LOAN AGREEMENT



                                   Dated as of



                                  July 17, 1998



                                     Between



                       HYDROCHEM INDUSTRIAL SERVICES, INC.

                                       AND

                      BANK ONE, TEXAS, NATIONAL ASSOCIATION




                                                                               


        

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                                TABLE OF CONTENTS


SECTION 1.        DEFINITIONS; INTERPRETATION.................................1
         Section 1.1.      Definitions........................................1
         Section 1.2.      Interpretation.....................................9

SECTION 2.        LOAN.......................................................10
         Section 2.1.      Construction Loan.................................10
         Section 2.2.      The Note..........................................12
         Section 2.3.      Repayment of Loan.................................12
         Section 2.4.      Loan Interest Rate................................13
         Section 2.5.      Conversion and Extension..........................14
         Section 2.6.      Use of Proceeds...................................15
         Section 2.7.      Notice of Change in Interest Rate.................15
         Section 2.8.      Collateral........................................15

SECTION 3.        PAYMENTS AND FEES..........................................16
         Section 3.1.      Method of Payment.................................16
         Section 3.2.      Prepayment........................................16
         Section 3.3.      Commitment Fee....................................16

SECTION 4         CONDITIONS TO LOAN.........................................16
         Section 4.1.      Initial Advance...................................16
         Section 4.2       Conditions to Subsequent Advances.................19
         Section 4.3       Waiver of Conditions..............................20

SECTION 5.        REPRESENTATIONS AND WARRANTIES.............................20
         Section 5.1.      Corporate Organization............................20
         Section 5.2.      Corporate Power and Authority; Validity...........20
         Section 5.3.      No Violation......................................20
         Section 5.4.      Litigation........................................20
         Section 5.5.      Investment Company Act............................21
         Section 5.6.      Public Utility Holding Company Act................21
         Section 5.7.      True and Complete Disclosure......................21
         Section 5.8.      Financial Statements..............................21
         Section 5.9.      No Material Adverse Effect........................21
         Section 5.10.     Taxes.............................................21
         Section 5.11.     ERISA.............................................22
         Section 5.12.     Consents..........................................22
         Section 5.13.     Ownership of Project..............................22
         Section 5.14.     Compliance with Statutes..........................22
         Section 5.15.     Year 2000 Requirement.............................22
         Section 5.16.     Place of Business.................................23

 

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SECTION 6.        COVENANTS..................................................23
         Section 6.1.      Existence.........................................23
         Section 6.2.      Maintenance.......................................23
         Section 6.3.      Taxes.............................................23
         Section 6.4.      ERISA.............................................23
         Section 6.5.      Insurance.........................................24
         Section 6.6.      Construction Contract and Retainage...............24
         Section 6.7.      Consent to Leases.................................24
         Section 6.8.      Financial Reports and Other Information...........24
         Section 6.9.      Lender Inspection Rights..........................26
         Section 6.10.     Restricted Payments...............................26
         Section 6.11.     Environmental Laws................................26
         Section 6.12.     Restrictions on Fundamental Changes...............26
         Section 6.13.     Liens.............................................27
         Section 6.14.     Debt..............................................27
         Section 6.15.     Transfer of Assets................................27
         Section 6.16.     Completion Deadline...............................27
         Section 6.17.     Compliance with Laws..............................27
         Section 6.18      Intentionally Omitted.............................27
         Section 6.19.     Minimum Consolidated Net Worth....................27
         Section 6.20.     Fixed Charge Coverage Ratio.......................27

SECTION 7.        EVENTS OF DEFAULT AND REMEDIES.............................28
         Section 7.1.      Events of Default.................................28
         Section 7.2.      Non-Bankruptcy Defaults...........................30
         Section 7.3.      Bankruptcy Defaults...............................31
         Section 7.4.      Application of Proceeds from Collateral...........31
         Section 7.5.      Deficiency........................................31

SECTION 8.        MISCELLANEOUS..............................................32
         Section 8.1.      No Waiver of Rights...............................32
         Section 8.2       Non-Business Day..................................32
         Section 8.3.      Documentary Taxes.................................32
         Section 8.4.      Survival of Representations.......................32
         Section 8.5.      Survival of Indemnities...........................32
         Section 8.6.      Setoff............................................32
         Section 8.7.      Notices...........................................33
         Section 8.8.      Counterparts......................................34
         Section 8.9.      Successors and Assigns............................34
         Section 8.10.     Participations in Borrowings and Notes; 
                           Transfers of Borrowings and
                           Notes.............................................34
         Section 8.11.     Amendments........................................36
         Section 8.12.     Headings..........................................36
         Section 8.13.     Legal Fees, Other Costs and Indemnification.......36
         Section 8.14      GOVERNING LAW; ARBITRATION; SUBMISSION TO
                           JURISDICTION......................................36

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         Section 8.15.     Severability......................................38
         Section 8.16.     Change in Accounting Principles or Tax Laws.......38
         Section 8.17.     Notice............................................39

EXHIBITS

Exhibit 2.1A      -        Form of Request for Advance
Exhibit 2.1B      -        Form of Affidavit of Bills Paid
Exhibit 2.1C      -        Form of Waiver of Lien
Exhibit 2.3       -        Term Loan Amortization Schedule
Exhibit 6.8       -        Form of Compliance Certificate


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     LOAN AGREEMENT,  dated as of July 17, 1998,  between  HydroChem  Industrial
Services,  Inc., a Delaware  corporation (the "Borrower"),  and Bank One, Texas,
National Association (the "Lender").

                                   WITNESSETH:

     WHEREAS,  the Borrower  desires to obtain a  commitment  from the Lender to
make a construction loan to the Borrower; and

     WHEREAS, the Lender is willing to extend such commitment to the Borrower on
the terms and subject to the conditions hereinafter set forth;

     NOW,  THEREFORE,  in  consideration  of the  premises  and  of  the  mutual
covenants herein contained, the parties hereto agree as follows:

SECTION 1.        DEFINITIONS; INTERPRETATION.

     Section 1.1.  Definitions.  Unless otherwise defined herein,  the following
terms shall have the following meanings:

     "Acquisition" means the direct or indirect purchase or acquisition, whether
in one or more  related  transactions,  of any Person or group of Persons or any
related  group of assets,  liabilities,  or securities of any Person or group of
Persons,  but excluding those acquisitions that constitute capital  expenditures
under GAAP.

     "Advance" means an advance of funds by the Lender to the Borrower  pursuant
to Section 2.1.

     "Advance Request" means a draw request substantially in the form of Exhibit
2.1A.

     "Agreement" means this Loan Agreement, as amended, restated or supplemented
from time to time.

     "Architect" means House Reh Burwell.

     "Base  Rate"  means,  for any day,  the  fluctuating  commercial  loan rate
announced  by the Lender from time to time as its base rate for Dollar  loans in
the United  States of America in effect on such day (which  base rate may not be
the lowest rate  charged by the Lender on loans to any of its  customers),  with
any change in the Base Rate resulting from a change in such announced rate to be
effective on the date of the relevant change.

     "Benefit Plan" means an employee  pension  benefit plan covered by Title IV
of ERISA or subject to the minimum  funding  standards  under Section 412 of the
Code that is either (i)




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maintained  by the Borrower or the  Guarantor or (ii)  maintained  pursuant to a
collective  bargaining  agreement or any other arrangement under which more than
one  employer  makes  contributions  and to which any of such  entities  is then
making or  accruing  an  obligation  to make  contributions  or has  within  the
preceding five (5) plan years made or had an obligation to make contributions.

     "Borrower"   means  HydroChem   Industrial   Services,   Inc.,  a  Delaware
corporation.

     "Borrower's   Credit  Facility"  means  that  certain   $25,000,000  Credit
Agreement  dated as of December 31,  1997,  by and among the  Borrower,  certain
financial institutions and NationsBank, N.A., successor by merger to NationsBank
of Texas, N.A., as agent for such financial institutions,  as amended,  restated
or supplemented  from time to time, or any replacement  credit facility therefor
or supplemental credit facility thereto.

     "Budget"  means the budget  prepared by the  Borrower,  and approved by the
Lender,  setting  forth  in  detail  all  direct  and  indirect  costs  for  the
construction of the Improvements.

     "Business  Day"  means any day other  than a  Saturday,  Sunday or a day on
which  banking  institutions  are  generally  authorized  or obligated by law or
executive order to close in Houston, Texas.

     "Capital  Expenditures"  means, with respect to any Person and with respect
to any period of its determination, the consolidated expenditures of such Person
during such period that are  required to be included in or are  reflected by the
consolidated  property,  plant,  or equipment  accounts of such  Person,  or any
similar fixed asset or long term capitalized  asset accounts of such Person,  on
the  consolidated  balance  sheet of such Persons in conformity  with GAAP,  but
excluding  in every  instance  those  expenditures  made in  connection  with an
Acquisition,  the Project and  industrial  vacuum  services as  permitted by the
Borrower's Credit Facility.

     "Capital  Leases"  means,  with  respect  to any  Person,  any lease of any
property by such Person which would,  in  accordance  with GAAP,  be required by
GAAP to be classified  and accounted for as a capital lease on the balance sheet
of such Person.

     "Closing Date" means the date the Lender and the Borrower  execute the Loan
Documents.

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

     "Collateral" has the meaning specified in Section 2.8.

     "Collateral  Assignment"  means the Collateral  Assignment of Agreements of
even date herewith by the Borrower in favor of the Lender, as amended,  restated
or supplemented from time to time.

     "Compliance  Certificate" means a certificate  substantially in the form of
Exhibit 6.8.


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     "Consolidated  Interest  Expense" means,  as of any date of  determination,
total interest  expense of the Borrower and its  Subsidiaries,  as determined in
accordance with GAAP.

     "Consolidated  Interest  Income" means,  with respect to any Person and for
any  period of its  determination,  total  interest  income of such  Person,  as
determined in accordance with GAAP.

     "Consolidated  Net Income"  means,  with  respect to any Person and for any
period of its  determination,  the net  income (or loss),  after  provision  for
Taxes, of such Person, as determined in accordance with GAAP.

     "Consolidated  Net  Worth"  means,  as of any  date of  determination,  the
Borrower's  consolidated  stockholders  equity as determined in accordance  with
GAAP.

     "Construction  Consultant"  means any  entity to be chosen by the Lender as
the construction consultant pursuant to Section 2.1.

     "Construction  Loan" means the  Construction  Loan described in Section 2.1
that matures on the Construction Loan Maturity Date.

     "Construction Loan Maturity Date" means July 16, 1999.

     "Construction  Loan Rate" means the Base Rate minus one-half of one percent
(0.5%) per annum.

     "Construction  Contract" means the Standard Form of Agreement Between Owner
and  Design/Builder by and between the Borrower and the Contractor,  as amended,
restated or supplemented from time to time with the consent of the Lender.

     "Contractor"  means D.E.  Harvey  Builders,  Inc.  and each  other  general
contractor and/or construction  consultant,  whether one or more, engaged by the
Borrower,  and approved in writing by the Lender,  to construct or supervise the
construction of the Improvements.

     "Contractor  Agreement" means the Contractor's  Agreement and Subordination
of even date herewith, as amended, restated or supplemented from time to time.

     "Conversion Date" has the meaning specified in Section 2.5.

     "Credit Party" means the Borrower, the Guarantor and any other Person which
is a party to any Loan Document.

     "Debt"  means,   with  respect  any  Person,   without   duplication,   (i)
indebtedness of such Person for borrowed money, which under GAAP is shown on the
balance  sheet as a liability  (excluding  reserves for deferred  income  taxes,
deferred pension liability, trade and other accounts


                                        3

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payable,  and other deferred  revenue,  deferred  expenses and  reserves);  (ii)
obligations  of such Person  evidenced  by bonds,  debentures,  notes,  or other
similar   instruments  and  which  constitute   liabilities  under  GAAP;  (iii)
obligations  of such Person to pay the  deferred  purchase  price of property or
services (other than trade debt and normal operating liabilities incurred in the
ordinary course of business) and which constitute  liabilities  under GAAP; (iv)
obligations of such Person as lessee under Capital  Leases;  (v)  obligations of
such  Person  under any swap,  hedge,  cap,  collar or similar  agreement;  (vi)
obligations  of such Person under or relating to letters of credit,  guaranties,
purchase  agreements,  endorsements,  or other  creditor  assurances  assuring a
creditor against loss in respect of indebtedness or obligations of others of the
kinds  referred to in clauses (i)  through  (v) of this  definition  (other than
endorsements of negotiable  instruments for collection in the ordinary course of
business  and other  contractual  commitments),  whether  direct or  indirect in
connection  with  obligations,  stocks,  or dividends  of any Person;  and (vii)
nonrecourse  indebtedness  or  obligations of others of the kinds referred to in
clauses (i) through (vi) of this definition secured by any Lien on or in respect
of any property of such Person,  whether or not the  indebtedness or obligations
secured  thereby shall have been assumed.  For the purposes of  determining  the
amount  of any Debt,  the  amount of any Debt  described  in clause  (vi) of the
definition  of Debt  shall be valued  at the  maximum  amount of the  contingent
liability thereunder,  and the amount of any Debt described in clause (vii) that
is not covered by clause (vi) shall be valued at the lesser of the amount of the
Debt secured or the book value of the property securing such Debt.

     "Debt Service" means, for any period of its  determination,  the sum of (i)
scheduled  principal  payments  on long term Debt  during  such period plus (ii)
Interest Charges accrued during such period.

     "Deed of  Trust"  means  the Deed of Trust  (with  Security  Agreement  and
Assignment  of Rents and  Leases) of even date  herewith  covering,  among other
things, the Land and the Improvements, as amended, restated or supplemented from
time to time.

     "Default" means any event or condition the occurrence of which would,  with
the  passage of time or the giving of notice,  or both,  constitute  an Event of
Default.

     "Default Rate" means the sum of two percent (2%) plus the Construction Loan
Rate or the Term Loan  Rate,  as  applicable,  during  the  period for which the
Default Rate applies.

     "Dollar"  and  "U.S.  Dollar"  and the sign "$" means  lawful  money of the
United States of America.

     "EBITDA"  means,  with  respect  to any  Person  and for any  period of its
determination,  the Consolidated Net Income of such Person for such period, plus
the Consolidated Interest Expense,  Taxes based on income or revenues, and minus
any Consolidated Interest Income and extraordinary gains of such Person for such
period and included in the  calculation  of  Consolidated  Net Income,  plus the
consolidated depreciation and amortization of such Person for such period.


                                        4

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     "Environmental  Claims"  means any and all  administrative,  regulatory  or
judicial actions,  suits,  demands,  demand letters,  claims,  liens, notices of
non-compliance  or violations,  investigations  or  proceedings  relating to any
Environmental Law ("Claims") or any permit issued under any  Environmental  Law,
including,  without  limitation,  (i) any  and all  Claims  by  governmental  or
regulatory authorities for enforcement,  cleanup, removal, response, remedial or
other actions or damages pursuant to any applicable  Environmental Law, and (ii)
any  and  all  Claims  by  any  third  party  seeking   damages,   contribution,
indemnification, cost recovery, compensation or injunctive relief resulting from
Hazardous Materials or arising from alleged injury or threat of injury to health
or safety in relation to the environment.

     "Environmental   Indemnity"  means  the  Certificate  and   Indemnification
Regarding  Hazardous  Substances  executed by the Borrower and the  Guarantor in
favor of the Lender of even date herewith, as amended,  restated or supplemented
from time to time.

     "Environmental Law" means any federal,  state or local statute,  law, rule,
regulation,  ordinance,  code,  policy or rule of common law now or hereafter in
effect,  including  any judicial or  administrative  order,  consent,  decree or
judgment  relating to (i) the environment,  (ii) health or safety in relation to
the environment or (iii) Hazardous Materials.

     "ERISA"  means the Employee  Retirement  Income  Security  Act of 1974,  as
amended.

     "Event of Default"  means any of the events or  circumstances  specified in
Section 7.1.

     "Fixed  Charge  Coverage  Ratio"  means as of the  last day of each  fiscal
quarter  of the  Borrower,  the  ratio  of (i) the  consolidated  EBITDA  of the
Borrower and its Subsidiaries for the preceding four fiscal quarters then ended,
less consolidated cash Taxes paid and Capital  Expenditures made by the Borrower
and its  Subsidiaries  during such period,  to (ii) Debt Service,  plus any cash
dividends made by the Borrower  during the preceding  four fiscal  quarters then
ended.

     "GAAP" means generally accepted accounting  principles from time to time in
effect  as set  forth  in the  opinions  and  pronouncements  of the  Accounting
Principles Board of the American  Institute of Certified Public  Accountants and
the statements and pronouncements of the Financial Accounting Standards Board or
in such other  statements,  opinions and  pronouncements by such other entity as
may be approved by a significant segment of the U.S. accounting profession.

     "Guarantor" means HydroChem International, Inc., a Delaware corporation.

