Document:

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                                                                    EXHIBIT 10.9

                 REIMBURSEMENT, CREDIT AND SECURITY AGREEMENT
                 --------------------------------------------

          THIS AGREEMENT, made as of August 1, 2000 between INNOVATIVE SOLUTIONS
AND SUPPORT, LLC, a Pennsylvania limited liability company (the "Borrower"), and
PNC BANK, NATIONAL ASSOCIATION (the "Bank"), a national banking association.

                             W I T N E S S E T H :

          A.   The Chester County Industrial Development Authority (the
"Issuer") has issued its Industrial Development Revenue Bonds, 2000 Series A
(Innovative Solutions and Support, LLC Project), in the aggregate principal
amount of $4,335,000 (the "Bonds") under a Trust Indenture dated as of August 1,
2000 (the "Indenture") between the Issuer and Chase Manhattan Trust Company,
National Association, as Trustee (including any successor trustee, the
"Trustee").

          B.   Pursuant to a Loan Agreement dated as of August 1, 2000 between
the Issuer and the Borrower (the "Loan Agreement"), the proceeds of the Bonds
are being applied to finance the costs of a project (the "Project") consisting
of (i) financing the costs associated with the issuance of the Bonds; (ii)
financing the acquisition of certain real property located in the Eagleview
Corporate Center in Upper Uwchlan Township, Chester County, Pennsylvania (the
"Property") and the construction thereon of a new manufacturing, warehouse and
office facility (collectively with the Property and as more fully described on
Exhibit B hereto, the "Project Facilities"). Under the Loan Agreement, the
Borrower is obligated to make loan payments to the Trustee in amounts and at the
times corresponding to the debt service and other payments required in respect
of the Bonds.

          C.   In order to facilitate the issuance and sale of the Bonds and to
enhance the marketability of the Bonds and thereby achieve interest cost savings
and other savings to the Borrower, the Borrower has asked the Bank to issue its
Irrevocable Letter of Credit (together with any substitute letter of credit
issued pursuant to the terms hereof, the "Letter of Credit") to the Trustee, for
the account of the Borrower authorizing the Trustee to make one or more draws on
the Bank up to an aggregate of $4,406,261 as reduced and reinstated from time to
time in accordance with the provisions of the Letter of Credit, the "Letter of
Credit Amount"), of which originally (i) $4,335,000 shall be in respect of
principal of the Bonds and (ii) $71,261 shall be in respect of accrued interest
on the Bonds. The purpose of the Letter of Credit is to provide funds for the
payment of principal of and interest on the Bonds and purchase price of Bonds
which have been tendered pursuant to the tender option provisions thereof and of
the Indenture to the extent remarketing proceeds or other funds are not
available therefor in accordance with the provisions of the Indenture.

          D.   The obligations of the Borrower under this Agreement are secured
by, among other things, a Guaranty and Surety Agreement of even date herewith of
Innovative Solutions and Support, Incorporated ("IS&S, Inc.") and IS&S Delaware,
Inc. (together with IS&S, Inc., the "Guarantors"").
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          E.   The Bank is willing to issue the Letter of Credit upon the terms
and conditions hereinafter set forth.

          NOW, THEREFORE, in consideration of the foregoing and the undertakings
herein set forth and intending to be legally bound, the Borrower and the Bank
hereby agree as follows:

                                  ARTICLE I.

                                  DEFINITIONS

          Section 1.01  Definitions. In this Agreement (except as otherwise
                        -----------
expressly provided for or unless the context otherwise requires), the following
terms have the meanings specified in the foregoing recitals:

          Bank                          Letter of Credit
          Bonds                         Letter of Credit Amount
          Borrower                      Loan Agreement
          Guarantors                    Project
          Indenture                     Project Facilities
          IS&S, Inc.                    Trustee
          Issuer

In addition, the following terms shall have the meanings specified in this
Article, unless the context otherwise requires:

          "Affiliate" means a Person who directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, the Borrower or the board of directors of the Borrower. The term "control"
(including the terms "controlling", "controlled by" and "under common control
with") means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of the Borrower or the board
of directors of the Borrower, or of the Person or the board of directors of the
Person, whether through stock ownership, partnership interests, membership,
voting rights, governing boards, committees, divisions or other bodies with one
or more common members, directors, trustees or other managers, or otherwise.

          "Architect" means the architect engaged for the design and
construction supervision of the Improvements, as may be approved by the Bank.

          "Architect Agreement" means that certain agreement, to be entered into
between the Borrower and the Architect, and all exhibits and attachments
thereto, as the same may be amended with the consent of the Bank.

          "Assignment of Construction Documents" shall have the meaning ascribed
to such term in Section 3.04.

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          "Bond Documents" means the Bonds, the Indenture, the Loan Agreement,
the Remarketing Agreement and any other agreements or instruments relating
thereto.

          "Business Day" means any day other than (i) a Saturday or Sunday, (ii)
a day on which banking institutions in New York, New York, Philadelphia,
Pennsylvania, Pittsburgh, Pennsylvania or in any other city where the principal
corporate trust office of the Trustee or the office of the Bank at which drafts
are to be presented under the Letter of Credit is located are required or
authorized by law (including executive order) to close or on which either such
office is closed for a reason not related to financial condition, or (iii) a day
on which the New York Stock Exchange is closed.

          "Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder, including any amendments and successor
provisions thereto.

          "Collateral Documents" means the Mortgage, the Security Agreement, the
Environmental Indemnity Agreement, the Assignment of Construction Documents, the
Guaranty, and all other documents delivered by the Borrower or the Guarantors to
the Bank as collateral to secure the Obligations.

          "Completion Date" means September 30, 2001.

          "Construction and Development Documents" means the Construction
Contract, the Architect Agreement, the Plans and Specifications, all consents,
licenses, permits, authorizations and approvals relating to the construction,
completion, use and occupancy of the Improvements and all other instruments,
documents and rights relating to the design, construction and development of the
Improvements.

          "Construction Contract" means the construction contract to be entered
into, and all exhibits and attachments thereto, between the Borrower and the
Contractor for the construction of the Improvements.

          "Contamination" means the uncontained presence of Hazardous Substances
at the Project Facilities, or arising from the Project Facilities, which may
require remediation under any applicable law.

          "Contractor" means the general contractor hired by the Borrower for
the construction of the Improvements.

          "Date of Issuance" shall have the meaning ascribed to such term in
Section 2.01.

          "EBITDA" means on the date of determination the sum of (i) net income
(or loss) plus (ii) all interest expense plus (iii) all charges against income
          ----                           ----
for federal, state and local taxes actually paid plus depreciation expenses plus
                                                 ----
amortization expenses, in each case determined on a consolidated basis for IS&S,
Inc. and its subsidiaries for the previous four consecutive fiscal quarters.

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          "Environmental Indemnity Agreement" shall have the meaning ascribed to
such term in Section 3.04.

          "Environmental Laws" means all applicable environmental statutes,
ordinances, regulations, orders and requirements of common law concerning (i)
activities at the Project Facilities, (ii) repairs or construction of any
improvements at the Project Facilities, (iii) handling of any materials at the
Project Facilities, (iv) discharges to the air, soil, surface water or ground
water from the Project Facilities, and (v) storage, treatment or disposal of any
waste at or connected with any activity at the Project Facilities.

          "Environmentally Sensitive Area" means (i) a wetland or other "water
of the United States" for purposes of Section 404 of the federal Clean Water Act
or any similar area regulated under any state law, (ii) a floodplain or other
flood hazard area as defined pursuant to applicable state law, (iii) a portion
of the coastal zone for purposes of the federal Coastal Zone Management Act, or
(iv) any other area development of which is specifically restricted under
applicable law by reason of its physical characteristics or prior use.

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

          "ERISA Affiliate" means (i) any corporation included with the Borrower
in a controlled group of corporations within the meaning of Section 414(b) of
the Code, (ii) any trade or business (whether or not incorporated or for-profit)
which is under common control with the Borrower within the meaning of Section
414(c) of the Code, (iii) any member of an affiliated service group of which the
Borrower is a member within the meaning of Section 414(m) of the Code, and (iv)
any other entity treated as being under common control with the Borrower under
Section 414(o) of the Code.

          "Event of Default" shall have the meaning ascribed to such term in
Section 8.01.

          "Fiscal Year" means the annual accounting year of IS&S, Inc., which
currently begins on October 1 in each calendar year.

          "Fixed Charge Ratio" means on the date of determination the ratio of
(i) EBITDA to (ii) the sum of interest expense plus prior year current
                                               ----
maturities of long term debt plus unfunded capital expenditures plus dividends
                             ----                               ----

plus cash taxes, in each case determined for IS&S, Inc. on a consolidated basis
----
for the previous four consecutive fiscal quarters.

          "GAAP" means generally accepted accounting principles consistently
applied.

          "Guaranty" shall have the meaning ascribed to such term in Section
3.06.

          "Hazardous Substances" means "hazardous substances" or "contaminants"
as defined pursuant to the Clean Air Act, 42 U.S.C. (S) 7401 et seq.; The
                                                             -- ---
Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. (S) 9601 et seq. ("CERCLA"); The Federal Water Pollution Control
                         -- ---
Act, 33 U.S.C. (S) 1251 et seq.; The
                        -- ---

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Hazardous Material Transportation Act, 49 U.S.C. (S) 1801 et seq.; The Federal
                                                          -- ---
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. (S) 136; The Resource
Conservation and Recovery Act of 1976, 42 U.S.C. (S) 6901 et seq. (including the
                                                          -- ---
Hazardous and Solid Waste Amendments of 1984); The Toxic Substances Control Act,
15 U.S.C. (S) 2601 et seq.; The Federal Occupational Safety & Health Act of
                   -- ----
1970, 29 U.S.C. (S) 651 et seq. (including (S).3101 of the Omnibus
                        -- ---
Reconciliation Act of 1990); The Oil Pollution Act of 1990, Pub. L. No. 101-380,
104 Stat. 484 (1990); and the state analogues to any of the foregoing, all as
amended from time to time and the regulations promulgated pursuant thereto; and
any requirements of the common law which may impose obligations or liabilities
as a result of the presence of or exposure to hazardous substances.

          "Improvements" means the manufacturing, warehouse and office facility
to be constructed on the Property and included in the Project Facilities.

          "Inspecting Architect" means such person or entity as the Bank may
designate, from time to time, to inspect the construction of the Improvements
and to perform other services with respect thereto on behalf of the Bank.

          "Interest Component" shall have the meaning ascribed to such term in
the Letter of Credit.

          "Interest Draft" shall have the meaning ascribed to such term in the
Letter of Credit.

          "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or otherwise), or preference, priority
or other security agreement or preferential arrangement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any capitalized lease having substantially the same
economic effect as any of the foregoing, and the filing of any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction.

          "Liquidity Period" means the period beginning on the date hereof and
terminating on the first to occur of (i) the date the Letter of Credit
terminates, (ii) the first date on which there are no longer any Bonds
Outstanding other than Bonds bearing interest at a Term Rate or Bonds secured by
a Replacement Credit Facility, and (iii) the date the Liquidity Period is
terminated pursuant to Section 8.02.

          "Material Contract" means each indenture, mortgage, agreement or other
instrument or contract (written or oral) to which the Borrower or either
Guarantor is a party or by which any of its assets are bound (including, without
limitation, any employment or executive compensation agreement, collective
bargaining agreement, agreement relating to an Obligation, agreement for the
construction, acquisition or disposition of real or personal property, agreement
for the purchasing or furnishing of services, operating lease, joint venture
agreement, agreement relating to the acquisition or disposition of an Affiliate
or agreement of merger or consolidation) which (i) evidences, secures or governs
any outstanding Obligation of either of $100,000 or more, (ii) is an operating
lease (not evidencing the acquisition of a capital asset under GAAP)

                                       5
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under which the Borrower or either Guarantor is a lessee providing for aggregate
annual rentals or similar payments of $100,000 or more, or (iii) if canceled,
breached or not renewed by any party thereto, would have a material adverse
effect on the assets or condition (financial or otherwise) of the Borrower or
either Guarantor.

          "Mortgage" shall have the meaning ascribed to such term in Section
3.04.

          "Multiemployer Plan" shall have the meaning ascribed to such term in
Section 3(37) of ERISA.

          "Obligations" means any and all obligations for the payment of money,
including without limitation any and all (i) obligations for money borrowed,
(ii) obligations evidenced by bonds, debentures, notes, guaranties or other
similar instruments, (iii) construction contracts, installment sale agreements
and other purchase money obligations in connection with the performance of work,
sale of property or rendering of services, (iv) leases evidencing the
acquisition of capital assets, (v) reimbursement obligations in connection with
letters of credit and other credit enhancement facilities, (vi) obligations for
unfunded pension liabilities, (vii) guaranties of any such obligation of a third
party, (viii) obligations under any interest or currency swaps future, option or
other similar agreement and (ix) any such obligations of third parties secured
by assets of the Borrower or either Guarantor.

          "Outstanding" when applied to the Bonds shall have the meaning
ascribed to such term in the Indenture.

          "PBGC" means the Pension Benefit Guaranty Corporation.

          "Permitted Liens" means (i) Liens for taxes or assessments which are
not yet due, Liens for taxes or assessments or Liens of judgments which are
being contested, appealed or reviewed in good faith by appropriate proceedings
which prevent foreclosure of any such Lien or levy of execution thereunder and
against which Liens, if any, adequate insurance or reserves have been provided;
(ii) pledges or deposits to secure payment of workers' compensation obligations,
unemployment insurance, deposits or indemnities to secure public or statutory
obligations or for similar purposes; (iii) those minor defects which in the
opinion of the Bank's counsel do not materially affect title to the collateral
for the Borrower's obligations hereunder; (vi) Liens in favor of the Bank; (v)
the lessor's retained title to personal property which is the subject matter of
a true operating lease to the Borrower; and (vi) those further encumbrances, if
any, shown on Exhibit F attached hereto.
              ---------

          "Person" means any individual, for-profit or not-for-profit
corporation, limited liability company, partnership, joint venture, association,
joint-stock company, trust, unincorporated organization or government or any
agency or political subdivision thereof.

          "Phase One Report" shall have the meaning ascribed to such term in
Section 4.01(k).

                                       6
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          "Plans" means all employee pension plans maintained by the Borrower or
any ERISA Affiliate which are subject to Part 3 of Title I of ERISA.

          "Plans and Specifications" means the final plans and specifications
for the construction and equipping of the Improvements, including all schematic
and working drawings, and designations of all manufacturers and model numbers of
all equipment, if any, as the same may be amended from time to time in
accordance with the terms hereof.

          "Pledged Bonds" shall have the meaning ascribed to such term in
Section 3.03(a).

          "Prime Rate" means the rate of interest publicly announced by the Bank
from time to time as the prime rate of the Bank effective in Philadelphia,
Pennsylvania, adjusted as of the date of an announcement of any change in such
prime rate. The prime rate is determined from time to time by the Bank as a
means of pricing some loans to its borrowers and neither is tied to any external
rate of interest or index, nor necessarily reflects the lowest rate of interest
actually charged by the Bank to any particular class or category of customers.

          "Principal Component" shall have the meaning ascribed to such term in
the Letter of Credit.

          "Prohibited Transaction" shall have the meaning ascribed to such term
in Section 4975 of the Code or in Section 406 of ERISA.

          "Project Cost Schedule" shall have the meaning assigned to such term
in Section 7.01.

          "Project Fund" shall have the meaning assigned to such term in the
Indenture.

          "Redemption Draft" shall have the meaning ascribed to such term in the
Letter of Credit.

          "Remarketing Agreement" means the Remarketing Agent's agreement with
the Borrower to perform its duties as Remarketing Agent under the Indenture.

          "Remarketing Agent" means PNC Capital Markets, Inc., and its successor
for the time being in such capacity pursuant to the Indenture.

          "Replacement Credit Facility" shall mean any Alternate Letter of
Credit, as defined in the Indenture, delivered to the Trustee in replacement for
the Letter of Credit as security for the Bonds pursuant to Section 5.09 of the
Indenture.

          "Reportable Event" shall have the meaning ascribed to such term in
Title IV of ERISA.

          "Security Agreement" shall have the meaning ascribed to such term in
Section 3.04.

                                       7
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          "State" means the Commonwealth of Pennsylvania.

          "Subcontract" means any contract for labor or material entered into
between the Contractor and any Subcontractor, and all exhibits and attachments
thereto.

          "Subcontractor" means any person or entity entering into a Subcontract
with the Contractor.

          "Tangible Net Worth" means stockholder's equity in IS&S, Inc. less any
advances to third parties, except those advances which the Bank deems have been
satisfactorily subordinated and all items properly classified as intangibles, as
all determined on a consolidated basis for IS&S, Inc. and its subsidiaries, in
accordance with GAAP.

          "Tender Draft" shall have the meaning ascribed to such term in the
Letter of Credit.

          "Term Rate" shall have the meaning ascribed to such term in the
Indenture.

          "Unfunded Benefit Liability" shall have the meaning given in and be
determined in accordance with Section 4001(a)(18) of ERISA.

          "Unremarketed Tendered Bonds" means Bonds which (a) have been tendered
for purchase pursuant to tender option provisions of the Bonds and the Indenture
and (b) have not been successfully remarketed by the Remarketing Agent prior to
10:00 a.m. on the date of purchase thereof pursuant to such tender.

          Section 1.02  Rules of Construction; Time of Day. In this Agreement,
                        ----------------------------------
unless otherwise indicated, (i) defined terms may be used in the singular or the
plural and the use of any gender includes all genders, (ii) the words "hereof",
"herein", "hereto", "hereby" and "hereunder" refer to this entire Agreement, and
(iii) all references to particular Articles, Sections or Exhibits are references
to the Articles, Sections or Exhibits of this Agreement. References to any time
of the day in this Agreement shall refer to Eastern standard time or Eastern
daylight saving time, as in effect in Philadelphia, Pennsylvania on such day.

                                  ARTICLE II.

                      LETTER OF CREDIT AND REIMBURSEMENT

          Section 2.01  Issuance of Letter of Credit. The Borrower hereby
                        ----------------------------
requests the Bank to issue the Letter of Credit to the Trustee. Subject to the
conditions precedent hereinafter set forth, the Bank will issue to the Trustee
pursuant to the request of the Borrower, on the date of issuance of the Bonds
(the "Date of Issuance"), the Letter of Credit in the Letter of Credit Amount
and substantially in the form of Exhibit A. The Interest Component of the Letter
of Credit Amount has been established on the basis of 50 days interest on the
Bonds and a 365-day

                                       8
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year, at an assumed maximum interest rate of 12% per annum and will initially
equal Seventy One Thousand Two Hundred Sixty One Dollars ($71,261) (as from time
to time reduced and reinstated as provided in the Letter of Credit). The Letter
of Credit shall expire at 5:00 p.m. on August 7, 2003 or, if such day is not a
Business Day, on the next succeeding Business Day, except that such expiration
date shall automatically be extended for one additional year effective on each
anniversary of the date of issuance of the Letter of Credit, unless the Bank, at
its option, gives the Borrower and the Trustee notice at least ninety (90) days
prior to such anniversary that such expiration date will not be so extended. The
Letter of Credit is subject to prior automatic termination as provided in
paragraph 8 thereof. All drawings under the Letter of Credit will be paid with
the Bank's own funds.

          Section 2.02  Reimbursement and Other Payments.
                        --------------------------------

                (a)     Reimbursement Payments and Interest. The Borrower hereby
                        -----------------------------------
agrees to pay or cause to be paid to the Bank:

                        (1)   a sum equal to each amount drawn under the Letter
     of Credit by an Interest Draft, on the same Business Day that such drawing
     is honored (but not before such drawing is honored);

                        (2)   a sum equal to each amount drawn against the
     Interest Component of the Letter of Credit Amount by a Tender Draft (A) in
     the case of any such amount drawn on an Interest Payment Date (as defined
     in the Indenture) of the Bonds being purchased with the proceeds of such
     Tender Draft, the same Business Day that such drawing is honored (but not
     before such drawing is honored), and (B) in all other cases, on the first
     to occur of (i) the first Business Day of the first calendar month
     following the calendar month in which such drawing is honored, (ii) the
     date on which the Bonds purchased with the proceeds of such Tender Draft
     are remarketed by the Remarketing Agent and the proceeds thereof delivered
     to the Trustee, (iii) the date on which the Bonds purchased with the
     proceeds of such Tender Draft are redeemed or otherwise paid in full, or
     (iv) the date the Liquidity Period terminates;

                        (3)   a sum equal to each amount drawn against the
     Principal Component of the Letter of Credit Amount by a Tender Draft, on
     the first to occur of (i) the date on which the Bonds purchased with the
     proceeds of such Tender Draft are remarketed by the Remarketing Agent and
     the proceeds thereof are delivered to the Trustee, (ii) the date on which
     the Bonds purchased with the proceeds of such Tender Draft are redeemed or
     otherwise paid in full, or (iii) the date the Liquidity Period terminates;
     and

                        (4)   a sum equal to each amount drawn under the Letter
     of Credit by a Redemption Draft, on the same Business Day that such drawing
     is honored (but not before such drawing is honored).

All sums payable to the Bank under this Section 2.02(a) shall bear interest,
from the date the Borrower receives notice from the Trustee that the
corresponding drawing was honored under

                                       9
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the Letter of Credit until such sums are paid in full (it being understood and
agreed that any sum paid after 3:00 p.m. on a Business Day shall bear interest
as if it was paid at 9:00 a.m. on the next following Business Day), at a
fluctuating rate per annum (computed for the actual number of days elapsed,
based on a 360-day year) equal to the Prime Rate; provided that any amount that
is not paid within 10 days of the date such amount is due and payable to the
Bank under this Agreement shall thereafter bear interest at a fluctuating rate
per annum (computed for the actual number of days elapsed, based on a 360-day
year) equal to two percent (2%) per annum above the Prime Rate. Interest
accruing pursuant to this Section 2.02(a) shall be due and payable on the first
Business Day of each calendar month after the date the corresponding drawing is
honored under the Letter of Credit and on the date the respective sum is paid.
All payments under this Section 2.02(a) shall be applied first to the payment of
interest due and payable under this Section 2.02(a) and then to the reduction of
the principal balance of sums due and payable under this Section 2.02(a).

               (b)  Fees. On the Date of Issuance, the Borrower shall pay to the
                    ----
Bank a commitment fee for the period from the Date of Issuance to September 30,
2000, computed at the rate of one and one-half percent (1.5%) per annum on the
Letter of Credit Amount. On October 1, 2000, and quarterly on each January 1,
April 1, July 1 and October 1 thereafter so long as any credit remains available
to the Trustee under the Letter of Credit, the Borrower shall pay to the Bank a
commitment fee computed in advance for the succeeding quarter at the rate of one
and one-half percent (1.5%) per annum on the Letter of Credit Amount as of the
date such commitment fee is due and payable. Computations of the commitment fees
under this Section shall be for the actual number of days in the applicable
period, based on a 360-day year. There shall be no reduction or refund of any
portion of any such commitment fee in the event the Letter of Credit expires or
is drawn upon, reduced (automatically or otherwise), terminated or otherwise
modified after the date such commitment fee is due and payable. In the event any
commitment fee payable under the terms hereof is not paid on or before the date
it is due and payable, the payment of such commitment fee shall be accompanied
by interest thereon, from the date such payment becomes due until it is paid in
full, at a fluctuating rate per annum (computed for the actual number of days
elapsed, based on a 360-day year) equal to two percent (2%) per annum above the
Prime Rate.

               (c)  Transaction and Transfer Charges and Expenses. The Borrower
                    ---------------------------------------------
shall pay to the Bank all reasonable transaction charges that the Bank may make
for drawings under the Letter of Credit. Such transaction charges shall be
payable upon submission to the Borrower by the Bank of the Bank's bill therefor.
In addition, the Borrower shall pay to the Bank on demand any and all reasonable
charges and expenses which the Bank may pay or incur relative to the Letter of
Credit. The Borrower shall pay to the Bank upon each transfer of the Letter of
Credit in accordance with its terms a transfer fee equal to $1,000.00, together
with any and all costs and expenses of the Bank incurred in connection with such
transfer.

               (d)  Increased Costs.
                    ---------------

                    (1)  If after the date of this Agreement any enactment,
promulgation or adoption of or change in any applicable law, treaty, regulation
or rule or in the interpretation or administration thereof by any court,
administrative or governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or

                                       10
<PAGE>

compliance by the Bank with any guideline, request or directive issued after the
date hereof (whether or not having the force of law compliance with which is not
optional on the part of the Bank) of any such authority, central bank or
comparable agency, shall either (i) impose, modify or deem applicable any
reserve, special deposit, capital, insurance assessment or similar requirement
(including without limitation a guideline, request or directive which affects
the manner in which the Bank allocates capital resources to its commitments,
including its obligations under this Agreement and the Letter of Credit), (ii)
subject the Bank to any tax, deduction or withholding or change the basis of
taxation of the Bank (other than a change in a rate of tax based on overall net
income of the Bank), (iii) cause or deem letters of credit to be assets held by
the Bank and/or deposits on its books, or (iv) impose on the Bank any other
condition regarding this Agreement or the Letter of Credit, and the result of
any event referred to in clause (i), (ii), (iii) or (iv) of this sentence shall
be to increase the direct or indirect cost to the Bank of issuing or maintaining
the Letter of Credit or the Bank's obligations under this Agreement or to reduce
the amounts receivable by the Bank hereunder or to reduce the rate of return on
the capital of the Bank in connection with this Agreement (which increase in
cost, reduction in amounts receivable or reduction in rate of return shall be
determined by the Bank's reasonable allocation of such cost increase or
reduction in amounts receivable resulting from such event), then within 30
Business Days after demand by the Bank, the Borrower shall pay to the Bank, from
time to time as specified by the Bank, additional amounts that in the aggregate
shall be sufficient to compensate the Bank for such increased cost, reduction in
amounts receivable or reduction in rate of return or take such other action that
shall be acceptable to the Trustee as shall cause the Bank's Letter of Credit
obligations hereunder to be terminated. A certificate as to such increased cost,
reduction in amounts receivable or reduction in rate of return by the Bank
together with evidence of the same showing calculations therefor, submitted by
the Bank to the Borrower shall, in absence of manifest error, be conclusive and
binding for all purposes.

