                                       AND

                           STAR BANK, N.A., AS TRUSTEE



            ========================================================

                            TAX REGULATORY AGREEMENT

            ========================================================


                             DATED OCTOBER 10, 1997



                                   RELATING TO
                                   $6,000,000
                          AGGREGATE PRINCIPAL AMOUNT OF
                               COUNTY OF SARATOGA
                          INDUSTRIAL DEVELOPMENT AGENCY
                            MULTI-MODE VARIABLE RATE
                      INDUSTRIAL DEVELOPMENT REVENUE BONDS
                (SPURLOCK ADHESIVES, INC. PROJECT), SERIES 1997 A

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<PAGE>


                                TABLE OF CONTENTS

            (This Table of Contents is not part of the Tax Regulatory
               Agreement and is for convenience of reference only)

<TABLE>
<CAPTION>

SECTION                                                                                                        PAGE


<S>                                                                                                              <C>
ARTICLE I
         DEFINITIONS
                  SECTION 1.1.  DEFINITIONS.......................................................................3
                  SECTION 1.2.  INTERPRETATION...................................................................13


ARTICLE II
         THE PROJECT AND THE PROJECT FACILITY
                  SECTION 2.1.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................................15
                  SECTION 2.2.  REPRESENTATIONS REGARDING MANUFACTURING..........................................17


ARTICLE III
         USE OF THE PROCEEDS OF THE BONDS
                  SECTION 3.1.  USE OF THE PROCEEDS OF THE BONDS.................................................18
                  SECTION 3.2.  CERTIFICATION AS TO PROJECT COSTS................................................18
                  SECTION 3.3.  AVERAGE  REASONABLY  EXPECTED  ECONOMIC  LIFE AND AVERAGE  BOND  MATURITY;
                           FORM 8038.............................................................................18
                  SECTION 3.4.  FINAL REQUEST FOR DISBURSEMENT...................................................19
                  SECTION 3.5.  EXISTING PROPERTY................................................................19
                  SECTION 3.6.  ACQUISITION OF LAND..............................................................19
                  SECTION 3.7.  REFUNDING........................................................................19


ARTICLE IV
         AGGREGATE FACE AMOUNT OF THE BONDS
                  SECTION 4.1.  REPRESENTATIONS WITH REGARD TO THE AGGREGATE FACE AMOUNT OF THE BONDS............20
                  SECTION 4.2.  COMPLIANCE WITH CAPITAL EXPENDITURE LIMITATIONS..................................20
                  SECTION 4.3.  OTHER ACTION AFFECTING THE AGGREGATE FACE AMOUNT OF THE BONDS....................21


                                       i
<PAGE>


ARTICLE V
         THE $40 MILLION LIMITATION
                  SECTION 5.1.  $40 MILLION LIMITATION REPRESENTATIONS...........................................22
                  SECTION 5.2.  COVENANT AS TO $40 MILLION LIMITATION............................................22


ARTICLE VI
         COMPOSITE ISSUES AND FEDERAL GUARANTEES
                  SECTION 6.1.  COMPOSITE AND OTHER ISSUES.......................................................23
                  SECTION 6.2.  FEDERAL GUARANTEES...............................................................23


ARTICLE VII
         ARBITRAGE
                  SECTION 7.1.  ARBITRAGE REPRESENTATIONS........................................................25
                  SECTION 7.2.  ARBITRAGE COMPLIANCE.............................................................30
                  SECTION 7.3.  CALCULATION OF REBATE AMOUNT.....................................................31
                  SECTION 7.4.  PAYMENTS TO UNITED STATED........................................................33
                  SECTION 7.5.  RECORDKEEPING....................................................................33
                  SECTION 7.6.  PROHIBITED PAYMENT COVENANT......................................................34
                  SECTION 7.7.  COMPANY RESPONSIBILITY...........................................................34


ARTICLE VIII
         COVENANTS AND AMENDMENTS
                  SECTION 8.1.  COMPLIANCE WITH CODE.............................................................35
                  SECTION 8.2.  AMENDMENT........................................................................35
                  SECTION 8.3.  NOTICES..........................................................................35
                  SECTION 8.4.  PARTIES INTERESTED HEREIN........................................................36
                  SECTION 8.5.  COUNTERPARTS.....................................................................36


SCHEDULE A
         PART I
                  SUMMARY OF ACQUISITION AND CONSTRUCTION COSTS.................................................A-1


SCHEDULE A
         PART II
                  SUMMARY OF SOURCES OF FUNDS...................................................................A-3


SCHEDULE A
         PART III
                  ITEMIZATION OF ACQUISITION AND CONSTRUCTION COSTS.............................................A-4


                                       ii
<PAGE>

SCHEDULE A
         PART IV
                  SOURCES FOR PAYMENT OF ACQUISITION AND CONSTRUCTION COSTS.....................................A-9


SCHEDULE B
         AVERAGE REASONABLY EXPECTED ECONOMIC LIFE AND AVERAGE MATURITY OF THE BONDS............................B-1


SCHEDULE C
         AGGREGATE FACE AMOUNT OF THE BONDS.....................................................................C-1


SCHEDULE D
         THE $40,000,000 AGGREGATE LIMIT........................................................................D-1


</TABLE>


                                      iii
<PAGE>



                            TAX REGULATORY AGREEMENT


         THIS TAX REGULATORY AGREEMENT made and dated OCTOBER 10, 1997 (the "Tax
Regulatory  Agreement") from SPURLOCK  ADHESIVES,  INC., a business  corporation
organized  and  existing  under the laws of the  State of  Virginia  having  its
principal  office at 5090 General Mahone Highway,  Waverly,  Virginia 23890 (the
"Company"),  for the  benefit of the COUNTY OF SARATOGA  INDUSTRIAL  DEVELOPMENT
AGENCY (the  "Issuer")  and STAR BANK,  N.A., as trustee under the Indenture (as
hereinafter defined) (the "Trustee");

                              W I T N E S S E T H :

         WHEREAS,  the Issuer, by resolution  adopted on September 16, 1997 (the
"Resolution"),  determined to issue its $6,000,000 aggregate principal amount of
Multi-Modal  Variable  Rate  Industrial   Development  Revenue  Bonds  (Spurlock
Adhesives,  Inc.  Project),  Series  1997 A (the  "Bonds")  for the  purpose  of
financing a portion of the costs of the Project (as hereinafter defined); and

         WHEREAS,  the  Project  (the  "Project")  shall  consist of (A) (1) the
acquisition of a certain  parcel of land  comprising  approximately  16.37 acres
constituting Lot #3 located in the Moreau Industrial Park in the Town of Moreau,
Saratoga County, New York (the "Land"),  (2) the construction on the Land of two
(2)  buildings  approximately  10,000  square  feet  each  in  size  and one (1)
approximately 800 square foot building for use in the manufacturing of synthetic
organic  chemicals and related  functions  (collectively the "Facility") and (3)
the  acquisition  and  installation  therein of certain  machinery  and  Project
Facility  (the  "Project  Facility" and together with the Land and the Facility,
the "Project Facility"),  and (B) the financing of a portion of the costs of the
foregoing; and

         WHEREAS,  contemporaneously  with the execution of the  Indenture,  the
Issuer and the Company have entered into an installment  sale agreement dated as
of October 1, 1997 (the "Installment  Sale Agreement")  specifying the terms and
conditions pursuant to which the Issuer agrees to acquire, construct and install
the Project Facility and to sell the Project Facility to the Company; and

         WHEREAS,  the  Issuer  proposes  to issue the Bonds for the  purpose of
providing  funds  for the  acquisition,  construction  and  installation  of the
Project Facility; and

         WHEREAS,  the Issuer, by the terms of the Indenture and as security for
the Bonds,  has  granted  the  Trustee a first  security  interest  in the Trust
Revenues (as defined in the Indenture); and

         WHEREAS,  as further  security  for the Bonds,  the Company has entered
into a reimbursement  agreement dated as of October 1, 1997 (the  "Reimbursement
Agreement") with KeyBank National  Association,  a national banking  association
organized  under the laws of the United States (the  "Bank"),  pursuant to which
the  Bank  has  issued  in  favor of the  Trustee  an  irrevocable  transferable
direct-pay letter of credit (the "Letter of Credit") to secure the Bonds; and

         WHEREAS,  the Bonds are to be issued  pursuant  to the terms of a trust
indenture  (the  "Indenture")  dated as of  October 1, 1997 by and  between  the
Issuer and the Trustee; and

<PAGE>

         WHEREAS,  the Internal  Revenue Code of 1986,  as amended (the "Code"),
and the Department of Treasury Regulations promulgated with respect thereto (the
"Regulations"),  prescribe  restrictions on, among other things,  the Bonds, the
activities  of the  Company,  the  application  of the proceeds of the Bonds and
earnings  thereon and the use of the Project  Facility in order that interest on
the Bonds be and remain exempt from federal income taxation; and

         WHEREAS,  in order to ensure that the  requirements of the Code are and
will  continue  to be met,  the  Company  has  determined  to enter into the Tax
Regulatory Agreement in order to set forth certain representations,  intentions,
conditions  and  covenants  relating  to,  among other  things,  the Bonds,  the
activities of the Company,  the application of the proceeds of the Bonds and the
earnings thereon and the use of the Project Facility;

         NOW, THEREFORE,  in consideration of the issuance, sale and purchase of
the Bonds,  the  issuance of the Letter of Credit and the mutual  covenants  and
undertakings set forth in the Financing Documents (as defined in the Indenture),
the Company  hereby  represents,  warrants and  undertakes the following for the
benefit of the Issuer, the Trustee and the holders of the Bonds as follows:



                                       2
<PAGE>


                                    ARTICLE I

                                   DEFINITIONS


SECTION  1.1.  DEFINITIONS.  For  purposes  of  the  Tax  Regulatory  Agreement,
capitalized  terms not otherwise defined herein shall have the meanings ascribed
to such terms in the Indenture.  In addition, the following italicized words and
phrases shall have the following meanings:

         "1954 Code" means the Internal Revenue Code of 1954, as amended.

         "Aggregate  Face Amount" means the aggregate face amount of an issue of
bonds determined in accordance with Section 144(a) of the Code (formerly Section
103(b)(6) of the 1954 Code) and Section 4.1 hereof.

         "Average  Maturity"  means the  average  maturity  of an issue of bonds
within  the  meaning  ascribed  to such  phrase  in  Section  147(b) of the Code
(formerly Section 103(b)(14) of the 1954 Code), which requires the determination
of Average  Maturity to be made by taking  into  account  the  respective  issue
prices of the obligations which are issued as part of the issue.

         "Average  Reasonably  Expected  Economic  Life"  shall have the meaning
ascribed  to such  phrase  in  Section  147(b)  of the  Code  (formerly  Section
103(b)(14)  of the 1954 Code) and shall be calculated by taking into account the
respective  costs of the different  assets forming part of the Project  Facility
and  determined as of the later of the date on which the Bonds are issued or the
date on which the Project Facility is placed in service or expected to be placed
in service.  Land shall not be taken into  account.  The economic  lives of such
assets shall be  determined  by using class lives under the ADR system  (Revenue
Procedure 87-56) for property other than real property and guideline lives under
Revenue  Procedure  62-21  for real  property.  If the  Company  can  establish,
however,  on the  basis of all the facts and  circumstances  of each  particular
case,  such as an appraisal,  that the economic  lives of such assets are longer
than the lives determined pursuant to the preceding  sentence,  then such assets
may be assigned such longer economic lives accordingly.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Computation  Period"  means  each  period  from the  date of  original
issuance of the Bonds  through the date on which a  determination  of the Rebate
Amount is made.

         "Fair  Market  Value" of an  investment  means the fair market value of
such  investment  at the time it  becomes a  Nonpurpose  Investment,  determined
pursuant to Section 1.148-5(d)(6) of the Regulations.


                                       3
<PAGE>

         "Gross  Proceeds"  shall  have the  meaning  ascribed  to such  term in
Section 1.148-1(b) of the Regulations which includes the following:

         (A)      Sale proceeds,  amounts  actually or  constructively  received
from the sale of an issue,  including amounts used to pay underwriters' discount
or compensation, and accrued interest other than pre-issuance accrued interest;

         (B)      Investment   proceeds,   amounts  actually  or  constructively
received  from the  investment  of  proceeds  of an issue (as defined in Section
1.148(b) of the Regulations);

         (C)      Amounts treated as sinking funds under Section  1.148(c)(2) of
the Regulations;

         (D)      Amounts  that  are  directly  or   indirectly   pledged  by  a
substantial beneficiary of an issue to pay principal or interest on an issue (as
defined in Section 1.148-1(c)(3) of the Regulations);

         (E)      Transferred  proceeds,  any  proceeds  treated as  transferred
proceeds as defined in Section  1.148-9 of the  Regulations,  or the  applicable
corresponding provisions of prior law); and

         (F)      Other  amounts  having  a nexus  to an issue  (as  defined  in
Section 1.148(c) of the Regulations).

         "Higher  Yielding  Investments"  means any  Investment  Property  which
produces a Yield over the term of the issue which is materially  higher than the
Yield on the issue.  For purposes  hereof,  "materially  higher"  shall have the
meaning  ascribed to such phrase in Section  1.148-2(d)(2)  of the which  states
that the Yield on any  investment  is  "materially  higher"  when it exceeds the
Yield on the Bonds by more than one-eighth of one percentage point (1/8 of 1%).

         "Included  Bonds"  means (A) any issue of bonds  treated as part of the
same issue as the Bonds  pursuant  to Section  1.150-1  of the  Regulations  and
Revenue Ruling 81-216, (B) any issue of bonds required to be aggregated with the
Bonds in determining  the Aggregate Face Amount thereof under Section  144(a)(2)
of the Code or Section  103(b)(6)(B) of the 1954 Code and (C) any issue of bonds
aggregated with the Bonds pursuant to Section 144(a)(9) of the Code.

