Document:

THE JOHNSTON COUNTY INDUSTRIAL FACILITIES AND

                     POLLUTION CONTROL FINANCING AUTHORITY,

                                 as the Issuer,

                              FLANDERS CORPORATION,
                                   the Company

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

                                 LOAN AGREEMENT

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

                            Dated as of March 1, 2000

                                   Relating to

                                   $4,000,000

                  The Johnston County Industrial Facilities and

                      Pollution Control Financing Authority

                      Industrial Development Revenue Bonds

                   (Flanders Corporation Project), Series 2000

The interest of The Johnston County Industrial  Facilities and Pollution Control
Financing  Authority  (the  "Issuer") in this Loan  Agreement  has been assigned
(except for "Reserved  Rights" defined in this Loan  Agreement)  pursuant to the
Indenture of Trust dated as of the date hereof from the Issuer to First-Citizens
Bank & Trust Company,  Raleigh, North Carolina, as trustee (the "Trustee"),  and
is subject to the security interest of the Trustee thereunder.

<PAGE>

                                 LOAN AGREEMENT

                                TABLE OF CONTENTS

(This  Table of  Contents  is not a part of the Loan  Agreement  and is only for
convenience of reference.)

                                                                          Page

                                    ARTICLE I

                                   DEFINITIONS

Section 1.1. Definitions....................................................2
Section 1.2. Uses of Words and Phrases......................................4

                                   ARTICLE II

                REPRESENTATIONS, CERTAIN COVENANTS AND WARRANTIES

Section 2.1.  Representations and Warranties of the Issuer..................5
Section 2.2.  No Representation or Warranty by Issuer as to Project.........6
Section 2.3.  Representations and Warranties of the Company.................6
Section 2.4.  Notice of Determination of Taxability.........................9

                                   ARTICLE III

       ACQUISITION AND CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS;
                               SPECIAL COVENANTS

Section 3.1.  Agreement to Acquire the Project..............................9
Section 3.2.  Agreement to Issue the Bonds; Application of Bond Proceeds...10
Section 3.3.  Disbursements from the Project Fund..........................10
Section 3.4.  Furnishing Documents to the Trustee..........................10
Section 3.5.  Establishment of Completion Date.............................10
Section 3.6.  Company Required to Pay in Event Project Fund Insufficient...10
Section 3.7.  Special Arbitrage Certifications.............................11
Section 3.8.  Use of Proceeds; Special Tax Covenants.......................11
Section 3.9.  Modification and Termination of Special Tax Covenants........14
Section 3.10.  Arbitrage and Rebate........................................15

                                   ARTICLE IV

                   LOAN PROVISIONS; SUBSTITUTE CREDIT FACILITY

Section 4.1.  Loan of Proceeds.............................................16
Section 4.2.  Amounts Payable..............................................16
Section 4.3.  Obligations of Company Unconditional.........................17
Section 4.4.  Substitute Credit Facility...................................17

                                     - i -
<PAGE>

                                    ARTICLE V

                       PREPAYMENT, PURCHASE AND REDEMPTION

Section 5.1.  Prepayment and Redemption....................................18

                                   ARTICLE VI

                                SPECIAL COVENANTS

Section 6.1.  No Warranty of Condition or Suitability by Issuer............19
Section 6.2.  Access to the Project........................................19
Section 6.3.  Further Assurances and Corrective Instruments................19
Section 6.4.  Issuer and Company Representatives...........................19
Section 6.5.  Financing Statements.........................................19
Section 6.6.  Covenant to Provide Continuing Disclosure....................20
Section 6.7.  Annual Report of Outstanding Bonds...........................20
Section 6.8.  Notice of Control............................................20

                                   ARTICLE VII

              ASSIGNMENT, SELLING, LEASING; INDEMNIFICATION, MERGER
                  OR ASSET SALE, MAINTENANCE AND REPAIR, TAXES

Section 7.1.  Assignment, Selling and Leasing..............................20
Section 7.2.  Release and Indemnification..................................21
Section 7.3.  Indemnity Against Claims.....................................22
Section 7.4.  Issuer to Grant Security Interest to Trustee.................22
Section 7.5.  Maintenance of Existence; Merger; Asset Transfer.............22
Section 7.5.  Company's Obligations to Maintain and Repair.................23
Section 7.6.  Taxes and Other Charges......................................23
Section 7.7.  Damage, Destruction or Loss of Property; Obligation to
              Rebuild; Use of Insurance Proceeds and Condemnation Awards...23

                                  ARTICLE VIII

                              DEFAULTS AND REMEDIES

Section 8.1.  Defaults Defined.............................................24
Section 8.2.  Remedies on Default..........................................25
Section 8.3.  No Remedy Exclusive..........................................25
Section 8.4.  Agreement to Pay Attorneys' Fees and Expenses................26
Section 8.5.  No Additional Waiver Implied by One Waiver...................26

                                   ARTICLE IX

                                  MISCELLANEOUS

Section 9.1.  Term of Agreement............................................26
Section 9.2.  Notices   26
Section 9.3.  Binding Effect...............................................27
Section 9.4.  Severability.................................................28

                                     - ii -
<PAGE>

Section 9.5.  Amounts Remaining in Funds...................................28
Section 9.6.  No Liability of Issuer; No Charge Against Issuer's Credit....28
Section 9.7.  If Performance Date Not a Business Day.......................28
Section 9.8.  Amendments, Changes and Modifications........................29
Section 9.9.  Execution in Counterparts....................................29
Section 9.10.  Applicable Law..............................................29
Section 9.11.  Captions 29
Section 9.12.  No Third Party Beneficiary..................................29

EXHIBIT A - Description of Project.........................................A-1
EXHIBIT B - Form of Promissory Note........................................B-1
EXHIBIT C - Form of Project Fund Certificate and Requisition...............C-1
EXHIBIT D - Certificate of Completion......................................D-1

                                    - iii -
<PAGE>

                                 LOAN AGREEMENT

    THIS LOAN AGREEMENT,  dated as of March 1, 2000, between THE JOHNSTON COUNTY
INDUSTRIAL  FACILITIES AND POLLUTION CONTROL FINANCING AUTHORITY (the "Issuer"),
a  political  subdivision  duly  organized  and  existing  under  the  laws  and
Constitution of the State of North Carolina (the "State"), FLANDERS CORPORATION,
a corporation  duly  organized and existing under the laws of the State of North
Carolina (the "Company");

                              W I T N E S S E T H:

    WHEREAS,  the Industrial  and Pollution  Control  Facilities  Financing Act,
Chapter 159C of the General Statutes of North Carolina,  as amended (the "Act"),
authorizes the creation of industrial facilities and pollution control financing
authorities  by the  several  counties  in  North  Carolina  and  empowers  such
authorities to acquire,  construct,  own,  repair,  maintain,  extend,  improve,
rehabilitate,  renovate,  furnish, equip and sell, lease, exchange,  transfer or
otherwise dispose of air and water pollution control  facilities to the end that
such  authorities  may be  able to  promote  the  right  to  gainful  employment
opportunity,  private  industry,  the prevention and control of the pollution of
the air, land and waters of the State, and the safety,  morals and health of the
people of the State and thereby  promote the general  welfare of the inhabitants
of North  Carolina by  exercising  such powers to aid in financing air and water
pollution  control  facilities  for the  purpose of  reducing,  controlling  and
preventing  environmental  pollution, and further authorizes such authorities to
loan to others the proceeds of bonds issued for the purpose of paying for all or
any part of a pollution control  facility,  to mortgage and pledge any or all of
such facilities,  whether then owned or thereafter acquired, as security for the
payment of the principal of, premium, if any, and interest on any such bonds and
any agreements made in connection therewith and to pledge or assign the revenues
and  receipts  from  such  facilities  or loan or from any  other  source to the
payment of such bonds; and

    WHEREAS, the Issuer has been duly organized pursuant to the Act; and

    WHEREAS, in order to further the purposes of the Act, the Issuer proposes to
undertake the financing of the  acquisition  and  construction of a building and
installation of equipment  therein for the recycling of waste  industrial  glass
(the  "Project")  in  Johnston  County,  North  Carolina,  which  constitutes  a
pollution control project under the Act, and to obtain the funds therefor by the
issuance  of its Bonds (as  hereinafter  defined)  under an  Indenture  of Trust
securing such Bonds, between the Issuer and First-Citizens Bank & Trust Company,
Raleigh,  North  Carolina,  as  Trustee,  dated  as  of  the  date  hereof  (the
"Indenture"); and

    WHEREAS,  the  Issuer  proposes  to loan the  proceeds  from the sale of the
Bonds, as hereinafter defined, to the Company to acquire and install the Project
upon the terms and conditions hereinafter set forth; and

    WHEREAS,  the Company and SunTrust Bank,  will enter into a Letter of Credit
Agreement (the "Credit Agreement") dated as of the date hereof pursuant to which
the Bank will issue an  irrevocable  letter of credit in an amount not to exceed
$4,072,223 to the Trustee at the

<PAGE>

request  and for the  account  of the  Company  upon the  terms set forth in the
Credit Agreement; and

    WHEREAS,  it has been  determined  that the  financing  of the Project  will
require the  issuance,  sale and  delivery by the Issuer of a series of bonds in
the  aggregate  principal  amount  of Four  Million  Dollars  ($4,000,000)  (the
"Bonds");

    NOW THEREFORE,  in  consideration  of the premises and the mutual  covenants
hereinafter contained, the parties hereto covenant, agree and bind themselves as
follows:  provided,  that any obligation of the Issuer created by or arising out
of this  Agreement  shall never  constitute  a debt or a pledge of the faith and
credit or the taxing power of the Issuer or any political  subdivision or taxing
district of the State of North  Carolina but shall be payable  solely out of the
Trust Estate (as defined in the  Indenture),  anything  herein  contained to the
contrary by implication or otherwise notwithstanding:

                                    ARTICLE I

                                   DEFINITIONS

    Section 1.1. Definitions. All capitalized, undefined terms used herein shall
have the same meanings as used in Article I of the Indenture (defined below). In
addition, the following words and phrases shall have the following meanings:

    "Acquisition",  when used with respect to the Project means the acquisition,
construction,  installation and equipping of the Project,  including  payment of
Costs of the Project, by the Company.

    "Act" means the Industrial and Pollution Control  Facilities  Financing Act,
Chapter 159C of the North Carolina General Statutes, as amended.

    "Agreement" means this Loan Agreement between the Issuer and the Company and
any  modifications,  alterations and supplements  hereto made in accordance with
the provisions hereof and of the Indenture.

    "Bond  Documents"  means this  Agreement,  the Indenture,  the Bonds and the
Note.

    "Company Documents" means this Agreement,  the Note, the Placement Contract,
the Remarketing Agreement and the Credit Agreement.

    "Completion  Date"  means  the  date  of  delivery  to  the  Trustee  of the
Certificate  of  Completion  of  the  Project  required  by  Section  3.5 of the
Agreement.