               (2)  If after the date of this Agreement the Bank shall have
determined that any enactment, promulgation or adoption of or change in any
applicable law, treaty, regulation, rule or guideline regarding capital
adequacy, or in the interpretation or administration thereof, by any
administrative or governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by the
Bank (or any controlling affiliate) with any guideline, request or directive
regarding capital adequacy (whether or not having the force of law and whether
or not failure to comply thereunder would be unlawful) of any such authority,
central bank or comparable agency, affects or would affect the amount of capital
required or expected to be maintained by the Bank (or any controlling affiliate)
and the Bank determines, on the basis of reasonable allocations, that the amount
of such capital is increased by or is based on its issuance or maintenance of
the Letter of Credit or the Bank's obligations under this Agreement, then,
within 30 Business Days after demand by the Bank, the Borrower shall pay to the
Bank, from time to time as specified by the Bank, additional amounts sufficient
to compensate the Bank therefor or take such other action that shall be
acceptable to the Trustee or shall cause the Bank's Letter of Credit obligations
hereunder to be terminated. A certificate as to such additional amounts,
together with evidence of the same showing calculations therefor, submitted to
the Borrower by the Bank shall, in the absence of manifest error, be conclusive
and binding for all purposes.

                                       11
<PAGE>

          (e)  General Interest Accrual; Place of Payment. Except as otherwise
               ------------------------------------------
provided in Section 2.02(a), all payments to the Bank under this Agreement
(including without limitation all payments becoming due under Sections 2.02(b)
and 2.02(c)) shall be accompanied by interest thereon, from the date such
payments become due until they are paid in full, at a fluctuating rate per annum
(computed for the actual number of days elapsed, based on a 360-day year) equal
to the Prime Rate; provided that any amount that is not paid within 10 days of
the date such amount is due and payable to the Bank under this Agreement shall
thereafter bear interest at a fluctuating rate per annum (computed for the
actual number of days elapsed, based on a 360-day year) equal to two percent
(2%) per annum above the Prime Rate. All payments by the Borrower to the Bank
under this Agreement shall be made in lawful currency of the United States at
the Bank's office at 1600 Market Street, Philadelphia, Pennsylvania 19103,
Attention: Corporate Banking, or at such other address and to the attention of
such other person as the Bank may stipulate by written notice to the Borrower,
upon at least 30 days prior written notice, or by a wire transfer in immediately
available funds from the Borrower to the Bank in accordance with written wire
instructions given to the Borrower by the Bank; provided that (i) all
reimbursement and transaction charge payments under Sections 2.02(a) and 2.02(c)
shall be made at the Bank's letter of credit office at 237 Fifth Avenue, 3rd
Floor - Annex Building, Pittsburgh, PA 15222, Attention: Letter of Credit
Department, or such other address as the Bank may stipulate by written notice to
the Borrower, and (ii) all reimbursement payments under Section 2.02(a) shall be
made in immediately available funds.

  Section 2.03 Transfer; Reduction; Reinstatement.
               ----------------------------------

          (a)  Transfer. The Letter of Credit may be transferred in accordance
               --------
with paragraph 9 of the Letter of Credit.

          (b)  Reduction. The Letter of Credit Amount and the respective
               ---------
Principal Component and Interest Component thereof shall be automatically
reduced as specified in paragraph 5 of the Letter of Credit. With respect to any
reductions of the Letter of Credit Amount pursuant to the terms of the Letter of
Credit as a result of Bonds ceasing to be Outstanding, the Bank shall have the
right, at its option, to require the Trustee to promptly surrender the
outstanding Letter of Credit to the Bank and to accept in substitution therefor
a letter of credit in the form of Exhibit A attached hereto, dated the date of
such substitution, for an amount equal to the Letter of Credit Amount as so
reduced, but otherwise having terms identical to the then outstanding Letter of
Credit.

          (c)  Reinstatement. In the event of a drawing under the Letter of
               -------------
Credit with an Interest Draft, the Interest Component of the Letter of Credit
Amount shall, as provided in paragraph 6 of the Letter of Credit and subject to
the conditions therein set forth, be automatically reinstated by an amount equal
to the amount of such drawing. In the event of a drawing under the Letter of
Credit with a Tender Draft, the Principal Component and Interest Component of
the Letter of Credit Amount shall, as provided in paragraph 7 of the Letter of
Credit, be reinstated with respect to such drawing (1) when and to the extent
that (i) the Bank has received reimbursement for such drawing in immediately
available funds (or the Trustee has received immediately available funds which,
pursuant to the Indenture, the Trustee will immediately remit to the Bank as
reimbursement for such drawing) and (ii) the Trustee has delivered a certificate
to the Bank in respect of such reinstatement in the form required by

                                       12
<PAGE>

paragraph 7 of the Letter of Credit, or (2) when and to the extent the Bank, at
its option, upon the Borrower's request, advises the Trustee in writing that
such reinstatement shall occur, it being understood that the Bank shall have no
obligation to grant any such reinstatement except as set forth in clause (1) of
this sentence.

     Section 2.04 Obligations Absolute. The obligations of the Borrower under
                  --------------------
this Article shall be absolute, unconditional and irrevocable and shall be
performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including without limitation the following
circumstances: (i) any lack of validity or enforceability of the Letter of
Credit, the Bond Documents or any other agreement or document relating thereto;
(ii) any amendment or waiver of or any consent to or departure from the Letter
of Credit, the Bond Documents or any document relating thereto; (iii) the
existence of any claim, set-off, defense or other right which the Borrower may
have at any time against the Trustee (or any persons or entities for whom the
Trustee may be acting), the Remarketing Agent, the Bank or any other person or
entity, whether in connection with this Agreement, the transactions described
herein or any unrelated transaction; or (iv) any of the circumstances
contemplated in clauses (1) through (7), inclusive, of Section 2.06(a), except
to the extent provided for therein. The Borrower understands and agrees that no
payment by it under any other agreement (whether voluntary or otherwise) shall
constitute a defense to its obligations hereunder, except to the extent that the
Bank has been indefeasibly paid in full.

     Section 2.05 Indemnification. To the extent permitted by applicable law,
                  ---------------
the Borrower hereby indemnifies and holds harmless the Bank (and its directors,
officers, employees and agents) from and against any and all claims, damages,
losses, liabilities, costs or expenses (including reasonable attorneys' fees for
counsel of the Bank's choice) whatsoever which the Bank may incur (or which may
be claimed against the Bank by any person or entity whatsoever) by reason of or
in connection with (a) the issuance or a transfer of, or payment or failure to
pay under, the Letter of Credit, (b) any material breach by the Borrower of any
representation, warranty, covenant, term or condition in, or the occurrence of
any default under, this Agreement, the Collateral Documents or the Bond
Documents, including all fees or expenses resulting from the settlement or
defense of any claims or liabilities arising as a result of any such breach or
default, and (c) involvement of the Bank in any legal suit, investigation,
proceeding, inquiry or action as a consequence, direct or indirect, of the
Bank's issuance of the Letter of Credit, its entering into this Agreement or any
other event or transaction contemplated by any of the foregoing; provided the
Borrower shall not be required to indemnify the Bank for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
caused by (i) Bank's failure to observe general banking practices, (ii) the
gross negligence or willful misconduct of the Bank or (iii) the Bank's failure
to pay under the Letter of Credit after the presentation to it by the Trustee of
a draft and certificate strictly complying with the terms and conditions of the
Letter of Credit, unless the Bank in good faith believes that it is prohibited
by law or other legal authority from making such payment. Nothing in this
Section is intended to limit the Borrower's reimbursement obligations contained
in Section 2.02(a). The obligations of the Borrower under this Section shall
survive the termination of this Agreement.

                                       13
<PAGE>

     Section 2.06 Liability of Bank.
                  -----------------

          (a)     As between the Borrower and the Bank, the Borrower assumes all
risks of the acts or omissions of the Trustee with respect to the Trustee's use
of the Letter of Credit. Neither the Bank nor any of its officers or directors
shall be liable or responsible for: (1) the use which may be made of the Letter
of Credit or for any acts or omissions of the Trustee in connection therewith;
(2) except as set forth in subsection 2.06(a)(3) hereof, the form, validity,
sufficiency, accuracy or genuineness of any documents (including without
limitation any documents presented under the Letter of Credit), or of any
statement therein or endorsement thereon, even if any such documents, statements
or endorsements should in fact prove to be in any or all respects invalid,
insufficient, fraudulent, forged, inaccurate or untrue; (3) the payment by the
Bank against presentation of documents which do not comply with the terms of the
Letter of Credit unless the documents on their face appear not to comply with
the terms of the Letter of Credit, including failure of any documents to bear
any reference or adequate reference to the Letter of Credit, or any other
failure by the Trustee to comply fully with conditions required in order to
effect a drawing under the Letter of Credit; (4) the validity or sufficiency of
any instrument transferring or assigning or purporting to transfer or assign the
Letter of Credit or the rights or benefit thereunder or proceeds thereof, in
whole or in part, which may prove to be invalid or ineffective for any reason
unless the documents on their face appear not to comply with the terms of the
Letter of Credit; (5) errors, omissions, interruptions, losses or delays in
transmission or delivery of any messages by mail, cable, telegraph, telex,
telephone or otherwise; (6) any loss or delay in the transmission or otherwise
of any document or draft required in order to make a drawing under the Letter of
Credit; or (7) any other circumstances whatsoever in making or failing to make
payment under the Letter of Credit; except only that the Borrower shall have a
claim against the Bank, and the Bank shall be liable to the Borrower, to the
extent, but only to the extent, of any direct, as opposed to consequential,
damages suffered by the Borrower which the Borrower proves were caused solely by
(i) the Bank's gross negligence or willful misconduct, (ii) or Bank's failure to
observe general banking practices or (iii) the Bank's willful failure to pay
under the Letter of Credit after the presentation to it by the Trustee of a
draft and certificate strictly complying with the terms and conditions of the
Letter of Credit, unless the Bank in good faith believes that it is prohibited
by law or other legal authority from making such payment. In furtherance and not
in limitation of the foregoing, the Bank may accept documents that appear on
their face to be in order, without responsibility for further investigation,
regardless of any notice or information to the contrary; provided that if the
Bank shall receive written notification from both the Trustee and the Borrower
that documents conforming to the terms of the Letter of Credit to be presented
to the Bank are not to be honored, the Bank agrees that it will not honor such
documents.

          (b)     Except for the Bank's obligations under the Letter of Credit,
the Bank shall have no liability to the Borrower or any other person as a result
of any reduction of the credit rating of the Bank or any deterioration in the
Bank's financial condition, and the Borrower hereby indemnifies and holds
harmless the Bank from any and all claims, damages, losses, liabilities, costs
or expenses relating to the Letter of Credit asserted by or on behalf of the
Borrower, the Guarantors, or any affiliate or agent thereof, which the Bank may
incur in connection therewith. No reduction of the credit rating of the Bank or
deterioration in the Bank's financial condition shall reduce or in any way
diminish the obligations of the Borrower to the

                                       14
<PAGE>

Bank under this Agreement, including without limitation the Borrower's
obligation to pay Letter of Credit commitment fees to the Bank and to reimburse
the Bank for any drawing under the Letter of Credit.

                                 ARTICLE III.

                                   SECURITY

     Section 3.01 Security and Subrogation under Indenture. The Borrower and the
                  ----------------------------------------
Bank intend that (i) the Bank will have the security and benefit of the Bond
Documents as provided in the Indenture and (ii) in the event of one or more
draws under the Letter of Credit and the application thereof to the payment of
Bonds, the Bank will be subrogated pro tanto to the rights of the Trustee and
the holders of such Bonds under the Bond Documents and in and to all funds and
security held by the Trustee under the Indenture for the payment of the
principal of and interest on such Bonds, including without limitation all loan
funds, construction funds, escrow funds, revenue funds, operation funds, debt
service funds, reserve funds, redemption funds and other funds and securities
and other instruments comprising investments thereof. In addition, the Bank
shall have any and all other subrogation rights available to the Bank at law or
in equity.

     Section 3.02 Pledge of Rights to Certain Funds and Investments. To secure
                  -------------------------------------------------
the Borrower's obligations to the Bank under this Agreement, the Borrower hereby
pledges to the Bank, and grants to the Bank a security interest in, all of the
Borrower's right, title and interest in and to all funds and investments thereof
now or hereafter held by the Trustee under the Indenture as security for the
payment of the Bonds, including without limitation any and all loan funds,
escrow funds, revenue funds, operations funds, debt service funds, reserve
funds, redemption funds and other funds and securities and other instruments
comprising investments thereof and interest and other income derived therefrom
held as security for the payment of the Bonds, such pledge, assignment and grant
being under and subject only to the rights of the Trustee under the Indenture.
The Borrower covenants and agrees that it will defend the Bank's rights and
security interests created by this Section against the claims and demands of all
persons except the Trustee. In addition to its other rights and remedies under
this Agreement and the Bond Documents, the Bank shall have all the rights and
remedies of a secured party under the Uniform Commercial Code of the State or
other applicable law with respect to the security interests created by this
Section. The Bank's rights under this Section are in addition to, and not in
lieu of, its rights described in Section 3.01.

     Section 3.03 Pledged Bonds.
                  -------------

          (a)     Pledge. To secure the Borrower's obligations to the Bank under
                  ------
this Agreement, the Borrower hereby pledges and assigns to the Bank, and grants
to the Bank a security interest in, all of the Borrower's right, title and
interest, now owned or hereafter acquired, in and to any and all Unremarketed
Tendered Bonds (together with all income therefrom and proceeds thereof)
purchased pursuant to the Indenture with the proceeds of a Tender Draft
presented under the Letter of Credit for which neither (i) full reimbursement
has

                                       15
<PAGE>

been made to the Bank nor (ii) the Trustee holds sufficient funds which,
pursuant to the Indenture, the Trustee is required to apply on behalf of the
Borrower to reimburse the Bank in full for such Tender Draft on the date such
Tender Draft is paid by the Bank. Such Unremarketed Tendered Bonds shall be
pledged to the Bank, registered in its name as pledgee of the Borrower and
delivered to and held by the Trustee as agent for the Bank under this Section
3.03 or, at the option of the Bank by written notice to the Borrower and the
Trustee, the pledged Unremarketed Tendered Bonds specified in such notice shall
be delivered to and held by the Bank. Unremarketed Tendered Bonds which are so
pledged and held by the Trustee as agent for the Bank or by the Bank are herein
referred to as "Pledged Bonds".

          (b)  Pledged Bond Payments. Any principal of, premium on and interest
               ---------------------
on Pledged Bonds which becomes due and payable (including any due-bills received
upon purchase thereof pursuant to the record date provisions of the Indenture or
the Bonds) shall be paid to the Bank. All sums of money so paid to the Bank in
respect of Pledged Bonds shall be credited against the obligation of the
Borrower to reimburse the Bank, with interest, under Section 2.02(a) for the
amount drawn with a Tender Draft to fund the purchase of such Pledged Bonds
pursuant to the Indenture.

          (c)  Release of Pledged Bonds. If the Borrower pays or causes to be
               ------------------------
paid in full its obligation under Section 2.02(a) for the reimbursement of the
amount (or allocable portion thereof) drawn with a Tender Draft to fund the
purchase of Pledged Bonds pursuant to Article IV of the Indenture (or if the
Trustee has received immediately available funds which, pursuant to Section 4.05
of the Indenture, the Trustee is required to pay over promptly to the Bank in an
amount sufficient to pay the Borrower's reimbursement obligation under Section
2.02(a) with respect to the amount drawn with such Tender Draft to fund the
purchase of such Pledged Bonds), and provided no Event of Default has occurred
and is continuing, the Bank will release from the pledge of this Agreement and
will deliver, or cause its agent to deliver, such Pledged Bonds to such person
or persons as the Trustee or the Borrower may direct. An amount equal to the
principal of, plus accrued interest on, such Pledged Bonds shall be presumed
(absent notice to the contrary) to be an "amount sufficient" for purposes of
this Section 3.03(c) and, upon receipt of such amount by the Trustee for payment
to the Bank as aforesaid, the Trustee shall be automatically authorized to
deliver such Pledged Bonds as aforesaid free from the pledge of this Agreement,
unless the Trustee has received from the Bank written notice or telephonic
notice (which shall thereafter be confirmed in writing) that such release shall
not occur.

          (d)  Liability of Bank. The Bank shall not be liable for failure to
               -----------------
collect or realize upon the obligations secured by the Pledged Bonds or any
collateral security or guarantee therefor, or any part thereof, or for any delay
in so doing, and the Bank shall not be under any obligation to take any action
whatsoever with regard thereto.

          (e)  Representations; Rights and Remedies. The Borrower represents and
               ------------------------------------
warrants to the Bank that the pledge, assignment and delivery of Pledged Bonds
pursuant to this Section 3.03 will create a valid first lien on and a first
perfected security interest in, all right, title and interest of the Borrower in
and to the Pledged Bonds, and the proceeds thereof. The Borrower covenants and
agrees that it will defend the Bank's right, title and security interest in and
to the Pledged Bonds and the proceeds thereof against the claims and demands of
all persons. In addition to its other rights and remedies under this Agreement
and the Bond

                                       16
<PAGE>

Documents, the Bank shall have all the rights and remedies of a secured party
under the Uniform Commercial Code of the State or other applicable law with
respect to the security interests created by this Section.

     Section 3.04 Mortgage; Additional Security. To further secure the
                  -----------------------------
Borrower's obligations to the Bank under this Agreement, the Borrower shall
execute (and with respect to subsection (iv) below, shall cause each Guarantor
to execute) (i) a mortgage and security agreement granting the Bank a first
priority mortgage on the Project Facilities (the "Mortgage"); (ii) an
Environmental Indemnity Agreement relating to the Project Facilities (the
"Environmental Indemnity Agreement"); (iii) an Assignment of Construction and
Development Documents collaterally assigning the Borrower's interest in all
Construction Documents (the "Assignment of Construction Documents") and (iv) a
Security Agreement granting the Bank a security interest in all of the
Borrower's and each Guarantors's accounts, general intangibles, instruments,
chattel paper, inventory, machinery and equipment (the "Security Agreement").

     Section 3.05 Financing Statements. The Borrower will execute and deliver,
                  --------------------
and cause to be executed and delivered, such financing statements and
continuation statements under the Uniform Commercial Code of the State or other
applicable law as the Bank may specify in order to perfect and maintain
perfection of the Bank's security interests under this Agreement, and the
Collateral Documents, and will pay the costs of filing the same in such public
offices as the Bank may designate.

     Section 3.06 Guaranty. The Borrower shall cause the Guarantors to execute
                  --------
and deliver to the Bank a Guaranty and Surety Agreement dated as of the date
hereof (the "Guaranty") under which the Guarantors shall guarantee and become a
surety for the Borrower's obligations under this Agreement.

                                  ARTICLE IV.

                             CONDITIONS PRECEDENT

     Section 4.01 Documentation. As conditions precedent to the Bank's issuance
                  -------------
of the Letter of Credit, the Bank shall have received each of the following in
form and substance satisfactory to the Bank:

          (a)     Executed copies of this Agreement and the Collateral Documents
(other than the Mortgage, the Environmental Indemnity Agreement and the
Assignment of Construction Documents), and true and correct copies of executed
copies of the Bond Documents and all documentation delivered in connection
therewith;

          (b)     Such financing statements as the Bank may require pursuant to
Section 3.05;

          (c)     Certified copies of the certificate or articles of formation
or incorporation, operating agreement or bylaws and authorizing resolutions of
the Borrower and each of the Guarantors, as applicable, and a good standing
certificate for the Borrower and each

                                       17
<PAGE>

of the Guarantors issued by the state of formation or incorporation of the
Borrower and each of the Guarantors;

          (d)     A certificate of the Borrower as of the date of execution and
delivery hereof stating that (i) the representations and warranties contained in
Article V are true and correct and (ii) no Event of Default has occurred and is
continuing, and no event has occurred and is continuing which, with the giving
of notice or lapse of time or both, would constitute an Event of Default;

          (e)     An opinion of counsel to the Borrower and the Guarantors
(which opinions may be issued, where indicated, in reasonable reliance upon
certifications, opinions and other documentation derived from governmental
agencies and others having particular access to materials and information
necessary to reach the conclusions expressed in such opinions) in form and
substance acceptable to the Bank and its counsel;

          (f)     A certificate or certificates of the officers of the Issuer
covering such matters as to the Issuer and the Bond Documents as the Bank may
reasonably request;

          (g)     Opinions of Stevens & Lee, bond counsel, and Conrad O'Brien
Gellman & Rohm, P.C., counsel to the Issuer, covering such matters as to the
Issuer and the Bond Documents as the Bank may reasonably request;

          (h)     A certificate or certificates of the Guarantors as of the date
of execution and delivery hereof (i) stating that the representations and
warranties contained in the Guaranty are true and correct and (ii) no Event of
Default as defined in the Guaranty has occurred and is continuing, and no event
has occurred and is continuing, which with the giving of notice or lapse of time
or both, would constitute such an Event of Default;

          (i)     Consolidated financial statements of IS&S, Inc. and its
subsidiaries as of March 31, 2000 for the six-month period then ending;

          (j)     Evidence of the insurance required under Section 6.05 and that
the Project Facilities are not located in a Special Flood Hazard area as defined
by the United States Department of Housing and Urban Development;

          (k)     The "Phase One" environmental reports concerning the Project
Facilities dated October 4, 1999 prepared by Tri State Environmental Management
Services (the "Phase One Report") and satisfactory to the Bank; and

          (l)     Such other documents, certificates, approvals, assurances and
opinions as are listed in the closing memorandum filed with the Trustee in
connection with the issuance of the Bonds or as the Bank may reasonably request.

     Section 4.02 Issuance of Bonds. On the date of execution and delivery
                  -----------------
hereof, all conditions precedent to the issuance and original placement of the
Bonds shall have been satisfied, and the Bonds shall have been duly issued and
delivered.

                                       18
<PAGE>

                                  ARTICLE V.

                        REPRESENTATIONS AND WARRANTIES

               Each Borrower represents and warrants as follows:

     Section 5.01 Existence. The Borrower is a limited liability company, duly
                  ---------
formed, validly existing and in good standing under the laws of Pennsylvania.
The Borrower has furnished to the Bank true and complete copies of its articles
of formation and operating agreement. The Borrower has all necessary permits,
licenses, certifications and qualifications to conduct its business as it is
presently being conducted, and has complied in all material respects with all
applicable requirements of the United States and the State, and their respective
agencies and instrumentalities, to own and operate the Project Facilities as it
is intended to be owned and operated pursuant to this Agreement.

     Section 5.02 Power, Authorization and No Conflicts. The Borrower has all
                  -------------------------------------
requisite power to own and operate its properties and to conduct its business
and operations as it is currently being conducted. The execution, delivery and
performance by the Borrower of this Agreement, the Collateral Documents and the
Bond Documents to which the Borrower is a party (i) are within the Borrower's
powers, and (ii) do not contravene the certificate of incorporation or the
bylaws of the Borrower or any law, rule, regulation, decree, order or judgment
applicable to the Borrower or any indenture, mortgage, instrument, contract,
agreement or restriction binding on or affecting the Borrower or any of its
assets, or result in the creation of any mortgage, pledge, lien or encumbrance
upon any of its assets other than as provided by the terms thereof.

     Section 5.03 Governmental Authorizations and Other Approvals. The Borrower
                  -----------------------------------------------
has all necessary governmental and other authorizations, approvals, consents,
permits, licenses, certifications and qualifications, and has complied in all
material respects with all applicable requirements of the United States and the
State and other jurisdictions where the Borrower conducts business or owns
property and of their respective agencies and instrumentalities, to conduct its
business as it is presently conducted and to own and operate the Project
Facilities as it is presently intended to be owned and operated pursuant to this
Agreement. No authorization, approval or other action by, and no notice to or
filing with, any governmental authority, regulatory body or court is required
for the due execution, delivery and performance by the Borrower of this
Agreement, the Collateral Documents and the Bond Documents to which the Borrower
is a party, except such as have been obtained or are not issuable on or before
the Date of Issuance.

     Section 5.04 Validity and Binding Effect. This Agreement, the Collateral
                  ---------------------------
Documents and the Bond Documents to which the Borrower is a party are, or in the
case of the Mortgage, the Environmental Indemnity Agreement and the Assignment
of Construction Documents, upon their due execution will be, the legal, valid
and binding obligations of the Borrower, enforceable against the Borrower in
accordance with their terms, subject to the application by a court of general
principles of equity and to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar law affecting creditors' rights generally.

                                       19
<PAGE>

     Section 5.05 No Litigation. There is no pending action or proceeding before
                  -------------
any court, governmental agency or arbitrator against or involving the Borrower
and, to the best of the Borrower's knowledge, there is no threatened action or
proceeding affecting the Borrower before any court, governmental agency or
arbitrator which, in any case, might materially and adversely affect the
business, operations, assets, condition (financial or otherwise) or prospects of
the Borrower, or the validity or enforceability of this Agreement, the
Collateral Documents or the Bond Documents to which the Borrower is a party, or
the acquisition, construction, renovation and operation of the Project
Facilities.

     Section 5.06 No Violations. The Borrower is not, and no event has occurred
                  -------------
which with the passage of time or the giving of notice or both would result, in
noncompliance with, breach of or in default under (a) any applicable law or
administrative regulation of the United States, the State or any other
governmental body or agency or instrumentality thereof or any applicable
judgment, order or decree or (b) the Bond Documents or any other credit
agreement, indenture, mortgage, agreement or other instrument to which it is a
party or otherwise subject, where the result of such noncompliance, breach or
default would have a material adverse effect on the Borrower. The Borrower has
no knowledge of any violation, nor is there any notice or other record of any
violation, of any zoning, subdivision, environmental, building or other statute,
ordinance, regulation, restrictive covenant or other restriction applicable to
the Project Facilities.

     Section 5.07 Compliance. To the best of the Borrower's knowledge, the
                  ----------
acquisition and renovation of the Project Facilities as contemplated by this
Agreement and the use and operation of the Project Facilities do and shall, in
all material respects, comply with, and are lawful, permitted and conforming
uses under, all applicable building, fire, safety, zoning, subdivision, sewer,
environmental, health, insurance and other laws, ordinances, rules, regulations
and plan approval conditions of any governmental or public body or authority,
and the Borrower has obtained, or will obtain prior to commencement of the
renovation of the Project Facilities, all permits, licenses or approvals from
such governmental or public bodies or authorities which are a necessary
precondition to the acquisition, construction and renovation of the Project
Facilities.