         "Included   Facilities"  means  any  facilities  described  in  Section
1.103-10(d)(2)(i)  of the  Regulations  which  includes any  facilities  located
within  the Town of  Moreau,  Saratoga  County,  New York and  those  facilities
located  outside  the Town of Moreau,  Saratoga  County,  New York but which are
contiguous to,  integrated  with or functionally  related to a facility  located
within the Town of Moreau, Saratoga County, New York.

         "Industrial  Development  Bond"  means any bond  which  constitutes  an
industrial development bond as defined in Section 103(b)(2) of the 1954 Code.

         "Investment Property" shall have the meaning ascribed to such phrase in
Section  148(b)(2)  of the Code which  describes  the same to mean any  security
(within  the  meaning  of  Section  165(g)(2)(A)  or (B) of  


                                       4
<PAGE>

the Code),  or any obligation  other than tax-exempt  obligations  which are not
"specified private activity bonds" within the meaning of Section  57(a)(5)(C) of
the Code,  any annuity  contract  or any  investment-type  property.  Investment
Property shall not mean tax-exempt bonds.

         "Issuance  Costs"  shall have the  meaning  ascribed  to such phrase in
Section 147(g) of the Code and by H. Conf. Rep. No. 99-841, pp. II-729-30, which
describes  the same as all costs  incurred  in  connection  with the  borrowing,
including,  but not limited to, underwriter's spread,  discount or fees, counsel
fees (including bond counsel, underwriter's counsel, issuer's counsel, company's
counsel and specialized  counsel fees),  financial advisor's fees, rating agency
fees, trustee fees, paying agent and certifying and  authenticating  agent fees,
accountant fees, printing costs, costs incurred in connection with obtaining the
required  public approval for the issuance of the Bonds and costs of engineering
and feasibility studies.

         "Net Proceeds" means the sum of the aggregate  principal  amount of the
Bonds,  minus  the  proceeds  invested  in  a  reasonably  required  reserve  or
replacement fund, plus the amount of invested earnings expected to accrue on the
proceeds of the Bonds.  For  purposes  of  calculating  the Net  Proceeds of the
Bonds, no reduction shall be made for Issuance Costs.

         "Nonpurpose  Investment" shall have the meaning ascribed to such phrase
in Section  148(f)(6) of the Code which  describes the same to be any Investment
Property which is acquired with the Gross Proceeds of the Bonds and which is not
acquired to carry out the governmental purpose of the Bonds.

         "Principal  User" shall mean  "principal  user" as such term is used or
defined in Section  144(a)(2)(B) of the Code (formerly Section  103(b)(6)(B)(ii)
of the  1954  Code)  and any  Regulations  or  rulings  promulgated  thereunder.
Pursuant to Section  1.103-10(h)(1) of the Regulations (as published in proposed
form on February  21, 1986 at page 6274 of the  Federal  Register),  a Principal
User is defined as any Person who is a principal  owner, a principal  lessee,  a
principal output purchaser or an "other" principal user, all as defined below:

         (A)      A principal  owner is a Person  who,  at any time,  holds more
than a ten percent (10%) ownership  interest (by value) in the facility,  or, if
no Person  holds more than a ten  percent  (10%)  ownership  interest,  then the
Person (or Persons in the case of multiple  equal  owners) who holds the largest
ownership interest in such facility.

         (B)      A  principal  lessee is any Person who at any time leases more
than ten percent (10%) of such facility,  as determined by reference to the fair
rental value of the portion of the facility so leased.

         (C)      A principal  output  purchaser is any Person who purchases the
output or products of an electric or thermal energy, gas, water or other similar
facility,  unless the total output purchased by such Person during each one-year
period  beginning with the date the facility is placed in service is ten percent
(10%) or less of the facility's total output during each such period.

         (D)      An "other"  principal user is a Person who enjoys a use of the
facility in a degree  comparable  to the  enjoyment  of a  principal  owner or a
principal lessee,  taking into account all the relevant 


                                       5
<PAGE>

facts and circumstances,  such as the Person's participation in the control over
use of the facility or its remote or proximate location.

         Co-owners or co-lessees who are  collectively  treated as a partnership
subject to  Subchapter  K under  Section  761(a) of the Code are not  treated as
Principal Users merely by reason of their partnership interests.

         The Internal  Revenue Service has interpreted the phrase Principal User
to include, among other Persons, the following:

         (1)      the owner or purchaser of the facility in question;

         (2)      any Person  using ten percent  (10%) or more of the space in a
facility (as measured as a percentage of the square footage of the noncommon use
space);

         (3)      any Person paying ten percent (10%) or more of the fair rental
value of such facility,  or from which more than ten percent (10%) of the annual
revenues attributable to such facility for any year are derived;

         (4)      a principal  customer of whatever is produced at such facility
(the Internal Revenue Service has found that a Person may be a Principal User of
a  facility,  even  though  not  an  occupant,  if,  pursuant  to a  contractual
obligation,  he takes a substantial portion of the goods or services produced at
the facility);

         (5)      any Person who both enjoys the  primary  use of such  facility
and directly and indirectly  constitutes the primary source of payment of either
the principal of or interest on the any  tax-exempt  bond issued with respect to
such facility; or

         (6)      a lessor of such facility  having a  reversionary  interest in
the facility.

         It should be noted that there may be more than one Principal  User of a
facility  and of other  facilities.  The ten percent fair rental value or annual
revenues test is applied annually,  and a Person may qualify as a Principal User
one year but not other years. For example, a Person may qualify as a ten percent
tenant before a facility is fully rented but not  afterwards.  In that case, for
purposes hereof,  that tenant should be considered a Principal User,  because he
may qualify in one year even though he may not be includable in that category in
other years. Application of the ten percent fair rental value or annual revenues
test  entails  numerous  complexities  relating,  among  other  matters,  to tax
reimbursements and other escalation charges and common area maintenance payments
(all of which should be counted as rent) as well as to contingent rents.

         "Prior  Issues"  means,  with  respect  to a new  issue of  bonds,  any
Industrial  Development  Bond or Qualified  Small Issue bond  outstanding on the
date of issuance of the new bonds, where the facilities  financed in whole or in
part by the proceeds of such  Industrial  Development  Bond or  Qualified  Small
Issue bond are located within the same  incorporated  municipality  or county as
the  facilities to be financed with the proceeds of the new issue of bonds and a
Principal User of such  facilities (or a Related Person thereto)


                                       6
<PAGE>

is or will be a Principal  User of the  facilities  (or a Related  Person) to be
financed with the proceeds of the new issue of bonds.

         "Private  Activity Bond" shall have the meaning ascribed to such phrase
in  Section  141 of the Code  which  describes  the same to mean any  obligation
issued by any state or political subdivision as part of an issue which satisfies
either of the two tests set forth below:

         (A)      (1)      more than ten percent  (10%) of the  proceeds of such
issue are to be used directly or indirectly in any Private Business Use; and

                  (2)      the payment of the  principal  of or interest on more
         than ten  percent  (10%) of the  proceeds  of such  issue is (under the
         terms  of  such  issue  or  any  underlying  arrangement)  directly  or
         indirectly:

                           (a)      secured by any interest in property  used or
                  to be  used  for a  Private  Business  Use or in  payments  in
                  respect of such property; or


                           (b)      to be derived  from  payments  in respect of
                  property,  or borrowed money, used or to be used for a Private
                  Business Use; or

         (B)      the  proceeds  of the issue  which are to be used  directly or
indirectly  to make or finance loans to Persons  other than  governmental  units
exceed the lesser of:

                  (1)      five percent (5%) of such proceeds; or

                  (2)      $5,000,000.

         "Private Business Use" means use (directly or indirectly) in a trade or
business  carried on by any Person other than a governmental  unit. For purposes
hereof, any activity carried on by a Person other than a natural person shall be
treated as a trade or business.

         "Qualified  Costs"  shall have the  meaning  ascribed to such phrase in
Section 2.1(D)(1) hereof.

         Qualified Small Issue" means an issue of  governmental  obligations the
interest on which is not subject to federal income taxation because it satisfies
the  requirements  of the Code for the tax exemption for interest on a qualified
small issue bond,  including,  but not limited to, Section 144 of the Code which
requires that the Aggregate Face Amount of such issue not exceed  $1,000,000 and
at least ninety-five  percent (95%) of the Net Proceeds of the issue be used (A)
for the  acquisition,  construction,  reconstruction  or  improvement of land or
property of a character  subject to the allowance for  depreciation  provided in
Section 167 of the Code, or (B) to redeem part or all of a Prior Issue which was
issued for such purposes.  In determining the Aggregate Face Amount of an issue,
certain Prior Issues and Included Bonds must be taken into account in accordance
with Article IV hereof. At the election of the issuer, the $1,000,000 


                                        7
<PAGE>

limitation may be increased to  $10,000,000,  provided that in  determining  the
Aggregate Face Amount of such issue Small Issue Capital  Expenditures  must also
be included.

         "Qualifying   Rehabilitation   Expenditures"  shall  have  the  meaning
ascribed to the phrase "rehabilitation expenditures" in Section 147(d)(3) of the
Code  (formerly  Section  103(b)(17)  of the 1954  Code)  which  describes  such
expenditures to mean any amount properly  chargeable to capital account which is
incurred by the Person  acquiring  the  building or property  (or  additions  or
improvements to property) in connection with the  rehabilitation  of a building.
In the case of an  integrated  operation  contained  in a  building  before  its
acquisition,  such  term  includes  rehabilitating  existing  equipment  in such
building or replacing it with equipment having  substantially the same function.
For  purposes of this  definition,  any amount  incurred  by a successor  to the
Person  acquiring the building or by the seller under a sales contract with such
Person shall be treated as incurred by such Person.

         The term Qualifying Rehabilitation Expenditures does not include:

         (A)      the cost of buying the existing building;

         (B)      any  expenditure   attributable  to  the  enlargement  of  the
existing building;

         (C)      any  expenditure  attributable  to  the  rehabilitation  of  a
certified  historic  structure  or building in a registered  historic  district,
unless:

                  (1)      the  rehabilitation  of such  historic  structure  or
         building  is a certified  rehabilitation  within the meaning of Section
         48(g)(2)(C) of the 1954 Code; or

                  (2)      the  building is not a certified  historic  structure
         and the Secretary of the Interior has certified to the Secretary of the
         Treasury  that the  building  is not of  historic  significance  to the
         district;

         (D)      any  expenditure  of the lessee of a building  if, on the date
the  rehabilitation  is completed,  the remaining term of the lease  (determined
without regard to renewal  periods) is less than the recovery period  determined
under Section 168(c) of the Code; or

         (E)      any  expenditure in connection  with the  rehabilitation  of a
building which is allocable to that portion of such building which is tax-exempt
use property within the meaning of 168(h) of the Code.

         "Rebate  Amount" means the amount  computed in accordance  with Section
7.3 hereof.

         "Regulations"  means the  Income  Tax  Regulations  promulgated  by the
Department  of  the  Treasury  from  time  to  time  and  includes   regulations
promulgated in final, temporary or proposed form.

         "Related  Person"  shall have the  meaning  ascribed  to such phrase in
Section 144(a)(3) of the Code (formerly  Section  103(b)(6)(C) of the 1954 Code)
which includes:


                                       8
<PAGE>

         (A)      Individual: "Related Persons" to an individual include but are
not limited to:

                  (1)      members of his  family.  The family of an  individual
         includes his brothers and sisters (whether by the whole or half blood),
         spouse, ancestors and lineal descendants;

                  (2)      a corporation  more than fifty percent (50%) in value
         of the outstanding  stock of which is owned (directly or indirectly) by
         or for that  individual,  his family or his partner.  An  individual is
         also  considered to own a  proportionate  share of the stock owned by a
         partnership,  corporation, estate or trust of which the individual is a
         partner, shareholder or beneficiary; and

                  (3)      a partnership,  if the individual  owns,  directly or
         indirectly,  more than fifty percent  (50%) of the capital  interest or
         profits interest in the partnership.

         (B)      Partnership:  "Related  Persons" to a partnership  include but
are not limited to:

                  (1)      a Person, if the Person owns, directly or indirectly,
         more than  fifty  percent  (50%) of the  capital  interest  or  profits
         interest in the partnership;

                  (2)      another  partnership  in  which  the same  Person  or
         Persons own,  directly or indirectly,  more than fifty percent (50%) of
         the capital interest or profits interest; and

                  (3)      a corporation,  if the same Persons own,  directly or
         indirectly,  more than fifty percent  (50%) of the capital  interest or
         profits  interest in the  partnership and more than fifty percent (50%)
         in value of the outstanding stock of the corporation.

         (C)      Corporation:  "Related  Persons" to a corporation  include but
are not limited to:

                  (1)      an individual who owns, directly or indirectly,  more
         than  fifty  percent  (50%) in value  of the  outstanding  stock of the
         corporation;

                  (2)      a partnership,  if the same Persons own,  directly or
         indirectly,  more than fifty percent  (50%) of the capital  interest or
         profits  interest in the  partnership and more than fifty percent (50%)
         in value of the outstanding stock of the corporation;

                  (3)      another S  corporation,  if the  corporation  is an S
         corporation  and the same Persons own more than fifty  percent (50%) in
         value of the outstanding stock of each corporation;

                  (4)      an S  corporation,  if the same Persons own more than
         fifty  percent  (50%)  in  value  of  the  outstanding  stock  of  each
         corporation;

                  (5)      another corporation, if such corporations are members
         of the same  controlled  group within the meaning of Section  267(f) of
         the Code; and


                                       9
<PAGE>

                  (6)      another  corporation  which is a  member  of the same
         "controlled  group  of  corporations".  The term  "controlled  group of
         corporations" means:

                           (a)      a parent-subsidiary controlled group;

                           (b)      a brother-sister controlled group;

                           (c)      a combined group consisting of three or more
         corporations  each of  which is a  member  of a group  of  corporations
         described  directly  above  in (a) or (b) and one of  which is a common
         parent corporation included in a parent-subsidiary controlled group and
         also is included in a brother-sister controlled group; and

                           (d)      two or more insurance  companies  subject to
         federal  taxation as Life Insurance  Companies under Section 801 of the
         Code which are members of a controlled group of corporations  described
         directly above in (a), (b) or (c).

