<PAGE>   1
                                                                   EXHIBIT 10.13
                                                                  Execution Copy


                                 LOAN AGREEMENT

                                    BETWEEN

                            MICHIGAN STRATEGIC FUND

                                      AND

                          ATMOSPHERE ANNEALING, INC.



                                   $2,510,000
                            MICHIGAN STRATEGIC FUND
                    VARIABLE RATE DEMAND LIMITED OBLIGATION
                           REVENUE BONDS, SERIES 1997
                      (ATMOSPHERE ANNEALING, INC. PROJECT)


                          DATED AS OF DECEMBER 1, 1997



The  interest  of  the  Michigan  Strategic  Fund,  the  Issuer, subject  to
certain specified exclusions  in this Loan  Agreement has been  assigned to
First  of America Bank, N.A., as Trustee under a Trust Indenture dated as of
December 1, 1997.
<PAGE>   2

<TABLE>
<CAPTION>
                                  TABLE OF CONTENTS

<S>                                                                            <C>
ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . .  Page 2
     Section 1.1. Definitions.  . . . . . . . . . . . . . . . . . . . . . . .  Page 2
     Section 1.2. Rules of Interpretation.  . . . . . . . . . . . . . . . . .  Page 4
     Section 1.3. Headings. . . . . . . . . . . . . . . . . . . . . . . . . .  Page 4
     Section 1.4. Exhibits. . . . . . . . . . . . . . . . . . . . . . . . . .  Page 4

ARTICLE II REPRESENTATIONS  . . . . . . . . . . . . . . . . . . . . . . . . .  Page 5
     Section 2.1. Representations of the Issuer.  . . . . . . . . . . . . . .  Page 5
     Section 2.2. Representations of the Obligor. . . . . . . . . . . . . . .  Page 5

ARTICLE III CONSTRUCTION AND EQUIPPING OF THE PROJECT;
ISSUANCE OF THE BONDS . . . . . . . . . . . . . . . . . . . . . . . . . . .   Page 11
     Section 3.1. Construction and Equipping of the Project.  . . . . . . .   Page 11
     Section 3.2. Agreement to Issue Bonds; Application of Bond Proceeds. .   Page 12
     Section 3.3. Approvals and Permits.  . . . . . . . . . . . . . . . . .   Page 12
     Section 3.4. Title.  . . . . . . . . . . . . . . . . . . . . . . . . .   Page 12
     Section  3.5. Investment of  Moneys in  the Construction Fund  and the 
                   Bond Fund. . . . . . . . . . . . . . . . . . . . . . . .   Page 12
     Section 3.6. Additional Bonds. . . . . . . . . . . . . . . . . . . . .   Page 13
     Section 3.7. Issuer Makes No Warranties Regarding the Project. . . . .   Page 13

ARTICLE IV REPAYMENT PROVISIONS . . . . . . . . . . . . . . . . . . . . . .   Page 13
     Section 4.1. The Loan. . . . . . . . . . . . . . . . . . . . . . . . .   Page 13
     Section 4.2. Repayment of the Loan and Payment of Other Amounts Payable. Page 13
     Section 4.3. No Defense or Setoff--Unconditional Obligation. . . . . .   Page 15
     Section 4.4. Assignment and Pledge of Issuer's Rights. . . . . . . . .   Page 15
     Section 4.5. Obligor's Performance Under Indenture.  . . . . . . . . .   Page 16
     Section 4.6. Mandatory Purchase of the Bonds by the Obligor. . . . . .   Page 16

ARTICLE V SPECIAL COVENANTS AND AGREEMENTS  . . . . . . . . . . . . . . . .   Page 16
     Section  5.1.  Issuer's, Trustee's, and Bank's Right of Access to the
          Project.  . . . . . . . . . . . . . . . . . . . . . . . . . . . .   Page 16
     Section  5.2.  Obligor to Maintain Existence; Conditions Under Which
                    Exceptions Permitted. . . . . . . . . . . . . . . . . .   Page 16
     Section 5.3. Indemnification Covenants.  . . . . . . . . . . . . . . .   Page 16
     Section 5.4. Insurance.  . . . . . . . . . . . . . . . . . . . . . . .   Page 19
     Section 5.5. Eminent Domain. . . . . . . . . . . . . . . . . . . . . .   Page 19
     Section 5.6. Application of Net Proceeds of Insurance and Eminent 
                  Domain. . . . . . . . . . . . . . . . . . . . . . . . . .   Page 19
     Section 5.7. Maintenance and Repair. . . . . . . . . . . . . . . . . .   Page 19
     Section 5.8. Qualification in State. . . . . . . . . . . . . . . . . .   Page 20
     Section 5.9. Letter of Credit. . . . . . . . . . . . . . . . . . . . .   Page 20
     Section 5.10. Issuer's Limited Liability.  . . . . . . . . . . . . . .   Page 20
     Section 5.11. Compliance with Laws.  . . . . . . . . . . . . . . . . .   Page 20

ARTICLE VI EVENTS OF DEFAULT AND REMEDIES . . . . . . . . . . . . . . . . .   Page 21
     Section 6.1. Events of Default.  . . . . . . . . . . . . . . . . . . .   Page 21
     Section 6.2. Remedies on Default.  . . . . . . . . . . . . . . . . . .   Page 22
     Section 6.3. Agreement to Pay Attorneys' Fees and Expenses.  . . . . .   Page 23
     Section 6.4. No Remedy Exclusive.  . . . . . . . . . . . . . . . . . .   Page 23
     Section 6.5. No Additional Waiver Implied by One Waiver. . . . . . . .   Page 23
                                                                                     
</TABLE>


<PAGE>   3


<TABLE>
<S>                                                                          <C>
ARTICLE VII PREPAYMENT OF LOAN PAYMENTS . . . . . . . . . . . . . . . . . .   Page 24
     Section 7.1. Obligation to  Prepay the Loan Payments Upon  Determination 
                  of Taxability. . .. . . . . . . . . . . . . . . . . . . .   Page 24
     Section 7.2. General Option to Prepay the Loan Payments. . . . . . . .   Page 24
     Section 7.3. Extraordinary Optional Prepayment.  . . . . . . . . . . .   Page 24
     Section 7.4. Prepayment from Construction Fund.  . . . . . . . . . . .   Page 25
     Section 7.5.  Obligation to  Prepay Loan Payments  on Failure  to Renew  
                   or Replace Letter of Credit. . . . . . . . . . . . . . .   Page 25
     Section 7.6. Notice of Prepayment. . . . . . . . . . . . . . . . . . .   Page 25

ARTICLE VIII RECORDING AND FINANCING STATEMENTS . . . . . . . . . . . . . .   Page 25
     Section 8.1. Recording and Financing Statements. . . . . . . . . . . .   Page 25

ARTICLE IX MISCELLANEOUS  . . . . . . . . . . . . . . . . . . . . . . . . .   Page 26
     Section 9.1. Notices.  . . . . . . . . . . . . . . . . . . . . . . . .   Page 26
     Section 9.2. Assignments.  . . . . . . . . . . . . . . . . . . . . . .   Page 27
     Section 9.3. Severability. . . . . . . . . . . . . . . . . . . . . . .   Page 27
     Section 9.4. Execution of Counterparts.  . . . . . . . . . . . . . . .   Page 27
     Section 9.5. Amounts Remaining in Any Fund or With Trustee.  . . . . .   Page 27
     Section 9.6. Amendments, Changes, and Modifications. . . . . . . . . .   Page 28
     Section 9.7. Governing Law.  . . . . . . . . . . . . . . . . . . . . .   Page 28
     Section 9.8. Authorized Obligor Representative.  . . . . . . . . . . .   Page 28
     Section 9.9. Term of Loan Agreement. . . . . . . . . . . . . . . . . .   Page 28
     Section 9.10. Binding Effect.  . . . . . . . . . . . . . . . . . . . .   Page 29
     Section 9.11. References to Bank and Letter of Credit. . . . . . . . .   Page 29
     Section 9.12. Issuer Not Liable. . . . . . . . . . . . . . . . . . . .   Page 29
     Section 9.13. Continuing Disclosure. . . . . . . . . . . . . . . . . .   Page 29
     Section 9.14. Redemption of Bonds  . . . . . . . . . . . . . . . . . .   Page 29

EXHIBIT A Description of Project  . . . . . . . . . . . . . . . . . . . . .  Page A-1

EXHIBIT B Project Site  . . . . . . . . . . . . . . . . . . . . . . . . . .  Page B-1

EXHIBIT C Requisition Certificate . . . . . . . . . . . . . . . . . . . . .  Page C-1

EXHIBIT D Completion Certificate  . . . . . . . . . . . . . . . . . . . . .  Page D-1
                                                                                     
</TABLE>
<PAGE>   4

                                 LOAN AGREEMENT

     THIS LOAN AGREEMENT (the "Loan Agreement") dated as of December 1,  1997,
by and between the  MICHIGAN STRATEGIC  FUND, a  public body  corporate and
politic of  the State of  Michigan established and created pursuant to Act 270
of the Public Acts of Michigan of 1984,  as amended  (the "Issuer"),  and
ATMOSPHERE  ANNEALING, INC.  (the "Obligor");

                                   RECITALS:

     A.   The Issuer  is authorized and empowered by the Act to make loans to
pay the costs of  a project, all as described in the Act,  for purposes of
assisting business enterprises  in obtaining additional  sources of  financing
and  to aid the  State of Michigan (the "State")  in achieving the goal  of
long-term economic growth  and full employment and otherwise achieving the
objectives of the Act; and

     B.   The Issuer is authorized by the  Act to issue revenue bonds to
finance all or part of  the cost of a project, which  bonds are to be payable
solely as provided in this  Loan Agreement  and in a  Trust Indenture  between
the Issuer  and First  of America  Bank, N.A.,  as  trustee (in  such
capacity, the  "Trustee"),  dated as  of December 1, 1997 (the "Indenture");
and

     C.   The  Obligor desires  to  acquire and  install  equipment in
manufacturing facilities  of the Obligor  located in the  City of Lansing,
Ingham County, Michigan (as  further  described in  Exhibit A,  the
"Project").   The  Obligor will  own the Project and will use the buildings and
real property  together with the new machinery and  equipment  for
manufacturing  operations   providing  heat  treating  services, phosphate and
zinc  coating  and shearing/sawing  operations  of  bar steel  to  the forging
and cast iron  (primarily automotive) industries.  The Issuer  will issue and
sell  its Bonds  (as  defined  below) and  loan  the money  to  the Obligor
for  the financing of the  Project and other  expenses incidental thereto
pursuant to and  in compliance with the Act,  provided, however, that the
Project Costs and the  cost of all acts and requirements incident  thereto
shall be paid solely from the proceeds of the sale of the Bonds or from moneys
provided by the Obligor; and

     D.   The Issuer has authorized the issuance  of, and agrees with the
Obligor  to issue,  its  Variable  Rate Demand  Limited  Obligation  Revenue
Bonds, Series  1997 (Atmosphere  Annealing,  Inc. Project)  in the  principal
amount of  $2,510,000 (the "Bonds"); and

     E.   The  proceeds from the  sale of the Bonds  will be used  for the
purpose of defraying the costs of the Project; and

     F.   Under  the  terms  of  this Loan  Agreement,  the  Obligor  will make
Loan Payments, and  will be responsible for paying all  costs of issuance of
the Bonds and the Issuer's obligation with respect  to the Bonds is subject to
the limitations that principal  of and interest  on the Bonds  and any other
costs  or pecuniary liability relating  to the  Bonds,  the  Loan or  any
proceeding, document,  or  certification incidental  to  the foregoing,  shall
never constitute  nor  give rise  to  a charge against the  credit or taxing
powers of the State  or any agency  thereof or general funds  or  assets  of
the Issuer  (including  funds  pertaining  to  other loans  or activities of
the Issuer),  but shall be a  limited obligation of the Issuer  payable only as
provided in this Loan Agreement and the Indenture.
<PAGE>   5

     NOW,  THEREFORE,  in   consideration  of  the  respective
representations  and agreements herein contained, the  parties hereto agree as
follows  (provided, that in the performance of the agreements of  the Issuer
herein contained, any obligation  it may thereby incur  shall not constitute an
indebtedness, debt or liability or loan of credit of  the Issuer,  the State or
any other political  subdivision thereof,  or a charge  against their  general
credit or  taxing powers  within  the meaning  of any constitutional or
statutory  limitation, but  shall  be payable  solely  out of  the proceeds
derived from this  Loan Agreement or the Project, the sale of the Bonds, the
income  from the temporary investment thereof and  moneys derived from drawings
under the Letter of Credit, all as herein provided):


                                   ARTICLE I

                                  DEFINITIONS

     SECTION 1.1.  DEFINITIONS. All words  and phrases defined  in Article XV
of the Indenture shall  have the  same meanings  in this  Loan Agreement.  In
addition,  the following words  and phrases shall have the following  meanings
unless the context in which they are used shall indicate another or different
meaning:

     "Act"  means the Michigan Strategic Fund  Act, being Act 270  of the
Public Acts of Michigan of 1984, as amended.

     "Authorized Obligor Representative" means  the person at the time
designated to act on  behalf of the Obligor by written certificate furnished
to the Issuer and the Trustee.  That certificate  may designate  an alternate
or alternates.  In the event that  all persons so designated  become
unavailable or unable to  act and the Obligor fails  to  designate a
replacement  within  ten days  after  such  unavailability or inability  to
act,   the  Trustee   may  appoint  an   interim  Authorized   Obligor
Representative until such time as the Obligor designates that person.

     "Bond  Purchase Agreement" means,  collectively, the Bond  Purchase
Agreement by and between the Issuer and Underwriter and approved by the
Obligor and the Letter of Representation from the Obligor to the Issuer and the
Underwriter.

     "Bond Resolution" means  the resolution  authorizing the issuance  of the
Bonds adopted by the Issuer on December 10, 1997.