                                     - 2 -
<PAGE>

    "Cost(s) of the Project",  "Cost" or "Costs" means all costs and  allowances
which the Issuer or the Company may properly pay or accrue,  or reimburse itself
(under the Code), for the Project and which, under generally accepted accounting
principles,  are chargeable to the capital account of the Project or could be so
charged  either with a proper  election to  capitalize  such costs or, but for a
proper  election,  to expense such costs,  including  (without  limitation)  the
following costs:

        (a) fees and expenses incurred in preparing the plans and specifications
    for the Project  (including any preliminary  study or planning or any aspect
    thereof);  any labor,  services,  construction  materials  and supplies used
    and/or  furnished in site  improvement;  any equipment for the Project;  any
    acquisition  necessary  to  provide  utility  services  or  other  services,
    including  trackage  to  provide  the  Project  with  public  transportation
    facilities,  roadways, parking lots, water supply, sewage and waste disposal
    facilities;  and all real and tangible personal property deemed necessary by
    the Company and acquired in connection with the Project;

        (b) fees for  architectural,  engineering,  supervisory  and  consulting
    services;

        (c) any fees and expenses  incurred in connection  with  perfecting  and
    protecting  title  to the  Project  and any fees and  expenses  incurred  in
    connection with preparing,  recording or filing such documents,  instruments
    or  financing  statements  as either  the  Company  or the  Issuer  may deem
    desirable  to  perfect or  protect  the rights of the Issuer or the  Trustee
    under the Bond Documents;

        (d) any legal,  accounting  or  financial  advisory  fees and  expenses,
    including, without limitation, fees and expenses of Bond Counsel and counsel
    to the Issuer,  the Company,  the Credit  Facility  Provider,  the Placement
    Agent,  the Remarketing  Agent or the Trustee,  any fees and expenses of the
    Issuer,  Trustee,  Remarketing Agent, Placement Agent, Credit Issuer, Tender
    Agent,  Paying Agent or any rating  agency,  filing  fees,  and printing and
    engraving costs,  incurred in connection with the  authorization,  issuance,
    sale and purchase of the Bonds,  and the  preparation  of the Bond Documents
    and all other documents in connection with the  authorization,  issuance and
    sale of the Bonds;

        (e) interest to accrue on the Bonds during construction of the Project;

        (f)  any   administrative  or  other  fees  charged  by  the  Issuer  or
    reimbursement  thereto of expenses in connection  with the Project until the
    Completion Date; and

        (g) any other costs and  expenses  relating  to the Project  which could
    constitute  costs or expenses for which the Issuer may expend Bond  proceeds
    under the Act.

    "Date of  Issuance"  means March 21,  2000,  being the date of the  original
issuance and delivery of the Bonds by the Issuer.

    "Default" means any Default under this Agreement as specified in and defined
by Section 8.1 hereof.

                                     - 3 -
<PAGE>

    "Governing Body" means the Board of Commissioners of the County of Johnston,
North Carolina.

    "Indenture"  means the  Indenture of Trust dated as of this date between the
Issuer and the Trustee, pursuant to which the Bonds are authorized to be issued,
and any amendments and supplements thereto.

    "LGC" means the Local Government Commission of North Carolina, a division of
the Department of State Treasurer, and any successor or successors thereto.

    "Net  Proceeds,"  when  used  with  respect  to any  insurance  recovery  or
condemnation  award with respect to the Project,  shall mean the gross  proceeds
from such insurance  recovery or  condemnation  award less payment of attorneys'
fees, fees and expenses of the Credit  Provider and all other expenses  properly
incurred in the collection of such gross proceeds.

    "Note"  means  the  Company's  promissory  note in the  principal  amount of
$4,000,000,  dated March 21,  2000,  in the form  attached  hereto as Exhibit B,
issued pursuant hereto and delivered to the Issuer as consideration for the loan
of the  proceeds  of the  Bonds  for the  undertaking  of the  Project,  and any
amendment or supplement thereto or substitution therefor.

    "Project" means the acquisition, construction, installation and equipping of
a facility  for the  recycling  of waste  glass by the  Company  in  Smithfield,
Johnston County,  North Carolina,  as more  particularly  described in Exhibit A
hereto.

    "Requisition"  means a written  request for a disbursement  from the Project
Fund, signed by a Company Representative, in the form attached hereto as Exhibit
C and satisfactorily completed as contemplated by said form.

    "Reserved  Rights" means the rights of the Issuer  provided  under  Sections
3.1(c),  3.8,  4.2(b),  7.2,  7.3 and 8.4 hereof and the rights of the Issuer to
receive  notices and  reports and to give  consents  and  approvals  as provided
herein and in the Indenture.

    "State" means the State of North Carolina.

    "Term of Agreement" means the term of this Agreement as specified in Section
9.1 hereof.

    Section 1.2.  Uses of Words and Phrases.  "Herein,"  "hereby,"  "hereunder,"
"hereof,"  "hereinabove,"  "hereinafter," and other equivalent words and phrases
refer to this  Agreement  and not solely to the  particular  portion  thereof in
which any such word is used.  The  definitions  set forth in Section  1.1 hereof
include both  singular and plural.  Whenever  used herein,  any pronoun shall be
deemed to include both singular and plural and to cover all genders.

                                   ARTICLE II

                REPRESENTATIONS, CERTAIN COVENANTS AND WARRANTIES

                                     - 4 -
<PAGE>

    Section  2.1.  Representations  and  Warranties  of the  Issuer.  The Issuer
represents, covenants and warrants that:

    (a) Organization and Authority. The Issuer is a political subdivision within
the meaning of the Act, created and validly existing  pursuant to the provisions
of the Act. The Issuer has all requisite  power and  authority  under the Act to
(i) issue the Bonds, (ii) lend the proceeds thereof to the Company to assist the
Company in financing  the cost of  acquiring,  constructing  and  equipping  the
Project,  and (iii) enter  into,  and  perform  its  obligations  under the Bond
Documents. The members of the Board of Commissioners of the Issuer are appointed
by the Board of County Commissioners of Johnston County.

    (b) Pending Litigation. There are no actions, suits, proceedings,  inquiries
or investigations pending, or to the knowledge of the Issuer threatened, against
or  affecting  the Issuer in any court or before any  governmental  authority or
arbitration  board or tribunal,  which involve the possibility of materially and
adversely  affecting  the  transactions  contemplated  by the Bond  Documents or
which,  in any way,  would  materially  and  adversely  affect the  validity  or
enforceability of the Bond Documents or any agreement or instrument to which the
Issuer is a party and which is used or contemplated  for use in the consummation
of the transactions contemplated hereby or thereby.

    (c)  Issue,  Sale and  Other  Transactions  Are Legal  and  Authorized.  The
issuance and sale of the Bonds and the  execution  and delivery by the Issuer of
the Bond  Documents and the  compliance by the Issuer with all of the provisions
of each  thereof  and of the Bonds  (i) are  within  the  purposes,  powers  and
authority  of the  Issuer,  (ii)  have  been  done in full  compliance  with the
provisions of the Act,  (iii) are legal and will not conflict with or constitute
on the part of the Issuer a  violation  of or a breach of or default  under,  or
result in the creation of any lien,  charge or encumbrance  upon any property of
the Issuer (other than as  contemplated  in the Indenture)  under the provisions
of, any activating resolution,  by-law, indenture, mortgage, deed of trust, note
agreement or other  agreement or instrument to which the Issuer is a party or by
which the Issuer is bound,  or to the best of Issuer's  knowledge  any  license,
judgment,  decree,  law,  statute,  order,  rule or  regulation  of any court or
governmental  agency or body having  jurisdiction  over the Issuer or any of its
activities or  properties,  and (iv) have been duly  authorized by all necessary
action on the part of the Issuer.

    (d) Governmental  Consents.  Neither the nature of the Issuer nor any of its
activities or properties,  nor any relationship between the Issuer and any other
person,  nor any circumstance in connection with the issue,  sale or delivery of
any of the Bonds is such as to require the  consent,  approval or  authorization
of,  or  the  filing,  registration  or  qualification  with,  any  governmental
authority on the part of the Issuer in connection  with the execution,  delivery
and  performance  of the Bond  Documents  or the issue,  sale or delivery of the
Bonds, other than those already obtained;  provided,  however, no representation
is made as to compliance with any federal or state securities or "blue sky" law.

    (e) No Defaults.  To the best of Issuer's  knowledge,  no event has occurred
and no condition  exists with respect to the Issuer  which would  constitute  an
"event of default" as defined in the Bond Documents or which,  with the lapse of
time or with the  giving  of  notice  or both,  would

                                     - 5 -
<PAGE>

become such an "event of default." The Issuer is not in default under the Act or
under any charter  instrument,  by-law or other agreement or instrument to which
it is a party or by which it is bound which default would  adversely  affect the
enforceability or taxability of the Bonds.

    (f) No Prior Pledge.  Neither this Agreement nor any of the Pledged Revenues
have been pledged or hypothecated in any manner or for any purpose other than as
provided in the Indenture as security for the payment of the Bonds.

    (g)  Nature and  Location  of  Project.  The  financing  of the costs of the
Project,  together with related expenses,  is authorized under the Act and is in
furtherance of the public purpose for which the Issuer was created.  The Project
is located in Johnston County, North Carolina.

    (h) Limited  Obligations.  Notwithstanding  anything herein contained to the
contrary,  any  obligation  the Issuer may hereby incur for the payment of money
shall not  constitute  an  indebtedness  of the County or of the State or of any
political  subdivision  thereof  within the meaning of any state  constitutional
provision  or  statutory  limitation  and  shall  not give  rise to a  pecuniary
liability  of the State or  County  or any  political  subdivision  thereof,  or
constitute a charge  against the general credit or taxing power of said State or
County or any political subdivision thereof, but shall be limited obligations of
the Issuer payable solely from (i) the Pledged  Revenues,  (ii) revenues derived
from the sale of the Bonds,  and (iii)  amounts on deposit  from time to time in
the Bond Fund,  subject to the  provisions  of this  Agreement and the Indenture
permitting  the  application  thereof  for the  purposes  and on the  terms  and
conditions set forth herein and therein.

    (i) Approval of Issuance of Bonds.  The Issuer has obtained  approval of the
issuance of the Bonds by the Board of County Commissioners of Johnston County as
required by Section  159C-4(d) of the Act, by the Secretary of the Department of
Commerce  of the  State  required  by  Section  159C-7 of the Act and by the LGC
required by Sections 159C-6, -8 and -9 of the Act.

    Section  2.2. No  Representation  or  Warranty by Issuer as to Project.  THE
ISSUER MAKES NO REPRESENTATION OR WARRANTY WHATSOEVER  CONCERNING THE USE OF THE
PROCEEDS  OF THE SALE OF THE BONDS OR THE  SUITABILITY  OF THE  PROJECT  FOR THE
PURPOSE FOR WHICH IT IS BEING UNDERTAKEN BY THE COMPANY. The Issuer has not made
any independent  investigation as to the feasibility or  creditworthiness of the
Company.  Any bond purchaser,  assignee of the Agreement or any other party with
any interest in this transaction,  shall make its own independent  investigation
as to the  creditworthiness  and feasibility of the Project,  independent of any
representation or warranties of the Issuer.

    Section 2.3.  Representations  and  Warranties  of the Company.  The Company
makes the following representations, covenants and warranties:

    (a)   Organization  and  Power.  The  Company  (i)  is  a  corporation  duly
incorporated, validly existing and in good standing under the laws of the State,
and (ii) has all requisite  power and  authority and all necessary  licenses and
permits to own and operate its  properties  and to carry on its  business as now
being conducted and as presently proposed to be conducted.

                                     - 6 -
<PAGE>

    (b)  Pending  Litigation.  There  are  no  proceedings  pending,  or to  the
knowledge of the Company  threatened,  against or  affecting  the Company in any
court or before any governmental authority,  arbitration board or tribunal which
if adversely determined,  would materially and adversely affect the transactions
contemplated  by the Bond Documents or which,  in any way, would  materially and
adversely  affect the  properties,  business,  prospects,  profits or  condition
(financial  or  otherwise)  of the  Company,  or the  ability of the  Company to
perform  its  obligations  under the  Company  Documents.  The Company is not in
default  with  respect  to  an  order  of  any  court,  governmental  authority,
arbitration board or tribunal.