     Section 5.08 Title to Properties; Liens and Encumbrances. The Borrower has
                  -------------------------------------------
good and marketable title in fee simple to all of its real property and valid
and indefeasible ownership of all of its fixtures, equipment and other assets.
All such real property, fixtures and equipment necessary to the conduct of the
business of the Borrower are in reasonable working order and free of any
material defects, and are suitable for the purposes for which they are presently
being used, and repair or replacement thereof has not knowingly been deferred.
There exist no Liens against any of the real or personal, tangible or
intangible, assets of the Borrower (including without limitation statutory and
other liens of mechanics, workers, contractors, subcontractors, suppliers,
taxing authorities and others), except Permitted Liens; and the Borrower has not
made a contract or arrangement of any kind, the performance of which by the
other party thereto could give rise to a Lien on the Project Facilities by
operation of law or otherwise except such as are adequately and fully covered by
the Bank's title insurance insuring the lien of the Mortgage.

                                       20
<PAGE>

          Section 5.09  Utilities and Access. All utility services necessary for
                        --------------------
operation of the Project Facilities, including water supply, storm and sanitary
sewer facilities, gas, electricity and telephone facilities are available within
the boundaries of the Project Facilities; and all roads necessary for the full
utilization of the Project Facilities for their intended purposes have been
completed and the necessary rights-of-way therefor have been acquired by the
appropriate governmental authority or others or have been dedicated to public
use and accepted by such governmental authority.

          Section 5.10  Financial Information. The audited consolidated balance
                        ---------------------
sheets of IS&S, Inc. and its subsidiaries as of September 30, 1999, and the
related consolidated statements of income and of cash flows for the fiscal year
ended on September 30, 1999, present fairly the consolidated financial condition
of IS&S, Inc. and its subsidiaries as at such date, and the consolidated results
of their operations and their consolidated cash flows for the Fiscal Year then
ended. All such financial statements, including the related schedules and notes
thereto, have been prepared in accordance with GAAP applied consistently
throughout the periods involved. Neither the Borrower nor any of the Guarantors
had, at the date of the balance sheet referred to above, any material contingent
obligation, liability for taxes, or any long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is required by GAAP to be
but is not reflected in the foregoing statements or in the notes thereto. Since
the date of the balance sheet referred to above there has been no material
adverse change in the financial condition of IS&S, Inc. on a consolidated basis.

          Section 5.11  ERISA. The Borrower, the ERISA Affiliates and the Plans
                        -----
are in compliance in all material respects with those provisions of ERISA and of
the Code which are applicable with respect to any Plan. No Prohibited
Transaction and no Reportable Event has occurred with respect to any Plan.
Neither the Borrower nor any of the ERISA Affiliates is an employer with respect
to any Multiemployer Plan. The Borrower and the ERISA Affiliates have met the
minimum funding requirements under ERISA and the Code with respect to each of
their respective Plans, if any, and have not incurred any liability to the PBGC
or any Plan. The execution, delivery and performance of this Agreement does not
constitute a Prohibited Transaction. There is no material Unfunded Benefit
Liability with respect to any Plan.

          Section 5.12  Environmental Representations. The Borrower has obtained
                        -----------------------------
the Phase One Report and, except as set forth in Exhibit C attached hereto, (a)
the Borrower does not know nor has reason to know of any activity at the Project
Facilities or any storage, treatment or disposal of any waste connected with any
activity at the Project Facilities, which has been conducted, or is being
conducted, in violation of any Environmental Law; (b) the Borrower does not know
nor has any reason to know of any of the following which could give rise to
material liabilities, material costs for remediation or a material adverse
change in the business, operations, assets, condition (financial or otherwise)
or prospects of the Borrower: (i) Contamination present at the Project
Facilities; (ii) polychlorinated biphenyls present at the Project Facilities,
(iii) asbestos or materials containing asbestos present at the Project
Facilities, or (iv) urea formaldehyde foam insulation present at the Project
Facilities; (c) no portion of the Project Facilities constitutes an
Environmentally Sensitive Area; (d) the Borrower does not know nor has

                                       21
<PAGE>

reason to know of any investigation of the Project Facilities for the presence
of radon gas or radioactive decay products of radon; and (e) no tanks presently
or formerly used for the storage of any liquid or gas above or below ground are
present at the Project Facilities or any property owned, leased or otherwise
used by the Borrower. No lien has been imposed upon the Borrower's or the
Guarantors' revenues or real or personal property pursuant to 42 U.S.C. (S)
9607(e) as that section may be amended from time to time, or pursuant to any
other applicable legal authority relating to contamination arising on or from
such entities' operations or property, and there exist no circumstances which
might lead to the imposition of such lien.

          Section 5.13  Outstanding Obligations. Attached hereto as Exhibit D is
                        -----------------------
a complete list of all Obligations of the Borrower as of the date of execution
and delivery hereof having an outstanding principal balance of $100,000 or more,
together with a description of the instruments evidencing, governing or securing
such Obligations. There exists no material default under any such instrument.

          Section 5.14  Other Material Contracts. Attached hereto as Exhibit E
                        ------------------------
is a complete list of all Material Contracts currently in effect which are not
described in Exhibit D. The Borrower has complied with all material provisions
of such Material Contracts and there exists no material default under any such
Material Contract by the Borrower or by any other party thereto.

          Section 5.15  Solvency. Each of the Borrower and the Guarantors is
                        --------
and, after giving effect to this Agreement and all other agreements of the
Borrower and the Guarantors being entered into on the date of execution and
delivery of this Agreement, will be solvent (which for this purpose shall mean
that the fair market value of its property is in excess of the total amounts of
its debts and that it is able to pay its debts as they mature).

          Section 5.16  Disclosure. This Agreement, the exhibits hereto and the
                        ----------
other documents, certificates, schedules and statements furnished to the Bank by
or on behalf of the Borrower or the Guarantors in connection with the
transactions contemplated hereby, do not contain any untrue statement of a
material fact and do not omit to state a material fact necessary in order to
make the statements contained therein not misleading in light of the
circumstances under which they were made. There is no fact known to the Borrower
which materially adversely affects or in the future may (so far as the Borrower
can now foresee) materially adversely affect the business, operations,
properties, assets or financial condition of the Borrower or the Guarantors
which has not been set forth in this Agreement or in the other documents,
certificates and statements furnished to the Bank by or on behalf of the
Borrower or the Guarantors prior to the date of execution and delivery of this
Agreement in connection with the transactions contemplated hereby.

          Section 5.17  Representations in Other Documents. The Borrower hereby
                        ----------------------------------
makes to and for the benefit of the Bank each of the representations and
warranties of the Borrower contained in the Bond Documents and the other
documents delivered by the Borrower in connection therewith.

                                       22
<PAGE>

                                  ARTICLE VI.

                               GENERAL COVENANTS

          So long as any amount is available under the Letter of Credit,
the Liquidity Period has not been terminated or any amount is due and owing to
the Bank hereunder, the Borrower covenants that, except to the extent the Bank
shall otherwise consent in writing, each of the following covenants shall be
performed and complied with by the Borrower, or the Guarantors, as indicated:

          Section 6.01  Maintenance of Existence. The Borrower will maintain its
                        ------------------------
existence, rights and privileges and its qualification to do business in the
State, will not dissolve or otherwise dispose of all or substantially all of its
assets.

          Section 6.02  Disposition of Assets. The Borrower shall not sell,
                        ---------------------
convey, assign, lease, abandon or otherwise transfer or dispose of, voluntarily
or involuntarily, any of its tangible properties or assets, except: (i)
transactions involving the sale of inventory in the ordinary course of business;
(ii) any sale, transfer or lease of assets in the ordinary course of business
which are no longer necessary or required in the conduct of the Borrower's
business; (iii) any sale, transfer or lease of assets in the ordinary course of
business which are replaced by substitute assets acquired or leased provided
such substitute assets are subject to the Bank's security interest; or (iv) any
sale, transfer or lease of assets, other than those specifically excepted
pursuant to clauses (i) through (iii) above, which is approved by the Bank.

          Section 6.03  Compliance with Laws. The Borrower will comply in all
                        --------------------
material respects with all applicable laws, rules, regulations and orders of any
governmental authority the noncompliance with which could materially and
adversely affect its business, operations, assets, condition (financial or
otherwise) or prospects or the Project Facilities, except for any such laws,
rules, regulations and orders which the Borrower is contesting in good faith by
appropriate proceedings and the noncompliance with which during such contest
would not materially and adversely affect the Borrower's business, operations,
assets, condition (financial or otherwise) or prospects or the Project
Facilities if the result of such contest were adverse to the Borrower.

          Section 6.04  Maintenance of Governmental Authorizations. The Borrower
                        ------------------------------------------
will maintain in full force and effect all of its governmental and other
authorizations, approvals, consents, permits, licenses, certifications and
qualifications necessary for the conduct of its business as it is presently
being conducted and the ownership and operation of its facilities as they are
presently being operated. The Borrower will promptly furnish copies of all
reports and correspondence relating to a loss or proposed revocation of any such
qualification to the Bank.

          Section 6.05  Maintenance of Insurance. The Borrower will maintain or
                        ------------------------
cause to be maintained (i) hazard insurance (including builder's risk insurance
with respect to any construction), with fire and extended coverage, vandalism
and malicious mischief coverage and boiler, pressure vessel, auxiliary piping,
pumps and compressors, refrigeration system, transformer and electrical
apparatus coverage, on all properties of the Borrower and the Guarantors, (ii)
business interruption (or, if appropriate, rental curtailment) insurance, (iii)

                                       23
<PAGE>

comprehensive general liability insurance and motor vehicle and rolling stock
insurance for bodily injury and property damage, and (iv) worker's compensation
insurance. Each of the policies in the preceding sentence shall be in form,
amounts and substance and with insurance companies reasonably satisfactory to
the Bank, containing 30-day notification of cancellation or change in coverage
clauses in favor of the Trustee and the Bank; and maintain such other insurance
with responsible and reputable insurance companies in such amounts and covering
such risks as are customarily maintained by persons similar to the Borrower and
the Guarantors or as the Bank may reasonably require by written notice to the
Borrower. All policies of insurance of the types described in clauses (i) and
(ii) of the first sentence of this Section with respect to the Project
Facilities shall name the Bank as a mortgagee/lender loss payee as its interests
may appear. The Borrower shall furnish to the Bank, upon written request, full
information as to all insurance carried by them.

          Section 6.06  Compliance with Bond Documents and Other Contracts. The
                        --------------------------------------------------
Borrower will comply in all material respects with all of its covenants and
agreements under the Bond Documents, as the same may hereafter be amended or
supplemented from time to time, and comply with, or cause to be complied with,
all material requirements and conditions of all contracts and insurance policies
which relate to the Project Facilities.

          Section 6.07  Maintenance of Properties. The Borrower will maintain
                        -------------------------
and preserve all of its properties in good working order and condition, ordinary
wear and tear and damage by insured casualty excepted; not permit, commit or
suffer any waste of any of its properties; not use or permit the use of any of
its properties for any unlawful purpose or permit any nuisance to exist thereon;
and make such repairs or replacements as are required or convenient for the
proper operation, repair and maintenance of the Borrower's properties in an
economical and efficient manner and consistent with customary standards
applicable to properties of like size and type.

          Section 6.08  Visitation Rights. The Borrower will permit the Bank or
                        -----------------
its agents or representatives following prior written notice to the Borrower to
examine and make copies of and abstracts from the records and books of account
of, and visit the properties of, the Borrower, and to discuss the affairs,
finances and accounts of the Borrower with the officers and accounts of the
Borrower.

          Section 6.09  Keeping of Books. The Borrower will keep proper books of
                        ----------------
record and account, in which full and correct entries shall be made of financial
transactions and the assets and operations of the Borrower in accordance with
GAAP, and have, a review of such books of record and account made by certified
public accountants reasonably acceptable to the Bank for each Fiscal Year.

          Section 6.10  Reporting Requirements. The Borrower will furnish or
                        ----------------------
cause to be furnished to the Bank the following in form satisfactory to the
Bank:

               (a)   Within 120 days after the close of each Fiscal Year of
IS&S, Inc.;

                                       24
<PAGE>

                    (1)  consolidated and consolidating financial statements for
     IS&S, Inc. and its subsidiaries, including a consolidated balance sheet and
     related consolidated statements of income, retained earnings, cash flows,
     and changes in financial position as of the end of such Fiscal Year and for
     such Fiscal Year, reviewed by independent certified public accountants
     acceptable to the Bank and prepared in accordance with GAAP, which shall
     fairly present the consolidated financial condition of IS&S, Inc. and its
     subsidiaries as at the end of such Fiscal Year; and

                    (2)  certificate signed by an officer of the Borrower
stating that (i) during such Fiscal Year the Borrower has observed and performed
in all material respects all of its covenants and agreements set forth in this
Agreement, except as disclosed in such certificate, and (ii) neither any Event
of Default nor any event which, with the giving of notice or lapse of time or
both, would constitute an Event of Default has occurred or is continuing, except
as disclosed in such certificate;

               (b)  Within 45 days after the end of each quarter of each Fiscal
Year of IS&S, Inc.;

                    (1)  unaudited consolidated and consolidating financial
     statements for IS&S, Inc. and its subsidiaries, including a consolidated
     balance sheet of IS&S, Inc. and its subsidiaries and related consolidated
     statement of income, retained earnings and cash flows as of the end of such
     fiscal quarter and for such fiscal quarter and the current fiscal year to
     the end of such fiscal quarter, which shall be internally prepared and
     presented on a consistent basis; and

                    (2)  certificate signed by an officer of the Borrower
     stating that (i) during such fiscal quarter the Borrower has observed and
     performed in all material respects all of its covenants and agreements set
     forth in this Agreement, except as disclosed in such certificate, and (ii)
     neither any Event of Default nor any event which, with the giving of notice
     or lapse of time or both, would constitute an Event of Default has occurred
     or is continuing, except as disclosed in such certificate;

               (c)  Promptly following the filing thereof, and in any event no
later than April 30 of each year, the annual Federal tax returns of IS&S, Inc.;

               (d)  Upon receipt thereof, copies of any letter or report with
respect to the management, operations or properties of the Borrower or either
Guarantor submitted to the Borrower or such Guarantor by its accountants in
connection with any annual or interim audit of the Borrower or either
Guarantor's accounts, and a copy of any written response of the Borrower or
either Guarantor to any such letter or report;

               (e)  As soon as possible and in any event within 3 days after
receipt of notice thereof, notice of any pending or threatened litigation,
investigation or other proceeding involving the Borrower or either Guarantor (i)
which could have a material adverse effect on the operations or financial
condition of the Borrower or such Guarantor or (ii) wherein the potential
damages, in the reasonable judgment of the Borrower or such Guarantor based upon
the advice of counsel experienced in such matters, are not fully covered by the
insurance policies

                                       25
<PAGE>

maintained by the Borrower or such Guarantor (except for the deductible amounts
applicable to such policies) or (iii) any material change in the condition of
the Project Facilities;

               (f)  As soon as possible, notice of any material adverse change
in the operations, financial condition or prospects of the Borrower or either
Guarantor;

               (g)  As soon as possible and in any event within 3 days after the
occurrence of each Event of Default or each event which, with the giving of
notice or lapse of time or both, would constitute an Event of Default, a
statement of an officer of the Borrower or either Guarantor setting forth the
details of such Event of Default or event and the action which the Borrower or
such Guarantor proposes to take with respect thereto;

               (h)  As soon as possible, notice of any proposed or agreed-upon
amendment or wavier of any provisions in any other credit documents to which the
Borrower or either Guarantor is a party; and

               (i)  Such other information respecting the operations and
properties, financial or otherwise, of the Borrower or either Guarantor as the
Bank may from time to time reasonably request.

          Section 6.11  Consents Under Bond Documents. The Borrower will obtain
                        -----------------------------
the consent of the Bank whenever the Borrower must obtain the consent of the
Trustee under the Bond Documents.

          Section 6.12  Amendments to Bond Documents. The Borrower will not
                        ----------------------------
consent to or enter into any amendment of or supplement to the Bond Documents.

          Section 6.13  Limitation on Optional Calls and Conversions. Except
                        --------------------------------------------
pursuant to Section 6.20, the Borrower will not exercise its rights under the
Bond Documents to direct the Issuer to call the Bonds for any optional
redemption thereof, unless the Borrower first demonstrates to the reasonable
satisfaction of the Bank that at the time of such redemption the Bank will be
fully reimbursed for all drawings on the Letter of Credit in connection with
such redemption. The Borrower will not direct or permit the conversion or
establishment of the interest rate on the Bonds to an interest rate other than
the Weekly Rate (as defined in the Indenture), unless either (i) the Letter of
Credit is being terminated in connection therewith and the Borrower demonstrates
to the reasonable satisfaction of the Bank that at the time of such conversion
the Bank will be fully reimbursed for all drawings on the Letter of Credit at or
before such conversion or (ii) the Bank consents in writing to such conversion
or establishment.

          Section 6.14  Liens; Negative Pledge. The Borrower will not enter into
                        ----------------------
any agreement with any Person other than the Bank which prohibits or limits the
ability of the Borrower to create, incur, assume or suffer to exist any
mortgage, pledge, security interest, encumbrance or other lien upon the Project
Facilities, except for the Credit Agreement. The Borrower will not create,
incur, assume or suffer to exist any mortgage, pledge, security interest,
encumbrance or other Lien upon the Project Facilities, other than:

                                       26
<PAGE>

               (i)   Permitted Liens existing on the date of this Agreement,
provided that the amounts secured by such liens are not greater than the amounts
secured thereby on the date of this Agreement;

               (ii)  liens for taxes, assessments or governmental charges or
levies not yet due and payable or being contested in good faith and by
appropriate proceedings promptly initiated and diligently conducted, provided
that a reserve or other appropriate provision, if any, as shall be required by
GAAP, shall have been made therefor and no foreclosure, distraint, sale or other
similar proceedings shall have been commenced and not stayed;

               (iii) statutory liens of landlords and liens of carriers,
warehouseman, mechanics and materialmen incurred in the ordinary course of
business for sums not yet due or being contested by appropriate proceedings
promptly initiated and diligently conducted, provided that such liens shall have
been bonded and a reserve or other appropriate provision, if any, as shall be
required by GAAP, shall have been made therefor;

               (iv)  liens incurred or deposits made in the ordinary course of
business in connection with worker's compensation, unemployment insurance and
other types of social security; and

               (v)   purchase money liens securing Obligations, provided that
each such lien is limited exclusively to the property purchased with the
proceeds of the Obligation secured by such lien.

          Section 6.15  Payment of Debt. The Borrower will make full and timely
                        ---------------
payment of the principal of and interest on all Obligations of the Borrower
whether now existing or hereafter arising, and comply in all material respects
with all covenants and agreements set forth in agreements evidencing Obligations
of the Borrower, except to the extent any such payment is being contested in
good faith, in appropriate proceedings which are being diligently pursued by the
Borrower and where adequate and appropriate reserves therefor have been set
aside by the Borrower and such non-payment has not given rise to any Lien on the
assets of the Borrower.

          Section 6.16  Environmental Covenants.
                        -----------------------

               (a)  The Borrower will cause all activities at the Project
Facilities during the term of this Agreement to be conducted in material
compliance with all Environmental Laws. The Borrower will cause all applicable
permits, licenses or approvals to be obtained and will cause all notifications
to be made, as required by Environmental Laws, and will, at all times, cause
compliance with the terms and conditions of any such approvals or notifications.
During the term of this Agreement, if reasonably requested by the Bank, the
Borrower will provide to the Bank copies of (i) applications or other materials
submitted to any governmental agency in compliance with Environmental Laws, (ii)
any notifications submitted to any person pursuant to Environmental Laws, (iii)
any permit, license, approval, amendment or modification thereto granted
pursuant to Environmental Laws, (iv) any record or manifest required to be
maintained pursuant to Environmental Laws, and (v) any correspondence, notice

                                       27
<PAGE>

of violation, summons, order, complaint or other document received by the
Borrower, its lessees, sublessees or assigns, pertaining to compliance with any
Environmental Laws.

               (b)  The Borrower will not cause or permit any Contamination
during the term of this Agreement. The Borrower will, at all times during the
term of this Agreement, cause Hazardous Substances created or used at the
Project Facilities to be handled in a manner which will not cause an undue risk
of Contamination.

               (c)  The Borrower will cause all construction of new structures
at the Project Facilities during the term of this Agreement to use design
features which safeguard against or mitigate the accumulation of radon or radon
products in concentrations exceeding an acceptable level in any such new
structure.

               (d)  Upon the occurrence and during the continuation of an Event
of Default, the Bank may, if it in good faith believes there is a violation of
or failure by the Borrower in compliance with the following, but no more
frequently than annually at its discretion, commission an investigation at the
Borrower's expense of (i) compliance at the Project Facilities with
Environmental Laws, (ii) the presence of Hazardous Substances or Contamination
at the Project Facilities, (iii) the presence at the Project Facilities of
materials which are described in clause (b) of Section 5.12, (iv) the presence
at the Project Facilities of Environmentally Sensitive Areas, (v) the presence
at the Project Facilities of radon products, or (vi) the presence at the Project
Facilities of tanks of the type described in paragraph (e) of Section 5.12. In
connection with any investigation pursuant to this paragraph, the Borrower, the
Guarantors and their lessees, sublessees and assigns, will comply with any
reasonable request for information made by the Bank or its agents in connection
with any such investigation. Any response to any such request for information
will be full and complete. The Borrower will assist the Bank and its agents to
obtain any records pertaining to the Project Facilities or to the Borrower and
the lessees, sublessees or assigns of the Borrower in connection with an
investigation pursuant to this paragraph. The Borrower will accord the Bank and
its agents access to all areas of the Project Facilities during regular business
hours and in reasonable manners in connection with any investigation pursuant to
this paragraph without unreasonable interference with the operation of business
at the Project Facilities. No investigation commissioned pursuant to this
paragraph shall relieve the Borrower from any responsibility for their
representations and warranties under Section 5.12.

               (e)  The Borrower hereby agrees to indemnify and to hold harmless
the Bank of, from and against any and all expense, loss or liability suffered by
the Bank by reason of the Borrower's breach of any of the provisions of Section
5.12 or this Section including, but not limited to, and whether or not
constituting such a breach (i) any and all expense that the Bank may reasonably
incur in complying with any Environmental Laws related to the Project
Facilities; (ii) any and all costs that the Bank may reasonably incur in
investigating or remedying any Contamination to the extent required by
Environmental Laws; (iii) any and all fines, penalties or other sanctions
(including a voiding of any transfer of the Project Facilities) assessed upon
the Bank by reason of a failure of the Borrower to have complied with
Environmental Laws; and (iv) any and all reasonable legal and professional fees
and costs incurred by the Bank in connection with the foregoing, provided that
the Borrower shall not be

                                       28
<PAGE>

responsible for any such expense, loss or liability resulting from the gross
negligence or willful misconduct of the Bank.

          Section 6.17  ERISA. The Borrower will comply in all material respects
                        -----
with all applicable provisions of ERISA and the Code as they relate to any Plan.
Promptly and in any event within 10 Business Days after receiving or becoming
aware thereof, the Borrower shall furnish to the Bank (i) a copy of any notice
of intent to terminate any Plan filed with the PBGC, (ii) a statement of the
chief financial officer of the Borrower setting forth the details of the
occurrence of any Reportable Event with respect to any Plan, (iii) a copy of any
notice that the Borrower or any ERISA Affiliate may receive from the PBGC
relating to the intention of the PBGC to terminate any Plan or to appoint a
trustee to administer any Plan, or (iv) a copy of any notice of failure to make
a required installment or other payment within the meaning of Section 412(n) of
the Code or Section 302(f) of ERISA with respect to a Plan.

          Section 6.18  Tax Returns. The Borrower will file all required tax
                        -----------
returns, pay when due all taxes imposed on their operations, assets, income or
properties, and, upon request, provide to the Bank copies of such returns and
receipts for payment of such taxes provided the Borrower may contest and in
certain cases refuse to pay any taxes that in the reasonable judgment of its
accountants and/or legal counsel the Borrower is not required to pay.

          Section 6.19  Leases. The Borrower hereby represents that there are no
                        ------
leases or agreements to lease all or any part of the Project Facilities now in
effect. The Borrower agrees not to enter into any lease or agreement to lease
all or any part of the Project Facilities without the prior written approval
thereof and of the respective tenant by the Bank

          Section 6.20  Optional Redemptions of Bonds.
                        -----------------------------

               (a)  The Borrower and the Bank intend to obtain shortly after the
Date of Issuance an appraisal of the Project Facilities on a completed value
basis from an MAI appraiser selected by the Bank and in form and substance
satisfactory to the Bank (the "Appraisal"). If the Appraisal establishes a value
of the Project Facilities (the "Project Appraised Value") such that the Letter
of Credit Amount is greater than 85% of the Project Appraised Value, then, upon
written request of the Bank, the Borrower agrees to direct the Trustee in
accordance with the terms and provisions of the Indenture to call the Bonds for
optional redemption as soon as practicable in an amount (rounded upwards to the
minimum increment permitted for such redemption) such that, after giving effect
to such redemption and the corresponding reduction in the Letter of Credit
Amount after such redemption, the Letter of Credit Amount is no greater than 85%
of the Project Appraised Value.

               (b)  In the event the Property is not acquired by the Borrower
within 180 days following the Date of Issuance, then, upon written request of
the Bank, the Borrower agrees to direct the Trustee in accordance with the terms
and provisions of the Indenture to call all of the Bonds for optional redemption
as soon as practicable.

               (c)  The Borrower agrees to direct the Trustee, in accordance
with the terms and provisions of the Indenture to call the Bonds for optional
redemption beginning on the Interest Payment Date occurring in August of 2001
and the Interest Payment Date occurring in

                                       29
<PAGE>

August of each year thereafter, in the amount as determined in accordance with
Exhibit H (with the amount of any optional redemption made pursuant to
subsection (a) above subtracted from the amount of the final redemption set
forth on Exhibit H). On the first day of [September, 2000] and the first day of
each calendar month thereafter so long as any Bonds are outstanding under the
Indenture, the Borrower shall pay to the Bank, for deposit by the Bank into the
"Bond Prepayment Fund" (which is hereby created) an amount equal to 1/12 of the
amount of the Bonds to be optionally redeemed on the following August 1. Funds
held in the Bond Prepayment Fund shall be immediately and automatically
transferred to the Bank to reimburse the Bank for draws made by the Trustee in
accordance with the Letter of Credit to optionally redeem the principal of the
Bonds on such dates.