     "Guaranty" by any Person means all obligations  (other than endorsements in
the  ordinary  course of  business  of  negotiable  instruments  for  deposit or
collection)  of such  Person  guarantying  or in  effect  guarantying  any Debt,
dividend or other  obligation  (including,  without  limitation,  obligations in
connection  with  sales of any  property)  of any  other  Person  (the  "primary
obligor") in any manner,  whether  directly or  indirectly,  including,  without
limitation, all obligations


                                        5

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incurred through an agreement,  contingent or otherwise,  by such Person: (i) to
purchase  such  Debt or  obligation,  or to  purchase  any  property  or  assets
constituting security therefor,  primarily for the purpose of assuring the owner
of such Debt or  obligations  of the  ability  of the  primary  obligor  to make
payment of the Debt or  obligation;  or (ii) to advance or supply  funds (x) for
the purchase or payment of such Debt or  obligation  or (y) to maintain  working
capital  or other  balance  sheet  condition  or  otherwise  to  advance or make
available funds for the purchase or payment of such Debt or obligation,  in each
case  primarily for the purpose of assuring the owner of such Debt or obligation
of the ability of the primary obligor to make payment of the Debt or obligation;
or (iii) to lease  property  or to  purchase  securities  or other  property  or
services of the primary obligor  primarily for the purpose of assuring the owner
of such Debt or obligation of the ability of the primary obligor to make payment
of the Debt or obligation;  or (iv) otherwise to assure the owner of the Debt or
obligation  of the primary  obligor  against  loss in respect  thereof.  For the
purpose of all computations made under this Agreement,  the amount of a Guaranty
in respect  of any  obligation  shall be deemed to be equal to the  amount  that
would apply if such obligation were the direct  obligation of such Person rather
than the primary obligor or, if less, the maximum aggregate  potential liability
of such Person under the terms of the Guaranty.

     "Hazardous  Material"  shall have the meaning  assigned to that term in the
Comprehensive  Environmental Response Compensation and Liability Act of 1980, as
amended by the Superfund  Amendments and Reauthorization Acts of 1986, and shall
include any substance  defined as  "hazardous" or "toxic" or words used in place
thereof under any Environmental Law applicable to the Borrower.

     "Hedge Agreement" means that certain ISDA Master Agreement dated as of July
17, 1998, between the Borrower and the Lender.

     "Highest Lawful Rate" means the maximum nonusurious  interest rate, if any,
that at any time or from time to time may be contracted  for,  taken,  reserved,
charged or received on the Loan or under laws  applicable  to the Lender,  which
are presently in effect or, to the extent allowed by applicable  law, under such
laws  which  may  hereafter  be in  effect  and  which  allow a  higher  maximum
nonusurious  interest rate than applicable laws now allow.  Determination of the
rate of  interest  for the purpose of  determining  whether the Loan is usurious
under all  applicable  laws shall be made by amortizing  or spreading  using the
actuarial  method  during the stated term of the Loan,  all interest at any time
contracted  for,  taken,  reserved,  charged or  received  from the  Borrower in
connection with the Loan, as applicable.

     "Improvements"   means  the  office,   laboratory  and  warehouse  building
containing  approximately  130,000 square feet and other capital improvements to
be constructed on the Land in accordance with the Plans.

     "Indenture"  means the  Indenture  dated as of August 1, 1997, by and among
the Borrower, Norwest Bank, Minnesota, N.A., as Trustee, and the Guarantor.



                                        6

<PAGE>


     "Initial  Borrowing Date" means the date on which all conditions  precedent
set forth herein to the initial  Advance are  satisfied or waived in writing and
the initial Advance hereunder occurs.

     "Interest  Charges" means, with respect to any Person and for any period of
its determination,  the Consolidated Interest Expense of such Person during such
period plus its capitalized  interest during such period, but without adjustment
for its interest income during such period determined in accordance with GAAP.

     "Interest  Rate  Adjustment  Date" means the  Conversion  Date and the last
Business Day of each succeeding full three (3) month period thereafter until the
Term Loan Maturity Date.

     "Interest Rate Protection Agreement" means any interest rate swap, interest
rate cap,  interest  rate collar or other  interest  rate  hedging  agreement or
arrangement designed to protect against fluctuations in interest rates.

     "Land" means the tract of land among two (2) contiguous  parcels containing
approximately  19.4375 acres located at 900 Georgia  Avenue,  Deer Park,  Texas,
more particularly described in Exhibit "A" to the Deed of Trust.

     "Lender" is defined in the preamble.

     "LIBOR  Rate"  means a rate of  interest  per annum  (rounded  upwards,  if
necessary,  to the nearest whole  multiple of 1/100 of 1%), equal to the offered
rate for U.S.  Dollar deposits of not less than $1,000,000 for a three (3) month
period of time as of 11:00  a.m.  City of  London,  England  time two (2) London
Business Days prior to the applicable  Interest Rate Adjustment Date as shown on
the display designated as "British Bankers Assoc.  Interest Settlement Rates" on
the Telerate System  ("Telerate"),  Page 3750 or Page 3740 or such other page or
pages as may replace such pages on Telerate for the purpose of  displaying  such
rate;  provided,  however,  that if such rate is not  available on Telerate then
such offered rate shall be otherwise independently determined by the Lender from
an alternate,  substantially  similar independent source available to the Lender
or shall be calculated by the Lender by a substantially  similar  methodology as
that theretofore used to determine such offered rate in Telerate.

     "Lien"  means any  interest  in any  property or asset in favor of a Person
other than the owner of the property or asset and securing an obligation owed to
such  Person,  whether  such  interest  is based on the common  law,  statute or
contract, including, but not limited to, the security interest lien arising from
a mortgage,  encumbrance,  pledge, conditional sale, security agreement or trust
receipt, or a lease, consignment or bailment for security purposes.

     "Loan" means the loan in the  original  principal  amount of Seven  Million
Five Hundred Thousand and No/100 Dollars  ($7,500,000.00)  made or to be made by
the Lender pursuant to Section 2.1, and shall include the Construction  Loan and
the Term Loan, as applicable.



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<PAGE>


     "Loan Documents" means this Agreement,  the Note, the Subsidiary  Guaranty,
the Deed of Trust,  the Collateral  Assignment,  the Contractor  Agreement,  the
Hedge  Agreement,  the Advance  Requests and any other  documents or instruments
executed by a Credit Party in connection with this Agreement.

     "London Business Day" means any day other than a Saturday,  Sunday or a day
on which banking  institutions  are generally  authorized or obligated by law or
executive order to close in the City of London, England.

     "Material  Adverse  Effect"  means an effect  that  results  in a  material
adverse  change since March 31, 1998, in (i) the business,  properties,  assets,
financial condition or prospects of the Borrower or the Guarantor or (ii) in the
ability of the Borrower or the Guarantor to perform its  Obligations  under this
Agreement, the Note or the other Loan Documents to which it is a party.

     "Note" means the promissory note of the Borrower described in Section 2.2.

     "Obligations"  means all obligations of any Credit Party to pay fees, costs
and expenses hereunder,  to pay principal or interest on the Loan and to pay any
other  obligations  to the  Lender  arising  under  or in  relation  to any Loan
Document.

     "PBGC" means the Pension  Benefit  Guaranty  Corporation  or any  successor
thereto.

     "Permitted Liens" means the Liens described in Section 6.13.

     "Person" means an individual,  partnership,  corporation, limited liability
company, association,  trust, unincorporated organization or any other entity or
organization,  including a  government  or any agency or  political  subdivision
thereof.

     "Personalty" means all equipment, fixtures, furnishings, and other articles
of personal property now owned or hereafter  acquired and attached to or used in
or about the  Improvements  that are  necessary for the use and occupancy of the
Improvements for the purposes for which they were or are to be attached, placed,
erected,  constructed or developed, or which personal property is or may be used
in or  related to the  planning,  development,  financing  or  operation  of the
Improvements (excluding furniture, office equipment,  corporate files, books and
records,  tools, work in progress,  finished goods and inventory,  computers and
computer  software,  vehicles and trailers  situated on the  Property),  and all
renewals of or replacements or substitutions for any of the foregoing.

     "Plans" means the plans  (including  all change orders prior to the Closing
Date)  relating to the  Improvements  prepared by the Architect  approved by the
Lender,  as amended from time to time with the consent of the Lender if required
hereby.

     "Project" means the Improvements, the Land and the Personalty.


                                        8

<PAGE>



     "Restricted  Payment"  shall have the meaning  assigned to such term in the
Indenture.

     "Senior  Subordinated Notes" means the 10 3/8% Series B Senior Subordinated
Notes due August 1, 2007, issued pursuant to the Indenture.

     "Subsidiary"  means,  for any Person,  any  corporation  or other entity of
which more than  fifty  percent  (50%) of the  outstanding  stock or  comparable
equity  interests  having ordinary voting power for the election of the board of
directors of such corporation, any managers of such limited liability company or
similar  governing body  (irrespective  of whether or not, at the time, stock or
other  equity  interests  of any other class or classes of such  corporation  or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned by such Person,  as
applicable.

     "Subsidiary  Guaranty"  means the Guaranty of the Guarantor in favor of the
Lender of even date herewith, as amended,  restated or supplemented from time to
time.

     "Taxes" has the meaning specified in Section 5.10 hereof.

     "Term Loan" means the Term Loan  described  in Section 2.5 that  matures on
the Term Loan Maturity Date,  provided the Borrower  qualifies for and elects to
convert the Construction Loan to the Term Loan.

     "Term Loan  Maturity  Date" has the  meaning  specified  in Section  2.3(b)
hereof.

     "Term Loan Rate"  means the LIBOR Rate,  as adjusted  every three (3) month
period  and in effect on each  Interest  Rate  Adjustment  Date,  plus 1.75% per
annum.

     "Title Agent" means Charter Title Company.

     "Title  Commitment"  means the Commitment for Title Insurance  described in
Section 4.1(j) hereof.

     "Title Company" means Lawyers Title Insurance Company.

     "Title Policy" means the Mortgage  Policy of Title  Insurance  described in
Section 4.1(j) hereof.

     "Unfunded Vested  Liabilities" means, for any Benefit Plan at any time, the
amount (if any) by which the present value of all vested nonforfeitable  accrued
benefits  under such  Benefit  Plan exceeds the fair market value of all Benefit
Plan assets  allocable to such  benefits,  determined as of the then most recent
valuation  date for such Benefit  Plan,  but only to the extent that such excess
represents  a potential  liability  of the  Borrower to the PBGC or such Benefit
Plan.

     Section 1.2.  Interpretation.  The foregoing  definitions  shall be equally
applicable to the singular and plural forms of the terms defined. All references
to times of day in this  Agreement  shall be references  to Houston,  Texas time
unless otherwise specifically provided.


                                        9

<PAGE>



SECTION 2.        LOAN.

     Section 2.1. Construction Loan. Subject to the terms and conditions hereof,
the Lender agrees to make the  Construction  Loan to the Borrower in Advances in
an aggregate amount not to exceed $7,500,000 as follows:

          (a) An initial  Advance in the amount of  $3,186,606  shall be made on
     the  Closing  Date.  The  remaining  Construction  Loan  proceeds  shall be
     advanced  to the  Borrower  by the  Lender  (i)  during  the  course of the
     construction  of the  Improvements  in accordance with the terms herein and
     the other Loan  Documents,  and (ii) in  accordance  with a schedule  to be
     submitted  by the Borrower and approved by the Lender which will allow that
     disbursements be made upon a percentage of completion basis.

          (b)  Disbursements  (other than the Initial Advance) shall be made not
     more frequently than once a month.  Disbursements  shall be made only after
     notice is given to the Lender five (5) Business Days prior to the requested
     date for each  such  disbursement  and in the draw  request  form  attached
     hereto  as  Exhibit  2.1A  (an  "Advance  Request").  Such  form  shall  be
     accompanied  by an Affidavit of Bills Paid in the form  attached  hereto as
     Exhibit 2.1B,  and a Waiver of Lien in the form attached  hereto as Exhibit
     2.1C,  executed by the  Contractor  and each  subcontractor,  respectively.
     Disbursement requests shall be submitted by the Borrower and the Contractor
     on AIA forms for review and approval of the Construction Consultant, if one
     has been  retained  by the  Lender,  which will  report to the  Lender,  or
     otherwise  directly to the Lender.  All  disbursements  must conform to the
     Budget for the  materials  and/or  services  covered  by such  disbursement
     request;  no variances will be permitted without the Lender's prior written
     approval which shall not be unreasonably withheld or delayed.

          (c) Bills or statements for all expenses for which a  disbursement  is
     requested  shall be  presented  to the Lender  along with the  request  for
     disbursement.  All requests for disbursement shall include certification by
     the Borrower,  and, if the draw is in excess of $50,000,  the  Construction
     Consultant,  if any, that all labor and material for which  disbursement is
     requested have gone into the construction of the Improvements  according to
     the Plans in accordance with the Budget and that the remaining  undisbursed
     portion of the Construction  Loan are adequate to complete the construction
     of the Improvements.

          (d) Unless otherwise  approved by the Lender,  no disbursements of the
     Construction  Loan proceeds shall be made if Default or an Event of Default
     has  occurred and is  continuing.  The Lender shall not be obligated at any
     time to disburse  proceeds of the Construction Loan in excess of the Budget
     or that recommended by the Construction  Consultant nor shall the Lender be
     obligated to disburse  proceeds of the Loan for materials stored off of the
     Land.  As a  condition  of each draw,  the Lender  must be  satisfied  that
     sufficient funds are available to complete the Improvements.

          (e) Each  disbursement  must be  accompanied  by an endorsement to the
     Title  Policy,  obtained by the Borrower at the  Borrower's  sole  expense,
     which endorsement shall


                                       10

<PAGE>


     provide that the coverage afforded by the Title Policy reflects the amounts
     that have been advanced.

          (f) All  interim  disbursements  of  Construction  Loan  proceeds  for
     construction  work  shall  be  subject  to a ten  percent  (10%)  retainage
     requirement,  except as  provided  in Section  5.1.1.1 of the  Construction
     Contract.  Any retainage with respect to a subcontract  will be released in
     accordance with the terms of the Construction Contract, conditioned upon no
     Default or Event of Default having occurred and be continuing,  and receipt
     by the Lender of a lien waiver from such subcontractor.  Final disbursement
     to the Contractor,  including  retainage,  shall be subject and conditioned
     upon  the  Lender  having  secured  the  following,   in  addition  to  any
     requirements  under  the  Construction   Contract:   (i) a  certificate  of
     completion  prepared  and  submitted  by the  Borrower  and approved by the
     Construction Consultant,  if any, which certificate shall contain only such
     qualifications  as are  acceptable  to the  Lender,  in the  Lender's  sole
     discretion,  and  indicating  that  the  construction  on the Land has been
     completed substantially in accordance with the Budget, all construction has
     been completed in a good and  workmanlike  manner,  all applicable  zoning,
     building or other  governmental  codes or  regulations  have been  complied
     with,  there  are no  known  structural  deficiencies,  and all  mechanical
     equipment,  including,  without limitation,  plumbing, air conditioning and
     heating,  electrical,  and kitchen  equipment,  if any, is in good  working
     order,  normal  wear and  tear  accepted,  and any and all  subcontractors,
     suppliers  and  laborers  have  been  paid in full or will be paid with the
     final disbursement for all labor and materials provided to the Borrower for
     the construction of the Project;  (ii) a certificate of completion executed
     by the  Contractor  and filed  with the  Office of the  Recorder  of Harris
     County, Texas,  (iii) an affidavit executed by the Contractor  satisfactory
     to the Lender,  the  Lender's  counsel and the Title  Company in their sole
     discretion,  stating,  among other things, that all work has been completed
     in accordance  with the Budget  approved by the Lender;  (iv) lien  waivers
     from any and all subcontractors,  in form and substance satisfactory to the
     Lender,   the  Lender's  counsel  and  the  Title  Company  in  their  sole
     discretion;  (v) a certificate of occupancy for the  Improvements;  (vi) if
     required  by the  Lender,  an  "as-built"  Survey,  approved by the Lender,
     showing the location of the Improvements and showing no encroachment by any
     of the Improvements,  any boundary line, easement, building setback line or
     other  restricted  area; (vii) if required by the Lender, a complete set of
     "as-built" plans and specifications,  certified as accurate in all material
     respects  by the  Contractor;  and  (viii) any  and  all  other  additional
     documents as the Lender may reasonably request.

     The Lender  shall  retain the services of the  Construction  Consultant  in
order to monitor  the  progress of the  construction  of the  Improvements.  The
Construction  Consultant  shall approve the Plans,  perform  inspections  of the
Improvements during construction,  including, without limitation, at the time of
each  Advance,  and  perform  a final  inspection  at  completion  (which  final
inspection  shall be an  additional  condition  to  payment of the  Advance  for
retainage  withheld from the  Contractor  under this Section 2.1).  The Borrower
shall pay directly to the  Construction  Consultant,  within ten (10) days after
written request therefor,  the fees and expenses of the Construction  Consultant
incurred by the Lender.  The  Borrower  shall  cooperate  with the  Construction
Consultant and shall cause the Contractor, each subcontractor, and the employees
of each of them to cooperate with the Construction Consultant and, upon request,
shall furnish the


                                       11

<PAGE>


Construction  Consultant  whatever  the  Construction  Consultant  may  consider
necessary  or useful in  connection  with the  performance  of the  Construction
Consultant's  duties.  Without  limiting the  generality of the  foregoing,  the
Borrower shall furnish or cause to be furnished  such items as working  details,
the  Plans  and  details  thereof,  samples  of  materials,  licenses,  permits,
certificates of public authorities,  building codes, and copies of the contracts
between the Borrower and the Contractor.

     Section 2.2.  The Note.  The  obligation  of the Borrower to repay the Loan
shall be evidenced by a promissory note executed by the Borrower, payable to the
order of the Lender,  in the principal amount of the Loan and dated of even date
herewith, and shall be full recourse to the Borrower and to the Guarantor.

     Section 2.3. Repayment of Loan.

