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                                      ELXSI
                                   (Borrower)

                                       and


                 ORANGE COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
                                    (Issuer)


                                 LOAN AGREEMENT


                         Dated as of September 24, 1997


                                   Relating to
                                   $2,500,000
                 Orange County Industrial Development Authority,
                      Industrial Development Revenue Bonds
                          (ELXSI Project), Series 1997


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ALL RIGHTS OF THE ISSUER  UNDER THIS  AGREEMENT  (EXCEPT  FOR  CERTAIN  RESERVED
RIGHTS) HAVE BEEN  ASSIGNED TO, AND ARE SUBJECT TO A SECURITY  INTEREST IN FAVOR
OF SUNTRUST BANK,  CENTRAL  FLORIDA,  NATIONAL  ASSOCIATION,  AS TRUSTEE FOR THE
HOLDERS OF THE BONDS UNDER A TRUST  INDENTURE DATED AS OF SEPTEMBER 24, 1997, AS
AMENDED OR SUPPLEMENTED FROM TIME TO TIME.


<PAGE>



                                TABLE OF CONTENTS

                                                                            Page

ARTICLE I    DEFINITIONS AND RULES OF CONSTRUCTION.............................3

             Section 1.1   Definitions.........................................3
             Section 1.2   Rules of Construction..............................14

ARTICLE II   REPRESENTATIONS..................................................16

             Section 2.1   Representations by the Issuer......................16
             Section 2.2   Representations, Warranties and Covenants
                           by the Borrower....................................17

ARTICLE III  ACQUISITION OF THE PROJECT.......................................20

             Section 3.1   Agreement as to Acquisition of the Project.........20
             Section 3.2   Borrower to Obtain Approvals Required for
                           the Project and the Plant..........................20
             Section 3.3   Plans and Specifications...........................20

ARTICLE IV   ISSUANCE OF THE BONDS; COMPLETION DATE...........................21

             Section 4.1   Agreement to Issue the Bonds.......................21
             Section 4.2   Disbursements from the Project Fund................21
             Section 4.3   Certificate as to Completion.......................21
             Section 4.4   Reserved...........................................21
             Section 4.5   Borrower Required to Pay in Event Project
                           Fund Insufficient..................................21
             Section 4.6   No Third Party Beneficiary.........................22
             Section 4.7   Rebate Provisions..................................22
             Section 4.8   Arbitrage Certifications and Covenants.............22
ARTICLE V    LOAN BY THE ISSUER TO THE BORROWER; REPAYMENT....................23

             Section 5.1   Loan by the Issuer; Repayment......................23
             Section 5.2   No Set Off.........................................23
             Section 5.3   Prepayments........................................24
             Section 5.4   Credits Against the Note...........................24

ARTICLE VI   MAINTENANCE AND MODIFICATIONS; TAXES AND UTILITY CHARGES; 
             INSURANCE AND EMINENT DOMAIN.....................................25

             Section 6.1   Maintenance and Modification of the Plant by
                           Borrower...........................................25
             Section 6.2   Taxes and Utility Charges..........................25
             Section 6.3   Title Insurance and Survey.........................26

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<PAGE>

             Section 6.4   Casualty and Liability Insurance Required..........26
             Section 6.5   General Requirements Applicable to Insurance.......27
             Section 6.6   Advances by the Bondholder or the Trustee..........28
             Section 6.7   Borrower to Make up Deficiency in Insurance
                           Coverage...........................................28
             Section 6.8   Eminent Domain.....................................28
             Section 6.9   Application of Net Proceeds of Insurance and
                           Eminent Domain.....................................29
             Section 6.10  Parties to Give Notice.............................30

ARTICLE VII  SPECIAL COVENANTS................................................31

             Section 7.1   Access to the Plant and Inspection.................31
             Section 7.2   Further Assurances and Corrective 
                           Instruments; Survey................................31
             Section 7.3   Recording and Filing; Other Instruments............31
             Section 7.4   Notice of Event of Taxability......................32
             Section 7.5   Administrative Expenses. ..........................32
             Section 7.6   Covenants with Respect to Tax Exemption............32
             Section 7.7   Financial Covenants................................33
             Section 7.8   Release and Indemnification Covenants..............34
             Section 7.9   Encumbrance Covenants..............................36
             Section 7.10  Financial Statements...............................37
             Section 7.11  Indebtedness.......................................38
             Section 7.12  Additional Information.............................38
             Section 7.13  Restricted Payments ...............................38
             Section 7.14  Sale of Assets.....................................39
             Section 7.15  Litigation.........................................39
             Section 7.16  Patents, Trademarks................................39
             Section 7.17  Default Certificates...............................40
             Section 7.18  Notification to Trustee............................40
             Section 7.19  Books of Record and Account........................40
             Section 7.20  Observe Laws.......................................40
             Section 7.21  Acceptance of Indenture............................40
             Section 7.22  Reserved...........................................40
             Section 7.23  Merger, Purchase and Sale..........................41
             Section 7.24  Changes in Control.................................41
             Section 7.25  ERISA..............................................41
             Section 7.26  Notice of Plan Events, Termination and Litigation..41
             Section 7.27  Plan Annual Reports................................42
             Section 7.28  Plan Liabilities...................................42
             Section 7.29  Notice of Adoption of Plan.........................42
             Section 7.30  Guaranties.........................................42
             Section 7.31  Subsidiaries.......................................43
             Section 7.32  Leases.............................................43
             Section 7.33  Unconditional Purchase Options.....................43
             Section 7.34  Use Of Proceeds....................................43

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<PAGE>

             Section 7.35  Transactions with Related Parties..................43
             Section 7.36  Borrower's and Subsidiaries' Stock.................43

ARTICLE VIII ASSIGNMENT, LEASING, SELLING AND ENCUMBERING.....................44

             Section 8.1   Assignment of Loan Agreement, Sale or
                           Encumbering of Plant by the Borrower...............44
             Section 8.2   Restrictions on Transfer of Issuer's Rights.  .....44
             Section 8.3   Assignment by the Issuer...........................44

ARTICLE IX   EVENTS OF DEFAULT AND REMEDIES...................................45

             Section 9.1   Events of Default Defined..........................45
             Section 9.2   Remedies on Default................................46
             Section 9.3   Application of Amounts Realized in 
                           Enforcement of Remedies............................47
             Section 9.4   No Remedy Exclusive................................47
             Section 9.5   Agreement to Pay Attorneys' Fees and Expenses......47

ARTICLE X    PREPAYMENTS......................................................49

             Section 10.1  Optional Prepayments...............................49
             Section 10.2  Mandatory Prepayments..............................49
             Section 10.3  Other Mandatory Prepayments........................50

ARTICLE XI   MISCELLANEOUS....................................................51

             Section 11.1  References to the Bonds Ineffective 
                           After Bonds Paid...................................51
             Section 11.2  No Implied Waiver..................................51
             Section 11.3  Issuer Representative..............................51
             Section 11.4  Borrower Representative............................51
             Section 11.5  Notices............................................51
             Section 11.6  If Payment or Performance Date is not a
                           Business Day.......................................52
             Section 11.7  Binding Effect.....................................52
             Section 11.8  Severability.......................................52
             Section 11.9  Amendments, Changes and Modifications..............52
             Section 11.10 Execution in Counterparts..........................53
             Section 11.11 Applicable Law.....................................53
             Section 11.12 No Charge Against Issuer Credit....................53
             Section 11.13 Issuer Not Liable..................................53
             Section 11.14 Expenses...........................................53
             Section 11.15 Amounts Remaining with the Trustee.................53

Signatures.................................................................55-56
<PAGE>

EXHIBIT A - FORM OF NOTE
EXHIBIT B -THE NEW FACILITY SITE
EXHIBIT C - THE EXISTING FACILITY SITE
EXHIBIT D - SCHEDULE OF INDEBTEDNESS


<PAGE>


                                 LOAN AGREEMENT


         This LOAN  AGREEMENT,  dated as of September  24, 1997  between  ORANGE
COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY, a public body corporate and politic and
a public  instrumentality  duly created and existing  under and by virtue of the
laws of the State of Florida (the "Issuer"), and ELXSI, a California corporation
(the "Borrower").

                              W I T N E S S E T H:

                                    RECITALS

         1.  The  Issuer  is  authorized  and  empowered  by Parts II and III of
Chapter 159, Florida Statutes, as amended from time to time (the "Enabling Act",
as defined herein) to issue industrial development revenue bonds for the purpose
of financing the cost of acquisition, construction, reconstruction, improvement,
rehabilitation,   renovation,   expansion  and  enlargement,  or  additions  to,
furnishing  and equipping of capital  projects for  industrial or  manufacturing
plants,  including  land,  rights  in  land,  buildings  and  other  structures,
machinery,  equipment,  appurtenances and facilities incidental thereto, and all
improvements  necessary or convenient therefor,  and to lend the proceeds of the
bonds for such  purpose  to any  financially  responsible  party  pursuant  to a
financing agreement providing for the repayment of the loan.

         2. The  Borrower  has  applied to the Issuer for a loan to finance  the
Cost of Acquisition of the Project (as hereinafter defined).

         3. The Issuer has determined that the Project (as hereinafter  defined)
complies with the provisions of the Enabling Act and serves a public purpose by,
among  other  things,   increasing  opportunities  for  gainful  employment  and
advancing the economic  prosperity  and general  welfare of the State of Florida
and its people.

         4. The Issuer intends to issue its Orange County Industrial Development
Authority,  Industrial  Development  Revenue Bonds (ELXSI Project),  Series 1997
(the "Bonds",  as defined  herein),  pursuant to the  Indenture (as  hereinafter
defined) in order to obtain funds to lend to the Borrower  pursuant to this Loan
Agreement. This Loan Agreement provides for the repayment by the Borrower of the
loan  contemplated  hereunder  and  further  provides  that  the  loan  shall be
evidenced by the Note (as hereinafter defined) of the Borrower and that the loan
and the Note shall be secured by a mortgage  and  security  interest and certain
other  security  pursuant  to  certain   collateral   documents  being  executed
concurrently herewith.

         5. Pursuant to the Indenture,  the Issuer has, inter alia, assigned and
pledged  the rights of the Issuer in, to and under the Note,  the  Mortgage  (as
hereinafter defined),  the Security Agreement (as hereinafter defined),  and the
Environmental Agreement (as hereinafter defined), to the Trustee (as hereinafter
defined) as security for the Bonds.

<PAGE>

         6. As further  security  for the  Bonds,  the  Borrower  has caused the
Guarantor  (hereinafter defined) to guaranty the prompt payment of the Bonds and
certain other amounts pursuant to the Guaranty (hereinafter defined).

         NOW, THEREFORE, in consideration of the promises and for other good and
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereby agree, covenant,  grant, pledge, assign, represent and warrant as follows
(it being  understood  and  agreed  that any  obligation  of the  Issuer for the
payment  of money  shall not be a general  obligation  on its part and shall not
constitute  or give rise to a debt,  liability or  obligation,  or  constitute a
pledge of the full faith and credit or the taxing  power,  of the Issuer,  or of
the State of Florida or of any  political  subdivision  thereof,  but shall be a
special and limited  obligation of the Issuer payable solely out of the revenues
and proceeds pledged therefor):



                                       2

<PAGE>


                                    ARTICLE I

                      DEFINITIONS AND RULES OF CONSTRUCTION

         Section  I.1  Definitions.  In  addition  to words and terms  elsewhere
defined in this Loan  Agreement  the  following  words and terms  shall have the
following meanings:

         "Acquisition"  when used in  connection  with the Project,  shall mean,
without limitation, the acquisition, construction, installation and equipping of
the Project.

         "Additional  Revolving Loan" means "Additional  Revolving Loan" as such
term is defined in the Amended and Restated Loan and Security Agreement dated as
of December  30,  1996,  between the  Borrower  and Bank of America  Illinois as
subsequently amended, supplemented, restated and modified.

         "Administrative  Expenses" shall mean the amounts  payable  pursuant to
Section  7.5 hereof by the  Borrower  to or for the account of the Issuer or the
Trustee to provide  for  payment of the costs,  expenses,  including  attorney's
fees, incurred by the Issuer or the Trustee.

         "Affiliate"  shall mean,  with respect to any Person,  any other Person
directly or indirectly  controlling or controlled by or under direct or indirect
common control with such Person. For the purposes of this definition,  "control"
when used with respect to a Person means the power to direct the  management and
policies of such Person,  directly or indirectly,  whether through the ownership
of voting securities,  by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

         "Amended  and  Restated  Loan  Agreement"  shall mean the  Amended  and
Restated Loan and Security  Agreement  dated as of December 30, 1996 between the
Borrower and Bank of America  Illinois,  as such agreement may be  supplemented,
amended,  restated  or  modified.  If the Amended and  Restated  Loan  Agreement
expires or is terminated or, if all liabilities of Borrower thereunder have been
paid in full,  references  to such  agreement  for defined terms shall be deemed
references  to such terms as defined  on the date such  agreement  expires or is
terminated.

         "Bankruptcy Code" shall mean 11 U.S.C ss.101 et seq., as amended.

         "Bickford's  Business" shall mean "Bickford's Business" as such term is
defined in the Amended and Restated Loan Agreement.

         "Bond" or "Bonds" shall mean the Orange County  Industrial  Development
Authority,  Industrial  Development Revenue Bonds (ELXSI Project),  Series 1997,
authorized  to be issued  pursuant to a resolution  of the Issuer in  accordance
with the Indenture in the aggregate principal amount of $2,500,000.00  including
such Bonds issued in replacement for mutilated,  destroyed, lost or stolen Bonds
pursuant to Section 209 of the Indenture,  and any  amendments  and  supplements
thereto, and any renewals and extensions thereof, permitted by the Indenture.

                                       3
<PAGE>

         "Bond Documents" shall mean,  collectively,  the Indenture,  the Bonds,
this Loan  Agreement,  the Note,  the  Mortgage,  the  Security  Agreement,  the
Environmental  Agreement,  and the Tax  Compliance  Certificate of the Borrower,
respectively.

         "Bondholder"  or "holder" shall mean the initial holders and any future
holders of the Bond or Bonds as  registered on the books and records of the Bond
Registrar pursuant to Section 206 of the Indenture.

         "Bond  Fund"  shall  mean the fund  created  under  Section  501 of the
Indenture.

         "Bond  Purchase  Agreement"  shall  mean  that  certain  Bond  Purchase
Agreement  executed as of the date of issuance  and delivery of the Bonds by and
between the Issuer and the Bond Purchaser.

         "Bond  Purchaser" shall mean Bank of America National Trust and Savings
Association.

         "Borrower"  shall  mean  ELXSI,  a  California  corporation,   and  its
successors and assigns.

         "Borrower Representative" shall mean any one of the Persons at the time
designated to act on behalf of the Borrower by written certificate  furnished to
the Issuer and the Trustee  containing  the specimen  signatures of such Persons
and signed by the Borrower.

         "Business  Day" shall mean a day upon which banks in Chicago,  Illinois
and  Orlando,  Florida  are open for the  transaction  of business of the nature
required pursuant to this Loan Agreement and the Indenture.

         "Capitalized  Lease" means any lease which is or should be  capitalized
on the balance sheet of the lessee in accordance with GAAP.

         "Cessation  of Operation"  shall mean that the Borrower has ceased,  in
the opinion of the Issuer and the Trustee, to operate the Project as a "project"
within the meaning of the Enabling  Act. A Cessation  of Operation  shall not be
deemed to have occurred  until 60 days shall have elapsed  after written  notice
has been given to the Borrower by the Issuer or the Trustee that  operations  at
the Project shall have ceased and the Borrower  shall not have  demonstrated  to
the  satisfaction  of the  Issuer  and the  Trustee  that  the  Borrower  (or an
assignee,  lessee or buyer  pursuant  to Section  8.1  hereof)  has  resumed the
operations of the Project as a "project"  within the meaning of the Enabling Act
or that the  Borrower  is, in good faith,  seeking to arrange  resumption  of an
economically  reasonable operation of the Project as such a "project";  provided
that a temporary  shutdown due to a strike or other labor dispute,  lack of fuel
or similar occurrence shall not be deemed a Cessation of Operation.

         "Closing Date" means September 24, 1997.

         "Code" shall mean the Internal  Revenue Code of 1986,  as amended,  and
all Tax Regulations thereunder.


                                       4
<PAGE>


         "Completion Date" shall mean that date certified as provided in Section
4.3 hereof.

         "Consistent  Basis"  shall mean,  in reference  to the  application  of
Generally  Accepted  Accounting  Principles,   that  the  accounting  principles
observed in the period  referred to are  comparable in all material  respects to
those applied in the preceding period,  except as to any changes consented to by
the Bond Purchaser.

         "Cost  of  Acquisition  of  the  Project"  shall  mean  all  costs  and
allowances for the Acquisition of the Project which include, but are not limited
to, all capital costs of the Project, including the following:

              (1) The Acquisition of the Project at the Project Site;

              (2)  Preparation of the plans and  specifications  for the Project
(including any preliminary  study or plan of the Project or any aspect thereof),
any labor, services, materials and supplies used or furnished in the Acquisition
of the Project,  the acquisition and  installation  necessary to provide utility
services or other services and all real and tangible  personal  property  deemed
necessary by the Borrower in connection with the Project;

              (3) The  fees  for  architectural,  engineering,  supervisory  and
consulting services in connection with Acquisition of the Project;

              (4) To the  extent  they  shall not be paid by a  contractor,  the
premiums  of all  insurance  and surety and  performance  bonds  required  to be
maintained in connection with the Acquisition of the Project;

              (5) Any fees and expenses incurred in connection with acquisition,
perfection and protection of title to the Project Site and any fees and expenses
incurred  in  connection  with the  preparation,  recording  or  filing  of such
documents,  instruments  or financing  statements  as either the Borrower or the
Issuer or the Trustee may deem desirable to perfect or protect the rights of the
Issuer or the Trustee under this Loan  Agreement,  the Note, the Indenture,  the
Mortgage, the Environmental Agreement, the Security Agreement, and the Bonds;

              (6)  The  legal,   accounting  and  financial  advisory  fees  and
expenses,  filing fees, and printing and engraving  costs incurred in connection
with the  authorization,  issuance,  sale and  purchase  of the  Bonds,  and the
preparation of this Loan Agreement,  the Note, the Indenture,  the Mortgage, the
Security Agreement,  the Environmental  Agreement,  and the Bonds, and all other
documents  prepared in connection with the  authorization,  issuance and sale of
the Bonds;

              (7) Interest prior to and during construction of the Project; and

              (8) Any  administrative  and processing or other fees and expenses
charged  by 

                                       5

<PAGE>



the Issuer or the State in connection  with the Project to the  Completion  Date
and any  initial  or  acceptance  fee and  expenses  charged  by the  Trustee in
connection with the acceptance of the trusts under the Indenture.

         "Counsel"  shall mean an attorney or a firm of attorneys  acceptable to
the Trustee, and may, but need not, be counsel to the Issuer or the Borrower.