    (c) Agreements Are Legal and  Authorized.  The execution and delivery by the
Company of each of the Company  Documents and the compliance by the Company with
all of the provisions  hereof and thereof (i) are within the corporate  power of
the Company,  (ii) will not conflict  with or result in any breach of any of the
provisions of, or constitute a default  under,  or result in the creation of any
lien,  charge  or  encumbrance  upon  any  property  of the  Company  under  the
provisions  of,  any  agreement,  articles  of  incorporation,  by-laws or other
instrument  to which the Company is a party or by which it may be bound,  or any
license,  judgment, decree, law, statute, order, rule or regulation of any court
or governmental  agency or body having  jurisdiction  over the Company or any of
its  activities  or  properties,  and (iii)  have been  duly  authorized  by all
necessary corporate action on the part of the Company; and

    (d) Enforceability of Documents. The Company Documents are valid and binding
agreements  of the Company,  enforceable  in  accordance  with their  respective
terms, except as the enforceability  thereof may be subject to judicial decision
or limited by  applicable  bankruptcy,  insolvency,  moratorium or other similar
laws affecting the enforcement of creditors' rights generally.

    (e)  Compliance  with  Indenture.  The Company has received and reviewed the
Indenture. By its execution of this Agreement,  the Company acknowledges that it
has approved, has agreed to and is bound by the provisions of the Indenture. The
Company will fully and faithfully  perform all the duties and obligations  which
the Issuer has  covenanted  and agreed in the  Indenture to cause the Company to
perform  and any duties and  obligations  which the  Company is  required in the
Indenture to perform.  The Company  agrees that the Trustee shall be entitled to
enforce and to benefit  from the terms and  conditions  of this  Agreement  that
relate to it  notwithstanding  the fact that it is not a signatory  hereto.  The
foregoing  shall not apply to any duty or undertaking of the Issuer which by its
nature cannot be delegated or assigned.

    (f)  Governmental  Consents.  Neither the Company nor any of its business or
properties,  nor any relationship  between the Company and any other person, nor
any circumstances in connection with the execution,  delivery and performance by
the Company of the Company  Documents or the offer,  issue,  sale or delivery by
the Issuer of the Bonds for the  benefit of the  Company,  is such as to require
the  consent,  approval  or  authorization  of, or the filing,  registration  or
qualification with, any governmental  authority on the part of the Company other
than those already obtained;  provided,  however, that no representation is made
as to any consents,  approvals or authorizations required in connection with the
construction  or  occupancy of the  Project,  or with respect to such  consents,
approvals or authorizations as may be required on the part of the Issuer.

                                     - 7 -
<PAGE>

    (g) No Defaults.  No event has occurred and no condition exists with respect
to the Company  that would  constitute  an "event of  default"  under any of the
Company  Documents or which, with the lapse of time or with the giving of notice
or both,  would  become  such an  "event  of  default."  The  Company  is not in
violation in any material respect of any agreement,  articles of  incorporation,
by-laws or other  instrument to which it is a party or by which it may be bound,
which violation might materially and adversely affect the properties,  business,
prospects, profits or conditions (financial or otherwise) of the Company.

    (h) Compliance with Law. The Company is not in violation in any material way
of any  laws,  ordinances,  governmental  rules  or  regulations  to which it is
subject and has not failed to obtain any licenses,  permits, franchises or other
governmental  authorizations  necessary to the ownership of its properties or to
the  conduct  of its  business,  which  violation  or  failure  to obtain  might
materially and adversely affect the properties,  business, prospects, profits or
conditions (financial or otherwise) of the Company.

    (i) Restrictions on the Company.  The Company is not a party to any contract
or agreement that materially and adversely  affects the business of the Company.
Except for the Credit Agreement,  the Company is not a party to, or bound by any
contract  or  agreement  that  restricts  the right or ability of the Company to
incur or guarantee indebtedness for borrowed money to such extent as to preclude
the Company from entering into the transactions  contemplated  hereby, under the
Bond  Documents  or any other  documents  executed in  connection  herewith  and
therewith.

    (j)  Inducement.  The issuance of the Bonds by the Issuer and the lending of
the  proceeds  thereof to the Company to enable the  Acquisition  of the Project
have  induced the Company to locate the Project in the County.  The  issuance of
the Bonds by the Issuer and the lending of the  proceeds  thereof to the Company
to enable the Company to acquire,  construct  and equip the Project shall assist
the Company in continuing to provide  continued  employment  and industry in the
County.

    (k) Pollution Control Project.  The Company anticipates that upon completion
of the Project,  the Company will operate the Project as a "project"  within the
meaning of the Act until the Bonds have been paid in full.

    (l) Notice.  The Project is of the type authorized and permitted by the Act,
and the  Project is  substantially  the same in all  material  respects  to that
described in the notice of public hearing published on August 20, 1999.

    (m)  Compliance  With Land Use  Regulations.  The Project  will be acquired,
constructed  and installed and will be operated by the Company in such manner as
to  conform in all  material  respects  with all  applicable  zoning,  planning,
building,  environmental and other  regulations of the governmental  authorities
having jurisdiction over the Project.

    (n)  Application of Proceeds.  The Company will cause all of the proceeds of
the Bonds to be applied solely to the payment of Costs of the Project.

    (o)  Location  of  Project.  The  Project  is  located  entirely  within the
geographical boundaries of Johnston County, North Carolina.

                                     - 8 -
<PAGE>

    Section 2.4.  Notice of  Determination  of  Taxability.  Promptly  after the
Company first  becomes aware of any  Determination  of  Taxability,  the Company
shall give written notice thereof to the Issuer and the Trustee.

                                   ARTICLE III

                  ACQUISITION AND CONSTRUCTION OF THE PROJECT;
                    ISSUANCE OF THE BONDS; SPECIAL COVENANTS

    Section 3.1. Agreement to Acquire the Project.

    (a) The Company agrees to make all contracts and do all things necessary for
the Acquisition of the Project. The Company further agrees that it will acquire,
construct  and equip the Project with all  reasonable  dispatch and use its best
efforts to cause the Acquisition of the Project to be completed by August, 2000,
or as soon thereafter as may be  practicable,  delays caused by force majeure as
defined  in  Section  8.1  hereof  only  excepted;  but if for any  reason  such
Acquisition  of the  Project is not  completed  by said date  there  shall be no
resulting  liability  on  the  part  of the  Company  and  no  diminution  in or
postponement  of the  payments  required in Section 4.2 hereof to be paid by the
Company.

    (b) The Company shall obtain or cause to be obtained all  necessary  permits
and approvals for the Acquisition,  operation and maintenance of the Project and
shall comply with all lawful requirements of any governmental body regarding the
use or condition of the Project or any of its component  parts. The Company may,
however,  contest any such requirement by an appropriate  proceeding  diligently
prosecuted.

    (c) The  Company  shall  maintain a set of plans and  specifications  at the
Project  site which shall be available  to the Issuer,  the Trustee,  the Credit
Facility Provider and the Paying Agent for inspection and examination during the
Company's  regular business hours, and the Issuer and the Company agree that the
Company may supplement, amend and add to such plans and specifications, and that
the Company shall be authorized to omit or make  substitutions for components of
the Project,  without approval of the Issuer, provided that no such change shall
be made which shall be contrary to  subsections  (k),  (l),  (m), (n) and (o) of
Section 2.3 hereof or the provisions of Article IX hereof,  and provided further
that if any such change would render  materially  incorrect  or  incomplete  the
description of the initial  components of the Project or the  description of the
Project as set forth in Exhibit A to this Agreement,  the Company and the Issuer
shall amend such Exhibit A to reflect  such change,  upon receipt by the Issuer,
the Trustee, as the Credit Facility Provider, of an opinion of Bond Counsel that
such change will not result in an Event of Taxability. No approval of the Issuer
or the Trustee shall be required for the  Acquisition  of the Project or for the
solicitation, negotiation, award or execution of contracts relating thereto.

    Section 3.2. Agreement to Issue the Bonds;  Application of Bond Proceeds. In
order to provide funds to pay the Costs of the Project, the Issuer, concurrently
with the execution of this  Agreement,  will issue,  sell, and deliver the Bonds
and deposit the net proceeds  thereof with the Trustee in the Project  Fund,  as
provided in the Indenture.

                                     - 9 -
<PAGE>

    Section 3.3.  Disbursements  from the Project  Fund.  The Issuer has, in the
Indenture,  authorized and directed the Trustee to make  disbursements  from the
Project  Fund to pay the Costs of the Project,  or to reimburse  the Company for
any Cost paid by the Company.  The Company  agrees to cause  Requisitions  to be
directed  to the  Trustee  as may be  necessary  to effect  payments  out of the
Project Fund in accordance  with this  Section.  The receipt by the Trustee of a
Requisition  signed by a Company  Representative  which  appears to be  properly
complete  on its face  shall be  sufficient  authorization  for the  Trustee  to
disburse such amounts as requested.

    Section 3.4.  Furnishing  Documents to the  Trustee.  The Company  agrees to
cause such  Requisitions  to be directed to the Trustee as may be  necessary  to
effect payments out of the Project Fund in accordance with Section 3.3 hereof.

    Section 3.5.  Establishment of Completion Date. The Completion Date shall be
evidenced to the Trustee by a certificate signed by a Company  Representative in
the form  attached  hereto  as  Exhibit  D.  Forthwith  upon  completion  of the
acquisition, construction and installation of the Project, the Company agrees to
cause such  certificate  to be  furnished  to the Issuer and the  Trustee.  Upon
receipt of such certificate,  the Trustee shall retain in the Project Fund a sum
equal to the amounts necessary for payment of the Costs not then due and payable
according  to such  certificate,  and any amount  remaining  in the Project Fund
shall be  transferred  by the Trustee into the General  Account of the Bond Fund
and used by the  Trustee (a) to redeem  Bonds on the  earliest  redemption  date
permitted by the Indenture without a premium,  (b) to purchase Bonds on the open
market  prior to such  redemption  date at prices  not in excess of one  hundred
percent  (100%)  of the  principal  amount of such  Bonds,  or (c) for any other
purpose provided that the Trustee is furnished with a Favorable  Opinion of Bond
Counsel, all in accordance with Article VI of the Indenture.  Until used for one
or more of the foregoing  purposes,  such  segregated  amount may be invested as
permitted  by the  Indenture  provided  that  prior to any such  investment  the
Trustee is provided with a Favorable Opinion of Bond Counsel.

    Section 3.6. Company Required to Pay in Event Project Fund Insufficient.  In
the event the moneys in the  Project  Fund  available  for  payment of the Costs
should  not be  sufficient  to pay the  Costs in full,  the  Company  agrees  to
complete  the Project and to pay, or to provide for payment of, that  portion of
the Costs in excess of the moneys  available  therefor in the Project Fund.  The
Issuer does not make any warranty,  either  express or implied,  that the moneys
paid into the  Project  Fund and  available  for  payment  of the Costs  will be
sufficient to pay all of the Costs.  The Company agrees that if after exhaustion
of the moneys in the Project  Fund,  the  Company  should pay any portion of the
Costs  pursuant to the  provisions  of this  Section,  the Company  shall not be
entitled  to any  reimbursement  therefor  from the  Issuer,  the Trustee or the
Owners of any of the Bonds,  nor shall the Company be entitled to any diminution
of the amounts payable under Section 4.2 hereof or under the Note.

    Section 3.7. Special  Arbitrage  Certifications.  The Company and the Issuer
covenant  not to cause or direct any moneys on deposit in any fund or account to
be used in a manner which would cause the Bonds to be  classified  as "arbitrage
bonds" within the meaning of Section 148 of the Code, and the Company  certifies
and  covenants  to and for the benefit of the Issuer and the Owners of the Bonds
that so long as there are any Bonds  Outstanding,  moneys on deposit in any fund
or account in connection  with the Bonds,  whether such moneys were derived from
the  proceeds  of the sale of the Bonds or from any other  sources,  will not be
used in a manner  which

                                     - 10 -
<PAGE>

will cause the Bonds to be classified as "arbitrage bonds" within the meaning of
Section 148 of the Code.