         The term  "controlled  group of  corporations" is more fully defined in
Section 1563(a) of the Code,  except that,  pursuant to Section  144(a)(3)(B) of
the Code  (formerly  Section  103(b)(6)(C)  of the  1954  Code),  "more  than 50
percent" shall be substituted for "at least 80 percent" each place it appears in
Section 1563(a) of the Code.

         (D)      Miscellaneous:  The  following  are also  considered  "Related
Persons":

                  (1)      a grantor and a fiduciary of any trust;

                  (2)      a  fiduciary  of a trust and a  fiduciary  of another
         trust, if the same person is a grantor of both trusts;

                  (3)      a  fiduciary  of a trust  and a  beneficiary  of such
         trust;

                  (4)      a fiduciary of a trust and a  beneficiary  of another
         trust, if the same Person is a grantor of both trusts;

                  (5)      a fiduciary  of a trust and a  corporation  more than
         fifty  percent  (50%)  in value  of the  outstanding  stock of which is
         owned,  directly  or  indirectly,  by or for the  trust  or by or for a
         Person who is a grantor of the trust; and

                  (6)      a Person  and an  organization  which is exempt  from
         federal  income  taxation  under  Section  501 of the Code and which is
         controlled,  directly or indirectly,  by such Person or (if such Person
         is an individual) by members of the family of such individual.

         (E)      Stock Ownership:  For purposes of determining  stock ownership
under all of the above,  except  subparagraph  (C)(6)  (relating to members of a
"controlled group of corporations"), the following rules shall apply:


                                       10
<PAGE>

                  (1)      stock  owned,  directly  or  indirectly,  by or for a
         corporation,  partnership, estate or trust shall be considered as being
         owned   proportionately  by  or  for  its  shareholders,   partners  or
         beneficiaries;

                  (2)      an individual shall be considered as owning the stock
         owned, directly or indirectly, by or for his family;

                  (3)      an  individual  owning  (otherwise  than  through his
         family by the  application  of  subparagraph  [2] above) any stock in a
         corporation shall be considered as owning the stock owned,  directly or
         indirectly, by or for his partner;

                  (4)      the family of an  individual  shall  include only his
         brothers  and  sisters  (whether by the whole or half  blood),  spouse,
         ancestors and lineal descendants;

                  (5)      stock  constructively  owned by a Person by reason of
         the  application of  subparagraph  (1) above shall,  for the purpose of
         applying  subparagraph  (1),  (2) or (3) above,  be treated as actually
         owned by such Person, but stock  constructively  owned by an individual
         by reason of the application of subparagraph (2) or (3) above shall not
         be treated as owned by him for the  purpose  of again  applying  either
         subparagraph (2) or (3) in order to make another the constructive owner
         of such stock;

                  (6)      the  ownership of a capital or profits  interest in a
         partnership  shall be determined in accordance with  subparagraphs  (1)
         through (5) of this paragraph (E), excluding subparagraph (3); and

                  (7)      for the rules for  determining  stock  ownership  for
         purposes  of  determining  whether  a  corporation  is  a  member  of a
         "controlled group of corporations", see Section 1563(d) of the Code.

         (F)      For  purposes  of  determining  whether  a Person is a Related
Person to a Substantial  User, in addition to all of the other ways that Persons
may be deemed to be Related  Persons to a Substantial  User, a  partnership  and
each of its partners (and their spouses and minor  children) shall be treated as
Related Persons,  and an S corporation and each of its  shareholders  (and their
spouses and minor children) shall be treated as Related Persons.

         "Sinking Fund" shall have the meaning  ascribed to such term in Section
1.148-1(c)(2) of the Regulations which includes a debt service fund,  redemption
fund, reserve fund, replacement fund or any similar fund, to the extent that the
issuer reasonably expects the fund to pay principal or interest on the issue.

         "Small Issue Capital  Expenditures"  means any capital  expenditures as
such term is used or defined in Section  144(a)(4)(A)(ii)  of the Code (formerly
Section 103(b)(6)(D) of the 1954 Code) and in any 


                                       11
<PAGE>

Regulations,   rulings  or  other  authority  promulgated  thereunder.   Section
1.103-10(b)(2)(ii)  of the  Regulations  describes  the  same  to  mean  capital
expenditures which meet the following five tests:

         (A)      the  capital  expenditure  was  financed  other  than  from  a
Qualified Small Issue;

         (B)      the  capital  expenditure  was  paid or  incurred  during  the
six-year  period which begins three (3) years before the date of issuance of the
issue in question and ends three (3) years after such date;

         (C)      the Principal  User of the facility in  connection  with which
the property  resulting  from the capital  expenditure is used and the Principal
User of the facility financed with the proceeds of the issue in question are the
same Person or two or more Related Persons;

         (D)      both the  facilities  referred to in paragraph  (C) above were
(during  the  period  described  in  paragraph  (B)  above)  located in the same
incorporated  municipality  or in the same county  (outside of the  incorporated
municipalities in such county); and

         (E)      the capital expenditure was properly chargeable to the capital
account of any Person or state or local  governmental  unit (whether or not such
Person is the Principal  User of the facility or a Related  Person)  determined,
for  this  purpose,  without  regard  to any  rule  of the  Code  which  permits
expenditures  properly  chargeable to capital  accounts to be treated as current
expenses.

         The  Internal  Revenue  Service  has ruled  that  Small  Issue  Capital
Expenditures include, among other expenses, such expenses as construction period
interest,  costs of issuance,  costs of equipment  moved into the  jurisdiction,
certain  research  and  development  costs and amounts paid for  goodwill.  (See
Memorandum to  Accountants  for a more in-depth  discussion of what  constitutes
Small Issue Capital Expenditures.)

         "Substantial  User"  means  "substantial  user" as such term is used or
defined in Section  147(a)(1) of the Code  (formerly  Section  103(b)(13) of the
1954  Code)  and  any  Regulations,   rulings  or  other  authority  promulgated
thereunder.  Section 1.103-11 of the Regulations describes a Substantial User of
a facility to include any  nonexempt  person who  regularly  uses a part of such
facility  in his  trade  or  business.  However,  unless a  facility,  or a part
thereof, is constructed,  reconstructed or acquired specifically for a nonexempt
Person  or  Persons,  such  a  nonexempt  Person  shall  be  considered  to be a
Substantial  User of a facility  only if (A) the gross  revenue  derived by such
user with  respect to such  facility is more than five percent (5%) of the total
revenue derived by all users of such facility,  or (B) the amount of area of the
facility  occupied  by such user is more than five  percent  (5%) of the  entire
usable area of the  facility.  Under certain  facts and  circumstances,  where a
nonexempt  Person has a contractual or preemptive  right to the exclusive use of
property or a portion of property, such Person may be a Substantial User of such
property.  A lessee or sublessee of all or a portion of the facility may also be
a Substantial User of such facility.  A licensee or similar Person may also be a
Substantial User where his use is regular and is not merely a casual, infrequent
or sporadic use of the facility.  Absent special circumstances,  individuals who
are physically  present on or in the facility as employees of a Substantial User
shall not be deemed to be Substantial Users.

         "Test Period  Beneficiary" means "test period beneficiary" as such term
is used or  defined  in  Section  144(a)(10)(D)  of the Code  (formerly  Section
103(b)(15)  of the 1954 Code) and any  Regulations,  rulings or 


                                       12
<PAGE>

other  authority  promulgated  thereunder.  Section  144(a)(10)(D)  and  Section
1.103-10(i)(3) of the Regulations  describe a Test Period  Beneficiary to be any
Person who is an owner or Principal User of the facility financed by an issue of
tax-exempt  Private  Activity  Bonds,  or any  Related  Person to such  owner or
Principal User, at any time during the three-year  period beginning on the later
of (A) the date such  facility  was  placed in  service,  or (B) the date of the
issue of such bonds. Once a Person is a Test Period  Beneficiary with respect to
a facility,  he will remain a Test Period  Beneficiary for so long as such issue
remains outstanding, regardless of the fact that such Person may no longer be an
owner or  Principal  User of the  bond-financed  facility  or Related  Person to
either.  However,  a Related Person will be treated as a Test Period Beneficiary
only if that  Person is or becomes a Related  Person at any time during the test
period in which the  Principal  User in  question  was a  Principal  User of the
bond-financed  facility and such Principal User has not ceased to be a Principal
User at the time such other Person becomes a Related Person.

         "Variable  Rate  Obligation"  means any  obligation the Yield on which,
under the terms of the  obligation,  is  adjusted  periodically  according  to a
prescribed formula such that the Yield over the term of the obligation cannot be
determined on the date of original issuance.

         "Weighted  Average Rate of Interest"  of an  obligation  for any period
means the total  interest paid during such period  divided by the product of (A)
the  principal  amount of such  obligation,  and (B) the amount of time from the
beginning of such period that the obligation is outstanding (expressed in number
of years). Weighted Average Rate of Interest for two or more obligations for any
period shall mean the total  interest paid during such period divided by the sum
of the products described above.

         "Yield" means "yield" as such term is used or defined in Section 148(h)
of the Code and Section 1.148-1(b) of the Regulations,  which provide that Yield
generally  means that yield which,  when used in computing  the present value of
all  unconditionally  payable  payments  of  principal,  interest  and  fees for
qualified  guarantees  on the issue,  produces  an amount  equal to the  present
value,  using the same discount rate, of the aggregate  issue price of the issue
as of the issue date.

SECTION 1.2. INTERPRETATION. In the Tax Regulatory Agreement, unless the context
otherwise requires:

         (A)      words  importing  the  inclusion  in gross  income for federal
income tax purposes of interest income on any of the Bonds shall not include the
imposition of an alternative  minimum or preference tax or environmental  tax or
branch profits tax on any  Bondholder,  in the  calculation of which is included
the interest on any of the Bonds;

         (B)      the terms "hereby",  "hereof",  "herein",  "hereunder" and any
similar  terms  as  used  in the  Tax  Regulatory  Agreement  refer  to the  Tax
Regulatory Agreement,  and the term "heretofore" shall mean before, and the term
"hereafter" shall mean after, the date of the Tax Regulatory Agreement;

         (C)      words of masculine  gender shall mean and include  correlative
words of feminine and neuter  genders,  and words  importing the singular number
shall mean and include the plural number and vice versa; and


                                       13
<PAGE>

         (D)      any  certificates,  letters or  opinions  required to be given
pursuant to the Tax Regulatory  Agreement shall mean a signed document attesting
to or acknowledging the circumstances, representations, opinions of law or other
matters  therein  stated or set forth or setting  forth matters to be determined
pursuant to the Tax Regulatory Agreement.


                                       14
<PAGE>


                                   ARTICLE II

                      THE PROJECT AND THE PROJECT FACILITY


SECTION 2.1.  REPRESENTATIONS AND WARRANTIES OF THE COMPANY. In consideration of
the mutual  covenants  contained  herein  and in the  Financing  Documents,  the
Company hereby makes the following representations and warranties:

         (A)      The  Project   undertaken  by  the  Issuer   consists  of  the
acquisition, construction and installation of the Project Facility.

         (B)      The Project Facility, which is to be acquired, constructed and
installed  as part of the  Project,  is to be  located  entirely  in the Town of
Moreau, Saratoga County, New York.

         (C)      The Project  constitutes a "project" within the meaning of the
Act.

         (D)      (1)      As indicated in Paragraph (I) of Part III of Schedule
A hereto,  at least  ninety-five  percent (95%) of the Net Proceeds of the Bonds
will be expended for costs (a) of "acquisition, construction,  reconstruction or
improvement  of land or  property of a character  subject to the  allowance  for
depreciation"  within the meaning of Section  144(a)(1)(A) of the Code (formerly
Section  103(b)(6)(A) of the 1954 Code), (b) which are chargeable to the capital
account of the Company or would be so chargeable  either with an election of the
Company,  or but for the  election of the  Company,  to deduct the amount of the
item,  and (c) which were paid or incurred  within sixty days' prior to June 24,
1997 (such costs are hereinafter referred to as "Qualified Costs"). For purposes
of calculating the Net Proceeds of the Bonds,  Issuance Costs shall not be taken
into  account.  In addition,  in  calculating  the amount of the proceeds of the
Bonds  utilized  for  Qualified  Costs,  Issuance  Costs shall not be treated as
utilized for Qualified  Costs.  The Company shall ensure that, as of the date of
each disbursement  from the Project Fund, at least ninety-five  percent (95%) of
the total amount disbursed from the Project Fund has been utilized for Qualified
Costs.

                  (2)      No part of the proceeds of the Bonds shall be used to
         provide working capital or inventory.

                  (3)      As is  indicated  in  Paragraph  (F) of  Part  III of
         Schedule A, the Company  will not utilize more than two percent (2%) of
         the  aggregate  face  amount of the Bonds for the  payment of  Issuance
         Costs.

                  (4)      No expense for supervision by any officer or employee
         of the  Company  and no  expense  for work done by any such  officer or
         employee in  connection  with the Project is or will be included in the
         Cost of the Project,  except to the extent any such officer or employee
         was  specifically  employed  or  designated  by the  Company  for  such
         particular  purpose  and such  sums may be and are  capitalized  by the
         Company and are allocable to Qualified Costs.