         "County" shall mean Orange County, Florida.

         "County  Commission"  shall mean the Board of County  Commissioners  of
Orange County, Florida.

         "Cues  Business"  shall mean "Cues Business" as such term is defined in
the Amended and Restated Loan Agreement.

         "Date of Taxability"  shall mean the earliest date as of which interest
on any Bond  shall be or have  become  includable  in the  gross  income  of any
Bondholder or former Bondholder pursuant to a Determination of Taxability.

         "Depository  Accounts" shall mean "Depository Accounts" as such term is
defined in the Amended and Restated Loan Agreement.

         "Determination  of  Taxability"  shall mean and shall be deemed to have
occurred on the first to occur of the following:

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

              (b) on that date when any Bondholder or former Bondholder notifies
the  Borrower  or the  Trustee  that it has  received  a written  opinion  by an
attorney or firm of attorneys of recognized standing on the subject of municipal
bonds to the effect  that an Event of  Taxability  shall have  occurred  unless,
within one  hundred  twenty  (120) days after  receipt by the  Borrower  of such
notification  from the Trustee,  any  Bondholder or any former  Bondholder,  the
Borrower shall obtain and deliver to the Trustee and each  Bondholder and former
Bondholder a favorable ruling or determination  letter issued to or on behalf of
the  Borrower by the  Commissioner  or any  District  Director  of the  Internal
Revenue  Service  (or any other  government  official  exercising  the same or a
substantially  similar  function  from time to time) to the effect  that,  after
taking into  consideration  such facts as form the basis for the opinion that an
Event  of  Taxability  has  occurred,  an  Event of  Taxability  shall  not have
occurred;

              (c) on that date when the Borrower  shall be advised in writing by
the  Commissioner or any District  Director of the Internal  Revenue Service (or
any other  government  official or agent  exercising the same or a substantially
similar function from time to time) that, 

                                       6

<PAGE>

based upon filings of the Borrower, or upon any review or audit of the Borrower,
or upon any other ground whatsoever, an Event of Taxability shall have occurred;
or

              (d) on that date when the Borrower shall receive notice in writing
from any Bondholder or former Bondholder, or from the Trustee, that the Internal
Revenue  Service  (or any  other  government  agency  exercising  the  same or a
substantially  similar function from time to time) has assessed as includable in
the gross income of any  Bondholder  or former  Bondholder  the interest on such
Bondholder's  or former  Bondholder's  Bond due to the occurrence of an Event of
Taxability;  provided,  however, that no Determination of Taxability shall occur
under  subparagraph  (iii) or (iv) hereof  unless the Borrower has been afforded
the opportunity,  at its expense,  to contest any such assessment or unfavorable
ruling and, further,  that no Determination of Taxability shall occur until such
contest, if made, has been finally determined;  provided further,  however, that
upon  demand  from any  Bondholder  or former  Bondholder,  the  Borrower  shall
immediately reimburse such Bondholder or former Bondholder for any payments such
Bondholder  or former  Bondholder  shall be obligated to make as a result of the
Determination of Taxability during any such contest.

         "EBITDA" means  Borrower's  consolidated  net earnings  before interest
expense,  depreciation,  amortization  and  provision  for Taxes for the  fiscal
quarter of Borrower  ending on the date of  determination.  For purposes of this
definition,  (i) net  earnings  shall not include any gains on the sale or other
disposition of Investments (other than cash equivalents) or fixed assets and any
extraordinary  or  nonrecurring  items of income in any  fiscal  quarter  to the
extent that the aggregate of all such gains and  extraordinary  or  nonrecurring
items  of  income  exceeds  the  aggregate  of  losses  on such  sales  or other
dispositions and extraordinary or nonrecurring  charges during such quarter, and
(ii) interest  expense shall  include,  without  limitation,  implicit  interest
expense on Capitalized Leases.

         "Eminent  Domain"  shall mean the taking of title to, or the  temporary
use  of,  the  Project  or any  part  thereof  pursuant  to  eminent  domain  or
condemnation proceedings, or any voluntary conveyance of any part of the Project
during the pendency of, or as a result of a threat of, such proceedings.

         "Enabling  Act" shall mean  Parts II and III of  Chapter  159,  Florida
Statutes, as amended.

         "Environmental   Agreement"  shall  mean  that  certain   Environmental
Indemnity Agreement dated as of the date hereof from the Borrower to the Issuer,
and any amendments and supplements thereto permitted by the Indenture.

         "ERISA" shall mean the  Employment  Retirement  Income  Security Act of
1974, as amended.

         "Event of  Default"  or  "Default"  shall have the meaning set forth in
Section 9.1 hereof.

         "Event  of  Taxability"  shall  mean,  with  respect  to Bonds  bearing
interest at the Tax-

                                       7

<PAGE>



Exempt  Rate,  a change  in law or fact or the  interpretation  thereof,  or the
occurrence  or  existence  of  any  fact,   event  or  circumstance   whatsoever
(including,  without limitation, the issuance of obligations or the incurring of
capital expenditures in excess of those permitted by Section 144(a) of the Code,
or the taking of any action by the  Borrower,  or the failure to take any action
by the Borrower, or the making by the Borrower of any  misrepresentation  herein
or in any certificate required to be given in connection with the issuance, sale
or delivery of the Bonds) which has the effect of causing the  interest  paid or
payable on any Bond to become  includable in the gross income of any  Bondholder
or former  Bondholder of any Bond other than a Bondholder  or former  Bondholder
who is or was a "substantial user" or "related person" as such terms are used in
Section 147(a) of the Code.

         "Excess  Cash  Flow"  shall  mean  "Excess  Cash  Flow" as such term is
defined in the Amended and Restated Loan Agreement.

         "Existing Facility Site" shall mean the real property located in Orange
County,  Florida, more particularly described in Exhibit "D" attached hereto and
by reference made a part hereof upon which the Borrower's existing manufacturing
facilities are located.

         "Existing Loan Agreement"  shall mean "Existing Loan Agreement" as such
term is defined in the Amended and Restated Loan Agreement.

         "Fiscal Year" means any period of 12 consecutive calendar months ending
on the  31st  day  of  December.  References  to a  Fiscal  Year  with a  number
corresponding to any calendar year (e.g., "Fiscal Year 1996) refer to the Fiscal
Year ending on the 31st day of December occurring during such calendar year.

         "Funded  Debt" means,  as of any date of  determination,  the principal
amount of  Borrower's  Indebtedness  outstanding  which  would be  reflected  as
liabilities on a balance sheet  prepared in accordance  with GAAP (but excluding
from the determination thereof all Indebtedness owing with respect to Additional
Revolving Loans).

         "Funded  Debt/EBITDA  Ratio" means the ratio of Borrower's  Funded Debt
determined  as of the last  day of any  specified  fiscal  quarter  of  Borrower
divided by Borrower's EBITDA for the four (4) fiscal quarters then ended.

         "Generally  Accepted  Accounting  Principles" or "GAAP" means generally
accepted accounting principles as in effect from time to time; provided that the
financial  tests set forth in Sections  7.7(a) through 7.7(d) shall at all times
be calculated in accordance with generally accepted accounting  principles as in
effect on the Closing Date unless Borrower and the Bondholder  shall have agreed
to modifications to such covenants to account for any changes in such principles
after the date hereof.

         "Government  Obligations"  shall  mean (i)  direct  obligations  of the
United  States of America  for the payment of which the full faith and credit of
the United States of America is 

                                       8
<PAGE>

pledged,  or (ii) obligations of the Government  National Mortgage  Association,
Federal Intermediate Credit Banks, Federal Banks for Cooperatives,  Federal Land
Banks, Federal Farm Credit Banks and Federal Home Loan Banks.

         "Guarantor" shall mean ELXSI Corporation.  A Delaware corporation,  and
its successors and assigns.

         "Guaranty" shall mean that certain  Guaranty  Agreement dated as of the
date hereof from ELXSI Corporation to the Bond Purchaser, and any amendments and
supplements thereto as permitted by the Indenture.

         "Indebtedness"  of any  Person  means,  without  duplication,  (i)  any
obligation of such Person for borrowed money, including, without limitation, (a)
any  obligation of such Person  evidenced by bonds,  debentures,  notes or other
similar debt  instruments  and (b) any  obligation  for borrowed  money which is
non-recourse  to the credit of such Person but which is secured by a Lien on any
asset of such Person,  (ii) any obligation of such Person on account of deposits
or advances, (iii) any obligation of such Person for the deferred purchase price
of any property or services,  except Trade Accounts Payable, (iv) any obligation
of such Person as lessee under a Capitalized  Lease and (v) any  Indebtedness of
another Person  secured by a Lien on any asset of such first Person,  whether or
not such Indebtedness is assumed by such first Person.  For all purposes of this
Agreement,  the Indebtedness of any Person shall include the Indebtedness of any
partnership or joint venture in which such Person is a general  partner or joint
venturer.  Notwithstanding the foregoing,  for purposes of computing  Borrower's
compliance with Sections 7.7(b) and 7.7(c), and for purposes of computing Funded
Debt,  there shall be excluded  from the  determination  of  "Indebtedness"  the
Subordinated Note and all Indebtedness of Borrower to Parent.

         "Indenture"  shall mean the Trust Indenture dated as of the date hereof
by and between  the Issuer and the  Trustee,  together  with any  amendments  or
supplements thereto permitted thereby.

         "Investment"  of any Person  means any  investment,  made in cash or by
delivery  of any kind of  property  or asset,  in any other  Person,  whether by
acquisition  of  shares  of stock or  similar  interest,  Indebtedness  or other
obligation  or  security,  or by  loan,  advance  or  capital  contribution,  or
otherwise.

         "Issuer" shall mean Orange County Industrial  Development  Authority, a
public body corporate and politic and a public  instrumentality duly created and
existing  under  and by  virtue  of the laws of the  State of  Florida,  and its
successors   and  assigns  and  any  body   resulting   from  or  surviving  any
consolidation or merger to which it or its successors may be a party.

         "Issuer  Representative"  shall mean any one of the persons at the time
designated  to act on behalf of the Issuer by written  certificate  furnished to
the Borrower and the Trustee containing the specimen  signatures of such persons
and signed on behalf of the Issuer by its Chairman or Vice-Chairman.

                                       9
<PAGE>


         "Liabilities" means all of the liabilities, obligations,  reimbursement
obligations  in  connection  with any  letter  of  credit  and  Indebtedness  of
Borrower,  any  Subsidiary or any other Obligor to the Bondholder of any kind or
nature,  however  created,  arising or  evidenced,  whether  direct or indirect,
absolute or contingent,  now or hereafter  existing or due or to become due, and
including but not limited to (i)  Borrower's  obligations  under any note,  (ii)
Borrower's obligations under this Agreement, (iii) interest,  charges, expenses,
attorneys'  fees and other sums  chargeable to Borrower by the Bondholder  under
this Loan Agreement or any related agreement,  (iv) the obligations of Borrower,
any  Subsidiary  or any other  obligor  under any related  agreement,  including
obligations of performance,  and (v) Borrower's  obligations with respect to any
letter of credit or application  therefor.  "Liabilities" shall also include any
and all  amendments  (including  any amendment and  restatement),  extensions or
renewals of any of the foregoing.

         "Lien" means any  mortgage,  pledge,  hypothecation,  judgment  lien or
similar legal  process,  title  retention  lien, or other lien,  encumbrance  or
security interest, including, without limitation, the interest of a vendor under
any conditional  sale or other title  retention  agreement and the interest of a
lessor under any Capitalized Lease.

         "Loan  Agreement" shall mean this Loan Agreement and any amendments and
supplements hereto permitted by the Indenture.

         "Management  Agreement" shall mean "Management  Agreement" as such term
is defined in the Amended and Restated Loan Agreement.

         "Maturity  Date"  shall  mean the final date of  maturity  of this loan
which shall be September 1, 2012.

         "Mortgage"  shall mean the Mortgage and Security  Agreement dated as of
the  date  hereof  from the  Borrower  to the  Issuer,  and any  amendments  and
supplements thereto permitted by the Indenture.

         "Mortgaged  Property"  shall mean the New Facility and the New Facility
Site.

         "Net  Proceeds"  when used with  respect to any  insurance  proceeds or
award  resulting  from,  or other amount  received in connection  with,  Eminent
Domain, shall mean the gross proceeds from such proceeds, award or other amount,
less all  expenses  (including  attorneys'  fees)  incurred  in the  realization
thereof.

         "Net  Worth"  means  at any  time,  the  sum of  (a)  the  consolidated
shareholder's  equity (including  capital stock,  additional paid-in capital and
retained  earnings after  deducting  treasury  stock) of Borrower  calculated in
accordance  with  GAAP  and  (b)  the  outstanding   principal   amount  of  all
Subordinated Debt.

         "New Facility"  shall mean all buildings,  structures and  improvements
now or hereafter 

                                       10
<PAGE>




located on the New Project Site including, but not limited to, the approximately
32,000  square foot  manufacturing  facility of the  Borrower,  now or hereafter
located at the New Project Site and the  equipment  installed  therein,  and all
other  fixtures,  furniture,  machinery,  equipment and other personal  property
installed in or on, or located at, such premises,  including such  modifications
thereof,  substitutions  therefor,  and repairs thereto, and excluding deletions
therefrom, as shall be made in accordance with this Loan Agreement.

         "New  Facility  Site"  shall mean the real  property  located in Orange
County,  Florida, more particularly described in Exhibit "C" attached hereto and
by reference made a part hereof which shall be acquired with the proceeds of the
Bonds,  be subject to the lien of the Mortgage,  and upon which the New Facility
shall be located.

         "Note" shall mean the promissory note given by the Borrower pursuant to
Section  5.1 of this Loan  Agreement,  substantially  in the form of Exhibit "A"
attached hereto.

         "Obligor"  means  Borrower and each other Person who is or shall become
primarily or secondarily liable on any of the Liabilities,  or who grants to the
Bondholder  a Lien on any  property of such  Person as  security  for any of the
Liabilities.

         "Original Loan Agreement"  shall mean "Original Loan Agreement" as such
term is defined in the Amended and Restated Loan Agreement.

         "Overdue  Rate" shall mean the Reference Rate plus two percent (2%) per
annum or the maximum rate of interest permitted by law, whichever is lower.

         "Parent" means ELXSI Corporation,  a Delaware corporation and the owner
of 100% of the  issued  and  outstanding  capital  stock  of  Borrower,  and any
successor thereto.

         "Payment of the Bonds" shall mean  payment of (i) the  principal of and
interest on the Bonds in accordance  with their terms whether through payment at
maturity,   upon   acceleration   or   prepayment,   (ii)  all  amounts  due  as
Administrative  Expenses or otherwise,  and (iii) any and all other  liabilities
and  obligations  arising under the Indenture  and this Loan  Agreement;  in any
case,  in such a manner that all such  amounts due and owing with respect to the
Bonds shall have been paid.

         "Permitted  Encumbrances"  shall mean, as of any  particular  time, (i)
liens for ad valorem taxes and special  assessments,  if any, which are not then
delinquent  or which are being  contested in good faith and for which the Person
liable for payment thereof has set aside adequate reserves,  unless the property
subject to any such lien or any part thereof shall be in danger of being lost or
forfeited as a result of the failure to pay such taxes or assessments,  (ii) the
liens  created  pursuant  to  the  Indenture,  the  Mortgage  and  the  Security
Agreement,  and (iii) all liens and  encumbrances  listed as  exceptions  to the
title  insurance  policy  required  by Section  6.3  hereof and which  liens and
exceptions  are not  objected to by the Trustee in writing  prior to the date of
the endorsement of the Note.


                                       11
<PAGE>

         "Person" means any individual, sole proprietorship,  partnership, joint
venture,   trust,   unincorporated   organization,   association,   corporation,
institution,  entity, or government (whether national,  federal,  state, county,
city,   municipal   or   otherwise,    including,    without   limitation,   any
instrumentality, division, agency, body or department thereof).

         "Plan"  shall  mean an  employee  benefit  plan or plans  and any trust
created  thereunder  which has been  established  or  maintained or hereafter is
established  or  maintained  for  employees of the  Borrower or any  Subsidiary,
provided such plan is covered by title I or IV of ERISA.

         "Plans and Specifications" shall mean the plans and specifications used
in the Acquisition of the Project,  as the same may be revised from time to time
by the Borrower in accordance with Section 3.3 hereof.

         "Plant" shall mean the Project Site and the Project and all  buildings,
structures  and  improvements  now or  hereafter  located  on the  Project  Site
including,  but not limited to, the New Facility and the equipment  installed at
the Project Site, and all other fixtures,  furniture,  machinery,  equipment and
other  personal  property  installed  in or on, or located  at,  such  premises,
including  such  modifications  thereof,  substitutions  therefor,  and  repairs
thereto, and excluding deletions therefrom,  as shall be made in accordance with
this Loan Agreement.

         "Prohibited  Transaction"  shall have the meaning assigned to that term
in Section 406 of Title I of ERISA.

         "Project"  shall  mean  the  New  Facility  and  the  improvements  and
modifications at the existing  manufacturing  facilities of the Borrower located
on  the  Existing  Site,  as  more  particularly  set  forth  in the  Plans  and
Specifications.

         "Project  Fund" shall mean the fund created  pursuant to Section 401 of
the Indenture.

         "Project  Site"  shall  mean  the  Existing  Facility  Site and the New
Facility Site.

         "Recapitalization Agreement" shall mean "Recapitalization Agreement" as
such term is defined in the Amended and Restated Loan Agreement.

         "Reference  Rate"  shall mean,  at any time and from time to time,  the
rate per annum then most  recently  announced by the Bond  Purchaser at its head
office as its reference rate. The Reference Rate is not necessarily  intended to
be the lowest rate of interest  determined  by the Bond  Purchaser in connection
with  extensions  of credit.  Changes in the rate of interest on that portion of
any loan maintained at the Reference Rate shall take effect  simultaneously with
each change in the Reference Rate.

         "Related  Entity"  shall  mean  any  entity  if,  with  respect  to the
Borrower,  any  of the  entity's  employees  fall  within  any of the  following
categories:  (a) employees of a controlled  group of 


                                       12
<PAGE>

corporations  as defined in Section  414(b) of the Internal  Revenue  Code;  (b)
employees of  partnerships,  proprietorships  or other  entities  that are under
common  control as defined in Section  414(c) of the Internal  Revenue Code; (c)
employees  of  affiliated  service  groups as defined  in Section  414(m) of the
Internal  Revenue Code; or (d) employees of entities that are deemed  affiliated
with or related to the Borrower in accordance with Sections 414(n) or (o) of the
Internal Revenue Code.

         "Related  Party" shall mean any Person  (other than a  Subsidiary)  (i)
which directly or indirectly through one or more intermediaries  controls, or is
controlled  by,  or  is  under  common  control  with,   Borrower,   (ii)  which
beneficially  owns or hold ten percent  (10%) or more of the equity  interest of
Borrower,  or (iii) ten percent (10%) or more of the equity interest of which is
beneficially owned or held by Borrower or a Subsidiary. The term "control" means
the  possession,  directly  or  indirectly,  of the power to direct or cause the
direction  of the  management  and  policies  of a Person,  whether  through the
ownership of voting securities, by contract or otherwise.