          (a)  Construction  Loan. The Borrower shall repay the unpaid principal
     amount of the Construction Loan, plus interest thereon, as follows:

               (i)  Commencing  on the last Business Day of October,  1998,  and
          continuing regularly and quarterly thereafter on the last Business Day
          of each  fiscal  quarter  until  the  earlier  of July 16,  1999  (the
          "Construction  Loan Maturity Date") or the Conversion  Date,  interest
          only at the Construction Loan Rate on the outstanding principal, shall
          be due and payable; and

               (ii) A  final  installment  in  the  amount  of  all  outstanding
          principal,  plus accrued and unpaid interest, shall be due and payable
          on the Construction Loan Maturity Date, unless the Borrower  satisfies
          the  conditions of converting the  Construction  Loan to the Term Loan
          described in Section 2.5 and elects to convert the  Construction  Loan
          to the Term Loan in the manner hereafter described,  in which case the
          Borrower shall pay interest only at the Construction  Loan Rate on the
          outstanding principal on the Conversion Date.

          (b) Term Loan. If the Borrower  satisfies the conditions of converting
     the Construction Loan to the Term Loan described in Section 2.5 hereof, and
     elects to  convert  the  Construction  Loan to the Term Loan in the  manner
     hereinafter described, the Borrower shall repay the unpaid principal amount
     of the Term Loan, plus interest thereon, as follows:

               (i) On the last  Business  Day of the first  full three (3) month
          period  after  the  Conversion  Date,  and  continuing  regularly  and
          quarterly  thereafter on the last Business Day of each and every three
          (3) month period until July 16, 2006 (the "Term Loan Maturity  Date"),
          quarterly  payments of principal shall be made as set forth in Exhibit
          2.3, together with all accrued and unpaid interest on the Term Loan at
          the Term Loan Rate; and

               (ii) A  final  installment  in  the  amount  of  all  outstanding
          principal,  plus all accrued and unpaid  interest  thereon at the Term
          Loan Rate and any other unpaid


                                       12

<PAGE>


          amounts due and payable to the Lender, shall be due and payable on the
          Term Loan Maturity Date.

     Section 2.4. Loan Interest Rate.

          (a)  Construction  Loan.  Prior to the  Conversion  Date,  the  unpaid
     principal amount of Advances on the  Construction  Loan shall bear interest
     prior to  maturity  at a per  annum  rate  equal to the  lesser  of (i) the
     Highest Lawful Rate or (ii) the Construction Loan Rate.

          (b) Term Loan. If the Borrower  satisfies the conditions of converting
     the Construction  Loan to the Term Loan described in Section 2.5 hereof and
     elects to  convert  the  Construction  Loan to the Term Loan in the  manner
     hereinafter described,  during the period commencing on the first day after
     the  Conversion  Date and ending on the Term Loan Maturity Date, the unpaid
     principal  amount of the Term Loan shall bear interest prior to maturity at
     a per annum rate equal to the lesser of (i) the Highest Lawful Rate or (ii)
     the Term Loan Rate.

          (c) Default  Rate.  So long as an Event of Default shall have occurred
     and be  continuing,  the unpaid balance of the Loan shall  thereafter  bear
     interest at the lesser of (i) the  Highest  Lawful Rate or (ii) the Default
     Rate.

          (d) Usury Savings Clause. It is the intention of the Lender to conform
     strictly to usury laws applicable to it.  Accordingly,  if the transactions
     contemplated  hereby or the Loan would be usurious  as to the Lender  under
     laws  applicable to it (including  the laws of the United States of America
     and the  State  of  Texas  or any  other  jurisdiction  whose  laws  may be
     mandatorily  applicable to the Lender  notwithstanding the other provisions
     of this  Agreement,  the Note or any other Loan  Document),  then,  in that
     event, notwithstanding anything to the contrary in this Agreement, the Note
     or any other Loan Document,  it is agreed as follows:  (i) the aggregate of
     all consideration  which constitutes  interest under laws applicable to the
     Lender that is contracted for, taken, reserved,  charged or received by the
     Lender  under  this  Agreement,  the Note or any  other  Loan  Document  or
     otherwise shall under no circumstances  exceed the Highest Lawful Rate, and
     any excess shall be credited by the Lender on the  principal  amount of the
     Note (or, if the principal amount of the Note shall have been paid in full,
     refunded  by the  Lender  to the  Borrower);  (ii) in the  event  that  the
     maturity of the Note is  accelerated by reason of an election of the holder
     or  holders  thereof  resulting  from any  Event of  Default  hereunder  or
     otherwise,  or in the event of any required or permitted  prepayment,  then
     such consideration  that constitutes  interest under laws applicable to the
     Lender may never  include  more than the Highest  Lawful  Rate,  and excess
     interest,  if any,  provided for in this  Agreement,  the Note or any other
     Loan Document or otherwise shall be automatically canceled by the Lender as
     of the date of such  acceleration or prepayment  and, if theretofore  paid,
     shall be credited by the Lender on the principal  amount of the Note (or if
     the principal amount of the Note shall have been paid in full,  refunded by
     the Lender to the Borrower); and (iii) if at any time the interest provided
     under this  Agreement,  the Note or any other Loan Document,  together with
     any other fees payable  pursuant to this  Agreement,  the Note or any other
     Loan Document and


                                       13

<PAGE>


     deemed interest under  applicable  law,  exceeds the amount that would have
     accrued at the Highest  Lawful  Rate,  the amount of interest  and any such
     fees to accrue to the Lender  hereunder and thereunder  shall be limited to
     the amount  which would have accrued at the Highest  Lawful  Rate,  but any
     subsequent reductions shall not reduce the interest to accrue to the Lender
     hereunder  and  thereunder  below the  Highest  Lawful Rate until the total
     amount of interest accrued pursuant hereto and thereto and such fees deemed
     to be interest  equals the amount of interest  which would have  accrued to
     the Lender if a varying rate per annum equal to the interest  hereunder had
     at all times been in effect  plus the amount of fees which  would have been
     received  but for  the  effect  hereof;  and in each  case,  to the  extent
     permitted by applicable  law, the Lender shall not be subject to any of the
     penalties provided by law for contracting for, taking, reserving,  charging
     or  receiving  interest in excess of the Highest  Lawful  Rate.  The Lender
     hereby elects to determine the applicable  rate ceiling under Chapter 1D of
     Article 5069 of the Texas Credit Title Act,  Title 79, Texas  Revised Civil
     Statutes by the weekly rate ceiling from time to time in effect, subject to
     the Lender's right  subsequently  to change such method in accordance  with
     applicable law.

     Section 2.5. Conversion and Extension.

          (a) The  Borrower  shall have the option to convert  the  Construction
     Loan to the Term Loan, and, thereby, extend the maturity of the Loan to the
     Term Loan Maturity Date upon satisfaction of the following requirements:

               (i) No Default or Event of Default exists and is continuing;

               (ii) The  construction  of the  Improvements  has been completed,
          substantially in accordance with the Plans and all of the certificates
          required under Section 2.1(f) hereof have been provided to the Lender;

               (iii) The Borrower provides the Lender with an endorsement to the
          Title Policy  extending the coverage thereof to the Term Loan and that
          insures that no Liens have been filed  against the Project  other than
          the Liens created by the Loan Documents; and

               (iv) The Borrower executes such amendments,  extensions, notes or
          other  instruments  as may be  reasonably  required  by the  Lender to
          evidence the conversion of the Construction Loan to the Term Loan.

          (b) The  Borrower  shall  exercise  its  option  to  convert  the Loan
     hereunder  by providing  the Lender with  written  notice no later than ten
     (10) days  prior to the  Construction  Loan  Maturity  Date that all of the
     foregoing  conditions  have or will be satisfied by the  Construction  Loan
     Maturity Date. Once the Lender confirms that the Borrower has satisfied all
     of the  conditions  to  exercising  such  conversion,  and the Borrower has
     executed  any  documents  described  in  subsection  (a) (iv)  foregoing to
     evidence the conversion,  the Lender will notify the Borrower, of that fact
     which notice will set forth the date (the "Conversion Date") upon which the
     conversion shall be deemed


                                       14

<PAGE>


     effective,  provided  that the  Conversion  Date shall be no later than the
     Construction  Loan  Maturity  Date. If the  Conversion  Date does not occur
     prior to the  Construction  Loan  Maturity  Date,  the Loan will be due and
     payable, in full, on the Construction Loan Maturity Date.

     Section 2.6.  Use of  Proceeds.  The proceeds of the Loan shall be used for
the sole purposes of financing the  construction of the Improvements on the Land
and related costs as set forth in the Budget.

     Section 2.7.  Notice of Change in Interest  Rate.  The Lender shall use its
best  efforts to notify the  Borrower  of any  change in the  Construction  Loan
Interest Rate or the Term Loan Interest Rate, and until the Borrower is notified
by the Lender of such change, the Borrower may continue to make loan payments at
the prior applicable interest rate; provided,  however, nothing contained herein
shall be construed as limiting  the  Lender's  right to collect  interest at the
applicable rate stated herein and in the Note and the Borrower will promptly pay
any shortfall  occasioned by the Borrower's  underpayment of interest on demand.
In the event of an  overpayment,  the  Lender  will  refund  such  amount to the
Borrower.

     Section  2.8.   Collateral.   To  secure  full  and  complete  payment  and
performance of the Obligations,  the Borrower shall execute and deliver or cause
to be executed and  delivered,  effective as of the Closing Date,  the documents
described  below covering the property and collateral  described in this Section
(which,  together  with any  other  property  and  collateral  which  may now or
hereafter secure the Obligations or any part thereof, is sometimes herein called
the "Collateral"):

          (a) The Borrower  shall grant to the Lender a first  priority  lien on
     the Land,  Improvements  and Personalty and assign all rents,  income,  and
     profits relating to the Project pursuant to the Deed of Trust;

          (b) The Borrower shall collaterally  assign,  without limitation,  all
     management agreements,  construction contracts,  architects and engineering
     contracts and agreements,  waste water capacity reservation agreements, and
     any other contracts,  architects and engineering contracts,  and agreements
     pertaining to the Project pursuant to the Collateral Assignment;

          (c) The Borrower  shall  execute and cause to be executed such further
     documents and instruments, including without limitation, Uniform Commercial
     Code financing  statements,  necessary to evidence and perfect the Lender's
     Liens in the Collateral; and

          (d) The  Guarantor  shall  guaranty  payment  of the  Obligations  and
     performance by the Borrower of all of the Borrower's  agreements  under the
     Loan Documents  pursuant to and subject to the limitations set forth in the
     Subsidiary Guaranty.



                                       15

<PAGE>


SECTION 3.        PAYMENTS AND FEES.

     Section 3.1. Method of Payment.  All payments of principal,  interest,  and
other  amounts to be made by the Borrower  hereunder and under the Note shall be
made to the Lender by 2:00 p.m.  at its  office at 910  Travis,  Houston,  Texas
77002,  in Dollars and in  immediately  available  funds.  Whenever  any payment
hereunder  or under  the Note  shall be  stated to be due on a day that is not a
Business Day, such payment may be made on the next  succeeding  Business Day and
interest shall continue to accrue during such extension.

     Section 3.2. Prepayment. Following five (5) days' prior written notice, the
Borrower  shall  have the  right to  prepay,  at any time and from  time to time
without premium or penalty,  the entire unpaid principal  balance of the Note or
any portion  thereof,  with accrued  interest to the date of  prepayment  on the
amounts prepaid.

     Section 3.3.  Commitment Fee. On the Closing Date, the Borrower will pay to
the Lender a commitment fee of $37,500.

SECTION 4         CONDITIONS TO LOAN.

     Section 4.1.  Initial  Advance.  The  obligation  of the Lender to make the
initial  Advance  of the Loan is  subject to the  condition  precedent  that the
Lender shall have  received  all of the  following,  each in form and  substance
satisfactory  to the  Lender on or before the  Closing  Date  (unless  otherwise
indicated):

          (a)  Borrower's  and the  Guarantor's  Organizational  Documents.  The
     Borrower will furnish:

               (i) The  Certificates  of  Incorporation  of the Borrower and the
          Guarantor,  together with all amendments  thereto,  certified as true,
          complete  and  correct  by the  Secretary  of  State  of the  State of
          Delaware;

               (ii)  The  Bylaws  of each  of the  Borrower  and the  Guarantor,
          together with all amendments thereto;

               (iii)  Resolutions  of  the  Borrower  and  the  Guarantor  which
          authorize the  execution,  delivery and  performance by such Person of
          the Loan Documents to which it is a party; and

               (iv) a Certificate  of Good Standing for each of the Borrower and
          the Guarantor issued by the State of Delaware;

          (b) Incumbency  Certificates.  Certificates of Incumbency certified by
     the authorized officer of each of the Borrower and the Guarantor certifying
     the names of the respective  officers of such Person authorized to sign the
     Loan Documents to which it is a party together with specimen  signatures of
     such officers;



                                       16

<PAGE>


          (c) Note. The Note executed by the Borrower;

          (d) Collateral  Assignment.  The Collateral Assignment executed by the
     Borrower;

          (e) Environmental  Indemnity.  The Environmental Indemnity executed by
     the Borrower and the Guarantor;

          (f) Deed of Trust. The Deed of Trust executed by the Borrower;

          (g) Financing Statements. Uniform Commercial Code financing statements
     executed by the  Borrower and covering  such  Collateral  as the Lender may
     request;

          (h) Contractor  Agreement.  The Contractor  Agreement  executed by the
     Contractor;

          (i)  Subsidiary  Guaranty.  The  Subsidiary  Guaranty  executed by the
     Guarantor;

          (j) Title Commitment; Insured Closing Letter. A commitment (the "Title
     Commitment")  for mortgagee  policy of title insurance (the "Title Policy")
     issued by the Title Agent,  as agent for the Title  Company in favor of the
     Lender  showing a policy amount equal to the aggregate  amount of the Loan,
     insuring  that the Lender has a valid first lien against the Land,  subject
     to exceptions,  if any,  acceptable to the Lender. The exception  regarding
     restrictive  covenants  shall be  deleted  or shall  list such  restrictive
     covenants  and insure that they will not affect the validity or priority of
     the Lender's Lien. To the extent  available based on the existing  surveys,
     the standard pre-printed  exception regarding any discrepancies,  conflicts
     or  shortages  in area or  boundary  lines  shall be  modified to read only
     "shortages in area." The standard  pre-printed  exception  regarding  taxes
     shall be  modified  to read  "Standby  fees and taxes for the year 1998 and
     subsequent  years not yet due and  payable." The Title Policy shall contain
     the standard pre-printed  "pending completion" and "pending  disbursements"
     exceptions  and the Borrower  shall,  at the  Borrower's  cost and expense,
     obtain  endorsements  to the Title  Policy as advances are made so that the
     coverage  reflects the amounts that have been  advanced  under the terms of
     the Loan  Documents.  The Title  Policy  shall  also  insure  access to the
     Project from a public  street.  The Title Company shall execute and deliver
     to the Lender an insured closing letter covering the Title Agent;

          (k)  Appraisal.  An MAI appraisal of the Project in form and substance
     satisfactory  to the Lender  and  conducted  by an  appraiser  selected  or
     approved by the Lender.  The appraisal  shall be commissioned by the Lender
     but the costs thereof shall be borne by the Borrower;

          (l) Environmental  Report. A Phase I Environmental Report and asbestos
     survey  covering the Land in form and substance  satisfactory to the Lender
     and  conducted  by a firm  selected or approved by the Lender,  the cost of
     which report shall be borne by the Borrower, and which report verifies that
     the Land is free from any Hazardous


                                       17

<PAGE>


     Materials and Hazardous  Waste, as those terms are defined by Environmental
     Laws  (as  defined  in the  Environmental  Indemnity),  including,  without
     limitation,  asbestos  and  diesel  fuel  (as  reflected  on  the  Phase  I
     Environmental  Assessment).  Such  Environmental  Report  shall  include  a
     determination action of "wetlands" status and condition. The Borrower shall
     provide the Lender with  evidence in form and  substance  acceptable to the
     Lender,  in the Lender's  sole  discretion,  indicating  that any Hazardous
     Materials  or  Hazardous  Waste  previously  located  on the Land have been
     properly   disposed  of  in  accordance   with  all  applicable   laws  and
     regulations;

          (m) Land Use Compliance.  Evidence satisfactory to the Lender that the
     Improvements on the Land comply with the present zoning  classification for
     the Land, if any, and with all subdivision, land use, planning and building
     and environmental laws, rules, regulations and ordinances;

          (n) Survey. A current survey (the "Survey") of the Land dated not less
     than one (1) year prior to the Closing Date, which Survey shall be prepared
     by a  professional  engineer or surveyor  acceptable  to the Lender and the
     Title  Company  and shall  contain,  among  other  matters,  the  following
     information:  (1) metes and  bounds  description  of the Land  showing  all
     corners and points of course  changes and/or marked with iron pins or rods;
     (2) the location of all existing and proposed roads,  highways, and streets
     adjoining   the  Land  and  the  access   thereto  and  all   improvements,
     encroachments,  easements,  drainage  ditches,  utilities,  parking  areas,
     rights-of-ways,  set-back  lines  and all  other  matters  located  upon or
     effecting the Land; (3) a certification that the Land is not located in any
     flood hazard area; and (4) a certification  on the face of the survey which
     shall be approved in both form and substance by the Lender and the Lender's
     legal counsel,  and in favor of both the Lender and the Title Company shall
     have been delivered to the Lender;

          (o)  Insurance  Policies.  Certificates  of Insurance  evidencing  the
     insurance coverages specified in Section 6.5 hereof;

          (p) UCC Search. The results of a Uniform Commercial Code search (which
     search  shall  be  ordered  by the  Lender's  counsel  but  paid for by the
     Borrower) showing no financing statements or other documents or instruments
     on file, which have not been previously  approved in writing by the Lender,
     against the Borrower or the  Guarantor  in the Offices of the  Secretary of
     States of each of Texas and Delaware or Harris County, Texas, such searches
     to be as of a date no more than ten (10) days prior to the Closing Date;

          (q) Opinion of  Counsel.  Favorable  opinions of legal  counsel to the
     Borrower and the Guarantor in form and substance  acceptable to the Lender,
     as to such matters as the Lender may reasonably request;

          (r) Lien Waivers.  An Affidavit of Bills paid executed by the Borrower
     and a  Partial  Release  of  Lien  executed  by  the  Contractor  and  each
     subcontractor  with  respect  to  all  work  on  the  construction  of  the
     Improvements  prior  to the  Closing  Date,  together  with  a list  of all
     subcontractors employed by the Contractor prior to the Closing Date;


                                       18

<PAGE>


          (s) Contracts.  Copies of all contracts  executed by the Borrower with
     engineers, the Architect and the Contractor. The Borrower will not agree or
     consent to any  material  amendment  thereto  without  the  Lender's  prior
     written consent;

          (t) Budget. The Borrower shall furnish the Lender a Budget;

          (u) Soils Test. The Lender shall have been  furnished soil  compaction
     and   percolation   test  report,   which  satisfies  the  Lender  and  the
     Construction Consultant,  if any, that the soil conditions are satisfactory
     for the construction of the Improvements in accordance with the Budget;

          (v) Availability of Utilities.  The Borrower shall use best efforts to
     furnish the Lender with Letters from authorized officials or agents of each
     governmental  entity or public  utility  furnishing  any  utility  service,
     including water,  sewer,  telephone,  gas and electricity,  to the Project,
     stating that such service will be made  available to the Project within the
     time required by the proposed  schedule of construction in amounts adequate
     to serve the Project after its completion;

          (w) Plans.  The Lender shall have been  supplied,  and  approved,  the
     Plans; and

          (x) Additional Information. Such additional documents, instruments and
     information  as the Lender or the  Lender's  legal  counsel may  reasonably
     request.