                                       15
<PAGE>

         (E)      No  portion  of the  proceeds  of the  Bonds  is to be used to
provide a facility  the  primary  purpose of which is retail  food and  beverage
services,  automobile  sales or  service,  or the  provision  of  recreation  or
entertainment.

         (F)      No  portion  of the  proceeds  of the  Bonds  is to be used to
provide any of the following:

                  (1)      any private or commercial golf course,  country club,
         massage  parlor,   tennis  club,  skating  facility  (including  roller
         skating,   skateboard  and  ice  skating),   racquet  sports   facility
         (including any handball or racquetball court), hot tub facility, suntan
         facility or  racetrack  within the meaning of Section  144(a)(8) of the
         Code (formerly Section 103(b)(6)(O) of the 1954 Code); or

                  (2)      any airplane, skybox or other private luxury box, any
         health club facility,  any facility primarily used for gambling, or any
         store  the  principal  business  of  which  is the  sale  of  alcoholic
         beverages for  consumption  off premises  within the meaning of Section
         147(e) of the Code (formerly Section 103(b)(18) of the 1954 Code).

         (G)      No portion of the proceeds of the Bonds is to be used directly
or indirectly to provide  residential  real property for family units within the
meaning of Section 144(a)(5) of the Code (formerly  Section  103(b)(6)(3) of the
1954 Code).

         (H)      No portion of the  proceeds of the Bonds or of any other Prior
Issues required to be taken into account under Section 144(a)(11)(C) of the Code
was or is to be used, directly or indirectly,  (1) to provide  "depreciable farm
property"  within the meaning of Section  144(a)(11)(B)  of the Code,  or (2) to
acquire land (or an interest therein) to be used for farming purposes.

         (I)      The  Standard  Industrial  Classification  (SIC) Codes for the
Project Facility and the  proportionate  amount of the Net Proceeds of the Bonds
allocable with respect to each are as follows:


                                            Net Proceeds of Bonds
                                            allocable to each SIC
         SIC Number                              Number

             2821                                $1,200,000
             2869                                $4,800,000


         (J)      The Company  does not expect to sell or  otherwise  dispose of
the Project Facility, in whole or in part, while the Bonds are Outstanding.  The
Company does not expect to sell or trade in any real property as a result of the
issuance of the Bonds or the  acquisition,  construction and installation of the
Project Facility.


                                       16
<PAGE>

         (K)      No  portion  of the  Project  Facility  to be  constructed  or
installed  with the proceeds of the Bonds was  acquired  from the Company or any
other Principal User of the Project Facility or any Related Person thereto.

         (L)      Prior  to  June  24,  1997  neither  the  Company,  any  other
Principal  User of the Project  Facility nor any Related  Person to either had a
leasehold or other interest in the Project Facility.

SECTION 2.2. REPRESENTATIONS  REGARDING  MANUFACTURING.  The Company proposes to
construct  and  operate a synthetic  organic  chemical  manufacturing  facility.
Formaldehyde and  urea-formaldehyde  aminoplast products will be manufactured at
the proposed  site and  delivered  to local  customers in a bulk liquid form via
tanker  truck.   Basic  raw  materials   for  the  proposed   formaldehyde   and
urea-formaldehyde  manufacturing processes include methanol, urea, fresh air and
water. Basic raw materials for the proposed urea-formaldehyde aminoplast process
include  formaldehyde  or  urea-formaldehyde,  urea and water.  Methanol will be
shipped to the proposed site via tanker truck. Urea prills (solid balls) will be
delivered to the site via truck or rail.  All raw  material  and finished  goods
storage will be by above ground tanks on the proposed site.

The total cost of the project is expected to be  $8,600,000.  The following is a
breakdown of this cost:

         Land                                                  $282,500
         Construction
                  Manufacturing            $6,143,200
                  Support (Storage)         1,524,300
                  Non Manufacturing           650,000
                                                             $8,317,500
                                                             ----------

         Total                                               $8,600,000
                                                             ==========

Proceeds  from the Bonds will be used strictly for  manufacturing  construction.
The manufacturing support class includes raw material and finished goods storage
as well as office and lab space for support personnel. Office and lab space will
be used for  purchasing,  employee  relations and production  control as well as
quality control.  No proceeds from the bond issue will be used for support,  non
manufacturing or land costs.


                                       17
<PAGE>


                                   ARTICLE III

                        USE OF THE PROCEEDS OF THE BONDS


SECTION  3.1.  USE OF THE  PROCEEDS OF THE BONDS.  The Bonds are being issued to
provide funds to enable the Issuer to undertake the Project.  The Company hereby
certifies and represents  that it reasonably  expects that the total cost of the
Project,  the proceeds  received from the sale of the Bonds, any other financing
to be obtained  with  respect to the Project and the use of the  proceeds of the
Bonds and such other financing will be as set forth in Schedule A.

SECTION 3.2.  CERTIFICATION  AS TO PROJECT COSTS.  The Company hereby  certifies
with respect to Schedule A as follows:

         (A)      No property  included  in the Project  Facility to be financed
with the proceeds of the Bonds was owned by the Company, a Principal User of the
Project Facility or any Related Person to either.

         (B)      All of the proceeds of the Bonds will be used to finance items
constituting  the  Cost  of the  Project  as set  forth  in  Section  4.3 of the
Installment Sale Agreement.

         (C)      No person who was a Substantial  User of the Project  Facility
(or a Related Person thereto) at any time during the five-year  period preceding
the date of issue of the Bonds and who will  also be a  Substantial  User of the
Project  Facility (or a Related Person thereto) at any time during the five-year
period  following  the date of issue of the Bonds,  will  receive,  directly  or
indirectly,  proceeds of the Bonds in an amount  equal to five  percent  (5%) or
more of the face amount of the Bonds in payment for its  interest in the Project
Facility,  except to the extent the Company is reimbursed for items constituting
the Cost of the  Project  paid or incurred  pursuant  to and within  sixty days'
prior to the adoption by the Issuer of the Inducement Resolution for the Project
on June 24, 1997.

         (D)      No  "Acquisition"  of  any  portion  of the  Project  Facility
financed with the proceeds of the Bonds  "commenced" prior to within sixty days'
of June 24, 1997 within the meanings ascribed to such quoted terms under Section
1.103-(8)(a)(5) of the Regulations.

         (E)      Except as listed in Paragraph (E) of Schedule C hereto,  there
are no  Qualified  Small  Issues  other than the Bonds which are to be used with
respect to a single building,  an enclosed  shopping mall or a strip of offices,
stores  or  warehouses  constituting  part  of (or  sharing  substantial  common
facilities with) the Project Facility within the meaning of Section 144(a)(9) of
the Code.

SECTION  3.3.  AVERAGE  REASONABLY  EXPECTED  ECONOMIC  LIFE  AND  AVERAGE  BOND
MATURITY;  FORM 8038. (A) The Average Reasonably  Expected Economic Life of that
portion of the Project Facility  financed with the proceeds of the Bonds and the
Average  Maturity of the Bonds were  determined  in  accordance  with Schedule B
hereto.  As is indicated  on Schedule B, the Average  Maturity of the Bonds does
not exceed one hundred twenty percent (120%) of the Average Reasonably  Expected
Economic Life of that portion of the Project Facility financed with the proceeds
of the Bonds.


                                       18
<PAGE>

         (B)      The  Company   hereby   represents   and  warrants   that  the
information  contained in Internal  Revenue Service Form 8038 attached hereto as
Exhibit I is true and  correct,  including,  but not  limited  to,  the  Average
Maturity of the Bonds and the Average Reasonably  Expected Economic Life of that
portion of the Project  Facility  financed  with the proceeds of the Bonds.  The
Company  shall cause Bond  Counsel to file a copy of such Form 8038 with the New
York State Department of Economic  Development and obtain from that Department a
certification of the Governor that the Bonds satisfy the requirements of Section
146 of the Code  (relating to volume  limitation)  in sufficient  time that such
Form 8038,  accompanied by such certification,  can be filed in a timely fashion
with the Internal Revenue Service Center,  Philadelphia,  Pennsylvania  19255 as
required by Section 149(e) of the Code.

SECTION  3.4.  FINAL  REQUEST FOR  DISBURSEMENT.  In  connection  with its final
request for  disbursement  from the Project Fund, the Company  hereby  covenants
that it shall make all  certifications  and  deliver  all items  required by the
Indenture.

SECTION  3.5.  EXISTING  PROPERTY.  (A) In order to assure  compliance  with the
requirements  of  Section  147(d) of the Code  relating  to the  acquisition  of
existing  property,  the Company  hereby  covenants and agrees that it will make
Qualifying  Rehabilitation  Expenditures  with respect to any existing  building
acquired  with the  proceeds of the Bonds in an amount at least equal to fifteen
percent (15%) of the cost of acquiring such existing  building financed from the
proceeds of the Bonds  within two (2) years  after the later of the  issuance of
the Bonds or the acquisition of such existing  building.  The Company shall file
with  the  Trustee,  upon  the  making  of all  such  Qualifying  Rehabilitation
Expenditures,  an  accounting  setting  forth  the  amount  and  nature  of such
expenditures.

         (B)      No  portion  of the  proceeds  of the  Bonds  is to be used to
acquire  equipment  unless the first use of such  equipment  is pursuant to such
acquisition.

SECTION 3.6.  ACQUISITION  OF LAND. As set forth in Paragraph (A) of Part III of
Schedule  A, the total cost of land (or any  interest  therein)  included in the
Project is  $282,500.  $254,250  of the  proceeds  of the Bonds will be utilized
towards the acquisition of land.

SECTION 3.7. REFUNDING. None of the proceeds of the Bonds will be used to refund
any Private Activity Bond or Industrial Development Bond.


                                       19
<PAGE>


                                   ARTICLE IV

                       AGGREGATE FACE AMOUNT OF THE BONDS


SECTION 4.1.  REPRESENTATIONS  WITH REGARD TO THE  AGGREGATE  FACE AMOUNT OF THE
BONDS.  The Aggregate  Face Amount of the Bonds under Section 144(a) of the Code
is the sum of the aggregate  principal amount of the Bonds, Prior Issues,  Small
Issue Capital Expenditures and Included Bonds, to the extent such Included Bonds
are  not  within  the   definition  of  Prior  Issues  or  Small  Issue  Capital
Expenditures. The Issuer has elected the application of Section 144(a)(4) of the
Code,  pursuant  to  which  the  Aggregate  Face  Amount  of  the  Bonds  may be
$10,000,000  or less.  The  Company  makes  the  following  representations  and
warranties:

         (A)      Paragraphs  (A) through  (C) of Schedule C correctly  list the
names,  addresses,  tax  identification  numbers and prior outstanding issues of
Prior  Issues  used to  finance  the  Project  Facility  and all other  Included
Facilities  of all the  Principal  Users  of the  Project  Facility  and all the
Related Persons thereto.

         (B)      Paragraphs  (D) and (E) of  Schedule C  correctly  set forth a
true and accurate  listing of all Included Bonds which are  aggregated  with the
Bonds pursuant to Section  1.150-1 of the  Regulations and Revenue Ruling 81-216
or in accordance with Section 144(a)(4) and 144(a)(9) of the Code.

         (C)      Paragraph  (F) of  Schedule C sets  forth a true and  accurate
listing of all Small Issue Capital Expenditures paid or incurred with respect to
the Project Facility and all other Included Facilities.

         (D)      Paragraph (H) of Schedule C sets forth the  computation of the
Aggregate  Face Amount of the Bonds.  The Aggregate  Face Amount of the Bonds is
$8,600,000.

SECTION 4.2. COMPLIANCE WITH CAPITAL EXPENDITURE  LIMITATIONS.  (A) Within three
(3) years after the issuance of the Bonds, the Company will not pay or incur, or
permit to be paid or incurred,  Small Issue Capital  Expenditures  such that the
$10,000,000 limit on the Aggregate Face Amount of the Bonds contained in Section
144(a)(4) of the Code shall be exceeded.

         (B)      With  respect to the period  ending  three (3) years after the
date of issuance  of the Bonds,  and so long as the Bonds are  Outstanding,  the
Company shall keep (and shall cause Principal Users of the Project  Facility and
any Related Person thereto to keep) books and records sufficient to indicate the
nature and amount of any Small Issue Capital Expenditures.

         (C)      If at any time that any of the Bonds are Outstanding,  (1) the
books and  records  required  to be kept by this  Section  4.2,  (2) any  return
required  to be filed by the  Regulations,  or (3) any  audit of such  books and
records or any such return  indicate that the  limitation on the Aggregate  Face
Amount of the Bonds has been exceeded,  the Company shall  forthwith  deliver to
the Trustee a certificate indicating that such limitation may have been exceeded
and  requesting  the  Trustee  to  designate  Bond  Counsel to review the books,
records and other  documentation  referred to in this Section 4.2 and deliver to
the  Trustee and the 


                                       20
<PAGE>

Issuer an opinion of Bond  Counsel as to whether,  based on such books,  records
and other  documentation,  such  limitation  was exceeded  during the three-year
period beginning on the Closing Date.

SECTION 4.3. OTHER ACTION  AFFECTING THE AGGREGATE FACE AMOUNT OF THE BONDS. (A)
If, at any time during the three-year  period commencing on the date of issuance
of the Bonds,  the Company,  any other Principal User of the Project Facility or
any Related  Person to either  proposes  to take any action  which would cause a
Person not previously treated as a Principal User of the Project Facility or any
Included  Facility  or a Related  Person to such a  Principal  User to become so
treated,  including,  but not  limited to, (1)  merging or  consolidating  with,
acquiring  more than a fifty percent (50%)  interest in or being  acquired by or
having more than a fifty  percent  (50%)  interest in any other  Person who is a
Principal  User of any  Included  Facilities,  (2) leasing more than ten percent
(10%) of the Project  Facility  measured by the fair rental value  thereof,  (3)
entering  into any contract  with any Person under which such Person is entitled
to purchase the output of the Project Facility under terms that would cause such
Person to be a Principal User of the Project Facility, or (4) otherwise enjoying
a use  of  the  Project  Facility(other  than  a  short-term  use)  in a  degree
comparable  to the  enjoyment  of a principal  owner or  principal  lessee,  the
Company  shall  first file an opinion of Bond  Counsel  with the Trustee and the
Issuer  satisfactory  to each to the effect that such action would not cause the
interest  on the Bonds to be  includable  in the gross  income of the  recipient
thereof for federal income tax purposes.