     "Cost"  or  "Project  Cost"  means  the  cost  of  constructing,
acquiring  and installing   the  Project.   Cost   or  Project   Cost
includes  any   engineering, architectural, legal,  accounting,  financial, and
other  expenses incident  to  the construction, acquiring and installing of the
Project.

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





                                 LOAN AGREEMENT
                                     Page 2
<PAGE>   6

     "Event of  Default" means  any  occurrence or  event specified  as such
in  and defined as such by Section 6.1 hereof.

     "Indemnified Persons"  has the meaning  set forth in  Section 5.3(a)
hereof and "Indemnified Parties" has the meaning set forth in Section 5.3(d)
hereof.

     "Investment Obligations"  means any  of the  following: (i)  obligations
of  the United States,  its agencies, or United States government sponsored
enterprises; (ii) obligations, the principal  and interest of which are
guaranteed by the United States or its agencies;  (iii) obligations of a
state, a territory, or a  possession of the United States,  or any political
subdivision of any  of the foregoing or the District of  Columbia  as
described  in  Section  103(a)  of  the  Code,  as  amended  (these obligations
must be  rated in  the highest  three major  grades as  determined by at least
one national  rating service  or be secured,  as to  payments of principal  and
interest, by a  letter of  credit provided by  a financial  institution or
insurance provided  by a  bond insurance  company which  itself  or its  debt
is  rated in  the highest three major  grades as determined by  at least one
national  rating service); (iv)  banker's  acceptances,   commercial  accounts,
certificates  of   deposit,  or depository receipts  issued by a bank,  trust
company, savings  and loan association, savings bank, a  credit union or other
financial institution whose deposits  are, as appropriate, insured by  the
Federal  Deposit Insurance Corporation  or the  National Credit Union
Administration or any successor entities; (v) commercial  paper rated at the
time of purchase  within the two highest classifications established  by at
least one  national rating  service, and which  matures within  270 days after
the date of issue; (vi)  repurchase  agreements  against obligations  itemized
in (i)  and  (ii) above, and executed by  a bank or trust company  or by
members of the  association of primary dealers or other  recognized dealers in
United States  government securities, the market value of which must be
maintained at levels  at least equal to the amounts advanced  and which
obligations  must be  held in the  custody of the  Trustee or the Trustee's
agent;  (vii)  any  fund or  other  pooling arrangement  which  exclusively
purchases and holds the  investments itemized in paragraphs  (i) through (vi)
above; (viii) an  investment agreement  or guaranteed  investment contract
with a  provider whose   unsecured   long-term  debt   is  rated   within   the
two   highest  rating classifications established by at least one national
rating service or an  investment agreement or  guaranteed investment contract
which is guaranteed by an entity meeting the provider requirements  described
in  this paragraph (viii);  and (ix)  Eurodollar time deposits in  a bank or
branch in the  United States owned  by a bank  domiciled outside  the United
States  (this type  of investment  must be  in a bank  with total assets of  at
least US $45,000,000,000 and  with a long-term debt  rating of at least "A3"
(or its equivalent) by at least one national rating service).

     "Issuance Costs" mean a one-time issuance fee of the Issuer equal  to
$6,275 and items of expense  payable or reimbursable  directly or indirectly
by the Issuer  and related to the authorization, sale and issuance of  the
Bonds, which items of expense shall include, but not be limited  to Issuer
application fees, printing costs,  costs of reproducing documents, filing and
recording fees, initial fees and charges  of the Trustee, the  Tender Agent
and any  paying agents,  bond discounts,  legal fees  and charges, professional
consultants' fees, costs  of credit ratings,  fees and charges for execution,
transportation and safekeeping of the Bonds,  and other costs, charges and fees
in connection with the foregoing.

     "Loan" means the loan made pursuant to Section 4.1 of this Loan Agreement.





                                 LOAN AGREEMENT
                                     Page 3
<PAGE>   7

     "Loan Payments" means  the amounts required to  be paid by the  Obligor
pursuant to Section 4.2(a) hereof.

     "Municipality" means the City of Lansing, Ingham County, Michigan.

     "Person" or  "persons" means  natural persons,  partnerships, limited
liability companies, firms, associations, corporations and public bodies.

     "Project"  means  the Project  described on  Exhibit  A to  this  Loan
Agreement located on the real property described in Exhibit B to this Loan
Agreement.

     "Underwriter" means First of America Securities, Inc.

     SECTION 1.2. RULES OF INTERPRETATION. For  all purposes of this Loan
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:

          (a)  The  words  "herein,"  "hereof" and  "hereunder"  and  other
     words of similar  import  refer  to this  Loan  Agreement  as  a  whole
     and  not  to  any particular article, section or other subdivision.

          (b)  The terms  defined in  this Article  I have  the meanings
     assigned  to them in this Article I  and include the plural as well as the
     singular, and the gender used shall include the other gender.

          (c)  All accounting terms  not otherwise defined  herein have the
     meanings assigned to them in accordance with generally accepted accounting
     principles.

          (d)  Any terms not  defined herein, but defined  in the Act shall
     have the same meaning herein, unless the context otherwise requires.

     SECTION 1.3. HEADINGS. The headings  of the various articles and sections
herein are for convenience only and shall not define or limit the provisions
hereof.

     SECTION 1.4.  EXHIBITS. The following Exhibits are  attached to and by
reference made a part of this Loan Agreement:

     Exhibit A: Description of Project.
     Exhibit B: Project Site.
     Exhibit C: Form of Requisition Certificate.
     Exhibit D: Form of Completion Certificate.





                                 LOAN AGREEMENT
                                     Page 4
<PAGE>   8


                                   ARTICLE II

                                REPRESENTATIONS

     SECTION  2.1.  REPRESENTATIONS OF  THE ISSUER.  The  Issuer makes  the
following representations as the basis for the undertakings on its part herein
contained:

          (a)  The Issuer  is a  public body  corporate and  politic
     established  and acting pursuant to the Act with full authority under the
     Act to  issue the Bonds and execute and enter into this Loan Agreement and
     the Indenture.

          (b)  All  of  the   proceedings  approving  this  Loan  Agreement
     and  the Indenture were conducted by the Issuer at  meetings which
     complied with the Open Meetings Act, Act 267 of the Public Acts of
     Michigan of 1976, as amended.

          (c)  No member of the  Issuer is directly  or indirectly a  party to
     or  in any  manner  whatsoever interested  in this  Loan  Agreement, the
     Bond Purchase Agreement, the Bonds or the proceedings related thereunder.

          (d)  Neither the  execution  and  delivery  of  this  Loan
     Agreement,  the consummation of  the transactions contemplated hereby, nor
     the fulfillment of or compliance with  the terms and conditions of  this
     Loan Agreement conflicts with or  results  in  a  breach  of  the  terms,
     conditions  or  provisions  of  any restriction, agreement  or instrument
     to which  the Issuer  is a  party, or  by which it or any of its property
     is bound, or constitutes a default under any  of the foregoing.

     SECTION 2.2. REPRESENTATIONS  OF THE  OBLIGOR. The Obligor  makes the
following representations as the basis for the undertakings on its part herein
contained:

          (a)  The Obligor  is a  corporation duly  organized under  the laws
     of  the State, and is qualified to  conduct its business in the State, has
     the requisite power and  authority to  conduct  its business,  to own  its
     properties  and  to execute and  deliver, and  to perform  all of  its
     obligations  under this  Loan Agreement,  the  Bond Purchase  Agreement,
     the  Remarketing Agreement  and  the Reimbursement  Agreement  and by
     proper action  this  Loan Agreement,  the Bond Purchase Agreement,  the
     Remarketing Agreement  and the  Reimbursement Agreement have been  duly
     authorized,  executed  and  delivered  by,  and,  assuming  due
     authorization by  the other parties  thereto, are valid  and binding
     obligations of, the Obligor.

          (b)  Neither  the  authorization,  execution  or   delivery  of  this
     Loan Agreement,  the  Bond  Purchase Agreement,  the  Remarketing
     Agreement  and the Reimbursement Agreement,  the consummation of  the
     transactions  contemplated by this  Loan  Agreement,   the  Bond  Purchase
     Agreement,  the  Indenture,   the Remarketing Agreement  and the
     Reimbursement Agreement nor the fulfillment of or compliance  with the
     terms  and conditions  of this  Loan  Agreement, the  Bond Purchase
     Agreement,  the Remarketing Agreement  and the  Reimbursement Agreement
     will require  any consent or  approval of the  directors or shareholders
     of the Obligor which has not been obtained, result in a





                                 LOAN AGREEMENT
                                     Page 5
<PAGE>   9

     breach of or  constitute a default under any of  the terms, conditions
     or provisions of  any agreement or  instrument to which  the Obligor is
     now a party or by  which it is  bound, or constitute a  default under any
     of the foregoing, or  result in the creation or imposition  of any lien,
     charge or encumbrance of any nature whatsoever upon any  of the property
     or assets of the  Obligor prohibited under the terms  of any instrument or
     agreement, or violate any  provision of any law, rule, regulation, order,
     writ, judgment, injunction,  decree, determination  or  award  presently
     in  effect  having applicability to  the  Obligor,  or of  the  articles
     of  incorporation  or bylaws of the Obligor.

          (c)  The  Obligor is  not in default  (i) under any  order, writ,
     judgment, injunction, decree, determination  or award or  any indenture,
     agreement,  lease or instrument  or (ii) under  any law, rule  or
     regulation wherein  such default could materially adversely affect the
     Obligor  or the ability of the Obligor  to perform its obligations under
     this Loan Agreement.

          (d)  The Project conforms  with all applicable zoning,  planning,
     building, environmental  and other  regulations  of  the governmental
     authorities  having jurisdiction of the Project and  all licenses and
     approvals the Obligor requires to operate its facilities have been
     obtained  from appropriate state and federal agencies  and  departments
     or,  if  not  obtained  on  the  date of  this  Loan Agreement, are
     expected  to be obtained in  the normal course of business  at or prior to
     the  time such authorizations, consents or approvals are required to be
     obtained.

          (e)  The Project  constitutes a  "project" within  the meaning  of
     the  Act which  the Obligor intends to  operate as a project throughout
     the term of this Loan Agreement as provided herein.

          (f)  To the  best  of  the knowledge  of  the Obligor,  no
     authorizations, consents  or  approvals  of governmental  bodies  or
     agencies  are required  in connection  with  the  execution  and  delivery
     by  the Obligor  of  this  Loan Agreement,  the  Bond  Purchase
     Agreement,  the  Remarketing  Agreement  or the Reimbursement  Agreement
     or in connection  with the carrying  out by the Obligor of its obligations
     under this Loan  Agreement, the Bond Purchase Agreement,  the Remarketing
     Agreement  or  the  Reimbursement  Agreement which  have  not  been
     obtained or, if  not obtained on the date  of this Loan Agreement,  are
     expected to be  obtained in the normal  course of business at  or prior to
     the time such authorizations, consents or approvals are required to be
     obtained.

          (g)  There are no actions  or proceedings pending or threatened
     before any court or  administrative agency which  will, in the  reasonable
     judgment  of the Obligor, materially  adversely affect  the ability  of
     the  Obligor to  meet its obligations  under  this  Loan  Agreement,  the
     Bond  Purchase  Agreement,  the Remarketing Agreement or the Reimbursement
     Agreement.

          (h)  No member, director or officer of  the Issuer has any interest
     of  any kind  in the  Obligor which would  result, as  a result  of the
     issuance of the Bonds, in a





                                 LOAN AGREEMENT
                                     Page 6
<PAGE>   10

     substantial  financial benefit  to such persons  other than as  a member
     of the general public of the State.

          (i)  No portion  of the proceeds of the  Bonds will be used  to
     provide any airplane, health club facilities,  skybox or other private
     luxury  box, facility primarily  used for gambling,  or store the
     principal business of  which is the sale of alcoholic beverages for
     consumption off premises.

          (j)  The  Obligor  has heretofore  supplied  the  Issuer estimates
     of  the Project Costs,  the completion date  and periods of  usefulness of
     the Project.  Such estimates were made in good faith and are fair,
     reasonable and realistic.

          (k)  Its requisitions from the  Construction Fund will be such  that
     all of the property which is  to be provided by the  net proceeds of the
     Bonds  will be owned by the Obligor.

          (l)  No more  than 2% of the proceeds of  the Bonds will be used to
     finance Issuance Costs of the Bonds.

          (m)  The average maturity of the Bonds does  not exceed 120% of the
     average reasonably expected  economic  life  of the  facilities  being
     financed  by  the Bonds, as determined pursuant to Section 147(b) of the
     Code.

          (n)  The  payment  of  principal  of  or  interest  on  the  Bonds
     is  not guaranteed  in whole  or  in  part  by  the  United  States  or
     any  agency  or instrumentality  thereof. The  Bonds  are  not issued  as
     part  of an  issue  a significant portion of the proceeds of which are to
     be  used in making loans the payment of  principal or interest with
     respect to which  are to be guaranteed in whole or in part by the United
     States or any agency  or instrumentality thereof, or invested  directly or
     indirectly  in federally insured  deposits or accounts.  The  payment  of
     principal  of  or  interest  on  the  Bonds is  not  otherwise indirectly
     guaranteed  in whole or in part by the United States or any agency or
     instrumentality thereof within the meaning of Section 149(b) of the Code.

          (o)  The  Obligor will  comply with the  provisions of  Section 148
     of the Code.

          (p)  The Obligor will not  make any payments, or agreements to  pay,
     to any party other than the United  States an amount that is required to
     be paid to the United States under the rebate requirements under Section
     148(f) of the  Code by entering into  any transaction that  reduces the
     amount  required to be  paid to the United  State because  such
     transaction  results in  a smaller  profit or  a larger loss  than would
     have  resulted if  the transaction  had been  at  arm's length and  had
     the yield on  the Bonds not  been relevant to either  party. The Obligor
     will  not acquire  with the  proceeds of  the Bonds  any certificate  of
     deposit, investment contract, or any other type of investment at other
     than its "fair market value" as defined by the Code.