     Section 4.2 Conditions to Subsequent  Advances.  The Lender's obligation to
make  Advances  (after the  initial  Advance)  under this  Agreement  is further
conditioned upon the Borrower satisfying the following conditions:

          (a) Mortgagee  Policy.  The original  Title  Policy,  issued in strict
     accordance with the Title Commitment as described in Section 4.1(j),  shall
     be delivered to the Lender  within thirty (30) days after the Closing Date,
     provided  that the Borrower can obtain a second  Advance prior to such date
     if the other conditions to such Advance are fulfilled.

          (b) Sufficient Loan Funds. The Borrower shall satisfy the Lender, as a
     condition of each  Advance,  that  remaining  Loan funds are  sufficient to
     complete the Improvements in accordance with the Budget.

          (c) No Liens.  No  mechanic's  or  materialman's  lien  claim or other
     encumbrance  shall have been filed and be in effect against the Land or the
     Improvements.

          (d) No Casualty.  The Improvements shall not have been damaged by fire
     or other  casualty  or, in such  event,  if  permitted  under the terms and
     provisions of this Agreement, and the Deed of Trust, the Improvements shall
     not have been fully  repaired  and  restored  or be in the process of being
     fully  repaired  and  restored,   to  the  state  of  completion   achieved
     immediately before the casualty.



                                       19

<PAGE>


     Section 4.3 Waiver of Conditions. The Lender may defer any of the foregoing
conditions to the Loan and the fact that all of the conditions may not have been
satisfied at the time the Lender  executes this  Agreement or advances any funds
pursuant to the Loan shall in no circumstances  be considered  evidence that the
Lender has waived any of such conditions.  Any waiver of such conditions must be
in writing.

SECTION 5. REPRESENTATIONS AND WARRANTIES.

     The Borrower represents and warrants to the Lender as follows:

     Section  5.1.  Corporate  Organization.   Each  of  the  Borrower  and  the
Guarantor(i) is  a duly organized and incorporated  corporation in good standing
under the laws of the State of Delaware,  (ii) has all necessary corporate power
to own the property and assets it uses in its business and otherwise to carry on
its present  business and the business it  currently  proposes to transact,  and
(iii) is duly  licensed  or  qualified  and in good  standing  in the  States of
Delaware  and  Texas and each  other  jurisdiction  in which  the  nature of the
business  transacted  by it or the nature of the property  owned or leased by it
makes such licensing or  qualification  necessary except where the failure to so
qualify could not reasonably be expected to have a Material Adverse Effect.

     Section 5.2. Corporate Power and Authority;  Validity. Each of the Borrower
and the Guarantor has the corporate power and authority to execute,  deliver and
carry out the  terms  and  provisions  of the Loan  Documents  and has taken all
necessary corporate action, as applicable, to authorize the execution,  delivery
and  performance of the Loan  Documents.  Each of the Borrower and the Guarantor
has duly  executed and  delivered  each Loan Document to which it is a party and
each such Loan Document  constitutes the legal,  valid and binding obligation of
such  Credit  Party  enforceable  in  accordance  with its terms,  subject as to
enforcement only to bankruptcy, insolvency, reorganization,  moratorium or other
similar laws affecting the enforcement of creditors' rights generally.

     Section 5.3. No Violation. Neither the execution,  delivery nor performance
by the Borrower nor the  Guarantor of the Loan  Documents to which it is a party
nor  compliance by each of such Persons with the terms and  provisions  thereof,
nor the  consummation by each of such Persons of the  transactions  contemplated
herein or therein,  will (i)  contravene  any  applicable  provision of any law,
statute, rule or regulation, or any applicable order, writ, injunction or decree
of any court or  governmental  instrumentality,  (ii) conflict with or result in
any breach of any term, covenant, condition or other provision of, or constitute
a default  under,  or result in the creation or imposition of (or the obligation
to create or  impose)  any Lien other  than any  Permitted  Lien upon any of the
property or assets of such Person under the terms of any contractual  obligation
to which  such  Person  is a party or by  which it or any of its  properties  or
assets are bound or to which it may be subject  which  could not  reasonably  be
expected to have a Material Adverse Effect or (iii) violate or conflict with any
provision of the corporate governance documents, as applicable, of such Person.

     Section  5.4.  Litigation.  There  are  no  lawsuits  (including,   without
limitation,  derivative  or  injunctive  actions),  arbitration  proceedings  or
governmental proceedings pending or, to the best


                                       20

<PAGE>


knowledge of the Borrower, overtly threatened,  involving any Credit Party which
could reasonably be expected to have a Material Adverse Effect.

     Section 5.5. Investment Company Act. Neither the Borrower nor the Guarantor
is an "investment company" or a company "controlled" by an "investment company,"
within the meaning of the Investment Company Act of 1940, as amended.

     Section 5.6. Public Utility  Holding Company Act.  Neither the Borrower nor
the Guarantor is a "holding  company," or a  "subsidiary  company" of a "holding
company," or an "affiliate" of a "holding company" or of a "subsidiary  company"
of a "holding company," within the meaning of the Public Utility Holding Company
Act of 1935, as amended.

     Section  5.7.  True  and  Complete  Disclosure.   All  factual  information
heretofore  or  contemporaneously  furnished by the Borrower or the Guarantor in
writing to the Lender in connection  with any Loan  Document or any  transaction
contemplated  therein  is,  and all other  such  factual  information  hereafter
furnished by any such Persons in writing to the Lender in  connection  herewith,
any of the other Loan  Documents  or the Loan will be, true and  accurate in all
material  respects,  taken as a whole,  on the date of such  information and not
incomplete  by  omitting  to  state  any  material  fact  necessary  to make the
information  therein not  misleading at such time in light of the  circumstances
under which such information was provided.

     Section 5.8.  Financial  Statements.  The financial  statements  heretofore
delivered to the Lender for the Borrower have been  prepared in accordance  with
GAAP applied on a basis consistent with the Borrower's  financial statements for
the  previous  fiscal year or quarter,  as the case may be,  except as otherwise
noted  therein.  Each of such annual and  interim  financial  statements  fairly
presents, or shall fairly present, as the case may be, the financial position of
the Borrower and its  Subsidiaries  as of the dates thereof,  and the results of
operations  for the  periods  covered  thereby,  subject  in the case of interim
financial statements to normal year-end audit adjustments.  The Borrower and its
Subsidiaries,  on a consolidated basis, have no material contingent  liabilities
or Debt other than those  disclosed in the financial  statements  referred to in
this Section 5.8.

     Section  5.9. No Material  Adverse  Effect.  There has occurred no event or
effect that has had, or to the best knowledge of the Borrower  could  reasonably
be expected to have, a Material Adverse Effect.

     Section 5.10.  Taxes.  Each of the Borrower and the Guarantor has filed all
tax returns and all other tax  returns  required to be filed,  and have paid all
governmental taxes, rates, assessments,  fees, charges and levies (collectively,
"Taxes") except such Taxes, if any, as are being contested in good faith and for
which  reserves have been  provided in  accordance  with GAAP. No tax liens have
been filed and no claims are being  asserted  for Taxes,  which  liens or claims
could  reasonably be foreseen to have a Material  Adverse  Effect.  The charges,
accruals and reserves on the books of each of the Borrower and the Guarantor for
Taxes and other  governmental  charges have been  determined in accordance  with
GAAP.



                                       21

<PAGE>


     Section  5.11.  ERISA.  With  respect  to each  Benefit  Plan,  each of the
Borrower and the  Guarantor  has  fulfilled  its  obligations  under the minimum
funding standards of, and are in compliance in all material respects with, ERISA
and with the Code to the  extent  applicable  to it, and have not  incurred  any
liability  under  Title IV of ERISA to the PBGC or a Benefit  Plan  other than a
liability to the PBGC for  premiums  under  Section  4007 of ERISA.  Neither the
Borrower nor the  Guarantor  has any  contingent  liability  with respect to any
post-retirement  benefits  under a welfare  plan as defined in ERISA  other than
liability for continuation  coverage described in Part 6 of Title I of ERISA and
as disclosed in the financial  statements of the Borrower for the fiscal quarter
ending March 31, 1998, described in Section 5.8.

     Section  5.12.  Consents.  All consents  and  approvals  of, and  licenses,
filings and  registrations  with,  and all other  actions  of, all  governmental
agencies,  authorities  or  instrumentalities  required to  consummate  Advances
hereunder,  on the date of each such Advance, have been obtained or made and are
or will be in full force and effect.

     Section 5.13. Ownership of Project.  Each of the Borrower and the Guarantor
has good title to or a valid leasehold interest in all of its property except to
the extent,  in the aggregate,  no Material  Adverse Effect could  reasonably be
expected to result  therefrom,  subject to no Liens except Permitted Liens. Each
of the  Borrower  and the  Guarantor  own or hold valid  licenses to use all the
material patents,  trademarks,  permits,  service marks and trade names that are
necessary to the  operation of the business of the Borrower and the Guarantor as
presently conducted and contemplated. There are no leases of the Land in effect.
Access  necessary for the  construction  and full utilization of the Project for
its  intended  purposes is  presently  available  to the Project over streets or
roads  which  have  been  dedicated  to  public  use and  accepted  therefor  by
appropriate  governmental  authorities and any permits  necessary for connecting
the driveways on the Project to such streets or roads have been obtained.

     Section  5.14.  Compliance  with  Statutes.  Each of the  Borrower  and the
Guarantor  are in  compliance  in all  material  respects  with  all  applicable
statutes, regulations and orders of, and all applicable restrictions imposed by,
all  governmental  bodies and have all  necessary  permits,  licenses  and other
necessary authorizations with respect to the conduct of their businesses and the
ownership and operation of their properties.

     Section  5.15.  Year 2000  Requirement.  All devices,  systems,  machinery,
information technology, computer software and hardware, and other date sensitive
technology (jointly and severally its "systems")  necessary for the Borrower and
the  Guarantor  to carry on  their  business  as  presently  contemplated  to be
conducted,  will be Year 2000  Compliant  within a period of time  calculated to
result  in no  material  disruption  of any of their  business  operations.  For
purposes  hereof,  "Year 2000 Compliant" means that such systems are designed to
be used prior to and after  December 31, 1999, and will operate during each such
time period  without  error  relating to date data,  specifically  including any
error  relating to, or the product of, date data which  represents or references
different  centuries  or more than one century.  The Borrower and the  Guarantor
will (i) undertake a detailed  inventory,  review,  and  assessment of all areas
within their  businesses and operations that could be adversely  affected by the
failure of the Borrower and the Guarantor to be Year 2000  Compliant on a timely
basis; and (ii) if such review reveals such a possible adverse effect, develop a
detailed plan and timeline for becoming Year 2000 Compliant on a timely basis.


                                       22

<PAGE>


The Borrower and the Guarantor  will, as soon as  reasonably  practicable,  make
written inquiry of each of its and its  Subsidiaries' key suppliers and vendors,
and will use reasonable efforts to obtain in writing confirmations from all such
Persons,  as to whether such Persons have initiated programs to become Year 2000
Compliant.  For purposes  hereof,  "key  suppliers and vendors"  refers to those
suppliers and vendors of the Borrower and the Guarantor  whose business  failure
could reasonably be expected to have a Material Adverse Effect.

     Section  5.16.  Place of Business.  Until  completion  of the Project,  the
Borrower's  chief executive  office is located at 6210 Rothway,  Houston,  Texas
77040 and thereafter at 900 Georgia Avenue, Deer Park, Texas 77536.

SECTION 6. COVENANTS.

     The Borrower  covenants  and agrees that,  so long as the Note or any other
Obligation is outstanding hereunder:

     Section 6.1. Existence.  Each of the Borrower and the Guarantor will at all
times  preserve and maintain its corporate  existence.  The Borrower will at all
times own one hundred  percent  (100%) of the capital stock of the Guarantor and
will have the sole right to vote such stock.

     Section  6.2.  Maintenance.  Each of the Borrower  and the  Guarantor  will
maintain,  preserve and keep its plants,  properties and equipment  necessary to
the proper  conduct of its businesses in reasonably  good repair,  working order
and  condition  (normal wear and tear  excepted) and will from time to time make
all  reasonably  necessary  repairs,  renewals,   replacements,   additions  and
betterments  thereto so that at all times such plants,  properties and equipment
are reasonably preserved and maintained; provided, however, that nothing in this
Section 6.2 shall prevent the Borrower and the Guarantor from  discontinuing the
operation or  maintenance  of any such plants,  properties  or equipment if such
discontinuance  is,  in the  judgment  of the  Borrower  or  the  Guarantor,  as
applicable,  desirable  in  the  conduct  of its  business  and  not  materially
disadvantageous to the Lender.

     Section 6.3.  Taxes.  Each of the Borrower and the Guarantor  will duly pay
and discharge all Taxes upon or against it or its  properties  before payment is
delinquent and before  penalties  accrue thereon,  unless and to the extent that
the same is being  contested in good faith and by  appropriate  proceedings  and
reserves have been established in conformity with GAAP.

     Section 6.4.  ERISA.  Each of the Borrower and the Guarantor  will promptly
pay and  discharge  all  obligations  and  liabilities  arising  under  ERISA or
otherwise  with respect to each  Benefit Plan of a character  which if unpaid or
unperformed  might  result in the  imposition  of a material  Lien  against  any
properties or assets of the Borrower or the  Guarantor and will promptly  notify
the Lender of (i) the occurrence of any  reportable  event (as defined in ERISA)
relating to a Benefit  Plan other than any such event with  respect to which the
PBGC has waived  notice by  regulation;  (ii) receipt of any notice from PBGC of
its  intention  to seek  termination  of any Benefit  Plan or  appointment  of a
trustee therefor; (iii) the Borrower's or the Guarantor's intention to terminate
or withdraw  from any Benefit  Plan;  and (iv) the  occurrence of any event that
could result


                                       23

<PAGE>


in the incurrence of any material  liability,  fine or penalty,  or any material
increase  in the  contingent  liability  of the  Borrower  or the  Guarantor  in
connection  with any  post-retirement  benefit  under a welfare plan benefit (as
defined in ERISA).

     Section 6.5. Insurance.  The Borrower will maintain (or with respect to all
builders risk coverage,  cause the Contractor to maintain and in an amount equal
to the greater of 100% of the full insurable value of the insurable  portions of
the  Improvements  or the Loan  amount),  with  financially  sound and reputable
insurance companies reasonably acceptable to the Lender,  workmen's compensation
insurance,  and insurance on the Borrower's  property,  assets,  and business in
amounts,  and with deductibles,  acceptable to the Lender and against such risks
as reasonably  required by the Lender, and the Borrower shall provide the Lender
with evidence satisfactory to the Lender in the Lender's sole discretion of such
insurance  coverage.  From  and  after  the  Closing  Date,  and  at  all  times
thereafter,  the  Borrower  will  maintain  liability  insurance  as  reasonably
required by the Lender.  All such insurance policies shall be issued by insurers
reasonably  satisfactory  to the Lender.  The  comprehensive  general  liability
policy  shall  provide  for  liability  limits  of at  least  $1,000,000.00  per
occurrence,  and $2,000,000.00 in the aggregate.  Each insurance policy covering
Collateral shall name the Lender as loss payee, as its interests may appear, and
provide  that such  policy  will not be  canceled or modified in any way without
thirty (30) days' prior written notice. At any time during the term of the Loan,
the Lender may require the Borrower to purchase flood  insurance (if the Project
is  located  within  a flood  risk  area as  designated  in the  Flood  Disaster
Protection  Act of 1973) in an amount  equal to the  greater of 100% of the full
insurable  value  of the  insurable  portions  of the  Improvements  or the Loan
amount,  with a financially  sound and reputable  insurance  company  reasonably
acceptable to the Lender.