    Section 3.8. Use of Proceeds; Special Tax Covenants.

    (a)  Qualifying  Costs.  Neither the Issuer nor the Company  shall cause any
proceeds of the Bonds to be expended,  except pursuant to the Indenture and this
Agreement.  The Company shall not (i) requisition or otherwise allow payment out
of proceeds of the Bonds (A) if such  payment is to be used for the  acquisition
(including  reimbursement  therefor in compliance with the Code) of any property
(or an interest  therein)  unless the first use of such  property is pursuant to
such  acquisition,  provided  that  this  clause  (A) shall not apply (1) to any
building  (and  the  equipment  purchased  as a part  thereof,  if  any,) if the
"rehabilitation  expenditures",  as defined in Section 147(d) of the Code,  with
respect  to the  building  equal or  exceed  15% of the  portion  of the cost of
acquiring the building  (including such equipment) financed with the proceeds of
the Bonds, or (2) to any other property if the rehabilitation  expenditures with
respect thereto equal 100% of the cost of acquiring such property  financed with
the proceeds of the Bonds;  (B) if as a result of such  payment,  25% or more of
the proceeds of the Bonds would be  considered  as having been used  directly or
indirectly for the  acquisition of land (or an interest  therein);  (C) if, as a
result of such payment, less than 95% of the net proceeds of the Bonds, expended
at the time of such  acquisition  would be  considered  as having  been used for
costs of the acquisition, construction, or reconstruction or improvement of land
or property of a character subject to the allowance for depreciation, within the
meaning of Section 144(a)(1)(A) of the Code ("Qualifying Costs"), or (D) if such
payment is used to pay issuance  costs  (including  counsel  fees and  placement
fees) of the Bonds in excess of an amount equal to 2% of the principal amount of
the Bonds; (ii) take or omit, or permit to be taken or omitted, any other action
with respect to the use of such  proceeds the taking or omission of which has or
would  result in the loss of the  exclusion  of interest on the Bonds from gross
income of the owners thereof for federal  income tax purposes;  or (iii) take or
omit, or permit to be taken or omitted,  any other action the taking or omission
of which has or would cause the loss of such exclusion.

    (b) Prohibited Uses.  Without limiting the generality of the foregoing,  the
Issuer and the Company  will not use the  proceeds of the Bonds,  or permit such
proceeds to be used directly or indirectly,  for the  acquisition of land (or an
interest  therein) to be used for farming  purposes,  or to provide any facility
the primary  purpose of which is retail food and beverage  services,  automobile
sales or service or the provision of recreation or entertainment,  any airplane,
skybox or other  private  luxury box,  any health club  facility,  any  facility
primarily  used for gambling,  any store the principal  business of which is the
sale of  alcoholic  beverages  for  consumption  off  premises,  any  private or
commercial  golf course,  country club,  massage  parlor,  tennis club,  skating
facility (including roller skating,  skateboard and ice skating),  racquet spots
facility  (including  any hand ball or  racquetball  court),  hot tub  facility,
suntan facility, or race track, or single or multi-family residences.

    (c) Manufacturing.  For purposes of applicability of the Code, not less than
95% of the net proceeds of the Bonds (consisting of the face amount of the Bonds
less any original issue discount plus any original issue premium,  but including
issuance  costs)  shall  be  used  to  provide  facilities  to be  used  in  the
manufacturing or production of tangible personal property,  including facilities
that are directly  related and ancillary to such  manufacturing  facilities  and
located on the

                                     - 11 -
<PAGE>

same site as the manufacturing facilities; provided, however, that not more than
twenty-five  percent  (25%) of the net  proceeds  shall be used to provide  such
ancillary facilities.

    (d) No Other Issues.  The Bonds are not being issued as part of an issue the
interest  of which is  exempt  from  federal  income  taxation  under  any other
provision of law other than Section 144(a) of the Code.

    (e)  Existing  Capital   Expenditures.   The  aggregate  amount  of  capital
expenditures  (as defined by Section  1.103-10(b)(2)  of the Tax  Regulations to
include  any  expenditure  which  was or could  have been  treated  as a capital
expenditure  under  any  rule or  election  under  the  Code)  with  respect  to
facilities  located in the same  incorporated  municipality  as the Project,  or
which are contiguous or integrated  facilities,  the principal user of which was
or is the Company or any  Related  Person,  paid or  incurred  during the period
beginning  three years  before the date of issuance of the Bonds,  and  financed
otherwise  than out of the Bond  proceeds  (not  including  investment  earnings
thereon) and otherwise than out of the proceeds of other  outstanding  issues to
which Section 144(a)(2) of the Code applies, is $0.00.

    (f) Bonds  Outstanding.  The  aggregate  face  amount  of all  prior  issues
outstanding  as of the date of issuance of the Bonds  (whether or not the issuer
of each  issue is the  same)  to which  Section  144(a)  of the Code or  Section
103(b)(6) of the Internal Revenue Code of 1954, as amended applies, the proceeds
of which were or will be used to any extent with respect to  facilities  located
in the same incorporated  municipality as the incorporated municipality in which
the  Project  is located  and the  principal  user of which is the  Company or a
Related Person, is $4,500,000. The Company and, at the direction of the Company,
the Issuer,  shall file any reports or  statements  and take any other action as
may be required from time to time with respect to the qualification of the Bonds
as an exempt small issue within the meaning of Section 144(a) of the Code.

    (g) No Other Bonds for Common Facilities.  There are no other bonds to which
Section  144(a) of the Code applies  which,  together with the Bonds,  are to be
used with respect to (a) a single  building,  (b) an enclosed  shopping mall, or
(c)  a  strip  of  offices,  stores  or  warehouses,  using  substantial  common
facilities with the Project or a portion thereof.

    (h)  Land.  No  portion  of the  Bond  proceeds  will  be used  directly  or
indirectly for the  acquisition  of land or any interest  therein to be used for
the  purpose of farming  and less than 25% of the Bond  proceeds  are or will be
used directly or indirectly for the  acquisition of land to be used for purposes
other than farming.

    (i)  Commencement  of   Construction;   First  Users.  The  Borrower  hereby
represents  that the Borrower will not requisition any amounts from the proceeds
of the Bonds to pay costs incurred  before the date of issuance of the Bonds and
paid more than 60 days  prior to the date of  "official  action"  of the  Issuer
within the  meaning of Section  142 of the Code,  which took place on August 17,
1999. No person, firm or corporation who was a "substantial user" of the Project
(within the meaning  described  in such term under  Section  144(a) of the Code)
before the date of issuance  of the Bonds and who was or will be a  "substantial
user" of the Project following its being placed in service, has received or will
receive, directly or indirectly,  any proceeds from the issuance and sale of the
Bonds.

                                     - 12 -
<PAGE>

    (j)  Economic  Life of  Project.  The  Company  hereby  represents  that the
weighted  average  maturity  of the Bonds does not exceed  120% of the  "average
reasonably  expected  economic life" of the  components  comprising the Project,
determined  pursuant to Section  147(b) of the Code.  The Company agrees that it
will not make any changes in the Project  which would,  at the time made,  cause
120% of the "average reasonably expected economic life" of the components of the
Project,  determined pursuant to Section 147(b) of the Code, to be less than the
"weighted average maturity" of the Bonds.

    (k)  Certificate of  Information;  Internal  Revenue  Service Form 8038. The
Company  hereby  represents  that the  information  contained  herein and in the
Company's Tax Certificate (attached to the Issuer's  Non-Arbitrage  Certificate)
delivered  in  connection  with the  issuance  of the Bonds with  respect to the
compliance with the  requirements of Section 103 and Sections 141 through 150 of
the Code,  including  the  information  in Internal  Revenue  Service  Form 8038
(excluding  the  issue  number  and the  employer  identification  number of the
Issuer)  filed by the Issuer with respect to the Bonds and the Project,  is true
and correct in all material respects.

    (l) Use by United  States of America or Its  Agencies.  The  Company has not
permitted and shall not permit the Project to be used or occupied  other than as
a member of the  general  public in any  manner for  compensation  by the United
States of America or an agency or instrumentality thereof,  including any entity
with  statutory  authority  to borrow from the United  States of America (in any
case within the meaning of Section  149(b) of the Code) unless,  with respect to
any  future use of the  Project,  the  Company  shall  deliver to the  Trustee a
Favorable Opinion of Bond Counsel.

    (m) Other Bonds. The Company agrees that during the period commencing on the
date of the issuance of the Bonds and ending 15 days thereafter,  there shall be
issued no "private activity bonds," as defined in Section 141 of the Code, which
are guaranteed or otherwise secured by payments to be made by the Company or any
"related  person"  (or group of  "related  persons")  unless the  Company  shall
deliver to the Trustee a Favorable  Opinion of Bond Counsel in  connection  with
the issuance of such  "private  activity  bonds".  The Company  represents  that
except for the Company or any "related person" (or group of "related  persons"),
no person has (i) guaranteed,  arranged,  participated in, assisted with or paid
any portion of the cost of the  issuance  of, the Bonds,  and (ii)  provided any
property  or any  franchise,  trademark  or trade name  (within  the  meaning of
Section 1253 of the Code) which is to be used in connection with the Project.

    (n) Limit on Amount of Bonds,  Reports.  The Company  represents that on the
date of the issuance of the Bonds (i) obligations were not assumed, expenditures
were not made and  outstanding  obligations  did not exist  that will  cause the
"aggregate face amount" of the Bonds as computed under the provisions of Section
144(a)  and  related  sections  of the  Code to  exceed  $10,000,000,  and  (ii)
outstanding  obligations  did not exist that  would  cause the  "aggregate  face
amount" of the Bonds allocated to any  "test-period  beneficiary," as defined in
Section  144(a)(10) of the Code, when increased by such  obligations as provided
in Section 144(a)(10) of the Code, to exceed $40,000,000.  During the three-year
period  beginning  on the date of the  issuance of the Bonds (or, in the case of
clause (ii) below, the date the Project is placed in service, unless the Company
provides to the Trustee an Opinion of Bond Counsel that such  restriction  is no
longer  applicable),  the  Company  shall not make any  expenditure,  assume any
obligation,  permit the use of the Project by any person or take or permit other
action that would  cause the  "aggregate  face  amount" of the Bonds as computed
under the provisions of Section  144(a) and related  sections of

                                     - 13 -
<PAGE>

the Code (i) to exceed  $10,000,000  or such other  maximum  dollar  amount then
permitted by the Code, or (ii) allocated to any "test-period beneficiary",  when
increased by such obligations as provided in Section  144(a)(10) of the Code, to
exceed  $40,000,000,  and shall on the  anniversary  date of the issuance of the
Bonds until the third  anniversary date of the issuance of the Bonds or the date
on which the Project is placed into service,  whichever is later,  file a report
with the Trustee setting forth all capital  expenditures and bond issues used in
calculating  such limits under Section  144(a) of the Code since the last report
received by the Trustee.

    The Company and the Issuer shall file any reports or statements and take any
other  action  as  may be  required  from  time  to  time  with  respect  to the
qualification  of the Bonds as qualified small issue bonds within the meaning of
Section 144(a) of the Code.

    (o) Election.  The Issuer  hereby  elects to have the  provisions of Section
144(a)(4) of the Code apply to the Bonds.

    (p) Covenant to Maintain Tax  Exemption.  The Issuer and the Company  hereby
covenant  and agree on their own  behalf  that they  shall not take any  action,
cause any action to be taken,  omit to take any action or cause any  omission to
occur which would cause the  interest on the Bonds to become  includable  in the
gross income of the recipients thereof for purposes of federal income taxation.