          (q)  No event has  occurred and no  condition is existing  with
     respect  to the Obligor that would constitute an Event  of Default under
     this Loan Agreement or that,





                                 LOAN AGREEMENT
                                     Page 7
<PAGE>   11

     with the  lapse of time  or the giving of  notice or both,  would become
     an Event of  Default under this Loan Agreement, the Bond Purchase
     Agreement or the Reimbursement Agreement.

          (r)  No changes will  be made in the  Project and no actions will  be
     taken by the Obligor that shall in  any way impair the exclusion from
     gross income  of interest on the Bonds for federal tax purposes.

          (s)  The information furnished  by the Obligor  and used  by the
     Issuer  in preparing  its  Non-Arbitrage   Certificate  pursuant  to   the
     Code  and   the information  statement pursuant to  Section 149(e) of  the
     Code (Form  8038), is accurate and complete as of the date of the issuance
     of the Bonds.

          (t)  After the expiration of any  applicable temporary period under
     Section 148(d)(3)  of the  Code, at  no time  during any  bond year  will
     the aggregate amount of gross proceeds of the Bonds invested in nonpurpose
     investments  with a yield materially  higher than the  yield on  the Bonds
     exceed  150% of  the debt service  on the  Bonds for  such bond  year and
     the aggregate  amount of  gross proceeds  of   the  Bonds  invested  in
     nonpurpose  investments  with  a  yield materially  higher than the  yield
     on the  Bonds, if  any, will be  promptly and appropriately reduced  as
     the amount  of principal of  the Bonds  Outstanding is reduced,  provided,
     however, that  the foregoing shall  not require the  sale or disposition
     of  any nonpurpose  investment if  such  sale or  disposition would result
     in a  loss which exceeds  the amount which  would be paid  to the  United
     States  (but  for  such  sale  or disposition)  at  the  time  of  such
     sale or disposition if a payment were due at such time.

          (u)  The Obligor covenants to  comply with the Tax Compliance
     Certificate.  To the extent that  the covenants in the Tax Compliance
     Certificate differ from those  contained in  this Loan  Agreement, the
     covenants  contained in  the Tax Compliance Certificate shall control.

          (v)  All  of the proceeds of the Bonds will  be expended on the
     Project and Issuance Costs or used for the redemption of Bonds pursuant to
     the Indenture.

          (w)  The Obligor  shall complete  the Project  as required  by  the
     Act  as promptly as practicable, and shall cause to be  paid all costs of
     the Project in excess of the moneys available therefor in the Construction
     Fund.

          (x)  The Obligor expects to  complete the Project within three  years
     after the date of issuance of the Bonds.

          (y)  The  issue of  Bonds  is the  only issue  of  obligations issued
     with respect to the  Project pursuant to the  provisions of Section
     144(a)(9)  of the Code.

          (z)  The  Project is  reasonably  expected to  create approximately
     23 new jobs in the Municipality.





                                 LOAN AGREEMENT
                                     Page 8
<PAGE>   12

          (aa) All reimbursements to Obligor  for Project Costs from proceeds
     of the Bonds shall  be made  in compliance  with Treasury  Regulations
     Section  1.150-2 (the "Reimbursement Regulations").

          (bb) At no time will any funds constituting  gross proceeds of the
     Bonds be used in a  manner as would constitute failure of  compliance with
     Section 148 of the Code.

          (cc) In the event that there  are any "rebatable arbitrage earnings"
     on the investment  of  the "gross  proceeds"  of the  Bonds,  if any,  for
     purposes of Section 148 of the Code, the  Obligor will take such action to
     compute, at such intervals as may be required to pay timely, such
     "rebatable arbitrage  earnings" to the United States in  satisfaction of
     the requirements of Section 148  of the Code.

          (dd) The Obligor will  not sell or cause  to be sold any  other
     obligations issued  by or  on behalf  of any state,  territory or
     possession of  the United States, or political  subdivision of the
     preceding, or  the District of Columbia on behalf of  or for the  benefit
     of the  Obligor or any  related person to  the Obligor  which are private
     activity bonds (within  the meaning of Section 103(b) of the  Code) within
     15  days of  the date of  sale of the  Bonds pursuant  to a common plan
     of financing with  the Bonds and which  will be paid  from the same source
     of funds  as the  Bonds without  (a)  delivering a  certificate to  Bond
     Counsel  and the  Attorney  General  of  the  State  to  the  effect  that
     such obligations, when aggregated  with the Bonds,  will not cause  the
     Bonds or  the aggregate issue to fail to meet the  requirements of the
     Code, thereby impairing the tax-exempt status  of the interest on  the
     Bonds, (b) representing  that the Obligor will  take all actions within
     its control  to insure that the tax-exempt status  of the interest on such
     obligations,  and the obligations as a whole, is maintained, and  (c)
     obtaining an opinion of nationally recognized bond counsel, in a  form
     acceptable  to Bond Counsel  and the Attorney  General of  the State, that
     the interest on such obligations is  excluded from gross income for
     federal income tax  purposes,  unless  the foregoing  requirements  are
     waived  by  Bond Counsel and by the Attorney General  of the State.  The
     Obligor represents  that there are no such obligations as described above
     other than the Bonds.

          (ee) The Obligor covenants,  for the benefit of itself, the  Issuer
     and the owners from  time to time  of the Bonds,  that it will  not cause
     or  permit any proceeds of the Bonds to be  invested in a manner contrary
     to  the provisions of Section  148 of the Code and that it will assume
     compliance with such provisions on  behalf of  the Issuer  (including,
     without  limitation, performing  required calculations,  the  keeping of
     proper records  and  the timely  payment  to the Department of the
     Treasury of the United States,  in the name of the Issuer,  of all amounts
     required  to be so paid by Section 148  of the Code) and the Obligor shall
     follow the procedures set forth in its Tax Compliance Certificate.

          (ff) None of the proceeds of the  Bonds will be used to provide a
     facility the primary  purpose of which is  retail food and beverage
     services, automobile sales or service,  or the provision of  recreation or
     entertainment. No  portion of the proceeds of the Bonds will be  used to
     provide any private or  commercial golf  course,  country  club,  massage
     parlor,  tennis club,  skating  facility (including roller skating,
     skateboard and ice





                                 LOAN AGREEMENT
                                     Page 9
<PAGE>   13

     skating), racquet  sports facility (including  any handball  or
     racquetball court), hot tub facility, suntan facility or racetrack.

          (gg) All  or a  major portion  of the proceeds  of the  Bonds will
     be used directly or indirectly in the trade or business of the Obligor.

          (hh) No portion  of  the  proceeds  of  the Bonds  will  be  used
     for  the acquisition of  any property (or  any interest therein)  the
     first use  of which was  not pursuant to such acquisition.  No portion of
     the  proceeds of the Bonds will be used for the acquisition of land.

          (ii) The inducement  resolution adopted by the Issuer  on May 21,
     1997, and the actions undertaken  by the  Issuer as contemplated  hereby
     have induced  the Obligor to develop the Project.

          (jj) The Project  was  not  "placed  in  service"  within  the
     meaning  of Regulation Section  1.150-2(d)(2)(ii) more than  18 months
     prior to  the date of issuance of the Bonds.

          (kk) Not less  than  95%  of  the net  proceeds  of  the  Bonds
     (including investment proceeds)  will be expended  for the construction,
     or improvement of land and  the acquisition of machinery and equipment  or
     property of a character subject to  the  allowance  for  depreciation
     within  the  meaning  of  Section 144(a)(1)  of the  Code paid or
     incurred in  compliance with  the Reimbursement Regulations and not less
     than  100% of the proceeds of the Bond were  or will be used to pay costs
     as permitted by the Act.

          (ll) As of  the date  hereof,  other than  the Bonds,  there are  no
     other issues of  bonds as defined  in Section 144(a)(2)  of the Code, the
     proceeds of which have  been or will be used  with respect to facilities
     located within the Municipality, the  principal user of which is the
     Obligor or a "related person" as defined in Section 144(a)(3) of the Code.

          (mm) Neither the Obligor nor any test period beneficiary have or will
     have an aggregate  allocable share (determined  in accordance with  the
     provisions of Section  144(a)(10)   of  the  Code)   of  outstanding  tax
     exempt  industrial development bonds,  including the Bonds,  issued to
     finance  facilities owned or used by the Obligor or such related person
     exceeding $40,000,000.

          (nn) The  Obligor shall not sell a portion of the Project or lease or
     allow the sublease of  a portion of the  Project to any  principal user
     who,  together with  related  persons  to such  principal  user,  would
     cause the  $40,000,000 limitation of Section 144(a)(10) of the Code to be
     exceeded.

          (oo) No  nonexempt  person  or a  related  person  (within  the
     meaning  of Section  147(a) of the Code), who was a  substantial user
     (within the meaning of Section  147(a) of the  Code) of  the Project or
     any part thereof  will receive directly  or indirectly proceeds of  the
     Bonds in an amount  equal to 5% or more of the face amount  of the Bonds
     in payment  for its interest in the  Project or any part thereof.





                                 LOAN AGREEMENT
                                    Page 10
<PAGE>   14

          (pp) An amount equal  to at least 15%  of the Bond-financed portion
     of the cost  of  acquiring a  used  building  (and  the  equipment
     therefor),  if  any, included in  the Project shall be expended as
     "rehabilitation expenditures" with respect to any such acquired building
     (and  the equipment therefor) for purposes of and within the meaning of
     Section 147(d) of the Code.

          (qq) None of the proceeds of the Bonds will be used directly  or
     indirectly to provide residential real property for family units.

          (rr) None of  the net proceeds  of the Bonds, or  any prior issue  of
     bonds described  in  Section 144(a)(11)  of  the Code,  has been  or  will
     be  used to provide depreciable farm property.

          (ss) The Obligor will  not permit capital expenditures in  the
     Municipality by the  Obligor and  any principal  user or  related person,
     as  such terms  are defined in the  Code, cumulatively, to exceed
     $10,000,000 during the period  of six  years  beginning three  years
     prior  to  the  issuance of  the  Bonds  and extending three years
     thereafter.

          (tt) The Project  constitutes a manufacturing  facility within  the
     meaning of Section 144(a)(12)(C) of the Code.

          (uu) None of  the proceeds of  the Bonds shall be  applied to any
     costs of the construction,  acquisition or installation of the Project
     which were paid or incurred (within  the meaning  of Section  103 of the
     Code) more  than 60  days prior to  the inducement resolution  adopted by
     the  Issuer with respect  to the Project on May 21,  1997.  No person that
     is a substantial user of  the Project or a  related  person  (as those
     terms  are  defined in  the  Code)  after  the acquisition date  was also
     a  substantial user of  the Project before  March 22, 1997 (60 days prior
     to the date of the inducement resolution).

          (vv) The Project will not cause the transfer  of employment of more
     than 20 full-time persons from one municipality of the State to the
     Municipality.


                                  ARTICLE III

                   CONSTRUCTION AND EQUIPPING OF THE PROJECT;
                             ISSUANCE OF THE BONDS

     SECTION 3.1. CONSTRUCTION AND EQUIPPING OF THE PROJECT.

         (a)  The Project will be implemented within the Municipality.

          (b)  The Obligor will  implement the Project  and the Issuer shall
     have no responsibility  or  liability whatsoever  with respect  to  the
     Project  and the construction, acquisition and installation thereof. It is
     agreed  and understood that the Obligor has entered  into and executed and
     will enter  into and execute all  agreements  and contracts  necessary to
     assure  and accomplish  the actual construction, acquisition and
     installation





                                 LOAN AGREEMENT
                                    Page 11
<PAGE>   15

     of the  Project (and that the Issuer shall  not execute any such
     agreements or  contracts) and  that the Obligor  will carry  out, pay,
     supervise, and enforce all  such  agreements  and contracts,  and  will
     provide  for  such insurance  on  and in  connection  with the
     construction,  acquisition and installation of  the Project as  it deems
     necessary  or advisable or  as is required  by law,  and  this Loan
     Agreement. The  Obligor shall  pay, from proceeds from  the sale  and
     delivery  of the  Bonds made  available to  it pursuant to this  Loan
     Agreement, and from any available income or earnings derived  therefrom,
     and from  other funds  of  the Obligor  to  the extent necessary, the
     entire Cost of the Project. The Obligor shall pay  all taxes before they
     become delinquent, including specifically  all sales taxes and ad valorem
     taxes, in  connection with  the Project  and the  construction,
     acquisition and  installation thereof. The Issuer shall loan to the
     Obligor proceeds from the sale of  the Bonds to be  used by the Obligor to
     finance the Cost of  the Project, in accordance with procedures
     established in the Indenture, including provisions for reimbursing the
     Obligor for paying  all or any part of  such Cost under the aforesaid
     agreements  and contracts for the  acquisition of  the  Project  prior  to
     the issuance  of  the  Bonds, including  the Requisition  Certificate  and
     Completion  Certificate,  the forms of which are attached  hereto as
     Exhibits C and D. It is specifically provided,  however, that none  of the
     proceeds  from the sale  of the Bonds will be  used to  reimburse the
     Obligor  for, or  to pay  (and the  Obligor hereby covenants  and agrees
     not to  request reimbursement  of or  payment for)  any part of  the Cost
     of the  Project if  such use or  payment would result in  a violation of
     any of the  Obligor's covenants contained in this Loan Agreement or in the
     Tax Compliance Certificate.

     SECTION 3.2.  AGREEMENT TO ISSUE  BONDS; APPLICATION OF BOND  PROCEEDS. In
order to provide funds to  finance the Project, as provided  in Section 4.1
hereof,  and at the request of the  Obligor, the Issuer  agrees that, pursuant
to the Indenture,  it will issue, sell  and cause to be  delivered to the
purchaser or  purchasers thereof, the Bonds bearing interest, maturing and
subject to prior redemption as set forth  in the Indenture.  The Issuer  will
make  available the  proceeds of  the  Bonds to  the Obligor by depositing the
proceeds of the Bonds in the  Construction Fund pursuant to Section 4.03 of the
Indenture. Disbursements of  money on deposit in the Construction Fund shall be
made in accordance with the conditions set forth in the Indenture.