               (d)  The Borrower agrees to take all steps necessary and required
by the Indenture to direct the Trustee to make the optional redemptions of the
Bonds at the times and on the dates required by subsections (a), (b) and (c)
above, in accordance with the terms and provisions of the Indenture.

          Section 6.21  Financial Covenants. The Borrower shall cause IS&S, Inc.
                        -------------------
to observe the following covenants:

               (a)  IS&S, Inc., on a consolidated basis, shall maintain at all
times, a ratio of total liabilities to EBITDA of not greater than 2.50:1.00
during the period from the Date of Issuance through September 29, 2000, and not
greater than 2.25:1.00 thereafter, calculated at the end of each fiscal quarter
of IS & S, Inc.

               (b)  IS&S, Inc., on a consolidated basis, shall maintain at all
times a Fixed Charge Ratio equal to or greater than 2.00:1.00, calculated at
the end of each fiscal quarter of IS&S, Inc.

               (c)  IS&S, Inc., on a consolidated basis, shall maintain at all
times a minimum Tangible Net Worth of $9,054,000, to be increased on each
September 30, commencing on September 30, 2000, by an amount equal to the sum of
(i) 75% of IS&S, Inc.'s net income (if a positive number) for the fiscal year
then ending, and (ii) 90% of the proceeds (net of customary and reasonable costs
of issuance) from the issuance of capital stock of IS&S, Inc.

          Section 6.22  Further Assurances. The Borrower will execute and
                        ------------------
deliver from time to time such further instruments and take such further actions
as may be reasonably required to carry out the purposes and provisions of this
Agreement and to assure the Bank of the subrogation and security rights in favor
of the Bank contemplated by Article IV and by the Indenture.

                                       30
<PAGE>

                                 ARTICLE VII.

                            CONSTRUCTION COVENANTS

          Section 7.01  Application of Project Fund. The Borrower shall not
                        ---------------------------
submit any requisition to the Trustee for disbursement of funds from the Project
Fund for Project costs which are inconsistent with the description of the
Project or the schedule of Project costs (the "Project Cost Schedule") to be
delivered to and approved by the Bank prior to the submission of the initial
requisition referred to in Section 7.01(b), and the Borrower shall not apply any
Bond proceeds in a manner inconsistent with the requisition therefor submitted
to the Trustee. Any costs of the Project incurred in excess of the budgeted
amounts set forth in the Project Cost Schedule will be paid for by the Borrower
upon demand of the Bank. Should it appear at any time that the balance of the
Project Fund is insufficient, in the Bank's reasonable judgment, to complete the
Improvements, the Bank may require that the Borrower pay, and the Borrower will
pay to the Trustee within 30 days of receipt of notice from the Bank, for
deposit in the Project Fund and disbursement pursuant to the Indenture, an
amount equal to the deficiency, as determined by the Bank, and the Bank shall
not be obligated to approve any further requisitions for disbursement from the
Project Fund until such amount is paid to the Trustee. Notwithstanding the
foregoing provisions, if the whole amount allocated to any component of Project
cost as set forth in the Project Cost Schedule is not, or in the Bank's
judgment, will not be expended to complete the work covered by such component,
then, with the Bank's approval, the Borrower may cause such excess to be
reallocated and used for any other component of Project cost as set forth on the
Project Cost Schedule prior to making any deposit required by the previous
sentence.

               (a)  Requisitions Regarding the Acquisition of the Property. The
                    ------------------------------------------------------
Borrower shall not submit to the Trustee under the Indenture a requisition for
the acquisition costs with respect to the Property, if any, unless and until all
of the conditions precedent set forth in Article IV shall have been satisfied
and the Bank shall have first received each of the following, in form and
substance satisfactory to the Bank:

                    (i)  Transaction Documents. The Mortgage and the
                         ---------------------
Environmental Indemnity Agreement.

                    (ii) Title Insurance Commitment. A prepaid title insurance
                         --------------------------
commitment or commitments issued by a reputable carrier reasonably satisfactory
to the Bank, committing to insure the Mortgage in the original Letter of Credit
Amount, subject only to such liens and encumbrances as the Bank may approve,
under a title insurance policy on the most current American Land Title
Association Standard Loan Policy - Revised Coverage, Form, without a pending
disbursements clause, containing (i) no exception for unrecorded easements,
discrepancies or conflicts in boundary lines, shortage in area and encroachments
which an accurate and complete survey would disclose or for loss or damage by
reason of encroachment other than by party walls, (ii) copies of any
restrictions or easements affecting the Project Facilities and, with respect to
any restrictions, affirmative coverage that they have not been violated and that
future violation would not work a forfeiture or reversion of title to the
Project Facilities, (iii) an endorsement against the invalidity or
unenforceability and loss of priority of the lien of the Mortgage resulting from
changes in the rates of interest payable on the obligations

                                       31
<PAGE>

secured by the Mortgage and (iv) such other endorsements and affirmative
insurance as may be reasonably required by the Bank, including but not limited
to, a contiguity endorsement, survey endorsement, zoning endorsement, revolving
credit endorsement, future advance endorsement and endorsement as to
nonviolation of any restrictions or easements, and the Borrower shall supply the
title company with such affidavits as may be necessary in connection therewith
and such policy or policies shall also obligate the title company to
affirmatively issue all advances pursuant to this Agreement, without exception
for mechanics' or materialmen's liens, and that access to the Property is by a
dedicated and accepted public right-of-way.

               (b)  Requisitions Regarding the Improvements on the Property. The
                    -------------------------------------------------------
Borrower shall not submit to the Trustee under the Indenture the first
requisition for hard construction costs with respect to the Improvements unless
the conditions of subsection (a) have been satisfied in full and the Bank shall
have first received each of the following in form and substance satisfactory to
the Bank:

                    (i)    Transaction Documents. The Construction and
                           ---------------------
Development Documents and the Assignment of Construction Documents.

                    (ii)   No-Lien Agreements. Duly filed and effective no-lien
                           ------------------
agreements from the Contractor and all general contractors performing any work
on the Project Facilities or Improvements effectively waiving all present and
future lien rights with respect to the Construction Contract and other contracts
thereunder.

                    (iii)  Inspection Report. A favorable report from the
                           -----------------
Inspecting Architect as to the detail set forth in the Plans and Specifications,
the quality of construction called for by the Plans and Specifications and the
adequacy of the Construction Contract to provide for completion of the
Improvements in accordance with the Plans and Specifications and as to such
other matters as the Bank may request. The Bank's obligation to authorize any
advances after the Date of Issuance for direct costs of construction may be
conditioned upon its continued receipt of similar reports from the Inspecting
Architect.

                    (iv)   Payment of Charges. Evidence satisfactory to the Bank
                           ------------------
that all installments of general or special taxes or assessments, service
charges, water and sewer charges, private maintenance charges, and other charges
by whatever name, to the extent due on or before the Date of Issuance and
relating to the Project Facilities have been paid on or before said date.

                    (v)    Compliance with Laws. Evidence satisfactory to the
                           --------------------
Bank that the Improvements, when constructed, and the Project Facilities, and
the proposed and actual use thereof, comply with all applicable laws, statutes,
codes, ordinances, rules and regulations, including but not limited to zoning
and environmental laws, of all governmental authorities having jurisdiction over
the same, and that there is no action or proceeding pending (or any time for an
appeal of any decision rendered) before any court, quasi-judicial body or
administrative agency at the time of any authorized disbursement by the Bank of
all or any part from the Project Fund relating to the validity of the
transactions contemplated hereby or the proposed or actual use or operation of
the Project Facilities or which would adversely affect the status of the zoning
with respect thereto.

                                       32
<PAGE>

                    (vi)    Permits and Approvals. Building, zoning and other
                            ---------------------
required permits covering construction of Improvements, together with evidence
satisfactory to the Bank that all approvals required with respect to the Project
Facilities from third parties or any governmental or quasi-governmental
authorities have been obtained or, in the case of approvals relating to the
operation of the Improvements which cannot be obtained until completion of
construction, evidence satisfactory to the Bank that such approvals are
obtainable. Such evidence shall include copies of all letters of grant or
approval of all zoning changes and other site plan approvals and subdivision
approvals, all variances of zoning regulations affecting the height, bulk,
location or configuration of the Project Facilities (or a satisfactory opinion
or counsel that the same are not required), and all approvals or variances
relating to parking or loading areas (both on-street and off-street) and all
appurtenant easements required by governmental authorities with respect to the
Project Facilities. Upon completion of the construction of the Improvements, the
Borrower shall furnish the Bank evidence satisfactory to the Bank that the
Project Facilities complies with the foregoing requirements.

                    (vii)   Utilities. Evidence satisfactory to the Bank that
                            ---------
(A) the Project Facilities have available to them adequate water, gas and
electric supply, storm and sanitary sewerage facilities, telephone facilities
and other required public utilities, and means of access between the Project
Facilities and public highways; and (B) all such facilities comply with all
applicable laws, rules and regulations, and all necessary easements to provide
such utility service to the Project Facilities have been obtained.

                    (viii)  Project Cost Schedule. The Project Cost Schedule in
                            ---------------------
form and substance satisfactory to the Bank approved by the Bank and the
Inspecting Architect, and certified by the Borrower as of the Date of Issuance
to be true, correct and complete.

                    (ix)    Plans and Specifications. The Plans and
                            ------------------------
Specifications in form and substance satisfactory to the Bank, approved and
signed for identification purposes by the Borrower, the Contractor, the
Architect and the Inspecting Architect.

                    (x)     No Damage or Taking. No portion of the Improvements
                            -------------------
shall have been damaged by fire or other casualty and no condemnation or taking
of the Project Facilities or the Improvements or any portion thereof shall be
pending or threatened.

                    (xi)    Subcontractor List. A list of all Subcontractors
                            ------------------
employed in connection with the construction of the Improvements and true and
correct copies of all executed Subcontracts.

                    (xii)   Lien Waivers. To the extent and at the time or times
                            ------------
permitted by applicable law, general waivers or stipulations against mechanic's
and materialman's liens by the Contractor and its Subcontractors and materialmen
for the Project.

                    (xiii)  Miscellaneous Documents, Etc. Such other documents,
                            ----------------------------
certificates, approvals and assurances that the Bank or its counsel may
reasonably request.

          Section 7.02  Requisitions Approval. The Borrower shall submit to the
                        ---------------------
Bank, no more than once per month and no later than 10 Business Days prior to
the date of the requested

                                       33
<PAGE>

disbursement, for its approval prior to disbursement thereon, each requisition
and related supporting materials required by the Indenture, together with: (a)
an itemization of the funds requisitioned against the Project Cost Schedule; (b)
in the case of hard construction costs, an Application and Certificate for
Payment (AIA Document G702) from the appropriate entity and approved by the
Inspecting Architect, together with all necessary Continuation Sheets (AIA
Document G703); (c) a certification of Borrower and the Contractor (or
construction manager, as appropriate) identifying all contractors,
subcontractors and suppliers who have performed work or furnished materials; (d)
satisfactory lien waivers from such contractors, subcontractors, and suppliers
current through the period covered by such request for funds (or through the
period covered by the previous request if permitted by the Bank); (e) a
certification of the Borrower that the Borrower has paid or actually incurred
the soft costs included in the AIA Document G702; (f) supporting invoices; (g)
if requested by the Bank, a title bring down search showing no additional liens;
(h) request to the Bank for approval of such requisition certifying, among other
things, that (i) the amounts requisitioned are due and unpaid and have not been
included in any previous requisition, (ii) the funds to be advanced against the
requisition will be fully applied in accordance with the Project Cost Schedule,
(iii) the construction of the Improvements to date has been performed in a good
and workmanlike manner, (iv) no Event of Default or event which, with the giving
of notice or lapse of time or both, would constitute an Event of Default has
occurred and is continuing, (v) the undisbursed balance of the Bond proceeds is
sufficient to complete the Project, and (vi) reaffirming the representations and
warranties of the Borrower in Article V. The Borrower will withdraw any
requisition which the Bank declines to approve. The Bank's review and approval
of the requisitions and the construction and equipping of the Project is solely
for the protection of the Bank's interests under this Agreement, and the Bank
shall not be deemed, by virtue of its inspection of the Project or approval of
any requisition, to have made any representation to any person with respect to
the construction and equipping of the Project, the validity of any costs
thereof, or the satisfaction of any conditions under the Indenture with respect
to the funding of requisitions (other than the Bank's consent thereto). All
conditions to the obligation of the Bank to approve requisitions hereunder are
imposed solely and exclusively for the benefit of the Bank and its assigns, and
no other person shall have standing to require satisfaction of such conditions
in accordance with their terms or be entitled to assume that the Bank will
approve or not approve advances in the absence of strict compliance with any or
all thereof, and no other person shall, under any circumstances, be deemed to be
a beneficiary of such conditions, any or all of which may be freely waived in
whole or in part by the Bank at any time if, in its sole discretion, it deems it
advisable to do so. The Bank shall not in any way or for any purpose be deemed
to be or to become a partner of or a joint venturer or a member of a joint
enterprise with the Borrower in connection with the construction, acquisition,
installation, ownership, development or operation of the Project.

          Section 7.03  Construction; Completion Date. The Borrower will proceed
                        -----------------------------
diligently to construct and equip the Project, in accordance with the Project
Cost Schedule and the Plans and Specifications, without delay. The Project shall
be completed on or before the Completion Date and at completion the Project
shall be free of any and all private or governmental charges or claims (filed or
not) of any nature, except for the Permitted Liens. The Borrower will deliver to
the Bank certified copies of all use, occupancy or completion certificates in
connection with the Project, immediately upon issuance. As used in this
Agreement the terms "complete", "completed", and "completion" mean, with respect
to the

                                       34
<PAGE>

Project, that (a) the Improvements are substantially physically complete in
accordance with the Plans and Specifications and equipped; (b) the Borrower has
received all permits, approvals and certificates required by law prior to the
use and occupancy thereof and has furnished true copies of such permits,
approvals and certificates to the Bank; (c) the Project is free of any and all
private or governmental charges, claims or liens (filed or not) of any nature
except the Permitted Liens; and (d) the Borrower has obtained all general
releases of mechanic's and materialman's liens required by Section 7.06 and
delivered true copies thereof to the Bank, and "Completion Date" means the date
upon which the requirements of (a), (b), (c) and (d) have been satisfied.

          Section 7.04  Certain Contracts Prohibited. The Borrower will not,
                        ----------------------------
without first obtaining written approval of the Bank, (a) execute any contract
or purchase order or permit any Subcontract or purchase order to be executed by
any person or persons with whom it has contracted in connection with the
Improvements (except for such contracts, Subcontracts or purchase orders that
have been executed prior to the date hereof and that have been approved by the
Bank), unless the amounts thereof are within the amounts budgeted therefor in
the Project Cost Schedule and are Costs of the Project (as defined in the
Indenture); (b) execute any amendment or modification to any of the Plans and
Specifications, the Contract or any other contract the effect of which would be
either to increase or decrease the amount to be paid by or on behalf of the
Borrower under any contract except as permitted by Section 7.07; or (c) contract
for any services, work or materials for the Project if such are not required by
the Plans and Specifications or if payment therefor is required to be made
regardless of the nondelivery or nonfurnishing of such materials, services or
work.

          Section 7.05  Certain Notices. The Borrower will forward to the Bank
                        ---------------
promptly after receipt, copies of all notices, permits or other documents
(excepting only notices for nondelinquent taxes due) received by the Borrower
from any governmental authority relating to the Improvements or from any person
claiming a mechanic's or materialman's lien against the Improvements or any
other property of the Borrower.

          Section 7.06  Releases. Prior to making final payment under any
                        --------
contract relating to construction of the Improvements, the Borrower will require
the contractor thereon to deliver to the Borrower, from such contractor and all
of such contractor's subcontractors or materialmen, a general release of
mechanic's and materialman's liens, and the Borrower will promptly deliver or
cause to be delivered to the Bank true and correct copies of all such releases
so obtained.

          Section 7.07  Change Orders. The Borrower will not permit, without the
                        -------------
prior written consent of the Bank, the performance of any work pursuant to any
amendment or modification of any of the Plans and Specifications, the Contract
or any Subcontract or purchase order (any such amendment or modification being
herein called a "Change Order") which would result in an increase or decrease in
excess of $20,000 of the contract prices for the construction of the
Improvements as shown in the Project Cost Schedule.

          Section 7.08  Subcontracts. (a) The Subcontracts shall be in form and
                        ------------
substance satisfactory to the Bank in all respects, and shall contain, among
other conditions, the following provisions: (i) all labor, supervision,
materials, supplies and equipment necessary to complete

                                       35
<PAGE>

the Improvements in accordance with the Plans and Specifications shall be
furnished by the Completion Date; (ii) no change in the Improvements or in the
Plans and Specifications shall be effective unless approved in writing by the
Bank; and (iii) a release and wavier to the extent permitted by law, by all
Subcontractors of the right to file mechanic's liens.

               (b)  The Borrower will furnish to the Bank from time to time on
request by the Bank, in a form acceptable to the Bank, correct lists of all
Subcontractors employed in connection with construction of the Improvements and
true and correct copies of all executed Subcontracts. The Bank may contact any
Subcontractor to verify any facts disclosed in the lists, and all Subcontracts
relating to construction of the Improvements must require the disclosure of
their contents to the Bank.

                                 ARTICLE VIII.

                             DEFAULTS AND REMEDIES

          Section 8.01  Defaults. Each of the following shall constitute an
                        --------
event of default hereunder ("Event of Default"):

               (a)  Failure by the Borrower to make or cause to be made within
two (2) days of the date when due any payment under this Agreement as (i)
reimbursement for a drawing under the Letter of Credit, (ii) a Letter of Credit
commitment fee, or (iii) interest on any such drawing or commitment or early
cancellation fee;

               (b)  Failure by the Borrower to make any other payment within 10
days of the date when it is due under this Agreement or the Mortgage;

               (c)  Failure by the Borrower to perform or comply within ten (10)
days after receipt of written notice of such failure with any of the terms or
conditions contained in Section 6.01, 6.12 or 6.13, or the Borrower shall grant
or otherwise create a lien in violation of Section 6.14;

               (d)  Failure by the Borrower or either Guarantor to perform or
comply with any of the other terms or conditions contained in this Agreement,
any Collateral Document or any other document delivered by them to the Bank
pursuant to this Agreement as the case may be and continuance of such failure
for thirty (30) days after the earlier of receipt of written notice from the
Bank to the Borrower or such Guarantor or the Borrower or such Guarantor has
knowledge that such failure has occurred, or such longer period to which Bank
may agree in the case of a default not curable by the exercise of due diligence
within such 30 day period, provided that the Borrower or such Guarantor shall
have commenced to cure, or cause the cure of, such default within such 30 day
period and shall complete such cure as quickly as reasonably possible with the
exercise of due diligence;

               (e)  Any of the representations or warranties of the Borrower or
either Guarantor set forth in this Agreement, any of the Collateral Documents,
any of the Bond Documents or any other document furnished to the Bank by or on
behalf of the Borrower or

                                       36
<PAGE>

either Guarantor pursuant to the terms hereof proves to have been false or
misleading in any material respect;

               (f)  Any material provision of this Agreement or any of the
Collateral Documents, for any reason ceases to be valid and binding on the
Borrower or any material provision of the Guaranty ceases to be valid or binding
on the Guarantors, or is declared to be null and void, or is violative of any
applicable law relating to a maximum amount of interest permitted to be
contracted for, charged or received, or the validity or enforceability thereof
is contested by the Borrower, either Guarantor or any governmental agency, court
or authority, or the Borrower denies that it has any or further liability or
obligation under this Agreement or any of the Collateral Documents, or either
Guarantor denies that it has any or further liability under the Guaranty;

               (g)  The occurrence of an Event of Default as defined in the
Indenture or the Loan Agreement;

               (h)  The Borrower or either Guarantor (i) applies for or consents
to the appointment of a receiver, trustee, liquidator or custodian or the like
of either of the Borrower or such Guarantor or of property of the Borrower or
either Guarantor or (ii) admits in writing the inability of the Borrower or
either Guarantor to pay its debts generally as they become due, or (iii) makes a
general assignment for the benefit of creditors, or (iv) is adjudicated a
bankrupt or insolvent, or (v) commences a voluntary case under the United States
Bankruptcy Code or files a voluntary petition or answer seeking reorganization,
an arrangement with creditors or an order for relief or seeking to take
advantage of any insolvency law or files an answer admitting the material
allegations of a petition filed against the Borrower or either Guarantor in any
bankruptcy, reorganization or insolvency proceeding, or action of the Borrower
or either Guarantor is taken for the purpose of effecting any of the foregoing,
or (vi) has instituted against it, without the application, approval or consent
of the Borrower or of either Guarantor, a proceeding in any court of competent
jurisdiction, under any law relating to bankruptcy, insolvency, reorganization
or relief of debtors, seeking in respect of the Borrower or either Guarantor an
order for relief or an adjudication in bankruptcy, reorganization, dissolution,
winding up or liquidation, a composition or arrangement with creditors, a
readjustment of debts, the appointment of a trustee, receiver, liquidator or
custodian or the like of the Borrower or either Guarantor or of all or any
substantial part of the assets of the Borrower or either Guarantor or other like
relief in respect thereof under any bankruptcy or insolvency law, and, if such
proceeding is being contested by the Borrower or either Guarantor in good faith,
the same (A) results in the entry of an order for relief or any such
adjudication or appointment or (B) remains undismissed and undischarged for a
period of 90 days;

               (i)  The Borrower fails to maintain in full force and effect the
hazard or other insurance required pursuant to this Agreement;

               (j)  The Project Facilities suffer a loss by fire or other
casualty and such loss is not fully insured and any deficiency in the amount of
insurance proceeds paid with respect to such loss is not posted with the Trustee
or the Bank within 10 days of the determination of such deficiency;

                                       37
<PAGE>

               (k)  The Project Facilities or any material portion thereof are
subjected to a material condemnation proceeding which if adjudicated adversely
to the Borrower or either Guarantor would render the Project Facilities unusable
for their intended use or materially reduce the collateral value thereof;

               (l)  Any litigation or administrative proceeding ensues, and is
not dismissed within 30 days, involving the Borrower or either Guarantor or any
instrument, contract or document delivered to the Bank in compliance with this
Agreement, and in the Bank's reasonable judgment (a) such litigation or
proceeding is likely to be formally adjudicated adversely to the Borrower or
such Guarantor and (b) the adverse result of such litigation or proceeding would
have in the Bank's reasonable opinion, a materially adverse effect on the
Borrower of either Guarantor's ability to pay its obligations and comply with
the covenants under this Agreement, the Collateral Documents or the Bond
Documents or on either Guarantor's ability to pay its obligations and comply
with the covenants under the Guaranty.

               (m)  Any one or more judgments or orders are entered against the
Borrower or either Guarantor, where such judgments or orders aggregate $100,000
or more and either (1) continue unsatisfied and unstayed for 30 days or (2) a
judgment lien on any property of either of the Borrower or either Guarantor is
recorded in respect thereof and is not stayed pending appeal by a bond or other
arrangement given or obtained by the Borrower or such Guarantor on terms which
do not violate the Borrower's or such Guarantor's covenants under the Guaranty;

               (n)  Failure by the Borrower or either Guarantor to make any
payment or payments in respect of any Obligation or Obligations, in an aggregate
principal amount of $100,000 or more, when such payment or payments are due and
payable (after the lapse of any applicable grace period) that results in the
acceleration of such Obligation or Obligations or enables the holder or holders
of such Obligation or Obligations or any person acting on behalf of such holder
or holders to accelerate the maturity of such Obligation or Obligations;

               (o)  The occurrence of any default or event of default with
respect to any other credit arrangement under which the Borrower or either
Guarantor is indebted to the Bank which is not cured within any applicable
notice or cure period;

               (p)  The occurrence of any payment default or any other default
or event of default with respect to any loan or other credit arrangement under
which either of the Borrower or either Guarantor is currently or hereafter
indebted in a principal amount aggregating $100,000 or more, whether to the Bank
or any other lender, which is not cured within any applicable notice or cure
period and the effect of such default or event of default is to cause or permit
the holder of such indebtedness to cause such indebtedness to become due and
payable prior to its stated maturity; or

               (q)  The occurrence of a Reportable Event that results in or
could result in any material liability of the Borrower or any ERISA Affiliate to
the PBGC or to any Plan and such Reportable Event is not corrected within thirty
(30) days after the occurrence thereof; or the occurrence of any Reportable
Event which could constitute grounds for termination of any Plan by the PBGC or
for the appointment by the appropriate United States District Court of a trustee

                                       38
<PAGE>

to administer any Plan and such Reportable Event is not corrected within thirty
(30) days after the occurrence thereof; or the filing by the Borrower or any
ERISA Affiliate of a notice of intent to terminate a Plan or the institution of
other proceedings to terminate a Plan which could result in any material
liability of the Borrower or any ERISA Affiliate to the PBGC or to any Plan; or
the Borrower or any ERISA Affiliate shall fail to pay when due any liability to
the PBGC or to a Plan; or the PBGC shall have instituted proceedings to
terminate, or to cause a trustee to be appointed to administer any Plan; or any
person engages in a Prohibited Transaction with respect to any Plan which
results in or could result in material liability of the Borrower, any ERISA
Affiliate, any Plan of the Borrower or any ERISA Affiliate or any fiduciary of
any such Plan; or failure by the Borrower or any ERISA Affiliate to make a
required installment or other payment to any Plan within the meaning of Section
302(f) of ERISA or Section 412(n) of the Code that results in or could result in
material liability of the Borrower or any ERISA Affiliate to the PBGC or any
Plan; or the withdrawal of the Borrower or any ERISA Affiliate from a Plan
during a plan year in which it was a "substantial employer" as defined in
Section 4001(9a)(2) of ERISA; or the Borrower or any ERISA Affiliate becomes an
employer with respect to any Multiemployer Plan without the prior written
consent of the Bank.

          Section 8.02  Remedies.  If an Event of Default has occurred and is
                        --------
continuing uncured, the Bank may:

               (a)  Notify the Trustee of such Event of Default, direct the
Trustee to declare an Event of Default, as defined in the Indenture, to
accelerate the Bonds and to direct the Trustee to draw on the Letter of Credit,
and direct the Trustee to exercise remedies under the Bond Documents;

               (b)  By written notice to the Borrower, the Trustee and the
Remarketing Agent terminate the Liquidity Period;

               (c)  Declare the Borrower's obligations hereunder to be,
whereupon the same shall become, immediately due and payable;

               (d)  Commission the investigation described in Section 6.16(d)
hereof.