    Section  3.9.   Modification  and  Termination  of  Special  Tax  Covenants.
Subsequent  to the issuance of the Bonds and prior to their  payment in full (or
provision  for the  payment  thereof  having  been made in  accordance  with the
provisions  of the  Indenture),  neither  this  Agreement  nor the  Note  may be
amended, changed, modified, altered or terminated except as permitted herein and
by the  Indenture and with the written  consent of the Company,  the Trustee and
the Credit  Provider.  Subject to Article XI of the Indenture,  the Issuer,  the
Trustee,  and the Company  hereby  agree to amend this  Agreement  to the extent
required or permitted,  in the opinion of Bond Counsel, in order for interest on
the Bonds to be excluded from gross income for federal income tax purposes under
Section 103(a) of the Code. The party requesting such amendment shall notify the
other party to this Agreement and the Trustee of the proposed amendment,  with a
copy of such  requested  amendment to Bond Counsel.  To effect any such proposed
amendments,  after review of such proposed amendment,  Bond Counsel shall render
to the Trustee a Favorable Opinion of Bond Counsel.

    Section 3.10. Arbitrage and Rebate.

    (a) The Company  acknowledges  having read Section 5.09 of the Indenture and
agrees to perform all duties imposed upon it by such  Sections.  Insofar as said
Sections or any other sections of the Indenture  expressly or implicitly  impose
duties and responsibilities on the Company,  they are specifically  incorporated
herein by reference.

    (b) Neither  the  Company nor the Issuer  shall (i) take or omit to take any
action,  or approve,  the making by the Company of any  investment or use of any
proceeds  of the Bonds or any  other  moneys  within  their  respective  control
(including  without limitation the proceeds of any insurance or any condemnation
award with  respect to the  Project),  or the  taking or  omission  of any other
action,  which would cause the Bonds to be "arbitrage  bonds" within the meaning
of

                                     - 14 -
<PAGE>

Section 148 of the Code,  or (ii) approve the use of any proceeds  from the sale
of  the  Bonds   otherwise  than  in  accordance  with  this  Agreement  or  the
Non-Arbitrage Certificate, barring any unforeseen circumstances, in which event,
the Company and the Issuer shall use such  proceeds with due diligence and shall
otherwise  comply with this  Agreement.  Without  limiting the generality of the
foregoing,  the Company shall at its sole expense take all action required under
Section 148 of the Code and Treasury  Regulations  thereunder to prevent loss of
the  exclusion  of the  interest  on the Bonds from  gross  income of the owners
thereof for Federal  income tax purposes  under such Section,  including but not
limited to paying on behalf of the Issuer the  "rebatable  arbitrage  amount" to
the United States of America in accordance  with the  requirements  set forth in
the related Treasury  Regulations and complying with the requirements of Section
5.09 of the Indenture and this Section,  including  making the  calculations and
deposits  required  therein  (with all such  calculations  to be supplied to the
Issuer). The Company shall also comply with any similar  requirements  contained
in  any  Treasury   Regulations  adopted  in  place  of  the  existing  Treasury
Regulations and all other requirements of any such Treasury Regulations,  to the
extent  applicable  to the Bonds.  The  Company  shall  maintain  or cause to be
maintained  records  of any such  rebate  calculations  for six (6) years  after
retirement of the Bonds.

    (c)  Nothing  contained  in this  Agreement  or in the  Indenture  shall  be
interpreted  or construed to require the Issuer to pay the Rebate  Amount,  such
obligations being the sole responsibility of the Company.

                                   ARTICLE IV

                                LOAN PROVISIONS;
                           SUBSTITUTE CREDIT FACILITY

    Section  4.1.  Loan of  Proceeds.  The  Issuer  agrees,  upon the  terms and
conditions contained in this Agreement and the Indenture, to lend to the Company
the proceeds  received by the Issuer from the sale of the Bonds, and the Company
hereby  borrows the same from the Issuer as evidenced by this  Agreement and the
execution  and  delivery  of the  Note to the  Issuer.  Such  proceeds  shall be
disbursed as provided in Sections 3.2 and 3.4 hereof.

    Section 4.2. Amounts Payable.

    (a) The Company  hereby  covenants and agrees to repay the loan, as follows:
on or before any Interest  Payment Date for the Bonds or any other date that any
payment of interest, premium, if any, or principal or Purchase Price is required
to be  made in  respect  of the  Bonds  pursuant  to the  Indenture,  until  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,  in immediately  available funds, a sum which, together with
any other  moneys  available  for such  payment in any account of the Bond Fund,
will enable the Trustee to pay the amount payable on such date as Purchase Price
or  principal  of (whether at maturity or upon  redemption  or  acceleration  or
otherwise),  premium,  if any,  and  interest  on the Bonds as  provided  in the
Indenture;  provided,  however,  that the  obligation of the Company to make any
payment  hereunder shall be deemed satisfied and discharged to the extent of the
corresponding  payment  made by the Credit  Provider  to the  Trustee  under the
Credit Facility.  The Company covenants to make all payments on the Note, as and
when the same become due.

                                     - 15 -
<PAGE>

    It is understood  and agreed that all payments  payable by the Company under
subsection  (a) of this Section and under the Note are assigned by the Issuer to
the Trustee for the benefit of the Owners of the Bonds.  The Company  assents to
such  assignment.  The Issuer hereby  directs the Company and the Company hereby
agrees to pay to the Trustee at the Principal Office of the Trustee all payments
payable by the Company pursuant to this subsection.

    (b) The Company will also pay the reasonable  expenses of the Issuer related
to the issuance of the Bonds.

    (c) The  Company  will  also pay the  reasonable  fees and  expenses  of the
Trustee  under the  Indenture  and all other amounts which may be payable to the
Trustee under Section 10.02 of the  Indenture,  such amounts to be paid directly
to the Trustee for the Trustee's own account as and when such amounts become due
and payable.

    (d) The Company  covenants,  for the benefit of the Owners of the Bonds,  to
pay or cause to be paid,  to the Trustee,  such amounts as shall be necessary to
enable  the  Trustee  to pay the  Purchase  Price of Bonds  delivered  to it for
purchase,  all as more  particularly  described in Sections 4.01 and 4.02 of the
Indenture;  provided,  however,  that the  obligation of the Company to make any
such payment under this  subsection (d) shall be reduced by the amount of moneys
available for such payment  described in  subsection  (a) of Section 4.03 of the
Indenture; and provided, further, that the obligation of the Company to make any
payment under this subsection (d) shall be deemed to be satisfied and discharged
to the extent of the corresponding payment made by the Credit Provider under the
Credit Facility.

    (e) In the  event  the  Company  should  fail  to make  any of the  payments
required in this Section,  the item or  installment so in default shall continue
as an  obligation  of the  Company  until the amount in default  shall have been
fully paid, and the Company agrees to pay the same with interest thereon, to the
extent permitted by law, from the date when such payment was due, at the rate of
interest borne by the Bonds.

    Section 4.3.  Obligations of Company  Unconditional.  The obligations of the
Company to make the  payments  required in Section 4.2 and under the Note and to
perform and observe the other agreements  contained herein shall be absolute and
unconditional  and shall not be subject  to any  defense or any right of setoff,
counterclaim  or  recoupment  arising  out of any  breach  by the  Issuer or the
Trustee,  of any obligation to the Company,  whether hereunder or otherwise,  or
out of any  indebtedness  or  liability  at any time owing to the Company by the
Issuer or the Trustee,  and,  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
Company (i) will not suspend or discontinue any payments provided for in Section
4.2 hereof, (ii) will perform and observe all other agreements contained in this
Agreement and (iii) except as otherwise provided herein,  will not terminate the
Term of Agreement for any cause,  including,  without limiting the generality of
the foregoing,  the occurrence of any acts or circumstances  that may constitute
failure of consideration,  eviction or constructive eviction,  destruction of or
damage to the Project, the taking by eminent domain of title to or temporary use
of any or all of the Project,  commercial  frustration of purpose, any change in
the tax or other  laws of the  United  States of  America or of the State or any
political

                                     - 16 -
<PAGE>

subdivision  of either  thereof or any  failure of the Issuer or the  Trustee to
perform and  observe any  agreement,  whether  express or implied,  or any duty,
liability or obligation arising out of or connected with this Agreement. Nothing
contained  in this  Section  shall be  construed  to release the Issuer from the
performance  of any of the agreements on its part herein  contained,  and in the
event the Issuer or the Trustee should fail to perform any such agreement on its
part, the Company may institute such action against the Issuer or the Trustee as
the Company may deem necessary to compel performance so long as such action does
not abrogate the  obligations of the Company  contained in the first sentence of
this Section.

    Section 4.4. Substitute Credit Facility. Subject to the conditions set forth
in this  Section 4.4, the Company may provide for the delivery to the Trustee of
a Substitute  Credit  Facility.  The Company shall furnish written notice to the
Trustee,  not less than twenty days prior to the Mandatory  Purchase  Date,  (a)
notifying the Trustee that the Company is  exercising  its option to provide for
the delivery of a Substitute  Credit Facility to the Trustee,  (b) setting forth
the  Mandatory  Purchase  Date (which shall in any event be an Interest  Payment
Date) in connection with the delivery of such Substitute Credit Facility,  which
shall in any event be not less than two  Business  Days prior to the  expiration
date of the Credit  Facility  then in effect with respect to the Bonds,  and (c)
instructing  the  Trustee to furnish  notice to the  Bondholders  regarding  the
Mandatory  Purchase Date at least  fifteen days prior to the Mandatory  Purchase
Date, as more fully  described in Section 4.01(b) of the Indenture and Exhibit B
thereto.  Any Substitute Credit Facility shall be delivered to the Trustee prior
to any such  Mandatory  Purchase  Date, and shall be effective on and after such
Mandatory  Purchase Date, and shall expire on a date which is fifteen days after
an Interest  Payment Date for the Bonds.  On or before the date of such delivery
of a Substitute Credit Facility to the Trustee, the Company shall furnish to the
Trustee (a) a Favorable  Opinion of Bond Counsel with respect to such Substitute
Credit  Facility;  (b) a written  opinion of counsel  to the  Substitute  Credit
Provider to the effect that the Substitute  Credit  Facility is a legal,  valid,
binding  and  enforceable  obligation  of  the  Substitute  Credit  Provider  in
accordance  with its terms;  and (c) the written consent of the Secretary of the
LGC as to the  acceptance  by the  Trustee of the  Substitute  Credit  Facility.
Notwithstanding  the prior  sentence,  the consent of the  Secretary  of the LGC
shall not be necessary if the Trustee has received (i) if the Bonds are rated by
a Rating  Agency,  written  evidence  from such Rating Agency to the effect that
such Rating Agency has reviewed the proposed Substitute Credit Facility and that
the substitution of the proposed Substitute Credit Facility for the then current
Credit  Facility  will not, by itself,  result in a permanent  withdrawal of its
rating of the Bonds or a reduction of the then current  rating of the Bonds,  or
(ii) if the Bonds are not rated by a Rating  Agency,  written  evidence that the
bank deposit  obligations  or other  long-term  debt of the bank or  institution
issuing the proposed  Substitute Credit Facility are rated by a Rating Agency at
least as high as the bank deposit  obligations  or other  long-term  debt of the
Credit Issuer as of the delivery date of the Substitute  Credit  Facility unless
the rating of the Credit  Issuer's bank deposit  obligations  or other long term
debt is higher than such rating on the original delivery date in which case such
lower  rating  shall be the highest  rating  required of the  Substitute  Credit
Facility unless otherwise directed in writing by a Company Representative.

    The Company  shall  require the Credit  Facility  Provider to provide to the
Trustee  notice of and all necessary  documents  related to any extension of the
term of the  Credit  Facility  at least  thirty  (30) days  prior to the  Credit
Facility Termination Date.