         (B)      In addition,  if the Company or another  Principal User of the
Project Facility, or a Related Person to either,  proposes to become a Principal
User  of any  Included  Facility  at  any  time  within  the  three-year  period
commencing on the date of issuance of the Bonds,  the Company  hereby  covenants
and agrees that it will first file with the Trustee and the Issuer an opinion of
Bond Counsel satisfactory to each to the effect that such action would not cause
the interest on the Bonds to be  includable in the gross income of the recipient
thereof for federal income tax purposes.


                                       21
<PAGE>


                                    ARTICLE V

                           THE $40 MILLION LIMITATION


SECTION  5.1.  $40  MILLION  LIMITATION  REPRESENTATIONS.   The  Company  hereby
represents and warrants that:S

         (A)      The Test Period  Beneficiaries of the Project Facility and the
Related  Persons  to all such  Test  Period  Beneficiaries  are as set  forth in
Schedule D hereto. The allocation of the amount of the Bonds to each Test Period
Beneficiary  and such  Related  Persons and the  allocation  of the  outstanding
amount of tax-exempt Private Activity Bonds of each such Test Period Beneficiary
and its Related Persons are computed in accordance with the allocation  rules of
Section  144(a)(10) of the Code (formerly  Section  103(b)(15) of the 1954 Code)
and Section 1.103-10(a)(4) of the Regulations and are as set forth in Schedule D
hereto.

         (B)      The Aggregate  Face Amount of the Bonds  allocated to any Test
Period  Beneficiary with respect to the Project Facility,  when increased by the
outstanding  tax-exempt Private Activity Bonds allocated to such Beneficiary and
its Related Persons, does not exceed $40,000,000.

SECTION 5.2. COVENANT AS TO $40 MILLION LIMITATION. The Company hereby covenants
and agrees that, if, at any time during the three-year  period  beginning on the
later of the date of  issuance  of the  Bonds or the date on which  the  Project
Facility is placed in service,  the Company or any other  Principal  User of the
Project  Facility or Related Person to either  proposes to take any action which
would cause any Person not previously  treated as either a Principal User of the
Project  Facility or such  Related  Person to such  Principal  User to become so
treated,  and  thereby  to  become  a Test  Period  Beneficiary  of the  Project
Facility,  including,  but not limited to, (A)  merging or  consolidating  with,
acquiring  more than a fifty percent (50%)  interest in or being acquired by any
other Person,  (B) leasing more than ten percent (10%) of the Project  Facility,
measured by fair rental value, (C) increasing its percentage of ownership or use
of the Project  Facility,  (D) entering  into any contract with any Person under
which  such  Person is  entitled  to take  output  of the  Project  Facility  in
circumstances  that would cause such other Person to be a Principal  User of the
Project  Facility,  and (E)  otherwise  enjoying a use of the  Project  Facility
(other than a  short-term  use) in a degree  comparable  to the  enjoyment  of a
principal owner or principal lessee, prior to taking any such action the Company
shall file or cause to be filed with the  Issuer and the  Trustee a  certificate
containing the  information set forth in Schedule D which  establishes  that the
aggregate  outstanding  amount of tax-exempt Private Activity Bonds allocated to
such Test Period Beneficiary does not exceed $40,000,000.


                                       22
<PAGE>


                                   ARTICLE VI

                     COMPOSITE ISSUES AND FEDERAL GUARANTEES


SECTION 6.1.  COMPOSITE  AND OTHER ISSUES.  The Company  hereby  represents  and
warrants as follows:

         (A)      Except as listed in Paragraph  (D) of Schedule C, there are no
other  obligations  heretofore  issued  or to be  issued  by or on behalf of any
state,   territory  or  possession  of  the  United  States,  or  any  political
subdivision  of any of the  foregoing,  or of the  District of  Columbia,  which
constitute Private Activity Bonds and which are:

                  (1)      to be  sold at  substantially  the  same  time as the
         Bonds;

                  (2)      to be sold at substantially the same interest rate as
         the rate of interest on the Bonds;

                  (3)      to be sold  pursuant  to a common  plan of  marketing
         with the marketing of the Bonds; and

                  (4)      payable (a) directly or indirectly by the Company,  a
         Principal User of the Project Facility or a Related Person to either or
         (b) from a common or pooled  security which is used or available to pay
         debt service on the Bonds.

         For purposes of this Section 6.1,  obligations  are considered  sold on
the earlier of the date a commitment letter or a purchase agreement is executed.

         (B)      The Bonds are not issued as part of a larger  issue where such
larger issue  contains any other  obligations  the interest on which is excluded
from gross income under any provision of federal law.

SECTION 6.2. FEDERAL GUARANTEES. The Company represents that neither (A) payment
of principal of or interest on the Bonds or payments  under any of the Financing
Documents are guaranteed,  in whole or in part,  directly or indirectly,  by the
United States (or any agency or instrumentality thereof), nor (B) is any portion
of the  proceeds  of the  Bonds  to be used in  making  loans,  the  payment  of
principal or interest with respect to which is to be guaranteed  (in whole or in
part) by the  United  States  (or any  agency  or  instrumentality  thereof)  or
invested, directly or indirectly, in federally insured deposits or accounts, nor
(C) is the payment of  principal or interest on the Bonds  otherwise  indirectly
guaranteed  (in  whole  or in part)  by the  United  States  (or any  agency  or
instrumentality thereof);  provided, however, that the following investments are
permitted  and may be made:  (1)  investments  of  proceeds  of the Bonds for an
initial  temporary  period until the  proceeds  are needed for the Project,  (2)
investments   of  a  bona-fide   debt   service  fund  (as  defined  in  Section
1.103-13(b)(12) of the Regulations), (3) investments of a reserve which meet the
requirements  of Section 148(d) of the Code, (4)  investments in bonds issued by
the  United  States  Treasury,  or (5)  other  investments  permitted  under the
Regulations.


                                       23
<PAGE>


                                   ARTICLE VII

                                    ARBITRAGE


SECTION 7.1. ARBITRAGE  REPRESENTATIONS.  In connection with the issuance of the
Bonds,  the Company  hereby  represents,  covenants  and  reasonably  expects as
follows:

         (A)      The  Project  Facility  will  be  acquired,   constructed  and
installed by the Company pursuant to the Installment  Sale Agreement.  Under the
Installment Sale Agreement and the Indenture,  the Issuer will make available to
the Company the  proceeds  of the Bonds for the  purpose of  financing  all or a
portion of the Cost of the Project.

         (B)      (1)      The Company will be obligated  under the  Installment
Sale Agreement to make installment purchase payments in amounts corresponding to
the principal and interest  payable by the Issuer on the Bonds.  The installment
purchase payments payable under the Installment Sale Agreement are payable on or
before  each  Bond  Payment  Date in an  amount  equal to the  principal  of and
interest  payable on the Bonds on such Bond Payment Dates.  Such amounts will be
applied  against  the  Company's  obligation  to  reimburse  the Bank  under the
Reimbursement  Agreement for any draws on the Letter of Credit. The Company will
make such installment  purchase  payments from its general funds and no fund has
been nor will be set aside for such payments.

                  (2)      Accordingly, the Company will endeavor to ensure that
         all amounts  held in the Bond Fund and will be depleted at least once a
         year except for a "reasonable  carryover amount" (as defined in Section
         148-1(b)  of the  Regulations)  and that the Bond Fund and  Installment
         Payment  Account  qualifies  as a  "bona-fide  debt  service  fund" (as
         defined in Section 148-1(b) of the Regulations). The amounts on deposit
         in the Bond Fund may be  invested  at Higher  Yielding  Investments  as
         permitted by Section 148-9(d)(1) of the Regulations.

         (C)      The  Company  is  required  to pay as  additional  installment
purchase  payments any premium when due on the Bonds and the reasonable fees and
expenses of the Issuer and the Trustee and their respective  representatives  in
connection with their performance of the transactions  contemplated by the terms
of the Financing  Documents.  With the exception of the Issuer's  administrative
fee in the amount of  $38,250,  and the  reimbursement  of  reasonable  expenses
incurred  by  the  Issuer  and  its   representatives  in  connection  with  the
transactions  contemplated  thereby,  and certain other fees and expenses as set
forth or referred to therein,  there are no fees  previously  paid or  currently
payable or expected to be payable to the Issuer  directly or  indirectly  by the
Company or any guarantor of the Bonds.

         (D)      The Bonds will be placed by KeyBank National  Association (the
"Placement  Agent") at par plus  accrued  interest  to the  purchase  date.  The
Placement  Agent  will  charge a fee of  $60,000  for  placing  the  Bonds.  The
Placement  Agent has certified  that it is placing the Bonds at a price equal to
the  principal  amount  thereof,  plus accrued  interest to the  purchase  date.
Therefore,  the  principal  amount of the Bonds is the "issue  price" within the
meaning of Section  1.148-1(b)  of the  Regulations  which should be utilized in
calculating the Yield on the Bonds.


                                       24
<PAGE>

         (E)      The Yield to be derived by the  Issuer in the  aggregate  from
its  administrative  fee pursuant to the  Installment  Sale  Agreement  will not
exceed by more than  one-eighth  of one percent  (1/8 of 1%) per annum the yield
payable  by the  Issuer on the  Bonds.  It is not  expected  that  there will be
sufficient  revenues  and/or  reserves  accumulated or retained by the Issuer to
retire the Bonds significantly before maturity.

         (F)      (1)      In accordance  with the Indenture,  the proceeds from
the sale of the Bonds  (other than  accrued  interest on the Bonds which will be
deposited into the Bond Fund) will be deposited in the Project Fund. The Trustee
will disburse moneys on deposit in the Project Fund to the Company,  as agent of
the Issuer,  periodically as the  acquisition,  construction and installation of
the Project Facility progress upon  satisfaction of the conditions  contained in
Article  IV of the  Indenture  and  in  the  Reimbursement  Agreement  for  such
disbursement.  Earnings from  investments of amounts in the Project Fund will be
deposited in the Project Fund and upon satisfaction of the conditions  contained
in the Indenture will be disbursed to pay the Cost of the Project.  Such amounts
so  disbursed  will be applied to the payment of the Cost of the Project or used
to  reimburse  the  Company  for  items  constituting  the  Cost of the  Project
previously paid and incurred by it in accordance with the Indenture.

                  (2)      Prior  to  disbursement,  such  moneys  held  in  the
         Project  Fund may be  invested  at an  unrestricted  Yield  during  the
         applicable   temporary   periods  as  provided  in  the  Code  and  the
         Regulations;  provided, however, that any proceeds from such investment
         or reinvestment  of any proceeds of such moneys will,  within three (3)
         years of the  Closing  Date or within one (1) year after the receipt of
         such  investment  income,  be expended to pay the Cost of the  Project,
         applied to redeem  Bonds or  deposited in the Rebate Fund for rebate to
         the United States.

                  (3)      Any  amounts  remaining  in the  Project  Fund on the
         Completion  Date are to be applied,  subject to the rebate  requirement
         described in Section 7.3 hereof, to the redemption of Bonds.

                  (4)      All of the  proceeds  of the  sale of the  Bonds  are
         expected  to be  expended  for (a)  payment  of  expenses  incurred  in
         connection  with the issuance of the Bonds,  (b) payment of interest on
         the Bonds during the Construction  Period,  (c) payment of the costs of
         acquiring,  constructing and installing the Project  Facility,  and (d)
         making any rebate  payments to the United States within three (3) years
         of the Closing Date.

                  (5)      If a  portion  of the  proceeds  of the  Bonds or the
         earnings  thereon are not  necessary to complete the Project  Facility,
         such  amounts  shall be  transferred  from the Project Fund to the Bond
         Fund,  invested  at Yield no  greater  than the  Yield on the Bonds and
         utilized to redeem Bonds on the first  possible date, all in accordance
         with Revenue Procedures 79-5 and 81-22.

         (G)      (1)      The  anticipated  total cost and  completion  date of
acquisition,  construction  and  installation  of the  Project  Facility  are as
follows:


                                       25
<PAGE>

             COST                             ANTICIPATED DATE OF COMPLETION

         $8,600,000                                    June 30, 1998



                  (2)      The  total  amount  of  the  proceeds  of  the  Bonds
         deposited  in the Project  Fund will be expended to pay the Cost of the
         Project as follows:

                           (a)      $-0-  will  be   expended   for  payment  of
         interest   during  the   period  of   acquisition,   construction   and
         installation of the Project Facility; and

                           (b)      $120,000-  will  be  expended  for  Issuance
         Costs; and

                           (c)      $-0-  will  be  deposited  in  a  reasonably
         required reserve or replacement fund; and

                           (d)      $5,880,000  will be expended for the payment
         of other items of the Cost of the Project.

         (H)      The Company has  incurred or will incur  within six (6) months
from the Closing Date at least  $8,600,000 in  expenditures  for the Cost of the
Project,  which is an amount in  excess of two  percent  (2%) of the Cost of the
Project.

         (I)      The acquisition,  construction and installation of the Project
Facility financed with the proceeds of the Bonds will proceed with due diligence
to completion,  and all of the proceeds of the Bonds  available to pay the costs
of such  acquisition,  construction  or  installation  will be expended for such
purpose by June 30, 1998.

