EXOLON-ESK COMPANY

                                         AND

                              THE CHASE MANHATTAN BANK


                               BUILDING LOAN AGREEMENT




                              Dated:  As of December 1, 1996



                              Location: RR No. 1
                                        ESK Road 875E
                                        Hennepin, Illinois



                              RECORD AND RETURN TO:

                              Phillips, Lytle, Hitchcock, Blaine & Huber
                              3400 Marine Midland Center
                              Buffalo, New York  14203
                              Attention:  Deborah A. Doxey, Esq.


                               BUILDING LOAN AGREEMENT



                                  TABLE OF CONTENTS

                                                                       Page


          1.   Definition .......................                         2

          2.   Bond Proceeds  .....................                       2

          3.   The Improvements ....................                      2

          4.   Change Orders  .....................                       4

          5.   Commencement of Construction ..............                4

          6.   Completion of Improvements ...............                 4

          7.   Force Majeure  .....................                       5

          8.   Title Insurance and Survey ...............                 5

          9.   Hazard Insurance ....................                      7

          10.  Advances ........................                          7

          11.  Advances for Stored Materials  .............               9

          12.  Additional Conditions to Advances  ...........             9

          13.  Contingency Reserve  ..................                   13

          14.  Deficiency .......................                        13

          15.  Specific Additional Covenants of Borrower  .......        14

          16.  Events of Default  ...................                    16

          17.  Other Remedies .....................                      17

          18.  Incorporation of Provisions  ..............               18

          19.  Further Assurances ...................                    18

          20.  Representations and Warranties .............              18

          21.  Construction of Agreement  ...............                19

          22.  Trust Fund .......................                        19

          23.  Parties Bound, etc.  ..................                   19

          24.  Waivers  ........................                         19 

          25.  Governing Law  .....................                      19

          26.  Severability ......................                       19

          27.  Notices  ........................                         19

          28.  Fees and Expenses  ...................                    20

          29.  Sign ..........................                           20

          30.  Modification ......................                       21

          31.  Termination of Advances  ................                 21

          EXHIBIT A
          EXHIBIT B
          EXHIBIT C
          EXHIBIT D
          EXHIBIT E

          SCHEDULE A
          SCHEDULE B 


                               BUILDING LOAN AGREEMENT



               THIS BUILDING LOAN AGREEMENT made as of the 1st day of
          December, 1996, between THE CHASE MANHATTAN BANK, a New York
          banking corporation having an office at 2300 Main Place Tower,
          Buffalo, New York 14202-3723 (hereinafter referred to as the
          "Bank"), and Exolon-ESK Company, a Delaware corporation having an
          office at 1000 East Niagara Street, Tonawanda, New York 14150
          (hereinafter referred to as the "Borrower");


                                W I T N E S S E T H:


               WHEREAS the Borrower is the owner of a fee estate in certain
          premises, as more particularly described in Exhibit A
          (hereinafter referred to as the "Premises");

               WHEREAS, pursuant to the Constitution and the laws of the
          State of Illinois (the "State"), and particularly 70 Illinois
          Compiled Statutes 1994, 530/1 et seq., as supplemented and
          amended (collectively, the "Act"), the Upper Illinois River
          Valley Development Authority (the "Issuer") is authorized to
          issue its revenue bonds to finance the cost of "projects," as
          defined in the Act; and

               WHEREAS, pursuant to and in accordance with the Act, the
          Issuer has agreed to issue and sell its Variable Rate Demand
          Solid Waste Disposal Revenue Bonds, Series 1996-A (Exolon-ESK
          Company Project) in the aggregate principal amount of $8,405,000
          (the "Series 1996-A Bonds") and its Taxable Variable Rate Demand
          Solid Waste Disposal Revenue Bonds, Series 1996-B (Exolon-ESK
          Company Project) in the aggregate principal amount of $4,595,000
          (the "Series 1996-B Bonds"), which Series 1996-A Bonds and Series
          1996-B Bonds (collectively, the "Bonds") will be issued under the
          terms of an Indenture of Trust (the "Indenture") dated as of
          December 1, 1996, from the Issuer to American National Bank and
          Trust Company of Chicago, as trustee (the "Trustee"), and to lend
          the proceeds of the Bonds to the Borrower to finance a portion of
          the costs of the acquisition of certain real estate, the
          construction of a building and related improvements and the
          acquisition of machinery, equipment and related property to be
          installed therein (the "Project"), all to be used for the
          disposal of certain solid wastes, to be owned and operated by the
          Borrower and all to be located in the Village of Hennepin,
          Illinois, which Project shall constitute a "project," within the
          meaning of the Act; and

               WHEREAS, the Bonds issued under the Indenture will be
          secured by (i) an assignment and pledge of all right, title and
          interest of the Issuer in and to a Loan Agreement between the
          Borrower and the Issuer dated as of December 1, 1996 (the "Loan
          Agreement") and the promissory note of the Borrower issued
          pursuant to the Loan Agreement (the "Note"), except as otherwise
          provided in the Indenture, and (ii) moneys derived from drawings 
          under the irrevocable, transferable letter of credit dated the
          date of issuance and delivery of the Bonds, issued by the Bank in
          favor of the Trustee for the benefit of the owners from time to
          time of the Bonds, in the amount of (A) the aggregate principal
          amount of the Bonds (1) to enable the Trustee to pay the
          principal of the Bonds at maturity, upon call for redemption
          prior to maturity or acceleration, and (2) to enable the Trustee
          to pay the portion of the purchase price of Bonds to be tendered
          or deemed to be tendered to it for purchase, equal to the
          aggregate principal amount of such Bonds, plus (B) an amount
          equal to the interest to accrue on the Bonds for thirty-five (35)
          days at the maximum rate of twelve percent (12%) per annum (1) to
          enable the Trustee to pay interest accrued on the Bonds on the
          dates and in the manner set forth in the Indenture, and (2) to
          enable the Trustee to pay the portion of the purchase price of
          Bonds tendered or deemed to be tendered to it for purchase equal
          to the accrued interest on such Bonds (which initial letter of
          credit, together with any substitute letter of credit, is
          hereinafter referred to as the "Letter of Credit").

               WHEREAS, the Borrower is obligated to reimburse the Bank for
          all amounts drawn on the Letter of Credit pursuant to the terms
          of a Letter of Credit Reimbursement Agreement between the
          Borrower and the Bank dated as of December 1, 1996 (the
          "Reimbursement Agreement").

               The Bank requires, as a condition and as an inducement for
          it to issue the Letter of Credit, that the Borrower execute and
          deliver this Agreement to the Bank.


          1.   Definition.  All terms as used in this Agreement shall,
          unless otherwise defined in the main body of this Agreement, have
          the meaning given to such terms in Exhibit B or in the Loan
          Agreement.

               2.   Bond Proceeds.  Subject to the terms and conditions
          hereof, and in consideration of the premises herein, including
          expressly, but not limited to the promise of the Borrower to
          construct the Improvements, the Borrower agrees that all proceeds
          of the Bonds shall be disbursed in accordance herewith.