         "Reportable  Event"  shall have the  meaning  assigned  to that term in
Section 4043 of Title IV of ERISA.

         "Revolving Loan" shall mean "Revolving Loan" as such term is defined in
the Amended and Restated Loan Agreement.

         "Revolving Loan Availability"  shall mean "Revolving Loan Availability"
as such term is defined in the Amended and Restated Loan Agreement.

         "Second  Restatement Date" shall mean "Second Restatement Date" as such
term is defined in the Amended and Restated Loan Agreement.

         "Security  Agreement" shall mean the Security Agreement dated as of the
date hereof from the Borrower to the Issuer covering certain pledged  collateral
of the Borrower,  and all amendments and  supplements  thereto  permitted by the
Indenture.

         "State" shall mean the State of Florida.

         "Subordinated  Debt"  means  (a) the  Subordinated  Note  and (b)  that
portion of any other  Indebtedness of Borrower which contains terms satisfactory
to  the  Bondholder  and  is  subordinated,  in a  manner  satisfactory  to  the
Bondholder,  as to right and time of payment of principal and interest  thereon,
to all of the Liabilities.

         "Subordinated Note" means that certain 15% subordinated Promissory Note
dated June 27,  1991  issued by  Borrower  to Parent in the  original  principal
amount of $4,500,000.

         "Subsidiary"  means any  Person of which or in which  Borrower  and its
other  Subsidiaries  own directly or indirectly  50% or more of (i) the combined
voting power of all classes of stock 


                                       13
<PAGE>

having general voting power under ordinary  circumstances to elect a majority of
the board of directors of such Person, if it is a corporation,  (ii) the capital
interest  or profits  interest of such  Person,  if it is a  partnership,  joint
venture or similar entity or (iii) the beneficial interest of such Person, if it
is a trust, association or other unincorporated  organization.  Unless otherwise
indicated, the term "Subsidiary", refers to a Subsidiary of Borrower.

         "Supplemental  Revolving Loan" shall mean "Supplemental Revolving Loan"
as such term is defined in the Amended and Restated Loan Agreement.

         "Tax Regulations" shall mean the applicable  regulations under the Code
whether at the time proposed,  temporary, final or otherwise, and the applicable
rulings of the Internal  Revenue  Service  under the Code  (including  published
revenue rulings and private letter rulings).

         "Tax Compliance  Certificate" shall mean the Tax Compliance Certificate
of the Borrower dated as of the date of issuance of the Bonds and any amendments
or supplements thereto permitted thereby.

         "Taxes" with respect to any Person  means taxes,  assessments  or other
governmental  charges or levies  imposed upon such Person,  its income or any of
its properties, franchises or assets.

         "Trade Accounts  Payable" of any Person means trade accounts payable of
such Person with a maturity of not greater than 90 days incurred in the ordinary
course of such Person's business.

         "Trustee"  shall mean the banking  institution  at the time  serving as
Trustee under the Indenture.

         "Unmatured Event of Default" shall mean, collectively, "Unmatured Event
of Default"  and "Event of Default" as such terms are defined in the Amended and
Restated Loan Agreement.

         Section I.2 Rules of Construction.

              (1) Words of the masculine gender shall be deemed and construed to
include  correlative words of the feminine and neuter genders,  and words of the
neuter gender shall be deemed and construed to include  correlative words of the
masculine and feminine genders.

              (2) The table of  contents,  captions  and  headings  in this Loan
Agreement are for convenience  only and in no way define,  limit or describe the
scope or intent of any provisions or sections of this Loan Agreement.

              (3) All references  herein to particular  articles or sections are
references  to articles or  sections  of this Loan  Agreement  unless some other
reference is established.

                                       14
<PAGE>

              (4) All accounting terms not specifically  defined herein shall be
construed in accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis.

              (5) All references herein to the Borrower shall be deemed to refer
to each of the  Persons  if more  than one are  described  by such  term and any
agreement,  obligation,  duty or liability of the Borrower  shall be a joint and
several  agreement,  obligation,  duty or  liability  of each of the  Persons so
described by such term.

              (6) Any terms not  defined  herein but defined in any of the other
Bond Documents shall have the same meaning herein.

              (7) All references herein to the Code or any particular  provision
or  section  thereof  shall be deemed to refer to any  successor,  or  successor
provision or section, thereof, as the case may be.


                                       15


<PAGE>


                                   ARTICLE II

                                 REPRESENTATIONS

         Section II.1  Representations  by the Issuer. The Issuer represents and
warrants as follows:

              (1) The Issuer is a public body corporate and politic and a public
instrumentality  created  and  existing  under  and by virtue of the laws of the
State.

              (2) Under the  provisions  of the Enabling Act, the Issuer is duly
authorized to enter into,  execute and deliver the Bond Documents to which it is
a party,  to undertake the  transactions  contemplated  by the Bond Documents to
which it is a party and to carry out its obligations hereunder and thereunder.

              (3) The  Issuer has found and  determined  that the  criteria  and
requirements set forth in Section 159.29, Florida Statutes, for the acquisition,
construction and equipping of the Project,  the issuance of the Bonds to provide
funds to pay all of, or part of, the Cost of  Acquisition of the Project and the
financing of the Cost of Acquisition of the Project have been complied with.

              (4) The Issuer has further found and determined that the financing
of the Cost of  Acquisition  of the Project  through  the  issuance of the Bonds
constitutes an appropriate use of the Issuer's bonding powers and will result in
a substantial public benefit,  which finding and determination has been accepted
by the County  Commission,  which has  approved  the Bond issue,  including  the
Bonds.

              (5) The  Issuer  proposes  to issue  the  Bonds  in the  aggregate
principal  amount of  $2,500,000.00  to finance  all or a portion of the Cost of
Acquisition  of the  Project,  presently  estimated  by the Borrower to equal or
exceed $2,500,000.00.

              (6) By duly  adopted  resolution,  the Issuer has  authorized  the
execution,  delivery  and  performance  of the Bond  Documents  to which it is a
party, including the borrowing under, and the sale, issuance and performance of,
the  Bonds and as  security  for the  Bonds,  the  pledge of the Note  (endorsed
without  recourse  to the order of the  Trustee),  the  Mortgage,  the  Security
Agreement,  and the Environmental Agreement to the Trustee, and has approved the
form of the other Bond Documents to which the Issuer is a party.

              (7) The Bonds will be issued under and  pursuant to the  Indenture
and will mature,  bear  interest,  and have the other terms and  provisions  set
forth or provided for in the Indenture.

              (8) No other  consent or approval is required by any  governmental
or public agency or authority as a condition to the performance by the Issuer of
its  obligations  under this 

                                       16
<PAGE>


Agreement  or the other Bond  Documents to which the Issuer is a party or to the
issuance or sale of the Bonds.

              (9) The execution  delivery and  performance of the Bond Documents
to which the Issuer is a party  will not (i)  conflict  with,  or  constitute  a
breach of or default  under,  the bylaws of the Issuer,  any order of any court,
regulatory body or arbitral tribunal or any agreement or instrument to which the
Issuer is a party or by which it is bound, or (ii) require any consent  pursuant
to any law or regulation  presently  applicable  to the Issuer  (except for such
consents and approvals as have heretofore been obtained).

              (10) There are no judicial, regulatory, arbitral or other actions,
suits, proceedings,  inquiries or investigations pending or, to the knowledge of
the Issuer,  threatened  against the Issuer which,  if decided  adversely to the
Issuer, would have a material adverse effect on the existence or organization of
the  Issuer or the title to  office  of any of the  members  of the Board of the
Issuer or officers of the Issuer,  the  issuance and sale of the Bonds or any of
the transactions or proceedings of the Issuer in connection therewith.

              (11) When duly executed and delivered on behalf of the Issuer, and
assuming the due authorization,  execution and delivery of the Bond Documents by
the other parties  thereto,  each of the Bond Documents to which the Issuer is a
party  shall  constitute  a legal,  valid and binding  obligation  of the Issuer
enforceable in accordance with its terms.

         Section II.2 Representations, Warranties and Covenants by the Borrower.
The Borrower represents, warrants and covenants as follows:

              (1) The Borrower has legal  authority  and capacity to enter into,
and to perform the  agreements  and covenants on its part  contained in the Bond
Documents to which it is a party.

              (2) The  Borrower  is  lawfully  seized  of a valid  title  to the
Project  Site,  and has a good and  sufficient  right to bargain,  sell,  grant,
convey,  mortgage and assign the Mortgaged  Property to the Issuer in the manner
provided herein, subject only to Permitted Encumbrances.

              (3) The  borrowing  under the Note,  the execution and delivery of
the Bond Documents to which it is a party,  the consummation of the transactions
contemplated  hereby and thereby,  and the fulfillment of or compliance with the
terms and  conditions  hereof and thereof do not and will not violate,  conflict
with or constitute a breach of or default  under or require any consent  (except
for such consents and approvals as have  heretofore  been obtained)  pursuant to
any law or regulation  presently  applicable  to the Borrower,  any order of any
court,  regulatory  body or arbitral  tribunal or any agreement or instrument to
which the Borrower is a party or by which it or any of its property is bound.

              (4) The  Borrower  will  cause  the  proceeds  of the  Bonds to be
applied to the payment of, or the  reimbursement of the Borrower for the payment
of, the Cost of Acquisition of the Project.

                                       17
<PAGE>

              (5) The commencement of the Acquisition of the Project,  including
the letting of purchase  orders for components  thereof,  did not occur prior to
April  18,  1997 (60 days  prior  to  adoption  by the  Issuer  of a  resolution
declaring its intention to finance the Project).

              (6) The Project being  acquired,  constructed and installed at the
Plant  constitutes  and will  constitute  a "project"  within the meaning of the
Enabling Act, and the Borrower  presently  expects to operate the Plant or cause
the same to be  operated  by the Company as a  manufacturing  facility  from the
Completion Date until payment of the Bonds.

              (7) The Borrower  presently  estimates the Cost of  Acquisition of
the Project to equal or exceed $2,500,000.00.

              (8) The Project will be located wholly within the County.

              (9) When executed and  delivered,  the Bond Documents to which the
Borrower  is a  party  will be the  legal,  valid  and  binding  obligations  or
agreements  of the Borrower  enforceable  in  accordance  with their  respective
terms.

              (10) There is no action, suit or proceeding at law or in equity or
by or before any  governmental  instrumentality  or agency or arbitral  body now
pending,  or to the knowledge of the Borrower,  threatened  against or affecting
the Borrower or any  properties  or rights of the Borrower  which,  if adversely
determined,  would  impair the right of the  Borrower  to carry on its  business
substantially  as  now  conducted  or  would  materially  adversely  affect  the
financial condition,  business or operations of the Borrower or the transactions
contemplated by, or the validity of, any of the Bond Documents.

              (11) The  Borrower  has  filed  all  federal,  state and local tax
returns  which are  required to be filed by it and has paid or caused to be paid
all taxes as shown on said returns or on any  assessment  received by it, to the
extent  that such  taxes  have  become  due,  and no  controversy  in respect of
additional income taxes, state or federal, of the Borrower is pending or, to the
knowledge of the Borrower, threatened which has not heretofore been disclosed in
writing to the Trustee and which, if adversely determined,  would materially and
adversely affect the financial condition or operations of the Borrower.

              (12)  Neither the Bond  Documents to which the Borrower is a party
nor any other document  contains any  misrepresentation  or untrue  statement of
fact or omits  to  state a  material  fact  necessary  in order to make any such
representation or statement contained therein not misleading.

              (13) The  Borrower  possesses  all  necessary  patents,  licenses,
trademarks,  trademark rights,  trade names, trade name rights and copyrights to
conduct its business as now  conducted,  without known conflict with any patent,
license, trademark, trade name or copyrights of any other Person.

                                       18
<PAGE>


              (14) The Project Site is properly zoned,  and its intended use and
the operation of the Plant comply with the uses  permitted by applicable  zoning
regulations.

              (15)  The  Plant  conforms  or will  conform  with  all  planning,
building,   land  use,  environmental  and  other  regulations  of  governmental
authorities  having  jurisdiction  of the Plant,  all  necessary  utilities  are
available  or will be provided  for the Plant,  and the Borrower has obtained or
will obtain all requisite planning,  building, land use, environmental and other
permits  necessary for the  Acquisition of the Project and the use and occupancy
of the Plant.

              (16) No notice of commencement  with respect to the Acquisition of
the  Project  has  been  filed or  posted  by the  Borrower  and,  further,  all
contractors,  suppliers and materialmen who have provided  services or materials
with  respect to the  Acquisition  of the  Project,  if any,  have been paid all
amounts due them through the date hereof.

              (17) No approval,  consent or  authorization  of, or registration,
declaration  or filing with,  any  governmental  or public body or authority not
already  obtained  by the  Borrower is  required  in  connection  with the valid
execution,  delivery and  performance  by the Borrower of the Bond  Documents to
which it is a party.

              (18) Once the Bonds bear  interest  at the  Tax-Exempt  Rate,  the
Borrower  will  not take or fail to take  any  action  which  would  impair  the
exclusion  of  interest on the Bonds from gross  income for  federal  income tax
purposes.

              (19) All of the  representations,  warranties and covenants of the
Borrower  contained in the  Borrower's  Tax  Compliance  Certificate  are hereby
reaffirmed and incorporated herein by reference.

         All  of the  above  representations,  warranties  and  covenants  shall
survive the making of this Loan Agreement and the issuance of the Note.


                                       19
<PAGE>


                                   ARTICLE III

                           ACQUISITION OF THE PROJECT

         Section III.1  Agreement as to Acquisition  of the Project.  The Issuer
and the Borrower  hereby agree that the Borrower shall complete the  Acquisition
of the Project with all reasonable dispatch (delays incident to strikes,  riots,
acts of God or the public enemy or any delay beyond its reasonable control which
do not delay the Completion Date by more than two (2) years from the date hereof
excepted), in accordance with the Plans and Specifications;  provided,  however,
that if completion of such Acquisition is delayed for any reason, there shall be
no  diminution  in or  postponement  of the  payments to be made by the Borrower
pursuant to the Note or Section 5.1 hereof.

         Section III.2 Borrower to Obtain Approvals Required for the Project and
the Plant.  The  Borrower  shall  obtain or cause to be obtained  all  necessary
permits and approvals for the  Acquisition  of the Project and the operation and
maintenance  of the Plant and shall comply with all lawful  requirements  of any
governmental  body  regarding  the use or  condition of the Project Site and the
Plant. The Borrower may, however, contest any such requirement by an appropriate
proceeding diligently prosecuted.

         Section III.3 Plans and  Specifications.  The Borrower shall maintain a
set of Plans and  Specifications at the Project Site which shall be available to
the Issuer, the Trustee and the Bondholder for inspection and examination during
the Borrower's  regular  business  hours,  and the Issuer and the Borrower agree
that the Borrower may supplement, amend and add to the Plans and Specifications,
and that the Borrower  shall be  authorized  to omit or make  substitutions  for
components of the Project,  without the approval of the Issuer, provided that no
such change shall be made which shall be contrary to subsections  (b), (c), (d),
(e),  (f), (g) and (h) of Section 2.2 hereof,  and provided  further that if any
such change would render  materially  incorrect or incomplete the description of
the  initial  components  of the  Project or the  description  of the Project or
Project  Site as set forth in Exhibits  "B" or "C" to this Loan  Agreement,  the
Borrower  and the Issuer  shall amend such  Exhibits  "B" or "C" to reflect such
change,  upon  receipt by the  Trustee of an opinion of bond  counsel  that such
change will not result in an Event of Taxability.  No approvals of the Issuer or
the Trustee  shall be  required  for the  Acquisition  of the Project or for the
solicitation, negotiation, award or execution of contracts relating thereto.


                                       20
<PAGE>


                                   ARTICLE IV

                     ISSUANCE OF THE BONDS; COMPLETION DATE

         Section IV.1 Agreement to Issue the Bonds. To provide funds for payment
of the Cost of Acquisition of the Project,  the Issuer agrees that it will sell,
issue  and  deliver  the  Bonds in the  aggregate  maximum  principal  amount of
$2,500,000.00 in the manner set forth in the Indenture and cause the proceeds of
the Bonds to be applied as provided in the Indenture.

         Section IV.2 Disbursements from the Project Fund. All payments from the
Project Fund to pay the Cost of Acquisition of the Project,  or to reimburse the
Borrower  for any Cost of  Acquisition  of the  Project  paid or incurred by the
Borrower  before or after the execution  and delivery of this  Agreement and the
issuance and delivery of the Bonds shall be made by the Trustee  pursuant to the
Indenture  with  monies  drawn  down  under  the  Note  following  receipt  of a
requisition and certificate substantially in the form of Exhibit "A" attached to
the Indenture.

         Section IV.3 Certificate as to Completion. The completion Date shall be
promptly established and evidenced to the Trustee and shall be the date on which
the Borrower  Representative  delivers to the Trustee a  Completion  Certificate
stating  that,  except for amounts  retained  by the  Trustee at the  Borrower's
direction for any Cost of  Acquisition of this Project not then due and payable,
the  Acquisition of the Project has been completed  substantially  in accordance
with the  Plans  and  Specifications  and all costs  and  expenses  incurred  in
connection  therewith  have  been  paid.  Notwithstanding  the  foregoing,  such
Certificate  may state that it is given without  prejudice to any rights against
third  parties  that  exist  at  the  date  of  such  Certificate  or  that  may
subsequently  come into being.  Within twenty (20) days of the completion of the
Project,  the Borrower  shall deliver to the Trustee an itemized  description of
all machinery,  equipment and other personal property for which payment has been
made  or is to be made  from  the  Project  Fund  with  amounts  theretofore  or
thereafter to be drawn down.

         Section IV.4 Reserved.

         Section  IV.5   Borrower   Required  to  Pay  in  Event   Project  Fund
Insufficient.  In the  event  the  moneys  in the  Project  Fund  should  not be
sufficient  to pay the Cost of the  Acquisition  of the  Project  in  full,  the
Borrower  agrees to complete the Project and to pay that portion of such cost in
excess of the moneys available therefor in the Project Fund. THE ISSUER MAKES NO
WARRANTY,  EITHER EXPRESS OR IMPLIED, THAT THE MONEYS PAID INTO THE PROJECT FUND
AND  AVAILABLE  FOR PAYMENT OF THE COST OF  ACQUISITION  OF THE PROJECT  WILL BE
SUFFICIENT  TO PAY THE TOTAL COST OF  ACQUISITION  OF THE PROJECT.  The Borrower
agrees that if after  exhaustion of the moneys in the Project Fund, the Borrower
should pay any portion of the Cost of Acquisition of the Project pursuant to the
provisions  of this  section,  it shall  not be  entitled  to any  reimbursement
therefor from the Issuer,  the Trustee,  or any  Bondholder  and it shall not be
entitled to any abatement or  diminution of the payments  required to be made by
the Borrower pursuant to the Note or Section 5.1 hereof.