                                     - 17 -
<PAGE>

                                    ARTICLE V

                       PREPAYMENT, PURCHASE AND REDEMPTION

    Section 5.1. Prepayment, Purchase and Redemption. The Company shall have the
option to prepay its  obligations  hereunder  at the times and in the amounts as
necessary  to exercise  its option to cause the Bonds to be redeemed or defeased
as set forth in the Indenture and in the Bonds.  The Company  hereby agrees that
it shall  prepay its  obligations  hereunder  at the times and in the amounts as
necessary to accomplish  the purchase and the mandatory  redemption of the Bonds
as set forth in the  Indenture and in the Bonds.  The Issuer,  at the request of
the Company, shall forthwith take all steps (other than the payment of the money
required  for  such  redemption)   necessary  under  the  applicable  redemption
provisions  of  the  Indenture  to  effect  redemption  of all  or  part  of the
Outstanding  Bonds, as may be specified by the Company,  on the date established
for such redemption.

                                   ARTICLE VI

                                SPECIAL COVENANTS

    Section 6.1. No Warranty of Condition or Suitability  by Issuer.  THE ISSUER
MAKES NO WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE PROJECT OR THE CONDITION
THEREOF,  OR THAT THE  PROJECT  IS  SUITABLE  FOR THE  PURPOSES  OR NEEDS OF THE
COMPANY.  THE ISSUER MAKES NO  REPRESENTATION  OR WARRANTY,  EXPRESS OR IMPLIED,
THAT THE COMPANY WILL HAVE QUIET AND  PEACEFUL  POSSESSION  OF THE PROJECT.  THE
ISSUER MAKES NO REPRESENTATION OR WARRANTY,  EXPRESS OR IMPLIED, WITH RESPECT TO
THE MERCHANTABILITY,  CONDITION OR WORKMANSHIP OF ANY PART OF THE PROJECT OR ITS
SUITABILITY FOR THE COMPANY'S PURPOSES.

    Section 6.2. Access to the Project.  The Company agrees that the Issuer, the
Credit  Provider,  the  Trustee  and their duly  authorized  agents,  attorneys,
experts,  engineers,  accountants  and  representatives  shall have the right to
inspect  the  Project at all  reasonable  times and on  reasonable  notice.  The
Issuer, the Credit Provider,  the Trustee and their duly authorized agents shall
also be  permitted,  at all  reasonable  times and upon  reasonable  notice,  to
examine the books and records of the Company with respect to the Project.

    Section 6.3. Further Assurances and Corrective  Instruments.  The Issuer and
the Company agree that they will,  from time to time,  execute,  acknowledge and
deliver, or cause to be executed,  acknowledged and delivered,  such supplements
hereto and such further  instruments  as may reasonably be required for carrying
out the expressed intention of this Agreement.

    Section  6.4.  Issuer  and  Company  Representatives.   Whenever  under  the
provisions  of this  Agreement  the  approval  of the  Issuer or the  Company is
required  or the Issuer or the  Company is  required  to take some action at the
request of the  other,  such  approval  or such  request  shall be given for the
Issuer  by  an  Issuer   Representative   and  for  the  Company  by  a

                                     - 18 -
<PAGE>

Company  Representative.  The  Trustee  shall be  authorized  to act on any such
approval or request.

    Section 6.5. Financing Statements. The Company agrees to execute and file or
cause to be executed and filed any and all  financing  statements  or amendments
thereof or  continuation  statements  necessary  to  perfect  and  continue  the
perfection of the security interests granted in the Indenture. The Company shall
pay all costs of filing such instruments.

    Section 6.6. Covenant to Provide Continuing  Disclosure.  The Company hereby
covenants  and agrees that,  upon the exercise by the Company of the  Conversion
Option to elect a Long Term Period or a  Commercial  Paper  Period,  the Company
shall  enter into a written  undertaking  for the  benefit of the holders of the
Bonds,  as required by Section  (b)(5)(i) of Securities and Exchange  Commission
Rule 15c2-12 under the Securities  Exchange Act of 1934, as amended (17 CFR Part
240, ss. 240.15c2-12) (the "Rule");  provided,  however,  that the Company shall
not be  obligated to enter into such written  undertaking  if the Company  shall
furnish to the  Trustee,  prior to the  exercise of the  Conversion  Option,  an
opinion of Bond Counsel that,  notwithstanding such election by the Company, the
Rule is not applicable to the Bonds.

    Section 6.7. Annual Report of Outstanding Bonds. Promptly after each June 30
during  the Term of the  Agreement,  the  Company  shall  notify the LGC and the
Issuer,  by  first-class  mail, of the aggregate  principal  amount of the Bonds
Outstanding at the close of business on such June 30.

    Section 6.8. Notice of Control.  The Company shall provide written notice to
the Trustee and the Remarketing Agent thirty (30) days prior to the consummation
of any  transaction  that would  result in the  Company  controlling  the Credit
Provider  or being  controlled  by the Credit  Provider  within  the  meaning of
Section 2(a)(9) of the Investment Company Act of 1940.

                                   ARTICLE VII

                  ASSIGNMENT, SELLING, LEASING; INDEMNIFICATION
               MERGER OR ASSET SALE, MAINTENANCE AND REPAIR, TAXES

    Section 7.1. Assignment, Selling and Leasing. This Agreement may be assigned
and the  Project  may be sold or leased,  as a whole or in part,  with the prior
written consent of the Trustee, the Credit Provider and the LGC, but without the
necessity of obtaining  the consent of the Issuer;  provided,  however,  that no
such assignment,  sale or lease shall, in the opinion of Bond Counsel, result in
interest on any of the Bonds  becoming  includable  in gross  income for federal
income tax  purposes,  or shall  otherwise  violate any  provisions  of the Act;
provided further, however, that no such assignment,  sale or lease shall relieve
the Company of any of its obligations under this Agreement.

    This  Agreement may be assigned and the Project may be sold or leased,  as a
whole or in  part,  and the  Company  released  of all  obligations  under  this
Agreement and the Indenture,  with the prior written consent of the Issuer,  the
Trustee,  and the LGC, if (i) such  assignee,  lessee or  purchaser  assumes the
Company's obligations hereunder in writing, (ii) the Credit Provider

                                     - 19 -
<PAGE>

consents in writing to such assignment, sale and/or lease and the release of the
Company  hereunder  (or, if no Credit  Facility is in effect at the time of such
assignment,  lease or sale,  the Owners of a  majority  in  aggregate  principal
amount of the Bonds then Outstanding consent in writing to such assignment, sale
(or  lease)  and  release),  and (iii)  prior to any  assignment,  lease or sale
pursuant to this  Section,  the Company shall have caused to be delivered to the
Issuer, the Trustee, the LGC and the Credit Provider, if any, an opinion of Bond
Counsel,  satisfactory in form and substance to each of them, to the effect that
such  assignment,  sale (or lease) and  release  will not cause  interest on the
Bonds to be  includable  in the  gross  income  of the  Owners  of the Bonds for
purposes of federal  income  taxation.  Upon the release of all of the Company's
duties and  obligations  under the provisions of this Section as provided above,
the Trustee may execute a release of the Company from its obligations  hereunder
and under the Indenture and all  references to the "Company" in this  Agreement,
the  Indenture and the Bonds shall mean the  assignee,  lessee or purchaser,  as
applicable.

    Section 7.2.  Release and  Indemnification  . The Company shall at all times
protect,  indemnify  and hold  harmless the Trustee,  the Issuer,  the Governing
Body, the LGC and their  respective  directors,  members,  officers,  attorneys,
agents and employees  against any and all  liability,  losses,  damages,  costs,
expenses,  taxes, causes of action, suits, claims,  demands and judgments of any
nature  arising from or in  connection  with the Project or the financing of the
Project, including,  without limitation, all claims or liability resulting from,
arising out of or in connection  with the  acceptance or  administration  of the
Bond Documents or the trusts  thereunder or the  performance of duties under the
Bond  Documents  or any loss or damage to  property or any injury to or death of
any person that may be  occasioned  by any cause  whatsoever  pertaining  to the
Project or the use thereof,  including  without  limitation any lease thereof or
assignment of its interest in this Agreement,  such  indemnification  to include
the reasonable costs and expenses of defending itself or investigating any claim
of liability and other  reasonable  expenses and attorneys' fees incurred by the
Issuer, the Trustee, the Governing Body, the LGC and their respective directors,
members,  officers,  attorneys,  agents and employees in  connection  therewith,
provided  that the benefits of this Section  shall not inure to any person other
than the Issuer,  the Governing Body, the LGC, the Trustee and their  respective
directors,  members,  officers,  attorneys,  agents and employees,  and provided
further that such loss, damage, death, injury,  claims,  demands or causes shall
not have  resulted  from the gross  negligence  or  willful  misconduct  of, the
Issuer,  the Trustee or such  director,  member,  officer,  attorneys,  agent or
employee.  The  obligations  of the Company under this Section shall survive the
termination  of this  Agreement  and the  Indenture.  Notwithstanding  any other
provision of this Agreement or the Indenture to the contrary, the Company agrees
(i) not to assert any claim or institute  any action or suit against the Trustee
or its employees arising from or in connection with any investment of funds made
by the Trustee in good faith as directed by a Company  Representative,  and (ii)
to  indemnify  and hold  harmless  the  Trustee  and its  employees  against any
liability,  losses, damages,  costs, expenses,  causes of action, suits, claims,
demands and judgments of any nature arising from or in connection  with any such
investment. In addition, the Issuer shall have the right, in the event of a suit
against the Issuer, to hire its own counsel, and the Company shall indemnify the
Issuer for the costs thereof.

                                     - 20 -
<PAGE>

    Section 7.3.  Indemnity  Against Claims.  The Company will pay and discharge
and will indemnify and hold harmless the Issuer, the Governing Body, the LGC and
the Trustee,  and their  respective  officers,  employees  and agents,  from any
taxes, assessments,  impositions and other charges in respect of the Project. If
any such claim is  asserted,  or any such lien or charge upon  payments,  or any
such taxes, assessments, impositions or other charges, are sought to be imposed,
the Issuer,  the Governing Body or the LGC, as the case may be, will give prompt
written  notice to the  Company and the  Trustee;  provided,  however,  that the
failure to provide  such notice  will not  relieve the Company of the  Company's
obligations and liability under this Section and will not give rise to any claim
against or liability of the Issuer or the  Trustee.  The Company  shall have the
sole right and duty to assume,  and shall  assume,  the  defense  thereof,  with
counsel  selected  by the  Company and  reasonably  acceptable  to the person on
behalf of which the Company  undertakes a defense,  with full power to litigate,
compromise or settle the same in its sole discretion.

    Section  7.4.  Issuer to Grant  Security  Interest to  Trustee.  The parties
hereto  agree that  pursuant to the  Indenture,  the Issuer  shall assign to the
Trustee,  in order to secure  payment of the Bonds,  all of the Issuer's  right,
title  and  interest  in and to this  Agreement  and the  Note,  except  for the
Reserved Rights.