     Section 6.6.  Construction  Contract  and  Retainage.  The  Borrower  shall
withhold  retainage as required by all  requirements of law and the Construction
Contract in connection with the construction of the  Improvements.  The Borrower
shall not amend the Construction Contract or the Plans without the prior written
consent of the  Lender,  which  consent  shall not be  unreasonably  withheld or
delayed, provided that the Borrower may enter into change orders in an amount of
less than $50,000 and aggregating less than $400,000 (exclusive of change orders
prior to the date hereof) without such approval.

     Section  6.7.  Consent to  Leases.  The  Borrower  shall not enter into any
leases or occupancy  agreements  affecting  the Project,  or any  amendments  or
renewals thereof, without the prior written consent of the Lender.

     Section 6.8. Financial Reports and Other Information.

          (a) Each of the Borrower and the  Guarantor  will maintain a system of
     accounting  in  such  manner  as  will  enable   preparation  of  financial
     statements in  accordance  with GAAP and will furnish to the Lender and its
     authorized   representatives   such  information  about  the  business  and
     financial condition of the Borrower and the Guarantor,  including,  without
     limitation, any corporate documents and records, within such time period as
     the Lender may reasonably request;  and, without any request,  will furnish
     to the Lender:


                                       24

<PAGE>


               (i) as  soon  as  available,  and in any  event  not  later  than
          forty-five  (45) days  after the end of each  fiscal  quarter  of each
          fiscal year of the  Borrower  the  consolidated  balance  sheet of the
          Borrower  as at  the  end of  such  fiscal  quarter  and  the  related
          statements  of  operations  and  stockholders'  equity for such fiscal
          quarter and for the portion of the fiscal year ended with the last day
          of such  fiscal  quarter  and cash flows for the portion of the fiscal
          year  ended  with the last day of such  fiscal  quarter,  all of which
          shall be in  reasonable  detail  and  certified  by an  officer of the
          Borrower  acceptable  to the  Lender  that  they  fairly  present  the
          consolidated  financial  condition  of the  Borrower  as of the  dates
          indicated and the results of its operations for the periods  indicated
          and that they have been  prepared  in  accordance  with GAAP,  in each
          case,  subject to normal year-end audit adjustments and the absence of
          footnotes; and

               (ii) as soon as available, and in any event not later than ninety
          (90)  days  after  the  end of  each  fiscal  year  of  the  Borrower,
          consolidated  balance  sheets  of the  Borrower  as at the end of such
          fiscal year and the related statements of operations and stockholders'
          equity  and  cash  flows  for  such  fiscal  year  and  setting  forth
          comparative  figures for the preceding fiscal year and certified by an
          officer of the Borrower  acceptable to the Lender,  to the effect that
          such statements fairly present the consolidated financial condition of
          the  Borrower  as of  the  dates  indicated  and  the  results  of its
          operations  for the periods  indicated,  and audited by an independent
          accounting firm of recognized national standing.

          (b) Each  financial  statement  furnished  to the Lender  pursuant  to
     subsection  (i) of Section  6.6(a)  shall be  accompanied  by (i) a written
     certificate  signed by an officer of the Borrower  acceptable to the Lender
     on behalf of the  Borrower  to the  effect  that (x) no Default or Event of
     Default has occurred  during the period  covered by such  statements or, if
     any such  Default or Event of Default  has  occurred  during  such  period,
     setting  forth a  description  of such  Default  or  Event of  Default  and
     specifying  the action,  if any,  taken by the Borrower to remedy the same,
     and (y) the  representations  and warranties  contained herein are true and
     correct  in all  material  respects  as  though  made  on the  date of such
     certificate,  except to the extent that any such representation or warranty
     relates solely to an earlier date, in which case it was true and correct as
     of such earlier date and except as otherwise described therein, as a result
     of  the  transactions   expressly  permitted  hereunder  or  as  previously
     disclosed to the Lender,  and (ii) a Compliance  Certificate in the form of
     Exhibit 6.8 showing the Borrower's  compliance with the financial covenants
     set forth herein.

          (c) Promptly  upon  receipt  thereof,  the  Borrower  will provide the
     Lender with a copy of each report or "management  letter"  submitted to the
     Borrower by its independent  accountants or auditors in connection with any
     annual,  interim or special  audit made by them of the books and records of
     the Borrower.

          (d) The Borrower will promptly and in any event,  within ten (10) days
     after an  executive  officer of the Borrower has  knowledge  thereof,  give
     written  notice to the Lender of: (i) any pending or threatened  litigation
     or proceeding against the Borrower asserting


                                       25

<PAGE>


     any claim or claims  against  any of same in  excess of  $1,000,000  in the
     aggregate;  (ii) the  occurrence  of any Default or Event of Default  under
     this  Agreement,   under  the  Borrower's  Credit  Facility  or  under  the
     Indenture;  (iii) any circumstance  that has had or reasonably  threatens a
     Material  Adverse  Effect;  and (iv) any event which results in a breach of
     Sections 6.19 or 6.20.

          (e) The Borrower will furnish such additional information,  statements
     and other  reports  with  respect  to the  Borrower's  compliance  (and its
     approach to and progress towards achieving compliance) with Section 5.15 as
     the Lender may reasonably  request from time to time;  (ii) in the event of
     any change in  circumstances  that causes or will  likely  cause any of the
     Borrower's  representations and warranties set forth in Section 5.15, to no
     longer be true, the Borrower shall promptly, and in any event within thirty
     (30) days of receipt of  information  regarding a change in  circumstances,
     provide the Lender with written notice that describes in reasonable  detail
     the  change in  circumstances  and any  additional  information  the Lender
     reasonably requests of the Borrower in connection therewith.

     Section 6.9. Lender  Inspection  Rights.  Upon  reasonable  notice from the
Lender,  each of the Borrower and the Guarantor will permit the Lender (and such
Persons as the Lender may designate) at the Borrower's expense and during normal
business  hours  following  reasonable  notice to visit and  inspect  any of the
properties  of the  Borrower or the  Guarantor,  to examine all of its books and
records,  to make copies and  extracts  therefrom,  and to discuss its  affairs,
finances and accounts  with its  management,  employees and  independent  public
accountants  (and by this  provision,  each of the  Borrower  and the  Guarantor
authorizes such  accountants to discuss with the Lender (and such Persons as the
Lender may designate) the affairs,  finances and accounts of the Borrower or the
Guarantor),  all at such  reasonable  times  and as often  as may be  reasonably
requested.

     Section 6.10.  Restricted Payments.  The Borrower shall not pay or make any
Restricted  Payment  except the Borrower  may, if no Default or Event of Default
shall have occurred and be continuing,  make any Restricted Payment permitted by
the  Indenture.  The  Borrower  may not  prepay,  purchase  or redeem the Senior
Subordinated  Notes except as permitted by the Borrower's Credit Facility and by
the Indenture.

     Section 6.11.  Environmental  Laws.  Each of the Borrower and the Guarantor
shall comply in all material  respects with all  Environmental  Laws (including,
without  limitation,  obtaining and maintaining all necessary permits,  licenses
and other necessary authorizations) applicable to or affecting the properties or
business operations of the Borrower or the Guarantor.

     Section 6.12. Restrictions on Fundamental Changes. Neither the Borrower nor
the  Guarantor  shall be a party to any merger into or  consolidation  with,  or
purchase or otherwise  acquire all or  substantially  all of the assets or stock
of, any other Person,  or sell all or substantially  all of its assets or stock,
except as permitted by the Borrower's Credit Facility and by the Indenture.



                                       26

<PAGE>


     Section 6.13. Liens. The Borrower shall not create, incur, assume or suffer
to exist any Lien (other than as contemplated by the Loan Documents) of any kind
on the Project.  Neither the Borrower nor the  Guarantor  shall  create,  incur,
assume or suffer to exist any Lien of any kind on any of its other properties or
assets of any kind except as permitted by the Borrower's  Credit Facility and by
the Indenture (a "Permitted Lien").

     Section 6.14. Debt.  Neither the Borrower nor the Guarantor shall contract,
assume  or  suffer  to  exist  any  Debt  (including,  without  limitation,  any
Guaranties), except:

          (a) Debt under the Loan Documents; and

          (b) other Debt permitted by the Borrower's  Credit Facility and by the
     Indenture.
 
     Section 6.15.  Transfer of Assets.  The Borrower shall not sell,  transfer,
convey,  assign or dispose of any of the Project  except for  Personalty  in the
ordinary course of business without the Lender's prior written approval. Neither
the Borrower nor the  Guarantor  shall  permit any sale,  transfer,  conveyance,
assignment  or other  disposition  of any  other  asset of the  Borrower  or the
Guarantor except as permitted by the Indenture.

     Section  6.16.   Completion   Deadline.   The  Borrower   shall  cause  the
construction of the  Improvements to be pursued with reasonable  diligence.  The
Borrower shall cause the  Improvements to be completed no later than twelve (12)
months from the Closing Date, regardless of whether the proceeds of the Loan are
sufficient for that purpose.

     Section 6.17.  Compliance with Laws. Each of the Borrower and the Guarantor
shall  conduct its  businesses  and  otherwise be in  compliance in all material
respects with all  applicable  laws,  regulations,  ordinances and orders of all
governmental,  judicial  and  arbitral  authorities  applicable  to it and shall
obtain and maintain all  necessary  permits,  licenses and other  authorizations
necessary to conduct its businesses and own and operate its properties.

     Section 6.18 Intentionally Omitted.

     Section 6.19. Minimum Consolidated Net Worth. The Borrower shall not permit
the  Consolidated  Net Worth of the  Borrower  as of the last day of each fiscal
quarter  to be less than the sum of (i)  $15,000,000,  plus (ii)  fifty  percent
(50%) of the cumulative quarterly  Consolidated Net Income of the Borrower since
September 30, 1997,  for each fiscal quarter ending after that date during which
the Borrower has positive  Consolidated  Net Income,  plus (iii) eighty  percent
(80%) of the net  proceeds  resulting  from any sale or issuance of any stock of
the Borrower or its Subsidiaries since September 30, 1997.

     Section 6.20.  Fixed Charge  Coverage  Ratio.  The Borrower will maintain a
Fixed Charge Coverage Ratio of at least 1.0 to 1.0.




                                       27

<PAGE>


SECTION 7. EVENTS OF DEFAULT AND REMEDIES.

     Section  7.1.  Events of Default.  Any one or more of the  following  shall
constitute an Event of Default:

          (a) default by the Borrower in the payment of the principal  amount of
     the Loan, any interest  thereon or any fees payable  hereunder  within five
     (5) days of the date such payment is due;

          (b) default in the observance or performance of any covenant set forth
     in Sections 6.8(d), 6.10, 6.12, 6.15, 6.19 or 6.20;

          (c) default by any Credit Party in the  observance or  performance  of
     any provision  hereof or of any other Loan Document not mentioned in (a) or
     (b) above,  which is not remedied within thirty (30) days after the earlier
     of (i) such  default  or  event  of  default  first  becoming  known to any
     executive  officer of the  Borrower or (ii)  notice to the  Borrower by the
     Lender of the occurrence of such default or event of default;

          (d) any  representation or warranty or other written statement made or
     deemed made herein, in any other Loan Document or in any financial or other
     report or document  furnished  in  compliance  herewith or therewith by any
     Credit  Party proves  untrue in any material  respect as of the date of the
     issuance or making, or deemed issuance or making thereof;

          (e) default occurs in the payment when due (after any applicable grace
     or cure period) of Debt in an aggregate  principal  amount of $1,000,000 or
     more of any Credit Party or all Credit  Parties,  an Event of Default shall
     occur  under  the  Borrower's  Credit  Facility  or the  Indenture,  or the
     occurrence of any other default,  which with the passage of time or notice,
     would permit the holder or beneficiary of such Debt, or a trustee therefor,
     to cause the acceleration of the maturity of any such Debt or any mandatory
     unscheduled prepayment, purchase or other early funding thereof;

          (f) any Credit Party (i) has entered involuntarily against it an order
     for relief under the United States  Bankruptcy Code or a comparable  action
     is taken  under any  bankruptcy  or  insolvency  law of another  country or
     political  subdivision  of such country,  (ii)  generally  does not pay, or
     admits its inability  generally to pay, its debts as they become due, (iii)
     makes a general assignment for the benefit of creditors,  (iv) applies for,
     seeks,  consents  to or  acquiesces  in,  the  appointment  of a  receiver,
     custodian,  trustee, examiner, liquidator or similar official for it or any
     substantial part of its property,  (v) institutes any proceeding seeking to
     have  entered  against  it an order  for  relief  under the  United  States
     Bankruptcy  Code or any  comparable  law, to adjudicate  it  insolvent,  or
     seeking dissolution, winding up, liquidation, reorganization,  arrangement,
     adjustment  or  composition  of it or its debts  under any law  relating to
     bankruptcy,  insolvency or  reorganization or relief of debtors or fails to
     file an answer or other  pleading  denying the material  allegations of any
     such  proceeding  filed  against  it,  (vi)  makes any  board of  directors
     resolution in direct


                                       28

<PAGE>


     furtherance  of any matter  described in clauses  (i)-(v)  above,  or (vii)
     fails to contest in good faith any  appointment or proceeding  described in
     this Section 7.1(f);

          (g) a custodian,  receiver,  trustee, examiner,  liquidator or similar
     official is appointed for any Credit Party or any  substantial  part of its
     property,  or a  proceeding  described in Section  7.1(f)(v) is  instituted
     against any Credit Party,  and such appointment  continues  undischarged or
     such  proceeding  continues  undismissed  or unstayed for a period of sixty
     (60) days;

          (h) any Credit  Party fails  within  thirty (30) days (or such earlier
     date as any steps to execute on such  judgment or order take place) to pay,
     bond or otherwise discharge, or to obtain an indemnity against on terms and
     conditions satisfactory to the Lender in its sole discretion,  any judgment
     or order for the  payment  of money in excess  of  $1,000,000  for all such
     Credit Parties which is uninsured or  underinsured  by at least such amount
     (provided that there is adequate  assurance,  in the sole discretion of the
     Lender,  that the  insurance  proceeds  attributable  thereto shall be paid
     promptly  upon the  expiration  of such time period or  resolution  of such
     proceeding), which is not stayed on appeal or otherwise being appropriately
     contested in good faith in a manner that stays execution;

          (i) any Credit  Party fails to pay when due an amount  aggregating  in
     excess of  $1,000,000  that it is liable to pay to the PBGC or to a Benefit
     Plan under Title IV of ERISA;  or a notice of intent to terminate a Benefit
     Plan having  Unfunded  Vested  Liabilities of any Credit Party in excess of
     $1,000,000  (a  "Material  Plan") is filed under Title IV of ERISA;  or the
     PBGC  institutes  proceedings  under Title IV of ERISA to  terminate  or to
     cause a trustee to be  appointed to  administer  any  Material  Plan;  or a
     proceeding  is  instituted  by a fiduciary of any Material Plan against any
     Credit Party to collect any  liability  under  Section 515 or 4219(c)(5) of
     ERISA  and  such  proceeding  is not  dismissed  within  thirty  (30)  days
     thereafter;  or a  condition  exists by  reason of which the PBGC  would be
     entitled to obtain a decree  adjudicating  that any  Material  Plan must be
     terminated;

          (j) any Credit Party,  any Person acting on behalf of any Credit Party
     or any governmental, judicial or arbitral authority challenges the validity
     of any Loan Document or any Credit Party's obligations  thereunder,  or any
     Loan  Document  ceases to be in full  force and effect or ceases to give to
     the Lender the Liens,  rights,  and powers  purported  to be granted in its
     favor thereby;

          (k) in  connection  with any request for an Advance of proceeds of the
     Construction  Loan,  the  Borrower  shall be unable to  satisfy  any of the
     conditions to the Advance listed in this Agreement;

          (l) a  determination  by the Lender (or its  Construction  Consultant)
     that the  construction  of the  Improvements  will not be  completed  on or
     before the Construction Loan Maturity Date (regardless of whether or not as
     a result of any casualty or condemnation);


                                       29

<PAGE>


          (m) failure of the Borrower or any  Contractor to perform,  observe or
     comply with any of the terms, covenants, conditions or provisions of any of
     the applicable construction contracts;  provided, however, that in the case
     of such a failure by such Contractor,  if the Borrower is diligently and in
     good  faith   pursuing  all   appropriate   remedies  under  the  pertinent
     Construction  Contract relating to such Contractor's failure thereunder and
     the  Borrower  terminates  the  Construction  Contract in good faith within
     thirty (30) days after the  occurrence of such  failure,  then the Borrower
     shall  not be deemed to be in  default  under  this  Agreement  if  another
     Contractor  satisfactory  to the Lender is  selected  by the  Borrower  and
     placed  under  contract  with the  Borrower  within  sixty  (60) days after
     terminating  said  defaulting  Contractor  and such  substitute  Contractor
     promptly proceeds to fully cure the defaulting  Contractor's default and to
     construct  the  Improvements  in  accordance  with the Budget and the Plans
     provided to the Lender for the  Improvements,  in a diligent  manner and in
     accordance with this Agreement;

          (n) if any act or  occurrence  of any kind or  nature  (including  any
     casualty for which  insurance was not obtained or obtainable)  shall result
     in material  damage to or  material  loss or  material  destruction  of the
     Improvements; or

          (o) an Event of  Default  or a  Termination  Event  occurs  under  any
     Interest  Rate  Protection  Agreement  by and between the  Borrower and the
     Lender.