               3.   The Improvements.  The Borrower has submitted to the
          Bank and the Construction Consultant a set of final plans and
          specifications for the Improvements prepared by the Construction
          Manager, as more particularly described in Exhibit C attached
          hereto, which shall include the construction of an additional
          well and septic system, (hereinafter referred to as the "Plans
          and Specifications"), which Plans and Specifications have been
          reviewed and accepted by the Bank and the Construction
          Consultant.  The Borrower acknowledges that (i) the Construction
          Consultant has been retained by the Bank to act as a consultant
          and only as a consultant to the Bank in connection with the
          construction of the Improvements, (ii) the Construction
          Consultant shall in no event or under any circumstance have any
          power or authority to make any decision or to give any approval
          or consent or to do any other act or thing which is binding upon 
          the Bank and any such purported decision, approval, consent, act
          or thing by the Construction Consultant on behalf of the Bank
          shall be void and of no force or effect, (iii) the Bank reserves
          the right to make any and all decisions required to be made by
          the Bank under this Agreement and to give or refrain from giving
          any and all consents or approvals required to be given by the
          Bank under this Agreement and to accept or not accept any matter
          or thing required to be accepted by the Bank under this
          Agreement, in each instance in its sole and absolute discretion,
          and without in any instance being bound or limited in any manner
          or under any circumstance whatsoever by any opinion expressed or
          not expressed, or advice given or not given, or information,
          certificate or report provided or not provided, by the
          Construction Consultant to the Bank or any other person or party
          with respect thereto, (iv) the Bank reserves the right in its
          sole and absolute discretion to disregard or disagree, in whole
          or in part, with any opinion expressed, advice given or
          information, certificate or report furnished or provided by the
          Construction Consultant to the Bank or any other person or party,
          (v) the Bank reserves the right in its sole and absolute
          discretion to replace the Construction Consultant with another
          construction consultant selected by the Bank and approved by the
          Borrower at any time and (vi) Borrower shall not in any event
          rely upon any purported decision, approval, consent, act or thing
          by the Construction Consultant.  The Borrower represents and
          warrants to the Bank that the Plans and Specifications are
          complete in all material respects and have been submitted to the
          Construction Manager, and the Construction Manager has agreed to
          perform its obligations under the General Construction Contract
          in a manner consistent with the requirements of the Plans and
          Specifications.  The Borrower represents and warrants to the Bank
          that (i) to the extent required by law on the basis of the
          present stage of development and construction of the
          Improvements, the Borrower has obtained from the appropriate
          Governmental Authorities all required approvals (including,
          without limitation, all environmental approvals) with respect to
          the Plans and Specifications and the Improvements, and (ii) all
          necessary permits, certificates, licenses and other approvals
          required for the construction of the Improvements have to the
          extent required by applicable law been issued or obtained from
          the appropriate Governmental Authorities and (iii) all necessary
          permits, certificates, licenses, and other approvals required for
          construction of the Improvements shall be unconditional, valid,
          final, and shall fully authorize Borrower to commence and
          complete the Project as set forth in the Plans and
          Specifications.  Subject to the provisions of paragraph 4 of this
          Agreement, each addition or modification to the Plans and
          Specifications or to the Construction Contract must be acceptable
          to the Bank, the Construction Consultant and, to the extent
          required by law, shall be approved and permitted by the
          appropriate Governmental Authorities.  The Borrower shall not
          commence any work on any stage or phase of the Improvements
          unless all required permits, certificates, licenses and approvals
          therefor have been issued or obtained from appropriate
          Governmental Authorities.  The Borrower shall construct and equip
          the Improvements in accordance with the Plans and Specifications
          free and clear of all mechanics' liens, notices of intention to 
          file mechanic's lien, notices of pendency, stop orders or
          comparable liens or filings and all other liens, encumbrances and
          security instruments of any nature whatsoever (other than the
          Mortgage and other exceptions to title specifically set forth in
          the policy of title insurance insuring the lien of the Mortgage
          or as may otherwise be specifically approved by the Bank).  The
          Bank shall without additional cost or expense have the use of the
          Plans and Specifications as accepted by the Bank and the
          Construction Consultant upon the occurrence beyond any applicable
          grace and cure period of a default under the Documents.  The
          Improvements shall be constructed and equipped in compliance with
          the requirements of the Governmental Authorities and the
          appropriate Board of Fire Underwriters, if any, or other similar
          body, if any, acting in and for the locality in which the
          Premises are situated.  Compliance with the provisions of this
          paragraph and any other provisions of this Agreement relating to
          the construction and equipping of the Improvements shall be
          determined by the Bank in its sole and absolute discretion.  At
          all times and without notice, the Bank, the Construction
          Consultant and their respective agents and employees, shall have
          the right of entry and free access to the Premises to inspect the
          Improvements, and to any off-site location to inspect any off-
          site stored materials for which Bank is permitting money to be
          advanced hereunder.

               4.   Change Orders.  Notwithstanding anything to the
          contrary contained in this Agreement, the Borrower shall have the
          right to enter into or to authorize the entering into of change
          orders with respect to the Improvements without obtaining the
          Bank's or the Construction Consultant's prior acceptance,
          provided that (i) no such change order will materially change the
          gross square feet or the net usable square feet space to be
          contained in the Improvements, or the basic layout of the
          Improvements, or the number of parking spaces to be located on
          the Premises after completion of construction of the
          Improvements, or involve the use of materials, furniture,
          fixtures or equipment which will not be at least equal in quality
          to the materials, furniture, fixtures and equipment originally
          specified in or required by the Plans and Specifications, as
          accepted by the Bank and the Construction Consultant, (ii) no
          such change order shall, in a single instance, result in an
          increase or decrease in the cost of constructing the Improvements
          of more than $100,000, and (iii) the aggregate cost of all such
          change orders which have not been accepted by the Bank and the
          Construction Consultant shall not, at any given time, result in
          an increase or decrease in the cost of constructing the
          Improvements of more than $250,000, it being agreed that such
          aggregate $250,000 maximum increase or decrease in the cost of
          constructing the Improvements as a result of such change orders
          shall not include the cost of any change order entered into
          without the prior acceptance of the Bank and the Construction
          Consultant pursuant to this paragraph with respect to which the
          acceptance of the Bank and the Construction Consultant shall have
          been subsequently obtained.  The Borrower shall also have the
          right, without obtaining the Bank's or the Construction
          Consultant's prior acceptance, to enter into change orders or
          field changes which do not increase or decrease the cost of 
          constructing the Improvements, provided that the requirements of
          clause (i) of the preceding sentence are satisfied with respect
          thereto.  The Borrower shall submit to the Bank and the
          Construction Consultant copies of all change orders entered into
          with respect to the Improvements within ten (10) days after the
          same are entered into and irrespective of whether the same
          require the prior acceptance of the Bank and the Construction
          Consultant pursuant to this Agreement.

               5.   Commencement of Construction.  The Borrower shall have
          commenced construction of the Improvements on or before the
          Commencement Date and shall continue with such construction until
          the Improvements are completed in accordance with the Plans and
          Specifications and the provisions of this Agreement.

               6.   Completion of Improvements.  Subject to the provisions
          of paragraph 7 of this Agreement, construction of the
          Improvements shall be completed substantially in accordance with
          the Plans and Specifications and the provisions of this Agreement
          on or before the Completion Date.  For the purposes of this
          Agreement, the Improvements shall not be deemed to have been
          completed until (i) the Improvements have, in the opinion of the
          Bank and the Construction Consultant, been completed
          substantially in accordance with the Plans and Specifications,
          (ii) the Improvements shall contain all furniture, fixtures and
          equipment required for the use and operation of the Improvements
          or which may be required by any Governmental Authority or by any
          law, regulation or rule of any Governmental Authority, (iii) all
          permanent certificates of occupancy (or their local equivalent)
          and all other certificates, licenses, consents and approvals
          required for the use and operation of the Improvements shall have
          been issued by or obtained from the appropriate Governmental
          Authorities, (iv) all Direct Construction Costs, Other Project
          Costs, and other costs and expenses incurred in connection with
          the construction and equipping of the Improvements, shall have
          been paid in full.

               7.   Force Majeure.  The Completion Date shall be extended
          for a period of time equal to the number of days during which the
          Borrower is prevented from proceeding with the construction of
          the Improvements by reason of force majeure, provided that (i) no
          default shall have occurred and shall be continuing under the
          Loan Documents, (ii) the aggregate of any such respective
          extensions of the Completion Date pursuant to the provisions of
          this paragraph shall in no event be for a period of time in
          excess of sixty (60) days, and (iii) the Borrower notifies the
          Bank of the events constituting such force majeure within 15 days
          after the Borrower has knowledge of their occurrence.  No
          extension of the Completion Date pursuant to this paragraph shall
          be construed as extending the maturity date of the Note.  If the
          Completion Date is extended by reason of force majeure pursuant
          to the provisions of this paragraph and if subsequent to such
          extension the Borrower makes up all or any portion of such force
          majeure delay, such extension of the Completion Date shall be
          reduced by the number of days the Borrower is able to make up
          after the occurrence of such force majeure delay.  The term
          "force majeure" as used in this paragraph shall include acts of 
          God, flooding, strikes, lockouts or other labor trouble,
          materially adverse weather conditions, fire or other casualty,
          governmental preemption in connection with a national emergency,
          any rule, order or regulation of any governmental agency or any
          department or subdivision thereof, or inability to secure
          materials or labor because of any such emergency, rule, order,
          regulation, war, civil disturbance or other emergency, cause or
          event beyond the reasonable control of the Borrower. 
               8.   Title Insurance and Survey.  The Bank's obligation to
          make the initial advance or any subsequent advance of Bond
          Proceeds is conditioned on the Bank's receipt of the following,
          all in form and substance satisfactory to Lender:

                    (a)  a commitment for a title insurance policy in the
               amount of the Debt covering all of the real property and
               fixtures that are part of the Premises and Improvements. 
               The commitment shall be issued by Chicago Title Insurance
               Company and shall be for an ALTA form of mortgage loan
               policy to be issued without standard exceptions or
               reservation for creditor's rights and assuring that, upon
               satisfaction of the requirements listed herein, the Bank
               will hold a valid first priority mortgage lien on real
               property and fixtures conforming to the requirements of the
               commitment.  The commitment shall include a pending

               disbursements clause satisfactory to the Bank and indicating
               that coverage under the policy will cover the initial
               disbursement of the Bank, and will be increased in amount
               and updated by appropriate endorsement prior to each
               construction advance.  The title commitment must be
               accompanied by complete copies of all documents referred to
               therein as exceptions to or encumbrances on title.  The Bank
               reserves the right to require such additional endorsements
               to the commitment as it may deem appropriate, including, but
               not limited to, a zoning 3.1 endorsement, including parking
               (or a zoning 3.0 endorsement with a commitment to issue a
               zoning 3.1 endorsement, including parking), tax parcel,
               comprehensive endorsement, endorsement over encroachments
               (if any that are otherwise acceptable to the Bank),
               mechanics' lien endorsement, access endorsement, interim
               endorsement, usury endorsement, variable rate endorsement
               and survey/location endorsement.  A mortgage loan title
               insurance policy pursuant to the approved loan commitment
               shall be issued concurrently with the initial advance of
               Bond Proceeds.  No actual physical improvement to the
               Development shall be permitted to occur until such time as
               the Mortgage has been recorded with the Recorder of Deeds
               for the County where the Premises is located;

                    (b)  a current certified Class "A" ALTA Land Title
               Survey by a registered engineer acceptable to the Bank with
               such certification being addressed to the Bank and to the
               Title Company.  The survey shall show the Premises and any
               matters affecting the same, including the location and area
               covered by all building set-back lines, the location and
               area of all easements encumbering and/or benefitting the
               Premises, the relation of the Premises to public
               thoroughfares and access thereto, the location of all
               physical conditions (including existing structures or
               foundations, utility lines, walks, drives, right-of-ways and
               parking areas) on the Premises, the proposed location of the
               Improvements (or the foundation thereof) and any
               encroachments of the Improvements (or the foundation
               thereof) or other physical conditions upon any easements,
               building lines or property boundary lines.  The survey shall
               also state whether the Premises or any portion thereof is
               located on a federally designated flood plain area or
               wetland and shall also indicate the zoning classification of
               the Premises.  The survey must conform to and be prepared in
               accordance with the Commitment and meet the "Minimum
               Standard Detail Requirements for ALTA Land Title Surveys"
               established and adopted by ALTA and the requirements of a
               Class A Survey as defined therein.  The legal description
               set forth on the face of the approved survey will be used in
               the Loan Documents.

          The state of facts shown in the Preliminary Survey shall be
          satisfactory in all respects to the Bank and its counsel, the
          Construction Consultant and the Title Company.  The Borrower
          shall deliver to the Bank (i) a foundation survey of the
          Improvements within thirty (30) days after the completion of the
          foundation of the Improvements, (ii) an as-built survey of the
          Improvements within thirty (30) days after the completion of
          Improvements, and (iii) any additional surveys requested or
          required by the Bank, the Construction Consultant or the Title
          Company within thirty (30) days after request, it being agreed
          that any change in the state of facts shown in any such updated
          survey shall be satisfactory in all respects to the Bank, its
          counsel, the Construction Consultant and the Title Company.  The
          Borrower shall also deliver to the Bank contemporaneously with
          the delivery of each survey an affidavit from the surveyor that
          set-backs are in conformity with current zoning restrictions.  

               9.   Hazard Insurance.  The Borrower shall furnish to the
          Bank (with evidence of the payment of premiums therefor), or if
          the Borrower shall fail to do so after the expiration of any
          applicable notice and grace period, the Bank may obtain at the
          Borrower's expense, insurance as required by the Mortgage.  So
          long as this Agreement shall be in force the policies of fire
          insurance shall be in the so-called "All Risk Builders' Risk
          Completed Value Non-Reporting Form," including collapse coverage
          and, if warranted, evidence of flood, and earthquake coverage,
          all as may be required by the Bank, and in amounts to be
          determined by the Bank and construction Consultant, which amounts
          shall in no event be less than 100% of the completed insurable
          value of the Improvements and shall be sufficient to satisfy all
          co-insurance requirements.  Upon completion of construction of
          the Improvements the insurance shall be converted to a standard
          hazard insurance policy with extended coverage and otherwise
          complying with the provisions of the Mortgage.  If the Premises,
          or any portion thereof, are located in a Federally designated
          "special flood hazard area," a flood insurance policy shall be
          delivered to the Bank.  If no portion of the Premises is located
          in a Federally designated "special flood hazard area" such fact 
          shall be substantiated by a certificate in form satisfactory to
          the Bank from a licensed surveyor, appraiser or professional
          engineer or other qualified person, party or entity.  

               10.  Advances.  Subject to compliance by the Borrower with
          the terms, provisions and conditions of this Agreement and the
          Loan Agreement, the Bank shall provide its written consent for
          the Trustee to make advances of the Bond proceeds to the Borrower
          subject to the Retainage, (i) for direct construction costs
          incurred by the Borrower in connection with the construction of
          the Improvements (hereinafter referred to as "Direct Construction
          Costs"), as itemized in a trade breakdown schedule reviewed and
          accepted by the Bank and the Construction Consultant (hereinafter
          referred to as the "Trade Breakdown Schedule"), as the same may
          be revised from time to time after the date hereof with the prior
          review and acceptance of the Bank and the Construction
          Consultant, and (ii) for costs, other than Direct Construction
          Costs, incurred by the Borrower in connection with the Bonds or
          the construction of the Improvements and permitted pursuant to
          the Loan Agreement (hereinafter referred to as "Other Project
          Costs"), as itemized in a schedule reviewed and accepted by the
          Bank (hereinafter referred to as the "Schedule of Other Project
          Costs"), as the same may be revised from time to time after the
          date hereof with the prior review and acceptance of the Bank.  If
          there is a savings in a particular line item set forth in the
          Trade Breakdown Schedule or in the Schedule of Other Project
          Costs, and if such savings is substantiated by evidence
          satisfactory to the Bank, the Borrower shall have the right, upon
          prior approval of the Bank, to reallocate such savings to other
          line items in the Trade Breakdown Schedule and the Schedule of
          Other Project Costs with respect to which additional costs have
          been incurred or to the Contingency Reserve (as hereinafter
          defined), provided, however, that the Borrower shall in no event
          or under any circumstance have the right to reallocate any
          portion of the Contingency Reserve (as hereinafter defined)
          without in each instance obtaining the prior approval of the
          Bank, which approval may be withheld in the sole and absolute
          discretion of the Bank, or to cause a reallocation to occur which
          in the opinion of the Bank, its counsel or the Title Company will
          adversely affect or impair in any manner whatsoever the lien or
          priority of lien of the Mortgage.  Except as hereinafter
          specifically provided to the contrary in paragraph 11 of this
          Agreement, the Bank shall not be required to consent to any
          advances of the Bond proceeds for costs incurred by the Borrower
          with respect to materials stored on or off the Premises unless
          the Bank shall, in its sole discretion, deem it advisable to do
          so.  The Bank shall not be obligated to consent to advances of
          Bond proceeds more frequently than once every thirty (30) days. 
          Each request by the Borrower to the Bank to consent to the
          advance of Bond proceeds shall be in the form attached as
          Exhibit D to the Loan Agreement, or in such other form as may be
          satisfactory in all respects to the Bank and shall in each case
          be signed by a duly authorized representative of the Borrower
          (any such request being hereinafter referred to as a "Request for
          Advance").  Each Request for Advance shall be delivered to the
          Bank not less than ten (10) business days prior to the date upon
          which an advance of Bond proceeds is requested.  Each Request for 
          Advance shall be based upon the Trade Breakdown Schedule and the
          Schedule of Other Project Costs and shall be accompanied by (i) a
          currently dated sworn statement and request for partial payment
          from the Construction Manager in the form specified in Exhibit D
          or in such other form as may be acceptable to the Bank and the
          Title Company, as approved by the Construction Manager, and
          accompanied by a waiver of lien from the Construction Manager in
          form satisfactory to the Bank and the Title Company, (ii) such
          waivers of lien and other documents and instruments as may be
          requested or required by the Bank with respect to subcontractors
          and materialmen engaged in the construction of the Improvements
          or as may be requested or required by the Title Company (to
          induce the Title Company to insure each advance of the Bond
          proceeds pursuant to this Agreement and the Loan Agreement
          against all mechanics' and materialmen's liens for labor
          furnished and materials supplied in connection with the
          construction of the Improvements), (iii) at the request of the
          Bank, the requisitions for payment from subcontractors and
          materialmen engaged in the construction of the Improvements, and
          (iv) such other information and documents as may be requested or
          required by the Bank or the Construction Consultant.  All
          requests and requisitions for payment shall be approved by the
          Borrower and the Construction Manager and recommended for payment
          by the Construction Consultant.  Each advance of the Bond
          proceeds may be made through the Title Company acting as escrowee
          pursuant to a Construction Escrow Agreement.  The Bank shall not
          be obligated to consent to any request for an advance of Bond
          proceeds by the Trustee in excess of the amount, from time to
          time, of Verified Project Costs, unless the Bank, in its sole and
          absolute discretion, deems it advisable to do so.  The Bank shall
          not be obligated to authorize the Trustee to make an advance of
          the Bond proceeds unless the Bank is satisfied, in its sole and
          absolute discretion, that the conditions precedent to the making
          of such advance as set forth in this Agreement and the Loan
          Agreement, have been satisfied by the Borrower.  Anything in this
          Agreement or any other agreement made with respect to the Bonds
          to the contrary notwithstanding, any advance of the Bond proceeds
          or approval or acceptance given by the Bank or the Construction
          Consultant, herein or therein, whether or not before or after a
          site observation of the Improvements by the Construction
          Consultant or otherwise, shall not be deemed to be an approval or
          acceptance by the Bank or the Construction Consultant of any work
          performed thereon or approval or acceptance by the Bank or the
          Construction Consultant of any work or materials done or
          furnished with respect thereto or a representation by the Bank or
          the Construction Consultant as to fitness of such work and
          materials.