                                       21
<PAGE>


         Section  IV.6 No Third Party  Beneficiary.  It is  specifically  agreed
between the parties executing this Loan Agreement that it is not intended by any
of the provisions of any part of this Loan Agreement to create the public or any
member  thereof,   other  than  as  may  be  expressly  provided  herein  or  as
contemplated  in the  Indenture,  a third  party  beneficiary  hereunder,  or to
authorize  anyone  not a party to this Loan  Agreement  to  maintain  a suit for
personal injuries or property damage pursuant to the terms or provisions of this
Loan Agreement. The duties, obligations,  and responsibilities of the parties to
this Loan  Agreement  with respect to third  parties  shall remain as imposed by
law.

         Section  IV.7  Rebate  Provisions.  The Issuer and the  Borrower  shall
comply with the provisions of the Tax Compliance Certificates  providing,  under
the  circumstances  set forth therein,  for the rebate of certain amounts to the
United States.

         Section IV.8 Arbitrage Certifications and Covenants.

              (1) The Borrower  reasonably  expects,  and hereby  certifies  and
represents  to the Issuer,  and the Issuer hereby  certifies  that it reasonably
expects,  that the proceeds of the Bonds will not be used in a manner that would
cause the Bonds to be classified as  "arbitrage  bonds" under Section  148(a) of
the Code. To the best  knowledge and belief of the Borrower,  there are no facts
or circumstances that would materially change the foregoing expectations.

              (2) The Borrower  certifies and covenants  with the purchasers and
the  holders of the Bonds from time to time  outstanding  that so long as any of
the Bonds  remain  outstanding,  moneys on  deposit  in any fund or  account  in
connection  with the Bonds,  whether or not such  moneys were  derived  from the
proceeds of the sale of the Bonds or from any other sources, will not be used in
a manner which will cause the Bonds to be  "arbitrage  bonds" within the meaning
of  Section  148(a)  of the  Code,  as the same  exists on the date of this Loan
Agreement  or may  from  time to time  hereafter  be  amended,  supplemented  or
revised.


                                       22
<PAGE>


                                    ARTICLE V

                  LOAN BY THE ISSUER TO THE BORROWER; REPAYMENT

         Section  V.1  Loan  by  the  Issuer;  Repayment.  Upon  the  terms  and
conditions  of this Loan  Agreement,  the Issuer  shall lend to the Borrower the
proceeds of the sale of the Bonds for the purpose of providing  funds to pay the
cost of the Acquisition of the Project.

         As  consideration  for the  issuance of the Bonds and the making of the
loan to the Borrower by the Issuer,  the Borrower  will execute and deliver this
Loan  Agreement,  the Note,  in the form  attached as Exhibit  "A"  hereto,  the
Mortgage, the Security Agreement,  and the Environmental Agreement to the Issuer
and the Issuer  will  endorse  the Note  without  recourse  to the order of, and
pledge and assign this Loan  Agreement,  the Note,  the  Mortgage,  the Security
Agreement,  and the Environmental  Agreement to the Trustee,  as the assignee of
the Issuer  under the  Indenture,  contemporaneously  with the  issuance  of the
Bonds.  The Borrower  shall repay the loan in accordance  with the provisions of
the Note and of this Loan Agreement.  In addition to the payments required to be
made by the  Borrower  on the loan under the Note and this Loan  Agreement,  the
Borrower also shall pay, at the time or times set forth  herein,  Administrative
Expenses  pursuant to Section  7.5 hereof and all other  amounts due the Issuer,
the  Trustee  or the  Bondholder,  pursuant  to the Bond  Documents,  including,
without  limitation,  payments due the Bondholder for increased cost pursuant to
Sections 213, 218 and 219 of the Indenture.

         Notwithstanding  anything else in the Note or in this Loan Agreement to
the contrary,  in no  contingency or event  whatsoever  shall the amount paid or
agreed  to be paid to the  Issuer or the  Trustee  for the use,  forbearance  or
detention of the money to be advanced  thereunder exceed the highest lawful rate
permitted  under  the  law  applicable  thereto.   If,  from  any  circumstances
whatsoever,  fulfillment of any provision of the Note or this Loan Agreement, at
the time  performance of such provisions  shall be due, shall involve payment of
interest at a rate which exceeds the highest lawful rate as so determined,  then
ipso facto the obligation to be fulfilled shall be reduced to the highest lawful
rate.  If, from any  circumstances  whatsoever,  the Issuer or the Trustee shall
ever receive  interest,  the amount of which would  exceed such  highest  lawful
rate, a portion  thereof which would be excessive  interest  shall be applied to
the  reduction  of the unpaid  principal  balance  due under the Note and to the
payment of interest, or if the Note is no longer outstanding, shall be repaid to
the Borrower.  Provided,  however, that nothing contained in the Note or in this
Loan Agreement shall be deemed to create a defense, contractual or otherwise, to
any sums due or to become due or coming due under the Note,  this Loan Agreement
or under any other agreement  existing between the Issuer and the Borrower where
no such defense exists at law, as for example,  wherein no limit exists upon the
rate of interest which may be charged.

         Section  V.2 No Set Off.  The  obligation  of the  Borrower to make the
payments required by the Note shall be absolute and unconditional.  The Borrower
will pay  without  abatement,  diminution  or  deduction  (whether  for taxes or
otherwise) all such amounts  regardless of any cause or circumstance  whatsoever
including,  without limitation, any defense, set off, recoupment or counterclaim
that the  Borrower  may have or assert  against the  Issuer,  the  Trustee,  

                                       24
<PAGE>


any Bondholder or any other Person.

         The  Borrower  (a) will not  suspend  or  discontinue,  or  permit  the
suspension  or  discontinuance  of, any of the payments  required by Section 5.1
hereof,  (b) will perform and observe all of its other  agreements  contained in
the Note and in this Loan Agreement,  the Mortgage, the Security Agreement,  and
the  Environmental  Agreement  and (c) will not suspend the  performance  of its
obligations  under the Note or this Loan Agreement,  the Mortgage,  the Security
Agreement,  or the Environmental  Agreement for any cause whatsoever  including,
without  limiting  the  generality  of the  foregoing,  failure to complete  the
Project, any acts or circumstances that may constitute failure of consideration,
failure  of or a  defect  of  title to the  Plant  or  Project  Site or any part
thereof,  eviction or constructive eviction,  destruction of damage to the Plant
or Project Site,  commercial  frustration  of purpose,  any change in the tax or
other laws or administrative  rulings of or administrative actions by the United
States of America or the State or any political  subdivision  of either,  or any
failure of the  Issuer or the  Trustee to perform  and  observe  any  agreement,
whether expressed or implied,  or any duty,  liability or obligation arising out
of or connected with this Loan Agreement.

         Section V.3 Prepayments.  The Borrower may, at any time,  prepay all or
any part of the Note as provided in, and subject to the terms and conditions of,
Section 10.1 hereof. The Borrower shall prepay all of the amounts it is required
to prepay as provided in Sections 10.2 and 10.3 hereof.

         Section V.4 Credits  Against the Note. To the extent that principal of,
premium, if any, or interest on the Bonds shall be paid, there shall be credited
against the unpaid  principal of,  premium,  if any, or interest on the Note, as
the case may be,  an amount  equal to the  principal  of,  premium,  if any,  or
interest  on the  Bonds so paid.  If the  principal  of,  premium,  if any,  and
interest  on and other  amounts  payable  under the Bonds  shall  have been paid
sufficiently that Payment of the Bonds shall have occurred,  then the Note, ipso
facto,  shall be deemed to have been paid in full,  the  Borrower's  obligations
thereon  shall be  discharged  (with  the  exception  of the  obligation  of the
Borrower to make certain payments which may subsequently  arise as a result of a
Determination of Taxability which shall survive  notwithstanding  Payment of the
Bonds), and the Note shall be canceled and surrendered to the Borrower.


                                       24
<PAGE>


                                   ARTICLE VI

                MAINTENANCE AND MODIFICATIONS; TAXES AND UTILITY
                      CHARGES; INSURANCE AND EMINENT DOMAIN

         Section VI.1 Maintenance and Modification of the Plant by Borrower. The
Borrower  agrees that,  until Payment of the Bonds shall be made, it will at its
own expense,  (a) keep the Plant or cause the Plant to be kept in as  reasonably
safe condition as the operations  thereat shall permit,  (b) make or cause to be
made  from  time  to  time  all  necessary  repairs  thereto  and  renewals  and
replacements  thereof and  otherwise  keep or cause to be kept the Plant in good
repair and in good  operating  condition  and (c) not permit or suffer others to
commit a nuisance on or about the Plant.  The Borrower  shall pay or cause to be
paid all costs and expenses of operation and  maintenance of the Plant.  Subject
to the terms of the Mortgage and the Security  Agreement,  the Borrower  may, at
its own  expense,  make  from  time  to time  any  additions,  modifications  or
improvements  to the Plant that it may deem desirable for its business  purposes
and that do not materially  impair the effective use, or decrease the value,  of
the Plant.

         Section VI.2 Taxes and Utility Charges.

              (1) The Borrower  shall pay as the same  respectively  become due,
all taxes,  assessments,  levies, claims and charges of any kind whatsoever that
may at any time be lawfully  assessed or levied  against or with  respect to the
Plant (including, without limiting the generality of the foregoing, any tax upon
or with  respect to the income or profits of the Issuer from the Plant and that,
if not paid,  would  become a charge on the  payments to be made under this Loan
Agreement or the Note prior to or on a parity with the charge thereon created by
the Indenture and including ad valorem, sales and excise taxes,  assessments and
charges upon the Borrower's  interest in the Plant) or any of the Bond Documents
(including, without limiting the generality of the foregoing,  documentary stamp
tax or intangible tax if, and to the extent, applicable),  all utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of the
Plant and all assessments and charges lawfully made by any governmental body for
public improvements that may be secured by a lien on any portion of the Plant.

              (2) The Borrower  may, at its  expense,  contest in good faith any
such levy, tax,  assessment,  claim or other charge, but the Borrower may permit
the items so contested to remain  undischarged and unsatisfied during the period
of such  contest and any appeal  therefrom  only if the  Borrower  notifies  the
Bondholder and the Trustee that, in the opinion of Counsel, by nonpayment of any
such items, the liens of the Mortgage and the Security  Agreement and the rights
of the Trustee with respect to the Mortgage,  the Security Agreement,  this Loan
Agreement and the Note created by the assignment under the Indenture,  as to the
rights  assigned  under  this  Loan  Agreement,  the  Mortgage  or the  Security
Agreement  or any part of the  payments to be made under this Loan  Agreement or
the Note,  will not be  materially  endangered  nor will the Project or any part
thereof be subject to loss or  forfeiture.  If the Borrower is unable to deliver
such an opinion of Counsel, the Borrower shall promptly pay or bond and cause to
be satisfied or discharged  all such unpaid items or furnish,  at the expense of
the Borrower,  indemnity  satisfactory


                                       25
<PAGE>

to  the  Bondholder  and  the  Trustee;  but  provided  further,  that  any  tax
assessment,  charge, levy or claim shall be paid forthwith upon the commencement
of  proceedings  to foreclose any lien securing the same. The Bondholder and the
Trustee,  at the  expense  of the  Borrower,  will  cooperate  fully in any such
permitted contest. If the Borrower shall fail to pay any of the foregoing items,
the  Bondholder or the Trustee may, but shall be under no obligation to, pay the
same and any  amounts so advanced  therefor  by the Issuer or the Trustee  shall
become  an  additional  obligation  of  the  Borrower  to  the  one  making  the
advancement,  which amounts,  together with interest thereon at the Overdue Rate
from the date of payment, the Borrower agrees to pay on demand therefor.

              (3) The Borrower  shall  furnish the  Bondholder  and the Trustee,
tupon request, with proof of payment of any taxes, governmental charges, utility
charges, insurance premiums or other charges required to be paid by the Borrower
under this Loan Agreement.

         Section VI.3 Title  Insurance and Survey.  The Borrower will deliver to
the Issuer  and the  Trustee  as named  insureds  at or prior to closing a title
insurance  policy issued by a financially  responsible  title insurance  company
qualified to do business in the State and  acceptable  to the  Bondholder in the
amount of $2,500,000  (a) insuring that the Borrower has fee simple title to the
New  Facility  Site (and  insuring  the  assignment  of the  Mortgage  under the
Indenture)  and that the  Mortgage  (as so  assigned)  constitutes  a valid  and
existing  first  lien  on  such  real   property,   subject  only  to  Permitted
Encumbrances and (b) insuring the Trustee's  interest in such real property.  At
the request of the  Bondholder,  the  Borrower  will  thereafter  deliver to the
Bondholder and the Trustee such  endorsements to said title insurance  policy as
may be  necessary  or  required  to show that  there have been no changes in the
state of title since the last preceding advance of loan proceeds.

         The  Borrower  will also  deliver to the  Issuer and the  Trustee at or
prior to closing a current  survey showing the New Facility Site to be free from
all encroachments and encumbrances, which survey shall meet all the requirements
of the  aforesaid  title  insurance  company  so as to enable  such  company  to
eliminate any exception for survey matters from the title insurance policy,  and
the survey  shall  locate all  recorded  restrictions  and  easements on the New
Facility Site by recording  references.  At the request of the  Bondholder,  the
Borrower will, from time to time  thereafter,  furnish a supplemental  survey or
surveys showing all foundations of the New Facility to be in place and so as not
to be in violation of any covenant,  restriction or zoning  ordinance  affecting
the New  Facility.  Upon  completion  of the  Acquisition  of the  Project,  the
Borrower  will furnish to the Trustee an as-built  survey as required by Section
7.2(b) hereof.

         Section VI.4 Casualty and Liability Insurance  Required.  Until Payment
of the Bonds shall be made,  the Borrower  will keep or cause to be kept the New
Facility  continuously  insured  against such risks as are  customarily  insured
against  by  businesses  of like size and type  engaged  in the same or  similar
manufacturing  operations (including business interruption insurance) including,
without limiting the generality of the foregoing:

              (1) prior to  completion  of the portion of the Project  involving
improvements to 


                                       26
<PAGE>


real  property,  builder's risk insurance on the Plant on an "all risk" basis in
an amount  acceptable to the  Bondholder  and with such other  provisions as are
required by the Bondholder;

              (2)  casualty  insurance on the New Facility in an amount not less
than the full insurable value of all property  located at, and all  improvements
to, the Project  Site,  against loss or damage by fire and  lightning  and other
hazards ordinarily  included under uniform broad form standard extended coverage
policies, limited only as may be provided in the standard broad form of extended
coverage endorsement at the time in use in the State;

              (3) general comprehensive  liability insurance,  naming the Issuer
and the  Trustee as loss  payees,  against  claims for bodily  injury,  death or
property  damage  occurring on, in or about the New Facility  (such  coverage to
include  provisions waiving  subrogation  against the Issuer and the Trustee) in
amounts not less than  $1,000,000.00  with  respect to bodily  injury to any one
person,  $1,000,000.00  with respect to bodily  injury to two or more persons in
any one accident and  $1,000,000.00,  with respect to property damage  resulting
from any one occurrence;

              (4) liability insurance with respect to the New Facility under the
workers' compensation laws of the State;  provided,  however, that the insurance
so required may be provided by blanket  policies now or hereafter  maintained by
the Borrower; and

              (5) if at any time any portion of the New  Facility  Site is in an
area that has been identified by the Secretary of Housing and Urban  Development
as having  special  flood and  mud-slide  hazards,  a policy of flood  insurance
covering  improvements  located on such portion of the Project Site with amounts
and coverage satisfactory to the Bondholder.

         Section VI.5 General Requirements Applicable to Insurance.

              (1)  Each  insurance   policy  obtained  in  satisfaction  of  the
requirements of Section 6.4 hereof:

                   (1)  shall  be by such  insurer  (or  insurers)  as  shall be
                        financially responsible, qualified to do business in the
                        State, and of recognized standing;

                   (2)  shall  be  in  such  form  and  have   such   provisions
                        (including,  without limitation,  the lenders' long-form
                        loss payable clause,  the waiver of subrogation  clause,
                        the  deductible   amount,   if  any,  and  the  standard
                        mortgagee   endorsement   clause),   as  are   generally
                        considered standard provisions for the type of insurance
                        involved  and  are  acceptable  in all  respects  to the
                        Bondholder;

                   (3)  shall prohibit cancellation or substantial modification,
                        termination or lapse in coverage by the insurer  without
                        at least 30 days' prior written notice to the Trustee;


                                       27
<PAGE>

                   (4)  shall provide that losses  thereunder  shall be adjusted
                        with the  insurer  by the  Borrower  at its  expense  on
                        behalf of the insured  parties  and the  decision of the
                        Borrower  as  to  any  adjustment  shall  be  final  and
                        conclusive; and

                   (5)  without  limiting the generality of the  foregoing,  all
                        insurance  policies  carried on the New  Facility  shall
                        name the Borrower, the Issuer and the Trustee as parties
                        insured  thereunder as the respective  interests of each
                        of such  parties  may  appear,  and any loss  thereunder
                        shall be made  payable  and shall be applied as provided
                        in Section 6.9 hereof.

              (2) Prior to expiration of any such policy, the Borrower shall, at
the  request of the  Trustee or the  Bondholder,  furnish  the  Trustee  and the
Bondholder with evidence satisfactory to the Trustee and the Bondholder that the
policy or certificate  has been renewed or replaced or is no longer  required by
this Loan Agreement.

         Section VI.6 Advances by the  Bondholder  or the Trustee.  In the event
the  Borrower  shall  fail to  maintain,  or  cause to be  maintained,  the full
insurance  coverage  required  by this Loan  Agreement  or shall fail to keep or
cause to be kept the New Facility in good repair and good  operating  condition,
the  Bondholder or the Trustee may (but shall be under no obligation  to), after
10 days written  notice to the Borrower  (unless such  insurance  coverage shall
terminate or expire  within that time period,  in which case,  no notice will be
required),  contract for the required policies of insurance and pay the premiums
on the same or make any required  repairs,  renewals and  replacements;  and the
Borrower agrees to reimburse the Bondholder and the Trustee to the extent of the
amounts so advanced by them or any of them with interest  thereon at the Overdue
Rate from the date of  advance  to the date of  reimbursement.  Any  amounts  so
advanced by the Bondholder or the Trustee shall become an additional  obligation
of the Borrower,  shall be payable on demand,  and shall be deemed a part of the
obligation of the Borrower secured by the lien of the Mortgage.

         Section VI.7 Borrower to Make up Deficiency in Insurance Coverage.  The
Borrower agrees that to the extent that it shall not carry insurance required by
Sections  6.3  and  6.4  hereof,  it  shall  pay  promptly  to the  Trustee  for
application in accordance with the provisions of Section 6.9 hereof, such amount
as would have been received as Net Proceeds by the Trustee under the  provisions
of Section 6.9 hereof had such insurance been carried to the extent required.