     Section 7.2. Non-Bankruptcy  Defaults. When any Event of Default other than
those  described  in  subsections  (f) or (g) of Section 7.1 has occurred and is
continuing  with  respect  to the  Borrower,  the Lender  may,  by notice to the
Borrower:  (a) terminate the remaining  commitment and all other  obligations of
the Lender  hereunder  on the date stated in such notice  (which may be the date
thereof);  (b) declare the principal of and the accrued  interest on the Note to
be forthwith due and payable and thereupon the Note,  including  both  principal
and interest thereon,  shall be and become  immediately due and payable together
with all other amounts payable under the Loan Documents  without further demand,
presentment,  protest  or notice of any kind,  including,  but not  limited  to,
notice of intent to  accelerate  and  notice of  acceleration,  each of which is
expressly  waived by the Borrower;  and the Borrower agrees to immediately  make
such  payment  and  acknowledges  and agrees  that the Lender  would not have an
adequate remedy at law for failure by the Borrower to honor any such demand. The
Lender may also, at the risk, cost, and expense of the Borrower:  (i) enter upon
and take possession of the Project and the materials and equipment being used in
the construction of the Improvements;  (ii) take such action as the Lender shall
deem  appropriate  to protect  the  Project;  and (iii) take such  action as the
Lender shall deem appropriate to continue  construction of the Improvements with
such changes  therein as the Lender may elect to make. If the Lender shall elect
to continue construction,  the Lender may: (i) assume or reject any construction
or other contracts made by the Borrower in connection  with the  construction or
operation   of  the   Improvements;   (ii)   engage   or   employ   contractors,
subcontractors,  architects,  engineers and others for the  construction  of the
Improvements; (iii) pay, settle or compromise existing or future bills or claims
relating to the  construction  of the  Improvements  or the Project or affecting
title  thereto;  (iv)  and  take  or  refrain  from  taking  such  other  action
(including, without limitation,  discontinuing construction),  in its name or in
the name of the Borrower,  as the Lender may  determine.  All costs and expenses
incurred by the Lender in taking and protecting the Project and in  constructing
the Improvements shall be paid by the Borrower to


                                       30

<PAGE>


the Lender upon  demand,  with  interest  at the  Default  Rate from the date of
disbursement to the date of payment to the Lender,  and the payment of such sums
shall be secured by the Loan  Documents.  The Lender shall have no obligation to
take any of the foregoing actions, and if the Lender should do so, it shall have
no  liability to the Borrower or any other  obligor for the  sufficiency  of any
such actions or otherwise, provided such actions are taken in good faith.

     Section 7.3.  Bankruptcy  Defaults.  When any Event of Default described in
subsections  (f) or (g) of  Section  7.1 has  occurred  and is  continuing  with
respect  to the  Borrower,  then (i) the Note shall  immediately  become due and
payable together with all other amounts payable under the Loan Documents without
presentment,  demand,  protest or notice of any kind, each of which is expressly
waived by the Borrower, (ii) and all obligations of the Lender to extend further
credit  pursuant to any of the terms hereof  shall  immediately  terminate,  the
Borrower  acknowledging  and agreeing that the Lender would not have an adequate
remedy at law for failure by the Borrower to honor this  provision  and that the
Lender shall have the right to require the Borrower to specifically perform such
undertaking.

     Section 7.4. Application of Proceeds from Collateral.  After the occurrence
of and during the continuance of an Event of Default,  any payment to the Lender
hereunder or from the proceeds of any Collateral or any cash Collateral shall be
applied as the Lender shall elect in its sole discretion.

     Section 7.5. Deficiency. The following shall be the basis for the finder of
fact's  determination  of the fair market value of the Project as of the date of
the foreclosure  sale in proceedings  governed by sections 51.003,  51.004,  and
51.005 of the Texas Property Code (as amended from time to time):

          (a) The Project shall be valued in an "as is" condition as of the date
     of the  foreclosure  sale,  without any assumption or expectation  that the
     Project  will be repaired or improved in any manner  before a resale of the
     Project after foreclosure;

          (b)  The  valuation  shall  be  based  upon  an  assumption  that  the
     foreclosure  purchaser  desires  a prompt  resale of the  Project  for cash
     promptly (but no later than twelve months) following the foreclosure sale;

          (c) All reasonable  closing costs customarily borne by the seller in a
     commercial real estate  transaction  should be deducted from the gross fair
     market  value of the  Project,  including,  without  limitation,  brokerage
     commissions,  title  insurance,  a survey of the Project,  tax  prorations,
     attorney's fees, and marketing costs;

          (d) The  gross  fair  market  value of the  Project  shall be  further
     discounted  to account for any  estimated  holding  costs  associated  with
     maintaining  the  Project  pending  sale,  including,  without  limitation,
     utilities expenses, property management fees, taxes and assessments (to the
     extent not accounted for in subsection (c)  immediately  above),  and other
     maintenance expenses; and



                                       31

<PAGE>


          (e) Any expert  opinion  testimony  given or  considered in connection
     with a determination  of the fair market value of the Project must be given
     by persons  having at least five years  experience in  appraising  property
     similar  to the  Project  and who have  conducted  and  prepared a complete
     written appraisal of the Project taking into  consideration the factors set
     forth above.

SECTION 8.        MISCELLANEOUS.

     Section  8.1.  No Waiver of Rights.  No delay or failure on the part of the
Lender or on the part of the holder or holders of any Note,  in the  exercise of
any power,  right or remedy under any Loan  Document  shall  operate as a waiver
thereof or as an  acquiescence  in any default,  nor shall any single or partial
exercise  thereof  preclude  any other or further  exercise of any other  power,
right or remedy.  To the fullest extent permitted by applicable law, the powers,
rights and  remedies  under the Loan  Documents  of the Lender and the holder or
holders  of the Note are  cumulative  to,  and not  exclusive  of, any rights or
remedies any of them would otherwise have.

     Section 8.2  Non-Business  Day. If any payment of  principal or interest on
the Loan or of any  other  Obligation  shall  fall  due on a day  which is not a
Business Day,  interest or fees (as applicable) at the rate, if any, the Loan or
other Obligation bears for the period prior to maturity shall continue to accrue
in the  manner  set forth  herein on such  Obligation  from the  stated due date
thereof to and  including  the next  succeeding  Business  Day on which the same
shall be payable.

     Section 8.3.  Documentary  Taxes.  The Borrower agrees that it will pay any
documentary,  stamp or similar taxes payable with respect to any Loan  Document,
including  interest  and  penalties,  in the event any such  taxes are  assessed
irrespective of when such  assessment is made and regardless  whether any credit
is then in use or available hereunder.

     Section  8.4.  Survival  of   Representations.   All   representations  and
warranties  made herein or in  certificates  given pursuant hereto shall survive
the  execution and delivery of this  Agreement and the other Loan  Documents and
shall  continue  in full force and effect  with  respect to the date as of which
they were made as long as any Credit Party has any Obligation hereunder or under
any other Loan Document or any Commitment hereunder is in effect.

     Section  8.5.  Survival  of  Indemnities.  All  indemnities  and all  other
provisions  relative to  reimbursement  to the Lender of amounts  sufficient  to
protect  the yield of the Lender  with  respect to the Loan  shall  survive  the
termination  of this  Agreement and the other Loan  Documents and the payment of
the Loan and all other Obligations for a period of one (1) year.

     Section 8.6.  Setoff.  In addition to any rights now or  hereafter  granted
under  applicable law and not by way of limitation of any such rights,  upon the
occurrence  of, and  throughout  the  continuance  of,  any  Default or Event of
Default,  the  Lender  and each  subsequent  holder of any of the Note is hereby
authorized by the Borrower at any time or from time to time,  without  notice to
the  Borrower,  any other Credit Party or to any other  Person,  any such notice
being hereby  expressly  waived,  to set off and to appropriate and to apply any
and all  deposits  (general  or  special,  including,  but not  limited to, Debt
evidenced by  certificates  of deposit,  whether  matured or unmatured,  but not
including trust accounts, and in whatever currency denominated) and any


                                       32

<PAGE>


other Debt at any time held or owing by the Lender or that subsequent  holder to
or for the  credit or the  account  of the  Borrower,  whether  or not  matured,
against and on account of the obligations and liabilities of the Borrower to the
Lender or that subsequent  holder under the Loan Documents,  including,  but not
limited to, all claims of any nature or description  arising out of or connected
with the Loan  Documents,  irrespective of whether or not (i) the Lender or that
subsequent  holder shall have made any demand hereunder or (ii) the principal of
or the interest on the Loan or the Note and other  amounts due  hereunder  shall
have  become  due and  payable  hereunder  and  although  said  obligations  and
liabilities,  or any of them, may be contingent or unmatured. The Lender agrees,
if there  shall be any other  Lender  pursuant to Section  8.10(b),  that if the
Lender  receives and retains any payment,  whether by setoff or  application  of
deposit balances or otherwise, on any of the Loan in excess of its ratable share
of payments on all such Obligations then owed to the Lender hereunder,  then the
Lender shall purchase for cash at face value, but without recourse, ratably from
each of the other  Lenders  such amount of the Loan or  participations  therein,
held by each such other  Lenders (or interest  therein) as shall be necessary to
cause  the  Lender  to share  such  excess  payment  ratably  with all the other
Lenders; provided, however, that if any such purchase is made by any Lender, and
if such  excess  payment  or part  thereof  is  thereafter  recovered  from such
purchasing  Lender,  the  related  purchases  from the  other  Lenders  shall be
rescinded  ratably  and the  purchase  price  restored as to the portion of such
excess payment so recovered, but without interest.

     Section 8.7. Notices.  Except as otherwise  specified  herein,  all notices
under the Loan  Documents  shall be in writing  (including  cable,  telecopy  or
telex) and shall be given to a party hereunder at its address, telecopier number
or telex  numbers set forth below or such other  address,  telecopier  number or
telex as such  party  may  hereafter  specify  by  notice  to the  Lender or the
Borrower,  as  applicable,  given by  courier,  by United  States  certified  or
registered  mail, by telegram or by other  telecommunication  device  capable of
creating a written record of such notice and its receipt. Notices under the Loan
Documents shall be addressed to the Lender and to the Borrower as follows:

                  Bank One, Texas, National Association
                  Attention:  Mr. John E. Elam, Jr.
                  910 Travis
                  Houston, Texas  77002
                  Telephone:        (713) 751-3828
                  Fax No.:          (713) 751-6199

                  with a copy to:

                  Gardere Wynne Sewell & Riggs, L.L.P.
                  Attention:  Ms. Lisa J. Mellencamp
                  333 Clay Ave., Suite 800
                  Houston, Texas  77002
                  Telephone:        (713) 308-5576
                  Fax No.:          (713) 308-5555

                  and


                                       33

<PAGE>


                  HydroChem Industrial Services, Inc.
                  6210 Rothway, Suite 150
                  Houston, Texas  77040
                  Attention:  Mr. Selby F. Little, III, Executive
                              Vice President and Chief
                              Financial Officer
                  Telephone:        (713) 329-2305
                  Fax No.:          (713) 329-2440

                  with a copy to:

                  Haynes and Boone, L.L.P.
                  1000 Louisiana, Suite 4300
                  Houston, Texas  77002-5012
                  Attention:  Mr. Robert S. Ladd
                  Telephone:        (713) 547-2023
                  Fax No.:          (713) 236-5534
 
     Each such notice,  request or other communication shall be effective (i) if
given by telecopier,  when such telecopy is transmitted to the telecopier number
specified in this Section 8.7 and a confirmation of receipt of such telecopy has
been  received  by the  sender,  (ii) if  given by  telex,  when  such  telex is
transmitted  to the telex  number  specified  in this Section 8.7 and the answer
back is received by sender, (iii) if given by courier,  when delivered,  (iv) if
given by mail, five (5) days after such  communication is deposited in the mail,
registered with return receipt requested, addressed as aforesaid or (v) if given
by any other means,  when  delivered at the addresses  specified in this Section
8.7;  provided  that any notice  given  pursuant to Section 2 shall be effective
only upon  receipt  and,  provided  further,  that any notice  that but for this
provision would be effective after the close of business on a Business Day or on
a day that is not a Business  Day shall be  effective at the opening of business
on the next Business Day.

     Section 8.8. Counterparts.  This Agreement may be executed in any number of
counterparts,  and by the different parties on different  counterpart  signature
pages,  each of which when  executed  shall be deemed an  original  but all such
counterparts taken together shall constitute one and the same Agreement.

     Section 8.9.  Successors and Assigns.  This Agreement shall be binding upon
the Borrower and the Lender and their  respective  successors  and assigns,  and
shall inure to the benefit of the Borrower  and the Lender and their  respective
successors  and  assigns,  including  any  subsequent  holder of the  Note.  The
Borrower may not assign any of its rights or obligations under any Loan Document
without the consent of the Lender.

     Section  8.10.   Participations  in  Borrowings  and  Notes;  Transfers  of
Borrowings and Notes.

          (a)  The   Lender   may  at  any  time  sell  to  one  or  more  banks
     ("Participants"),  participating  interests  in any  Advance  owing  to the
     Lender,  the Note,  the  Commitment  or any other  interest  of the  Lender
     hereunder, provided that the Lender shall not transfer, grant or assign any
     participation under which the Participant shall have rights to vote upon


                                       34

<PAGE>


     or consent to any matter to be decided by the Lender hereunder or under any
     Loan  Document or approve any  amendment to or waiver of this  Agreement or
     any other Loan Document except to the extent such amendment or waiver would
     (i) increase the amount of the Lender's  Commitment and such increase would
     affect such  Participant,  (ii) reduce the principal of or interest on, any
     of the  Lender's  Loan or any fees or other  amounts  payable to the Lender
     hereunder  and  such  reduction  would  affect  such  Participant  or (iii)
     postpone  any date  fixed for any  scheduled  payment  of  principal  of or
     interest on, any of the Lender's Loan or any fees or other amounts  payable
     to  the  Lender   hereunder  and  such   postponement   would  affect  such
     Participant.  In the event of any such sale by the Lender of  participating
     interests to a Participant,  the Lender's  obligations under this Agreement
     to the other parties to this Agreement shall remain  unchanged,  the Lender
     shall remain solely  responsible  for the performance  thereof,  the Lender
     shall remain the holder of the Note for all purposes  under this  Agreement
     and the Borrower shall continue to deal solely and directly with the Lender
     in  connection  with  the  Lender's  rights  and  obligations   under  this
     Agreement.  The  Borrower  agrees  that if amounts  outstanding  under this
     Agreement  and the Note are due and unpaid or shall have been  declared  or
     shall  have  become  due and  payable  upon the  occurrence  of an Event of
     Default,  each  Participant  shall be deemed to have the right of setoff in
     respect of its participating interest in amounts owing under this Agreement
     and the Note to the  same  extent  as if the  amount  of its  participating
     interest were owing  directly to it as a Lender under this Agreement or any
     Note.

          (b) The Lender may sell all or any part of its rights and  obligations
     under this  Agreement  and the Note to any  Affiliate  of the Lender at any
     time or, if an Event of Default shall have occurred and be  continuing,  to
     one or more  financial  institutions  or other  Persons.  If any such  sale
     occurs,  the  purchasing  Lender shall be considered  for all purposes as a
     Lender hereunder.

          (c) The provisions of the foregoing  subsections (a) and (b) shall not
     apply to or  restrict or require the consent of or any notice to any Person
     to  effectuate,  the pledge or assignment by the Lender of its rights under
     this Agreement and the Note to any Federal Reserve Bank.

          (d) If,  pursuant to this Section 8.10, any interest in this Agreement
     or the Note is transferred to any transferee  which is organized  under the
     laws of any  jurisdiction  other than the  United  States of America or any
     State  thereof,   the  transferor   Lender  shall  cause  such  transferee,
     concurrently with the  effectiveness of such transfer,  (i) to represent to
     the  transferor  Lender (for the benefit of the  transferor  Lender and the
     Borrower) that under  applicable law and treaties no taxes will be required
     to be withheld by the Lender or the  Borrower  with respect to any payments
     to be made to such  transferee  in respect of the Loan,  (ii) to furnish to
     the  transferor  Lender (and,  in the case of any  purchasing  Lender,  the
     Borrower) either U.S.  Internal Revenue Service Form 4224 or U.S.  Internal
     Revenue  Service Form 1001 or such successor forms as shall be adopted from
     time to time by the relevant United States taxing authorities (wherein such
     transferee  claims  entitlement  to complete  exemption  from U.S.  federal
     withholding  tax on all interest  payments  hereunder),  and (iii) to agree
     (for the benefit of the transferor  Lender and the Borrower) to provide the
     transferor Lender (and, in the case of any purchasing Lender, the Borrower)
     a new Form


                                       35

<PAGE>


     4224 or Form 1001 upon the  expiration or  obsolescence  of any  previously
     delivered form and comparable statements in accordance with applicable U.S.
     laws and  regulations  and amendments  dully executed and completed by such
     transferee,  and to comply from time to time with all applicable  U.S. laws
     and regulations with regard to such withholding tax exemption.

     Section 8.11. Amendments. Any provision of this Agreement may be amended or
waived if, but only if, such  amendment or waiver is in writing and is signed by
the Borrower and the Lender.

     Section 8.12.  Headings.  Section  headings used in this  Agreement are for
reference only and shall not affect the construction of this Agreement.