               (e)  Exercise, or cause to be exercised, any and all such
remedies as it may have under this Agreement, any of the Collateral Documents or
any other document or at law or in equity.

          Section 8.03  Waivers; Consents. No waiver of, or consent with respect
                        -----------------
to, any provision of this Agreement shall in any event be effective unless the
same shall be in writing and signed by the Bank, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given.

          Section 8.04  No Waiver; Remedies Cumulative. No failure on the part
                        ------------------------------
of the Bank to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; and no single or partial exercise of any right
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right. The remedies herein provided are

                                       39
<PAGE>

cumulative and not exclusive of any remedies available under any other document
or at law or in equity.

          Section 8.05  Set-Off. Upon the occurrence and during the continuance
                        -------
of any Event of Default, the Bank is hereby authorized at any time and from time
to time without notice to the Borrower (any such notice being expressly waived
by the Borrower) and, to the fullest extent permitted by law, to set off and to
apply any and all balances, credits, deposits (general or special, time or
demand, provisional or final), accounts or moneys at any time held and other
indebtedness at any time owing by the Bank to or for the account of the Borrower
against any and all of the obligations of the Borrower now or hereafter existing
under this Agreement or any other agreement or instrument delivered by the
Borrower to the Bank in connection therewith, whether or not the Bank shall have
made any demand hereunder or thereunder and although such obligations may be
contingent or unmatured. The rights of the Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of set-off) which the Bank may have.

                                  ARTICLE IX.

                                 MISCELLANEOUS

          Section 9.01  Notices. All notices and other communications provided
                        -------
for hereunder shall, unless otherwise specified, be in writing and sent by
United States certified or registered mail, postage prepaid return receipt
requested, or by telegraph, telex, telecopier (confirmed by certified or
registered mail or private delivery service), addressed as follows:

               If to the Bank:

                    PNC Bank, National Association
                    1000 Westlakes Drive, Suite 200
                    Berwyn, PA 19312
                    Attention: Mark D. Lavelle
                    Facsimile No.: (610) 725-5775

               If to Borrower or either Guarantor :

                    c/o Innovative Solutions and Support, LLC
                    420 Lapp Road
                    Malvern, PA 19355
                    Attention: Geoffrey S. M. Hedrick
                    Facsimile No.: (610) 651-5506

                                       40
<PAGE>

                 If to the Trustee:

                    Chase Manhattan Trust Company,
                     National Association
                    One Liberty Place, 52/nd/ Floor
                    1650 Market Street, Suite 5200
                    Philadelphia, PA 19103
                    Attention: Capital Markets Fiduciary Services
                    Facsimile No.: (215) 972-1685

               If to the Remarketing Agent:

                    PNC Capital Markets, Inc.,
                     Remarketing Agent
                    One PNC Plaza, 26/th/ Floor
                    249 Fifth Avenue
                    Pittsburgh, PA 15222-2707
                    Attention: Manager - Remarketing Desk
                    Facsimile No.: (412) 762-9543

Any such notice to the Bank shall refer to this Agreement and PNC Bank, National
Association Irrevocable Letter of Credit No. S231762NWP. Either party hereto and
the Trustee, and the Remarketing Agent may change the address to which notices
to it are to be sent by written notice given to the other persons listed in this
Section. All notices shall, when mailed as aforesaid, be effective on the date
indicated on the return receipt, and all notices given by other means shall be
effective when received.

          Section 9.02  Successors and Assigns. This Agreement shall inure to
                        ----------------------
the benefit of and shall be binding upon the parties hereto and their respective
successors and assigns. The Borrower may not assign its rights under this
Agreement without the prior written consent of the Bank. The Borrower and the
Bank intend that no other person shall have any claim or interest under this
Agreement or right of action hereon or hereunder.

          Section 9.03  Survival of Covenants. All covenants made by the
                        ---------------------
Borrower herein and in any document delivered pursuant hereto shall survive the
delivery of this Agreement and the Letter of Credit and any advances under the
Letter of Credit.

          Section 9.04  Counterparts. The execution hereof by each party hereto
                        ------------
shall constitute a contract between them for the uses and purposes herein set
forth, and this Agreement may be executed in any number of counterparts, with
each executed counterpart constituting an original and all counterparts together
constituting one agreement.

          Section 9.05  Costs, Expenses and Taxes. The Borrower agrees to pay
                        -------------------------
promptly following Bank's request therefor all costs and expenses of the Bank in
connection with the

                                       41
<PAGE>

preparation, execution, delivery and administration of this Agreement, the
Letter of Credit, the Collateral Documents, and any other documents that may be
delivered in connection with this Agreement, the Letter of Credit, the
Collateral Documents or the Bond Documents or any amendments or supplements
thereto, including without limitation the reasonable fees and expenses of
counsel for the Bank with respect thereto and with respect to advising the Bank
as to its rights and responsibilities under this Agreement, the Letter of
Credit, the Collateral Documents and such other documents, and all costs and
expenses, if any, including without limitation reasonable counsel fees and
expenses of the Bank, in connection with the enforcement of this Agreement, the
Letter of Credit, the Collateral Documents, and such other documents. In
addition, the Borrower shall pay any and all stamp and other taxes and
governmental fees payable or determined to be payable in connection with the
execution and delivery of this Agreement, the Letter of Credit, the Collateral
Documents, and such other documents and agrees to indemnify and to hold the Bank
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and fees; provided the
Bank promptly notifies the Borrower of any such taxes and fees.

          Section 9.06  Amendments. This Agreement may be amended by an
                        ----------
instrument in writing executed and delivered by the Borrower and the Bank.

          Section 9.07  Severability; Interest Limitation. If any provision
                        ---------------------------------
hereof is found by a court of competent jurisdiction to be prohibited or
unenforceable in any jurisdiction, it shall be ineffective as to such
jurisdiction only to the extent of such prohibition or unenforceability, and
such prohibition or unenforceability shall not invalidate the balance of such
provision as to such jurisdiction to the extent it is not prohibited or
unenforceable, nor invalidate such provision in any other jurisdiction, nor
invalidate the other provisions hereof, all of which shall be liberally
construed in favor of the Bank in order to effect the provisions of this
Agreement. Notwithstanding anything to the contrary herein contained, the total
liability of the Borrower for payment of interest pursuant hereto shall not
exceed the maximum amount, if any, of such interest permitted by applicable law
to be contracted for, charged or received, and if any payments by the Borrower
to the Bank include interest in excess of such a maximum amount, the Bank shall
apply such excess to the reduction of the unpaid principal amount due pursuant
hereto, or if none is due, such excess shall be refunded to the Borrower;
provided that, to the extent permitted by applicable law, in the event the
interest is not collected, is applied to principal or is refunded pursuant to
this sentence and interest thereafter payable pursuant hereto shall be less than
such maximum amount, then such interest thereafter so payable shall be increased
up to such maximum amount to the extent necessary to recover the amount of
interest, if any, theretofore uncollected, applied to principal or refunded
pursuant to this sentence. Any such application or refund shall not cure or
waive any Event of Default. In determining whether or not any interest payable
under this Agreement exceeds the highest rate permitted by law, any nonprincipal
payment (except payments specifically stated in this Agreement to be "interest")
shall be deemed, to the extent permitted by applicable law, to be an expense,
fee, premium or penalty rather than interest.

          Section 9.08  Conflicts. Insofar as possible the provisions of this
                        ---------
Agreement shall be deemed complementary to the terms of the Collateral
Documents, but in the event of conflict the terms hereof shall control to the
extent such are enforceable under applicable law.

                                       42
<PAGE>

          Section 9.09  Complete Agreement. Taken together with the Collateral
                        ------------------
Documents and the other instruments and documents delivered in compliance
herewith, this Agreement is a complete memorandum of the agreement of the
Borrower and the Bank. Waivers or modifications of any provision hereof must be
in writing signed by the party to be charged with the effect thereof.

          Section 9.10  Consent to Jurisdiction; Venue; Waiver of Jury Trial.
                        ----------------------------------------------------
The Borrower hereby irrevocably (i) agrees that any suit, action or other legal
proceeding arising out of or relating to this Agreement, the Collateral
Documents or the Letter of Credit may be brought in any federal or state court
located in the Commonwealth of Pennsylvania and consents to the jurisdiction of
such court in any such suit, action or proceeding, (ii) agrees that any suit,
action or other legal proceeding by the Borrower against the Bank shall be
brought solely in a federal or state court located in the Commonwealth of
Pennsylvania and (iii) waives any objection which it may have to the laying of
venue of any such suit, action or proceeding in any such court and any claim
that any such suit, action or proceeding has been brought in an inconvenient
forum. The Borrower agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Section shall affect the right of the Bank to bring any suit, action or
proceeding against the Borrower or its property in the courts of any other
jurisdiction. The Borrower and the Bank hereby waive the right to trial by jury
in any action arising hereunder or under any of the Collateral Documents or
otherwise in connection herewith.

          Section 9.11  Governing Law. This Agreement shall be governed by, and
                        -------------
construed in accordance with, the laws of the Commonwealth of Pennsylvania
without reference to its principles of conflicts of law. The Letter of Credit
shall be governed and construed as set forth in paragraph 12 thereof.

          Section 9.12  Headings. Section headings in this Agreement are
                        --------
included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.

                                       43
<PAGE>

          IN WITNESS WHEREOF, the Borrower and the Bank have caused this
Agreement to be duly executed and delivered as of the date first above.

                          INNOVATIVE SOLUTIONS AND SUPPORT, LLC,
                          by its sole Member and Manager INNOVATIVE
                          SOLUTIONS AND SUPPORT, INCORPORATED

                          By:________________________________
                               Name:  James Reilly
                               Title: Chief Financial Officer

                          PNC BANK, NATIONAL ASSOCIATION

                          By:________________________________
                               Name:
                               Title:

This execution page is part of the Reimbursement, Credit and Security Agreement
dated as of August 1, 2000 between Innovative Solutions and Support, LLC and PNC
Bank, National Association.

                                       44
<PAGE>

                                   EXHIBIT A

                             [Letterhead of Bank]

                  IRREVOCABLE LETTER OF CREDIT NO. S231762NWP

                                                          August 8, 2000

Chase Manhattan Trust Company,
  National Association, as Trustee
1650 Market Street
Suite 5210
Philadelphia, Pennsylvania 19103
Attention: Global Trust Services

Dear Sirs:

          1.   At the request and for the account of Innovative Solutions and
Support, LLC (the "Borrower"), we hereby establish in your favor, as Trustee
under the Trust Indenture dated as of August 1, 2000 (the "Indenture") between
Chase Manhattan Trust Company, National Association, as Trustee (the "Trustee"),
and Chester County Industrial Development Authority (the "Issuer"), pursuant to
which $4,335,000.00 aggregate principal amount of Industrial Development Revenue
Bonds, 2000 Series A (Innovative Solutions and Support, LLC Project) (the
"Bonds") have been issued by the Issuer, our Irrevocable Letter of Credit No.
S231762NWP (the "Letter of Credit") in the amount of $4,406,261.00 (as more
fully described below), effective immediately and expiring at 5:00 p.m. on
August 7, 2003 or, if such day is not a Business Day, on the next succeeding
Business Day (the "Stated Expiration Date"), provided that the Stated Expiration
Date shall automatically be extended for one additional year effective on each
anniversary of the date of this Letter of Credit, unless we shall have given you
notice at least ninety (90) days prior to such anniversary that the Stated
Expiration Date will not be so extended. This Letter of Credit is subject to
automatic termination as provided in paragraph 8 hereof.

          2.   We hereby irrevocably authorize you to draw on us in accordance
with the terms and conditions hereinafter set forth, by one or more drafts on
us, an aggregate amount not exceeding Four Million Four Hundred Six Thousand Two
Hundred Sixty One Dollars $4,406,261.00 (as reduced and reinstated from time to
time in accordance with the provisions hereof, the "Letter of Credit Amount"),
of which (i) an aggregate amount not exceeding $4,335,000.00 (as reduced and
reinstated from time to time in accordance with the provisions hereof, the
"Principal Component") may be drawn upon with respect to principal of the Bonds
and (ii) an aggregate amount not exceeding $71,261.00 (as reduced and reinstated
from time to time in accordance with the provisions hereof, the "Interest
Component") may be drawn upon with respect to interest accrued on the Bonds. The
Principal Component shall not be available to

                                      A-1
<PAGE>

pay amounts corresponding to the interest on the Bonds, and the Interest
Component shall not be available to pay amounts corresponding to principal of
the Bonds.

          3.   Funds under this Letter of Credit are available to you at the
time specified below, (a) in one or more drawings by one or more of your drafts,
each dated the date of its presentation and stating on its face: "Drawn under
PNC Bank, National Association Irrevocable Letter of Credit No. S231762NWP",
accompanied by one or more of your certificates in the form of Annex 1 attached
hereto appropriately completed and executed (any such draft accompanied by such
certificate being herein called an "Interest Draft"); (b) in one or more
drawings by one or more of your drafts, each dated the date of its presentation
and stating on its face: "Drawn under PNC Bank, National Association Irrevocable
Letter of Credit No. S231762NWP", accompanied by one or more of your
certificates in the form of Annex 2 attached hereto appropriately completed and
executed (any such draft accompanied by such certificate being herein called a
"Tender Draft"); and (c) in one or more drawings by one or more of your drafts,
each dated the date of its presentation and stating on its face: "Drawn under
PNC Bank, National Association Irrevocable Letter of Credit No. S231762NWP",
accompanied by one or more of your certificates in the form of Annex 3 attached
hereto appropriately completed and executed (any such draft accompanied by such
certificate being herein called a "Redemption Draft"). Each such draft and
certificate shall be presented, at our office at PNC Bank, National Association,
237 Fifth Avenue, Third Floor, Annex Building, Pittsburgh, PA 15222, Attention:
Letter of Credit Department or such other office of ours in Pittsburgh,
Pennsylvania that we hereafter designate by written notice to you, and shall be
made either (i) in the form of a letter on your letterhead manually signed by
one of your officers and addressed to us at PNC Bank, National Association, 237
Fifth Avenue, Third Floor, Annex Building, Pittsburgh, PA 15222, Attention:
Letter of Credit Department or at any other office in Pennsylvania that we
hereafter designate by written notice delivered to you, or (ii) in the form of a
telecopy transmission of the documents described in clause (i) of this sentence
to Telecopier No. 412-705-0966 (with transmission confirmed by call to Telephone
No. 412-762-2078) or such other telecopier and telephone numbers that we
hereafter designate by written notice delivered to you. If drawing is made by
telecopier, it must contain a certification by you that originals of the draft
and certificate on your letterhead manually signed by one of your officers will
be mailed to us concurrently by first class United States mail. If we receive
your Interest Draft or Redemption Draft at such office, all in strict conformity
with the terms and conditions of this Letter of Credit, at or prior to 12:00
noon, on a Business Day, we will honor the same in accordance with your payment
instructions by 12:00 noon on the later of (a) the Business Day immediately
following the Business Day on which you present to us your draft and certificate
or (b) the "Value Date" set forth in such certificate; and if we receive your
Interest Draft or Redemption Draft at such office, all in strict conformity with
the terms and conditions of this Letter of Credit, after 12:00 noon, on a
Business Day, we will honor the same in accordance with your payment
instructions by 12:00 noon on the later of (1) the second Business Day
immediately following the Business Day on which you present to us your draft and
certificate or (2) the "Value Date" set forth in such certificate. If we receive
your Tender Draft at such office, all in strict conformity with the terms and
conditions of this Letter of Credit, at or prior to 11:00 a.m., on a Business
Day, we will honor the same in accordance with your payment instructions by 3:00
p.m. on the later of (x) the Business Day on which you present to us your draft
and certificate or (y) the "Value Date" set forth in such certificate; and if we
receive your Tender Draft at such office, all in strict conformity with the

                                      A-2
<PAGE>

terms and conditions of this Letter of Credit, after 11:00 a.m., on a Business
Day, we will honor the same in accordance with your payment instructions by 3:00
p.m. on the later of (i) the Business Day immediately following the Business Day
on which you present to us your draft and certificate or (ii) the "Value Date"
set forth in such certificate. For purposes of this Letter of Credit, we shall
be deemed to have "honored" a draft at the time at which we commence and confirm
by a federal reference number a wire transfer of immediately available funds in
accordance with your instructions. All payments made by us under this Letter of
Credit will be made with our own funds.

          4.   As used herein the term "Business Day" means any day other than
(i) a Saturday or Sunday, (ii) a day on which commercial banking institutions in
New York, New York, Pittsburgh, Pennsylvania or Philadelphia, Pennsylvania or in
any other city where your principal corporate trust office or our office at
which drafts are to be presented under this Letter of Credit is located are
required or authorized by law (including executive order) to close or on which
either such office is closed for a reason not related to financial condition, or
(iii) a day on which the New York Stock Exchange is closed. References to any
time of day in this Letter of Credit shall refer to Eastern standard time or
Eastern daylight saving time, as in effect in Philadelphia, Pennsylvania on such
day.

          5.   Each drawing honored by us hereunder shall reduce the Letter of
Credit Amount and the respective Principal and Interest Components thereof by
the respective amounts of such drawing and the corresponding components of such
drawing. In addition, the Letter of Credit Amount and the respective Principal
and Interest Components thereof shall be reduced automatically, without notice
to you, upon our receipt from you of a certificate in the form of Annex 4
attached hereto appropriately completed and executed, each such reduction to be
(i) in the amounts necessary to reduce the Letter of Credit Amount and the
Principal and Interest Components thereof to the respective amounts specified by
you in such certificate and (ii) effective on the Business Day on which we
receive such certificate from you. No drawing hereunder honored by us shall
exceed the Letter of Credit Amount at the time of such drawing, as the Letter of
Credit Amount has been reduced and reinstated in accordance with the terms
hereof, and no component of any such drawing corresponding to principal of or
interest on the Bonds shall exceed the corresponding Principal and Interest
Component of the Letter of Credit Amount as such Component has been reduced and
reinstated in accordance with the terms hereof.

          6.   On the tenth calendar day following the date of each drawing
under this Letter of Credit by your Interest Draft, the Letter of Credit Amount
and the Interest Component shall be automatically reinstated by an amount equal
to the amount of such drawing, unless before said tenth day, we give written
notice specifically referring to "PNC Bank, National Association Irrevocable
Letter of Credit No. S231762NWP" signed by our authorized officer and received
by you and the Trustee, to the effect that an Event of Default has occurred
under the Reimbursement, Credit and Security Agreement dated as of August 1,
2000 between the Borrower, and us and such reinstatement shall not occur, in
which case such reinstatement shall not occur.

                                      A-3
<PAGE>

          7.   Following any drawing under this Letter of Credit by your Tender
Draft, the Letter of Credit Amount and the Principal and Interest Components
thereof shall be reinstated with respect to such drawing (a) automatically when
and to the extent that both (i) we have received reimbursement for such drawing
in immediately available funds (or you have received immediately available funds
which, pursuant to Section 4.05 of the Indenture, you will immediately remit to
us as reimbursement for such drawing, such funds to be remitted to the attention
of our Letter of Credit Department stating that they are repayments for Tender
Drafts drawn under PNC Bank, National Association Letter of Credit No.
S231762NWP) and (ii) you have delivered to us a certificate in respect of such
reinstatement in the form of Annex 5 attached hereto appropriately completed and
executed, which may be sent by tested telex or telecopier in the manner, to the
numbers and with the confirmations and follow-up mailings described in paragraph
3 of this Letter of Credit, or (b) when and to the extent that we, at our
option, upon the Borrower's request, otherwise advise you in writing that such
reinstatement shall occur, it being understood that we shall have no obligation
to grant any such reinstatement except as provided in clause (a) of this
sentence.

          8.   This Letter of Credit shall automatically terminate upon the
first to occur of: (a) the Stated Expiration Date (as such date may have been
extended), (b) the date on which we receive a certificate from you in the form
of Annex 6 attached hereto, appropriately completed and executed, to the effect
that there are no Bonds Outstanding (as defined in the Indenture) other than
Bonds bearing interest at a Term Rate or secured by an Alternate Letter of
Credit (as defined in the Indenture) or (c) the date on which the final drawing
available hereunder is honored. This Letter of Credit shall be promptly
surrendered to us by you upon such termination.

          9.   This Letter of Credit is transferable in its entirety (but not in
part) to any transferee who you certify to us has succeeded you as Trustee under
the Indenture, and may be successively transferred. Transfer of this Letter of
Credit to such transferee shall be effected by the presentation to us of this
Letter of Credit accompanied by a certificate substantially in the form of Annex
7 attached hereto appropriately completed and executed.

          10.  Only you (or a transferee permitted by the terms of this Letter
of Credit) may make drawings under this Letter of Credit. Upon the payment to
you or your account of the amount specified in a draft drawn hereunder, we shall
be fully discharged of our obligation under this Letter of Credit with respect
to such draft, and we shall not thereafter be obligated to make any further
payments under this Letter of Credit with respect to such draft.

          11.  This Letter of Credit sets forth in full the terms of our
undertaking, and this undertaking shall not in any way be modified, amended,
amplified or limited by reference to any document, instrument or agreement
referred to herein or in which this Letter of Credit is referred to or to which
this Letter of Credit relates, except only the drafts and certificates referred
to herein; and any such reference shall not be deemed to incorporate herein by
reference any document, instrument or agreement, except such drafts and
certificates. Payment of all drawings honored under this Letter of Credit will
be made with our own funds.

                                      A-4
<PAGE>

          12.  This Letter of Credit is subject to the provisions of the Uniform
Customs and Practice for Documentary Credits, 1993 Revision, International
Chamber of Commerce Publication Number 500 (the "UCP") other than Article 48(g)
thereof. This Letter of Credit shall be deemed to be issued under the laws of
the Commonwealth of Pennsylvania and shall, as to matters not governed by the
UCP, be governed and construed in accordance with the laws of said state,
without regard to principles of conflicts of law.

                                         Very truly yours,

                                         PNC BANK, NATIONAL ASSOCIATION

                                         By __________________________

                                         Title _______________________

                                      A-5
<PAGE>

ANNEX 1 to PNC Bank, National Association
Irrevocable Letter of Credit No. S231762NWP
-------------------------------------------

To:  PNC Bank, National Association
     237 Fifth Avenue
     Third Floor, Annex Building
     Pittsburgh, PA 15222
     Attention: Letter of Credit Department

          CERTIFICATE FOR INTEREST DRAWING OF ACCRUED INTEREST ON
          INDUSTRIAL DEVELOPMENT REVENUE BONDS, 2000 SERIES A
          (INNOVATIVE SOLUTIONS AND SUPPORT, LLC PROJECT), ISSUED BY
          THE CHESTER COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
          ----------------------------------------------------------

          The undersigned, a duly authorized officer of [Name of Trustee],
                                                         ---------------
TRUSTEE (the "Trustee") under the Trust Indenture dated as of August 1, 2000
between the Issuer and the Trustee (the "Indenture") under which the Bonds have
been issued, hereby certifies, with reference to Irrevocable Letter of Credit
No. S231762NWP (the "Letter of Credit") issued by PNC Bank, National Association
(the "Bank") in favor of the Trustee (the capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Letter of
Credit), that:

          1.   The Trustee is the Trustee under the Indenture for the holders of
the Bonds.

          2.   This Certificate accompanies a draft in the amount of $_________
by which the Trustee is making a drawing under the Letter of Credit in respect
of the payment of accrued interest on Bonds, which payment is due on or before
_____________________ (the "Value Date"). None of such Bonds is a Borrower Bond
or a Pledged Bond as defined in the Indenture.

          3.   The Trustee has not received a notice from the Bank that
reinstatement of the Letter of Credit in respect of any Interest Draft shall not
occur.

          4.   The amount of the draft accompanying this Certificate (i) is
being drawn against the Interest Component of the Letter of Credit Amount and
does not exceed the Letter of Credit Amount, as reduced and reinstated in
accordance with the terms of the Letter of Credit, or the Interest Component, as
reduced and reinstated in accordance with the terms of the Letter of Credit,
(ii) was computed in accordance with the terms and conditions of the Bonds and
the Indenture, (iii) does not include any amount in respect of interest on Bonds
which was included in any Interest Draft, Tender Draft or Redemption Draft
presented and not dishonored on or prior to the date of this Certificate, and
(iv) shall be applied pursuant to the provisions of the Bonds

                               Page 1 of Annex 1

                                      A-6
<PAGE>

and the Indenture to the payment of accrued interest on Bonds which are not
Borrower Bonds or Pledged Bonds.

         5. If this Certificate and the accompanying draft are initially
presented by telex or telecopier, the originals of such draft and this
Certificate on the Trustee's letterhead manually signed by one of its officers
are being mailed to you concurrently by first class United States mail.

         IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate as of the ____ day of _____________.

                                               [TRUSTEE NAME],
                                                 TRUSTEE

                                               By __________________________

                                               Name ________________________

                                               Title _______________________

                               Page 2 of Annex 1

                                      A-7
<PAGE>

ANNEX 2 to PNC Bank, National Association
Irrevocable Letter of Credit No. S231762NWP
-------------------------------------------

To:      PNC Bank, National Association
         237 Fifth Avenue
         Third Floor, Annex Building
         Pittsburgh, PA 15222,
         Attention: Letter of Credit Department

                  CERTIFICATE FOR TENDER DRAWING IN RESPECT OF
                  PRINCIPAL AND ACCRUED INTEREST ON INDUSTRIAL
                  DEVELOPMENT REVENUE BONDS, 2000 SERIES A (INNOVATIVE
                  SOLUTIONS AND SUPPORT, LLC PROJECT), ISSUED BY THE
                  CHESTER COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
                  ----------------------------------------------------

                  The undersigned, a duly authorized officer of [Name of
                                                                 -------
Trustee], TRUSTEE (the "Trustee") under the Trust Indenture dated as of August
-------
1, 2000 between the Issuer and the Trustee (the "Indenture") under which the
Bonds have been issued, hereby certifies, with reference to Irrevocable Letter
of Credit No. S231762NWP (the "Letter of Credit") issued by PNC Bank, National
Association (the "Bank") in favor of the Trustee (the capitalized terms used
herein and not defined herein shall have the meanings ascribed to them in the
Letter of Credit), that:

                  1. The Trustee is the Trustee under the Indenture for the
holders of the Bonds.

                  2. This Certificate accompanies a draft in the amount of
$___________ by which the Trustee is making a drawing under the Letter of Credit
in respect of the payment of the purchase price of Bonds, corresponding to the
principal thereof and accrued interest thereon, tendered for purchase pursuant
to the provisions of the Indenture and, in the case of Bonds tendered pursuant
to Section 4.01 of the Indenture, not successfully remarketed by the Remarketing
Agent (as defined in the Indenture) with the purchase price therefor received
prior to 10:00 a.m. on the date of this Certificate. Such Bonds are herein
called "Tendered Bonds". The purchase price payment for the Tendered Bonds is
due on or before _________________________ (the "Value Date"). None of the
Tendered Bonds is presently a Borrower Bond or a Pledged Bond as defined in the
Indenture.