         Section VI.8 Eminent Domain. Unless the Borrower shall have prepaid the
Note pursuant to the provisions of Article X hereof, in the event that title to,
or the temporary use of, the Plant or any part thereof shall be taken by Eminent
Domain,  the  Borrower  shall be  obligated  to  continue  to make the  payments
required  to be made  pursuant  to the Note and the Net  Proceeds  received as a
result of such Eminent  Domain with respect to the Mortgaged  Property  shall be
applied as provided in Section 6.9(b) hereof.

                                       28
<PAGE>

         Section  VI.9  Application  of Net  Proceeds of  Insurance  and Eminent
Domain.

              (1) The Net  Proceeds  of the  insurance  carried  pursuant to the
provisions  of Sections  6.3,  6.4(c) and 6.4(d)  hereof shall be applied by the
Borrower  toward  extinguishment  of the defect or claim or  satisfaction of the
liability  with respect to which such insurance  proceeds may be paid,  provided
that if the Borrower  does not cause  promptly,  and in any event within  ninety
(90) days of receipt,  the Net Proceeds of the insurance carried pursuant to the
provisions   of  Section  6.3  to  be  so  applied  to  the  full  and  complete
extinguishment  of the applicable  defect or claim, then such Net Proceeds shall
be applied to the prepayment of the Bonds as provided in Article X hereof.

              (2) The Net Proceeds of the insurance  carried with respect to the
New Facility  pursuant to the provisions of Sections  6.4(a),  6.4(b) and 6.4(e)
hereof (excluding the Net Proceeds of any business interruption insurance, which
shall be paid to the  Borrower),  and the Net  Proceeds  resulting  from Eminent
Domain shall be paid to the Trustee and applied as follows:

                   (1)  If the  amount  of the  Net  Proceeds  does  not  exceed
                        $50,000.00,  the  Net  Proceeds  shall  be  paid  to the
                        Borrower   and   shall  be   applied   to  the   repair,
                        replacement,  renewal or improvement of the New Facility
                        as necessary.

                   (2)  If the amount of the Net  Proceeds  exceeds  $50,000.00,
                        the  Net  Proceeds  shall  be  paid  to and  held by the
                        Trustee  as a special  account in the  Project  Fund and
                        invested in accordance with Section 602 of the Indenture
                        pending  receipt  of  written   instructions   from  the
                        Borrower. At the option of the Borrower, to be exercised
                        within the period of ninety  (90) days from the  receipt
                        by the Trustee of such Net Proceeds,  the Borrower shall
                        advise the Trustee  that (A) the  Borrower  will use the
                        Net  Proceeds  for the repair,  replacement,  renewal or
                        improvement  of the New  Facility  (such funds to remain
                        with the Trustee and to be drawn down by the Borrower as
                        provided  in the  Indenture  in the case of  withdrawals
                        from the Project Fund), or (B) the Net Proceeds shall be
                        applied to the  prepayment  of the Bonds as  provided in
                        Article X hereof.  If the  Borrower  does not advise the
                        Trustee  within  said period of ninety (90) days that it
                        elects  to  proceed  under  clause  (A) to use  such Net
                        Proceeds  for  the  repair,   replacement,   renewal  or
                        improvement of the New Facility, such Net Proceeds shall
                        be applied to the  prepayment  of the Bonds  pursuant to
                        Article  X  hereof.  Any  prepayment   pursuant  to  the
                        preceding   sentence  shall  be  effected  on  the  next
                        interest  payment  date not less than  thirty  (30) days
                        after the  expiration of said period of ninety (90) days
                        without an election by the Borrower.

                                       29
<PAGE>

         The  Borrower  agrees  that if it shall elect to use the moneys paid to
the Trustee  pursuant to subsection  (b)(ii) of this Section 6.9 for the repair,
replacement, renewal or improvement of the New Facility, it will restore the New
Facility, or cause the same to be done, to a condition substantially  equivalent
to its condition  prior to the occurrence of the event to which the Net Proceeds
were  attributable.  To the extent that the Net Proceeds are not  sufficient  to
restore or replace the New  Facility,  the  Borrower  shall use its own funds to
restore or replace the New Facility. Prior to the commencement of such work, the
Trustee may require the Borrower to furnish a completion bond, escrow deposit or
other satisfactory  evidence of the Borrower's ability to pay or provide for the
payment of any estimated costs in excess of the amount of the Net Proceeds.  Any
balance  remaining after any such application of such Net Proceeds shall be paid
to the  Borrower.  The  Borrower  shall be entitled  to the Net  Proceeds of any
insurance or proceeds  resulting from Eminent Domain relating to property of the
Borrower not included in the Mortgaged  Property and not providing  security for
the Note or this Loan Agreement.

         Section VI.10 Parties to Give Notice. In case of any material damage to
or destruction of all or any part of the Mortgaged Property,  the Borrower shall
give prompt notice thereof to the Issuer and the Trustee. In case of a taking or
proposed  taking  of all or any  part of the  Mortgaged  Property  or any  right
therein by Eminent Domain,  the Borrower shall give prompt notice thereof to the
Issuer and the Trustee. Each such notice shall describe generally the nature and
extent of such damage, destruction, taking, loss, proceeding or negotiations.


                                       30
<PAGE>


                                   ARTICLE VII

                                SPECIAL COVENANTS

         Section  VII.1  Access  to  the  Plant  and   Inspection.   The  Issuer
Representative,  the  Bondholder  and the Trustee  shall have the right,  at all
reasonable times upon the furnishing of reasonable  notice to the Borrower under
the circumstances, to enter upon the Project Site and to examine and inspect the
Plant. The Issuer Representative,  the Bondholder and the Trustee and their duly
authorized  agents  shall  also have such right of access to the Plant as may be
reasonably  necessary to cause to be completed the,  Acquisition of the Project,
and thereafter for the proper  maintenance of the Plant, in the event of failure
by the Borrower to perform its  obligations  relating to maintenance  under this
Loan  Agreement,  the Mortgage or the Security  Agreement.  The Borrower  hereby
covenants to execute, acknowledge and deliver all such further documents, and do
all such  other  acts and  things  as may be  necessary  to grant to the  Issuer
Representative,  the Bondholder and the Trustee such right of entry.  The Issuer
Representative,  the Bondholder and the Trustee shall also be permitted,  at all
reasonable  times, to examine the books and records of the Borrower with respect
to the Acquisition of the Project and the obligations of the Borrower hereunder,
but neither  shall be entitled to access to trade  secrets or other  proprietary
information (other than financial information) of the Borrower.

         Section VII.2 Further Assurances and Corrective Instruments; Survey.

              (1) Subject to the provisions of the Indenture, the Issuer and the
Borrower  agree  that they will,  from time to time,  execute,  acknowledge  and
deliver, or cause to be executed,  acknowledged and delivered,  such supplements
and amendments hereto and such further instruments as may reasonably be required
for  correcting  any  inadequate or incorrect  description  of the Plant and for
carrying  out the  intention  or  facilitating  the  performance  of  this  Loan
Agreement.

              (2) No later than the Completion  Date, the Borrower shall deliver
to the Trustee an "as built" survey  (complying with the requirements of Section
6.3 hereof)  showing the  location of the  completed  New Facility and all other
improvements on the New Facility Site.

         Section VII.3 Recording and Filing; Other Instruments.

              (1) The Borrower  covenants  that it will,  at its expense,  cause
Counsel to take all steps as are  reasonably  necessary  to render an opinion to
the Bondholder and the Trustee not earlier than sixty (60) nor later than thirty
(30) days prior to each anniversary date occurring at five-year  intervals after
the issuance of the Bonds,  and upon  completion of any  application  of the Net
Proceeds of insurance or Eminent Domain pursuant to Section  6.9(b)(ii)  hereof,
to the effect that all financing statements,  continuation  statements,  notices
and other instruments  required by applicable law have been recorded or filed or
re-recorded  or refiled in such  manner and in such  places  required  by law in
order  fully to  preserve  and protect the rights of the Trustee (i) in the lien
granted pursuant to the Mortgage in the Mortgaged Property, (ii) in the security
interest granted 

                                       31
<PAGE>

pursuant to the Security  Agreement,  and (iii) in the granting by the Issuer of
certain  rights  of the  Issuer,  pursuant  to the  Indenture,  under  this Loan
Agreement,  the Note,  the  Mortgage  and the  Security  Agreement,  as  against
creditors of or purchasers for value from, the Issuer or the Borrower.

              (2) The  Borrower  and the Issuer  shall  execute  and deliver all
instruments and shall furnish all  information and evidence deemed  necessary or
advisable  by such  Counsel to enable it to render the  opinion  referred  to in
subsection  (a) of this Section.  The Borrower  shall file and refile and record
and re-record or cause to be filed and refiled and recorded and  re-recorded all
instruments  required  to be filed  and  refiled  and  recorded  or  re-recorded
pursuant  to the  opinion  of such  Counsel  and shall  continue  or cause to be
continued  the  liens  of such  instruments  for so long as the  Bonds  shall be
outstanding, except as otherwise required by this Loan Agreement.

         Section VII.4 Notice of Event of  Taxability.  The Borrower  shall give
prompt  written  notice to the  Issuer,  the  Bondholder  and the Trustee of the
filing by the Borrower of any statement,  tax schedule,  return or document with
the Internal  Revenue Service which discloses that an Event of Taxability  shall
have  occurred  and its receipt of any oral or written  advice from the Internal
Revenue Service that an Event of Taxability shall have occurred.

         Section VII.5 Administrative Expenses. The Borrower shall pay to or for
the account of the Issuer , the Bondholder or the Trustee, as applicable, within
thirty (30) days after notice thereof all reasonable costs and expenses incurred
by such person in connection with the financing, construction and administration
of the  Project,  except  such as may be paid out of the  proceeds of the Bonds,
including,  without  limitation,  the costs of administering  and enforcing this
Loan  Agreement  and the other  Bond  Documents,  the fees and  expenses  of the
Issuer,  the  Bondholder  and  Trustee and the fees and  expenses of  attorneys,
consultants  and others  retained by or on behalf of such person.  To the extent
permitted by law, all elements of Administrative Expenses shall bear interest at
the Overdue Rate from and after the date upon which  payment of the same becomes
due and payable and the term  "Administrative  Expenses" shall  automatically be
deemed to include such interest at the Overdue Rate.

         Section VII.6 Covenants with Respect to Tax Exemption.  While the Bonds
bear interest at the  Tax-Exempt  Rate,  the Borrower  represents,  warrants and
covenants to the Issuer,  for the benefit of any Person who shall at any time be
or  become a holder of the  Bonds  that it has taken no action  and will take no
action or fail to take any required  action the consequence of which would be to
forego,  jeopardize  or  terminate  the  exemption of interest on the Bonds from
Federal income tax; provided, however, that failure to comply with this covenant
shall result in a Determination  of Taxability and shall not constitute an Event
of Default under Section 9.1 of this Loan Agreement.

         The Borrower covenants that it will comply with all requirements of the
Enabling Act (and the Code while the Bonds bear interest at the Tax-Exempt Rate)
with  respect  to the use of the  proceeds  of the Bonds and that it will  file,
deliver or execute,  or cause to be filed,  all  statements 

                                       32
<PAGE>


or notices  required thereby.

         Whenever the Issuer shall be required to file,  deliver or execute,  or
produce any reports, notices or other documents while the Bonds are Outstanding,
the Borrower  shall furnish or cause the proper Person to furnish in due time to
the Issuer,  through Counsel for the Issuer,  the completed form of such report,
notice or other  required  document,  together with (a) a  certification  by the
Borrower  or other  proper  Person  required  to provide  information  that such
document is accurate and (b) an opinion of bond counsel  addressed to the Issuer
that the report or other document is not in violation of any provision of law or
of the documents constituting the complete transcript of proceedings relating to
the  issuance  of the  Bonds  and that such  report,  notice  or other  required
document meets the legal requirements for such filing, delivery or execution. In
the event of the failure or refusal of the  Borrower or other  proper  Person to
comply  with  this  provision,  the  Borrower  agrees to pay the  statement  for
attorney's  fees and  administrative  time  presented  by the Issuer for filing,
delivering  or  executing  such report or  document,  such  statement to be paid
within thirty (30) days after presentation by the Issuer.

         Section VII.7 Financial Covenants.  Until all of Borrower's obligations
under the Bond  Documents  are paid in full,  Borrower  agrees that,  unless the
Bondholder otherwise consents in writing, it will:

              (1) Net Worth.  Not permit at any time during any fiscal  quarter,
measured as of the last day of the most recently  completed  fiscal  quarter set
forth  below,  Net Worth to be less than the amount set forth below  across from
such fiscal quarter:

                  Fiscal Quarter Ending                       Net Worth

                           09/30/97                           $28,000,000
                           12/31/97                           $28,000,000
                           03/31/98                           $28,000,000
                           06/30/98                           $28,000,000
                           09/30/98                           $28,000,000
                           12/31/98 and thereafter            $32,000,000

              (2) Capital  Expenditures.  Not, and not permit any Subsidiary to,
purchase or otherwise acquire (including, without limitation, acquisition by way
of Capitalized  Lease),  or commit to purchase or otherwise  acquire,  any fixed
asset if, after giving  effect to such  purchase or other  acquisition,  (A) the
aggregate  capitalized cost of all fixed assets purchased or otherwise  acquired
(other than by means of a Capitalized Lease) by Borrower and its Subsidiaries on
a consolidated  basis plus (B) the aggregate  annual payments under  Capitalized
Leases (excluding the portion thereof representing imputed interest) of Borrower
and its Subsidiaries on a consolidated basis (excluding, in each of (A) and (B),
(a) any fixed asset which  constitutes a replacement  for an asset which was the
subject of a casualty or governmental taking to the extent the purchase or other
acquisition  thereof is funded by insurance  proceeds or other payments received
as a result of such  casualty  or  taking;  (b) the first  $675,000  of  capital
expenditures  

                                       33
<PAGE>

related  solely to removal of underground  storage tanks or other  environmental
problems at Borrower's  restaurant  locations;  and (c) any capital expenditures
(excluding the capital expenditures  financed with the proceeds from the Bonds))
would exceed $3,500,000 in Fiscal Year 1997 and in any Fiscal Year thereafter.

              (3) Interest  Coverage Ratio.  Not permit,  on the last day of any
fiscal quarter set forth below, the ratio of (a) Borrower's  EBITDA for the four
(4) fiscal quarters then ended to (b) Borrower's  consolidated  interest expense
(but excluding from the calculation thereof all interest expense with respect to
Additional  Revolving  Loan) for the four (4) fiscal  quarters  then ended to be
less than the ratio set forth below opposite such fiscal quarter:

             Fiscal Quarter Ending                           Ratio

                 09/30/97                                    3.00:1
                 12/31/97                                    3.00:1
                 03/31/98 and thereafter                     4.00:1

              (4) Funded  Debt/EBITDA  Ratio. Not permit, on the last day of any
fiscal quarter set forth below, the Funded Debt/EBITDA Ratio to be more than the
ratio set forth below opposite such fiscal quarter:

             Fiscal Quarter Ending                           Ratio

                 09/30/97                                    2.50:1
                 12/31/97                                    2.25:1
                 03/31/98                                    2.25:1
                 06/30/98                                    2.25:1
                 09/30/98                                    2.25:1
                 12/31/98                                    2.25:1
                 03/31/99 and thereafter                     2.00:1

         Section VII.8 Release and Indemnification Covenants.

              (1) The Borrower shall and hereby agrees to indemnify,  defend and
hold harmless the Issuer,  the Trustee,  and the Bondholder and their respective
members, officers,  employees, and agents and officials from and against any and
all losses, claims, damages, taxes (including interest and penalties), costs and
expenses  (including  reasonable  attorneys'  fees,  whether prior to, during or
after trial or in the event of any  appeal) and  liabilities  arising  from,  in
connection  with, or as a result of the issuance of the Bonds, the execution and
delivery of this Loan  Agreement,  the  Mortgage,  the Security  Agreement,  the
Environmental   Agreement,  the  Indenture,  and  other  documents  executed  in
connection with the foregoing, the performance and observance by or on behalf of
the  Issuer and the  Trustee  of those  things on the part of the Issuer and the
Trustee  agreed to be performed or observed  hereunder  and  thereunder,  or the
Acquisition  of the Project or the use and operation of the Plant,  or the costs
of enforcement  (including reasonable attorneys' fees) of any obligations of the
Borrower  hereunder or under the Bonds, the 

                                       34
<PAGE>

Mortgage, the Security Agreement or any related documents, including any and all
liability  or loss,  costs or  expense,  including  reasonable  attorneys'  fees
incurred in connection with, or pertaining to the issuance,  sale or delivery of
the Bonds,  and  arising  under the  Securities  Act of 1933,  as  amended,  the
Securities  Exchange Act of 1934, as amended, or any applicable state securities
laws;  provided,  however,  that such indemnity for liabilities under securities
law shall be subject to the limitation  that such indemnity  shall not have been
determined by a binding legal precedent to be void as contrary to public policy.
The Borrower  shall  indemnify  and hold the Issuer and the Trustee  harmless as
aforesaid,  and upon notice from the Issuer or the Trustee,  the Borrower shall,
at its own expense, defend them or any of them in any such action or proceeding.

              (2)  Notwithstanding  the  fact  that it is the  intention  of the
parties hereto that the Issuer shall not incur any pecuniary liability by reason
of the terms of this Loan Agreement or the  undertakings  required of the Issuer
hereunder, by reason of the issuance of the Bonds, by reason of the execution of
the Indenture or by reason of the performance of any act requested of the Issuer
by the  Borrower,  including  all  claims,  liabilities  or  losses  arising  in
connection  with the violation of any statutes or  regulation  pertaining to the
foregoing;   nevertheless,  if  the  Issuer  should  incur  any  such  pecuniary
liability,  then in such event the Borrower shall  indemnify and hold the Issuer
harmless against all claims,  demands or causes of action  whatsoever,  by or on
behalf of any Person arising out of the same or out of any offering statement or
lack of offering  statement in  connection  with the sale or resale of the Bonds
and all costs and  expenses  incurred  in  connection  with any such claim or in
connection with any action or proceeding  brought thereon,  and upon notice form
the  Issuer,  the  Borrower  shall  defend  the  Issuer  in any such  action  or
proceeding.  All references to the Issuer in this Section 7.8 shall be deemed to
include its commissioners,  members, directors, officers, employees,  attorneys,
and agents.