     SECTION  3.3.  APPROVALS  AND PERMITS.  The  Obligor  has  obtained all
permits necessary  with  respect to  the construction,  acquisition  and
installation  of the Project or, if not  obtained on the date of  this Loan
Agreement, are expected  to be obtained in the  normal course of business at or
prior  to the time those permits are required.

     SECTION 3.4. TITLE. Except as provided in  this Loan Agreement, the Issuer
shall have no other right, title,  or interest in and to the Project. Except
for making the proceeds of  the Bonds  available to the  Obligor from the
source and in  the manner provided  in this Loan  Agreement, the Issuer  shall
not be responsible  or liable in any manner for  any claims, losses, damages,
penalties, costs, taxes, or  fines with respect to  the acquisition,
installation, construction,  operation, maintenance  or ownership of the
Project.

     SECTION 3.5. INVESTMENT  OF MONEYS IN THE  CONSTRUCTION FUND AND THE  BOND
FUND.  Any moneys held  in the  Construction Fund and  the Bond  Fund shall  be
invested  or reinvested  by the  Trustee,  at  the written  direction  of the
Authorized  Obligor Representative as provided in





                                 LOAN AGREEMENT
                                    Page 12
<PAGE>   16

Article VI  of  the Indenture,  to  the extent  permitted by  law, in
Investment Obligations.  Any such  Investment Obligations may  be purchased  at
the  offering or market price thereof at the time of such  purchase. The
Trustee may make any and  all such investments through its own investment
department.

     The investments so purchased  shall be held by  the Trustee and shall  be
deemed at all  times a part of the Construction  Fund or the Bond Fund,  as the
case may be, and  the  interest  accruing thereon  and  any  profit  realized
therefrom shall  be credited  to such Fund  and any  net losses resulting  from
such  investment shall be charged to such Fund and paid by the Obligor.

     SECTION  3.6. ADDITIONAL BONDS.  The Issuer  covenants that  it shall  not
issue additional bonds on behalf  of the Obligor without  the prior written
consent of  the Bank,  and an opinion of  Bond Counsel and  the Attorney
General of  the State to the effect that  the issuance  of such  additional
bonds  will not  adversely affect  the exclusion from gross income for federal
income tax purposes of interest  on the Bonds Outstanding. The Obligor
understands that the Issuer is under no obligation to issue additional bonds.

     SECTION 3.7. ISSUER MAKES  NO WARRANTIES REGARDING THE  PROJECT. The
Issuer  has not made  an inspection  of the  Project, and  makes no  warranty
or  representation, express  or implied or otherwise, with  respect to the
Project  or the location, use, description, design,  merchantability, fitness
for use  for any particular  purpose, condition or durability thereof, or as to
the quality of the material  or workmanship therein, it  being agreed  that the
Obligor is  to bear  all risks  incident to  the Project.  The Issuer  is to
have no  responsibility or  liability for  any defect or deficiency  in the
Project, whether patent or latent. The Issuer makes no warranty or
representation that the moneys contained in the Construction Fund will  be
sufficient to pay all of the Project Costs attributable to the Project.


                                   ARTICLE IV

                              REPAYMENT PROVISIONS

     SECTION 4.1.  THE LOAN.  The Issuer  covenants and  agrees, upon  the
terms  and conditions of this  Loan Agreement, to  loan the proceeds  received
from the sale  of the Bonds  to the Obligor  in order  to finance  all or  a
part  of the  Cost of  the Project.  Pursuant to this  covenant and agreement,
the Issuer will  issue the Bonds upon the terms  and conditions contained  in
the Indenture  and this Loan  Agreement, and will loan the proceeds  of the
Bonds to the Obligor to be  applied as provided in Article III hereof. These
proceeds shall be disbursed by the Trustee to or on  behalf of the Obligor as
provided in Section 4.03 of the Indenture.

     SECTION 4.2. REPAYMENT OF THE LOAN AND PAYMENT OF OTHER AMOUNTS PAYABLE.

          (a)  The Obligor  covenants and  agrees to make  or cause  to be made
     Loan Payments to the Trustee, as  assignee of the Issuer, equal to  the
     principal of, premium,  if any, and interest  on the Bonds  for deposit by
     the  Trustee in the Bond Fund, which shall at all times be  sufficient to
     enable the Trustee to  pay when  due  (whether  at  maturity  or  upon
     redemption  prior  to  maturity  or acceleration) the principal of,
     premium, if any,





                                 LOAN AGREEMENT
                                    Page 13
<PAGE>   17

     and interest on the Bonds. All Loan Payments  shall be made or shall be
     on deposit in  immediately available funds not later than 12:00 p.m.,
     Detroit, Michigan, time  on the Business Day  on which such payment  on
     the Bonds is to be made. The  Excess Amount (as  defined below) held  by
     the Trustee  in the Bond  Fund on an  Interest Payment Date  shall be
     credited  against the payment  due on  such  date; and  provided  further,
     that,  subject to  the provisions of  the  immediately  following
     sentence,  if  at any  time  the amount of Available Moneys held by  the
     Trustee in the Bond Fund should  be sufficient  (and  remain  sufficient)
     to  pay  on  the  dates required  the principal of,  interest and premium,
     if any, on  the Bonds  then remaining unpaid, the  Obligor shall not be
     obligated to make or cause to be made any further   payments  under   the
     provisions   of  this   Section   4.2(a).  Notwithstanding the  provisions
     of the  preceding sentence, if  on any date the Excess Amount held  by the
     Trustee in the Bond  Fund is insufficient to make the then  required
     payments of principal (whether at  maturity or upon redemption  prior to
     maturity  or acceleration),  interest and  premium, if any, on  the Bonds
     on such date,  the Obligor shall forthwith  pay or cause to  be paid such
     deficiency. The term  "Excess Amount" as  of any Interest Payment Date
     shall mean the amount of Available Moneys in the Bond Fund  on such  date
     in excess  of  the  amount  required  for the  payment  of  the principal
     of the  Bonds which previously have  matured at maturity or  on a date
     fixed for redemption and  premium, if any, on such Bonds  in all cases
     where  Bonds have  not been  presented for  payment  and paid,  or for
     the payment  of interest  which  has previously  come  due in  all  cases
     where interest checks have not been presented for payment and paid.

          If  the Obligor shall  fail to pay  or cause to  be paid  any Loan
     Payments under this  Section 4.2(a), the Loan Payment so in  default shall
     continue as an obligation  of the Obligor until the amount  so in default
     shall have been fully paid.

          (b)  To the  extent they  are not paid  out of  the Construction
     Fund,  the Obligor shall  pay to  the Issuer  the Issuer's  fee at
     closing  and all  other Issuance Costs  and the following within ten  days
     of demand therefor, including but not  limited to, (i)  other
     out-of-pocket costs  and expenses of  the Issuer incidental to the
     performance  of its obligations under this Loan Agreement, the Indenture
     and the  Bond Purchase Agreement,  to the extent  not paid as  Project
     Costs,  and  (ii)  the out-of-pocket  expenses  of  the  Issuer related
     to  the Project, or incurred  by the  Issuer in enforcing  the provisions
     of this  Loan Agreement and the Indenture.

          (c)  The  Obligor also agrees  to pay to  the Trustee and  the Tender
     Agent (l)  the initial  acceptance fee  of the Trustee  and the  Tender
     Agent  and the costs  and  expenses,  including reasonable  attorneys'
     fees,  incurred  by the Trustee and the  Tender Agent in entering  into
     and executing the  Indenture and the  Tender Agreement, and  (2) during
     the  term of  this Loan Agreement  (i) an amount equal  to the  annual fee
     of  the Trustee  and the Tender  Agent for  the services  of  the  Trustee
     and  the Tender  Agent  rendered  and  its  expenses incurred, under  the
     Indenture  and the Tender  Agreement, including  reasonable attorneys'
     fees, as  and when the  same become due,  and (ii) the fees,  charges and
     expenses of  the Trustee, the Tender Agent,  and the Bond Registrar,  as
     and when the same become due.





                                 LOAN AGREEMENT
                                    Page 14
<PAGE>   18

          (d)  The Trustee  is  authorized  and directed  to  draw moneys
     under  the Letter of  Credit in accordance with the provisions of  the
     Indenture to pay the principal  of, premium, if any (to the  extent
     covered by the Letter of Credit), and  interest  on the  Bonds if  and
     when  due,  and any  moneys derived  from a drawing  under  the Letter  of
     Credit  shall constitute  a  credit against  the obligation of the
     Obligor to make payments under subsection (a) of this Section 4.2.

          (e)  If the  date when  any of the  payments required  to be  made by
     this Section 4.2 is not  a Business Day, then such  payments may be made
     on  the next Business Day with  the same force and effect as if  made on
     the normal due date, and no interest  shall accrue for the period  after
     such date through  such next Business Day.

          (f)  The Obligor agrees to pay the Remarketing  Agent all fees and
     expenses (including reasonable attorneys' fees) due under the Remarketing
     Agreement.

     SECTION 4.3. NO DEFENSE OR  SETOFF--UNCONDITIONAL OBLIGATION. The
obligations of the  Obligor to make the payments  required in Section 4.2
hereof  and to perform and observe the  other agreements  on its  part
contained  herein shall  be absolute  and unconditional, irrespective  of any
defense  or any rights  of setoff,  recoupment or counterclaim it might
otherwise have against  the Issuer, the  Trustee or the  Bank.  During the
term of this  Loan Agreement, the  Obligor shall  pay the payments  to be made
in Section  4.2 hereof and  all other  payments required hereunder  free of any
deductions and  without  abatement,  diminution or  setoff  other than  those
herein expressly  provided. Until  such  time as  the  principal of,  premium,
if any,  and interest on  the Bonds  shall have  been  fully paid,  or
provision  for the  payment thereof shall have been made in  accordance with
the Indenture, the Obligor: (i) will not suspend  or discontinue  any payments
provided  for in  Section 4.2 hereof;  (ii) will perform and  observe all of
its agreements contained in this Loan Agreement; and (iii)  will  not terminate
this Loan  Agreement  for any  cause,  including, without limiting the
generality  of the foregoing, its failure to  complete the construction,
acquisition  and  installation  of  the  Project,  the  occurrence  of  any
acts  or circumstances that  may constitute failure of consideration,
destruction of or damage to the Project, commercial frustration of purpose, any
change in the tax laws of  the United States of  America or the State  or any
political subdivision thereof,  or any failure of the Issuer, the Trustee or
the  Bank to perform and observe any agreement, whether express or  implied, or
any duty, liability  or obligation arising out  of or connected with  this Loan
Agreement, except  to the  extent permitted  by this  Loan Agreement.

     SECTION  4.4. ASSIGNMENT  AND PLEDGE  OF ISSUER'S  RIGHTS. As  security
for the payment of  the Bonds  (including redemption  payments), the  Issuer
will assign  and pledge  to the Trustee all  right, title, and  interest of the
Issuer  in and to this Loan Agreement,  including the right to receive
payments hereunder (except the right to receive  payments, if any, under
Sections 4.2(b), 5.3,  6.3, and 9.12  hereof and the  rights to  make
determinations  and  receive notices  as  herein provided),  and hereby directs
the  Obligor to  make  said payments  directly  to the  Trustee.  The Obligor
herewith assents to  such assignment and pledge and will  make or cause to be
made  payments directly  to the Trustee  without defense  or setoff by  reason
of any dispute between the Obligor and the Issuer, the Trustee or the Bank.





                                 LOAN AGREEMENT
                                    Page 15
<PAGE>   19


     SECTION 4.5.  OBLIGOR'S PERFORMANCE UNDER INDENTURE. The Obligor agrees,
for the benefit of  all Registered Owners, to do and  perform all acts and
things required in the Indenture to be done or performed by it.

     SECTION 4.6. MANDATORY PURCHASE OF THE BONDS BY THE OBLIGOR.

          (a)  The Obligor agrees to purchase on  the dates on which Bonds are
     to  be purchased pursuant to the Demand Purchase  Option, all of the Bonds
     or  portions thereof properly delivered  to the Tender Agent for purchase
     in accordance with the provisions of  Section 1.04 of the  Indenture, at a
     price equal to 100%  of the principal  amount thereof, plus accrued
     interest; provided, however, that if and to  the  extent all  or  a
     portion  of those  Bonds  are remarketed  by  the Remarketing Agent, the
     Obligor  shall be deemed to have satisfied its obligation to purchase the
     Bonds so tendered for purchase.

          (b)  The Obligor  shall satisfy the  obligation set forth  in
     paragraph (a) of this  Section 4.6 by  providing to the Trustee  a Letter
     of  Credit providing for the payment of the purchase price of Bonds.


                                   ARTICLE V

                        SPECIAL COVENANTS AND AGREEMENTS

     SECTION 5.1.  ISSUER'S, TRUSTEE'S, AND  BANK'S RIGHT OF  ACCESS TO  THE
PROJECT.  The Obligor  agrees that  during the  term  of this  Loan Agreement
the Issuer,  the Trustee, the  Bank, and  their duly  authorized agents  shall
have  the right  during regular  business  hours, with  reasonable  notice,  to
enter  upon  and  examine and inspect the Project,  provided that  neither the
Issuer,  the Trustee,  nor the  Bank will materially disturb  the business
operations of  the Obligor and each  shall hold in confidence  all confidential
information,  trade secrets, patents,  and patentable information.