         (J)      The total amount of the  proceeds  received by the Issuer from
the sale of the Bonds,  less Issuance  Costs (not  exceeding two percent (2%) of
the  proceeds  of the  Bonds),  will not  exceed the  amount  necessary  for the
purposes of the Bonds, i.e., the costs of acquiring, constructing and installing
the Project Facility.

         (K)      The date of issuance of the Bonds has been  determined  solely
on the basis of bona-fide  financial reasons,  and to obtain a favorable rate of
interest on the Bonds,  and has not been  determined  with a view to  prolonging
abnormally the period  between the issuance of the Bonds and  expenditure of the
proceeds thereof.

         (L)      Pursuant  to Section  5.05 of the  Indenture,  the Trustee has
been  directed to  establish  the Rebate  Fund.  Pursuant to Section 5.05 of the
Indenture,  moneys in the Rebate  Fund will be applied  first to make the rebate
payments to the United  States  described in Section 7.4 hereof,  and any excess
funds will be  deposited in the Project  Fund prior to the  Completion  Date or,
after the  Completion  Date,  transferred  to the Bond Fund to be applied to the
redemption of Bonds.


                                       26
<PAGE>


         (M)      Pursuant  to Section  4.03 of the  Indenture,  the Trustee has
been directed to establish the Insurance and  Condemnation  Fund.  There are not
expected to be any insurance  proceeds or Condemnation  awards which will become
available to redeem or secure the Bonds.

         (N)      There is and will be no  segregated or  identifiable  fund not
described herein (including, but not limited to, a sinking fund, pledged fund or
similar fund, including, without limitation, any arrangement under which moneys,
securities or  obligations  are pledged  directly or indirectly to secure or for
payment of debt service on the Bonds or any  contract  securing the Bonds or any
arrangement providing for compensating balances to be maintained by the Company,
any guarantor or any Related Person to either with the Trustee or the Bank) held
by or on behalf of the Issuer, the Company, any guarantor, the Bank, the Trustee
or any holder of the Bonds which the  holders of the Bonds are  assured  will be
available to pay the principal of or interest and premium, if any, on the Bonds,
which will be pledged as security for the Bonds,  or which will  replace  moneys
that will be used to pay such principal, interest or premium, if any.

         (O)      The Project  Facility is not expected to be sold,  leased in a
transaction  which is  treated as a sale for  federal  income  tax  purposes  or
otherwise disposed of (except for ordinary, noncapitalized leases of the Project
Facility  [the  "Installment  Sales"]  entered into in the normal  course of the
Company's business),  in whole or in part, while the Bonds are Outstanding.  Set
forth below are covenants of the Company intended to insure that any Installment
Sale of the Project  Facility by the Company  will be a "true lease" for federal
income tax purposes and will not,  therefore,  be an  "acquired  obligation"  to
which the proceeds of the Bonds must be allocated pursuant to the Regulations:

                  (1)      any  Installment  Sale will have a term such that the
         economic  useful life of the Project  Facility at the expiration of the
         Installment Sale term, including all fixed-rate renewal option periods,
         will equal at least twenty  percent (20%) of the  reasonably  estimated
         economic useful life of the Project Facility at the commencement of the
         Installment Sale;

                  (2)      the fair market value of the Project  Facility at the
         end of the term of any such  Installment  Sale including all fixed-rate
         renewal  option periods will exceed twenty percent (20%) of the Project
         Facility's original cost, without taking inflation into account;

                  (3)      there  will be no  restrictions  as to the use of the
         Project  Facility  at the  end of the  term  of any of the  Installment
         Sales;

                  (4)      none of the lessees under any  Installment  Sale will
         have any right to purchase  all or any portion of the Project  Facility
         for less than its fair market value at the time the right is exercised;

                  (5)      payments under any Installment Sale do not exceed the
         current fair rental value of the Project Facility;


                                       27
<PAGE>

                  (6)      any and all  leases to a third  party of the  Project
         Facility  or any  part  thereof  entered  into  by any  lessee  under a
         Installment  Sale, its successors or assigns will be fully  subordinate
         to the Installment Sales;

                  (7)      at the end of the term of any  Installment  Sale, the
         Project  Facility  will be useful or useable by the Company or suitable
         for use by or  leasing  to Persons  other  than the  tenants  under the
         Installment Sales or a Related Person;

                  (8)      no lessee under any Installment Sale (nor any Related
         Person) may be a Person who furnishes,  or has  furnished,  any part of
         the cost of the Project Facility or who loans or guarantees any portion
         of the funds used to pay the cost of the Project Facility;

                  (9)      the Company will have no contractual  right under any
         Installment  Sale to cause any Person to purchase the Project  Facility
         or to abandon the Project Facility to any Person; and

                  (10)     the Company  will not execute  any  Installment  Sale
         unless it  reasonably  expects,  at the time such  Installment  Sale is
         executed,  that it will  receive a profit  from such  Installment  Sale
         apart from the value of or benefits  obtained from any tax  deductions,
         losses,  allowances,  credits and any other tax attributes arising from
         the ownership of the Project Facility and the Installment Sale.

         The  Company  reasonably  expects,  therefore,  that it is, and will be
throughout the term of any Installment  Sale, the owner of the Project  Facility
for federal income tax purposes.  For purposes of this Section 7.1(O), the terms
of the  Installment  Sales shall not include any optional  renewal periods other
than at fair rental value at the time the option is exercised.

         (P)      Except as specifically  set forth in paragraphs (B) and (F) of
this Section 7.1, no portion of the proceeds of the Bonds is expected to be used
directly or  indirectly to acquire  Higher  Yielding  Investments  or to replace
funds used directly or indirectly to acquire Higher Yielding Investments.

         (Q)      Except as specifically  set forth in paragraphs (B) and (F) of
this Section 7.1, no Investment  Property will be pledged as collateral  for the
payment of the principal of or interest on the Bonds.

         (R)      The  proceeds  of the Bonds will not be used to  refinance  or
refund any prior Industrial  Development Bond or Private Activity Bond issued by
the Issuer with respect to the Project Facility.

         (S)      The Company has not entered into any transaction to reduce the
Yield on the investment of the Gross Proceeds of the Bonds in such a manner that
the amount to be rebated  to the  federal  government  pursuant  to Section  7.4
hereof is less than it would have been had the transaction  been at arm's-length
and had the  Yield  on the  Bonds  not  been  relevant  to  either  party to the
transaction (a "Prohibited Payment").

         (T)      The following are "safe harbor" provisions for compliance with
the  fair  market  value  rule  contained  in  Section  1.148(d)(6)(ii)  of  the
Regulations   with  respect  to  investing  in  certificates  of  deposit:   the
certificate of deposit must have a fixed interest rte, a fixed payment schedule,
and a  substantial  penalty for early  withdrawal.  The  purchase  price of such
certificate  of deposit is treated as its fair market value on 


                                       28
<PAGE>

the Purchase  date if the yield on the  certificate  of deposit is not less than
(1) the yield on reasonably  comparable direct obligations of the United States,
and (2) the  highest  yield that is  published  or posted by the  provider to be
currently available from the provider on reasonably  comparable  certificates of
deposit offered to the public.

         (U)      Any  investment of Bond  proceeds in a "guaranteed  investment
contract"  (i.e.  a  Nonpurpose  Investment  that  has  specifically  negotiated
withdrawal or  reinvestment  provisions and a specifically  negotiated  interest
rate  [including  any  agreement  to supply  investments  on two or more  future
dates]) must meet the rules of Section  1.148-5(d)(6)(iii) of the Regulations to
be considered to be in an amount not greater than the fair market value.

         (V)      The amount of  proceeds of the sale of the Bonds which is part
of any  reasonably  required  reserve  or  replacement  fund will not exceed ten
percent (10%) of the proceeds of the Bonds.

         (W)      The  Bonds are not being  issued to enable  the  Issuer or the
Company to exploit the difference  between tax-exempt and taxable interest rates
to  gain a  material  advantage  and  increase  the  burden  on the  market  for
tax-exempt obligations in any manner, including,  without limitation, by selling
a bond that would not otherwise be sold, or selling a larger bond, or issuing it
sooner or permitting  it to remain  outstanding  longer than would  otherwise be
necessary.

         (X)      The representations set forth herein may be relied upon by the
Issuer in issuing  its  arbitrage  certification  pursuant to Section 148 of the
Code and Sections 1.148-0 through  1.148-11 of the Regulations.  The Company has
reviewed  the  Arbitrage  Certificate  of the  Issuer,  and,  to the best of its
knowledge,  information and belief,  the facts,  estimates and circumstances set
forth  therein are  accurate and complete in all respects and there are no other
facts,  estimates  or  circumstances  that  would  change the  expectations  and
representations of the Issuer set forth therein.

SECTION 7.2. ARBITRAGE  COMPLIANCE.  The Company acknowledges that the continued
exemption  of interest on the Bonds from federal  income  taxation  depends,  in
part, upon compliance with the arbitrage  limitations  imposed by Section 148 of
the Code,  including the rebate requirement  described in Section 7.3 hereof and
the one hundred-fifty  percent requirement  described in Section 7.7 hereof. The
Issuer has, in the Installment  Sale  Agreement,  authorized the Company to take
all actions necessary to comply with the rebate requirements. The Company hereby
agrees and covenants that it shall not permit at any time any of the proceeds of
the Bonds or other funds of the Company to be used,  directly or indirectly,  to
acquire any asset or obligation, the acquisition of which would cause any of the
Bonds to be an  "arbitrage  bond" for  purposes of Section 148 of the Code.  The
Company  further  agrees and covenants that it shall do and perform all acts and
things  necessary in order to assure that the  requirements of Section 148(f) of
the Code (formerly Section 103(a)(6) of the 1954 Code) are met. To that end, the
Company,  on behalf of the  Issuer,  shall take the  actions  described  in such
Sections 7.3 through 7.7 hereof and any other actions required under Section 148
and the  applicable  Regulations  with respect to the  investment of proceeds on
deposit in the funds and accounts established under the Indenture.


                                       29
<PAGE>

SECTION 7.3. CALCULATION OF REBATE AMOUNT.  Section 148(f) of the Code (formerly
Section 103(a)(6) of the 1954 Code) requires the payment to the United States of
the excess of the aggregate amount earned on the investment of Gross Proceeds in
Nonpurpose  Investments  over the amount  that  would  have been  earned on such
investments  had the amount so  invested  been  invested  at a rate equal to the
Yield on the Bonds, together with any income attributable to such excess. Except
as provided below,  all the funds and accounts  established  under the Indenture
are subject to this  requirement.  In order to meet the rebate  requirements  of
such Section  148(f),  the Company  agrees and  covenants to take the  following
actions:

         (A)      For each  investment of amounts held with respect to the Bonds
in the various funds and accounts  established under the Indenture,  the Company
shall record the purchase date of such investment,  its purchase price, its Fair
Market Value,  accrued  interest due on its purchase date, its face amount,  its
coupon rate, its yield to maturity,  the frequency of its interest payments, its
disposition  price  and its  disposition  date.  The  yield to  maturity  for an
investment  means that discount rate,  based on semiannual  compounding,  which,
when  used  to  determine  the  present  value  on the  purchase  date  of  such
investment, or the date on which the investment becomes a Nonpurpose Investment,
whichever  is  later,  of  all  payments  of  principal  and  interest  on  such
investment,  gives an amount equal to the Fair Market  Value of such  investment
plus accrued interest due on such date.

         (B)      The  aggregate  amount  earned  on  the  investment  of  Gross
Proceeds in Nonpurpose Investments for each Computation Period shall include all
income  realized under federal income tax accounting  principles with respect to
such Nonpurpose  Investments and with respect to the  reinvestment of investment
receipts from such  Nonpurpose  Investments  (without  regard to the transaction
costs  incurred in acquiring,  carrying,  selling or redeeming  such  Nonpurpose
Investments).  Such income shall include, for example,  gain or loss realized on
the  disposition of such  Nonpurpose  Investments  (without  regard to when such
gains are taken into  account  under  Section 453 of the Code) and income  under
Section 1272 of the Code. In addition, where Nonpurpose Investments are retained
after  retirement of the Bonds, any unrealized gains or losses as of the date of
retirement of the Bonds must be taken into account in calculating  the aggregate
amount earned on such Nonpurpose Investments.  In addition, the aggregate amount
earned on Nonpurpose  Investments  in any  Computation  Period shall include the
gain or loss on the sale of any investment  determined by  subtracting  the Fair
Market Value of the investment from the disposition price of the investment.

         (C)      For each Computation  Period specified in paragraph (D) below,
(1) if the Bond issue contains no Variable Rate  Obligations,  then the Yield on
the Bonds shall be computed as required by Section 1.148-1(b) of the Regulations
using  payments of principal and interest  actually paid through the last day of
the  Computation  Period,  and  payments of principal  and  interest  reasonably
expected  to be paid after the  Computation  Period,  and using as the  purchase
price of the Bonds the initial  offering price to the public (not including bond
houses and brokers,  or similar persons or organizations  acting in the capacity
of underwriters or wholesalers) at which price a substantial amount of the Bonds
were sold,  or, if privately  placed,  the price paid by the first buyer of such
obligations;  or (2) if the Bonds contain Variable Rate  Obligations  (including
adjustable  mode  bonds),  then the  Yield on the  Bonds  shall be  computed  as
required by Section  1.148-1(b) of the  Regulations  using payments of principal
actually  paid and  interest  accrued  through  the last day of the  Computation
Period and  payments of  principal  and  interest  expected to be made after the
Computation  Period,  assuming a rate of interest equal to the Weighted  Average
Rate of Interest 


                                       30
<PAGE>

from the date of original  issuance  of the Bonds to the end of the  Computation
Period,  and using as the  purchase  price of the Bonds the amount  described in
clause (1) of this paragraph (C). For purposes of this calculation, the fee paid
by the Company for the Letter of Credit is treated as interest.