              (3)  Notwithstanding  anything to the contrary contained herein or
in any of the Bonds or the  Indenture,  or in any other  instrument  of document
executed by or on behalf of the Issuer in connection  herewith,  no stipulation,
covenant, agreement or obligation contained herein or therein shall be deemed or
construed to be a stipulation  covenant,  agreement or obligation of any present
or future member, commissioner, director, trustee, officer, employee or agent of
the Issuer, or of any incorporator,  member,  commissioner,  director,  trustee,
officer,  employee or agent of any successor to the Issuer, in any such person's
individual capacity,  and no such person, in his individual  capacity,  shall be
liable  personally  for any breach or  non-observance  of or for any  failure to
perform, fulfill or comply with any such stipulations,  covenants, agreements or
obligations,  nor shall any recourse be had for the payment of the principal of,
premium,  if any, or interest on any of the Bonds or for any claim based thereon
or on any such stipulation,  covenant, agreement or obligation, against any such
person, in his individual capacity, either directly or through the Issuer or any
successor  to  the  Issuer,  under  any  rule  of  law  or  equity,  statute  or
constitution  or by the  enforcement  of any assessment or penalty or otherwise,
and all such liability of any such person, in his individual capacity, is hereby
expressly waived and released.

              (4)  Notwithstanding  anything to the contrary contained herein or
in any of the Bonds or the  Indenture,  or in any other  instrument  or document
executed by or on behalf of the Issuer in  connection  herewith,  (i) the Issuer
shall  have  no  obligation  to take  action  under  this  

                                       35
<PAGE>

Loan Agreement, the Indenture, the Bonds or such other instruments or documents,
unless the Issuer is requested in writing by an appropriate  Person to take such
action and is provided  with  indemnity  and  assurances  satisfactory  to it or
payment of or reimbursement for any expenses  (including  attorneys' fees) to be
incurred in such action, (ii) no member of the Issuer or any officer,  attorney,
employee or agent of the Issuer shall be personally liable to the Borrower,  the
Trustee  or any  other  person  for any  action  taken by the  Issuer  or by its
officers,  attorneys,  agents or  employees,  or for any failure to take action,
under this Loan Agreement, the Indenture, the Bonds or such other instruments or
documents,  except  that the Issuer  agrees to take or refrain  from  taking any
action  required by an injunction or required to comply with any final  judgment
for specific performance; and (iii) any judgment rendered against the Issuer for
breach of its obligations under this Loan Agreement, the Indenture, the Bonds or
such other  instruments  or documents,  shall be payable solely from the Project
Fund, and no personal  liability or charge payable  directly or indirectly  from
the general funds of the Issuer shall arise therefrom.

         The foregoing provisions of this Section 7.8 shall survive the payment,
prepayment or redemption of the Bonds and the termination of this Loan Agreement
and the Indenture.

         Notwithstanding anything to the contrary contained herein, the Borrower
shall  have no  liability  to  indemnify  the Issuer  against  claims or damages
resulting from the Issuer's own gross negligence or willful misconduct.

         Section VII.9 Encumbrance  Covenants.  Until Payment of the Bonds shall
have occurred,  the Mortgaged  Property shall remain free and clear of any lien,
encumbrance,  mortgage,  security interest,  and secondary financing whatsoever,
and shall not be sold,  conveyed,  transferred,  or leased with the exception of
any Permitted Encumbrances.

         The Borrower  shall not, and shall not permit any Subsidiary to, create
or permit to exist any Lien with  respect  to any of its  property,  revenue  or
assets now owned or hereafter  acquired,  except:  (a) Liens for Taxes which are
not  delinquent  or which are being  contested in good faith and by  appropriate
proceedings and as to which such reserves or other appropriate provisions as may
be  required  by GAAP  are  being  maintained;  (b)  carriers',  warehousemen's,
mechanics',  materialmen's,  repairmen's, and other like statutory Liens arising
in the ordinary course of business securing obligations which are not overdue or
which are being contested in good faith and by appropriate proceedings and as to
which such reserves or other  appropriate  provisions as may be required by GAAP
are being  maintained;  (c)  pledges or  deposits in  connection  with  workers'
compensation,   unemployment   insurance  and  other  similar   legislation   or
regulations;  (d) Liens in connection with the acquisition of property after the
date of this Loan Agreement by way of purchase money mortgage,  conditional sale
or other title retention agreement,  Capitalized Lease or other deferred payment
contract,  and  attaching  only to the property  being  acquired  (and  proceeds
thereof  and  accessions  thereto),  if (i) except in the case of a  Capitalized
Lease, the  Indebtedness  secured thereby does not exceed 75% of the fair market
value of such  property  at the  time of the  acquisition  thereof  and (ii) the
aggregate  principal and interest  payments of the  Indebtedness of Borrower and
its  Subsidiaries  secured by such Liens does not exceed (w)  $450,000 in Fiscal
Year 1996, (x) $900,000 in Fiscal Year 1997, (y) $1,350,000 in Fiscal 


                                       36
<PAGE>

Year 1998, and (z) $1,500,000 in any Fiscal Year  thereafter;  (e) liens on real
property and any related fixtures (and proceeds thereof and accessions  thereto)
securing  loans to  Borrower  obtained  after the date of this  Loan  Agreement,
provided  the  initial  amount of the loan  secured by any such Lien is not more
than 75% of the  appraised  value of the real property  securing such loan;  (f)
Liens in favor of Bond  Purchaser;  (g)  Liens  listed on  Schedule  5.16 of the
Amended and  Restated  Loan  Agreement  (and in the case of  Capitalized  Leases
listed or referred to thereon, Capitalized Leases entered into after the date of
this Loan Agreement for the same property or assets,  provided that any increase
in  the  Indebtedness  payable  under  such  new  Capitalized  Leases  shall  be
permitted,  and count against the  limitations  set forth,  under clause (d)(ii)
above); (h) lessor's Liens and reasonable  deposits pursuant to operating leases
permitted  hereunder  under which  Borrower or a Subsidiary  is the lessee;  (i)
Liens  disclosed  in the ALTA Title  Loan  Insurance  Policies  and ALTA Class A
Surveys delivered  pursuant to Section 8.1.10(c) of the Original Loan Agreement,
or otherwise  under the Original Loan Agreement or the Existing Loan  Agreement,
or disclosed in the title insurance  policies  delivered pursuant to Section 6.3
hereof,  and not  objected  to by  Bond  Purchaser  on or  prior  to the  Second
Restatement   Date;  (j)  zoning  or  building   restrictions  and  other  minor
encumbrances  on and defects in title to real property  which do not  materially
impair the use or value  thereof;  (k) Liens incurred or deposits made to secure
the  performance  of surety  or  appeal  bonds and  attaching  to  property  not
exceeding $200,000; (l) attachment or judgment Liens not exceeding $200,000; (m)
bankers'  liens  arising by operation of law in connection  with the  Depositary
Accounts; and (n) Liens consented to in writing by Bond Purchaser.

         Section VII.10 Financial Statements. The Borrower shall furnish to Bond
Purchaser in form reasonably satisfactory to Bond Purchaser:

              (1) Annual Audit Report. Within ninety (90) days after each Fiscal
Year  of  Borrower,  a copy of the  annual  audit  report  of  Borrower  and its
consolidated  Subsidiaries prepared on a consolidated (and, if requested by Bond
Purchaser,  consolidating)  basis in  conformity  with GAAP and  certified by an
independent  certified  public  accountant  who shall be of recognized  national
standing or otherwise reasonably  satisfactory to Bond Purchaser,  together with
(i) a letter from such  accountant in the form acceptable to the Bond Purchaser,
(ii) a certificate from such accountant containing a computation of, and showing
compliance with, each of the financial  covenants  contained herein, and (iii) a
certificate  from such  accountant to the effect that, in making the examination
necessary for the signing of such annual audit report,  such  accountant has not
become  aware of any Event of Default  or  Unmatured  Event of Default  that has
occurred and is continuing,  or, if such accountant has become aware of any such
event, describing it;

              (2) Quarterly  Financial  Statement.  Within  forty-five (45) days
after  the end of each  calendar  quarter  of each  Fiscal  Year,  a copy of the
unaudited financial  statement of (x) Parent and its consolidated  Subsidiaries,
(y)  the  Bickford's  Business,   and  (z)  the  Cues  Business  prepared  on  a
consolidated   basis  in  conformity  with  GAAP  (subject  to  normal  year-end
adjustments and except that such  statements need not include notes),  signed by
Borrower's chief financial  officer and consisting of at lest a balance sheet as
at the close of such quarter and  

                                       37
<PAGE>

statements  of earnings  and cash flows for such quarter and for the period from
the beginning of such Fiscal Year to the close of such quarter;

              (3) Officer's Certificate.  Together with the financial statements
furnished by Borrower under the preceding  clauses (a) and (b) (but only for the
calendar  quarters  ended  on  March,  June and  September),  a  certificate  of
Borrower's chief financial  officer or treasurer,  dated the date of such annual
audit  report  or  such  monthly  financial  statements,  as the  case  may  be,
containing a statement  that no Event of Default or  Unmatured  Event of Default
has occurred and is  continuing,  or, if there is any such event,  describing it
and the steps,  if any, being taken to cure it, and containing a computation of,
and showing compliance with, each of the financial  covenants  contained herein;
and

              (4) Management  Letters.  Promptly upon receipt thereof, a copy of
any "management letter" or other material communication from Borrower's auditors
(including a copy of any such letter which accompanies the audit report referred
to in clause (a)).

              (5) Same Store Sales  Reports.  Not later than July 31 and January
31 of each year, a report for each of Borrower's restaurants and stores of sales
for the preceding six months and  year-to-date,  with a comparison of such sales
figures  to the  corresponding  period in the  prior  Fiscal  Year,  all in form
reasonably satisfactory to Bond Purchaser.

              (6) SEC and Other  Reports.  Copies of each filing and report made
by Parent with or to any  securities  exchange or the  Securities  and  Exchange
Commission  and of each  communication  from Parent to  shareholders  generally,
promptly upon the filing or making thereof;

              (7) Other Reports.  Promptly from time to time, such other reports
and information as Bond Purchaser may reasonably request.

         Section  VII.11  Indebtedness.  The  Borrower  shall not, and shall not
permit any Subsidiary to, incur or permit to exist any Indebtedness  (including,
but not limited to,  Indebtedness as lessee under Capitalized  Leases),  except:
(a) Indebtedness under the terms of this Loan Agreement;  (b) Subordinated Debt;
(c) other  Indebtedness  outstanding  on the date  hereof and listed on Schedule
5.15 to the Amended and Restated  Loan  Agreement;  (d)  Indebtedness  hereafter
incurred in  connection  with Liens  permitted  under Section 7.9; and (e) other
Indebtedness approved in writing by Bond Purchaser.

         Section VII.12 Additional Information. Until Payment of the Bonds shall
have occurred, the Borrower shall promptly,  from time to time, deliver or cause
to be delivered to the Bondholder,  the Trustee and the Issuer such  information
regarding  the  operations,  business  affairs and  financial  condition  of the
Borrower  and the  Guarantor as the  Bondholder,  the Trustee and the Issuer may
reasonably request in writing.

         Section VII.13 Restricted Payments . The Borrower shall not purchase or
redeem any shares of its stock  (other than for stock of  Borrower),  declare or
pay any dividends thereon (other 

                                       38
<PAGE>

than stock dividends), make any distribution to stockholders as such (other than
distributions of stock of Borrower) or set aside any funds for any such purpose,
not prepay,  purchase or redeem, and not permit any Subsidiary to purchase,  any
Subordinated  Debt,  not make any advances to Parent and, if an Event of Default
or Unmatured  Event of Default  exists or would result  therefrom,  not, and not
permit any Subsidiary to, pay any management or similar fees to Parent or any of
its affiliates  pursuant to the terms of the Management  Agreement  (except that
any such fees may be paid whether or not an Event of Default or Unmatured  Event
of Default exists or would result therefrom,  solely to the extent such fees are
to pay  regular  salaries  (and not  bonuses)  of any  employees  or officers of
Parent); provided, however, that: (a) Borrower may pay dividends and advances to
Parent in an aggregate  amount not exceeding 50% of Borrower's  Excess Cash Flow
for the  immediately  preceding  Fiscal Year so long as (i) Bond Purchaser shall
have received  Borrower's  annual audit report pursuant to Section 7.10 for such
preceding Fiscal Year, (ii) after giving effect to any such proposed dividend or
advance,  the  amount  of  the  Revolving  Loan  Availability  will  exceed  the
outstanding principal amount of the Revolving Loans by at least $500,000,  (iii)
no Event of  Default  or  Unmatured  Event of  Default  shall then exist or will
result from any such dividend  payment or advance,  and (iv) Borrower shall have
given Bond  Purchaser  prior  written  notice of any such  proposed  dividend or
advance and certified its  compliance  with this Section 7.13; (b) Borrower may,
within 60 days after  obtaining the proceeds of any loan  permitted  pursuant to
Section  5.15(e) of the Amended and Restated Loan  Agreement,  pay a dividend or
advance to Parent in an amount not exceeding 25% of the proceeds of such loan so
long as the conditions  specified in sub-clauses  (ii), (iii) and (iv) of clause
(a) above have been met; (c) Borrower may make  scheduled  payments of principal
of and interest on the Subordinated Note, so long as the conditions specified in
sub-clauses  (ii),  (iii) and (iv) of clause  (a) above  have been met (it being
understood  that each  reference to a "dividend"  in such  sub-clauses  shall be
deemed,  for  purposes of this clause  (c),  to be a reference  to the  relevant
payment on the  Subordinated  Note);  and (d) Borrower may, within ten (10) days
after obtaining the proceeds of any Supplemental  Revolving Loan, pay a dividend
or advance in the amount of such  proceeds  of such Loan to Parent to be used by
Parent as specified by Section 5.25 of the Amended and Restated  Loan  Agreement
so long as the conditions  specified in sub-clauses (iii) and (iv) of clause (a)
above have been met. Dividends and advances permitted and paid under clause (a),
(b) or (d) of the foregoing sentence shall not reduce the amount of dividends or
advances payable under any other such sub-clause.

         Section VII.14 Sale of Assets.  The Borrower covenants that, unless the
Bondholder  otherwise consents in writing,  it will not sell, assign,  transfer,
convey,  grant a lien on or security  interest in or otherwise dispose of all or
substantially all of its assets (including, but not limited to, the Plant).

         Section  VII.15  Litigation.  The Borrower shall notify the Trustee and
the Bondholder of any pending  litigation or claims  against it wherein  another
party seeks damages  against it where the aggregate of such litigation or claims
(or portions thereof) is in excess of $50,000.00,  which is not fully covered by
insurance,  or any  litigation  or claims  seeking  damages or equitable  relief
which,  if granted,  would  materially  interfere  with the  Acquisition  of the
Project or the operation of the Plant as hereby contemplated.

                                       39
<PAGE>

         Section  VII.16  Patents,  Trademarks.  The  Borrower  shall  take  all
reasonable  steps to  preserve  and  protect  its  patents,  licenses,  permits,
trademarks,  trademark rights, trade names, trade name rights, copyrights, trade
secrets and other proprietary  information used or useful in connection with its
operation at the Plant and shall maintain all of its other properties and assets
used or useful  in the  conduct  of its  business  at the Plant in good  repair,
working  order and  condition  and from time to time cause to be made all proper
replacements, betterments and improvements thereto.

         Section VII.17 Default Certificates.  The Borrower shall deliver to the
Trustee and the Bondholder  forthwith,  upon obtaining  knowledge of an Event of
Default hereunder or under the Note, the Indenture,  the Mortgage,  the Security
Agreement,  the Guaranty, the Environmental  Agreement,  or an event which would
constitute such an Event of Default but for the requirement that notice be given
or time elapse or both, a certificate of the Borrower  specifying the nature and
period of existence  thereof and what action the Borrower  proposes to take with
respect thereto.

         Section VII.18  Notification to Trustee.  The Borrower shall notify the
Trustee and the Bondholder in writing promptly, but in any event within five (5)
Business  Days, of the  occurrence  of any of the following  with respect to the
Borrower:

              (1) any event or  condition  which  shall  constitute  an event of
default under any other agreement for borrowed money;

              (2) any levy of an attachment,  execution or other process against
its assets,  which may materially  adversely  affect the financial  condition or
operation of the Borrower;

              (3) any change in any  existing  agreement  or contract  which may
materially adversely affect its business or affairs, financial or otherwise; and

              (4)  any  change  in the  ownership  or  control  of the  Borrower
(provided,  however, any such change in ownership or control shall be subject to
the limitations of Section 7.23 hereof).

         Section VII.19 Books of Record and Account.

              (1) The Borrower shall keep proper books of record and accounts in
which  full,  true and  correct  entries  shall be made of its  transactions  in
accordance with Generally Accepted Accounting Principles applied on a Consistent
Basis.

              (2) The  Borrower  shall set aside on its books from its  earnings
for  each  Fiscal  Year  all  such  proper  reserves,   including  reserves  for
depreciation,  depletion, obsolescence and amortization of its properties during
such Fiscal Year, as shall be required in  accordance  with  Generally  Accepted
Accounting Principles applied on a Consistent Basis.


                                       40
<PAGE>

         Section  VII.20 Observe Laws. The Borrower shall observe or cause to be
observed all laws,  regulations  and other valid  requirements of any regulatory
authority with respect to the operations at the Plant.

         Section VII.21 Acceptance of Indenture.  The Borrower accepts the terms
and  provisions  of the Indenture and agrees to perform or cause to be performed
all duties and obligations, expressed or implied, of the Borrower thereunder.

         Section VII.22 Reserved.

         Section VII.23  Merger,  Purchase and Sale. The Borrower shall not, and
shall not permit any Subsidiary to: (a) be a party to any merger, liquidation or
consolidation,  provided  that  any  Subsidiary  may  merge  with and  into,  or
liquidate into, Borrower or another Subsidiary;  (b) except in the normal course
of its business or as otherwise permitted herein, sell, transfer,  convey, lease
or otherwise dispose of any of the Project; or (c) purchase or otherwise acquire
all or substantially all the assets of any Person (unless and to the extent that
such assets  constitute no more than two (2) restaurant  locations in any Fiscal
Year;  it being  understood  and  agreed  that the  addition  of new  restaurant
locations solely through the assumption or incurrence of lease obligations shall
not be deemed to be a purchase for purposes of this clause (c)).

         Section  VII.24  Changes in Control.  Until  Payment of the Bonds shall
have  occurred,  unless the  Bondholder  has  otherwise  given its prior written
consent,  the Parent  shall own all of the  Borrower's  issued  and  outstanding
voting  stock  and  shall  control  the  Borrower.  For  purposes  of this  Loan
Agreement,  a Person  shall be deemed to control a  corporation  if such  Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such  corporation,  whether through the ownership
of voting securities, by contract, or otherwise.

         Section VII.25 ERISA. No material  employee benefit plan established or
maintained  by the  Borrower or any  Subsidiary  or  Affiliate  of the  Borrower
(including any multiemployer  plan to which the Borrower or any Affiliate of the
Borrower  contributes)  which is subject  to Part 3 of  Subtitle B of Title I of
ERISA had a material  accumulated funding deficiency (as such term is defined in
Section 302 of ERISA) as of the last day of the most recent  fiscal year of such
plan ended prior to the date hereof,  or would have had an  accumulated  funding
deficiency  (as so defined) on such day if such year were the first year of such
plan to which Part 3 of Subtitle B of Title I of ERISA applied,  and no material
liability to the Pension Benefit Guaranty Corporation,  has been, or is expected
by the Borrower or any Affiliate of the Borrower to be, incurred with respect to
any such plan by the Borrower or any Affiliate of the Borrower.