     SECTION 5.2.  OBLIGOR TO MAINTAIN  EXISTENCE; CONDITIONS UNDER  WHICH
EXCEPTIONS PERMITTED. Except as provided below, the Obligor agrees  that during
the term of this Loan  Agreement  it will  maintain  its existence  and  will
not  dispose  of all  or substantially all of  its assets.   The Obligor  may
consolidate with  or merge  into another entity or permit one or  more entities
to consolidate with or  merge into it, provided that any surviving, resulting
or transferee entity shall be qualified  to do business in the State and  shall
assume in writing or by operation of  law all of the obligations of  the
Obligor, under  this Loan Agreement,  the Reimbursement Agreement and the
Remarketing Agreement.

     SECTION 5.3. INDEMNIFICATION COVENANTS.

          (a)  The  Issuer and  its  members, officers,  agents,  and employees
     (the "Indemnified Persons") shall  not be liable to  the Obligor for any
     reason. The Obligor shall  indemnify  and  hold  the  Issuer  and  the
     Indemnified  Persons harmless  from  any  loss,  expense  (including
     reasonable  counsel  fees),  or liability of any nature due to any and all





                                 LOAN AGREEMENT
                                    Page 16
<PAGE>   20

     suits, actions, legal or  administrative proceedings, or claims arising
     or resulting from, or in any way connected with:

               (1)  the acquisition, operation, use or maintenance of the
                    Project,

               (2)  any act,  failure  to act,  or misrepresentation  by any
          person, firm,  corporation,  or  governmental  agency,  including
          the  Issuer,  in connection with the issuance, sale, delivery or
          remarketing of the Bonds,

               (3)  any act,  failure to act,  or misrepresentation by  the
          Issuer in connection  with this  Loan  Agreement, the  Indenture,
          the Bond  Purchase Agreement, or any other document involving the
          Issuer in this matter, or

               (4)  the  selection  and  appointment   of  firms  providing
          services related to the Bond transaction.

     If  any suit,  action,  or  proceeding is  brought  against  the Issuer
     or  any Indemnified Person, that action  or proceeding shall  be defended
     by counsel  to the Issuer  or the Obligor, as the Issuer shall determine.
     If the defense is by counsel  to the Issuer,  which is the Attorney
     General of the  State or may, in some instances,  be private, retained
     counsel, the Obligor  shall indemnify the Issuer  and  Indemnified
     Persons  for  the  reasonable  cost  of  that  defense including
     reasonable counsel  fees. If  the Issuer determines  that the  Obligor
     shall defend the  Issuer or  Indemnified Person, the  Obligor shall
     immediately assume the  defense at  its own cost.  The Obligor shall  not
     be liable  for any settlement of any  proceeding made without its consent
     (which  consent shall not be unreasonably withheld).

          (b)  The Obligor  shall not be  obligated to  indemnify the  Issuer
     or  any Indemnified Person  under subsection (a), if a court with
     competent jurisdiction finds that the  liability in question  was caused
     by  the willful misconduct  or sole gross negligence  of the Issuer or the
     involved  Indemnified Person, unless the court determines  that, despite
     the adjudication of liability but in view of all circumstances of the
     case, the Issuer or the Indemnified Person(s)  is (are) fairly and
     reasonably  entitled to  indemnity for the  expenses which the  court
     considers proper.

          (c)  The Obligor  shall  also  indemnify  the  Issuer  for  all
     costs  and expenses, including reasonable counsel fees, incurred in:

               (1)  enforcing  any  obligation   of  the  Obligor  under   this
          Loan Agreement or any related agreement,

               (2)  taking any action requested by the Obligor,

               (3)  taking  any   action  required  by   this  Loan
          Agreement,  the Indenture, the Bond Purchase Agreement or any related
          agreement, or





                                 LOAN AGREEMENT
                                    Page 17
<PAGE>   21

               (4)  taking any action  considered necessary by  the Issuer and
          which is authorized  by this  Loan Agreement,  the Indenture,  the
          Bond  Purchase Agreement, or any related agreement.

          (d)  The Obligor also agrees to pay and  to indemnify and hold 
     harmless the Trustee, any person  who "controls" the Trustee within the 
     meaning of Section 15 of the  Securities Act  of 1933,  as amended,  and a
     any member, officer, agent, director, official and employee of the Trustee 
     (collectively  called  the "Indemnified Parties") from and against, any
     and all claims,  damages, demands, expenses, liabilities  and losses of 
     every kind, character  and nature asserted by or on  behalf of any  person
     in connection  with (i) the issuance,  offering, sale, or delivery  of the
     Bonds, the Indenture  and this Loan Agreement  and the obligations 
     imposed   on  the  Trustee  hereby  and  thereby;  or the design,
     installation,  operation,  use,  occupancy, maintenance,  or ownership  of 
     the Project; (ii)  any written statements  or representations made  or
     given  by the Obligor  or  any  of  its directors,  members, partners  or 
     employees  to  the Indemnified Parties, with respect to  the Obligor, the 
     Project, or the  Bonds, including,  but not  limited  to,  statements  or 
     representations  of  facts, financial information, or its general 
     affairs; (iii) damage to property  or any injury to or death of any person
     that may be  occasioned by any cause whatsoever pertaining to the Project;
     and (iv)  any loss or damage incurred by the  Trustee as a  result of 
     violation  by the  Obligor  of the  provisions of  Section  2.2 hereof, or 
     arising out of,  resulting from, or in  any way connected  with, the
     condition,  use, possession, conduct, management, planning, design,
     acquisition, installation, renovation  or sale  of the  Project or  any
     part  thereof to  the extent not  caused or occasioned by  the gross
     negligence or  willful misconduct of  such  Indemnified Party.  The 
     Obligor  also covenants  and  agrees, at  its expense, to pay, and to
     indemnify and save the Indemnified Parties harmless of, from and  against,
     all costs, reasonable attorney fees, expenses and liabilities incurred in 
     any action or  proceeding brought by reason of  any such  claim or demand.
     In  the event  that  any action or proceeding  is brought  against  the
     Indemnified  Parties by  reason of any such  claim or  demand, the 
     Indemnified Parties shall  immediately  notify the  Obligor, which  shall
     resist  and defend  any action or  proceeding on behalf of the 
     Indemnified Parties, including the employment of  counsel, the payment of 
     all expenses and  the right to negotiate  and consent to settlement.  Any
     one  or more  of the Indemnified Parties  shall have  the right  to employ 
     separate counsel  in any  such action  and  to  participate in  the 
     defense thereof, but the fees and expenses of such counsel  shall be at
     the expense  of such Indemnified Parties  unless the  employment of  such 
     counsel has  been specifically authorized  by the Obligor.  If such 
     separate counsel  is employed, the Obligor may join in any such suit for
     the protection of its own interests. The Obligor shall  not be  liable for
     any settlement of any  such action effected without its consent (which
     consent shall not be unreasonably withheld),  but if settled with the
     consent  of the Obligor or if there  be a final, unappealable judgment for
     the plaintiff  in any such action, the Obligor agrees to indemnify and
     hold harmless the Indemnified Parties.

          (e)  The  indemnification   provisions  herein  contained   shall
     not   be exclusive  or in  limitation of,  but shall  be  in addition  to,
     the  rights to indemnification of  the Indemnified Persons or the
     Indemnified Parties under any other agreement or law by which the Obligor
     is bound or to which it is subject.





                                 LOAN AGREEMENT
                                    Page 18
<PAGE>   22

          (f)  The obligations  of the Obligor  under this section  shall
     survive any assignment or termination of this Loan Agreement.

     SECTION 5.4. INSURANCE. The Obligor represents and  covenants that it will
keep, or cause to  be kept, in  force adequate  insurance of a  nature that
entities  would maintain  for  like  facilities  and  in  accordance  with  the
requirements  of  the Reimbursement Agreement  or any agreement securing the
Reimbursement Agreement. It is understood and  agreed  that the  Issuer and
the  Trustee shall  have no  duties  or responsibilities whatsoever  with
respect  to the  insurance of the  Project, or  the performance of  the Project
for  its designated purposes.  The net  proceeds received from any  casualty or
property insurance shall be  applied as provided in Section 5.6 hereof.

     Except as required by  the Reimbursement Agreement or any agreement
securing the Reimbursement Agreement, the Obligor shall have the  sole right
and responsibility to adjust  any  losses with  its  insurers  and to  conduct
negotiations in  connection therewith.

     SECTION 5.5. EMINENT DOMAIN.  In the event that  title to, or the
temporary use of,  the Project or  any part thereof shall  be taken by  Eminent
Domain, the Obligor shall be obligated to continue to  pay the Loan Payments
specified in Section  4.2(a) hereof, and the Issuer shall cause any net
proceeds received  by it or the Trustee as a result of such eminent domain to
be applied as provided in Section 5.6 hereof.

     SECTION 5.6.  APPLICATION  OF  NET PROCEEDS  OF  INSURANCE AND  EMINENT
DOMAIN.  Subject  to the  provisions  of the  Mortgage  and the  Security
Agreement (both  as defined  in  the Reimbursement  Agreement), the  net
proceeds of  property insurance carried with  respect to  the  Project pursuant
to the  provisions hereof,  the  net proceeds resulting  from  Eminent Domain
and  any other  amounts  receivable by  the Obligor, the Trustee or the Issuer
pursuant to the provisions of Section  5.4 and/or Section 5.5 hereof  shall
with  the consent of  the Bank  (so long as  the Letter  of Credit is in effect
and has not been wrongfully dishonored) be applied together  with such other
amounts  as necessary provided by the Obligor for the repair, replacement,
renewal or improvement (the "Restoration") of the Project (such funds to
remain with the  Bank and to be drawn down by the Obligor for Restoration of
the Project) and any proceeds  not so  used  shall be  used to  redeem the
Bonds  in accordance  with the provisions  of the Bonds  and Section  7.3
hereof.  Prior to their  expenditure, such amounts  shall be invested so  as
not to  have an adverse effect  on the exclusion of the interest  on the Bonds
from the gross income of the registered owners for federal income tax purposes.

     The  Obligor agrees that  if the net  proceeds from insurance  or
resulting from Eminent Domain relating  to the Project is applied to the
Restoration of the Project, it  will  restore  the Project,  or  cause  the
same  to  be done,  to  a  condition substantially  equivalent to its
condition prior to  the occurrence of  the event to which the net proceeds
were attributable. The Obligor shall  be entitled to the  net proceeds of any
insurance or resulting from  Eminent Domain relating to  property of the
Obligor not constituting part of the Project as provided herein.

     SECTION 5.7.  MAINTENANCE AND REPAIR.  The Obligor agrees that  it will
maintain the Project in good repair, working  order and operating condition,
making from  time to time all needed and proper repairs thereto.





                                 LOAN AGREEMENT
                                    Page 19
<PAGE>   23

     SECTION 5.8. QUALIFICATION  IN STATE. Subject  to the provisions of
Section 5.2 hereof, the  Obligor agrees that throughout the term of  this Loan
Agreement, it will be qualified to do business in the State.

     SECTION 5.9. LETTER OF CREDIT.

          (a)  On or  prior to  the issuance,  sale and  delivery of  the
     Bonds,  the Obligor hereby  covenants and agrees  to obtain and  deliver
     to the  Trustee the Letter of  Credit to  be issued  by the  Bank in favor
     of the  Trustee for  the benefit of the  owners from time to time of  the
     Bonds in the form  of Exhibit A to the Reimbursement Agreement. The Letter
     of Credit shall be dated the  date of issuance and  delivery of  the
     Bonds;  shall expire  on December  15, 2002,  and shall  comply with  the
     additional requirements  stated in  Section 5.01  of the Indenture.

          (b)  At any  time while  the Letter  of Credit  or a  Substitute
     Letter  of Credit  is in effect, subject to  the provisions of the
     Reimbursement Agreement, the Obligor from  time to  time may, at  its
     option,  deliver to  the Trustee  a Substitute Letter of Credit in
     substitution for the existing Letter  of Credit.  The Substitute Letter
     of Credit shall  be an  irrevocable direct-pay letter  of credit in
     substantially the same form,  tenor and amount as the existing  Letter of
     Credit and  shall  comply  with and  be  delivered  in compliance  with
     the provisions of Section 5.02 of the Indenture.

     SECTION 5.10. ISSUER'S  LIMITED LIABILITY.  It is recognized  that the
Issuer's only source of funds  with which to  carry out its commitments  with
respect to  this Loan Agreement  will be  from the  proceeds from  the sale of
the Bonds;  and it  is expressly  agreed   that  the  Issuer   shall  have  no
liability,  obligation,  or responsibility with  respect to  this Loan
Agreement  except to  the extent of  funds available from such Bond proceeds.
If, for any  reason, the proceeds from the sale of the Bonds are not
sufficient to pay the Cost  of the Project, the Obligor  shall pay the  balance
of  the funds necessary  to pay  the Cost  of the  Project from  its own funds,
and it shall not be entitled to reimbursement therefor.

     SECTION  5.11. COMPLIANCE WITH LAWS.  The Obligor shall,  throughout the
term of this Loan Agreement and  at no expense to the Issuer or Trustee,
promptly comply with all  laws,  ordinances,   orders,  rules,  regulations
and  requirements  of   duly constituted public authorities which  are
applicable to the Project or  to the repair and alteration  thereof, or  to the
use  or manner of  use of the  Project, provided, however,  that such  laws,
ordinances,  orders, rules,  regulations  and requirements shall  not
unlawfully  discriminate  against   the  Obligor.   Notwithstanding  the
foregoing, the Obligor shall have the right to contest the legality of any such
law, ordinance, order, rule, regulation or requirement as  applied to the
Project provided that, in the opinion of legal counsel acceptable  to the Bank,
such contest shall not in any way  materially and adversely affect or impair
the obligations of the Obligor under this Loan Agreement or the Indenture.