     Section 8.13.  Legal Fees, Other Costs and  Indemnification.  The Borrower,
upon demand by the Lender,  agrees to pay the reasonable fees and  disbursements
of legal counsel to the Lender in connection  with the preparation and execution
of the Loan Documents, any amendment, waiver or consent related thereto, whether
or not the transactions  contemplated  therein are  consummated,  any Default or
Event of Default by the Borrower  hereunder  and any  enforcement  of any of the
Loan  Documents.  The Borrower  further  agrees to indemnify  the Lender and its
respective   directors,   officers,   shareholders,   employees   and  attorneys
(collectively,  the "Indemnified Parties"), against all losses, claims, damages,
penalties,  judgments,  liabilities and expenses (including, without limitation,
all reasonable  attorneys' fees and other  reasonable  expenses of litigation or
preparation  therefor,  whether or not the Indemnified Party is a party thereto)
which any of them may pay or incur  arising  out of or  relating to (a) any Loan
Document,  the Loan or the  application  or proposed  application  by any of the
Borrower  of the  proceeds  of any Loan,  REGARDLESS  OF WHETHER  SUCH CLAIMS OR
ACTIONS  ARE  FOUNDED  IN WHOLE  OR IN PART  UPON THE  ALLEGED  SIMPLE,  SOLE OR
CONTRIBUTORY  NEGLIGENCE OF ANY OF THE  INDEMNIFIED  PARTIES AND/OR ANY OF THEIR
RESPECTIVE DIRECTORS,  OFFICERS,  SHAREHOLDERS,  EMPLOYEES OR ATTORNEYS, and (b)
any investigation of any third party or any governmental authority involving the
Lender and related to any use made or proposed to be made by the Borrower of the
proceeds of the Advance or any  transaction  financed or to be financed in whole
or in part,  directly or indirectly with the proceeds of any Advance;  provided,
however,  that the Borrower shall not be obligated to indemnify any  Indemnified
Party for any of the  foregoing  arising out of such  Indemnified  Party's gross
negligence or willful misconduct.  The Borrower,  upon demand by the Indemnified
Party at any time, shall reimburse the Indemnified  Party for any legal or other
expenses  incurred in connection with  investigating or defending against any of
the foregoing  except if the same is excluded from  indemnification  pursuant to
the provisions of the foregoing sentence.

     Section 8.14 GOVERNING LAW; ARBITRATION; SUBMISSION TO JURISDICTION.

          (a) This  Agreement and the other Loan  Documents,  and the rights and
     duties of the parties  thereto,  shall be construed in accordance  with and
     governed by the internal laws of the State of Texas.



                                       36

<PAGE>


          (b) EACH PARTY  HERETO  HEREBY  WAIVES ITS RIGHT TO RESOLVE  DISPUTES,
     CLAIMS,  AND  CONTROVERSIES  ARISING  FROM THIS  AGREEMENT,  ANY OTHER LOAN
     DOCUMENT  OR  ANY  MATTER  IN  CONNECTION  THEREWITH,   INCLUDING,  WITHOUT
     LIMITATION, CONTRACT DISPUTES AND TORT CLAIMS, THROUGH ANY COURT PROCEEDING
     OR  LITIGATION  AND  ACKNOWLEDGES  THAT  ALL  SUCH  DISPUTES,   CLAIMS  AND
     CONTROVERSIES  SHALL BE  RESOLVED  PURSUANT  TO THIS  SECTION,  EXCEPT THAT
     EQUITABLE  RELIEF AND CERTAIN OTHER RIGHTS AND REMEDIES SET FORTH BELOW MAY
     BE SOUGHT FROM ANY COURT OF COMPETENT JURISDICTION. The Borrower represents
     to the Lender and the Lender represents to the Borrower that this waiver is
     made knowingly and voluntarily  after  consultation with and upon advice of
     counsel and is a material part of this Agreement. All such disputes, claims
     and controversies shall be resolved by binding arbitration  pursuant to the
     commercial  rules of the  American  Arbitration  Association  ("AAA").  Any
     arbitration proceeding held pursuant to this arbitration provision shall be
     conducted  in  Houston,  Texas or at any  other  place  selected  by mutual
     agreement of the Lender and the Borrower.  No act to take or dispose of any
     collateral shall  constitute a waiver of this  arbitration  agreement or be
     prohibited by this arbitration agreement.  This arbitration provision shall
     not  limit  the  right  of  either  party  during  any  dispute,  claim  or
     controversy to seek, use, and employ ancillary or preliminary rights and/or
     remedies,  judicial  or  otherwise,  for the  purposes of  realizing  upon,
     preserving, protecting, foreclosing upon or proceeding under forcible entry
     and detainer for possession of, any real or personal property, and any such
     action shall not be deemed an election of remedies.  Such remedies include,
     without limitation,  obtaining injunctive relief or a temporary restraining
     order,  invoking  a power of sale  under  any  deed of  trust or  mortgage,
     obtaining  a  writ  of  attachment  or  imposition  of  a  receivership  or
     exercising any rights relating to personal property,  including  exercising
     the right of  set-off  or  taking or  disposing  of such  property  with or
     without  judicial  process  pursuant to the uniform  commercial  code.  Any
     disputes,   claims  or   controversies   concerning   the   lawfulness   or
     reasonableness  of an act or exercise of any right or remedy concerning any
     collateral,  including any claim to rescind, reform or otherwise modify any
     agreement relating to the collateral,  shall also be arbitrated;  provided,
     however that no  arbitrator  shall have the right or the power to enjoin or
     restrain any act of either party.  Judgment upon any award  rendered by any
     arbitrator may be entered in any court having jurisdiction.  The statute of
     limitations,  estoppel,  waiver,  laches and similar  doctrines which would
     otherwise be applicable in an action brought by a party shall be applicable
     in any  arbitration  proceeding,  and the  commencement  of an  arbitration
     proceeding  shall be  deemed  the  commencement  of any  action  for  these
     purposes.  The Federal  Arbitration Act (Title 9 of the United States Code)
     shall apply to the  construction,  interpretation,  and enforcement of this
     arbitration provision.

          (c) To the fullest  extent  permitted by  applicable  law, each of the
     Borrower  and the Lender  agrees that any court  proceeding  or  litigation
     permitted by Section 8.14(b) may be brought and maintained in the courts of
     the State of Texas sitting in Harris  County or the United States  District
     Court for the Southern  District of Texas. To the fullest extent  permitted
     by applicable law, each of the Borrower and the Lender hereby expressly and


                                       37

<PAGE>


     irrevocably submits to the jurisdiction of the courts of the State of Texas
     and the United States District Court for the Southern District of Texas for
     the  purpose  of any such  litigation  as set forth  above and  irrevocably
     agrees to be bound by any judgment rendered thereby in connection with such
     litigation.  To the fullest extent permitted by applicable law, each of the
     Borrower  and the Lender  further  irrevocably  consents  to the service of
     process,  by registered mail, postage prepaid or by personal service within
     or  without  the  State  of  Texas.  To the  fullest  extent  permitted  by
     applicable  law, each of the Borrower and the Lender  hereby  expressly and
     irrevocably waives any objection which it may have or hereafter may have to
     the  laying  of venue  of any such  litigation  brought  in any such  court
     referred to above and any claim that any such  litigation  has been brought
     in an inconvenient forum. To the extent that the Borrower or the Lender has
     or hereafter  may acquire any immunity  from  jurisdiction  of any court or
     from any legal process (whether through service of notice, attachment prior
     to judgment,  attachment in aid of execution or otherwise)  with respect to
     itself  or its  property,  each  of the  Borrower  and  the  Lender  hereby
     irrevocably  waives to the fullest extent permitted by applicable law, such
     immunity in respect of its obligations under this Agreement.

          (D) TO THE FULLEST  EXTENT  PERMITTED BY  APPLICABLE  LAW,  EACH PARTY
     HERETO  VOLUNTARILY,  KNOWINGLY,  IRREVOCABLY AND  UNCONDITIONALLY  (BY ITS
     ACCEPTANCE  HEREOF)  WAIVES  ANY  RIGHT  TO A TRIAL  BY  JURY IN ANY  COURT
     PROCEEDING OR LITIGATION  PERMITTED BY SECTION  3.1(B) AND WAIVES ANY RIGHT
     TO HAVE A JURY  PARTICIPATE  IN  RESOLVING  ANY DISPUTE  (WHETHER  BASED ON
     CONTRACT,  TORT OR  OTHERWISE)  ARISING OUT OF THIS  AGREEMENT OR ANY OTHER
     LOAN DOCUMENT,  ANY OTHER RELATED DOCUMENT OR ANY RELATIONSHIP  BETWEEN THE
     LENDER,  THE  BORROWER,  AND/OR THE  GUARANTOR,  AND  AGREES  THAT ANY SUCH
     ACTION,  PROCEEDING OR DISPUTE TO THE EXTENT  PERMITTED BY SECTION  8.14(B)
     SHALL BE TRIED  BEFORE A COURT AND NOT BEFORE A JURY.  THIS  PROVISION IS A
     MATERIAL INDUCEMENT TO THE LENDER TO PROVIDE THE LOAN.

     Section  8.15.  Severability.  Any  provision  of  this  Agreement  that is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

     Section  8.16.  Change in  Accounting  Principles  or Tax Laws.  If (i) any
change in  accounting  principles  from  those  used in the  preparation  of the
financial  statements referred to in Section 5.9 is hereafter  occasioned by the
promulgation of rules,  regulations,  pronouncements and opinions by or required
by the  Financial  Accounting  Standards  Board  or the  American  Institute  of
Certified  Public  Accounts  (or  successors  thereto or agencies  with  similar
functions) and such change  materially  affects the calculation of any component
of any  financial  covenant,  standard or term found in this  Agreement  or (ii)
there is a  material  change in federal  or  foreign  tax laws which  materially
affects the Borrower's ability to comply with the financial covenants, standards
or terms found in this  Agreement,  the  Borrower  and the Lender agree to enter
into negotiations in order


                                       38

<PAGE>


to amend such  provisions  so as to  equitably  reflect  such  changes  with the
desired  result  that the  criteria  for  evaluating  the  Borrower's  financial
condition  shall be the same after such  changes as if such changes had not been
made.  Unless and until such provisions have been so amended,  the provisions of
this Agreement shall govern.

     Section  8.17.   Notice.   The  Loan   Documents   constitute   the  entire
understanding  among the  Borrower and the Lender and  supersede  all earlier or
contemporaneous  agreements,  whether  written or oral,  concerning  the subject
matter of the Loan  Documents.  THIS WRITTEN  AGREEMENT  TOGETHER WITH THE OTHER
LOAN DOCUMENTS REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES.  THIS WRITTEN  AGREEMENT  REPRESENTS THE FINAL AGREEMENT BETWEEN
THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT  ORAL  AGREEMENTS  OF  THE  PARTIES.  THERE  ARE  NO  UNWRITTEN  ORAL
AGREEMENTS BETWEEN THE PARTIES.

     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed and delivered by their duly authorized  officers as of the day and
year first above written.

                                         BORROWER:

                                         HYDROCHEM INDUSTRIAL SERVICES, INC.,
                                         a Delaware corporation


                                         By: /S/ Selby F. Little,  III
                                         -----------------------------
                                         Name:   Selby F. Little,  III
                                         Title:  Executive Vice President
                                                 and Chief Financial Officer

                                          LENDER:

                                          BANK ONE, TEXAS, NATIONAL ASSOCIATION



                                          By: /S/ John E. Elam, Jr.     
                                          -------------------------     
                                          Name:   John E. Elam, Jr.
                                          Title:  Vice President



                                       39

<PAGE>


                                  EXHIBIT 2.1A

                               REQUEST FOR ADVANCE


<PAGE>

                                 EXHIBIT "2.1A"

                               REQUEST FOR ADVANCE


Bank One Southern Region                         Date:_________________________
Construction Risk - Real Estate Loan Administration
1717 Main, Lower Level 1 (TX1-2424)              Draw #:_______________________
Dallas, Texas 75201
ATTN: ___________________________


RE:      Borrower Name              : HydroChem Industrial Services, Inc.
         Project Name               : Corporate Headquarters
         Loan Amount                : $7,500,000

     1.   Pursuant to that certain Loan Agreement dated July 17, 1998 (the "Loan
          Agreement")  between  the  Borrower  and  Bank  One,  Texas,  National
          Association  ("Bank"),  the Borrower hereby requests an advance in the
          amount of $___________________.  The Borrower hereby acknowledges that
          this  amount is  subject to  inspection,  verification  and  available
          funds.

     2.   The Borrower also hereby covenants and agrees that:

          (a)  It has complied with all duties and obligations  required to date
               to be carried  out and  performed  by it pursuant to the terms of
               the Loan Agreement;

          (b)  No Default  or Event of Default as defined in the Loan  Agreement
               has occurred and is continuing;

          (c)  All change orders have been  submitted to and approved by Bank as
               required under the terms of the Loan Agreement;

          (d)  All funds previously disbursed have been used for the purposes as
               set forth in the Loan Documents;

          (e)  All  outstanding  claims for  labor,  materials  and/or  services
               furnished prior to this draw period have been paid;

          (f)  All  construction  prior to the date of this  request for advance
               has  been  accomplished  in  accordance  with  the  Plans,  or as
               modified by Bank approved change orders;

          (g)  All sums  advanced  by Bank on  account of this draw will be used
               solely  for the  purpose  of paying  obligations  owing as on the
               attached documentation and no other reason;

          (h)  There are no Liens outstanding against the subject project or its
               equipment  except  for  Bank's  Liens as agreed  upon in the Loan
               Documents;



<PAGE>


          (i)  The amount of undisbursed  Loan proceeds is sufficient to pay the
               cost of  completing  the  Project  in  accordance  with the Plans
               originally  submitted  to Bank,  or as modified by Bank  approved
               change orders; and

          (j)  The undersigned affiant understands that this affidavit,  is made
               for the purpose of  inducing  Bank to make an advance to Borrower
               and  that,  in  making  such  advance,  Bank  will  rely upon the
               accuracy of the matters stated in this affidavit.

     3.   Disbursement of the Loan proceeds  hereby  requested may be subject to
          the receipt by Bank of a certificate  from the Title  Company  stating
          that no claims have been filed of record which  adversely  affects the
          title of the  Borrower  to the Land,  subsequent  to the filing of the
          Bank's Deed of Trust.

     4.   The terms used in this Request for Advance and not  otherwise  defined
          herein have the same meaning and definitions as those set forth in the
          Loan Agreement.

     5.   The Borrower  certifies that the  statements  made in this Request for
          Advance and any documents submitted herewith and identified herein are
          true and correct  and has duly  caused this  Request for Advance to be
          signed on its behalf by the undersigned who is duly authorized.

     6.   The  Borrower   requests  that  this  draw  be  funded  and  that  the
          disbursement  funds  be  deposited  into  its  Bank  One  Account  No.
          ________________.

          OR,  wired with instructions as follows:

                  Account #         _____________________________________
                  ABA #             _____________________________________
                  Bank Name         _____________________________________

         EXECUTED as of the date first above written.

                                        HYDROCHEM INDUSTRIAL SERVICES, INC.,
                                         a Delaware corporation



                                        By:___________________________________
                                        Name:_________________________________
                                        Title:________________________________






<PAGE>


THE STATE OF TEXAS                  
                                    
COUNTY OF HARRIS                    

     The foregoing  instrument  was  acknowledged  before me this _______ day of
___________,  199__,  by  _________________________  the  __________________  of
HYDROCHEM INDUSTRIAL SERVICES, INC., a Delaware corporation.

     IN THE WITNESS WHEREOF, I have hereunto set my hand and official seal.



[SEAL]                                __________________________________________
                                       NOTARY PUBLIC IN AND FOR
                                       THE STATE OF TEXAS

                                      __________________________________________
                                       Printed Name of Notary

                                       Commission Expires:______________________

THE STATE OF TEXAS                  
                                    
COUNTY OF HARRIS                    

     SUBSCRIBED AND SWORN BEFORE ME on this ____ day of ________________, 199__,
by ________________________.



[SEAL]                                __________________________________________
                                       NOTARY PUBLIC IN AND FOR
                                       THE STATE OF TEXAS

                                      __________________________________________
                                       Printed Name of Notary

                                       Commission Expires:______________________



<PAGE>

                                  EXHIBIT 2.1B

                             AFFIDAVIT OF BILLS PAID



<PAGE>

                                 EXHIBIT "2.1B"

                             AFFIDAVIT OF BILLS PAID

THE STATE OF TEXAS                  
                                            KNOW ALL PERSONS BY THESE PRESENTS:
COUNTY OF HARRIS                    

     BEFORE ME, the undersigned  authority, a Notary Public in and for the State
of   Texas,   on  this   day   personally   appeared   __________________,   the
________________ of HydroChem Industrial Services,  Inc., a Delaware corporation
(the "Borrower"), who being duly sworn by me, upon oath says:

               "On  behalf  of  the   Borrower,   the  owner  of  the  land  for
          improvements  being erected on the  following  described  property,  I
          certify that all bills for labor and materials  have been paid or will
          be paid with the  proceeds  of this  draw;  that the  Borrower  has no
          notice of any liens  being in  existence  on the  following  described
          property, to wit:

                                  SEE EXHIBIT A

               That the  facts  herein  stated  are  within my  knowledge  as an
          officer of the Borrower.

               I further  acknowledge the receipt of $___________ from Bank One,
          Texas,   National   Association,   on   _______________,   199__   for
          improvements  on  and  for  which  the  above-described   property  is
          security."

                                           HYDROCHEM INDUSTRIAL SERVICES, INC.,
                                           a Delaware corporation

                                           By:_________________________________
                                           Name:_______________________________
                                           Title:______________________________

     SUBSCRIBED AND SWORN TO BEFORE ME, this ____ day of _______________,  199__
by _____________________.