         (D)      Subject to the special rules set forth in paragraph (E) below,
the Company shall  determine the amount of earnings  received on all investments
described  in  paragraph  (A)  above,  other  than  investments  in  obligations
described in Section  103(a) of the Code or  investments  of amounts held in the
Rebate  Fund,   during  the  Computation   Periods  ending  with  the  following
determination  dates: (1) annually on the first  anniversary of the Closing Date
and each  succeeding  anniversary  thereof;  (2) the Maturity  Date;  (3) if all
Outstanding  Bonds are paid or redeemed  prior to the Maturity Date, the date of
such redemption; (4) the date of expenditure of all the proceeds of the Bonds on
completion  of the  Project  Facility;  and (5) in the  event  of  damage  to or
Condemnation  of the  Project  Facility,  the  date  of the  expenditure  of the
proceeds of any insurance  settlement or Condemnation award on the completion of
the restoration of the Project Facility.

         (E)      (1)      Except as provided in paragraph (F) below,  if all of
the Gross  Proceeds of the Bonds have been expended for the purpose of the issue
within six (6) months after the date of original issuance of the Bonds, then the
Rebate  Amount  shall be zero (0)  until  such time as either  (a)  amounts  are
received from the sale, Condemnation,  casualty, title loss or other disposition
of the Project  Facility or any part thereof  (which amounts will be held in the
Insurance and  Condemnation  Fund),  or (b) any other amounts  become pledged as
security for the Bonds,  and neither of such amounts are expended on the payment
of principal or interest on the Bonds within thirteen (13) months of the date of
their receipt.  The Company shall evidence  qualification  for the six (6) month
exception  by  delivering  to the Trustee the  documentation  required for final
disbursement  of moneys from the Project  Fund  pursuant to Section  4.01 of the
Indenture  and  receiving  the balance on deposit in the Project Fund within six
(6) months  after the date of  original  issuance  of the Bonds.  The  six-month
exception  provided by this paragraph (E) is  inapplicable  if any reserve fund,
sinking  fund or pledged  fund,  other than a  bona-fide  debt  service  fund as
defined in Section 1.148-1(b) of the Regulations, is maintained for the Bonds.

                  (2)      In  determining  whether  the Gross  Proceeds  of the
         Bonds have been  expended  within the  six-month  period  described  in
         clause (1) above,  there  shall not be taken into  account  any amounts
         held in the  Bond  Fund,  provided  such  fund  continues  to  remain a
         bona-fide  debt service fund (as defined in Section  1.148-1(b)  of the
         Regulations)  which is  depleted  once a year  except for a  reasonable
         carryover  amount  not  exceeding  the  greater  of (a) one (1)  year's
         earnings  on the Bond Fund or (b)  one-twelfth  (1/12)  of annual  debt
         service on the Bonds.

         (F)      For each Computation  Period specified in paragraph (D) above,
there shall be calculated for each  investment  described in paragraph (A) above
(other than investments held in the Rebate Fund) an amount equal to the earnings
which would have been received on such investment if in the  Computation  Period
an amount equal to the Fair Market Value of such  investment were invested at an
interest  rate equal to the Yield on the Bonds as  described  in  paragraph  (C)
above.

         (G)      For each Computation  Period specified in paragraph (D) above,
the Company shall  calculate the Rebate Amount,  an amount (to be rounded to the
next larger whole number of cents) equal to 


                                       31
<PAGE>

the aggregate  amount earned on the  investment of Gross  Proceeds in Nonpurpose
Investments  determined in paragraph (B) above,  less the amounts  determined in
paragraph  (F) above,  plus any  interest  earned on such  amount,  and less the
amount which has previously  been paid to the United States  pursuant to Section
7.4 hereof.

         (H)      For each Computation  Period specified in paragraph (D) above,
the Company shall furnish the Trustee in writing, within fifteen (15) days after
the end of the Computation  Period, a computation of the Rebate Amount,  and (1)
if the Rebate  Amount  exceeds  the amount on  deposit in the Rebate  Fund,  the
Company shall  instruct the Trustee to deposit an amount in the Rebate Fund such
that the  balance in the Rebate Fund after such  deposit  shall equal the Rebate
Amount,  the Trustee to withdraw  such amount from the Project Fund prior to the
Completion Date; provided, however, that, if the Completion Date is passed or if
insufficient  funds are available in the Project Fund,  the Company shall direct
the Trustee in writing to withdraw  excess funds from other funds or accounts to
be deposited in the Rebate Fund or  contribute  moneys from other sources in the
amount  necessary to deposit the full Rebate Amount in the Rebate Fund;  and (2)
if the amount in the Rebate Fund exceeds the Rebate  Amount,  the Company  shall
instruct  the Trustee to withdraw  such excess  amount and deposit it (a) in the
Project  Fund  prior to the  Completion  Date or (b) in the Bond Fund  after the
Completion  Date to be used to redeem Bonds in  accordance  with Article VIII of
the Indenture.

SECTION 7.4. PAYMENTS TO UNITED STATES. (A) Within sixty (60) days after the end
of the fifth  Bond Year and the end of every  fifth  Bond Year  thereafter,  the
Company  shall  direct the  Trustee in writing to pay to the United  States,  an
amount equal to ninety  percent  (90%) of the Rebate  Amount.  The Company shall
direct the Trustee in writing to pay to the United States, not later than thirty
(30) days after the last Outstanding Bonds are redeemed, the balance, if any, in
the  Rebate  Fund.  In  addition,  on the date that the  Trustee  makes any such
payment,  the  Company  shall pay or cause to be paid to the  United  States any
additional amounts required to be paid under Section 148(f) of the Code.

         (B)      The Company  shall  direct the Trustee that each payment of an
installment  be made  to the  Internal  Revenue  Service  Center,  Philadelphia,
Pennsylvania  19255. Each payment shall be accompanied by a copy of the Internal
Revenue  Service  Form 8038  filed  with  respect  to the Bonds and a  statement
prepared by the Company summarizing the determination of the Rebate Amount.

         (C)      If, during any Computation Period, the aggregate amount earned
on Nonpurpose  Investments in which the Gross Proceeds of the Bonds are invested
is less than the amount that would have been earned if the  obligations had been
invested  at a rate equal to the Yield on the Bonds,  as  determined  in Section
7.3(C)  hereof,  no  such  deficit  may be  recovered  from  any  Rebate  Amount
previously paid to the United States.

SECTION 7.5.  RECORDKEEPING.  In  connection  with the rebate  requirement,  the
Company shall maintain the following records:

         (A)      The Company shall retain  records of the  determinations  made
pursuant to Section 7.3 hereof until six (6) years after the  retirement  of the
last of the Bonds.


                                       32
<PAGE>

         (B)      The Company shall record all amounts paid to the United States
pursuant to Section 7.4 hereof.  The Company shall furnish to the Issuer and the
Trustee copies of the materials filed with the Internal Revenue Service.

SECTION 7.6. PROHIBITED PAYMENT COVENANT.  The Company covenants and agrees that
it shall not enter into any transaction to reduce the Yield on the investment of
the Gross  Proceeds of the Bonds in such a manner that the Rebate Amount is less
than it would have been had the  transaction  been at  arm's-length  and had the
Yield on the Bonds not been relevant to either party to such transaction.

SECTION  7.7.  COMPANY  RESPONSIBILITY.  The Company  hereby  acknowledges  that
compliance  with this  Article  VII shall be solely  the  responsibility  of the
Company  and  that   neither   the  Issuer  nor  the  Trustee   shall  have  any
responsibility therefor.


                                       33
<PAGE>


                                  ARTICLE VIII

                            COVENANTS AND AMENDMENTS


SECTION 8.1. COMPLIANCE WITH CODE. (A) The Company covenants and agrees that (1)
it will never permit the use of the Gross Proceeds of the Bonds, or take or omit
to take any action,  which  would  cause  interest on the Bonds to be subject to
federal income  taxation,  and (2) it shall at all times do and perform all acts
and things necessary or desirable and within its control in order to assure that
interest paid on the Bonds shall,  for the purposes of federal income  taxation,
be excludable  from the gross income of the  recipients  thereof and exempt from
such taxation,  except in the event that such recipient is a Substantial User of
the Project Facility or Related Person to such Substantial User.

         (B)      The Company acknowledges that the covenants and conditions set
forth in Articles II-VII of the Tax Regulatory Agreement are based upon the Code
and  Regulations  as  they  exist  on the  date  hereof  and  that  the  Code or
Regulations  may  be  subsequently   interpreted  or  modified  by  the  federal
government  in a manner  which is  inconsistent  with the  covenants  set  forth
herein.   The  Company  agrees  that  any  such   subsequent   modification   or
interpretation of the Code or Regulations will be deemed a requirement that must
be met pursuant to the general tax covenant set forth in paragraph (A) above.

SECTION 8.2.  AMENDMENT.  The Tax Regulatory  Agreement may be amended only with
the concurring written consent of the Issuer, the Company and the Trustee.

SECTION 8.3. NOTICES. (A) Any notice, demand, direction, certificate, opinion of
counsel,  request,  instrument or other communication  authorized or required by
the Tax  Regulatory  Agreement  to be  given to or filed  with the  Issuer,  the
Company or the Trustee shall be deemed to have been sufficiently  given or filed
for all purposes of the Tax  Regulatory  Agreement if and when delivered or sent
by registered or certified mail,  return receipt  requested,  postage prepaid to
the addresses listed in Section 1103 of the Indenture.

         (B)      The Issuer,  the Company and the Trustee  may, by like notice,
designate  any  further  or  different  addresses  to which  subsequent  notice,
demands, directions, certificates, opinions of counsel, requests, instruments or
other  communications  hereunder shall be sent. Any notice,  demand,  direction,
certificate,  opinion of counsel,  request,  instrument  or other  communication
hereunder shall,  except as may expressly be provided herein,  be deemed to have
been delivered or given as of the date it shall have been mailed.

SECTION 8.4. PARTIES INTERESTED HEREIN.  Nothing in the Tax Regulatory Agreement
expressed or implied is intended or shall be  construed  to confer  upon,  or to
give to, any Person,  other than the  Issuer,  the  Company,  the Trustee or the
holders of the Bonds,  any right,  remedy or claim under or by reason of the Tax
Regulatory Agreement or any covenant, condition or stipulation thereof.

SECTION 8.5.  COUNTERPARTS.  The Tax Regulatory  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 instrument.


                                       34
<PAGE>




         IN WITNESS  WHEREOF,  the  Company  has  caused  these  presents  to be
executed in its name and behalf for the  benefit of the Issuer,  the Trustee and
the holders of the Bonds, all as of the day and year first above written.



                                              SPURLOCK ADHESIVES, INC.


                                              By: /s/ Phillip S. Sumpter
                                                  ------------------------------
                                              Name: Phillip S. Sumpter     
                                                    ----------------------------
                                              Title: Executive Vice President
                                                     ---------------------------



                                       35
<PAGE>


                                   SCHEDULE A

                                     PART I

                 SUMMARY OF ACQUISITION AND CONSTRUCTION COSTS*


                                                                   Amount To
                                                                   Be Financed
                                                                   With Bond
                                                   Cost             Proceeds
                                                   ----             --------

(A) Purchase of Real Property                    $282,500             $254,250
    (See Part III, paragraph (A))

(B) Purchase of Project Facility                   -0-                 -0-
    (See Part III, paragraph (B))

(C) Construction or Renovation                 $8,047,500          $5,625,750
    Costs (See Part III, paragraph (C))

(D) Closing Costs                                  -0-                 -0-
    (See Part III, paragraph (E))

(E) Issuance Costs (See                          $210,000            $120,000
    Part III, paragraph (F))

(F) Miscellaneous Costs                           $60,000              -0-
                                               ----------          ----------
    (See Part III, paragraph (H))

            TOTAL                              $8,600,000          $6,000,000











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

*See detailed itemization attached.


                                      A-1
<PAGE>


                                   SCHEDULE A

                                     PART II

                          SUMMARY OF SOURCES OF FUNDS*


                                                                     Amount
                                                                     ------

(A)  Debt                                                          $7,500,000

(B)  Investment Earnings/Equity                                    $1,100,000

(D)  Miscellaneous                                                     -0-
                                                                   ----------

TOTAL SOURCES OF FUNDS                                             $8,600,000









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

*See detailed itemization attached.


                                      A-2
<PAGE>


                                   SCHEDULE A

                                    PART III

                ITEMIZATION OF ACQUISITION AND CONSTRUCTION COSTS


        Instructions:  If any  item is  inapplicable,  please  mark  "N/A".  The
"Amount  to be  Financed  with Bond  Proceeds"  should  include  any  investment
proceeds earned from the investment of Bond proceeds.

<TABLE>
<CAPTION>

<S>                                                                                                     <C>      
(A)     Purchase of Real Property.  Attach any real estate contract.

                      ITEM                                                                                   COST

        (1)    (a)    Contract Purchase Price                                                            $282,500

                      TOTAL PURCHASE PRICE                                                               $282,500

                      TOTAL LAND COSTS                                                                   $282,500

                      Amount of Land Costs to be
                      Financed with Bond Proceeds                                                       $254,250-


(B)     Purchase of Project Facility.

                      ITEM                                                                                   COST

        (1)    New Project Facility                                                                           -0-

               TOTAL NEW PROJECT FACILITY COSTS                                                               -0-

               Amount of New Project Facility Costs to be
               Financed with Bond Proceeds                                                                    -0-

        (2)    Portion of New Project Facility Costs Applicable
               to Replacing Project Facility Used in an Integrated
               Operation Within the Facility Prior to
               Bond Issuance                                                                                  -0-

                                      A-3
<PAGE>

        (3)    Used Project Facility                                                                          -0-


               TOTAL PROJECT FACILITY COSTS                                                                   -0-


               Total Project Facility Costs to be
               Financed with Bond Proceeds                                                                    -0-

(C) Construction or Renovation Costs. Attach any contracts.