                                 LOAN AGREEMENT
                                    Page 20
<PAGE>   24


                                   ARTICLE VI

                         EVENTS OF DEFAULT AND REMEDIES

     SECTION 6.1. EVENTS  OF DEFAULT. The occurrence  and continuation of any
one of the following shall constitute an Event of Default hereunder:

          (a)  failure  by the  Obligor  to  pay or  cause  to  be paid  any
     amounts required to be paid as Loan Payments under this Loan Agreement on
     the dates and in the manner specified herein; or

          (b)  failure by  the Obligor to observe and perform any covenant,
     condition or agreement  on its part  to be observed  or performed in  this
     Loan Agreement, other than  as referred to  in subsection  (a) above, for
     a period  of 30  days after written  notice,  specifying  such  failure
     and  requesting  that  it  be remedied, is  given to  the Obligor  by the
     Issuer,  the Trustee  or the  Bank, unless (i)  the Trustee and the Bank
     shall agree in writing  to an extension of such  time prior to its
     expiration or (ii) if the failure is such that it can be corrected but not
     within such  30-day period, corrective action is instituted by the Obligor
     within such  period and  diligently pursued  until such failure  is
     corrected; or

          (c)  the dissolution or  liquidation of  the Obligor or  the filing
     by  the Obligor  of  a voluntary  petition  in bankruptcy,  or  failure
     by the  Obligor promptly to  lift any execution,  garnishment or
     attachment  of such consequence as will impair its ability  to carry on
     its  obligations hereunder, or an  order for relief under Title 11 of  the
     United States Bankruptcy Code, as amended from time to time, is entered
     against the Obligor, or a petition  or answer proposing the entry  of an
     order for  relief against the  Obligor under  Title 11 of  the United
     States  Bankruptcy  Code,  as  amended  from   time  to  time,  or  its
     reorganization, arrangement  or debt  readjustment under  any present or
     future federal bankruptcy  act or any similar  federal or state  law shall
     be  filed in any  court and such  petition or answer  shall not be
     discharged  within 90 days after the filing thereof, or  the Obligor shall
     fail generally to  pay its debts as they  become due, or  a custodian
     (including without limitation  a receiver, trustee, assignee  for the
     benefit  of creditors or  liquidator of  the Obligor) shall be appointed
     for or take possession  of all or a substantial  part of its property and
     shall  not be discharged within  90 days after such  appointment or taking
     possession, or  the  Obligor  shall  consent  to or  acquiesce  in  such
     appointment or taking possession, or  assignment by the Obligor for  the
     benefit of  its creditors, or the entry by  the Obligor into an agreement
     of composition with its  creditors, or the  adoption of  a resolution by
     the directors  of the Obligor  or  the taking  of  any  other action  to
     file  a petition  or  answer proposing the entry of  an order for relief
     against the Obligor under  Title 11 of  the United  States Bankruptcy
     Code, as  amended from time  to time,  or its reorganization, arrangement
     or  debt readjustment  under any  present or  future federal bankruptcy
     act  or any similar federal or state laws; provided, that the term
     "dissolution or  liquidation of the  Obligor," as used  in this
     subsection (c), shall not be construed to include  the cessation of the
     corporate existence of the Obligor  resulting either from a  merger or
     consolidation of  the Obligor into or  with another  entity or  a
     dissolution  or liquidation  of the  Obligor following a transfer of all
     or substantially all of its assets as





                                 LOAN AGREEMENT
                                    Page 21
<PAGE>   25

     an  entirety,  under the  conditions permitting  such actions  contained
     in Section 5.2 hereof; or

          (d)  any material warranty,  representation or other  statement made
     by  or on behalf  of the Obligor  contained herein, or  in any document
     or certificate furnished by the Obligor in compliance with or in reference
     hereto, is false  or misleading in any material respect when made; or

          (e)  The occurrence of an Event of Default under the Indenture.

     SECTION 6.2.  REMEDIES  ON DEFAULT.  Whenever any  Event of  Default shall
have occurred and be continuing  hereunder, the Trustee  may take any one  or
more of  the following remedial steps:

          (a)  The Issuer  or the  Trustee may  exercise any  right, power or
     remedy permitted to  it by  law, and  shall have  in particular,  without
     limiting  the generality of the  foregoing, the right to  declare the
     unpaid Loan  Payments to be  immediately  due  and  payable,  if
     concurrently  with  or  prior  to  such declaration  the unpaid  principal
     of  and all  unpaid  accrued interest  on the Bonds have  been declared to
     be  due and payable  under the Indenture,  and upon such declaration the
     unpaid  Loan Payments shall thereupon become  forthwith due and payable in
     an  amount sufficient to pay the principal of and interest on the Bonds
     under  Section  8.02  of the  Indenture,  without presentment,  demand  or
     protest, all of which  are hereby expressly waived. The  Obligor shall
     forthwith pay to the Trustee the entire principal of and interest accrued
     on the Bonds.

          Any declaration of acceleration  on the Bonds may be waived,
     rescinded and annulled pursuant to and in accordance with Section 8.11 of
     the Indenture.

          (b)  The  Issuer or  the  Trustee may  take whatever  action  at law
     or in equity as may  appear necessary or desirable  to collect the
     payments  and other amounts then due and thereafter to become due or to
     enforce the performance  and observance  of any obligation,  agreement or
     covenant of  the Obligor under this Loan Agreement, provided, however, all
     such action shall be with the  consent of the Bank (which consent  shall
     be required only so long  as the Letter of Credit is in effect and has not
     been wrongfully dishonored).

          (c)  The Issuer or the Trustee shall, subject to  the limitations set
     forth in  Section 5.1 of  this Loan Agreement,  have reasonable access  to
     the Project and the  right to inspect, examine and make copies of  the
     books and records and any and all accounts, data and  income tax and other
     tax returns of the  Obligor relating to the Project or an Event of Default
     during regular  business hours of the  Obligor  if reasonably  necessary
     in the  opinion  of the  Trustee  or the Issuer.

     In case  the Issuer or the  Trustee shall have  proceeded to enforce  its
rights under  this Loan  Agreement and  such  proceedings shall  have  been
discontinued  or abandoned for any  reason or shall  have been determined
adversely to the  Issuer or the Trustee as the case  may be, then and in every
such case  the Obligor, the Issuer and the Trustee shall be restored
respectively to





                                 LOAN AGREEMENT
                                    Page 22
<PAGE>   26

their several positions and rights hereunder, and all rights, remedies and
powers of the Obligor,  the Issuer and the Trustee shall continue  as though no
such proceeding had been taken, except to the extent of any adverse
determination.

     In  case there  shall  be pending  proceedings  for the  bankruptcy  or
for  the reorganization  of  the  Obligor  under  the federal  bankruptcy  laws
or  any other applicable law, or in case  a receiver or trustee  shall have
been appointed for  the property  of the Obligor,  or in the  case of any other
similar judicial proceedings relative to the Obligor, or to the creditors  or
property of the Obligor, the Trustee shall be  entitled and empowered, by
intervention in such proceedings  or otherwise, to file and prove  a claim or
claims for  the whole amount owing and  unpaid pursuant to this Loan Agreement
and, in  case of any judicial proceedings, to file such proofs of claim and
other papers  or documents as may be necessary or advisable  in order to have
the claims of  the Trustee allowed in such judicial  proceedings relative to
the Obligor, its  creditors or its  property, and to  collect and  receive any
moneys  or other property payable or deliverable on any such claims, and to
distribute the same after  the deduction  of its  charges and  expenses;  and
any  receiver, assignee  or trustee in bankruptcy or  reorganization is hereby
authorized to make such  payments to the Trustee,  and to pay  to the Trustee
any amount due  it for compensation  and expenses, including reasonable
attorney  fees incurred by it up  to the date of  such distribution.

     SECTION 6.3.  AGREEMENT TO PAY  ATTORNEYS' FEES AND  EXPENSES. In the
event the Issuer or  the  Trustee should  employ  attorneys or  incur  other
expenses  for  the collection of the  payments due under this Loan  Agreement
or the enforcement  of the performance or observance of any  obligation or
agreement on the part of  the Obligor herein  contained, the  Obligor agrees
that  it will  on demand  therefor pay  to the Issuer or  the Trustee the
reasonable fees of such  attorneys and such other expenses so incurred by the
Issuer or the Trustee.

     SECTION 6.4. NO REMEDY  EXCLUSIVE. No remedy herein  conferred upon or
reserved to the Issuer  or the  Trustee is intended  to be  exclusive of  any
other  available remedy or  remedies, but each and every such remedy shall  be
cumulative and shall be in addition to every other remedy  given under this
Loan Agreement and the  Indenture now  or hereafter existing at law or in
equity or by statute. No delay or omission to exercise  any right  or  power
accruing  upon any  Event  of Default  hereunder shall impair  any such right
or power or shall be construed to be a waiver thereof, but any such right  and
power  may be  exercised from time  to time  and as  often as may  be deemed
expedient. In order to  entitle the Issuer to exercise any remedy  reserved to
it in this Article VI, it shall not be  necessary to give any notice, other
than such notice as may  be herein expressly required.  Such rights and
remedies as are  given the  Issuer hereunder  shall  also extend  to the
Trustee, and  the Trustee  and the Owners from time to  time of the Bonds shall
be deemed third party  beneficiaries of all covenants and agreements herein
contained.

     SECTION 6.5.  NO ADDITIONAL  WAIVER  IMPLIED BY  ONE WAIVER.  In the
event  any agreement contained  in this  Loan Agreement should  be breached  by
the Obligor  and thereafter waived by the Issuer or  the Trustee, such waiver
shall be limited to  the particular  breach so  waived and  shall  not be
deemed to  waive  any other  breach hereunder.





                                 LOAN AGREEMENT
                                    Page 23
<PAGE>   27


                                  ARTICLE VII

                          PREPAYMENT OF LOAN PAYMENTS

     SECTION 7.1.  OBLIGATION  TO  PREPAY THE  LOAN  PAYMENTS UPON
DETERMINATION  OF TAXABILITY. Upon the occurrence  of a Determination  of
Taxability the Obligor  shall have, and hereby accepts,  the obligation to
prepay the Loan Payments as a whole, and not in part,  in furtherance of  its
obligation under  Section 4.2(a) hereof,  on any date not  less than 30  days
or more than  60 days after  the mailing by  first class mail of written notice
of redemption because of the occurrence of a  Determination of Taxability to
the registered owners of  the Bonds pursuant to the terms of the Bonds.  The
amount to  be prepaid  pursuant to this  Section 7.1  shall be 100%  of the
then outstanding principal amount  of the Bonds (103%  during the Fixed Rate
Period) plus accrued interest to the date fixed  for redemption. The Trustee
shall, in  accordance with Section  4.04 of the  Indenture, draw upon  the
Letter  of Credit to  prepay the principal of and  accrued interest on the
Bonds in accordance with the  terms of the Letter of Credit.

     SECTION  7.2.  GENERAL OPTION  TO PREPAY  THE  LOAN PAYMENTS.  With  the
written consent of the  Bank (so long as the  Letter of Credit is in effect
and has not been wrongfully dishonored), the Obligor shall have, and is hereby
granted, the  option to prepay the Loan  Payments payable under Section  4.2(a)
hereof, in whole or  in part, by paying to the Trustee an amount sufficient  in
Available Funds to redeem all or  a portion of  the Bonds  then  Outstanding,
in  the manner,  at the  redemption  prices (including premium, if any), from
the sources and on  the dates specified in Sections 1.03(a) and  (b) of  the
Indenture  and  in the  Bonds for  optional redemption.  The Trustee shall,  in
accordance  with  Section 4.04  of the  Indenture, draw  upon  the Letter of
Credit to prepay  the principal of  and any applicable  redemption premium (if
covered by the Letter of Credit) and  accrued interest on the Bonds payable
under this Section 7.2 in accordance  with the terms of the Letter of Credit.
The Obligor may not revoke its  election to prepay all or  part of the Loan
Payments  without the prior written consent of the Bank.

     SECTION  7.3. EXTRAORDINARY  OPTIONAL PREPAYMENT. During  the Fixed  Rate
Period and with  the written consent  of the  Bank (so long  as the Letter  of
Credit  is in effect and  has not  been  wrongfully dishonored),  the Obligor
shall have,  and  is hereby granted, the option  to prepay the unpaid balance
of the Loan Payments payable under Section 4.2(a)  hereof, together with
interest  thereon, as may be  required to redeem, pursuant to the  terms of the
Bonds, all Bond  principal then outstanding if, in the reasonable opinion of
the Obligor:

          (i)  All  or  substantially all  of the  Project  shall have  been
     damaged, destroyed, condemned or  taken by eminent domain  and the Obligor
     elects  not to reconstruct it; or

          (ii) the construction  or operation of the Project is enjoined or
     prevented or  is otherwise prohibited  by, or conflicts  with, any order,
     decree, rule or regulation  of  any  court,   or  federal,  state  or
     local   regulatory  body, administrative agency or other governmental
     body.

     For purpose  of this Section 7.3, the "reasonable  opinion of the Obligor"
shall be expressed to the Trustee  by delivery of a  certificate of the
Authorized  Obligor Representative stating that  it is the opinion of the
Obligor that the circumstances, situations or conditions





                                 LOAN AGREEMENT
                                    Page 24
<PAGE>   28

described in clause (i)  or (ii) have occurred to the extent required for the
Obligor to exercise the option provided.

     SECTION 7.4. PREPAYMENT  FROM CONSTRUCTION FUND.  The Obligor acknowledges
that the  Bonds  are  subject  to  mandatory redemption  prior  to  maturity
in  part  in authorized denominations from  funds remaining  on deposit in  the
Construction  Fund (except certain funds  identified in the Completion
Certificate)  upon the earlier of the  completion of the Project  in accordance
with the  Loan Agreement or December 1, 2000, at  a redemption  price of  100%
of the  principal amount  to be redeemed  plus accrued  interest to  the  date
fixed for  redemption.  In  the furtherance  of  its obligations  under Section
4.2(a)  hereof, the Obligor shall  cause the prepayment of Loan Payments from
funds remaining on deposit in the Construction Fund to facilitate the mandatory
redemption of Bonds.