         Neither the Borrower nor any Subsidiary is required to contribute to or
is  contributing to a  "Multiemployer  Pension Plan" (as such term is defined in
the Multiemployer Pension Plan Amendments Act of 1980). Neither the Borrower nor
any Subsidiary has any  "withdrawal  liability" (as also defined in such Act) to
any multiemployer pension plan.

         Section VII.26 Notice of Plan Events,  Termination and  Litigation.  As
soon as possible 


                                       41
<PAGE>


and in any event within 30 Days after the  Borrower  knows or has reason to know
that any Reportable  Event or a Prohibited  Transaction with respect to any plan
has occurred or that the Pension Benefit Guaranty Corporation or the Borrower or
any Related Entity has instituted or will institute  proceedings  under ERISA to
terminate a Plan, or a partial  termination  of a Plan has or is alleged to have
occurred, or more than twenty percent (20%) of the total number of employees who
are participants in a Plan will sever, or have severed,  their employment due to
a decision to cease operations at a facility or facilities or to reduce the work
force, or any litigation regarding a Plan or naming the trustee of a Plan or the
Borrower  or any  Related  Entity  with  respect  to a  Plan  is  threatened  or
instituted, or the purchase,  acceptance, holding or sale of customer notes by a
Plan fails to comply with Prohibited  Transactions  Exemption 85-68 published on
April 3, 1985,  the Borrower will provide the  Bondholder and the Trustee copies
of the written  statement of the chief financial officer of the Borrower setting
forth details of such  Reportable  Event,  Prohibited  Transaction,  termination
proceeding,  partial termination,  litigation or prohibited  transaction and the
action being or proposed to be taken with respect thereto,  together with copies
of the notice of such  Reportable  Event or any other notices,  applications  or
forms submitted to the Pension Benefit  Guaranty  Corporation,  Internal Revenue
Service or the United States  Department of Labor,  and copies of any notices or
correspondence received from the Pension Benefit Guaranty Corporation,  Internal
Revenue  Service or the United  States  Department  of Labor,  and copies of any
pleadings, notices or other documents relating to such litigation.

         Section VII.27 Plan Annual  Reports.  Promptly after the filing thereof
with the Internal Revenue Service or the Pension Benefit  Guaranty  Corporation,
the Borrower  will provide to the  Bondholder  copies of each annual  report and
annual  premium  filing  form which is filed with  respect to each Plan for each
plan year,  including (i) a statement of assets and  liabilities of such Plan as
of the end of such plan year and  statements  of changes in fund  balance and in
financial  position,  or a statement of changes in net assets available for plan
benefits,  for such  plan  year,  certified  by the  trustee  of the Plan or the
independent certified public accountants for such and (ii) if required by law or
applicable  regulations,  an actuarial statement of such Plan applicable to such
plan year, certified by the actuary for the Plan.

         Section VII.28 Plan  Liabilities.  Neither the Borrower nor any Related
Entity will permit the aggregate  present value of accrued benefits of any Plan,
computed in accordance with actuarial  principles and  assumptions  applied on a
uniform and  consistent  basis by an  enrolled  actuary of  recognized  standing
acceptable to the  Bondholder,  to exceed the aggregate  value of asserts of the
Plans,  computed on a fair market value basis,  or permit the aggregate  present
value of vested  benefits of the Plans,  computed in accordance  with  actuarial
principles  and  assumptions  applied on a uniform  and  consistent  basis by an
enrolled  actuary of recognized  standing  acceptable to the  Bondholder and the
Trustee,  to exceed the  aggregate  value of assets of the Plans,  computed on a
fair market value basis.

         Section  VII.29  Notice of Adoption of Plan. As soon as possible and in
any event within 30 Days after the Borrower or any Related  Entity  adopts a new
Plan,  the Borrower or such 


                                       42
<PAGE>

Related  Entity shall notify the  Bondholder  and the Trustee of the adoption of
the new Plan.  Adoption of a new Plan shall include the adoption of the new Plan
by the Borrower or such Related  Entity as well as inclusion of employees of the
Borrower or such Related Entity under the Plan of another corporation.

         Section VII.30 Guaranties. The Borrower shall not, and shall not permit
any Subsidiary to, become or be a guarantor or surety of, or otherwise become or
be responsible in any manner (whether by agreement to purchase any  obligations,
stock,  assets,  goods or services,  or to supply or advance any funds,  assets,
goods or services,  or otherwise)  with respect to, any undertaking of any other
Person,  except for the  endorsement,  in the ordinary course of collection , of
instruments payable to it or its order.

         Section  VII.31  Subsidiaries.  The  Borrower  shall not, and shall not
permit any Subsidiary  to, acquire any stock or similar  interest in any Person,
and not create,  establish or acquire any Subsidiaries other than those existing
on the Second Restatement Date.

         Section VII.32  Leases.  The Borrower shall not enter into or permit to
exist,  or  permit  any  Subsidiary  to  enter  into or  permit  to  exist,  any
arrangements for the leasing by Borrower or such  Subsidiary,  as lessee under a
lease which is not a Capitalized Lease, of any real or personal property (or any
interest  therein)  other  than  under (a)  leases in  existence  on the  Second
Restatement  Date and listed on Schedule  4.15 to the Amended and Restated  Loan
Agreement and extensions and renewals thereof (provided that any increase in the
rental  payments  thereunder  will count against the permitted  lease rentals in
clause (b) below) and (b) leases entered into after the Second  Restatement Date
having base rentals not  exceeding  (in the  aggregate  for all such leases) (i)
$400,000 in Fiscal  Year 1996,  (ii)  $800,000  in Fiscal  Year 1997,  and (iii)
$1,200,000 in Fiscal Year 1998.

         Section VII.33  Unconditional  Purchase Options. The Borrower shall not
enter  into or be a party to, or permit  any  Subsidiary  to enter  into or be a
party to, any contract for the purchase of materials, supplies or other property
or services,  if such contract requires that payment be made by it regardless of
whether  or not  delivery  is ever  made of such  materials,  supplies  or other
property or services.

         Section  VII.34 Use Of Proceeds.  The Borrower  shall not use or permit
any proceeds of the Bonds to be used,  either  directly or  indirectly,  for the
purpose,  whether  immediate,  incidental  or ultimate,  of (i)  "purchasing  or
carrying" any Margin Stock, and shall furnish to Bond Purchaser, upon request, a
statement  in  conformity  with the  requirements  of Federal  Reserve  Form U-1
referred to in Regulation U of the Federal  Reserve Board or (ii) funding all or
any part of any hostile take-over or tender offer.

         Section VII.35  Transactions  with Related Parties.  The Borrower shall
not,  and shall not permit any  Subsidiary  to,  enter into or be a party to any
transaction or arrangement,  including,  without limitation, the purchase, sale,
lease or exchange of property or the rendering of any service,  with any Related
Party,  except  in the  ordinary  course  of  and  pursuant  to  the  reasonable
requirements  of  Borrower's  or such  Subsidiary's  business  and upon fair and
reasonable  terms no less  favorable to Borrower or such  Subsidiary  than would
obtain in a  comparable  arm's-length  

                                       43
<PAGE>

transaction  with a Person  not a Related  Party;  provided,  however,  that the
foregoing  shall not prohibit (a) the existence or performance of the Management
Agreement;   (b)  the  transactions   contemplated  under  the  Recapitalization
Agreement;  or (c) any other  transaction or arrangement  permitted by any other
provision of this Agreement.

         Section VII.36 Borrower's and  Subsidiaries'  Stock. The Borrower shall
not permit any  Subsidiary  to purchase or  otherwise  acquire any shares of the
stock of Borrower, and not take any action, or permit any Subsidiary to take any
action,  which  will  result in a  decrease  in  Borrower's  ultimate  ownership
interest in any Subsidiary.



                                       44

<PAGE>


                                  ARTICLE VIII

                  ASSIGNMENT, LEASING, SELLING AND ENCUMBERING

         Section  VIII.1  Assignment of Loan  Agreement,  Sale or Encumbering of
Plant by the  Borrower.  Except as  expressly  permitted  under the terms of the
Mortgage and the Security Agreement, or otherwise with the prior written consent
of the Issuer and the Bondholder (which consent may be withheld for any reason),
the rights of the Borrower  under this Loan  Agreement may not be assigned,  and
the Mortgaged Property may not be leased, sold, encumbered or otherwise disposed
of as a whole or in part.

         Section VIII.2  Restrictions on Transfer of Issuer's Rights. The Issuer
agrees that, except for the assignment made pursuant to the Indenture of certain
of its rights under this Loan Agreement,  the Mortgage,  the Security Agreement,
the  Environmental  Agreement,  and its  pledge  of the Note,  endorsed  without
recourse to the order of the Trustee, to the Trustee as security pursuant to the
Indenture,  it will not during  the term of this Loan  Agreement  sell,  assign,
transfer or convey any of its  interests in this Loan  Agreement,  the Mortgage,
the  Security  Agreement,  the  Environmental  Agreement,  or the Note except as
hereinafter provided in Section 8.3.

         Section VIII.3 Assignment by the Issuer.  It is understood,  agreed and
acknowledged  that the Issuer,  as security  for  payment of the  principal  of,
premium,  if any, and interest on the Bonds,  will grant to the Trustee pursuant
to the Indenture,  inter alia, certain of its rights,  title and interest in and
to this Loan Agreement,  the Mortgage, the Security Agreement, the Environmental
Agreement,  and  pledge  the Note,  endorsed  as  aforesaid,  to the  Trustee as
security, and the Borrower hereby assents to such assignment and pledge.


                                       45
<PAGE>


                                   ARTICLE IX

                         EVENTS OF DEFAULT AND REMEDIES

         Section  IX.1  Events of Default  Defined.  The term "Event of Default"
shall mean any one or more of the following events:

              (1) The  failure by the  Borrower  to pay when due any  payment of
principal of, or interest on or other amount payable under the Note or this Loan
Agreement.

              (2) The failure of the Borrower to perform any of its  obligations
under or otherwise  comply with the provisions of Section 6.4, 7.4, 7.7, 7.8, or
7.23 hereof.

              (3) The  occurrence of an "Event of Default" or a default or event
of default under any of the Indenture, the Mortgage, the Security Agreement, the
Guaranty, or the Environmental Agreement.

              (4) Any  representation  or warranty of the Borrower  contained in
Section 2.2 hereof,  or in any  document,  instrument or  certificate  delivered
pursuant  hereto or to the Indenture or in connection with the issuance and sale
of the Bonds shall be false, misleading or incomplete in any material respect on
the date as of which made.

              (5) Failure by the  Borrower to observe and perform any  covenant,
condition or  agreement on the part of the Borrower  under the Note or this Loan
Agreement, other than as referred to in the preceding paragraphs of this Section
9.1,  for a period of thirty (30) days after  written  notice,  specifying  such
failure and  requesting  that it be  remedied,  is given to the  Borrower by the
Issuer or the Trustee.

              (6) The  commencement  against the Borrower of an involuntary case
under the Bankruptcy Code, or any other applicable  federal or state bankruptcy,
insolvency  or  other  similar  law,  or of any  action  or  proceeding  for the
appointment   of  a  receiver,   liquidator,   assignee,   custodian,   trustee,
sequestrator  (or similar  official) of the Borrower or for any substantial part
of its  property,  or for the winding up or  liquidation  of its affairs and the
continuance of any such case, action, or proceeding unstayed and in effect for a
period of thirty (30) consecutive days.

              (7) The commencement by the Borrower of a voluntary case under the
Bankruptcy Code, or any other applicable federal or state bankruptcy, insolvency
or other  similar  law,  or the  consent  by it to, or its  acquiescence  in the
appointment  of  or  taking  possession  by a  receiver,  liquidator,  assignee,
trustee, custodian,  sequestrator (or other similar official) of the Borrower or
of any substantial  part of its property,  or the making by it of or the consent
by it to any  assignment  for the  benefit of  creditors,  or the failure of the
Borrower  generally  to pay its debts as such debts become due, or the taking of
any action by the Borrower in furtherance of any of the foregoing.


                                       46
<PAGE>

              (8)  Failure  by the  Borrower  to pay,  when  due or  within  any
applicable grace period, any amount owing on account of any Indebtedness, or the
failure by the Borrower to observe or perform any covenant or undertaking on its
part to be  observed  or  performed  in any  agreement  evidencing,  securing or
relating to such  Indebtedness,  if the effect of such  default is to cause,  or
permit the holder or holders of such obligation (or a trustee for such holder or
holders) to cause such obligation to become due prior to its stated maturity.

              (9) The entry of a final  judgment,  which with other  outstanding
final judgments against the Borrower exceeds an aggregate of $250,000.00 and not
covered by insurance shall be rendered against the Borrower, and if within sixty
(60) days after entry  thereof such judgment  shall not have been  discharged or
execution thereof stayed pending appeal, or if within thirty (30) days after the
expiration of any such stay such judgment shall not have been discharged.

              (10) If a Reportable Event,  which the Bondholder  determines,  in
its sole  discretion,  has  created  or is likely to create a  material  adverse
effect on the Borrower's or any Subsidiary's  overall business operation,  shall
have  occurred in  connection  with any Plan  maintained  by the Borrower or any
Related Entity.

              (11) Default in the payment,  when due or declared  due, of any of
the Liabilities.

              (12) Non-Payment of or Default under Other  Indebtedness.  Default
in the payment when due,  whether by acceleration  or otherwise  (subject to any
applicable  grace period),  of any  Indebtedness of, or guaranteed by, Borrower,
any other Obligor or any Subsidiary (other than (i) any Indebtedness  under this
Agreement and the Note, or (ii) any  Indebtedness  of any Subsidiary to Borrower
or to any other Subsidiary), or any event or condition shall occur which results
in the  acceleration  of the  maturity of any such  Indebtedness  or enables the
holder or  holders  of any such  Indebtedness  or any  trustee or agent for such
holders (any  required  notice of default  having been given and any  applicable
grace  period  having   expired)  to  accelerate  the  maturity  of  such  other
Indebtedness;  provided that the aggregate amount of all such Indebtedness which
is so affected shall equal or exceed $200,000.

         Section  IX.2  Remedies on  Default.  If Payment of the Bonds shall not
have been made,  whenever any Event of Default referred to in Section 9.1 hereof
shall have happened and shall not have been waived:

              (1) The Issuer or the Trustee may, by written  notice  declare all
installments of principal  payable pursuant to the Note for the remainder of the
term thereof and all Administrative  Expenses to be immediately due and payable,
whereupon the same,  together with accrued  interest  thereon as provided for in
the Note and this Loan  Agreement,  shall  become  immediately  due and  payable
without  presentment,  demand,  protest or any other notice  whatsoever,  all of
which are hereby expressly waived by the Borrower;  provided,  however, all such
amounts shall  automatically  be and become  immediately due and payable without
notice upon the  occurrence of any event  described in Section  9.1(g) or 9.1(h)
hereof, which notice the Borrower hereby expressly waives.

                                       47
<PAGE>


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

              (3) The Issuer or the Trustee may  exercise  any and all  remedies
available to it under this Loan Agreement,  the Note, the Mortgage, the Security
Agreement, the Guaranty, or the Environmental Agreement.

              (4) The Trustee  shall have all  remedies  available to a "secured
party"  under the  Uniform  Commercial  Code of the  State  and  shall  have all
remedies  provided for in the Indenture and may foreclose its security  interest
against any one or more (or all) items of machinery, equipment or other personal
property comprising a part of the Mortgaged Property.

In the enforcement of the remedies  provided in this Section 9.2, the Issuer may
treat all reasonable  expenses of enforcement,  including,  without  limitation,
legal (whether or not suit is instituted and whether incurred in connection with
trial  or  any  appellate  proceeding),  accounting  and  advertising  fees  and
expenses, as additional Administrative Expenses payable by the Borrower then due
and owing and the Borrower  agrees to pay such  additional  amounts upon demand,
the amount of such legal fees to be without regard to any statutory presumption.

         Section  IX.3   Application  of  Amounts  Realized  in  Enforcement  of
Remedies.  Any  amounts  collected  pursuant to action  taken under  Section 9.2
hereof  shall be paid to the Trustee and applied to the payment of,  first,  any
costs,  expenses and fees  incurred by the Issuer and the Trustee as a result of
taking such action; second, any interest which shall have accrued on any overdue
interest and any accrued  interest on any overdue  principal of the Bonds at the
rate set forth in the Bonds;  third, any overdue interest on the Bonds;  fourth,
any overdue principal of the Bonds; fifth, the outstanding  principal balance of
the Bonds;  and  sixth,  if  Payment  of the Bonds  shall  have been  made,  all
remaining moneys as required by law.

         Section IX.4 No Remedy  Exclusive.  No remedy herein  conferred upon or
reserved to the Issuer or the Trustee is intended to be  exclusive  of any other
available remedy or remedies, but each and every such remedy shall be cumulative
and shall be in addition to every other remedy  given under this Loan  Agreement
or any of the other Bond  Documents  or now or  hereafter  existing at law or in
equity  or by  statute.  No delay or  omission  to  exercise  any right or power
accruing upon default shall impair any such right or power or shall be construed
to be a waiver thereof,  but any such right and power may be exercised from time
to time and as often as may be deemed expedient.

         Section IX.5  Agreement to Pay  Attorneys'  Fees and  Expenses.  In any
Event of Default, if the Issuer or the Trustee employs attorneys or incurs other
expenses for the collection of amounts payable  hereunder or for the enforcement
of the  performance  or observance of any 


                                       48
<PAGE>

covenants  or  agreements  on the part of the  Borrower  herein  contained,  the
Borrower agrees that it will on demand therefor pay to the Issuer or the Trustee
the  reasonable  fees of such  attorneys  (whether or not suit is instituted and
whether incurred in connection with trial, rehearing or retrial or any appellate
or bankruptcy  proceeding) and such other reasonable expenses so incurred by the
Issuer or the Trustee the amount of such fees of attorneys to be without  regard
to any statutory presumption.




                                       49
<PAGE>


                                    ARTICLE X

                                   PREPAYMENTS

         Section X.1 Optional Prepayments.

              (1) The Borrower  may, at any time,  prepay all or any part of the
principal of the Note;  provided,  all prepayments  shall be made in immediately
available funds and with accrued interest to the date of prepayment and that any
prepayment  of the Note in part  shall be  applied  to  unpaid  installments  of
principal  in  inverse  order  of  maturity.  Any  prepayment  pursuant  to this
subsection  (a) shall be made by the Borrower  taking,  or causing the Issuer to
take,  the  actions  required  (i) for  Payment  of the  Bonds,  in the  case of
prepayment of the Note in whole,  or (ii) to effect  prepayment of less than all
of the Bonds according to their terms in the case of a partial prepayment of the
Note.