    Section 7.5. Maintenance of Existence;  Merger; Asset Transfer. So long as a
Credit  Facility  is in effect the  Company  agrees  that it will  maintain  its
existence, will not dissolve or otherwise dispose of all or substantially all of
its assets and will not  consolidate  with or merge into another  corporation or
permit  one or more other  corporations  to  consolidate  with or merge into it,
except either with the consent of the Credit Issuer or as provided in the Credit
Agreement;  if a Credit  Facility is not in effect,  the Company  agrees that it
will continue to be a corporation organized under the laws of the State of North
Carolina, will maintain its corporate existence,  will not dissolve or otherwise
dispose of all or substantially  all of its assets and will not consolidate with
or  merge  into  another  corporation  or  permit  one or more  corporations  to
consolidate  with or merge into it;  provided,  that the  Company  may,  without
violating the foregoing,  consolidate with or merge into another corporation, or
permit  one or more  corporations  to  consolidate  with or merge  into  it,  or
transfer all or substantially all of its assets to another such corporation (and
thereafter  dissolve  or  not  dissolve,  as  the  Company  may  elect)  if  the
corporation  surviving such merger or resulting from such consolidation,  or the
corporation to which all or  substantially  all of the assets of the Company are
transferred,  as the case may be: (i) is a corporation  organized under the laws
of the United States of America,  or any state,  district or territory  thereof,
and  qualified  to do business  in the State;  (ii) shall  expressly  in writing
assume all of the obligations of the Company contained in this Agreement;  (iii)
has  a   consolidated   tangible  net  worth  (after   giving   effect  to  such
consolidation,  merger or transfer) of not less than the  consolidated  tangible
net worth of the Company and its consolidated  subsidiaries immediately prior to
such consolidation, merger or transfer; (iv) shall notify each person identified
in Section 9.2 hereof of the name and address of such corporation surviving such
merger or resulting from such consolidation,  or the corporation to which all or
substantially all of the assets of the Company are transferred; and (v) provided
that no Default has occurred and is continuing hereunder.

    The term "consolidated  tangible net worth," as used in this Section,  shall
mean the difference obtained by subtracting total consolidated  liabilities (not
including as a liability  any

                                     - 21 -
<PAGE>

capital or surplus item) from total consolidated  tangible assets of the Company
and all of its consolidated subsidiaries,  computed in accordance with generally
accepted  accounting  principles.  Prior to any such  consolidation,  merger  or
transfer the Trustee shall be furnished a certificate  from the chief  financial
officer of the  Company or his/her  deputy  stating  that in the opinion of such
officer none of the covenants in this  Agreement will be violated as a result of
said consolidation, merger or transfer.

    Section  7.5.  Company's  Obligations  to Maintain  and Repair.  The Company
agrees  that during the term of this  Agreement  it will keep and  maintain  the
Project in good  condition,  repair and working  order,  ordinary  wear and tear
excepted,  at its own cost,  and will make or cause to be made from time to time
all necessary repairs thereto  (including  external and structural  repairs) and
renewals and replacements thereto.

    Section 7.6. Taxes and Other Charges.  (a) The Company will promptly pay and
discharge or cause to be promptly paid and  discharged,  as the same become due,
all taxes, assessments, governmental charges or levies and all utility and other
charges incurred in the operation, maintenance, use, occupancy and upkeep of the
Project  imposed  upon it or in  respect  of the  Project  before the same shall
become in default, as well as all lawful claims which, if unpaid, might become a
lien or charge upon such  property and assets or any part  thereof,  except such
that are  contested  in good  faith by the  Company  for which the  Company  has
maintained  adequate  reserves  satisfactory to the Credit  Provider,  or in the
absence of any Credit Provider, satisfactory to the Issuer and the Trustee.

    (b) The Company shall furnish the Issuer and the Trustee, upon request, with
proof of payment of any taxes, governmental charges, utility charges,  insurance
premiums  or  other  charges  required  to be paid  by the  Company  under  this
Agreement.

    Section 7.7. Damage, Destruction or Loss of Property; Obligation to Rebuild;
Use of Insurance  Proceeds and Condemnation  Awards. If prior to full payment of
all Bonds (or provision for payment  thereof having been made in accordance with
the provisions of the Indenture),  the Project,  or any part or component of the
Project shall be damaged or destroyed,  by whatever  cause, or shall be taken by
any public  authority or entity in the exercise of or acquired  under the threat
of the exercise of its power of eminent  domain,  there shall be no abatement or
reduction in the loan repayment  obligations  payable under this Agreement,  and
the Company will apply any insurance  proceeds or condemnation  awards resulting
from claims for such losses or takings as provided in this Section.

    If prior to full  payment of all Bonds (or  provision  for  payment  thereof
having  been made in  accordance  with the  provisions  of the  Indenture),  the
Project, or any part or component of the Project shall be damaged, destroyed, or
the Project or any part or component  of the Project,  the Project Site shall be
taken by eminent domain or the threat of exercise of eminent domain, the Company
shall promptly give, or cause to be given, written notice thereof to the Issuer,
the Bank and the Trustee.  All proceeds  received from such  property  insurance
with  respect to the Project  and all  condemnation  awards with  respect to the
Project  shall be deposited  with the Trustee to the credit of the Project Fund.
Following  the  occurrence  of such an event with  respect to the  Project,  the
Company  shall  have the option of (1)  continuing  to pay all  amounts  payable
hereunder  and to the extent  permitted  below  proceeding  promptly  to repair,
rebuild, restore or replace the property

                                     - 22 -
<PAGE>

damaged,  destroyed or taken,  with such changes,  alterations and modifications
(including the substitution and addition of other property) as may be desired by
the  Company  and,  with  respect to the  Project,  and as will  comply with the
limitations  contained  in this  Agreement,  and the Trustee  will  deposit such
proceeds  to  the  credit  of the  Project  Fund  and  make  such  disbursements
therefrom, in accordance with Section 3.3 hereof, as may be necessary to pay the
cost of such repair, rebuilding or restoration,  either on completion thereof or
as the work  progresses  or (2)  requesting  the Issuer to cause the Bonds to be
redeemed in accordance with the terms of the Indenture.

                                  ARTICLE VIII

                              DEFAULTS AND REMEDIES

    Section 8.1. Defaults Defined.  The following shall be "Defaults" under this
Agreement  and  the  term  "Default"  shall  mean,  whenever  it is used in this
Agreement, any one or more of the following events:

    (a)  Failure  by the  Company to pay any  amount  required  to be paid under
subsection (a) or (d) of Section 4.2 hereof.

    (b) Failure by the Company to observe and perform any covenant, condition or
agreement on its part to be observed or performed,  other than as referred to in
Section 8.1(a), for a period of thirty (30) days after written notice specifying
such  failure and  requesting  that it be remedied  shall have been given to the
Company by the Issuer or the  Trustee,  unless the Issuer and the Trustee  shall
agree in writing to an extension of such time prior to its expiration; provided,
however,  if the failure  stated in the notice  cannot be  corrected  within the
applicable  period,  the Issuer and the Trustee will not  unreasonably  withhold
their consent to an extension of such time if corrective action is instituted by
the Company  within the  applicable  period and  diligently  pursued  until such
failure is corrected.

    (c) The  dissolution or liquidation of the Company,  except as authorized by
Section 7.5 hereof, or the voluntary initiation by the Company of any proceeding
under any federal or state law relating to bankruptcy, insolvency,  arrangement,
reorganization,  readjustment of debt or any other form of debtor relief, or the
initiation  against  the  Company  of any such  proceeding  which  shall  remain
undismissed  for sixty (60) days,  or failure by the  Company to  promptly  have
discharged any execution, garnishment or attachment of such consequence as would
impair the ability of the Company to carry on its operations at the Project,  or
assignment  by the  Company for the  benefit of  creditors,  or the entry by the
Company  into an  agreement  of  composition  with its  creditors or the failure
generally by the Company to pay its debts as they become due.

    (d) The occurrence of a Default under the Indenture.

    The  provisions  of  subsection  (b) of  this  Section  are  subject  to the
following  limitation:  if by reason of force  majeure  the Company is unable in
whole or in part to carry out any of its agreements contained herein (other than
its obligations contained in Article IV hereof), the Company shall not be deemed
in Default during the continuance of such inability. The term "force majeure" as
used herein shall mean, without limitation,  the following: acts of God;

                                     - 23 -
<PAGE>

strikes or other  industrial  disturbances;  acts of public  enemies;  orders or
restraints  of any kind of the  government of the United States of America or of
the State or of any of their departments, agencies or officials, or of any civil
or military authority;  insurrections;  riots; landslides;  earthquakes;  fires;
storms;  droughts;  floods;  explosions;  breakage  or  accident  to  machinery,
transmission pipes or canals; and any other cause or event not reasonably within
the control of the  Company.  The Company  agrees,  however,  to remedy with all
reasonable dispatch the cause or causes preventing the Company from carrying out
its  agreement,  provided that the  settlement  of strikes and other  industrial
disturbances  shall be  entirely  within the  discretion  of the Company and the
Company shall not be required to settle strikes,  lockouts and other  industrial
disturbances  by acceding to the demands of the  opposing  party or parties when
such course is in the judgment of the Company unfavorable to the Company.

    Section 8.2.  Remedies on Default.  Whenever any Default shall have happened
and be continuing,  the Trustee,  or the Issuer with the written  consent of the
Trustee, may take one or any combination of the following remedial steps:

    (a) If the  Trustee  has  declared  the Bonds  immediately  due and  payable
pursuant to Section  9.02 of the  Indenture,  by written  notice to the Company,
declare  an amount  equal to all  amounts  then due and  payable  on the  Bonds,
whether by acceleration of maturity (as provided in the Indenture) or otherwise,
to be immediately due and payable as liquidated damages under this Agreement and
not as a penalty, whereupon the same shall become immediately due and payable;

    (b) Have  reasonable  access to and 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  Company  during  regular  business  hours  of the  Company  if
reasonably necessary in the opinion of the Trustee; or

    (c) Take  whatever  action  at law or in  equity  may  appear  necessary  or
desirable  to collect the amounts then due and  thereafter  to become due, or to
enforce  performance and observance of any obligation,  agreement or covenant of
the Company under this Agreement.

    Any amounts  collected  pursuant to action taken under this Section shall be
paid into the Bond Fund and applied in  accordance  with the  provisions  of the
Indenture.

    Section 8.3. No Remedy Exclusive.  Subject to Section 9.02 of the Indenture,
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  Agreement  or now or  hereafter  existing at law or in
equity.  No delay or omission to exercise any right or power  accruing  upon any
Default  shall  impair  any such  right or power or shall be  construed  to be a
waiver  thereof,  but any such right or power may be exercised from time to time
and as often as may be deemed  expedient.  In order to entitle the Issuer or the
Trustee to exercise any remedy  reserved to it in this Article,  it shall not be
necessary to give any notice,  other than such notice as may be required in this
Article.  Such rights and remedies as are given the Issuer  hereunder shall also
extend to the Trustee,  and the Trustee and the Owners of the Bonds,  subject to
the  provisions  of the  Indenture,  shall be  entitled  to the  benefit  of all
covenants and agreements herein contained.

                                     - 24 -
<PAGE>

    Section 8.4. Agreement to Pay Attorneys' Fees and Expenses. In the event the
Company  should  default under any of the  provisions of this  Agreement and the
Issuer should  employ  attorneys or incur other  expenses for the  collection of
payments  required  hereunder or the enforcement of performance or observance of
any  obligation or agreement on the part of the Company  herein  contained,  the
Company agrees that it will on demand  therefor pay to the Issuer the reasonable
fees of such attorneys and such other expenses so incurred by the Issuer.

    Section 8.5. No Additional  Waiver  Implied by One Waiver.  In the event any
agreement  contained  in this  Agreement  should be breached by either party and
thereafter  waived by the other  party,  such  waiver  shall be  limited  to the
particular  breach so waived  and shall not be deemed to waive any other  breach
hereunder.

                                   ARTICLE IX

                                  MISCELLANEOUS

    Section 9.1. Term of Agreement.  This  Agreement  shall remain in full force
and effect  from the date here of to and  including  April 1, 2015 or until such
time as all of the Bonds and the fees and expenses of the Issuer and the Trustee
and all amounts payable to the Credit Provider under the Credit  Agreement shall
have been fully paid or provision  made for such  payments,  whichever is later;
provided,  however,  that this  Agreement may be  terminated  prior to such date
pursuant  to  Article V of this  Agreement,  but in no event  before  all of the
obligations  and duties of the  Company  hereunder  have been  fully  performed,
including,  without  limitation,  the  payments  of all costs and fees  mandated
hereunder.