               11.  Advances for Stored Materials.  Notwithstanding
          anything to the contrary contained in this Agreement and subject
          to the terms of the Loan Agreement, the Bank may consent to
          disbursements of the Bond proceeds to pay for Direct Construction
          Costs actually incurred by the Borrower for stored materials
          which are required in connection with the construction of the
          Improvements, provided that (i) such materials are in accordance
          with the Plans and Specifications approved by the Bank and the
          Construction Consultant, (ii) such materials are securely stored, 
          properly inventoried, and clearly stenciled or otherwise marked
          to indicate that they are the property of the Borrower,
          (iii) such materials if they are stored off-site, are stored in a
          bonded warehouse or with a contractor, materialman or fabricator
          who bears the risk of loss until delivery and installation of
          such materials in the construction of the Improvements as part of
          the work in place, and who has supplied a bond securing such
          contractor's, materialman's or fabricator's obligation to so
          deliver and install such materials, which bond shall be issued by
          a company, shall be in an amount and shall be in form and
          substance satisfactory to the Bank and shall name the Bank as a
          dual obligee, (iv) the bills of sale and contracts under which
          such materials are being provided shall be in form and substance
          satisfactory to the Bank and the Construction Consultant,
          (v) such materials are insured against casualty, loss and theft
          in a manner satisfactory to the Bank, (vi) the Borrower owns such
          materials free and clear of all liens and encumbrances of any
          nature whatsoever and establishes such ownership by evidence
          satisfactory to the Bank, (vii) the Borrower executes and
          delivers to the Bank such additional security documents as the
          Bank shall deem necessary to create and perfect a first lien in
          such materials as additional security for the payment of the
          Debt, (viii) the aggregate amount of such disbursements for such
          materials shall in no event at any time exceed the actual Direct
          Construction Costs incurred by the Borrower for such materials as
          verified by the Construction Consultant pursuant to the
          provisions of this Agreement, (ix) the materials which are stored
          off-site shall be limited to the materials listed on Exhibit E
          hereto.  The Bank shall in no event or under any circumstance
          have any obligation to authorize the Trustee to make any advance
          of the Bond proceeds for materials which are stored off-site
          unless the Bank shall agree to the contrary in its sole and
          absolute discretion.

               12.  Additional Conditions to Advances.  The obligation of
          the Bank to consent to advances of the Bond proceeds pursuant to
          this Agreement is subject to the following additional conditions
          precedent:

                    (a)  The Borrower shall invest an amount equal to $0
               (hereinafter referred to as the "Initial Equity
               Requirement") in the Property in a manner satisfactory to
               the Bank prior to any advance of Bond proceeds for Direct
               Construction Costs, Other Project Costs or for any other
               reason whatsoever.  The investment of the Initial Equity
               Requirement by the Borrower in the Property shall be
               substantiated by evidence satisfactory to the Bank.  The
               entire Initial Equity Requirement shall remain invested in
               the Property until such time as the Bonds, together with all
               interest thereon and other sums due with respect thereto,
               have been paid in full.

                    (b)  Each Request for Advance shall be accompanied by a
               certificate or report of the Construction Consultant to the
               Bank in which the Construction Consultant shall in substance
               (i) verify that the portion of the Improvements completed as
               of the date of such site observation has been completed 
               substantially in accordance with the Plans and
               Specifications, and (ii) state its estimate of (aa) the
               percentage of construction of the Improvements completed as
               of the date of such site observation on the basis of work in
               place as part of the Improvements and the Trade Breakdown
               Schedule, (bb) Direct Construction Costs actually incurred
               for work in place as part of the Improvements as of the date
               of such site observation, (cc) the sum necessary to complete
               construction of the Improvements in accordance with the
               Plans and Specifications, and (dd) the amount of time from
               the date of such inspection which will be required to
               complete construction of the Improvements in accordance with
               the Plans and Specifications.

                    (c)  Prior to each advance of the Bond proceeds, the
               Title Company shall have issued (i) a written continuation
               of title showing title to the Property to be vested in the
               Borrower and no exceptions to the title of the Property
               other than those exceptions previously approved by the Bank
               in writing, and (ii) a written commitment to insure the
               priority of the lien of the Mortgage, subject only to
               exceptions previously approved by the Bank in writing, for
               an amount equal to the full amount of each advance of the
               Bonds.  The title policy insuring the lien of mortgage shall
               contain all endorsements required by the Bank.  If required
               by the Bank, such continuations of title shall contain
               affirmative insurance that covenants and restrictions, if
               any, reported against the Property have not been violated by
               the Improvements.

                    (d)  Prior to each advance of the Bond proceeds to the
               Borrower pursuant to this Agreement, the Borrower shall,
               upon request of the Bank, furnish the Bank with evidence
               satisfactory to the Bank, showing payment of all bills and
               charges for which advances of the Bond proceeds have been
               previously made pursuant to this Agreement.  The Borrower
               shall also deliver to the Bank, upon request, such bills,
               receipts, invoices and other evidence as may reasonably be
               required by the Bank to substantiate the actual incurrence
               by the Borrower of Direct Construction Costs and Other
               Project Costs.

                    (e)  The Borrower shall, if required by the Bank,
               deliver to the Bank a written statement executed by the
               Construction Manager certifying that the Construction
               Manager has received payment in full of all monies owed to
               the Construction Manager.

                    (f)  The Borrower shall, if required by the Bank,
               deliver to the Bank a written statement executed by each
               subcontractor and materialman engaged in the construction of
               the Improvements on behalf of the Construction Manager or
               the Borrower certifying that each such subcontractor and
               materialman has received payment in full of all monies owed
               to each such subcontractor and materialman by the
               Construction Manager or by the Borrower. 

                    (g)  Construction of the Improvements shall comply with
               all applicable laws, rules, restrictions, orders and
               regulations of the Governmental Authorities.  

                    (h)  The Borrower shall have delivered to the Bank all
               necessary certificates, authorizations, permits and licenses
               which are required to permit the construction and completion
               of the Improvements, as issued by the appropriate
               Governmental Authorities.  The Borrower, to the full extent
               permitted by applicable law, hereby assigns to the Bank as
               additional security for the payment of the Debt and the
               observance and performance by the Borrower of the terms,
               covenants and provisions of the Bond Documents all right,
               title and interest which the Borrower may now have or may
               hereafter acquire in and to such certificates,
               authorization, permits and licenses.