               ITEM                                                                                          COST

        (1)    Contract Cost                                                                           $7,743,500
        (2)    Licenses and Permits
        (3)    Architect  (attach any  Architect's  contract) 
        (4)    Engineering  
        (5)    Legal Fees pertaining to construction 
        (6)    Interest during construction
        (7)    Payment and Performance Bond                                                               $43,000
        (8)    Contingency                                                                               $118,000
        (9)    Other (specify) Item: Renovations, etc.
               Item: Outside surface repairs                                                             $144,000
                                                                                                       ----------

                      TOTAL CONSTRUCTION COSTS                                                         $8,049,500

                      Amount of Construction Costs to be
                      Financed with Bond Proceeds                                                      $5,625,750

(D)     Construction Costs Constituting Qualifying Rehabilitation  Expenditures.
        This section is required to be completed only if an existing building
        is being acquired.                                                                                    N/A


                      TOTAL CONSTRUCTION COSTS CONSTITUTING
                      QUALIFYING REHABILITATION EXPENDITURES                                                  N/A


(E)     Closing  Costs of Loan  (other  than stated in  paragraph  (A)(3)  above
        relating to the purchase of real property
        and paragraph (F) below relating to Issuance Costs).                                                  -0-


                                      A-4
<PAGE>

                      ITEM                                                                                   COST

        (1)    Recordation of Instruments                                                                     -0-
        (2)    Title Insurance                                                                                -0-
        (3)    Survey                                                                                         -0-

                      TOTAL CLOSING COSTS OF LOAN                                                             -0-

                      Amount of Closing Costs of Loan to be
                      Financed with Bond Proceeds                                                             -0-

(F)     Issuance Costs.

                      ITEM                                                                                COST

             (1)      DTC
             (2)      Trustee's fee                                                                     $5,000
             (3)      Trustee's Counsel fee                                                             $5,000
             (4)      Company Counsel fee                                                              $50,000
             (5)      Bond, Bank and Placement Agent's Counsel fee                                     $50,000
             (6)      CUSIP fee
             (7)      Printing and Miscellaneous
             (8)      Placement fee                                                                    $60,000
             (9)      Issuer's fee                                                                     $30,000
            (10)      Issuer's Counsel fee                                                             $10,000
                                                                                                    ----------
               (A)    TOTAL ISSUANCE COSTS                                                            $210,000

               (B)    Amount of Issuance Costs to be Financed with Bond Proceeds
                      (subject
                      to a maximum of 2% of Bond proceeds)                                          -$120,000-
(G)     Reasonably Required Reserve or Replacement Fund.

                              NONE

(H)     Miscellaneous Costs. Complete this section in every transaction.

                      ITEM                                                                                COST

        (1)    Insurance premiums paid during construction
               (e.g. property, liability, etc.)                                                            -0-
        (2)    Travel and entertainment                                                                    -0-
        (3)    Principal of interim loan (not
               reflected in other items)                                                                   -0-
        (4)    Interest on interim loan (not

                                      A-5
<PAGE>

               reflected in other items)                                                                   -0-
        (5)    Loan servicing fee                                                                          -0-
        (6)    Research and development                                                                    -0-
        (7)    Carrying costs during construction
               (other than interest)                                                                       -0-
        (8)    Other (specify)
               Item: Letter of Credit fee                                                              $60,000
               Item:
                                                                                                    ----------
                      TOTAL MISCELLANEOUS COSTS                                                        $60,000

                      Amount of Miscellaneous Costs to be Financed
                      with Bond Proceeds                                                                   -0-

                               * * * * * * * * * *


                    TOTAL ACQUISITION AND CONSTRUCTION COSTS

               Total Cost of Project (sum of (A) - (H))                                             $8,600,000

               Total Cost of Project to be financed with
               Bond Proceeds                                                                        $6,000,000

(I)     Qualified Costs Test.

        (1)    Face amount of Bonds                                                                 $6,000,000

        (2)    Amount of reasonably  required  reserve or
               replacement fund to be financed with Bond proceeds
               (subject to a maximum of 10% of Bond proceeds)                                              -0-

        (3)    Net Proceeds of the Bonds
               (difference of 1 and 2 above)                                                        $6,000,000

                                      A-6
<PAGE>

        (4)    Amount of (3) above which will be spent on
               Qualified Costs (i.e., costs
               which (a) are expended for the "acquisition,
               construction, reconstruction or improvement
               of land or property of a character subject to
               the allowance for depreciation" within the
               meaning of Section 144(a)(1)(A) of the Code,
               (b) are chargeable to the capital account of
               the Company or would be so chargeable upon
               election of the Company to deduct the amount
               of the item, and (c) were paid or incurred
               within sixty days' prior to June 24, 1997)                                           $5,880,000

        (5)    Percentage of Net Proceeds of the Bonds to be
               spent on Qualified Costs ((4) divided by (3))                                             98%

</TABLE>

                                      A-7
<PAGE>



                                   SCHEDULE A

                                     PART IV

                               SOURCES FOR PAYMENT
                      OF ACQUISITION AND CONSTRUCTION COSTS

               ITEM                                                    AMOUNT

(A)  Debt

        (1)    Face amount of the Bonds                            $6,000,000
        (2)    Urban Development Action Grant                             -0-
        (3)    Conventional loans (specify):                       $1,500,000
        (4)    Other (specify)
               Item:
                      TOTAL DEBT                                   $7,500,000


(B)     Equity/Investment Earnings

        (1)    Company's contributions/Investment Earnings  $1,110,000
        (2)    Facility user's contributions                              -0-
        (3)    Grants and other (specify)                                 -0-
               Item:
               Item:
                      TOTAL EQUITY                                 $1,100,000

(C)     Miscellaneous

        (1)    Like-kind exchange (Swap)                                  -0-
        (2)    Cash flow from Project Facility                            -0-
        (3)    Other (specify)                                            -0-
               Item:
                      TOTAL MISCELLANEOUS                                 -0-

                                        *   *   *   *   *   *   *   *   *   *

                      TOTAL SOURCE OF FUNDS                        $8,600,000


                                      A-8
<PAGE>


                                   SCHEDULE B

                    AVERAGE REASONABLY EXPECTED ECONOMIC LIFE
                        AND AVERAGE MATURITY OF THE BONDS


(A)  ACRS  Classifications.  The  following  information  with  respect  to  the
classification   of  Property   constituting  the  Project  Facility  under  the
Accelerated  Cost  Recovery  System  ("ACRS") is furnished to complete  Internal
Revenue Service Form 8038:

<TABLE>
<CAPTION>

<S>                                                                                               <C>  
        (1)    Cost of Land (or portion thereof
               financed by the Bonds)                                                                 $254,250

        (2)    Cost of Building (or portion
               thereof financed by the Bonds)                                                              -0-

        (3)    Cost of Project Facility with an ACRS life of more
               than 5 years (or portion thereof financed by the Bonds)                              $5,625,750

        (4)    Cost of Project Facility with an ACRS life of less than
               5 years (or portion thereof financed by the Bonds)                                          -0-

        (5)    Cost of other Property financed by the Bonds (Closing Costs)                                -0-
</TABLE>

(B)  Average Reasonably Expected Economic Life. The following information is set
forth to determine the Average Reasonably Expected Economic Life of that portion
of the Project Facility financed with the proceeds of the Bonds.

<TABLE>
<CAPTION>

       A                  B                   C                  D               E***                F

                                       Portion of Cost
Description of                         of Assets Financed  Average              Basis of           Weighted Life
Assets Financed                        Financed with       Expected             Determination      of Assets
with Bond                              Proceeds of         Economic             of Economic        (Column C x        
Proceeds             Cost of Assets    Bonds               Assets               Life               Column D)          
--------             --------------    -----               ------               ----               ---------          

                    

<S>                 <C>                <C>                 <C>                    <C>               <C>        
Equipment           $6,124,790         $5,625,750          10.25                  ADR               $57,663,938



TOTAL               $6,124,790         $5,625,750          10.25                  ADR               $57,663,938

</TABLE>

                                      B-1
<PAGE>

To determine the Average  Reasonably  Expected  Economic Life of that portion of
the Project Facility financed with the proceeds of the Bonds,  divide the sum of
the Weighted Life of Assets  (Column F) by the sum of the Cost of Assets (Column
C).

        Sum of Column F
        _______________ = Average Reasonably Expected Economic Life

        Sum of Column C


        57,663,938
        ___________ = 10.25

         5,625,750

-------------------
***     The midpoint lives under the Asset Depreciation Range (Revenue Procedure
        87-56)  should be used where  applicable.  In cases of  structures,  the
        guideline lives under Revenue Procedure 62-21 should be used.


(C)      Average Maturity of Bonds.

                  (1)      The last possible maturity of the Bonds is 10.5 years
         (if such term does not exceed 120% of the Average  Reasonably  Expected
         Economic Life determined in paragraph (B) above,  paragraphs (C)(2) and
         (3) need not be completed).

                           N/A

                  (2)      The Average  Maturity of the Bonds is  determined  as
         follows:

                           (a)      Each principal  installment is multiplied by
         the number of payment periods (e.g., monthly, semi-annually, etc.) that
         such principal installment is outstanding.

                           (b)      The  products  obtained  as a result of each
         multiplication described in (a) above are then added together.

                           (c)      The  sum  obtained  in  (b)  above  is  then
         divided  by the face  amount of the Bonds  and this  number is  divided
         again by the number of payments per year.

                  (3)      Show  calculation  of paragraph  (2) above or provide
         computer printout.

                           N/A

                                      B-2
<PAGE>

                                   SCHEDULE C

                       AGGREGATE FACE AMOUNT OF THE BONDS


         (A)      The following  constitute  all of the  Principal  Users of the
Project Facility:

                                                                 Federal Tax
                                                                 Identification
         Name                            Address                 Number
         ----                            -------                 ------

Spurlock Adhesives, Inc.      5090 General Mahone Highway        54-1522700
                              Waverly, Virginia  23890


         (B)      The following  constitute all Related Persons to the Principal
Users listed in paragraph (A) above:


                                                                 Federal Tax
                                                                 Identification
         Name                            Address                 Number
         ----                            -------                 ------

Spurlock Industries, Inc.      5090 General Mahone Highway       84-1019856
                               Waverly, Virginia  23890


         (C)      The  following  is a complete  listing of all the Prior Issues
used to finance the Project Facility, any other Included Facility or any portion
of either of all the  Principal  Users listed in paragraph (A) above and all the
Related Persons listed in paragraph (B) above.


                                         Date                 Outstanding
Name of Issue                            Issued               Principal Amount
-------------                            ------               ----------------


                                    N/A


         (D)      The following is a complete  listing of all  tax-exempt  bonds
which are aggregated with the Bonds pursuant to Section  1.103-13(b)(10)  of the
Regulations  and Revenue  Ruling 81-216  (including  bonds  described in Section
6.1(A) of the Tax Regulatory Agreement):

                                      C-1
<PAGE>

                                         Date                 Outstanding
Name of Issue                            Issued               Principal Amount
-------------                            ------               ----------------

                                    N/A


         (E)      The following is a complete listing of all tax-exempt bonds, a
portion  of the  proceeds  of which  were on are to be used  with  respect  to a
building,  enclosed  shopping  mall or strip of  offices,  stores or  warehouses
constituting  part of (or  sharing  substantially  common  facilities  with) the
Project Facility:

                                         Date                 Outstanding
Name of Issue                            Issued               Principal Amount
-------------                            ------               ----------------

                                    N/A

         (F)      The  following  is a complete  listing of all the Small  Issue
Capital  Expenditures paid or incurred by any Principal User listed in paragraph
(A) above or any Related  Person  listed in paragraph  (B) above with respect to
the Project Facility or any other Included Facility:

               Period                                      Amount
               ------                                      ------




         (G)      The sum of:
<TABLE>
<CAPTION>

<S>                        <C>                 <C>                           
                  (A)      $6,000,000          (face amount of the Bonds);

                  (B)      -0-                 (the sum of the Prior Issues listed in paragraph (C) above);

                  (C)      -0-                  the sum of all bonds detailed in paragraph (D) above; and

                  (D)      $2,600,000           (the  sum  of  the  Small  Issue  Capital  Expenditures  listed  in
                           ----------                                                                  
                                                paragraph (F) above, which is $-0-)

                           $8,600,000                TOTAL

</TABLE>

is the Aggregate Face Amount of the Bonds.


                                      C-2
<PAGE>


                                   SCHEDULE D

                         THE $40,000,000 AGGREGATE LIMIT


         The questions below are formulated to determine  whether the sum of the
Aggregate  Face Amount of the Bonds  allocable to each Test Period  Beneficiary,
and the Aggregate Face Amount of all the outstanding tax-exempt Private Activity
Bonds  allocated to each such  beneficiary  under Section  144(a)(10)(D)  of the
Code, exceeds $40,000,000.

         (A)      Listed below are all the  facilities  which were financed with
the proceeds of tax-exempt Private Activity Bonds of which any Principal User of
the Project  Facility is now or was,  at any time within the  three-year  period
from  the  issuance  of  said  bonds,  an  owner  or a  Principal  User  of such
bond-financed facility and the aggregate authorized face amount of said bonds:


                                    N/A


         (B)      Listed below are all the  facilities  which were financed with
the proceeds of tax-exempt  Private  Activity Bonds of which a Related Person to
the  Principal  Users  listed in  paragraph  (A) above (or an entity which was a
Related Person to any such Principal User) is now or was, at any time within the
three-year  period from the issuance of said bonds, an owner or a Principal User
of such bond-financed  facility and the aggregate authorized face amount of said
bonds:


                                    N/A






                                      D-1