    Section 9.2.  Notices.  All notices,  certificates  or other  communications
hereunder shall be  sufficiently  given and shall be deemed given when delivered
or mailed by registered mail, postage prepaid, addressed as follows:

If to the Issuer:             The Johnston County Industrial Facilities
                              and Pollution Control Financing Authority
                              212 Market Street, Room 117
                              Smithfield, North Carolina  27577
                              Attn:  Michael E. de Sherbinin

If to the Trustee:            First-Citizens Bank & Trust Company
                              100 East Tryon Road
                              Mail Drop DAC61
                              Raleigh, North Carolina  27603
                              Attn.:  Corporate Trust Department

If to the Company:            Flanders Corporation
                              c/o Precisionaire, Inc.
                              2399 26th Avenue North
                              St. Petersburg, Florida  33713
                              Attn.:  Steven K. Clark

                                     - 25 -
<PAGE>

If to the Credit Provider:    SunTrust Bank
                              Mail Code FL-Tampa-4206
                              401 East Jackson Street, 20th Floor
                              Tampa, Florida  33602
                              Attn:  Donald J. Campisano

If to the Remarketing Agent:  SunTrust Equitable Securities Corporation
                              303 Peachtree Street, 24th Floor
                              Atlanta, Georgia  30303
                              Attention:  Municipal Desk

If to the LGC:                Local Government Commission
                              325 N. Salisbury Street
                              Raleigh, North Carolina 27603
                              Attn:  Secretary

If to Moody's:                Moody's Investors Service, Inc.
                              99 Church Street
                              New York, New York 10007
                              Attention:  Corporate Department, Structured
                                          Finance Group

If to S&P:                     Standard & Poor's Corporation
                               25 Broadway
                               New York, New York 10004
                               Attention:  Corporate Finance Department

A  duplicate  copy of each  notice,  certificate  or other  communication  given
hereunder  by the Issuer or the  Company  shall also be given to the Trustee and
the Credit  Provider.  The Issuer,  the  Company,  the  Trustee,  and the Credit
Provider  may,  by written  notice  given  hereunder,  designate  any further or
different  addresses  to  which  subsequent   notices,   certificates  or  other
communications shall be sent.

    Section 9.3.  Binding  Effect.  This Agreement shall inure to the benefit of
and shall be binding upon the Issuer,  the  Company,  the Credit  Provider,  the
Trustee, the Owners of Bonds and their respective successors and assigns.

    Section 9.4.  Severability.  In the event any  provision  of this  Agreement
shall be held invalid or unenforceable  by any court of competent  jurisdiction,
such holding shall not invalidate or render  unenforceable  any other  provision
hereof.

    Section  9.5.  Amounts  Remaining  in Funds.  Subject to the  provisions  of
Section  6.11 of the  Indenture,  it is agreed by the  parties  hereto  that any
amounts remaining in any account of the Bond Fund, or any other fund (other than
the  Rebate  Fund)  created  under the  Indenture  upon  expiration  or  earlier
termination of this Agreement,  as provided in this Agreement,  after payment in
full of the  Bonds  (or  provision  for  payment  thereof  having  been  made in
accordance  with the  provisions of the  Indenture) and the fees and expenses of
the Trustee in accordance with the

                                     - 26 -
<PAGE>

Indenture, shall belong to and be paid to the Company by the Trustee.

    Section 9.6. No Liability of Issuer; No Charge Against Issuer's Credit.  Any
obligation  of the  Issuer  created  by,  arising  out of,  or  entered  into in
contemplation of this Agreement, including the Bonds, shall not impose a debt or
pecuniary  liability  upon the Issuer,  the State or any  political  subdivision
thereof or  constitute a charge upon the general  credit or taxing powers of any
of the  foregoing.  Any such  obligation  shall  be  payable  solely  out of the
revenues and any other moneys derived  hereunder and under the Indenture and the
Credit Facility,  except (as provided in the Indenture and in this Agreement) to
the extent it shall be paid out of moneys  attributable  to the  proceeds of the
Bonds or the income from the temporary investment thereof.

    The  principal  of,  premium,  if any,  and  interest  on the Bonds shall be
payable  solely from the funds pledged for their payment in accordance  with the
Indenture and from payments made pursuant to the Credit Facility.

    THE BONDS AND THE INTEREST THEREON AND REDEMPTION PREMIUM, IF ANY, SHALL NOT
BE DEEMED TO  CONSTITUTE A DEBT OR A PLEDGE OF THE FAITH AND CREDIT OF THE STATE
OF NORTH  CAROLINA OR ANY  POLITICAL  SUBDIVISION  THEREOF,  INCLUDING,  WITHOUT
LIMITATION, THE ISSUER AND JOHNSTON COUNTY, NORTH CAROLINA. NEITHER THE STATE OF
NORTH  CAROLINA  NOR  ANY  POLITICAL  SUBDIVISION  THEREOF,  INCLUDING,  WITHOUT
LIMITATION,  THE ISSUER AND JOHNSTON COUNTY, NORTH CAROLINA,  SHALL BE OBLIGATED
TO PAY THE  PRINCIPAL  OF OR PREMIUM,  IF ANY, OR INTEREST ON THE BONDS OR OTHER
COSTS INCIDENT THERETO EXCEPT FROM THE REVENUES  ASSIGNED AND PLEDGED  THEREFOR,
AND  NEITHER  THE FAITH AND CREDIT  NOR THE  TAXING  POWER OF THE STATE OF NORTH
CAROLINA OR ANY POLITICAL  SUBDIVISION THEREOF,  INCLUDING,  WITHOUT LIMITATION,
THE ISSUER AND JOHNSTON COUNTY, IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF OR
PREMIUM,  IF ANY, OR INTEREST ON THE BONDS OR OTHER COSTS INCIDENT THERETO.  THE
ISSUER HAS NO TAXING POWER.

    Section 9.7. If  Performance  Date Not a Business  Day. If the last date for
performance  of any act or the  exercising  of any right,  as  provided  in this
Agreement,  shall  not be a  Business  Day,  such  payment  may be  made  or act
performed or right exercised on the next succeeding Business Day.

    Section  9.8.  Amendments,  Changes  and  Modifications.  Subsequent  to the
issuance  of Bonds  and prior to their  payment  in full (or  provision  for the
payment  thereof  having  been made in  accordance  with the  provisions  of the
Indenture),  and except as otherwise herein expressly  provided,  this Agreement
may not be effectively amended, changed, modified, altered or terminated without
the written consent of the Trustee and, prior to the Credit Facility Termination
Date and payment of all amounts  payable to the Credit Provider under the Credit
Agreement,  the consent of the Credit Provider, and otherwise in accordance with
the provisions of the Indenture.

                                     - 27 -
<PAGE>

    Section 9.9. Execution in Counterparts. This 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  9.10.  Applicable  Law.  This  Agreement  shall be  governed by and
construed in accordance with the laws of the State.

    Section 9.11. Captions.  The captions and headings in this Agreement are for
convenience only and in no way define,  limit or describe the scope or intent of
any provisions or Sections of this Agreement.

    Section 9.12. No Third Party Beneficiary.  It is specifically agreed between
the  parties  executing  this  Agreement  that it is not  intended by any of the
provisions of any part of this  Agreement to establish in favor of the public or
any member thereof,  other than as expressly  provided herein or as contemplated
in the  Indenture,  the rights of a  third-party  beneficiary  hereunder,  or to
authorize  anyone not a party to this  Agreement to maintain a suit for personal
injuries  or  property  damage  pursuant  to the  terms  or  provisions  of this
Agreement.  The duties,  obligations and responsibilities of the parties to this
Agreement with respect to third parties shall remain as imposed by law.

                                     - 28 -
<PAGE>

    IN WITNESS  WHEREOF,  the Issuer has caused this Agreement to be executed in
its name and  attested  by its duly  authorized  officers,  and the  Company has
caused  this  Agreement  to be  executed  in its name and  attested  by its duly
authorized officers, all as of the date first above written.

(SEAL)                               THE JOHNSTON COUNTY  INDUSTRIAL
                                     FACILITIES AND POLLUTION  CONTROL
                                     FINANCING AUTHORITY

Attest:                              By:______________________________
                                                   Chairman

By:________________________
           Secretary

(SEAL)                               FLANDERS CORPORATION

Attest:                              By:______________________________
                                          Robert R. Amerson, President

By: _____________________
    Debra Hill, Secretary

                                     - 29 -
<PAGE>

                                    EXHIBIT A

                             DESCRIPTION OF PROJECT

    The project consists of the construction and equipping of a facility for the
recycling of waste  industrial glass into spun glass fiber. The facility will be
constructed on the site of the Company's existing manufacturing facility.

                                      A-1AMENDMENT TO EMPLOYMENT AGREEMENT

    THIS AMENDMENT TO EMPLOYMENT AGREEMENT (the "Amendment") is made and entered
into this 3rd day of November,  1999,  by and between  Flanders  Corporation,  a
North  Carolina  corporation  (formerly  known  as  Elite  Acquisitions,   Inc.)
("Flanders  Corporation"),  Flanders Filters, Inc., a North Carolina corporation
("Flanders  Filters")  (Flanders  Corporation and Flanders Filters are sometimes
hereinafter  collectively  referred  to as  the  "Company"),  and  Steven  Clark
("Clark" or the "Executive"). In this Amendment, Flanders Corporation,  Flanders
Filters, and Clark, together with their successors and permitted assignees,  are
separately referred to as a "Party" and collectively as the "Parties."

                              W I T N E S S E T H:

    WHEREAS,  Flanders  Corporation,  Flanders Filters and Clark entered into an
Employment  Agreement (the "Agreement")  dated December 15, 1995, and amended on
December 4, 1997.

    WHEREAS,  Flanders  Corporation,  Flanders  Filters  and Clark  amended  the
Agreement on November 3, 1999; and

    WHEREAS, Flanders Corporation,  Flanders Filters and Clark desire to further
amend the Agreement upon the terms provided herein.

    NOW,  THEREFORE,  for good  and  valuable  consideration,  the  receipt  and
sufficiency of which is hereby  acknowledged,  the Parties hereby agree to amend
the Agreement as follows:

    1.  AMENDMENT TO TERM.

    Section 3 of the Agreement is hereby amended as follows:

        The  employment of the Executive by the Company under the  provisions of
    this Agreement  shall end on December 31, 2010,  unless further  extended or
    sooner terminated as hereinafter  provided. On December 31, 2010, and on the
    last day of  December  each  year  thereafter,  the  term of the  Executives
    employment  shall,  unless sooner  terminated as  hereinafter  provided,  be
    automatically  extended  for an  additional  two year  period  from the date
    thereof unless, at least six (6) months before such December 31, the Company
    shall have delivered to the Executive or the Executive  shall have delivered
    to the Company  written  notice that the term of the  Executives  employment
    hereunder will not be extended beyond its existing duration.

                                     - 1 -
<PAGE>

    2.  NO FURTHER AMENDMENT

        Except as provided  above,  the Agreement shall remain in full force and
    effect, unless further amended pursuant to the terms of the Agreement.

    IN WITNESS  WHEREOF,  the Parties  hereto have executed and  delivered  this
Amendment as of the day and year first above written.

                                      FLANDERS CORPORATION

                                      By:   /s/ Robert R. Amerson
                                      Its:  CEO

                                      FLANDERS FILTERS, INC.

                                      By:   /s/ Robert R. Amerson
                                      Its:  CEO

                                      STEVEN CLARK

                                      /s/ Steven K. Clark
                                      Steven Clark

                                     - 2 -

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00007-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00007-of-00352.parquet"}]]