                  3. The amount of the draft accompanying this Certificate is
equal to the sum of (i) $___________ being drawn against the Principal Component
of the Letter of Credit Amount in respect of the payment of the portion of the
purchase price of the Tendered Bonds corresponding to the principal thereof and
(ii) $___________ being drawn against the Interest

                               Page 1 of Annex 2

                                      A-8
<PAGE>

Component of the Letter of Credit Amount in respect of the portion of the
purchase price of the Tendered Bonds corresponding to accrued interest thereon.

                  4. The amount of the draft accompanying this Certificate does
not exceed the Letter of Credit Amount, as reduced and reinstated in accordance
with the terms of the Letter of Credit. Neither of the components of the amount
of the draft set forth in paragraph 3 of this Certificate exceeds the
corresponding component of the Letter of Credit Amount as reduced and reinstated
in accordance with the terms of the Letter of Credit. The amount of the draft
accompanying this Certificate (i) was computed in accordance with the terms and
conditions of the Bonds and the Indenture, (ii) does not include any amount in
respect of principal of or interest on the Bonds which was included in any
Interest Draft, Tender Draft or Redemption Draft presented and not dishonored on
or prior to the date of this Certificate and (iii) shall be applied pursuant to
the provisions of the Bonds and the Indenture, to the payment of purchase price
of the Tendered Bonds.

                  5. If this Certificate and the accompanying sight draft are
initially presented by telex or telecopier, the originals of such draft and this
Certificate on the Trustee's letterhead manually signed by one of its officers
are being mailed to you concurrently by first class United States mail.

                  IN WITNESS WHEREOF, the Trustee has executed and delivered
this certificate this ____ day of __________.

                                              [TRUSTEE NAME],
                                                TRUSTEE

                                              By ___________________________

                                              Name _________________________

                                              Title ________________________

                               Page 2 of Annex 2

                                      A-9
<PAGE>

ANNEX 3 to PNC Bank, National Association
Irrevocable Letter of Credit No. S231762NWP
-------------------------------------------

To:  PNC Bank, National Association
     237 Fifth Avenue
     Third Floor, Annex Building
     Pittsburgh, PA 15222
     Attention: Letter of Credit Department

             CERTIFICATE FOR REDEMPTION OR FINAL PAYMENT DRAWING IN
             RESPECT OF PRINCIPAL AND ACCRUED INTEREST ON INDUSTRIAL
             DEVELOPMENT REVENUE BONDS, 2000 SERIES A (INNOVATIVE
             SOLUTIONS AND SUPPORT, LLC PROJECT), ISSUED BY THE
             CHESTER COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY
             ------------------------------------------------------

             The undersigned, a duly authorized officer of [Name of Trustee],
                                                            ---------------
TRUSTEE (the "Trustee") under the Trust Indenture dated as of August 1, 2000
between the Issuer and the Trustee (the "Indenture") under which the Bonds have
been issued, hereby certifies, with reference to Irrevocable Letter of Credit
No. S231762NWP (the "Letter of Credit") issued by PNC Bank, National Association
(the "Bank") in favor of the Trustee (the capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Letter of
Credit), that:

             1.   The Trustee is the Trustee under the Indenture for the holders
of the Bonds.

             2.   This Certificate accompanies a draft in the amount of
$___________ by which the Trustee is making a drawing under the Letter of Credit
in respect of the payment of principal of and accrued interest on Bonds (other
than Borrower Bonds or Pledged Bonds as defined in the Indenture) upon the
applicable event indicated in paragraph 3 of this Certificate, which payment is
due on or before _______________________ (the "Value Date").

             3.   The Trustee is presenting this Certificate and the
accompanying draft in connection with (check and complete one):

             [ ]  A mandatory redemption of the Bonds in whole pursuant to
                  Sections 3.01(e) or 3.01(f) of the Indenture.

                               Page 1 of Annex 3

                                     A-10
<PAGE>

             [ ]  An optional redemption of the Bonds in the principal amount of
                  $_____________ pursuant to Section 3.01(b) or 3.01(c) of the
                  Indenture. After such redemption, $____________ principal
                  amount of the Bonds will remain Outstanding and will not
                  presently be Borrower Bonds or Pledged Bonds.

             [ ]  The payment of the Bonds upon acceleration of the maturity
                  thereof pursuant to Section 7.03 of the Indenture

             [ ]  The payment of the Bonds at final maturity thereof pursuant to
                  Section 5.04 of the Indenture.

             4.   The amount of the draft accompanying this Certificate is equal
to the sum of (i) $__________ being drawn against the Principal Component of the
Letter of Credit Amount in respect of the principal of Bonds (other than Bonds
which are presently Borrower Bonds or Pledged Bonds) and (ii) $___________ being
drawn against the Interest Component of the Letter of Credit Amount in respect
of interest accrued on such Bonds.

             5.   The amount of the draft accompanying this Certificate does not
exceed the Letter of Credit Amount, as reduced and reinstated in accordance with
the terms of the Letter of Credit. Neither of the components of the amount of
the draft set forth in paragraph 4 of this Certificate exceeds the corresponding
component of the Letter of Credit Amount, as reduced and reinstated in
accordance with the terms of the Letter of Credit. The amount of the draft
accompanying this Certificate (i) was computed in accordance with the terms and
conditions of the Bonds and the Indenture, (ii) does not include any amount in
respect of principal of or interest on the Bonds which was included in any
Interest Draft, Tender Draft or Redemption Draft presented and not dishonored on
or prior to the date of this Certificate, and (iii) shall be applied pursuant to
the provisions of the Bonds and the Indenture to the payment of the principal of
and accrued interest on Bonds which are not Borrower Bonds or Pledged Bonds.

             6.   If this Certificate and the accompanying draft are initially
presented by telex or telecopier, the originals of such draft and this
Certificate on the Trustee's letterhead manually signed by one of its officers
are being mailed to you concurrently by first class United States mail.

                               Page 2 of Annex 3

                                     A-11
<PAGE>

          IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this ____ day of _____________.

                                                [TRUSTEE NAME],
                                                 TRUSTEE

                                                By _________________________

                                                Name _______________________

                                                Title ______________________

                               Page 3 of Annex 3

                                     A-12
<PAGE>

ANNEX 4 to PNC Bank, National Association
Irrevocable Letter of Credit No. S231762NWP
-------------------------------------------

To:  PNC Bank, National Association
     237 Fifth Avenue
     Third Floor, Annex Building
     Pittsburgh, PA 15222
     Attention: Letter of Credit Department

            CERTIFICATE FOR REDUCING PNC BANK, NATIONAL ASSOCIATION
            (THE "BANK") IRREVOCABLE LETTER OF CREDIT NO. S231762NWP
            (THE "LETTER OF CREDIT") SUPPORTING INDUSTRIAL DEVELOPMENT
            REVENUE BONDS, 2000 SERIES A (INNOVATIVE SOLUTIONS AND
            SUPPORT, LLC PROJECT), ISSUED BY THE CHESTER COUNTY
            INDUSTRIAL DEVELOPMENT AUTHORITY
            -----------------------------------------------------------

            The undersigned, a duly authorized officer of [Name of Trustee],
                                                           ---------------
TRUSTEE (the "Trustee") under the Trust Indenture dated as of August 1, 2000
between the Issuer and the Trustee (the "Indenture") under which the Bonds have
been issued, hereby certifies that (the capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Letter of
Credit):

            1. The Trustee is the Trustee under the Indenture for the holders of
the Bonds.

            2. Pursuant to the provisions of the Bonds and the Indenture
$___________ principal amount of the Bonds have been redeemed or are deemed to
have been paid pursuant to

                               Page 1 of Annex 4

                                     A-13
<PAGE>

Article X of the Indenture, and the remaining aggregate principal amount of the
Bonds Outstanding is $___________.

            3. Pursuant to the terms of the Letter of Credit, the Bank is hereby
directed to reduce the Letter of Credit Amount and the Principal and Interest
Components thereof, effective on the Business Day on which you receive this
Certificate, so that after such reduction the Letter of Credit Amount shall be
$__________, of which $__________ shall be the Principal Component and
$__________ shall be the Interest Component (calculated on the basis of 50 days
interest on the Outstanding Bonds and a 365-day year, at an assumed maximum
interest rate of 12% per annum).

            4. If this Certificate is initially presented by telex or
telecopier, the originals of this Certificate on the Trustee's letterhead
manually signed by one of its officers are being mailed to you concurrently by
first class United States mail.

            IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this _____ day of ------------.

                                              [TRUSTEE NAME],
                                                TRUSTEE

                                              By _________________________

                                              Name _______________________

                                              Title ______________________

                               Page 2 of Annex 4

                                     A-14
<PAGE>

ANNEX 5 to PNC Bank, National Association
Irrevocable Letter of Credit No. S231762NWP
-------------------------------------------

To:  PNC Bank, National Association
     237 Fifth Avenue
     Third Floor, Annex Building
     Pittsburgh, PA 15222
     Attention: Letter of Credit Department

           CERTIFICATE FOR REINSTATING PNC BANK, NATIONAL ASSOCIATION
           (THE "BANK") IRREVOCABLE LETTER OF CREDIT NO. S231762NWP
           (THE "LETTER OF CREDIT") SUPPORTING INDUSTRIAL DEVELOPMENT
           REVENUE BONDS, 2000 SERIES A (INNOVATIVE SOLUTIONS AND
           SUPPORT, LLC PROJECT), ISSUED BY THE CHESTER COUNTY
           INDUSTRIAL DEVELOPMENT AUTHORITY
           -----------------------------------------------------------

           The undersigned, a duly authorized officer of [Name of Trustee],
                                                          ---------------
TRUSTEE (the "Trustee") under the Trust Indenture dated as of August 1, 2000
between the Issuer and the Trustee (the "Indenture") under which the Bonds have
been issued, hereby certifies that (the capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Letter of
Credit):

           1. The Trustee is the Trustee under the Indenture for the holders of
the Bonds.

           2. On the date of this Certificate $_________ aggregate principal
amount of Bonds are being purchased upon a remarketing thereof by the
Remarketing Agent (as defined in the Indenture). All of such Bonds were
heretofore purchased (or anticipated to be purchased) with the proceeds of one
or more Tender Drafts in the total drawing amount of $__________, of which
proceeds $__________ was drawn in respect of principal of such Bonds and
$__________ was drawn in respect of accrued interest on such Bonds. Prior to the
date of this Certificate there has been no reinstatement of the Letter of Credit
Amount with respect to amounts drawn by such Tender Drafts to purchase such
Bonds.

           3. The Trustee has received for immediate payment (or repayment) to
the Bank in respect of the Bonds described in paragraph 2 of this Certificate
the total amount of $__________, consisting of $__________ from the Remarketing
Agent, $__________ from the Borrower and $__________ from the Bank. Such total
amount is being paid to the Bank at the above address with reference to Letter
of Credit No. S231762NWP, pursuant to Section 4.05 of the Indenture, as
reimbursement for amounts drawn under the Letter of Credit by the Tender Drafts
described in paragraph 2 of this Certificate; provided that, unless such
reimbursement is

                               Page 1 of Annex 5

                                     A-15
<PAGE>

being made on the same day that payment of such Tender Drafts was received by
the Trustee from the Bank, the Trustee will release the Bonds described in
paragraph 2 of this Certificate for remarketing and will make such payment to
the Bank only upon receipt by the Trustee of telephonic confirmation from the
Bank of the reinstatement described in paragraph 6 below. Such confirmation
shall be made to the Trustee at (___) __________, Attention:
_____________________ (which confirmation shall thereafter be sent in writing to
the Trustee at its address on file with you).

         4. Of the total amount referred to in paragraph 3 of this Certificate,
$__________ represents the aggregate principal amount of Bonds described in
paragraph 2 of this Certificate and $__________ represents accrued interest on
such Bonds.

         5. Payment of the total amount referred to in paragraph 3 of this
Certificate, together with other amounts heretofore paid to the Bank by or on
behalf of the Borrower, represents reimbursement for the entire outstanding
balance of all amounts drawn in respect of the Bonds described in paragraph 2 of
this Certificate. The foregoing certification is made in reliance upon
representations by the Borrower and/or the Bank to the Trustee that, upon
payment of such amounts, the Bank will be fully reimbursed for all Tender Drafts
(or allocable portions thereof) presented to the Bank to purchase such Bonds. No
Certification is made by the Trustee as to the payment of interest accrued
pursuant to the Reimbursement, Credit and Security Agreement described in the
Letter of Credit on the amounts drawn by such Tender Drafts.

         6. Pursuant to paragraph 7 of the Letter of Credit, the Letter of
Credit Amount shall be automatically reinstated by an amount equal to
$__________ (which does not exceed the aggregate amount of the Tender Drafts, or
allocable portions thereof, paid by the Bank to purchase such Bonds), of which
$__________ (which does not exceed the aggregate amount of such Tender Drafts,
or allocable portions thereof, drawn against the Principal Component) shall be
applied to the Principal Component and $__________ (which does not exceed the
aggregate amount of such Tender Drafts, or allocable portions thereof, drawn
against the Interest Component) shall be applied to the Interest Component.

         7. If this Certificate is initially presented by telex or telecopier,
the original of this Certificate on the Trustee's letterhead manually signed by
one of its officers is being mailed to you concurrently by first class United
States mail.

                               Page 2 of Annex 5

                                     A-16
<PAGE>

          IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this __________day of ___________.

                                                  [TRUSTEE NAME],
                                                   TRUSTEE

                                                  By______________________

                                                  Name____________________

                                                  Title___________________

                               Page 3 of Annex 5

                                     A-17
<PAGE>

ANNEX 6 to PNC Bank, National Association
Irrevocable Letter of Credit No. S231762NWP
-------------------------------------------

To:      PNC Bank, National Association
         237 Fifth Avenue
         Third Floor, Annex Building
         Pittsburgh, PA 15222
         Attention: Letter of Credit Department

               CERTIFICATE FOR TERMINATING PNC BANK,
               NATIONAL ASSOCIATION (THE "BANK") IRREVOCABLE
               LETTER OF CREDIT NO. S231762NWP (THE "LETTER
               OF CREDIT") SUPPORTING INDUSTRIAL DEVELOPMENT
               REVENUE BONDS, 2000 SERIES A (INNOVATIVE
               SOLUTIONS AND SUPPORT, LLC PROJECT), ISSUED
               BY THE CHESTER COUNTY INDUSTRIAL DEVELOPMENT
               AUTHORITY
               --------------------------------------------

               The undersigned, a duly authorized officer of [Name of Trustee],
                                                              ---------------
TRUSTEE (the "Trustee") under the Trust Indenture dated as of August 1, 2000
between the Issuer and the Trustee (the "Indenture") under which the Bonds have
been issued, hereby certifies that (the capitalized terms used herein and not
defined herein shall have the meanings ascribed to them in the Letter of
Credit):

               1.   The Trustee is the Trustee under the Indenture for the
holders of the Bonds.

               2.   Pursuant to the Indenture and the Letter of Credit, the
Letter of Credit shall be terminated on the date the Bank receives this
Certificate, and the Trustee is herewith surrendering the Letter of Credit for
cancellation, because no Bonds remain Outstanding other than Bonds bearing
interest at a Term Rate or secured by an Alternate Letter of Credit.

                               Page 1 of Annex 6

                                     A-18
<PAGE>

          IN WITNESS WHEREOF, the Trustee has executed and delivered this
Certificate this _____ day of _____________.

                                               [TRUSTEE NAME],
                                                TRUSTEE

                                               By _________________________

                                               Name _______________________

                                               Title ______________________

                               Page 2 of Annex 6

                                     A-19
<PAGE>

ANNEX 7 to PNC Bank, National Association
Irrevocable Letter of Credit No. S231762NWP
-------------------------------------------

                                             --------------,

To:      PNC Bank, National Association
         237 Fifth Avenue
         Third Floor, Annex Building
         Pittsburgh, PA 15222
         Attention: Letter of Credit Department

                  Re:      PNC Bank, National Association
                           Irrevocable Letter of Credit
                           No. S231762NWP
                           ------------------------------

Gentlemen:

                  For value received, the undersigned beneficiary hereby
irrevocably transfers to:

                  (Name of Transferee)

                  (Address)

all rights of the undersigned beneficiary to draw under the above Letter of
Credit in its entirety. Said transferee has succeeded to the undersigned as
Trustee under the Trust Indenture dated as of August 1, 2000 between the Chester
County Industrial Development Authority and Chase Manhattan Trust Company,
National Association, as Trustee.

                  By this transfer, all rights of the undersigned beneficiary in
such Letter of Credit are transferred to the transferee and the transferee shall
have the sole rights as beneficiary thereof, including sole rights relating to
any amendments whether increases or extensions or other amendments and whether
now existing or hereafter made. All amendments are to be advised direct to the
transferee without necessity of any consent of or notice to the undersigned
beneficiary.

                               Page 1 of Annex 7

                                     A-20
<PAGE>

          The original of such Letter of Credit is returned herewith, and in
accordance therewith we ask you to transfer the Letter of Credit to the
transferee in the Letter of Credit Amount (as defined in the Letter of Credit)
with provision for reinstating or increasing the Letter of Credit Amount with
respect to all drawings by Interest Drafts and Tender Drafts (as defined in the
Letter of Credit) with respect to which the Letter of Credit Amount may be
reinstated, and forward it directly to the transferee with your customary notice
of transfer.

                                            Very truly yours,

SIGNATURE AUTHENTICATED                     CHASE MANHATTAN TRUST COMPANY,
                                            NATIONAL ASSOCIATION, TRUSTEE

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

____________________________                By _________________________________
         (Authorized Signature)

                                            Title ______________________________

                               Page 2 of Annex 7

                                     A-21
<PAGE>

                                                                     EXHIBIT B
                                                                     ---------

                        PROJECT FACILITIES DESCRIPTION

         The Project Facilities consist of the construction and equipping of an
approximately 44,800 square foot building, to be owned and operated by the
Borrower as a facility for the manufacturing of avionics instrumentation.

                                      B-1
<PAGE>

                                                                      EXHIBIT C
                                                                      ---------

                             ENVIRONMENTAL MATTERS

                                     None

                                      C-1
<PAGE>

                                                                      EXHIBIT D
                                                                      ---------

                            OUTSTANDING OBLIGATIONS

                                     None

                                      D-1
<PAGE>

                                                                      EXHIBIT E
                                                                      ---------

                        OUTSTANDING MATERIAL CONTRACTS

          Agreement of Lease between Rouse & Associates - 420 Lapp Road Limited
Partnership and Innovative Solutions & Support for 420 Lapp Road, Malvern,
Pennsylvania 19355, signed September 24, 1997, as amended.

                                      E-1
<PAGE>

                                                                      EXHIBIT F
                                                                      ---------

                                PERMITTED LIENS

1.   Unrecorded easements, discrepancies or conflicts in boundary lines,
     shortages in area and encroachments which an accurate and complete survey
     would disclose.

2.   Rights granted to Keystone Pipeline in Misc. Deed Book 56 page 280, 56 page
     281, 57 page 317, and 68 page 247.

3.   Rights granted to BF Warren in Misc. Deed Book 19 page 313.

4.   Water Rights as in Misc. Deed Book 3 page 70.

5.   Rights granted to Philadelphia Electric Company and Bell Telephone Company
     in Misc. Deed Book 69 page 516.

6.   Rights granted to Bell Atlantic-Pennsylvania, Inc. in Record Book 4639 page
     424.

7.   The Declaration of General Conditions for Covenants under Act 515 in
     Chester County in Misc. Deed Book 240 page 335, and Contract and Covenant
     pursuant thereto in Chester County in Misc. Deed Book 265 page 341, 264
     page 348 and Record Book 2674 page 164.

8.   Easement Agreement in Misc. Deed Book 655 page 536.

9.   Agreement to Release Easement in Misc. Deed Book 655 page 541.

10.  Rights granted to Philadelphia Electric Company in Misc. Deed Book 541 page
     108, and 92 page 211 and Record Book 1158 page 230.

11.  Rights granted to Uwchlan Township Municipal Authority in Record Book 1154
     page 168 and 1154 page 174.

12.  Declaration of Easements and Protective Covenants and Restrictions for
     Eagleview Corporate Center in Record Book 1070 page 185. Amendment thereto
     in Record Book 1678 page 217, Second Amendment thereto in Record Book 1851
     page 313, Third Amendment thereto in Record Book 1885 page 55.

13.  Amended and Restated Declaration of Easements and Protective Covenants and
     Restrictions for Eagleview Corporate Center in Record Book 2074 page 240,
     First Amendment thereto in Record Book 2074 page 240, Second Amendment
     thereto in Record Book 3590 page 1986, Third Amendment thereto in Record
     Book 3672 page 579,

                                      F-1
<PAGE>

     Fourth Amendment thereto in Record Book 4177 page 2306, Fifth Amendment
     thereto in Record Book 4206 page 1534, Sixth Amendment thereto in Record
     Book 4365 page 649, Seventh Amendment thereto in Record Book 4744 page 278.

14.  Rights of First Refusal as in Record Book 1397 page 66.

15.  Unsettled taxes due the Commonwealth of Pennsylvania by mortgagor
     corporation, not presently a lien, all of which taxes when assessed or
     settled, if not paid will constitute a prior lien against any fund created
     at a judicial sale.

                                      F-2
<PAGE>

                                                                      EXHIBIT H
                                                                      ---------

                         OPTIONAL REDEMPTION OF BONDS

         Redemption Date                 Principal Amount of Bonds
           (August 1)                         To be Redeemed
         ---------------                 -------------------------

         2001                                  $100,000
         2002                                   150,000
         2003                                   200,000
         2004                                   250,000
         2005                                   250,000
         2006                                   340,000
         2007                                   340,000
         2008                                   340,000
         2009                                   340,000
         2010                                   340,000
         2011                                   340,000
         2012                                   340,000
         2013                                   340,000
         2014                                   340,000
         2015                                   325,000
------------------------------

                                      H-1
<PAGE>

================================================================================

                 REIMBURSEMENT, CREDIT AND SECURITY AGREEMENT

                          Dated as of August 1, 2000

                                    Between

                     INNOVATIVE SOLUTIONS AND SUPPORT, LLC

                                      and

                        PNC BANK, NATIONAL ASSOCIATION

================================================================================

<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                         Page
<S>                                                                      <C>
Recitals................................................................   1

                                  ARTICLE I.
                                 DEFINITIONS 2
Section 1.01  Definitions ..............................................   2
Section 1.02  Rules of Construction; Time of Day .......................   8

                                  ARTICLE II.
                      LETTER OF CREDIT AND REIMBURSEMENT

Section 2.01  Issuance of Letter of Credit .............................   8
Section 2.02  Reimbursement and Other Payments .........................   9
Section 2.03  Transfer; Reduction; Reinstatement .......................  12
Section 2.04  Obligations Absolute .....................................  13
Section 2.05  Indemnification ..........................................  13
Section 2.06  Liability of Bank ........................................  14

                                 ARTICLE III.
                                   SECURITY

Section 3.01  Security and Subrogation under Indenture .................  15
Section 3.02  Pledge of Rights to Certain Funds and Investments.........  15
Section 3.03  Pledged Bonds ............................................  15
Section 3.04  Mortgage; Additional Security.............................  17
Section 3.05  Financing Statements .....................................  17
Section 3.06  Guaranty .................................................  17

                                  ARTICLE IV.
                             CONDITIONS PRECEDENT

Section 4.01  Documentation ............................................  17
Section 4.02  Issuance of Bonds ........................................  18

                                  ARTICLE V.
                        REPRESENTATIONS AND WARRANTIES

Section 5.01  Existence ................................................  19
Section 5.02  Power, Authorization and No Conflicts ....................  19
Section 5.03  Governmental Authorizations and Other Approvals ..........  19
Section 5.04  Validity and Binding Effect ..............................  19
Section 5.05  No Litigation ............................................  20
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                      <C>
Section 5.06  No Violations ............................................  20
Section 5.07  Compliance ...............................................  20
Section 5.08  Title to Properties; Liens and Encumbrances ..............  20
Section 5.09  Utilities and Access .....................................  21
Section 5.10  Financial Information ....................................  21
Section 5.11  ERISA ....................................................  21
Section 5.12  Environmental Representations ............................  21
Section 5.13  Outstanding Obligations ..................................  22
Section 5.14  Other Material Contracts .................................  22
Section 5.15  Solvency .................................................  22
Section 5.16  Disclosure ...............................................  22
Section 5.17  Representations in Other Documents .......................  22

                                  ARTICLE VI.
                               GENERAL COVENANTS

Section 6.01  Maintenance of Existence .................................  23
Section 6.02  Disposition of Assets ....................................  23
Section 6.03  Compliance with Laws .....................................  23
Section 6.04  Maintenance of Governmental Authorizations ...............  23
Section 6.05  Maintenance of Insurance .................................  23
Section 6.06  Compliance with Bond Documents and Other Contracts .......  24
Section 6.07  Maintenance of Properties ................................  24
Section 6.08  Visitation Rights ........................................  24
Section 6.09  Keeping of Books .........................................  24
Section 6.10  Reporting Requirements ...................................  24
Section 6.11  Consents Under Bond Documents ............................  26
Section 6.12  Amendments to Bond Documents .............................  26
Section 6.13  Limitation on Optional Calls and Conversions .............  26
Section 6.14  Liens; Negative Pledge ...................................  26
Section 6.15  Payment of Debt ..........................................  27
Section 6.16  Environmental Covenants ..................................  27
Section 6.17  ERISA ....................................................  29
Section 6.18  Tax Returns ..............................................  29
Section 6.19  Leases ...................................................  29
Section 6.20  Optional Redemptions of Bonds ............................  29
Section 6.21  Financial Covenants ......................................  30
Section 6.22  Further Assurances .......................................  30