                    (i)  The Borrower shall make available to the
               Construction Consultant, upon request, all shop and related
               drawings used in connection with the Plans and
               Specifications and the construction of the Improvements at
               the office and location where the same are kept.

                    (j)  The Bank and the Construction Consultant shall be
               of the opinion that the Improvements can be completed by the
               Completion Date, as the same may be extended pursuant to
               paragraph 7 of this Agreement.

                    (k)  If the Advance includes funds for the purchase of
               equipment, the Borrower shall have delivered UCC financing
               statements or assignment statements in form satisfactory to
               the Bank, perfecting the Bank's security interest in such
               equipment, wherever located.

                    (l)  The Borrower shall have delivered to the Bank and
               the Construction Consultant a copy of the General
               Construction Contract, which General Construction Contract
               shall be either a guaranteed maximum price contract or a
               fixed price contract and shall otherwise be in form and
               substance satisfactory in all respects to the Bank, together
               with evidence satisfactory to the Bank that the Construction
               Manager maintains professional liability insurance in an
               amount not less than $500,000.  The Borrower hereby assigns
               to the Bank as additional security for the payment of the
               Debt and the observance and performance by the Borrower of
               the terms, covenants and provisions of the Bond Documents to
               which the Borrower is a party all right, title and interest
               which the Borrower may now have or may hereafter acquire in
               and to the General Construction Contract.  Except as may
               otherwise be permitted by paragraph 4 of this Agreement, the
               Borrower shall not agree to any modification or to any
               termination of the General Construction Contract without the
               prior approval of the Bank.  The Borrower shall furnish the
               Bank with such information regarding the Construction
               Manager as the Bank may request and the identity of the
               Construction Manager shall be subject to approval by the
               Bank. 

                    (m)  The Borrower shall (to the extent required by the
               Bank) have delivered to the Bank and the Construction
               Consultant copies of all the Major Subcontracts now or
               hereafter entered into, each of which Major Subcontracts
               shall be in form and substance satisfactory in all respects
               to the Bank.  The Borrower hereby assigns to the Bank as
               additional security for the payment of the Debt and the
               observance and performance by the Borrower of the terms,
               covenants and provisions of the Loan Documents all right,
               title and interest which the Borrower may now have or may
               hereafter acquire in and to the Major Subcontracts.  Except
               as may otherwise be permitted by paragraph 4 of this
               Agreement, the Borrower shall not agree to any modification
               or to any termination of any Major Subcontract without the
               prior approval of the Bank.

                    (n)  The Borrower shall (to the extent required by the
               Bank) make available for inspection at all times by the
               Construction Consultant and the Bank copies of all Other
               Subcontracts, and shall furnish to the Construction
               Consultant and the Bank, upon request, copies of the same. 
               The Borrower hereby assigns to the Bank as additional
               security for the payment of the Debt and the observance and
               performance by the Borrower of the terms, covenants and
               provisions of the Bond Documents to which the Borrower is a
               party all right, title and interest which the Borrower may
               now have or may hereafter acquire in and to the Other
               Subcontracts.  Except as may otherwise be permitted by
               paragraph 4 of this Agreement, the Borrower shall not agree
               to any modification or to any termination of the Other
               Subcontracts without the prior approval of the Bank.

                    (o)  The Major Subcontracts and the Other Subcontracts,
               to the extent not already awarded as of the date hereof,
               shall be awarded in accordance with a time table acceptable
               to the Bank and the Construction Consultant.  The Borrower
               shall cause the Construction Manager and, to the extent
               required by the Bank, any architect hired by the
               Construction Manager, the subcontractors and materialmen
               under the Major Subcontracts to respectively execute and
               deliver to the Bank, contemporaneously with the execution
               and delivery of their respective contracts, letter
               agreements pursuant to the provisions of which the
               Construction Manager, any such architect and such
               subcontractors and materialmen shall agree to perform their
               respective contracts at no additional cost or expense for
               the benefit of the Bank, its nominee, or wholly-owned
               subsidiary, in the event of a default under the
               Reimbursement Agreement or any of the other Bond Documents
               or a foreclosure of the Mortgage, which letter agreements
               shall be in form and substance satisfactory to the Bank.

                    (p)  The Borrower shall cause the Construction Manager
               and those subcontractors and materialmen under the Major
               Subcontracts designated by the Bank to provide 100% payment
               and performance bonds, which payment and performance bonds
               shall be in amount, form and substance and issued by 
               companies satisfactory to the Bank, and shall name the Bank,
               as a dual obligee.

                    (q)  The Borrower shall observe and perform all of the
               terms, covenants and conditions of the General Construction
               Contract, the Major Subcontracts and the Other Subcontracts
               on the Borrower's part to be observed or performed.

                    (r)  The Bank shall not be obligated to authorize the
               Trustee to make an advance of the Bond proceeds with respect
               to any contractor, subcontractor or materialman providing
               work or materials with respect to the Improvements unless
               such subcontractor or materialman is providing such work or
               materials under a signed contract or purchase order.

                    (s)  All of the terms, conditions and provisions of the
               Bond Documents insofar as they pertain to the obligation of
               the Bank to authorize the Trustee to make any advance of the
               Bond proceeds shall have been complied with to the
               satisfaction of the Bank and its counsel.

          All conditions and requirements of this Agreement relating to the
          obligation of the Bank to authorize the Trustee to make advances
          of the Bond proceeds are for the sole benefit of the Bank and no
          other person or party (including, without limitation, the
          Construction Manager and subcontractors and materialmen engaged
          in the construction of the Improvements) shall have the right to
          rely on the satisfaction of such conditions and requirements by
          the Borrower as a condition precedent to the Bank authorize the
          Trustee making an advance of the Bond proceeds.  The Bank shall
          have the right, in its sole and absolute discretion, to waive any
          such condition or requirement as a condition precedent to
          authorize the Trustee making an advance of the Bond proceeds.

               13.  Contingency Reserve.  A portion of the Bond proceeds in
          the amount of $750,000  (hereinafter referred to as the
          "Contingency Reserve") shall be reserved to cover the payment of
          contingencies incurred in connection with the construction of the
          Improvements (including, without limitation, the payment of
          additional unanticipated costs incurred with respect to
          particular line items set forth in the Trade Breakdown Schedule
          and the Schedule of Other Project Costs and additional costs
          incurred in connection with change orders entered into in
          conformity with the provisions of this Agreement), and shall not
          be advanced for any other purpose prior to the completion of
          construction of the Improvements pursuant to this Agreement
          unless agreed to the contrary by the Bank in its sole and
          absolute discretion.  All advances from the Contingency Reserve
          shall be subject to specific prior review and approval in all
          respects by the Bank.

               14.  Deficiency.  The Bank shall not be obligated to
          authorize the Trustee to make any advance of the Bond proceeds
          if, in the sole opinion of the Bank, the balance of the Bond
          proceeds yet to be advanced pursuant to this Agreement and the
          Loan Agreement is at any time less (the amount by which it is
          less being hereinafter referred to as the "Deficiency") than the 
          actual sum, as estimated by the Bank, which will be required
          (x) to complete the construction of the Improvements in
          accordance with the Plans and Specifications and this Agreement
          and to pay all Direct Construction Costs, Other Project Costs and
          all other costs and expenses of any nature whatsoever which will
          be incurred in connection with the completion of construction of
          the Improvements, and (y) to cover the payment of all operating
          deficits of the Property (inclusive of debt service in connection
          with the Bonds) through the date upon which the Bank reasonably
          anticipates that the actual gross cash flow of the Property will
          be sufficient to cover all operating expenses of the Property,
          inclusive of debt service in connection with the Bonds.  The
          Borrower shall invest the Deficiency in the Property in the
          following manner:

               The Borrower shall, within fifteen (15) days after being
          notified by the Bank that there is or will be a Deficiency,
          either (i) invest in the Improvements in a manner satisfactory to
          the Bank an amount equal to the Deficiency and deliver to the
          Bank evidence satisfactory to the Bank of such investment, which
          investment shall remain invested in the Improvements until the
          Debt has been paid in full, or (ii) deposit with the Trustee an
          amount sufficient to eliminate the Deficiency.  Any amounts
          deposited by the Borrower with the Trustee pursuant to
          clause (ii) of the preceding sentence of this paragraph to cover
          a Deficiency shall be disbursed by the Trustee to the Borrower in
          accordance with the terms of the Indenture and this Agreement and
          shall be applied by the Borrower to cover the payment of Direct
          Construction Costs and Other Project Costs incurred in connection
          with the construction of the Improvements, and until so disbursed
          shall be held by the Trustee in the Acquisition and Construction
          Fund.  If an Event of Default (as hereinafter defined) shall
          occur and be continuing, the Bank, in addition to all other
          rights which it may have, (i) shall have the absolute and
          unconditional right in its discretion to direct the Trustee to
          apply the undisbursed balance of any Deficiency deposit, together
          with interest earned thereon, in whole or in part to the payment
          of the Debt in such order, priority and proportion as the Bank in
          its sole and absolute discretion deems to be appropriate.