              (2) To  exercise  the  option  granted in  subsection  (a) of this
Section  10.1,  the  Borrower  shall give  written  notice to the Issuer and the
Trustee which shall specify  therein (i) the date of the intended  prepayment of
the Note, which shall not be less than 5 nor more than 30 days from the date the
notice is mailed and (ii) the principal  amount of the Note to be prepaid.  When
given, such notice shall be irrevocable by the Borrower.

         Section X.2 Mandatory Prepayments.

              (1) In the event of a  Determination  of Taxability,  the Borrower
shall (i) on a date selected by the Borrower not more than 60 days following the
date  of the  Determination  of  Taxability,  pay to or for the  account  of the
Bondholder and former  Bondholder  those amounts required to be paid pursuant to
Section 301(c)(i) and 301(c)(ii) of the Indenture and (ii) pay within 10 days of
receipt of written demand therefor from any Bondholder or former  Bondholder the
amounts  required to be paid pursuant to Section  301(c)(iii)  and 301(c)(iv) of
the Indenture. Immediately upon the occurrence of a Determination of Taxability,
the Borrower  shall  notify the Issuer and the Trustee of the date  selected for
payment pursuant to this Section 10.2. The obligation of the Borrower  contained
herein with  respect to the payment of amounts  required to be paid in the event
of a  Determination  of Taxability  shall survive the  termination  of this Loan
Agreement and the payment in full of the Note or the Bonds.

              (2) In the event of a Cessation  of  Operation of the Plant by the
Borrower,  the Borrower shall, on a date selected by the Borrower within 45 days
after the date of Cessation of Operation,  pay to or for the account of the then
Bondholder the entire unpaid principal balance of the Note, if any,  outstanding
at the date of payment  hereunder,  plus accrued interest thereon to the date of
such  payment plus all other  amounts  otherwise  due under the Note,  this Loan
Agreement and the Bonds.

              (3)  Bondholder  shall be  entitled  to  tender  the  Bonds on the
earlier of (i) any date on or after June 30, 2002,  provided that Borrower shall
have received not less than ninety


                                       50
<PAGE>

(90) days' prior written  notice  thereof from  Bondholder,  or (ii) the date on
which the Amended and Restated Loan  Agreement  expires or is terminated for any
reason, and the Borrower shall, on a date selected by the Bondholder,  pay to or
for the account of the then  Bondholder the entire unpaid  principal  balance of
the Note, if any,  outstanding  at the date of payment  hereunder,  plus accrued
interest  thereon to the date of such payment plus all other  amounts  otherwise
due under the Note, this Loan Agreement and the Bonds.

         Section X.3 Other  Mandatory  Prepayments.  The amounts  required to be
applied to the  prepayment of the Note by Sections 4.3, 5.3 and 6.9 hereof shall
be applied by the Borrower to prepay,  together with accrued interest,  all or a
portion of the unpaid  principal of the Note. Such  prepayment  shall be made by
the Borrower taking, or causing the Issuer to take, the actions required (a) for
payment of the Bonds,  whether by redemption prior to the maturity or by payment
at maturity, or (b) to effect the purchase, redemption or payment at maturity of
less than all of the  installments of principal on the Bonds in inverse order of
their maturities.



                                       51
<PAGE>


                                   ARTICLE XI

                                  MISCELLANEOUS

         Section XI.1 References to the Bonds Ineffective After Bonds Paid. Upon
Payment of the Bonds,  all  references in this Loan Agreement to the Bonds shall
be  ineffective  and the Issuer and any holder of the Bonds shall not thereafter
have any rights  hereunder,  excepting those that shall have theretofore  vested
and the right to receive certain payments pursuant to Section 10.2 (a) hereof as
a result of a  Determination  of Taxability  and the rights to the  computation,
reporting  and  payment  of  Rebate  Amounts  pursuant  to  the  Tax  Compliance
Certificates.

         Section XI.2 No Implied Waiver. In the event any agreement contained in
the  Note or this  Loan  Agreement  should  be  breached  by  either  party  and
thereafter  waived by the other  party,  such  waiver  shall be  limited  to the
particular  breach so waived  and shall not be deemed to waive any other  breach
thereunder  or  hereunder.  Neither any failure nor any delay on the part of the
Issuer or the Trustee to exercise any right, power or privilege  hereunder shall
operate as a waiver  thereof,  nor shall any single or partial  exercise  of any
such right,  power or privilege  preclude any other or further exercise thereof,
or the exercise of any other right, power or privilege.

         Section XI.3 Issuer  Representative.  Whenever  under the provisions of
this Loan  Agreement  the  approval  of the Issuer is  required or the Issuer is
required to take some action at the request of the Borrower, such approval shall
be made or such  action  shall be taken by the  Issuer  Representative;  and the
Borrower, the Trustee and the Bondholder shall be authorized to rely on any such
approval or action.

         Section XI.4 Borrower Representative.  Whenever under the provisions of
this Loan  Agreement the approval of the Borrower is required or the Borrower is
required to take some action at the request of the Issuer,  such approval  shall
be made or such action  shall be taken by the Borrower  Representative;  and the
Issuer,  the Trustee and the  Bondholder  shall be authorized to act on any such
approval or action.

         Section XI.5 Notices. All notices, certificates or other communications
hereunder shall be  sufficiently  given and shall be deemed given when delivered
by hand  delivery  or mailed by first  class,  postage  prepaid,  registered  or
certified mail, addressed as follows:

                  If to the Issuer, to

                  Orange County Industrial Development Authority
                  c/o Economic Development Commission of Mid-Florida, Inc.
                  200 E. Robinson Street, Suite 600
                  Orlando, Florida  32801
                  Attention: Daniel A. Lynch, Secretary

                  If to the Borrower, to


                                       52
<PAGE>

                  ELXSI
                  3600 Rio Vista Avenue
                  Orlando, FL 32811
                  Attention: Controller

                  If to the Trustee, to

                  SunTrust Bank, Central Florida, National Association
                  225 E. Robinson Street, Suite 250
                  Orlando, FL 32801
                  Attention:  Corporate Trust Department

                  If to the initial Bondholder, to

                  Bank of America National Trust
                  and Savings Association
                  231 S. LaSalle Street
                  Chicago, IL 60697
                  Attention: Marc J. Crady

         The Issuer, the Borrower,  the Trustee or the Bondholder may, by notice
given hereunder,  designate from time to time any further or different addresses
to which subsequent notices, certificates or other communications shall be sent.

         Section XI.6 If Payment or  Performance  Date is not a Business Day. If
the specified or last date for the making of any payment, the performance of any
act or the exercising of any right, as provided in this Loan Agreement, shall be
a day which is not a Business  Day, such payment may be made or act performed or
right  exercised on the next  succeeding  Business  Day;  provided that interest
shall accrue during any such period during which payment shall not occur.

         Section XI.7 Binding  Effect.  This Loan  Agreement  shall inure to the
benefit  of and  shall be  binding  upon the  Issuer,  the  Borrower  and  their
respective  successors  and assigns,  subject to the  provisions  of Section 8.3
hereof.

         Section  XI.8  Severability.  In the event any  provision  of this Loan
Agreement or the other Bond Documents shall be held invalid or  unenforceable by
any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof or thereof.

         Section XI.9 Amendments,  Changes and Modifications.  Subsequent to the
issuance of the Bonds and prior to Payment of the Bonds, this Loan Agreement and
the other Bond Documents,  may not be effectively  amended,  changed,  modified,
altered or terminated except in accordance with the Indenture.


                                       53
<PAGE>

         Section XI.10  Execution in  Counterparts.  This Loan  Agreement may be
executed in several counterparts,  each of which shall be an original and all of
which shall constitute but one and the same  instrument,  and no one counterpart
of which need be executed by all parties.

         Section XI.11  Applicable Law. This Loan Agreement shall be governed by
and construed in accordance with the laws of the State.

         Section XI.12 No Charge  Against  Issuer  Credit.  No provision  hereof
shall be construed to impose a charge  against the general  credit of the Issuer
or any personal or pecuniary  liability upon any member of the governing  board,
official, employee or agent of the Issuer.

         Section XI.13 Issuer Not Liable. Notwithstanding any other provision of
this Loan  Agreement,  (a) the Issuer shall not be liable to the  Borrower,  the
Trustee,  any  Bondholder  or any other  Person for any failure of the Issuer to
take action  under this Loan  Agreement  unless the Issuer (i) is  requested  in
writing by an appropriate Person to take such action, (ii) is assured of payment
of or  reimbursement  for any  expenses in such  action,  and (iii) is afforded,
under the existing  circumstances,  a reasonable period to take such action, and
(b) except with respect to any action for specific  performance or any action in
the nature of a prohibitory or mandatory injunction,  neither the Issuer nor any
member of the Issuer  nor any other  official,  employee  or agent of the Issuer
shall be liable to the Borrower, the Trustee, any Bondholder or any other Person
for any  action  taken by the  Issuer or by its  officers,  servants,  agents or
employees,  or for any failure to take action  under this Loan  Agreement or the
other Bond  Documents to which the Issuer is a party.  In acting under this Loan
Agreement,  or in refraining from acting under this Loan  Agreement,  the Issuer
may conclusively rely on the advice of its counsel.

         Section XI.14 Expenses.  The Borrower agrees to pay all reasonable fees
and expenses incurred in connection with the preparation,  execution,  delivery,
modification,  waiver  and  amendment  of this Loan  Agreement,  the other  Bond
Documents  and related  documents,  and the fees and  expenses of bond  counsel,
counsel for the Issuer and any counsel for the Trustee. The Borrower also agrees
to pay all expenses  incurred by the Trustee or the Issuer in the  protection of
or enforcement of any of its rights in the collateral  described in the Mortgage
or  the  Security  Agreement,  or in  collection  of any  indebtedness  incurred
hereunder in the event of default by the  Borrower,  provided that the amount of
any legal fees so incurred shall be without regard to any statutory presumption.

         Section XI.15 Amounts Remaining with the Trustee. Any amounts remaining
in the Project Fund,  the Bond Fund or otherwise in trust with the Trustee under
the Indenture or this Loan Agreement  shall,  after Payment of the Bonds and all
Administrative  Expenses in accordance with this Loan Agreement, be disbursed by
the Trustee in accordance  with the  provisions of the Indenture or otherwise as
may be required by law.

         Section XI.16 WAIVER OF JURY TRIAL. THE UNDERSIGNED  HEREBY  KNOWINGLY,
VOLUNTARILY AND  INTENTIONALLY  WAIVE ANY RIGHT THEY

                                       54
<PAGE>

MAY HAVE TO A TRIAL BY JURY IN  RESPECT  OF ANY  LITIGATION  BASED ON THIS  LOAN
AGREEMENT OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS LOAN AGREEMENT OR
ANY DOCUMENT OR INSTRUMENT  CONTEMPLATED  TO BE EXECUTED IN CONNECTION WITH THIS
LOAN AGREEMENT,  INCLUDING WITHOUT LIMITATION, THE BOND DOCUMENTS, OR ANY COURSE
OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS
OF ANY PARTY  WITH  RESPECT  HERETO OR  THERETO.  THIS  PROVISION  IS A MATERIAL
INDUCEMENT  FOR THE  ISSUER'S  ISSUANCE  OF THE BONDS  AND LOAN OF THE  PROCEEDS
THEREOF TO THE  BORROWER AND FOR  ISSUER'S  ACCEPTANCE  OF AND/OR ENTRY INTO ALL
DOCUMENTS  AND  INSTRUMENTS  EXECUTED IN  CONNECTION  WITH THIS LOAN  AGREEMENT,
INCLUDING  WITHOUT  LIMITATION,  THE OTHER BOND  DOCUMENTS  FROM,  OR WITH,  THE
BORROWER AND/OR THE GUARANTOR.

                                       55
<PAGE>


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

                                     ELXSI



                                     By:
                                        ----------------------------------------
                                     Name:    Alexander M. Milley
                                     Title:      President




                                     Attest:


                                     -------------------------------------------
                                     Name:    David Doolittle
                                     Title:      Vice President


                                     (CORPORATE SEAL)

                                     "BORROWER"


                                     ORANGE COUNTY INDUSTRIAL
                                     DEVELOPMENT AUTHORITY


                                     By:
                                        ----------------------------------------
                                     Name:    David A. Winteres
                                     Title:   Vice Chairman of the Orange County
                                              Industrial Development Authority



                                     Attest:

                                       56

<PAGE>

                                     -------------------------------------------
                                     Name:    Daniel A. Lynch
                                     Title:   Secretary of the Orange County
                                              Industrial Development Authority


                                     (SEAL)

                                    "ISSUER"




                                       57
<PAGE>




                                   EXHIBIT "A"

                                  Form of Note

AFTER THE  ENDORSEMENT  OF THIS NOTE AS  HEREON  PROVIDED,  THIS NOTE MAY NOT BE
ASSIGNED,  PLEDGED,  ENDORSED OR OTHERWISE  TRANSFERRED EXCEPT TO A SUCCESSOR OR
ASSIGN  OF THE  TRUSTEE  UNDER  THE  TRUST  INDENTURE  REFERRED  TO IN THE  LOAN
AGREEMENT REFERRED TO HEREIN.

                                 PROMISSORY NOTE

$2,500,000.00                                                 September 24, 1997

         FOR VALUE RECEIVED,  ELXSI, a California  corporation (the "Borrower"),
by this promissory note promises to pay to the order of Orange County Industrial
Development  Authority (the "Issuer") or holder hereof, the principal sum of Two
Million Five Hundred Thousand Dollars ($2,500,000.00), or so much thereof as has
been  advanced  under the Loan  Agreement (as  hereinafter  defined) and remains
unpaid, in one hundred eighty (180) equal consecutive monthly  installments each
in  the  amount  of  $13,888.69,  commencing  October  1,  1997,  with  a  final
installment in the amount of the remaining unpaid  principal  balance hereof due
and payable on September 1, 2012, together with interest on the unpaid principal
amount  hereof,  from the date  hereof  until the  principal  amount  hereof and
accrued and unpaid interest hereon is paid in full, payable at such times and at
such rates as interest is payable on the Issuer's Industrial Development Revenue
Bonds (ELXSI Project)  Series 1997 (the "Bonds"),  as set forth in the Bonds and
the Trust  Indenture  dated  September  24, 1997 between the Issuer and SunTrust
Bank,  Central  Florida,  National  Association,  as  trustee,  and  subject  to
adjustment as provided therein.

         This  Promissory  Note is the "Note"  referred to in the Loan Agreement
dated as of the date hereof (the "Loan Agreement"), between the Borrower and the
Issuer and is entitled to the benefits thereof (including the security therefor)
and is subject to the  conditions  thereof.  Terms not otherwise  defined herein
shall  have  the  definitions  set  forth in the Loan  Agreement.  This  Note is
secured,  inter  alia,  by the  collateral  described  in the  Mortgage  and the
Security  Agreement.  Neither the Issuer nor any other holder of this Note shall
be required to enforce payment hereof out of any collateral at any time securing
this Note.

         Each  payment  of  principal  of and  interest  on  this  Note  will be
sufficient to enable the Issuer to pay when due the total amount of principal of
(whether at maturity, upon acceleration or otherwise) and interest on the Bonds.
To the extent that  principal  of or interest on the Bonds shall be paid,  there
shall be credited  against the unpaid  principal of or interest on this Note, as
the case may be, an amount  equal to the  principal of or interest on such Bonds
so paid.  The principal of and interest on this Note are payable in  immediately
available funds of any coin or currency of the United States of America which on
the respective dates of payment thereof shall be legal tender for the payment of
public and private debts.


                            Exhibit "A" Page 1 of 3
<PAGE>

         In addition,  the Borrower agrees to pay in immediately available funds
all  other  amounts  at the  time the  Issuer  may be  required  to pay the same
pursuant to the Bonds or the Indenture.

         The obligation of the Borrower to make the payments required  hereunder
shall be absolute and unconditional without any defense,  recoupment or right of
setoff by reason of any default by the Issuer  under the Loan  Agreement  or for
any other reason.

         Upon  the  occurrence  of an  Event of  Default  specified  in the Loan
Agreement,  the unpaid  principal  hereof and accrued  interest  and  additional
interest  hereon may become  forthwith  due and  payable as provided in the Loan
Agreement,  and in the event the Borrower shall fail to pay any amount  required
to be paid under this Note when due,  the  Borrower  shall pay  interest on such
amount at the Overdue Rate.

         The Borrower may at its option at certain  times and may under  certain
circumstances  be required to prepay all or any part of the unpaid  principal of
this Note upon the terms  provided in the Loan  Agreement  and with a prepayment
premium as set forth  therein.  Upon a  Determination  of  Taxability  (during a
period when this Note would otherwise bear interest at the Tax-Exempt Rate), the
Borrower shall be required to make payments on this Note in the amounts provided
in the Loan  Agreement,  including  those required by Section 10.2 thereof,  and
from and after the Date of  Taxability  this Note shall bear  interest at a rate
per annum equal to the Taxable Rate.

         The Borrower hereby promises to pay all costs of collection,  including
reasonable  attorneys' fees and  disbursements,  without regard to any statutory
presumption, in the case of a default under this Note or the Loan Agreement. The
Borrower hereby waives presentment, protest and notice of protest or dishonor.

         This Note shall be construed in  accordance  with the laws of the State
of Florida.

                            Exhibit "A" Page 2 of 3

<PAGE>


         IN WITNESS WHEREOF, the Borrower has executed this instrument as of the
date first above written.

                                     ELXSI



                                     By:
                                        ----------------------------------------
                                     Name:    Alexander M. Milley
                                     Title:      President




                                     Attest:


                                     -------------------------------------------
                                     Name:    David Doolittle
                                     Title:      Vice President


                                     (CORPORATE SEAL)


                                   ENDORSEMENT

         Pay  to  the  order  of  SUNTRUST  BANK,   CENTRAL  FLORIDA,   NATIONAL
ASSOCIATION,  as  Trustee  for the  benefit  of the  Bondholder  under the Trust
Indenture  dated as of September  24, 1997,  between the Issuer and the Trustee,
without recourse.  This endorsement is given and made without any warranty as to
the  authority  and  genuineness  of the signature of the maker of the foregoing
Promissory Note.

         This 24th day of September, 1997.

                                  ORANGE COUNTY INDUSTRIAL
                                  DEVELOPMENT AUTHORITY


[SEAL]                            By:
                                     ---------------------------------
                                  Name:   David A. Winters
                                  Title:  Vice Chairman of the Orange County
                                          Industrial Development Authority

ATTEST:

----------------------------------------
Name:   Daniel A. Lynch
Title:  Secretary of the Orange County
        Industrial Development Authority

                            Exhibit "A" Page 3 of 3
<PAGE>



                                   EXHIBIT "B"

                              The New Facility Site

         Lots 1 through  12,  Block M and all of Block N lying North and West of
Interstate  4, PLAT OF WOODHAVEN,  as recorded in Plat Book J, Page 127,  Public
Records of Orange County, Florida.






                            Exhibit "A" Page 4 of 3


<PAGE>


                                   EXHIBIT "C"

                           The Existing Facility Site


<PAGE>