     SECTION 7.5. OBLIGATION TO PREPAY LOAN  PAYMENTS ON FAILURE TO RENEW OR
REPLACE LETTER OF CREDIT.  The Obligor acknowledges that  the Bonds are subject
to mandatory redemption prior to  maturity if the Obligor  does not renew the
Letter  of Credit or obtain a  Substitute  Letter  of  Credit at  least  60
days  prior to  the  date  of expiration  or  termination of  the  Letter of
Credit,  all as  provided  in Section 1.03(e)  of the Indenture, at  a
redemption price of 100%  of the principal amount of the  Bonds to be
redeemed, if the  Bonds bear interest  at the Weekly  Rate, or at a redemption
price of up  to 103% of the principal  amount of the Bonds to  be redeemed as
provided in  Section 1.03(e) of the Indenture,  if the Bonds bear interest  at
the Fixed Rate.

     SECTION 7.6. NOTICE OF PREPAYMENT. In furtherance  of an obligation
imposed upon the Obligor or to exercise  an option granted to the Obligor by
Sections 7.2, 7.3 and 7.4 hereof,  the Obligor  shall give  not less  than 40
days written  notice to  the Issuer, the  Trustee and the  Bank which notice
shall specify therein the  date upon which prepayment  will be made, which
date shall be not  less than 40  days from the date  the notice  is mailed,
and  shall specify  that all  of  the outstanding  Loan Payments or  a
specified portion thereof is to be so prepaid. The Issuer has directed the
Trustee to  take  forthwith all  steps  (other  than the  payment  of the
money required  to  redeem the  Bonds)  necessary under  the  applicable
provisions  of the Indenture  to effect the redemption of  the Bonds (or a
portion thereof) as provided in this Article VII.


                                  ARTICLE VIII

                       RECORDING AND FINANCING STATEMENTS

     SECTION 8.1.  RECORDING  AND  FINANCING STATEMENTS.  The  Obligor will,
at  its expense, take  all necessary action,  if any, to maintain  and preserve
the  lien and security  interest of  the Indenture  and  this Loan  Agreement
so  long as  any Bond remains Outstanding.

     The Obligor  will, forthwith after the  execution and delivery of  the
Indenture and thereafter  from time to  time, cause the Indenture  to be filed,
registered and recorded in that  manner and in those  places, if any, as  may
be required by  law in order to  publish notice of and  fully to perfect  and
protect the lien  and security interest of  the Indenture and this Loan
Agreement.  The Obligor will pay or cause to be paid  all  filing,
registration  and recording  fees  incident  to  such  filing, registration and
recording, and all expenses incident to the preparation,





                                 LOAN AGREEMENT
                                    Page 25
<PAGE>   29

execution and  acknowledgment  of  such instruments  of  further assurance,
and  all federal  or state  fees  and other  similar  fees, duties,  imposts,
assessments and charges  arising out  of  or in  connection with  the execution
and delivery  of the Indenture,  said  financing statements  and  such
instruments  of  further assurance.  Copies of those filings, as filed, shall
be provided to the Trustee.


                                   ARTICLE IX

                                 MISCELLANEOUS

     SECTION  9.1. NOTICES. All  notices, certificates or  other communications
shall be sufficiently given  and shall be  deemed given on  the first to  occur
of (i)  two Business Days after such notices are deposited in the United States
mail and sent  by first  class mail, postage prepaid,  (ii) when the same are
delivered, in each case, to the parties at the  addresses set forth below or at
such other  address as a party may designate  by notice to  the other parties,
or (iii) when  the same are  sent by facsimile or telecopy (the  receipt of
which  is orally or electronically  confirmed) promptly confirmed in writing by
first class mail, postage prepaid:

     If to the Issuer:

          Michigan Strategic Fund
          P. 0. Box 30234
          Lansing, Michigan 48909
          Attention: President
          Telephone No. (517) 335-4417
          Facsimile No. (517) 335-3059

     If to the Obligor:

          Atmosphere Annealing, Inc., a Michigan corporation
          209 W. Mt. Hope
          Lansing, Michigan 48910
          Attention: Michael W. Wisti, President
          Telephone No. (517) 485-5090
          Facsimile No. (517) 482-7240

          with a copy to:

          MAXCO, Inc.
          1118 Centennial Way
          Lansing, MI 48917
          Attention: Vincent Shunsky, Vice President
          Telephone No. (517) 321-3130
          Facsimile No. (517) 321-1022





                                 LOAN AGREEMENT
                                    Page 26
<PAGE>   30

     If to the Trustee:

          First of America Bank, N.A.
          1001 South Worth
          Birmingham, Michigan 48009
          Attention: Corporate Trust Department
          Telephone No. (810) 901-1433
          Facsimile No. (810) 901-2457

     If to the Bank:

          First of America Bank, N.A.
          P. O. Box 30120
          Lansing, Michigan 48909
          Attention: Commercial Loan Department
          Telephone No. (517) 334-1600
          Facsimile No. (517) 334-5489

          with a copy to:

          First of America Bank, N.A.
          108 East Michigan Avenue
          Kalamazoo, Michigan 49007
          [Mail Code K-BO1-2C]
          Attention: Corporate and Municipal Finance Division
          Telephone No. (616) 376-9040
          Facsimile No. (616) 376-9152

A duplicate copy  of each notice, certificate or  other communication given
hereunder by either the Issuer or  the Obligor to the other shall also be
given to the Trustee and the Bank.

     SECTION 9.2. ASSIGNMENTS.  The Issuer shall assign and pledge to the
Trustee its right,  title and interest in  and to this Loan Agreement  as
provided by Section 4.4 hereof,  and the Obligor may with  the consent of the
Bank  (so long as the Letter of Credit is in effect and has not been
wrongfully dishonored) assign to any surviving, resulting or transferee
corporation or entity its rights and  obligations under this Loan Agreement as
provided by Section 5.2 hereof.

     SECTION 9.3.  SEVERABILITY. If any  provision of  this Loan  Agreement
shall  be held or deemed  to be or shall,  in fact, be  illegal, inoperative or
unenforceable, the same  shall not  affect any  other provision  or provisions
herein contained  or render the same invalid, inoperative or unenforceable to
any extent whatsoever.

     SECTION   9.4.  EXECUTION   OF  COUNTERPARTS.   This  Loan   Agreement
may   be simultaneously executed in several  counterparts, each of which shall
be an original and all of which shall constitute but one and the same
instrument.

     SECTION 9.5. AMOUNTS REMAINING IN ANY FUND OR WITH TRUSTEE. It is agreed
by  the parties hereto that after payment in full of  (i) the principal of,
premium, if  any, and interest on





                                 LOAN AGREEMENT
                                    Page 27
<PAGE>   31

the Bonds,  (ii) the  fees,  charges, indemnities  and expenses  of the
Issuer,  the Trustee and  the Tender  Agent in  accordance herewith  and with
the Indenture  (the payment of which  fees, charges,  indemnities and expenses
shall be  evidenced by  a written certification of the Obligor that  it has
fully paid all such  fees, charges, indemnities and  expenses), and  (iii) all
other  amounts required  to be paid  under this Loan Agreement  and the
Indenture, any amounts remaining  in any fund or account maintained under this
Loan Agreement or  the Indenture, (other  than amounts in  the Rebate  Fund
under Section  4.06 of the  Indenture) and not applied  to the principal of,
premium, if  any, and interest on  the Bonds shall belong  to and be paid  to
the Obligor by  the Trustee, provided, that, prior to  making any payments,
Trustee shall request a  written statement from  the Bank as  to whether or
not the Bank  has been reimbursed  by  the Obligor  for any  and  all drawings
under  the Letter  of Credit pursuant to the  Reimbursement Agreement  or
whether any  other obligations are  then due  and owing  to  the Bank  under
the Reimbursement  Agreement,  and such  amounts remaining in the Bond  Fund
shall, upon written notice from the Bank that the Obligor has not reimbursed
the Bank under the  Reimbursement Agreement for any  such drawing under the
Letter of Credit  or for any  other obligation then  due and owing  to the Bank
under the  Reimbursement Agreement  (which notice shall  state the
unreimbursed amount),  belong to and  be paid to  the Bank by  the Trustee to
the extent that the Obligor has not so reimbursed the Bank.

     SECTION  9.6.  AMENDMENTS,  CHANGES,  AND  MODIFICATIONS.  Except  as
otherwise provided in this Loan Agreement or the  Indenture, subsequent to the
initial issuance of the Bonds  and prior  to their payment  in full,  this Loan
Agreement  may not  be effectively amended, changed,  modified, altered, or
terminated without the  written consent of the  Trustee and the Bank  (so long
as the  Letter of Credit is  in effect and has not been wrongfully dishonored).

     SECTION 9.7.  GOVERNING LAW. This  Loan Agreement shall  be governed
exclusively by and construed in accordance with the applicable law of the
State.

     SECTION 9.8.  AUTHORIZED OBLIGOR REPRESENTATIVE.  Whenever under  the
provisions of this Loan  Agreement the approval  of the  Obligor is required
or the Obligor  is required to take some action  at the request of the Issuer,
the Trustee  or the Bank, such  approval or  such request  shall be  given  for
the  Obligor by  the Authorized Obligor  Representative,  and  the  Issuer,
the  Trustee,  and  the  Bank  shall  be authorized  to act  on any such
approval or  request and neither  party hereto shall have any complaint
against the other or against the Trustee  or the Bank as a result of any such
action taken.

     SECTION 9.9. TERM OF LOAN AGREEMENT.  This Loan Agreement shall be in full
force and effect from the date  hereof, and shall continue  in effect until
the payment  in full of all principal  of, premium, if any, and  interest
on the Bonds,  or provision for  the payment  thereof  shall have  been  made
pursuant to  Article  XIII of  the Indenture, all fees, charges, indemnities
and expenses of the Issuer and the Trustee have been fully paid  or provision
made for such payment (the payment of  which fees,  charges, indemnities and 
expenses shall  be evidenced by  a written  certification of the Obligor that
it  has fully paid all such fees, charges, indemnities and expenses)  and all
other amounts due hereunder have been duly paid or provision made for such
payment and  all obligations of the Obligor to the Bank under the Reimbursement
Agreement have been  paid. All representations, certifications and covenants by
the  Obligor as to the indemnification of various parties as described in
Section 5.3 hereof, the payment of fees and expenses of the





                                 LOAN AGREEMENT
                                    Page 28
<PAGE>   32
Issuer  and the Trustee as described  in Section 6.3 hereof, and all matters 
affecting the tax-exempt status of the Bonds shall survive the termination of 
this Loan Agreement.

     SECTION 9.10. BINDING  EFFECT. This Loan Agreement shall inure to the
benefit of and shall be  binding upon the  Issuer, the Obligor  and their
respective  successors and assigns; subject, however,  to the limitations
contained in Sections  4.4 and 5.2 hereof.

     SECTION 9.11. REFERENCES TO  BANK AND LETTER  OF CREDIT. At  any time
while  the Letter of Credit has  been wrongfully dishonored, all references to
the  Bank and the Letter of Credit shall be ineffective.

     SECTION 9.12. ISSUER  NOT LIABLE.  Notwithstanding any other  provision of
this Loan Agreement (a) the  Issuer shall not be liable  to the Obligor, the
Trustee, the owners of  Bonds or any  other person for  any failure of  the
Issuer to  take action under  this  Loan Agreement  unless  the Issuer  (i) is
requested  in writing  by an appropriate person  to take  such  action, (ii)
is assured  to its  satisfaction  of payment of, indemnification against or
reimbursement for  any expenses in such action and  (iii) is  afforded  a
reasonable  period under  the  circumstances to  take such action,  and (b)
neither  the Issuer  nor  any member  of  the Issuer  or any  other official
or employee of the  Issuer or the  State shall be liable  to the Obligor or any
other person for  any action taken  by its officers,  servants, agents,
members, counsel or  employees, or for  any failure to take  action under this
Loan Agreement except that the  Issuer agrees to take,  or refrain from,  any
action required by  an injunction and to  comply with any final judgment for
specific performance. In acting under this Loan  Agreement, or in refraining
from acting under this  Loan Agreement, the Issuer may conclusively  rely on
the advice of its  counsel. Nothing in this Loan Agreement is  a covenant,
stipulation, obligation  or agreement  of  any present  or future  employee,
member,  counsel  or  agent  of the  Issuer  or  the State  in  his individual
capacity,  and  neither  the  members  of the  Issuer  nor  any  official
executing  this  Loan  Agreement  or the  Bonds  shall  be  subject  to any
personal liability  or accountability by reason of such execution by the Issuer
or any officer or employer of the Issuer.

     SECTION  9.13. CONTINUING DISCLOSURE.  The Obligor  hereby covenants  and
agrees that it  will comply  with and  carry out  all of  the provisions  of
any  Continuing Disclosure  Agreement that may  be required  in connection
with the  underwriting or remarketing  of the Bonds, including  remarketing in
connection  with a conversion of the Bonds to the Fixed Rate  as provided in
the Indenture. Notwithstanding any  other provision  of  this  Loan  Agreement,
failure  of  the  Obligor  to  comply with  the Continuing Disclosure
Agreement  shall  not  be  considered  an  Event  of  Default; however, the
Trustee may (and, at the request of the Underwriter or the Owners of  at least
25%  in  aggregate  principal  amount  of  the  Outstanding  Bonds  and  upon
indemnification  of the  Trustee  for such  actions  as  provided in  the
Indenture, shall), or  any Bondholder  or Beneficial  Owner  may, take  such
actions  as may  be necessary and  appropriate, including seeking specific
performance by court order, to cause the Obligor to comply with its obligations
under this Section 9.13.