               15.  Specific Additional Covenants of Borrower.  The
          Borrower shall comply with each of the following terms and
          conditions:

                    (a)  The Borrower shall obtain and furnish to the Bank
               within thirty (30) days after the completion of the
               Improvements the originals or copies of all temporary
               permanent certificates of occupancy (or their local
               equivalent) and all other certificates, licenses, consents
               and other approvals of the Governmental Authorities which
               are required for the use and occupancy of the Improvements. 
               In no event shall the last advance of the Bond proceeds be
               made pursuant to this Agreement and the Loan Agreement until
               all such certificates, licenses, consents and approvals have
               been obtained and delivered to the Bank.  If temporary
               certificates of occupancy are issued, the Borrower will
               diligently take all steps necessary to obtain permanent 
               certificates of occupancy within a period not exceeding six
               (6) months after the date of issuance of the temporary
               certificates of occupancy, and shall upon receipt thereof
               deliver to the Bank the originals or copies thereof.

                    (b)  The Borrower shall furnish to the Bank from time
               to time upon request (i) current financial statements of the
               Borrower, (ii) information as to the Borrower's financial
               condition, (iii) the names of all persons with whom the
               Borrower or the Construction Manager has contracted or
               intends to contract for the construction of the Improvements
               or the furnishing of labor or materials in connection
               therewith, (iv) a list of all unpaid bills for labor and
               materials with respect to construction of the Improvements,
               (v) budgets of the Borrower and revisions thereof showing
               estimated Direct Construction Costs and Other Project Costs
               and other costs and expenses to be incurred in connection
               with the completion of construction of the Improvements,
               (vi) lien waivers, receipted bills or other evidences of
               payment of all Direct Construction Costs, Other Project
               Costs and other costs and expenses incurred in connection
               with the construction of the Improvements and any other
               costs and expenses relating to the Property, and (vii) such
               other information relating to the Borrower, the Property,
               any guarantor or indemnitor or other person or party
               connected with the Borrower, the Bonds, the construction of
               the Improvements or any collateral for the Loan or other
               source of repayment of the Bonds, as the Bank may reasonably
               request.

                    (c)  The Borrower shall proceed immediately if the
               Improvements are partially or totally damaged or destroyed
               by fire or other casualty with the repair and restoration
               thereof and shall diligently prosecute the work of repair
               and restoration to completion, it being agreed that (i) if
               such casualty is covered by fire or other casualty
               insurance, the Borrower's obligation to proceed with such
               repair and restoration shall be contingent upon the Bank
               authorizing the Trustee to disburse to the Borrower the
               proceeds of such insurance to pay the cost of such repair
               and restoration, and (ii) the cost of such repair and
               restoration shall in no event or under any circumstance be
               made the basis of any advance of the Bond proceeds.

                    (d)  The Borrower shall pay when due all Direct
               Construction Costs, Other Project Costs and other costs and
               expenses incurred by the Borrower in connection with the
               construction of the Improvements or any repair and
               restoration of the Improvements pursuant to the provisions
               of this paragraph hereinabove set forth.

                    (e)  The Borrower shall pay all fees and charges
               incurred in connection with this Agreement, including,
               without limitation, reasonable attorneys' fees incurred by
               the Bank, fees of the Construction Consultant, appraisal and
               environmental fees, and fees and expenses relating to
               examination of title, title insurance premiums, surveys, and 
               mortgage recording, documentary, transfer or other similar
               taxes and revenue stamps.

                    (f)  The Bank shall not be required to pay any
               brokerage fees or commissions arising in connection with
               this Agreement and the Borrower agrees to defend, indemnify
               and hold the Bank harmless from and against any and all such
               claims in connection therewith.

                    (g)  The Borrower shall not assign this Agreement or
               the moneys to be advanced and disbursed hereunder or convey,
               assign, pledge, encumber or mortgage (except for the
               Mortgage) any part of the Property without the prior consent
               of the Bank.

               16.  Events of Default.  The term "Event of Default" as used
          in this Agreement shall mean the occurrence of any one or more of
          the following events:

                    (a)  If the Borrower shall continue to be in default
               under any of the provisions of this Agreement for five (5)
               days after notice from the Bank in the case of any default
               which can be cured by the payment of a sum of money, or for
               twenty (20) days after notice from the Bank in the case of
               any other default, provided that if such default cannot
               reasonably be cured within such twenty (20) day period and
               the Borrower shall have commenced to cure such default
               within such twenty (20) day period and thereafter diligently
               and expeditiously proceeds to cure the same, such twenty
               (20) day period shall be extended for so long as it shall
               require the Borrower in the exercise of due diligence to
               cure such default, it being agreed that no such extension
               shall be for a period in excess of sixty (60) days, or shall
               be construed as having the effect of extending the
               Completion Date; 

                    (b)  If a default shall occur and be continuing beyond
               any applicable grace and cure period under the Mortgage, the
               Reimbursement Agreement or any of the other Bond Documents;

                    (c)  If any survey required or requested by the Bank
               pursuant to the provisions of this Agreement shows any
               condition not approved by the Bank, and such condition is
               not removed within thirty (30) days after notice thereof by
               the Bank to the Borrower;

                    (d)  If the Improvements are not completed in
               accordance with the provisions of this Agreement on or
               before the Completion Date, as the same may be extended
               pursuant to paragraph 7 of this Agreement;

                    (e)  If construction of the Improvements is suspended
               for a period of three (3) consecutive business days other
               than by reason of the occurrence of an event of force
               majeure, or if construction of the Improvements in the
               judgment of the Bank or the Construction Consultant is not
               carried on with reasonable diligence, or if the Bank or the 
               Construction Consultant is of the opinion that the
               Improvements cannot be completed by the Completion Date, as
               the same may be extended pursuant to paragraph 7 of this
               Agreement;

                    (f)  If the Borrower shall fail to cover any Deficiency
               in the manner and within the time period specified in
               paragraph 14 of this Agreement;

                    (g)  If the Borrower executes any chattel mortgage or
               other security agreement with respect to any materials,
               equipment, furniture or fixtures used in the construction of
               the Improvements or the operation of the Improvements or
               with respect to any articles of personal property
               constituting part of the Property, or if any such materials,
               equipment, furniture, fixtures or articles of personal
               property are not substantially in accordance with the Plans
               and Specifications or are leased or purchased pursuant to
               any conditional sales contract or other security agreement
               or otherwise so that the ownership thereof will not vest
               unconditionally in the Borrower free from encumbrances upon
               being made a part of the Property, or if the Borrower does
               not furnish to the Bank on request the contracts, bills of
               sale, statements, receipted vouchers or other agreements,
               under which the Borrower claims title to such materials,
               equipment, furniture, fixtures or articles of personal
               property; or

                    (h)  If the Borrower shall be in default under the
               Revolving Credit Agreement between the Borrower and the Bank
               dated December 22, 1992, as amended from time to time.

          Upon the occurrence of an Event of Default, the Bank (i) may, at
          its option and in its sole and absolute discretion, declare the
          Debt immediately due and payable, and (ii) may, at its option and
          in its sole and absolute discretion, cease to authorize the
          Trustee to make advances of the Bond proceeds, and (iii) may
          pursue any and all remedies provided for in the Bond Documents,
          or otherwise available.