                          ARTICLE VII.
                       CONSTRUCTION COVENANTS

Section 7.01  Application of Project Fund...............................  31
Section 7.02  Requisitions Approval.....................................  33
Section 7.03  Construction; Completion Date.............................  34
Section 7.04  Certain Contracts Prohibited..............................  35
</TABLE>

                                     F-ii
<PAGE>

<TABLE>
<S>                                                                      <C>
Section 7.05  Certain Notices...........................................  35
Section 7.06  Releases..................................................  35
Section 7.07  Change Orders.............................................  35
Section 7.08  Subcontracts..............................................  35

                                 ARTICLE VIII.
                             DEFAULTS AND REMEDIES

Section 8.01  Defaults..................................................  36
Section 8.02  Remedies..................................................  39
Section 8.03  Waivers; Consents.........................................  39
Section 8.04  No Waiver; Remedies Cumulative............................  39
Section 8.05  Set-Off...................................................  40

                                  ARTICLE IX.
                                 MISCELLANEOUS

Section 9.01  Notices...................................................  40
Section 9.02  Successors and Assigns....................................  41
Section 9.03  Survival of Covenants.....................................  41
Section 9.04  Counterparts..............................................  41
Section 9.05  Costs, Expenses and Taxes.................................  41
Section 9.06  Amendments................................................  42
Section 9.07  Severability; Interest Limitation.........................  42
Section 9.08  Conflicts.................................................  42
Section 9.09  Complete Agreement........................................  43
Section 9.10  Consent to Jurisdiction; Venue; Waiver of Jury Trial......  43
Section 9.11  Governing Law.............................................  43
Section 9.12  Headings..................................................  43

EXECUTION...............................................................  44
</TABLE>

                                     F-iii
<PAGE>

<TABLE>
<S>                                                                       <C>
EXHIBIT A - Form of Letter of Credit....................................  A-1

EXHIBIT B - Project Facilities Description..............................  B-1

EXHIBIT C - Environmental Matters.......................................  C-1

EXHIBIT D - Outstanding Obligations.....................................  D-1

EXHIBIT E - Outstanding Material Contracts..............................  E-1

EXHIBIT F - Permitted Liens ............................................  F-1

EXHIBIT G - [Intentionally Omitted].....................................  G-1

EXHIBIT H - Optional Redemption of Bonds ...............................  H-1
</TABLE>

                                     F-iv<PAGE>

                                                                   EXHIBIT 10.10

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

                                LOAN AGREEMENT

                          Dated as of August 1, 2000

                                    Between

                CHESTER COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY

                                      And

                     INNOVATIVE SOLUTIONS AND SUPPORT, LLC

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

             Bond Counsel                 Authority Counsel
             ------------                 -----------------

             Stevens & Lee                Conrad O'Brien Gellman & Rohn, P.C.
             111 North Sixth Street       17 West Gay Street Suite 100
             Reading, PA  19601           West Chester, PA  19380-3090

                 ---------------------------------------------
                 ---------------------------------------------
<PAGE>

                               Table of Contents
                               -----------------

<TABLE>
<CAPTION>
                                                                                                            Page
                                                                                                            ----
<S>                                                                                                         <C>
                                                      ARTICLE I

                                                     DEFINITIONS

   Section 1.1  Use of Terms Defined in Indenture.......................................................      1

   Section 1.2  Definitions.............................................................................      2

   Section 1.3  Interpretation..........................................................................      5

   Section 1.4  Captions, Headings and Table of Contents................................................      5

                                                      ARTICLE II

                                                   REPRESENTATIONS

   Section 2.1  Representations and Findings of Issuer..................................................      6

   Section 2.2  Representations of Borrower.............................................................      7

                                                     ARTICLE III

                               ACQUISITION OF PROJECT; ISSUANCE OF BONDS; PROJECT FUND

   Section 3.1  Acquisition of Project..................................................................      9

   Section 3.2  Additions and Changes to Project........................................................      9

   Section 3.3  Issuance of Bonds; Application of Proceeds..............................................      9

   Section 3.4  Disbursements from Project Fund.........................................................     10

   Section 3.5  Borrower Required to Pay Costs in Event Project Fund Insufficient.......................     10

   Section 3.6  Completion..............................................................................     11

   Section 3.7  Investment and Use of Fund Moneys.......................................................     12

   Section 3.8  Rebate Fund.............................................................................     12
</TABLE>

                                       i
<PAGE>

                               Table of Contents
                               -----------------

                                  (continued)

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
                                                         ARTICLE IV

                                         LOAN BY ISSUER; LOAN PAYMENTS; OTHER PAYMENTS

   Section 4.1   Loan by Issuer................................................................................  13

   Section 4.2   Loan Payments.................................................................................  13

   Section 4.3   Purchase Payments.............................................................................  13

   Section 4.4   Additional Payments...........................................................................  13

   Section 4.5   Obligations Unconditional.....................................................................  14

   Section 4.6   Assignment of Issuer's Rights.................................................................  14

   Section 4.7   Letter of Credit..............................................................................  14

                                                         ARTICLE V

                                              ADDITIONAL COVENANTS OF BORROWER

   Section 5.1   Maintenance of Existence......................................................................  16

   Section 5.2   Compliance with Laws; Commencement and Continuation of Operations
   at Project; No Sale, Removal or Demolition of Project.......................................................  16

   Section 5.3   Right of Inspection...........................................................................  16

   Section 5.4   Lease by Borrower.............................................................................  16

   Section 5.5   Financial Statements; Books and Records.......................................................  17

   Section 5.6   Taxes, Other Governmental Charges and Utility Charges.........................................  17

   Section 5.7   Insurance.....................................................................................  17

   Section 5.8   Damage to or Condemnation of Project..........................................................  18

   Section 5.9   Litigation Notice.............................................................................  18

   Section 5.10  Indemnification...............................................................................  18
</TABLE>

                                      ii
<PAGE>

                               Table of Contents
                               -----------------

                                  (continued)

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
   Section 5.11  Tax Covenants of Borrower and Issuer..........................................................  19

   Section 5.12  Further Tax Covenants of Borrower.............................................................  20

   Section 5.13  No Control of Bank............................................................................  23

   Section 5.14  Annual Certificate............................................................................  23

   Section 5.15  Nondiscrimination.............................................................................  24

                                                         ARTICLE VI

                                                     REDEMPTION OF BONDS

   Section 6.1   Optional Redemption...........................................................................  25

   Section 6.2   Extraordinary Optional Redemption.............................................................  25

   Section 6.3   Mandatory Redemption..........................................................................  26

   Section 6.4   Actions by Issuer.............................................................................  26

                                                         ARTICLE VII

                                               EVENTS OF DEFAULT AND REMEDIES

   Section 7.1   Events of Default.............................................................................  27

   Section 7.2   Remedies on Default...........................................................................  28

   Section 7.3   Remedies Not Exclusive........................................................................  29

   Section 7.4   Payment of Legal Fees and Expenses............................................................  29

   Section 7.5   No Waiver.....................................................................................  29

   Section 7.6   Notice of Default.............................................................................  30

                                                        ARTICLE VIII

                                                       MISCELLANEOUS

   Section 8.1   Term of Agreement.............................................................................  31
</TABLE>

                                      iii
<PAGE>

                               Table of Contents
                               -----------------

                                  (continued)

<TABLE>
<CAPTION>
                                                                                                                Page
                                                                                                                ----
<S>                                                                                                             <C>
   Section 8.2   Notices.......................................................................................  31

   Section 8.3   Limitation of Liability; No Personal Liability................................................  32

   Section 8.4   Binding Effect................................................................................  32

   Section 8.5   Amendments....................................................................................  32

   Section 8.6   Counterparts..................................................................................  33

   Section 8.7   Severability..................................................................................  33

   Section 8.8   Governing Law.................................................................................  33

   Section 8.9   Assignment....................................................................................  33

   Section 8.10  Receipt of Indenture..........................................................................  33
</TABLE>

Exhibit A - Project Site Description

Exhibit B - Project Description

Exhibit C - Form of Disbursement Request

Exhibit D - Nondiscrimination Clause

                                      iv
<PAGE>

                                LOAN AGREEMENT

          THIS LOAN AGREEMENT dated as of August 1, 2000 between CHESTER COUNTY
INDUSTRIAL DEVELOPMENT AUTHORITY (the "Issuer"), a public instrumentality and
body corporate and politic of the Commonwealth of Pennsylvania, and INNOVATIVE
SOLUTIONS AND SUPPORT, LLC (the "Borrower"), a limited liability company duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania (the capitalized terms not defined in the recitals being used
therein as defined or otherwise described in Article I of this Agreement),

                               WITNESSETH THAT:

          A.   The Issuer is a public instrumentality and a body corporate and
politic of the Commonwealth of Pennsylvania organized and existing under the
Act. Under the Act, and in furtherance of the public purposes thereof, the
Issuer is authorized to enter into agreements providing for the financing of the
Project described below.

          B.   The Issuer has undertaken the financing of certain costs of a
Project to be located on certain real property more fully described in Exhibit A
attached hereto (the "Project Site"). The Project Site and such facilities are
herein collectively called the "Project". The Project will be owned and operated
by the Borrower. A more complete description of the Project and the estimated
costs thereof are set forth in Exhibit B attached hereto.

          C.   In order to finance the Project, the Issuer has duly authorized
the issuance and sale of its Industrial Development Revenue Bonds, 2000 Series A
(Innovative Solutions and Support, LLC Project) (the "Bonds") to be issued under
the terms of a Trust Indenture dated as of the date hereof (as the same may
hereafter be amended or supplemented from time to time, the "Indenture") by and
between the Issuer and Chase Manhattan Trust Company, National Association, as
Trustee.

          D.   The Issuer and the Borrower intend that the interest on the Bonds
will not be included in the gross income of the recipients thereof under the
Code.

          E.   The Issuer has entered into this Agreement with the Borrower for
the purposes of providing for (i) the loan of the proceeds of the Bonds to the
Borrower in order to finance the Project and (ii) the repayment of such loan by
the Borrower in amounts sufficient to pay, when due, the principal of, premium,
if any, on and interest on the Bonds.

          NOW, THEREFORE, intending to be legally bound, the Issuer and the
Borrower hereby agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

          Section 1.1    Use of Terms Defined in Indenture. Terms used in this
                         ---------------------------------
Agreement which are defined in the Indenture and are not otherwise defined in
this Agreement shall have the meanings set forth in the Indenture unless the
context or use clearly indicates another meaning or intent.

                                       1
<PAGE>

          Section 1.2    Definitions. In addition to the terms defined in the
                         -----------
recital clauses of this Agreement, as used herein:

               "Additional Payments" means the amounts required to be paid by
     the Borrower pursuant to Section 4.4.

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

               "Authorized Representative" means, with respect to the Issuer,
     each person at the time designated to act on behalf of the Issuer by
     written certificate furnished to the Trustee containing the specimen
     signature of such person and signed on behalf of the Issuer by its
     Secretary or Assistant Secretary, and, with respect to the Borrower, each
     person at the time designated to act on behalf of the Borrower by written
     certificate furnished to the Trustee containing the specimen signature of
     such person and signed on behalf of the Borrower by its Secretary or
     Assistant Secretary.

               "Bond Purchase Agreement" means the Bond Purchase Agreement among
     the Issuer, the Borrower and PNC Capital Markets, Inc., as the underwriter,
     relating to the Bonds.

               "Bond Service" means, for any period or payable at any time, the
     principal of, premium, if any, on and interest on the Bonds for that period
     or payable at the time whether due on an Interest Payment Date, at maturity
     or upon acceleration or redemption.

               "Borrower's Agreements" means this Agreement, the Bond Purchase
     Agreement, the Remarketing Agreement and the Reimbursement Agreement.

               "Code" means the Internal Revenue Code of 1986, as amended from
     time to time. References to the Code and Sections of the Code include
     relevant applicable regulations, temporary regulations and proposed
     regulations thereunder and under the Internal Revenue Code of 1954, as
     amended, and any successor provisions to those Sections, regulations,
     temporary regulations or proposed regulations.

               "Completion Date" means the date of completion of the Project
     evidenced in accordance with the requirements of Section 3.6.

               "Construction Period" means the period between the beginning of
     the acquisition, construction, installation, equipment or improvement of
     the Project or the date on which the Bonds are issued, whichever is
     earlier, and the Completion Date.

               "Event of Default" means any of the events described as an Event
     of Default in Section 7.1.

               "Exempt Facility Bonds" means bonds issued to finance exempt
     facilities as defined in the Code or in the Internal Revenue Code of 1954.

               "Issuer's Fee" means the amount of $33,537.50.

                                       2
<PAGE>

               "Loan" means the loan by the Issuer to the Borrower of the
     proceeds of the Bonds pursuant to Section 4.1 in the original principal
     amount of $4,335,000.

               "Loan Payments" means the amounts required to be paid by the
     Borrower in repayment of the Loan pursuant to Section 4.2.

               "Principal User" shall mean, with respect to any facility, a
     "principal user" as such term is used in Section 144(a) of the Code,
     including, without limiting the generality of the foregoing, (i) any Person
     whose ownership interest in such facility exceeds 10% or, if no ownership
     interest in such facility exceeds 10%, any Person (or Persons, in the case
     of multiple equal owners) holding the largest ownership interest in such
     facility, (ii) any Person who leases more than 10% of such facility under a
     lease with a term (taking into account all options to renew and reasonably
     anticipated renewals) of more than one year, and (iii) any Person who
     enjoys the use of such facility in a degree comparable to the enjoyment of
     a Person described in clauses (i) and (ii); for purposes of determining the
     extent of a Person's ownership interest, lease interest, lease term and
     degree of enjoyment of a facility, the term "Person" includes a Person and
     all Related Persons with respect to such Person.

               "Project Approval" means the initial official action of the
     Issuer declaring its intent with respect to the financing of the Project
     with the proceeds of the Issuer's bonds. The date of the Project Approval
     is November 17, 1999.

               "Project Costs" means costs of the Project permitted under the
     Act, including, but not limited to, the following:

                    (a)  Costs incurred in acquisition, construction,
          installation, equipment or improvement of the Project, including costs
          incurred in respect of the Project for preliminary planning and
          studies; architectural, engineering, accounting, consulting, legal and
          other professional fees and expenses; labor, services and materials;

                    (b)  Fees, charges and expenses incurred in connection with
          the authorization, sale, issuance and delivery of the Bonds, including
          without limitation bond discount, printing expense, title insurance,
          recording fees and the initial fees and expenses of the Trustee, the
          Issuer, the Remarketing Agent and the Bank; provided that the amount
          of the proceeds of the Bonds used to finance issuance costs (but
          excluding Bank letter of credit fees) shall not exceed 2% of the
          aggregate face amount of the Bonds within the meaning of Section
          147(g) of the Code;

                    (c)  Payment of interest on the Bonds and fees of the Bank,
          Trustee and Remarketing Agent accruing during the Construction Period;

                    (d)  Any other costs, expenses, fees and charges properly
          chargeable to the cost of acquisition, construction, installation,
          equipment or improvement of the Project; and

                    (e)  Payments made to the Rebate Fund.

                                       3
<PAGE>

               "Purchase Payments" means the amounts required to be paid by the
     Borrower pursuant to Section 4.3.

               "Rehabilitation Expenditure" shall mean a "rehabilitation
     expenditure" as such term is defined in Section 147(d)(3) of the Code,
     including, without limiting the generality of the foregoing, a capital
     expenditure incurred in connection with the rehabilitation of a building or
     structure which is part of the Project, if such expenditure is incurred by
     the Borrower, the seller of such building to the Borrower (if incurred
     pursuant the sales contract between such seller and the Borrower) or a
     successor to the Borrower; provided, that:

                    (1)  if an integrated operation is contained in such
          building or structure before its acquisition by the Borrower,
          expenditures incurred to rehabilitate existing equipment or to replace
          existing equipment with equipment having substantially the same
          function is treated as incurred in connection with the rehabilitation
          of such building or structure; and

                    (2)  notwithstanding the foregoing, the term "Rehabilitation
          Expenditure" does not include any expenditure:

                         (a)  with respect to which the method and period of
               depreciation is other than the straight line method over a period
               determined under Section 168(c) or (g) of the Code, unless the
               alternative depreciation system of Section 168(g) of the Code
               applies to such expenditure by reason of Section 168(g)(1)(B) or
               (C) of the Code;

                         (b)  for the cost of acquiring any building or interest
               therein;

                         (c)  attributable to enlargement of an existing
               building;

                         (d)  attributable to the rehabilitation of a certified
               historic structure or a building in a registered historic
               district, unless either the rehabilitation is a certified
               rehabilitation or, with respect to a building other than a
               certified historic structure, the Secretary of the Interior has
               certified to the Secretary of the Treasury that the building is
               not of historic significance to the district (all terms used in
               this paragraph (d) have the meanings assigned in Section
               47(c)(2)(B) of the Code);

                         (e)  allocable to the portion of such building which
               is, or may reasonably be expected to be, tax-exempt use property
               within the meaning of Section 168(h) of the Code; or

                         (f)  by a lessee of such building.

               "Reimbursement Agreement" means the Reimbursement, Credit and
     Security Agreement between the Bank and the Borrower relating to the Letter
     of Credit and the Bonds, as amended, supplemented or replaced from time to
     time.

                                       4
<PAGE>

               "Related Person" shall have the meaning set forth in Section
          144(a)(3) of the Code and shall include (to the extent there provided)
          any parent, subsidiary, affiliated corporation or unincorporated
          enterprise, majority shareholder and commonly owned entity.

               "Remarketing Agreement" means the Remarketing Agreement between
          the Borrower and the Remarketing Agent relating to the Bonds, as
          amended, supplemented or replaced from time to time.

               "Remedial Action Date" means the earliest of the following dates:
          (i) the Completion Date; (ii) the date on which the Borrower
          determines that the Project will not be completed; or (iii) the date
          on which the entire Project is placed in service, within the meaning
          of the Code.

               "Resolutions" means the resolution or resolutions of the Issuer
          approving and authorizing the Bonds, the Indenture and this Agreement.

               "Small Issue Bonds" means bonds issued under the $1,000,000 or
          $10,000,000 limits imposed by the Section 144(a) of the Code or
          Section 103 of the Internal Revenue Code of 1954.

               "Test Period" means the three-year period beginning on the later
          of the date tax-exempt bonds are issued or the date the facilities
          financed by such tax-exempt bonds are placed in service.

               "Unassigned Issuer's Rights" means all of the rights of the
          Issuer to receive Additional Payments under Section 4.4, to be held
          harmless and indemnified under Section 5.10, to be reimbursed for
          attorney's fees and expenses under Section 7.4, and to give or
          withhold consent to or approval of amendments, modifications,
          termination or assignment of this Agreement, or amendment, sale,
          transfer, assignment, lease (or assignment of lease) or other disposal
          of the Project, under Sections 3.2, 5.1, 5.2, 5.4, 8.5 and 8.9.

             Section 1.3   Interpretation. In this Agreement, unless the context
                           --------------
indicates otherwise, words importing the singular number include the plural
number, and vice versa, the terms "hereof", "hereby", "herein", "hereto",
"hereunder" and similar terms refer to this Agreement, and the term "hereafter"
means after and the term "heretofore" means before the Series Issue Date, and
words of any gender include the correlative words of the other genders. In this
Agreement, unless otherwise indicated, all references to particular Articles,
Sections, Subsections or paragraphs are references to the Articles, Sections,
Subsections or paragraphs of this Agreement.

             Section 1.4   Captions, Headings and Table of Contents. The
                           ----------------------------------------
captions, headings and table of contents in this Agreement are solely for
convenience of reference and in no way define, limit or describe the scope or
intent of any Articles, Sections, Subsections or paragraphs hereof.

                                       5
<PAGE>

                                  ARTICLE II

                                REPRESENTATIONS

          Section 2.1    Representations and Findings of Issuer. The Issuer
                         --------------------------------------
hereby confirms its findings and represents that:

                    (a)  The Issuer is a public body corporate and politic
established in the Commonwealth of Pennsylvania pursuant to the laws of the
Commonwealth of Pennsylvania (including the Act). Under the Act, the Issuer has
the power to enter into the Indenture, the Bond Purchase Agreement and this
Agreement and to carry out its obligations thereunder and to issue the Bonds to
finance the Project.

                    (b)  By adoption of the Resolutions at one or more duly
convened meetings of the Issuer at which a quorum was present and acting
throughout, the Issuer has duly authorized the execution and delivery of the
Indenture, the Bond Purchase Agreement and this Agreement and performance of its
obligations thereunder and the issuance of the Bonds. Simultaneously with the
execution and delivery of this Agreement, the Issuer has duly executed and
delivered the Indenture and issued and sold the Bonds.

                    (c)  Based on representations and information furnished to
the Issuer by or on behalf of the Borrower, the Issuer has found that the
Borrower is qualified to be a beneficiary of financing provided by the Issuer
pursuant to the Act.

                    (d)  Based on representations and information furnished to
the Issuer by or on behalf of the Borrower, the Issuer has found that the
Project (i) will promote the public purposes of the Act, (ii) is located within
the boundaries of the Commonwealth of Pennsylvania and within the boundaries of
the County of Chester, and (iii) will constitute a project within the meaning of
the Act.

                    (e)  The Issuer has filed a Preliminary Allocation Request
("PAR") for purposes of receiving an allocation of the tax-exempt bond authority
of the Commonwealth of Pennsylvania and has received approval of the PAR from
the Pennsylvania Department of Community and Economic Development (the
"Department"), certifying approval of such allocation for the Project as
required by Section 146 of the Code. The Issuer will simultaneously with the
issuance of the Bonds deliver a Final Allocation Request to the Department to
obtain a final confirmation of such allocation.

                    (f)  The Project has been approved (1) by the Pennsylvania
Secretary of Community and Economic Development, as required by the Act, (2) by
the Board of Commissioners of the County of Chester, Pennsylvania, as the
"applicable elected representative", as that term is defined under the Code,
after a public hearing held upon reasonable notice, as required by the Code, and
(3) by the Issuer by adoption of the Resolutions, as required by the Act.

                    (g)  The Issuer has not and will not pledge the income and
revenues derived from this Agreement other than pursuant to and as set forth in
the Indenture.

                                       6
<PAGE>

                    (h)  The Issuer hereby elects to have the $10,000,000 limit
for Small Issue Bonds under the Code apply to the Bonds.

          Section 2.2  Representations of Borrower. The Borrower represents
                       ---------------------------
that:

                    (a)  The Borrower is a limited liability company duly
organized and validly existing under the laws of the Commonwealth of
Pennsylvania, and has full power and authority to execute, deliver and perform
its obligations under the Borrower's Agreements and to enter into and carry out
the transactions contemplated thereby.

                    (b)  The Borrower's Agreements have been duly authorized,
executed and delivered by the Borrower and constitute valid and binding
obligations of the Borrower. The execution, delivery and performance of the
Borrower's Agreements by the Borrower do not, and will not, violate any
provision of law applicable to the Borrower or the Borrower's certificate of
organization or operating agreement or any agreement or instrument to which the
Borrower is a party or by which it or any of its properties is bound.

                    (c)  The Project will promote the public purposes of the Act
and will not cause, directly or indirectly, the removal, either in whole or in
part, of a plant, facility or establishment from one area of the Commonwealth of
Pennsylvania to another. The Project is located within the boundaries of the
County of Chester, Pennsylvania.

                    (d)  The Borrower has acquired or will acquire before they
are needed all permits and licenses, and has satisfied or will satisfy other
requirements necessary, for the acquisition, construction, installation and/or
operation of the Project. The Project is a project within the meaning of the Act
and will be operated as such.

                    (e)  The Borrower presently intends to use or operate the
Project in a manner consistent with the Act until the date on which the Bonds
have been fully paid and knows of no reason why the Project will not be so used
or operated.

                    (f)  The aggregate of the following amounts does not, at the
Series Issue Date, exceed $10,000,000:

                         (i)    The outstanding amount of prior Small Issue
     Bonds with respect to facilities which are to be or have been used by the
     Borrower, any other Principal User of the Project or any Related Person and
     are located within the same city, town, borough, township or other
     incorporated municipality as the Project;

                         (ii)   The face amount of the Bonds; and

                         (iii)  Any and all capital expenditures, including any
     expenditures which could at the option of any Person be capitalized under
     any provision of the Code, paid or incurred by any Person within three
     years preceding the Series Issue Date, with respect to any facilities
     located in the same city, town, borough, township or other incorporated
     municipality as the Project of which the Borrower, any other Principal User
     of the Project or any Related Person is a Principal User, except
     expenditures made with proceeds of any prior Small Issue Bonds or
     expenditures reimbursed with the proceeds of the Bonds.

                                       7
<PAGE>

                    (g)  The information furnished by the Borrower and used by
the Issuer in preparing the arbitrage certificate pursuant to Section 148 of the
Code and information statement pursuant to Section 149(e) of the Code is
accurate and complete as of the Series Issue Date.

                    (h)  The proceeds of the Bonds will not exceed the Project
Costs.

                    (i)  The costs of issuance financed with proceeds of the
Bonds, including any bond discount on the sale of the Bonds, but not including
fees and charges in respect of the Letter of Credit, will not exceed 2% of the
proceeds of the Bonds.

                    (j)  No costs of the Project to be financed with the
proceeds of the Bonds have been paid by or on behalf of the Borrower or any
Related Person more than 60 days prior to the date of the Project Approval.

                              (End of Article II)

                                       8
<PAGE>

                                  ARTICLE III

            ACQUISITION OF PROJECT;ISSUANCE OF BONDS; PROJECT FUND

          Section 3.1  Acquisition of Project. The Borrower (a) has acquired, or
                       ----------------------
on the Series Issue Date is acquiring, the Project Site and shall construct,
install, equip and/or improve the Project on the Project Site with all
reasonable dispatch and in accordance with the description thereof in Exhibit B
attached hereto and applicable law, (b) shall procure or cause to be procured
all permits and licenses necessary for the prosecution of any and all work on
the Project, and (c) shall pay when due all costs and expenses incurred in
connection with such acquisition, construction, installation, equipment and
improvement from funds made available therefor in accordance with this Agreement
or otherwise. It is understood that the Project is the property of the Borrower
and that any contracts made by the Borrower with respect thereto and any work to
be done by the Borrower on the Project are made or done by the Borrower in its
own behalf and not as agent or contractor for the Issuer.