[SEAL]                         ________________________________________________
                               Notary Public in and for the State of T E X A S
                               ________________________________________________
                               Printed Name of Notary
                               Commission Expires:_____________________________



<PAGE>


                                    EXHIBIT A

TRACT 1:

All that  certain  15.109  acres of land,  more or less,  out of the 30.763 acre
tract and the 16.3959 acre tract described in the deed from Shell Oil Company to
Sesco Texas Properties Inc.  recorded under Harris County Clerk File No. H542197
out of the W.C.R.R. Company Survey, A-929, and the Thomas Earl Survey, A-18, and
being more particularly described by metes and bounds as follows:

     All that certain 15.109 acres of land, more or less, out of the 30.763 acre
     tract and the  16.3959  acre  tract  described  in the deed from  Shell Oil
     Company to Sesco Texas  Properties Inc.  recorded under Harris County Clerk
     File No. H542197 out of the W.C.R.R.  Company Survey, A-929, and the Thomas
     Earl Survey,  A-18, and being more  particularly  described by metes and as
     follows:  (All  bearings  are based on a 344.96 acre tract  recorded  under
     Volume 1336, Page 526, H.C.D.R.)

     Commencing  at a 5/8"  iron rod  found  at the  southeast  intersection  of
     Georgia Avenue (100' ROW) and Howard Avenue (80' ROW); Thence S 01  06' 49"
     E - 1,000.08' along the east  right-of-way line of said Georgia Avenue to a
     point;  Thence S 88  52' 36" W - 100.00'  to a 5/8" iron rod found  marking
     the  northeast  corner and the POINT OF BEGINNING  of the herein  described
     tract;

     THENCE S 01  06' 49" E - 859.07' along the west  right-of-way  line of said
     Georgia  Avenue to a 5/8" iron rod set marking the southeast  corner of the
     herein described tract;

     THENCE  S 89  03'  18" W at  384.84'  passing  a found  5/8"  iron  rod and
     continuing  for a total  distance  of  769.02'  along the north line of the
     10.4683  acre  tract  described  in a deed from Dale L.  Sinor and Lou Anne
     Sinor to Dale L. Sinor, Trustee recorded under H.C.C. File No. P430996 to a
     3/4" iron pipe found marking the southwest  corner of the herein  described
     tract in the east line of the 5.0304  acre tract  described  in a deed from
     Texas  Properties  Inc. to Houston Marine  Containers  Inc.  recorded under
     H.C.C. File No. K668803;

     THENCE N 00  52' 20" W - 856.67'  along  said east line to a 3/4" iron pipe
     found marking the  northwest  corner of the herein  described  tract in the
     south line of Deer Park Industrial  Park,  Section 1, according to the plat
     thereof recorded under Volume 190, Page 85, Harris County Map Records;

     THENCE N 88  52' 32" E - 765.41'  along the south line of said Section 1 to
     the  northeast  corner and the POINT OF BEGINNING  of the herein  described
     tract and containing 15.109 acres of land (658,170 square feet) of land.





<PAGE>


TRACT 2:

A 4.3285 acre tract out of a 25.5098 acre tract located in Deer Park  Industrial
Park  Section One (1),  Thomas Earl Survey,  Abstract No. 18, Deer Park,  Harris
County, Texas,  According to the Plat as recorded in Volume 190, Page 85, Harris
County Map Records, and being more particularly  described by metes and bound as
follows:

     A 4.3285  acre  tract  out of a 25.5098  acre  tract  located  in Deer Park
     Industrial  Park  Section One,  Thomas Earl  Survey,  Abstract No. 18, Deer
     Park,  Harris  County,  Texas,  according to the plat as recorded in Volume
     190, Page 85, Harris County Map Records:

     Commencing  at the  southwest  corner  of said Deer  Park  Industrial  Park
     Section One;

     Thence N 88  53' 11" E, along the south  line of said Deer Park  Industrial
     Park Section One, a distance of 30.00 feet to the southwest  corner of said
     25.5098 acre tract and being the POINT OF BEGINNING of the herein described
     tract;

     THENCE N 00  48' 12" W,  parallel  to and 30 feet  east of the west line of
     said Deer Park Industrial Park Section One, a distance of 175.00 feet;

     THENCE N 88  53' 11" E,  across  said  25.5098  acre  tract,  a distance of
     1076.97 feet to a point on the easterly line of said 25.5098 acre tract;

     THENCE S 01  06' 49" E, 175.00 feet to the most southerly  southeast corner
     of said  25.5098  acre  tract and being in the south line of said Deer Park
     Industrial Park Section One;

     THENCE S 88  53' 11" W, along the south line of Deer Park  Industrial  Park
     Section One, a distance of 1077.92 feet to the POINT OF BEGINNING.




<PAGE>

                                  EXHIBIT 2.1C

                             WAIVER OF LIEN TO DATE




<PAGE>

                                 EXHIBIT "2.1C"

                             WAIVER OF LIEN TO DATE

THE STATE OF TEXAS                 
                                   
COUNTY OF HARRIS                   


     The  undersigned  is  an  original  contractor  or  subcontractor  who  has
furnished  labor and/or  material  ("Work") in the  development of land owned by
HydroChem Industrial Services, Inc. ("Owner"), located in the City of Deer Park,
Harris County,  Texas,  and described in Exhibit A which is attached  hereto and
incorporated herein by reference (the "Property").

     For work in connection with the Property, the undersigned:

     * received  $__________________  through  ____________,  19___ ("Prior Down
       Date"),

     * is owed $______________ through ____________, 19___ ("Down Date"),

     * except for $______________ of retainage, not yet due and payable.

     Except for such retainage  amount,  the  undersigned  (a) through the Prior
Down Date, and (b)  additionally,  upon receipt of the amount owed,  through the
Down Date:

     1. Has been  paid in full for all  sums  owed for the Work  concerning  the
Property;

     2. Acknowledges  complete satisfaction of, and forever waives and releases,
all  claims of every  kind  against  Owner or the  Property,  including  but not
limited to all liens and claims of liens,  which the  undersigned  may have as a
result of or in connection with the Work;

     3. Has represented and warranted and does hereby represent and warrant that
all  persons  or  entities  who have  furnished  labor  and/or  material  to the
undersigned  in  connection  with the work have been paid all  amounts  they are
owed,  except  agreed  retainage not yet due and payable which in total does not
exceed the retainage amount set forth above; and

     4.  Agrees  unconditionally  to  indemnify  Owner and hold  Owner  harmless
against all liability,  loss,  cost or expense  (including,  but not limited to,
attorneys'  fees) now or  hereafter  incurred,  paid or  suffered by or asserted
against Owner or the Property because of any claim or action by the undersigned,
or by any person or entity claiming by, through or under the  undersigned,  with
respect to the claims,  liens and rights  herein  waived and released or arising
out of any breach or untruth of any representation herein made.



<PAGE>


     In consideration of its funding of loan proceeds to be used to pay for work
furnished by the undersigned, the undersigned hereby agrees and acknowledges for
the benefit of Bank One, Texas,  National  Association that all mechanic's liens
or rights to the same now or hereafter  owned or held by the undersigned are and
shall be subordinate  and inferior to the lien of the deed of trust held by such
lender or any successor or assignee thereof on the Property.

     The  person  signing  this  document  represents  that  he or she  is  duly
authorized  to do  so on  behalf  of  the  undersigned  original  contractor  or
subcontractor.

     All of the provisions of this document shall bind the undersigned  original
contractor or subcontractor and the undersigned's heirs, legal  representatives,
successors  and  assigns  and shall  inure to the  benefit of Owner and  Owner's
heirs, legal representatives, successors, assigns and sureties.

     EXECUTED this _____ day of ________________, 199___.


                                          _____________________________________


                                           By:_________________________________
                                           Name:_______________________________
                                           Title:______________________________



THE STATE OF TEXAS                  
                                    
COUNTY OF HARRIS                    

     This instrument was acknowledged before me on _________________, 199___, by
______________________________,  __________________________  of and on behalf of
_____________________, a _________________________.


[SEAL]                       ________________________________________________
                             NOTARY PUBLIC IN AND FOR
                             THE STATE OF TEXAS
                                                                 
                             _______________________________________
                             Printed Name of Notary

                             Commission Expires:______________________

<PAGE>
                       

                                    EXHIBIT A


TRACT 1:

All that  certain  15.109  acres of land,  more or less,  out of the 30.763 acre
tract and the 16.3959 acre tract described in the deed from Shell Oil Company to
Sesco Texas Properties Inc.  recorded under Harris County Clerk File No. H542197
out of the W.C.R.R. Company Survey, A-929, and the Thomas Earl Survey, A-18, and
being more particularly described by metes and bounds as follows:

     All that certain 15.109 acres of land, more or less, out of the 30.763 acre
     tract and the  16.3959  acre  tract  described  in the deed from  Shell Oil
     Company to Sesco Texas  Properties Inc.  recorded under Harris County Clerk
     File No. H542197 out of the W.C.R.R.  Company Survey, A-929, and the Thomas
     Earl Survey,  A-18, and being more  particularly  described by metes and as
     follows:  (All  bearings  are based on a 344.96 acre tract  recorded  under
     Volume 1336, Page 526, H.C.D.R.)

     Commencing  at a 5/8"  iron rod  found  at the  southeast  intersection  of
     Georgia Avenue (100' ROW) and Howard Avenue (80' ROW); Thence S 01  06' 49"
     E - 1,000.08' along the east  right-of-way line of said Georgia Avenue to a
     point;  Thence S 88  52' 36" W - 100.00'  to a 5/8" iron rod found  marking
     the  northeast  corner and the POINT OF BEGINNING  of the herein  described
     tract;

     THENCE S 01  06' 49" E - 859.07' along the west  right-of-way  line of said
     Georgia  Avenue to a 5/8" iron rod set marking the southeast  corner of the
     herein described tract;

     THENCE  S 89  03'  18" W at  384.84'  passing  a found  5/8"  iron  rod and
     continuing  for a total  distance  of  769.02'  along the north line of the
     10.4683  acre  tract  described  in a deed from Dale L.  Sinor and Lou Anne
     Sinor to Dale L. Sinor, Trustee recorded under H.C.C. File No. P430996 to a
     3/4" iron pipe found marking the southwest  corner of the herein  described
     tract in the east line of the 5.0304  acre tract  described  in a deed from
     Texas  Properties  Inc. to Houston Marine  Containers  Inc.  recorded under
     H.C.C. File No. K668803;

     THENCE N 00  52' 20" W - 856.67'  along  said east line to a 3/4" iron pipe
     found marking the  northwest  corner of the herein  described  tract in the
     south line of Deer Park Industrial  Park,  Section 1, according to the plat
     thereof recorded under Volume 190, Page 85, Harris County Map Records;

     THENCE N 88  52' 32" E - 765.41'  along the south line of said Section 1 to
     the  northeast  corner and the POINT OF BEGINNING  of the herein  described
     tract and containing 15.109 acres of land (658,170 square feet) of land.

<PAGE>

TRACT 2:

A 4.3285 acre tract out of a 25.5098 acre tract located in Deer Park  Industrial
Park  Section One (1),  Thomas Earl Survey,  Abstract No. 18, Deer Park,  Harris
County, Texas,  According to the Plat as recorded in Volume 190, Page 85, Harris
County Map Records, and being more particularly  described by metes and bound as
follows:

     A 4.3285  acre  tract  out of a 25.5098  acre  tract  located  in Deer Park
     Industrial  Park  Section One,  Thomas Earl  Survey,  Abstract No. 18, Deer
     Park,  Harris  County,  Texas,  according to the plat as recorded in Volume
     190, Page 85, Harris County Map Records:

     Commencing  at the  southwest  corner  of said Deer  Park  Industrial  Park
     Section One;

     Thence N 88  53' 11" E, along the south  line of said Deer Park  Industrial
     Park Section One, a distance of 30.00 feet to the southwest  corner of said
     25.5098 acre tract and being the POINT OF BEGINNING of the herein described
     tract;

     THENCE N 00  48' 12" W,  parallel  to and 30 feet  east of the west line of
     said Deer Park Industrial Park Section One, a distance of 175.00 feet;

     THENCE N 88  53' 11" E,  across  said  25.5098  acre  tract,  a distance of
     1076.97 feet to a point on the easterly line of said 25.5098 acre tract;

     THENCE S 01  06' 49" E, 175.00 feet to the most southerly  southeast corner
     of said  25.5098  acre  tract and being in the south line of said Deer Park
     Industrial Park Section One;

     THENCE S 88  53' 11" W, along the south line of Deer Park  Industrial  Park
     Section One, a distance of 1077.92 feet to the POINT OF BEGINNING.


<PAGE>

                                   EXHIBIT 2.3

                         TERM LOAN AMORTIZATION SCHEDULE

<PAGE>

                                   EXHIBIT 2.3


                           Notional                 Amort
                           --------                 -----

                           7,500,000
                           7,462,015               37,985*
                           7,419,937               42,078
                           7,378,666               41,271
                           7,338,200               40,466
                           7,296,907               41,293
                           7,253,148               43,759
                           7,208,504               44,644
                           7,164,559               43,945
                           7,119,716               44,843
                           7,070,792               48,924
                           7,022,460               48,332
                           6,974,712               47,748
                           6,925,987               48,725
                           6,873,188               52,799
                           6,820,861               52,327
                           6,768,991               51,870
                           6,716,061               52,930
                           6,659,064               56,997
                           6,602,406               56,658
                           6,546,070               56,336
                           6,488,582               57,488
                           6,428.477               60,105
                           6,367,157               61,320
                           6,306,011               61,146
                           6,243,615               62,396
                           6,177,169               66,446
                           6,110,767               66,402
                           6,044,380               66,387
                           5,976,635               67,745
 

Principal  payments will be made in up to 28 installments  with this installment
being the first payment

<PAGE>

                                   EXHIBIT 6.8

                         FORM OF COMPLIANCE CERTIFICATE


<PAGE>

                             COMPLIANCE CERTIFICATE

     HydroChem Industrial Services, Inc. (the "Borrower"),  and Bank One, Texas,
National  Association  (the "Lender"),  executed and delivered that certain Loan
Agreement dated as of July 17, 1998 (as amended,  supplemented and restated from
time to time, the "Loan Agreement").  Any term defined in the Loan Agreement and
used in this  Compliance  Certificate  shall have the meaning given to it in the
Loan Agreement.

     The  undersigned,  solely  in his  or her  capacity  as an  officer  of the
Borrower hereby certifies to the Lender that:

     A.  The  attached  financial  statements  are  (check  one) [ ]  quarterly
financial statements dated  __________________,  [ ] annual financial statements
dated   _____________________,   and  fairly  present  on  a   consolidated   or
consolidating  basis,  as the case may be,  the  balance  sheet,  statements  of
operations  and  stockholders  equity  and cash  flows of the  Borrower  and its
Subsidiaries  covered  thereby as of the date thereof and for the period covered
thereby,  subject to normal  year-end audit  adjustments and the omission of any
footnotes  for any  such  financial  statements  that  are  quarterly  financial
statements.

     B. As of the date of the attached financial  statements and with respect to
the Borrower and its  Subsidiaries  on a consolidated  basis,  the following are
calculated in accordance with the Loan Agreement:

     1. Minimum Consolidated Net Worth

          a. Starting Consolidated Net Worth                 $ 15,000,000

               b. Fifty percent (50%) of cumulative
                  quarterly Consolidated Net Income
                  since September 30, 1997 for each   
                  fiscal quarter ending after that
                  date during which the Borrower has
                  positive Consolidated Net Income           $__________________
 
               c. Eighty percent (80%)of net proceeds
                  of equity issuances from 9/30/97           $__________________

               d. Minimum Consolidated Net Worth             $__________________
                  (a plus b plus c)

               e. Consolidated Net Worth                     $__________________

     2. Fixed Charge Coverage Ratio
 
               a. Consolidated Net Income                    $__________________

<PAGE>


               b. Consolidated Interest Expense              $__________________

               c. Taxes                                      $__________________

               d. Consolidated Interest Income               $__________________

               e. Extraordinary Gains                        $__________________

               f. Consolidated Depreciation and Amortization $__________________

               g. EBITDA                                     $__________________

               h. Cash taxes                                 $__________________

               i. Capital Expenditures                       $__________________

               j. Adjusted   EBITDA
                  (g minus the sum of h and i)               $__________________

               k. Debt Service                               $__________________

               l. Cash dividends                             $__________________

               m. Fixed Charge Coverage Ratio
                  (Ratio of j to the sum of
                   k and l; not less than 1.0 to 1.0)          ______ to ______

     C.  To  the  best  of  my  knowledge   after  due   inquiry,   all  of  the
representations  and  warranties  contained in the Loan  Agreement  are true and
correct  in all  material  respects  on the date  hereof  as if made on the date
hereof except, (i) to the extent such representation and warranty relates solely
to an earlier  date in which case it shall have been true and correct as of such
earlier  date,  or (ii) as to the  following  matters:  [Describe  or  attach  a
schedule of all such  representations  and warranties that are no longer true or
correct  and, if  applicable,  what action the Borrower has taken or proposes to
take].

                _____________________________________
                                                                      
                _____________________________________
                                                               
                _____________________________________
                                                                

     D. (Check either 1 or 2) To the best of my knowledge after due inquiry:

          [__] 1. As of the date  hereof,  no Default  or Event of  Default  has
     occurred and is continuing.


<PAGE>

          [__] 2. As of the date  hereof,  no Default  or Event of  Default  has
     occurred and is continuing except the following matters: [Describe all such
     Defaults or Events of Default,  specifying the nature,  duration and status
     thereof  and what  action the  Borrower  has taken or proposes to take with
     respect thereto].

                _____________________________________
                                                                      
                _____________________________________
                                                               
                _____________________________________
                                                                     
                                                                    
                                                                    
Date: _________________, __

                                   HYDROCHEM INDUSTRIAL SERVICES, INC.,
                                   a Delaware corporation

                                   By:___________________________________
                                   Name:_________________________________
                                   Title:________________________________