               17.  Other Remedies.  Upon the occurrence of an Event of
          Default, whether or not the Debt shall be or shall have been
          declared due and payable or the Bank shall have instituted any
          foreclosure or other action for the enforcement of the Mortgage,
          the Bank may, in addition to any other remedies which the Bank
          may have under the Loan Documents and in the Bank's sole and
          absolute discretion, (a) enter upon the Premises and complete the
          Improvements in accordance with the Plans and Specification with
          such changes therein as the Bank may deem appropriate and employ
          watchmen to protect the Improvements, all at the risk, cost and
          expense of the Borrower, (b) at any time discontinue any work
          commenced in respect of the Improvements or change any course of
          action undertaken by it and not bound by any limitations or
          requirements of time whether set forth herein or otherwise,
          (c) assume any construction contract made by the Borrower in any
          way relating to the Improvements and take over and use all or any
          part of the labor, materials, equipment, furniture, fixtures and 
          articles of personal property contracted for by the Borrower,
          whether or not previously incorporated into the Improvements, and
          (d) in connection with any construction of the Improvements
          undertaken by the Bank pursuant to the provisions of this
          paragraph (w) engage builders, contractors, architects, engineers
          and others for the purpose of furnishing labor, materials,
          equipment, furniture, fixtures and articles of personal property
          in connection with the construction of the Improvements, (x) pay,
          settle or compromise all bills or claims which may become liens
          against the Property, or any portion thereof, or which have been
          or may be incurred in any manner in connection with completing
          construction of the Improvements, and irrespective of whether any
          of the same have been incurred by the Borrower, the Bank or any
          other person or party, (y) pay all sums and take all action
          necessary to effect the discharge of liens or encumbrances on, or
          to effect the cure of defects in, the title of the Property, or
          any portion thereof, and irrespective of whether any of the same
          have been caused by any act or omission of the Borrower, the Bank
          or any other person or party, and (z) take or refrain from taking
          such action hereunder as the Bank may from time to time determine
          in its sole discretion.  The Borrower shall be liable to the Bank
          for all sums paid or incurred by the Bank to construct and equip
          the Improvements whether the same shall be paid or incurred
          pursuant to the provisions of this paragraph or otherwise, and
          all payments made or liabilities incurred by the Bank hereunder
          of any kind whatsoever shall be paid by the Borrower to the Bank
          upon demand, with interest thereon (calculated for the actual
          number of days elapsed on the basis of a 360 day year) at a rate
          per annum equal to the greater on a daily basis of (i) 20%, or
          (ii) 5% plus the Prime Rate, provided that such interest rate
          shall in no event exceed the maximum interest rate which the
          Borrower may by law pay, from the date of payment by the Bank to
          the date of payment to the Bank, which sums and interest shall be
          secured by the Mortgage.  For the purpose of exercising the
          rights granted by this paragraph, the Borrower hereby irrevocably
          constitutes and appoints the Bank its true and lawful
          attorney-in-fact to execute, acknowledge and deliver any
          instruments and to do and perform any acts in the name and on
          behalf of the Borrower.

               18.  Incorporation of Provisions.  The Mortgage is subject
          to the conditions, stipulations, agreements and covenants
          contained in this Agreement to the same extent and effect as if
          fully set forth therein until this Agreement is terminated by the
          completion of the Improvements and the payment in full of the
          Debt.  

               19.  Further Assurances.  The Borrower shall on demand of
          the Bank do any act or execute any additional documents required
          by the Bank to confirm the lien of the Mortgage.

               20.  Representations and Warranties.  The Borrower
          represents and warrants to the Bank as follows:

                    (a)  The Improvements and their contemplated use will
               upon completion in accordance with the Plans and
               Specifications comply with all applicable zoning 
               resolutions, building codes, environmental and other
               applicable laws, rules and regulations.

                    (b)  The Improvements are not now damaged or injured as
               a result of any fire, explosion, accident, flood or other
               casualty.

                    (c)  No condemnation or eminent domain proceeding has
               been commenced or to the knowledge of the Borrower is about
               to be commenced against the Property, or any portion
               thereof.

                    (d)  The Borrower has no knowledge of any notes or
               notices of violation of Federal law or municipal ordinances
               or orders or requirements of the state in which the Property
               is located or any municipal department or other Governmental
               Authority.

                    (e)  The Borrower is duly qualified to do business in
               the State in which the Property is located.

                    (f)  The Borrower (and the undersigned representatives
               of the Borrower) have the full power and authority to
               execute and deliver this Agreement and the other Bond
               Documents, and the same constitute the binding and
               enforceable obligations of the Borrower in accordance with
               their terms.

               21.  Construction of Agreement.  The titles and headings of
          the paragraphs of this Agreement have been inserted for
          convenience of reference only and are not intended to summarize
          or otherwise describe the subject matter of such paragraphs and
          shall not be given any consideration in the construction of this
          Agreement.

               22.  Trust Fund.  The Borrower shall receive the advances of
          the Bond proceeds and shall hold the right to receive such
          advances of the Bond proceeds as a trust fund to be applied first
          for the purpose of paying the cost of the Improvements, and the
          Borrower shall apply the same first to the payment of the cost of
          the Improvements before using any part of the total of the same
          for any other purpose.

               23.  Parties Bound, etc.  The provisions of this Agreement
          shall be binding upon and inure to the benefit of the Borrower,
          the Bank and their respective successors and assigns (except as
          otherwise prohibited by this Agreement).

               24.  Waivers.  The Bank may at any time and from time to
          time waive any one or more of the conditions contained herein,
          but any such waiver shall be deemed to be made in pursuance
          hereof and not in modification thereof, and any such waiver in
          any instance or under any particular circumstance shall not be
          effective unless in writing and shall not be considered a waiver
          of such condition in any other instance or any other
          circumstance. 

               25.  Governing Law.  This Agreement is and shall be deemed
          to be a contract entered into pursuant to the laws of the State
          of New York and shall in all respects be governed, construed,
          applied and enforced in accordance with the laws of the State of
          New York.

               26.  Severability.  If any term, covenant or provision of
          this Agreement shall be held to be invalid, illegal or
          unenforceable in any respect, this Agreement shall be construed
          without such term, covenant or provision.

               27.  Notices.  Any notice, request, demand, statement,
          authorization, approval, consent or acceptance made hereunder
          shall be in writing and shall be hand delivered or sent by
          Federal Express or other reputable courier service, or by
          registered or certified mail, return receipt requested, and shall
          be deemed given (i) when received at the following addresses if
          hand delivered or sent by Federal Express, or other reputable
          courier service, and (ii) three (3) business days after being
          postmarked and addressed as follows if sent by registered or
          certified mail, return receipt requested:

               If to the Bank:

                    The Chase Manhattan Bank
                    2300 Main Place Tower
                    Buffalo, New York  14202-3723
                    Attn:  Alan E. Boyce
                           Vice President


               With a copy to:

                    The Chase Manhattan Bank
                    Legal Department
                    270 Park Avenue - 40th Floor
                    New York, New York 10017
                    Attn:  Robert B. Lynch, Vice President
                           and Assistant General Counsel

               If to the Borrower:

                    Exolon-ESK Company
                    1000 East Niagara Street
                    Tonawanda, New York 14150
                    Attn: Michael H. Bieger
                           Vice President and
                           Chief Financial Officer

          Each party may designate a change of address by notice to the
          other party, given at least fifteen (15) days before such change
          of address is to become effective.

               28.  Fees and Expenses.  The Borrower shall pay to the Bank,
          upon demand, all expenses incurred by the Bank in connection with
          the collection of the Debt after an Event of Default, the
          enforcement of the Bond Documents, and in curing any defaults 
          under the Bond Documents (including, without limitation,
          reasonable attorneys' fees), with interest thereon (calculated
          for the actual number of days elapsed on the basis of a 360-day
          year) at a rate per annum equal to the Bank's Prime Rate plus 5%,
          provided that such interest rate shall in no event exceed the
          maximum interest rate which the Borrower may by law pay, from the
          date incurred by the Bank to the date of repayment to the Bank,
          which sums and interest shall be secured by the Mortgage.

               29.  Sign.  At the request of the Bank, the Borrower shall,
          subject to applicable ordinances pertaining to the Property,
          place a sign on the Premises reciting, among other things, the
          source of construction financing for the Improvements, which sign
          shall be provided at the expense of the Borrower and shall remain
          in place until the completion of construction of the
          Improvements.

               30.  Modification.  This Agreement may not be modified,
          amended or terminated, except by an agreement in writing executed
          by the parties hereto.  The Borrower acknowledges that this
          Agreement and the other Bond Documents set forth the entire
          agreement and understanding of the Bank and the Borrower with
          respect to the Bonds and that no oral or other agreements,
          understandings, representations or warranties exist with respect
          to the Loan other than those set forth in this Agreement and the
          other Bond Documents.