     SECTION 9.14.  REDEMPTION  OF BONDS.  Pursuant  to the  Reimbursement
Agreement between  the Obligor  and  the Bank  the Obligor  has  agreed to
cause  Bonds to  be optionally redeemed pursuant  to a schedule set forth in
the Reimbursement Agreement resulting in  a weighted  average life  of 5.20
years for  the Bonds.   The  Obligor covenants not to agree with the Bank to
amend





                                 LOAN AGREEMENT
                                    Page 29
<PAGE>   33

this  schedule so as  to defer  the payment of  principal beyond the  dates set
forth therein without first  obtaining a written opinion  of Bond Counsel and
the Attorney General that such  amendment will not adversely  affect the
exclusion of  interest on the Bonds  from gross interest for purposes  of
federal income taxation.   Nothing in this Section  9.14 shall be construed to
restrict the right  of the Obligor, with the consent of  the Bank,  to cause
the redemption  of the Bonds  more rapidly  than set forth in such schedule.

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

                            MICHIGAN STRATEGIC FUND

                              By
                                   _____________________________________________
                                   Gordon B. Alexander
                              Its: Authorized Officer



                              ATMOSPHERE ANNEALING, INC.

                              By:  _____________________________________________

                              Its: Treasurer





                                 LOAN AGREEMENT
                                    Page 30
<PAGE>   34

                                   EXHIBIT A

                             DESCRIPTION OF PROJECT

     This Exhibit  A to  Loan Agreement  dated as  of December  1, 1997,
between  the Michigan Strategic Fund and Atmosphere Annealing, Inc., a Michigan
corporation.

     The  Project  consists  of the  acquisition  and  installation  of
equipment  in manufacturing  facilities  of the  Obligor located  in  the City
of  Lansing, Ingham County, Michigan.   The Obligor will own  the Project and
use the  buildings and real property together with the  new machinery and
equipment for  manufacturing operations providing  heat treating  services,
phosphate  and  zinc coating  and shearing/sawing operations of  bar  steel  to
the  forging  and  cast  iron  (primarily  automotive) industries.  The  Issuer
will  issue and sell  its Bonds  and loan the  money to  the Obligor  for the
financing  of the  Project and  other  expenses incidental  thereto pursuant to
and in  compliance with  the Act,  provided, however,  that the  Project Costs
and  the cost  of all  acts and  requirements  incident thereto  shall be  paid
solely  from the proceeds  of the sale  of the Bonds  or from moneys  provided
by the Obligor.





                                 LOAN AGREEMENT
                                    Page A-1
<PAGE>   35

                                   EXHIBIT B

                                  PROJECT SITE

     This Exhibit  B to  Loan Agreement  dated as  of December  1, 1997,
between  the Michigan Strategic Fund and Atmosphere Annealing, Inc., a Michigan
corporation.

     The Project is located on real property situated in the  City of Lansing,
County of Ingham, State of Michigan, described as follows:

209 W. MOUNT HOPE PROPERTY

     Land in the City of Lansing, Ingham County, Michigan, described as:

     Parcel No. 1:
     Lot 4,  Rockford Subdivision, according to the recorded  plat thereof, as
     recorded in Liber 6 of Plats, page 44, Ingham County Records.

     Parcel No. 2:
     Lot 6, Rockford Subdivision,  according to the recorded plat thereof,  as
     recorded in Liber 6 of Plats, page 44, Ingham County Records.

     Parcel No. 3:
     Commencing 89.5 feet South of the  Southwest corner of Lot 23, Rockford
     Subdivision, thence South  38 feet,  thence East  121.5 feet, thence  North
     38 feet, thence  West 121.5 feet to  the place of beginning, being a part
     of the Northwest  1/4 of Section 28, Town 4 North, Range 2 West.

     Parcel No. 4:
     Lot 23, Rockford  Subdivision, according to the recorded plat thereof, as
     recorded in Liber 6 of Plats, page 44, Ingham County Records.

     Parcel No. 5:
     Commencing 203.5 feet South of the Southwest corner of Lot 23,  Rockford
     Subdivision, thence South  38 feet,  thence East 121.5  feet, thence  North
     38 feet, thence  West 121.5 feet to the place of beginning, being  a part
     of the Northwest  1/4 of  Section 28, Town 4 North, Range 2 West.

     Parcel No. 6:
     Commencing 127.5 feet South of the Southwest corner of Lot 23,  Rockford
     Subdivision, thence South  38 feet,  thence East  121.5 feet,  thence North
     38 feet, thence  West 121.5 feet to the place of beginning, being  a part
     of the Northwest  1/4 of  Section 28, Town 4 North, Range 2 West.

     Parcel No. 7:
     Commencing 241.5 feet South of the Southwest corner of Lot 23,  Rockford
     Subdivision, thence South 39.5 feet, thence East 121.5 feet, thence North
     39.5





                                 LOAN AGREEMENT
                                    Page B-1
<PAGE>   36

     feet,  thence West  121.5  feet to  the  place of  beginning,  being  a
     part of  the Northwest  1/4 of Section 28, Town 4 North, Range 2 West.

     Parcel No. 8:

     Lots 17 through 20,  inclusive, Rockford Subdivision, according to the
     recorded plat thereof, as  recorded in Liber  6 of  Plats, page  44, Ingham
     County Records,  ALSO, Commencing  at   the  Northeast  corner  of  Lot
     20, Rockford  Subdivision,  thence Southwesterly 212.5 feet to  the South
     line of Lot 19, thence West 667.2 feet, thence South 120  feet, thence West
     121.5 feet to  the East  line of Osband  Avenue, thence South 50  feet,
     thence  East 121.5 feet, thence  South 231  feet, thence West  121.5 feet,
     thence South  191 feet  to  the Northerly  corner  of  Lot 120,  Duplex
     Park Addition, thence East 50 feet, thence Southeasterly  181.1 feet to the
     Southeasterly corner of Lot  120, Duplex Park Addition,  thence
     Southeasterly 100 feet  on Easterly line  of Lot l20, Duplex  Park
     Addition, extended  to the Northerly line  of New York Central Railroad,
     thence Northeasterly along railroad  right of way 1600 feet to  the South
     line of  W. Mt.  Hope Road, thence  West 500  feet to the  place of
     beginning, being a part of the Northwest  1/4 of Section 28, Town 4 North,
     Range 2 West.


1801 BASSETT PROPERTY

     The property is legally described by:

     Parts of Lots 12, 15, 16 and 21 through  26 including commencing on the
     South line of Bassett Street  24.95 feet South of Northeast corner of Lot
     21, thence South 132 feet West 34.3 feet, South 56.5 feet, West 40 feet,
     South 141.5 feet, West 92 feet,  South 132 feet, East  123.75 feet,  South
     165 feet,  West 187.75 feet, North 114.96  feet, West 35 feet, North 50
     feet, West 70.3 feet, Northerly 461.91 feet to  South line of said  street,
     East 335.56 feet to beginning,  Assessors Plat No. 11, City of Lansing,
     Ingham County, Michigan.





                                 LOAN AGREEMENT
                                    Page B-2
<PAGE>   37

                                   EXHIBIT C

                            REQUISITION CERTIFICATE


TO:       First of America Bank, N.A., as Trustee

FROM:     Atmosphere Annealing, Inc., a Michigan corporation (the "Obligor")

SUBJECT:  Loan  Agreement  dated  as  of  December  1,  1997,  between  the
          Michigan Strategic Fund (the "Issuer") and the Obligor (the "Loan
          Agreement")



     This represents Requisition Certificate No.  ____ in the total amount of
$______ ____ for payment of those Costs of the Project detailed in the schedule
attached.

     The undersigned certifies that:

     1.   All of the  expenditures for  which moneys are  requested hereby
          represent proper Project  Costs, have  not been  included in  a
          previous  Requisition Certificate and have been properly recorded on
          the Obligor's books.

     2.   The  moneys requested hereby are  not greater than  those necessary
          to meet obligations due and payable  or to reimburse the Obligor for
          funds actually advanced for  Costs of  the Project.  The moneys
          requested do not  include retention or  other  moneys  not  yet  due
          or  earned  under  construction contracts.

     3.   At  least  95%  of  the sum  of  the  payments  herein  requested
          from  the Construction Fund and  all other payments  from the
          proceeds of the  Bonds heretofore made  from the Construction Fund
          have been used to  finance the acquisition  and installation of
          equipment which property  other than land is of  a character subject
          to the  allowance for depreciation under Section 167 of  the Code,
          and  no more than  5% of the  sum of the  payments herein requested
          from  the  Construction  Fund and  all  other payments  from  the
          proceeds of the  Bonds heretofore made from the Construction  Fund
          has been or will be  used, directly or  indirectly, as working
          capital or  Issuance Costs (subject to  the 2%  limitation set forth
          in Section  147(g) of  the Code).





                                 LOAN AGREEMENT
                                    Page C-1
<PAGE>   38


     4.   Pursuant to  Section 4.03(c) of the Indenture, the undersigned
          certifies on behalf of the Obligor that:

          a)   the  expenditures  for  which payment  is  to  be  made or  for
               which reimbursement is  requested are listed in summary form in
               the attached schedule;

          b)   that the  amounts requested are to be or have been paid by the
               Obligor for   property   or  to   contractors,   subcontractors,
               materialmen, engineers,  architects, or  other  persons who
               will  perform or  have performed necessary  or appropriate
               services  or will  supply or  have supplied  necessary  or
               appropriate  materials  for the  acquisition, construction,
               renovation, equipping, and  installation of the Project, as the
               case may  be, and that, to the  best of my knowledge,  the fair
               value of such property, services, or materials is  not exceeded
               by the amounts requested to be paid;

          c)   that no  part of  the  several amounts  requested to  be paid
               to  the Obligor, as stated in such  schedule, has been or is the
               basis for the payment of any money in any previous or then
               pending request;

          d)   that the payment of the amounts requested  will not result in a
               breach of any  of  the  covenants  of  the  Obligor  contained
               in  the  Loan Agreement; and

          e)   that  the expenditure of  such amounts to  be paid, when  added
               to all previous disbursements from the  Construction Fund, will
               result in  at least   95%  of   the   total  of   such
               disbursements,   other  than disbursements for  issuance
               expenses, being  used to  provide property of a character
               subject to  the allowance for  depreciation under  the Internal
               Revenue  Code  of  1986, as  amended  (the  "Code"),  (which
               expenditures are  amounts  paid or  incurred  which are,  for
               federal income tax purposes,  chargeable to the  Project's
               capital account  or would  be so chargeable either  with a
               proper  election by the Obligor [for example,  under section
               266 of  the Code]  or but  for a  proper election by the Obligor
               to deduct such amounts).

     5.   The  Obligor   is  not  in   default  under  the  Loan   Agreement
          or  the Reimbursement Agreement  and nothing has  occurred to the
          knowledge of the Obligor that would  prevent the  performance of its
          obligations under  the Loan Agreement or the Reimbursement Agreement.





                                 LOAN AGREEMENT
                                    Page C-2
<PAGE>   39

     6.   Delivered herewith are  all of the  documents in form and  content
          required by Section 4.03 of the Indenture.

     7.   The terms used in this Requisition Certificate  shall have the same
          meaning as in the Loan Agreement.

Executed this ______ day of _____________________, 19__.

                           ATMOSPHERE ANNEALING, INC.

                           BY:_______________________________________
                                Authorized Obligor Representative



Approved:

FIRST OF AMERICA BANK, N.A.,
as Letter of Credit Bank
                                                        Dated:________________

By: _______________________________

Its: ______________________________





                                 LOAN AGREEMENT
                                    Page C-3
<PAGE>   40

                SCHEDULE TO REQUISITION CERTIFICATE NO. 
                                                        --------
Payee and Location                                                     Amount
------------------                                                     ------




Reimbursement to Obligor                                                Amount
------------------------                                                ------




                                 LOAN AGREEMENT
                                    Page C-4
<PAGE>   41

                                   EXHIBIT D

                             COMPLETION CERTIFICATE

TO:       Michigan Strategic Fund (the "Issuer")
          First of America Bank, N.A., as Letter of Credit Bank
          First of America Bank, N.A., as Trustee

FROM:     Atmosphere Annealing, Inc., a Michigan corporation (the "Obligor")

SUBJECT:  Loan Agreement  dated as of  December 1, 1997,  between the Issuer
          and the Obligor (the "Loan Agreement")

     The undersigned hereby certify:

     1.   The Project has been  substantially completed in such manner as  to
          conform with  all  applicable  zoning, planning  and  building
          regulations  of the governmental authorities having jurisdiction of
          the Project, as of  _______ __________, 19__ (the "Completion Date").

     2.   The Costs of the Project  have been paid in  full except for those
          not  yet due  and  payable,  which are  described  below  and for
          which  moneys for payment thereof are  being held in the
          Construction Fund and will,  in all events, be paid prior to December
          1, 2000:

          Cost of the Project not yet due and payable:

          Description                                        Amount


                                                             $_______

                                                    Total    $_______

     3.   The moneys in the Construction Fund in excess of the totals set forth
          in  2 above represent  surplus bond proceeds and the Trustee is
          hereby authorized and directed to  transfer all such surplus  bond
          proceeds to the  Bond Fund for use as provided in Section 1.03(f) of
          the Indenture.

     4.   No  Event  of  Default  has  occurred  under  the  Loan  Agreement
          or  the Reimbursement Agreement nor has any event occurred which





                                 LOAN AGREEMENT
                                    Page D-1
<PAGE>   42

          with the  giving of notice or lapse of  time or both shall become
          such an Event of  Default. Nothing has occurred to  the knowledge of
          the  Obligor  that  would  prevent  the  performance  of  its
          obligations  under  the  Loan  Agreement   or  the  Reimbursement
          Agreement.

     5.   The terms used  in this Completion Certificate shall  have the same
          meaning as in the Loan Agreement.

     This certificate is given without prejudice to  any rights against third
parties which exist at the date hereof or which may subsequently come into
being.

     Executed this ________ day of ______________, 19___.


                                    ATMOSPHERE ANNEALING, INC.


                                    By:____________________________________

                                    Its: Authorized Obligor Representative





                                 LOAN AGREEMENT
                                    Page D-2