               31.  Termination of Advances.  Notwithstanding anything to
          the contrary contained in this Agreement, the Bank shall have no
          further obligation to authorize the Trustee to make any
          additional advances of the Bond proceeds as of the date upon
          which the Improvements have been completed in accordance with the
          provisions of this Agreement and all Direct Construction Costs,
          Other Project Costs and other costs and expenses incurred in
          connection therewith have been paid in full and the actual net
          cash operating income of the Property after the payment of all
          operating expenses of the Property (exclusive of debt service in
          connection with the Bonds) for a period of three (3) consecutive
          calendar months and as determined on the basis of sound cash
          accounting practices consistently applied is equal to or in
          excess of the debt service in connection with the Bonds for such
          period of three (3) consecutive calendar months.

               IN WITNESS WHEREOF, the Bank and the Borrower have duly
          executed this Agreement the day and year first above written.


                                             EXOLON-ESK COMPANY

                                        By:  Michael H. Bieger, 
                                             Vice President and
                                             Chief Financial Officer


                                             THE CHASE MANHATTAN BANK

                                        By:  Alan E. Boyce 
                                             Vice President 


          STATE OF ILLINOIS   )
                              ) ss.:
          COUNTY OF COOK )


               On the 1st day of December, 1996, before me personally came
          Michael H. Bieger, to me known, who, being by me duly sworn, did
          depose and say that he resides at Clarence, New York;
          that he is Vice President and Chief Financial Officer of
          EXOLON-ESK COMPANY, the corporation described in and which
          executed the above instrument; and that he signed his name
          thereto by authority of the Board of Directors of said
          corporation.


              Nancy E. Gates
               Notary Public




          STATE OF ILLINOIS   )
                              ) ss.:
          COUNTY OF COOK )


               On the 1st day of December, 1996, before me personally came
          Alan E. Boyce, to me known, who, being by me duly sworn, did
          depose and say that he resides at Hamburg, New York;
          that he is Vice President of THE CHASE MANHATTAN BANK, the
          corporation described in and which executed the above instrument;
          and that he signed his name thereto by authority of the Board of
          Directors of said corporation.


                   Deborah Doxey
                    Notary Public 


                                      EXHIBIT A

                            (Description of the Premises)





                                        -A1- 


                                      EXHIBIT B

                            (Definition of Certain Terms)



          Commencement Date:  The term "Commencement Date" as used in this
          Agreement shall mean December 1, 1996.

          Completion Date:  The term "Completion Date" as used in this
          Agreement shall mean June 30, 1998.

          Construction Consultant:  The term "Construction Consultant" as
          used in this Agreement shall mean Sachs Electric.

          Construction Escrow Agreement:  The term "Construction Escrow
          Agreement" as used in this Agreement shall mean the agreement
          established among the Title Company, the Bank, the Construction
          Manager, and Borrower for the disbursement of advances of Bond
          proceeds and administration of the Bonds.  The establishment of
          the Construction Escrow Agreement may be a condition precedent to
          the initial advance of Bond proceeds.

          Construction Manager:  The term "Construction Manager" as used in
          this Agreement shall mean Sachs Electrical Company, having an
          office at 16300 Justus Post Road, Chesterfield Village, Missouri.

          Debt:  The term "Debt" as used in this Agreement shall mean all
          principal, interest, additional interest and other sums of any
          nature whatsoever which shall or may become due and payable to
          the Bank pursuant to the provisions of the Reimbursement
          Agreement.

          Construction Contract:  The term "Construction Contract" or
          "General Construction Contract" as used in this Agreement shall
          mean a certain Contract dated December 9, 1996, entered into
          between the Borrower and the Construction Manager.

          Governmental Authorities:  The term "Governmental Authorities" as
          used in this Agreement shall mean all governmental authorities
          having jurisdiction over the Property.

          Improvements:  The term "Improvements" as used in this Agreement
          shall mean the improvements to be constructed with a portion of
          the Bond proceeds, more particularly described in the Loan
          Agreement.

          Documents:  The term "Bond Documents" as used in this Agreement
          shall collectively mean the "Bond Documents" as defined in the
          Reimbursement Agreement.

          Major Subcontracts:  The term "Major Subcontracts" as used in
          this Agreement shall mean any contract or contracts entered into
          with any architect, single subcontractor or materialman employed
          by the Construction Manager or the Borrower in connection with

                                        -B1- 


          the construction of the Improvements and providing for aggregate
          payments to such architect, subcontractor or materialman equal to
          or in excess of $100,000.00.

          Mortgage:  The term "Mortgage" as used in this Agreement shall
          mean a certain Mortgage dated the date hereof in the principal
          sum of $13,000,000 executed and delivered by the Borrower
          constituting a first lien on the fee estate of the Borrower in
          Property and intended to be duly recorded in Putnam County,
          Illinois.

          Other Subcontracts:  The term "Other Subcontracts" as used in
          this Agreement shall mean any contracts other than Major
          Subcontracts entered into by the Construction Manager or the
          Borrower with architects, subcontractors or materialmen in
          connection with the construction of the Improvements.

          Preliminary Survey:  The term "Preliminary Survey" as used in
          this Agreement shall mean, collectively, December 3, 1996
          prepared by J. William Shafer of Shafer Engineering.

          Prime Rate:  The term "Prime Rate" as used in this Agreement
          shall mean such rate of interest as is publicly announced by the
          Bank at its principal office from time to time as its prime rate. 
          Any change in the Prime Rate shall be effective on the date such
          change is announced by the Bank.

          Reimbursement Agreement:  The term "Reimbursement Agreement" as
          used in this Agreement shall mean the Letter of Credit
          Reimbursement Agreement between the Borrower and the Bank dated
          as of December 1, 1996, as the same may be amended or
          supplemented from time to time.

          Retainage:  The term "Retainage" as used in this Agreement shall
          mean an amount equal to 10% of the aggregate Direct Construction
          Costs actually incurred by the Borrower for work in place as part
          of the construction of the Improvements, as verified from time to
          time by the Construction Consultant pursuant to the provisions of
          this Agreement.  The Retainage shall in no event be less than the
          amount actually held back by the Borrower from the Construction
          Manager and all subcontractors and materialmen engaged in the
          construction of the Improvements.  The Retainage shall not be
          released until the construction of the Improvements has been
          completed in accordance with the Plans and Specifications
          accepted by the Bank and the Construction Consultant and the
          provisions of this Agreement.

          Title Company:  The term "Title Company" as used in this
          Agreement shall mean Chicago Title Insurance Company.

          Verified Project Costs:  The term "Verified Project Costs" as
          used in this Agreement shall mean the aggregate, from time to
          time, of (a) Other Project Costs actually incurred by the
          Borrower in connection with the construction of the Improvements
          and as substantiated by evidence reasonably satisfactory to the

                                        -B2- 


          Bank, and (b) Direct Construction Costs actually incurred by the
          Borrower for work in place as part of the construction of the
          Improvements, as verified by the Construction Consultant, from
          time to time, pursuant to the provisions of this Agreement, minus
          a sum equal to the aggregate of (i) the Initial Equity
          Requirement which is required to have been invested in the
          Property pursuant to this Agreement, (ii) the aggregate portion
          of the Deficiency, if any, which is required to have been
          invested in the Property from time to time pursuant to this
          Agreement, and (iii) the aggregate Retainage from time to time.


                                        -B3- 


                                      EXHIBIT C


                      (Description of Plans and Specifications)

                    The term "Plans and Specifications" shall
                    include any and all blueprints, designs and
                    drawings done by Sachs Electric Company,
                    Westfield Engineering & Services, Inc. and
                    Dow Chemical in connection with the
                    construction and installation of a Dow
                    Sulferox Desulpherization System to control
                    the Particulate and SO2 emissions at the
                    Exolon-ESK Company facility in Hennepin,
                    Illinois.


                                        -C1- 


                                      EXHIBIT D

                         (Direct Construction Cost Breakdown
                          and Request for Partial Payment)



               The term "Direct Construction Cost Breakdown and Request for
          Partial Payment" as used in this Agreement shall mean the
          Application and Certificate for Payment (AIA Document G 6702 and
          AIA Document G 6703 or their equivalent), with such changes
          therein as the Bank or the Construction Consultant may reasonably
          request, or such other form of Direct Construction Cost Breakdown
          and Request for Partial Payment as may be reasonably acceptable
          to the Bank and the Construction Consultant.


                                        -D1-