          Section 3.2  Additions and Changes to Project. Subject to Sections
                       --------------------------------
5.11 and 5.12, the Borrower may, at its option and at its own cost and expense,
at any time and from time to time, revise the description of the Project in
Exhibit B attached hereto and/or make such additions and changes to the Project
as it may deem to be desirable for its uses and purposes, provided that (i) such
additions and changes shall constitute part of the Project, (ii) the Borrower
shall supplement the information contained in Exhibit B attached hereto by
filing with the Issuer and the Trustee such supplemental information as is
necessary to reflect such additions and changes so that the Issuer and the
Trustee will be able to ascertain the nature and cost of the facilities included
in the Project and covered by this Agreement and (iii) if an addition or change
is substantial in relation to the Bonds, the Borrower shall have first obtained
and filed with the Issuer and the Trustee an opinion of Bond Counsel to the
effect that such addition or change is authorized or permitted under the Act and
will not adversely affect the exclusion from gross income of interest on the
Bonds under the Code. In any case, the Borrower shall obtain the Issuer's
approval of the addition to the Project of any proposed facilities or any other
changes not generally described in Exhibit B attached hereto on the date of
delivery of this Agreement, and the Borrower shall delete any facilities from
the Project if such deletion is necessary to maintain the exclusion from gross
income of interest on the Bonds under the Code.

          Section 3.3  Issuance of Bonds; Application of Proceeds. To provide
                       ------------------------------------------
funds to make the Loan for the purpose of paying Project Costs in accordance
with Exhibit B attached hereto, the Issuer will issue the Bonds in the aggregate
principal amount of $4,335,000. The Bonds will be issued pursuant to the
Indenture and will bear interest, mature and be subject to redemption and
tender, all as set forth therein. The Borrower hereby approves the terms and
conditions of the Indenture and the Bonds, and the terms and conditions under
which the Bonds will be issued, sold and delivered.

          The proceeds from the sale of the Bonds (including any bond discount)
shall be loaned to the Borrower pursuant to Section 4.1 and such proceeds (net
of any bond discount) shall be paid over to the Trustee for deposit in the
Project Fund. Pending disbursement pursuant to Section 3.4, the proceeds of the
Bonds so deposited in the Project Fund, together

                                       9
<PAGE>

with any investment earnings thereon, shall constitute a part of the Trust
Estate and shall be subject to the lien of the Indenture pursuant to the
granting clauses therein as security for the obligations described in such
granting clauses, and to such end the Borrower hereby grants to the Trustee as
security for such obligations a security interest in all of the Borrower's
right, title and interest in and to the Project Fund.

          Section 3.4  Disbursements from Project Fund. Subject to the
                       -------------------------------
provisions below, disbursements from the Project Fund shall be made to reimburse
or pay the Borrower, or any Person designated by the Borrower, for Project
Costs. The Borrower agrees that the sums so disbursed from the Project Fund will
be used only for the payment of Project Costs, and will not be used for any
other purpose.

          Any disbursements from the Project Fund for the payment of the Project
Costs shall be made by the Trustee only upon the written order of an Authorized
Representative of the Borrower, with the written approval of the Bank, delivered
to the Trustee; provided that disbursements made for costs described in clause
(b) of the definition of Project Costs may be made by the Trustee upon delivery
to the Trustee of a closing statement signed by the respective Authorized
Representatives of the Borrower and approved by the Bank. Each such written
order shall be substantially in the form of the disbursement request attached
hereto as Exhibit C and shall be consecutively numbered and accompanied by
invoices or other appropriate documentation supporting the payments or
reimbursements requested. Any disbursement for any item not described in, or the
cost for which item is other than as described in, the information statement
filed by the Issuer in connection with the issuance of the Bonds as required by
Section 149(e) of the Code and referred to in Section 5.12, shall be accompanied
by an opinion of a Bond Counsel to the effect that such disbursement does not
result in the interest on the Bonds becoming included in the gross income of the
Holders for federal income tax purposes. In case any contract provides for the
retention by the Borrower of a portion of the contract price, there shall be
paid from the Project Fund only the net amount remaining after deduction of any
such portion, and only when that retained amount is due and payable, may it be
paid from the Project Fund.

          Any moneys in the Project Fund (including the earnings from
investments therein) remaining after the Completion Date and payment, or
provision for payment, in full of the Project Costs shall, at the written
direction of an Authorized Representative of the Borrower, be transferred to the
General Account of the Bond Fund and applied as provided in Subsection 5.04(c)
of the Indenture; provided that (i) any such transfer and application shall be
made only to the extent that such use or application does not, in the opinion of
Bond Counsel or under ruling of the Internal Revenue Service, cause the interest
on the Bonds to become included in the gross income of the Holders for federal
income tax purposes, and (ii) unless there shall be delivered to the Trustee a
similar opinion of Bond Counsel, the Borrower shall not direct the investment of
such remaining moneys in "investment property" (as defined in Section 148 of the
Code) at a yield in excess of the yield on the Bonds.

          Section 3.5  Borrower Required to Pay Costs in Event Project Fund
                       ----------------------------------------------------
Insufficient. If moneys in the Project Fund are not sufficient to pay all
------------
Project Costs, the Borrower nonetheless shall complete the Project in accordance
with Exhibit B attached hereto and shall pay all such additional Project Costs.
The Borrower shall not be entitled to any

                                       10
<PAGE>

reimbursement for any such payments from the Issuer, the Trustee, the Bank or
any Holder; nor shall it be entitled to any abatement, diminution or
postponement of the Loan Payments.

          Section 3.6  Completion. Except to the extent otherwise approved by
                       ----------
the Issuer and by an opinion of Bond Counsel furnished by the Borrower to the
Trustee, within three years of the date of original delivery and payment for the
Bonds, the Borrower shall have completed the Project and caused all of the
proceeds of the Bonds to be expended for Project Costs in accordance with
Exhibit B attached hereto or otherwise applied as described in Section 3.4. The
Borrower shall notify the Issuer and the Trustee of the Completion Date by a
certificate signed by an Authorized Representative of the Borrower stating

               (a)  the date on which the Project was substantially completed,

               (b)  that all other facilities necessary in connection with the
Project have been acquired, constructed, installed, equipped and improved,

               (c)  that the acquisition, construction, installation, equipment
and/or improvement of the Project and such other facilities have been
accomplished in such a manner as to conform with all applicable zoning,
planning, building, environmental and other similar governmental regulations,

               (d)  that except as provided in clause (e) below, all costs of
the Project then or theretofore due and payable have been paid, and

               (e)  the amounts which the Trustee shall retain in the Project
Fund for the payment of Project Costs not yet due or for liabilities which the
Borrower is contesting or which otherwise should be so retained and the reasons
therefor.

Such certificate may state that it is given without prejudice to any rights
against third parties which then exist or subsequently may come into being. The
Authorized Representative of the Borrower shall include with such certificate a
statement specifically describing all items of personal property comprising a
part of the Project. The certificate shall be delivered as promptly as
practicable after the Borrower is in a position to certify as to the matters
referred to in clauses (a) through (e) above. Within 10 days of the delivery by
the Authorized Representative of the Borrower of such certificate evidencing the
Completion Date, the Trustee shall retain in the Project Fund a sum equal to the
amounts necessary for payment of Project Costs not then due and payable or the
liability for which the Borrower is contesting as set forth in said certificate.
Any amount not to be retained in the Project Fund for such costs, and all
amounts so retained but not subsequently used and for which written notice of
such failure of use has been given by the Borrower to the Trustee, and all
amounts on deposit in the Project Fund if the Borrower determines that the
Project will not be completed, shall be segregated by the Trustee and used by
the Trustee, at the written direction of the Authorized Representative of the
Borrower, within 90 days of the Remedial Action Date for one of the following
purposes: (a) to redeem Bonds prior to maturity on the earliest redemption date
permitted by this Agreement and the Indenture, (b) to purchase Bonds prior to
such redemption date for the purpose of cancellation, or (c) for any other
purpose; provided that the Trustee is furnished with an opinion of Bond Counsel
to the effect that such use is lawful under the Act and does not adversely
affect the exclusion of interest on any of the Bonds from gross income of the
owners thereof for federal income tax purposes. Until used for one or more of
the foregoing purposes, such segregated amount may be invested as permitted

                                       11
<PAGE>

by Section 3.7, but may not be invested by the Borrower, without an opinion of
Bond Counsel to the effect that such investment does not adversely affect the
exclusion of interest on any of the Bonds from gross income of the owners
thereof for federal income tax purposes, to produce a yield on such amount
(computed from the Completion Date and taking into account any investment of
such amount from the Completion Date) greater than the yield on the Bonds,
computed in accordance with the applicable provisions of the Code. The Issuer
agrees to cooperate with the Trustee and take all required action necessary to
redeem the Bonds or to accomplish any other purpose contemplated by this
Section.

          Section 3.7  Investment and Use of Fund Moneys. At the oral or written
                       ---------------------------------
direction of an Authorized Representative of the Borrower, any moneys held as
part of the Bond Fund (except moneys in the Letter of Credit Debt Service
Account created under Section 5.04 of the Indenture and except any moneys
representing principal of, or premium, if any, or interest on, any Bonds which
are deemed paid under Section 10.02 of the Indenture) or the Project Fund shall
be invested or reinvested by the Trustee in Eligible Investments. The Issuer and
the Borrower each hereby covenants that it will restrict that investment and
reinvestment and the use of the proceeds of the Bonds in such manner and to such
extent, if any, as may be necessary, after taking into account reasonable
expectations at the time of delivery of and payment for the Bonds, so that the
Bonds will not constitute arbitrage bonds under Section 148 of the Code.

          Any Authorized Representative of the Issuer having responsibility for
issuing the Bonds is authorized and directed, alone or in conjunction with an
Authorized Representative of the Borrower and/or any other officer, partner,
employee or agent of or consultant to the Issuer or the Borrower, to give an
appropriate certificate of the Issuer pursuant to Section 148 of the Code, for
inclusion in the transcript of proceedings for the issuance of the Bonds,
setting forth the reasonable expectations of the Issuer regarding the amount and
use of the proceeds of the Bonds and the facts, estimates and circumstances on
which those expectations are based, all as of the Series Issue Date. The
Borrower shall provide the Issuer with, and the Issuer's certificate may be
based on, a certificate of the Authorized Representative of the Borrower or
other appropriate officer, partner, employee or agent of or consultant to the
Borrower setting forth the reasonable expectations of the Borrower on the Series
Issue Date regarding the amount and use of the proceeds of the Bonds and the
facts, estimates and circumstances on which they are based.

          Section 3.8  Rebate Fund. The Borrower agrees to engage a Financial
                       -----------
Consultant to determine Excess Earnings, to make such payments to the Trustee as
are required of the Borrower under Section 5.08 of the Indenture and to
otherwise comply with requirements of Section 5.08 of the Indenture applicable
to the Borrower. The obligation of the Borrower to make such payments shall
remain in effect and be binding upon the Borrower notwithstanding the release
and discharge of the Indenture.

                             (End of Article III)

                                       12
<PAGE>

                                  ARTICLE IV

                 LOAN BY ISSUER; LOAN PAYMENTS;OTHER PAYMENTS

          Section 4.1  Loan by Issuer. Upon the terms and conditions of this
                       --------------
Agreement, the Issuer will make the Loan to the Borrower on the Series Issue
Date in a principal amount equal to the aggregate principal amount of the Bonds.
The Loan shall be deemed fully advanced upon deposit of the proceeds of the
Bonds (net of any bond discount) in the Project Fund pursuant to Section 3.3.

          Section 4.2  Loan Payments. In consideration of and in repayment of
                       -------------
the Loan, the Borrower shall make, as Loan Payments, payments which correspond,
as to amounts and due dates, to the Bond Service on the Bonds. Amounts received
upon a drawing by the Trustee under the Letter of Credit for the payment of Bond
Service shall be credited against the Loan Payments otherwise payable by the
Borrower corresponding to such Bond Service; provided that the Bank has been
fully reimbursed for such drawing by the Borrower.

          It is the intention of the Issuer and the Borrower that,
notwithstanding any other provision of this Agreement, the Trustee, as assignee
of the Issuer, shall receive funds from or on behalf of the Borrower (taking
into account such credits for amounts drawn on the Letter of Credit) in such
amounts and at such times as will enable the Issuer to pay when due all of its
Bond Service on the Bonds and any obligations arising under Section 4.3 and any
such obligations surviving the payment of the Bonds.

          All Loan Payments shall be payable in lawful money of the United
States of America and shall be made by, or on behalf of the Borrower, to the
Trustee at its Principal Office for the account of the Issuer and deposited in
the General Account of the Bond Fund created by the Indenture. Such Loan
Payments shall be applied as provided in the Indenture.

          The Borrower shall be entitled to credits against the Loan Payments as
and to the extent provided in Subsection 5.04(f) of the Indenture.

          Section 4.3  Purchase Payments. To the extent that moneys on deposit
                       -----------------
in the Remarketing Proceeds Purchase Account or the Letter of Credit Purchase
Account established under the Indenture are insufficient to pay the full
purchase price of Bonds payable pursuant to Sections 4.01 and 4.02 of the
Indenture on the applicable Purchase Date, the Borrower shall also pay to the
Trustee as Purchase Payments for deposit in the Borrower Purchase Account
established under the Indenture amounts sufficient to cover the shortfalls.

          Section 4.4  Additional Payments. The Borrower shall pay as Additional
                       -------------------
Payments hereunder: (a) to the Issuer, the Issuer's Fee on the Series Issue Date
and any and all costs and expenses (including reasonable legal fees and
expenses) incurred or to be paid by the Issuer in connection with the issuance
and delivery of the Bonds or otherwise related to actions taken by the Issuer
under this Agreement or the Indenture or any amendment thereof, supplement
thereto or waiver or consent thereunder, including without limitation, any
annual charge made by a Rating Service to maintain a rating on the Bonds; (b) to
the Remarketing Agent, the fees and expenses of the Remarketing Agent under the
Indenture and the Remarketing Agreement for

                                       13
<PAGE>

services rendered in connection with the Bonds; (c) to the Trustee, the
reasonable fees, charges and expenses of the Trustee and its agents for acting
as such under the Indenture; and (d) all other reasonable fees and expenses
incurred in connection with the issuance of the Bonds.

          Section 4.5  Obligations Unconditional. The obligations of the
                       -------------------------
Borrower to make Loan Payments, Purchase Payments, Additional Payments and any
payments required under Section 3.8 shall be absolute and unconditional, and the
Borrower shall make such payments without abatement, diminution or deduction
regardless of any cause or circumstances whatsoever including without limitation
any defense, set-off, recoupment or counterclaim which the Borrower may have or
assert against the Issuer, the Trustee, the Remarketing Agent, the Bank or any
other Person, whether express or implied, or any duty, liability or obligation
arising out of or connected with this Agreement, it being the intention of the
parties that the payments required of the Borrower hereunder will be paid in
full when due without any delay or diminution whatsoever. Loan Payments and
Purchase Payments required to be paid by or on behalf of the Borrower hereunder
shall be received by the Issuer or the Trustee as net sums and the Borrower
agrees to pay or cause to be paid all charges against or which might diminish
such net sums.

          Section 4.6  Assignment of Issuer's Rights. To secure the payment of,
                       -----------------------------
first, the Bond Service, and second, the Borrower's obligations under the
-----                        ------
Reimbursement Agreement, the Issuer shall pledge and assign to the Trustee all
the Issuer's rights in, to and under this Agreement (except for the Unassigned
Issuer's Rights), the Revenues and the other property comprising the Trust
Estate. The Borrower consents to such pledge and assignment and agrees to make
or cause to be made Loan Payments and Purchase Payments directly to the Trustee
without defense or set-off by reason of any dispute between the Borrower and the
Trustee. Whenever the Borrower is required to obtain the consent of the Issuer
hereunder, the Borrower shall also obtain the consent of the Trustee; provided
that, except as otherwise expressly stipulated herein or in the Indenture, the
Borrower shall not be required to obtain the Trustee's consent with respect to
the Unassigned Issuer's Rights.

          Section 4.7  Letter of Credit. Concurrently with the initial delivery
                       ----------------
of the Bonds pursuant to Section 2.01 of the Indenture, the Borrower shall cause
the initial Letter of Credit to be issued by the Bank pursuant to the
Reimbursement Agreement, which Letter of Credit (1) shall be substantially in
the same form as the exhibit attached to the Reimbursement Agreement; (2) shall
be dated the date of delivery of the Bonds; and (3) shall authorize the Trustee
to draw on the Bank, subject to the terms and conditions thereof, up to (a) an
amount equal to the principal amount of the Bonds (i) to enable the Trustee to
pay the principal amount of the Bonds when due at maturity or upon redemption or
acceleration and (ii) to enable the Trustee to pay the portion of the purchase
price of Bonds tendered to it for purchase and not remarketed corresponding to
the principal amount of such Bonds, plus (b) an amount equal to 50 days interest
on the Bonds at the Maximum Rate with respect to the Weekly Rate (i) to enable
the Trustee to pay interest on the Bonds when due and (ii) to enable the Trustee
to pay the portion of the purchase price of Bonds tendered to it for purchase
and not remarketed corresponding to the accrued interest on such Bonds. The
Letter of Credit may be extended, amended or replaced by an Alternate Letter of
Credit or other credit enhancement complying with the provisions of Sections
2.05 and 5.09 of the Indenture.

                                       14
<PAGE>

          It is anticipated that all payments of principal of and interest on
the Bonds, and all payments of purchase price of the Bonds payable upon optional
or mandatory tender for purchase for the payment of which remarketing proceeds
are not available pursuant to Article IV of the Indenture, will be funded from
draws on the Letter of Credit.

          The Borrower shall take whatever action may be necessary to maintain
the Letter of Credit in full force and effect during the period required by the
Indenture, including the payment of any transfer fees required by the Bank upon
any transfer of the Letter of Credit to any successor Trustee.

                              (End of Article IV)

                                       15
<PAGE>

                                   ARTICLE V

                       ADDITIONAL COVENANTS OF BORROWER

          Section 5.1  Maintenance of Existence. If the Borrower is a
                       ------------------------
corporation, partnership, limited liability company or other entity, the
Borrower shall do all things necessary to preserve and keep in full force and
effect its existence, rights, franchises and qualification to do business in the
Commonwealth of Pennsylvania and shall not (a) dissolve or otherwise sell,
transfer or dispose of all, or substantially all, of its assets or (b)
consolidate with or merge into any other entity; provided that, subject to the
provisions of Sections 5.11 and 5.12, the preceding restrictions shall not apply
to a transaction to which the Issuer and the Bank consent in writing if the
transferee or the surviving or resulting entity, if other than the Borrower, by
written instrument satisfactory to the Trustee, irrevocably and unconditionally
assumes and agrees to perform and observe the agreements and obligations of the
Borrower under this Agreement and the provisions of Section 8.9 are satisfied.

          Section 5.2  Compliance with Laws; Commencement and Continuation of
                       ------------------------------------------------------
Operations at Project; No Sale, Removal or Demolition of Project. The Borrower
----------------------------------------------------------------
will acquire, construct, install, operate and maintain the Project in such
manner as to comply with the Act and all applicable requirements of federal,
state and local laws and the regulations, rules and orders of any federal, state
or local agency, board, commission or court having jurisdiction over the Project
or the operation thereof, including without limitation applicable zoning,
planning, building and environmental laws, regulations, rules and orders;
provided that the Borrower shall be deemed in compliance with this Section so
long as it is contesting in good faith any such requirement by appropriate legal
proceedings. The Borrower (or its lessee) shall commence operations at the
Project within three years from the Series Issue Date and shall continue such
operations throughout the term of this Agreement. The Borrower shall not sell,
assign or otherwise dispose of (whether in one transaction or in a series of
transactions) its interest in the Project or any material portion thereof (other
than as permitted by Section 5.1 and other than leases permitted under Section
5.4) or undertake or permit the demolition or removal of the Project or any
material portion thereof without (i) the prior written consent of the Issuer and
(ii) delivery to the Trustee of an opinion of Bond Counsel to the effect that
such sale, assignment or other disposal does not adversely affect the exclusion
from gross income of interest on the Bonds for federal income tax purposes;
provided that the Borrower shall be permitted to sell, transfer, assign or
otherwise dispose of or remove any portion of the Project which is retired or
replaced in the ordinary course of business.

          Section 5.3  Right of Inspection. Subject to reasonable security and
                       -------------------
safety regulations and upon reasonable notice, the Issuer and the Trustee, and
their respective agents, shall have the right during normal business hours to
inspect the Project.

          Section 5.4  Lease by Borrower. The Borrower may, subject to the
                       -----------------
provisions of Sections 5.11 and 5.12, lease the Project, in whole or in part, to
one or more other Persons, provided that:

                                       16
<PAGE>

               (a)  No such lease shall relieve the Borrower from its
obligations under this Agreement, the Reimbursement Agreement or the Remarketing
Agreement;

               (b)  In connection with any such lease the Borrower shall retain
such rights and interests as will permit it to comply with its obligations under
this Agreement, the Reimbursement Agreement and the Remarketing Agreement;

               (c)  No such lease shall impair materially the accomplishment of
the purposes of the Act to be accomplished by operation of the Project as herein
provided;

               (d)  Any such lease shall require the lessee to operate the
Project as a "project" under the Act as long as the Bonds are outstanding;

               (e)  In the case of a lease to a new lessee or an assignment of
an existing lease to a new lessee of substantially all of the Project, such new
lessee shall have been approved by the Issuer (such approval not to be
unreasonably withheld); and

               (f)  The lessees under any such leases, including any leases in
force on the Series Issue Date, shall be subject to the applicable terms and
conditions of Section 5.12.

       Section 5.5  Financial Statements; Books and Records. The Borrower
                    ---------------------------------------
shall prepare or have prepared such financial statements and reports in such
form as are required by the Bank or as otherwise shall be in accordance with
generally accepted accounting principles, and shall keep true and proper books
of records and accounts in which full and correct entries are made of all its
business transactions. Copies of such financial statements and reports shall be
provided to the Issuer and the Trustee promptly upon request, and such books of
records and accounts shall be made available for inspection during normal
business hours upon request by the Issuer, the Trustee and their respective
agents.

       Section 5.6  Taxes, Other Governmental Charges and Utility Charges.
                    -----------------------------------------------------
The Borrower shall pay, or cause to be paid before the same become delinquent,
all taxes, assessments, whether general or special, and governmental charges of
any kind whatsoever that may at any time be lawfully assessed or levied against
or with respect to the Project, including any equipment or related property
installed or brought by the Borrower therein or thereon, and all utility and
other charges incurred in the operation, maintenance, use, occupancy and upkeep
of the Project. With respect to special assessments or other governmental
charges that lawfully may be paid in installments over a period of years, the
Borrower shall be obligated to pay only such installments as are required to be
paid during the term hereof. The Borrower may, at its expense, in good faith
contest any such taxes, assessments and other charges and, in the event of any
such contest, may permit the taxes, assessments or other charges so contested to
remain unpaid during the period of such contest and any appeal therefrom, unless
the Issuer or the Trustee shall notify the Borrower that, in the opinion of
counsel selected by the Issuer or the Trustee, by nonpayment of any such items
the Project or any part thereof will be subject to loss or forfeiture, in which
event such taxes, assessments or charges shall be paid promptly. The Borrower
shall also comply at its own cost and expense with all notices received from
public authorities with respect to the Project.

       Section 5.7  Insurance. The Borrower shall at its own cost and
                    ---------
expense obtain or cause to be obtained insurance policies against such risks,
and in such amounts, as are

                                       17
<PAGE>

customarily insured against by entities owning facilities of like size and type
to the Project, paying, as the same become due and payable, all premiums in
respect thereof.

          Section 5.8  Damage to or Condemnation of Project. In the event of
                       ------------------------------------
damage, destruction or condemnation of part or all of the Project, the Borrower
shall either: (i) restore the Project or (ii) if permitted by the terms of the
Bonds, direct the Issuer to call the Bonds for redemption as set forth in
Section 6.2. Damage to, destruction of or condemnation of all or a portion of
the Project shall not terminate this Agreement or cause any abatement of or
reduction in the payments to be made by the Borrower under this Agreement.

          Section 5.9  Litigation Notice. The Borrower shall give the Trustee,
                       -----------------
the Remarketing Agent and the Bank prompt notice of any action, suit or
proceeding pending or threatened against it at law or in equity, or before any
governmental instrumentality or agency, which, if adversely determined, would
materially impair the right of the Borrower to carry on the business which is
contemplated in connection with the Project or would materially and adversely
affect its business, operations, properties, assets or condition.

          Section 5.10 Indemnification. The Borrower will indemnify and hold
                       ---------------
harmless the Issuer and each member, director, officer, employee, attorney and
agent of the Issuer for and against any and all claims, losses, damages or
liabilities (including the costs and expenses of defending against any such
claims) to which the Issuer or any member, director, officer, employee or agent
of the Issuer may become subject, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise directly or indirectly out of
(a) any loss or damage to property or injury to or death of or loss by any
Person that may be occasioned by any cause whatsoever pertaining to the
construction, maintenance, operation and use of the Project; (b) any breach or
default on the part of the Borrower in the performance of any covenant or
agreement of the Borrower under any of the Borrower's Agreements or any related
document, or arising from any act or failure to act by the Borrower or any of
its agents, contractors, servants, employees or licensees; (c) the
authorization, issuance and sale of the Bonds, or the provision of any
information or certification furnished in connection therewith concerning the
Bonds, the Project or the Borrower (including, without limitation, any
information furnished by the Borrower for inclusion in any certification made by
the Issuer or for inclusion in, or as a basis for preparation of, the
information statements furnished by the Issuer and any information or
certification obtained from the Borrower) to assure the exclusion of the
interest on the Bonds from the gross income of the Holders for federal income
tax purposes; (d) the Borrower's failure to comply with any requirements of this
Agreement pertaining to compliance with the Code to assure such exclusion of the
interest or the provisions set forth in Sections 5.11 and 5.12; (e) any failure
by the Borrower to comply with the provisions of the Act; and (f) any claim,
action or proceeding brought with respect to any matter set forth in clause (a),
(b), (c), (d) or (e) above.

          The Borrower will indemnify and hold the Trustee and its directors,
officers, agents and employees harmless from and against any and all claims,
liabilities, losses, damages, fines, penalties and expenses (including out-of-
pocket, incidental expenses, legal fees and expenses, and the allocated costs
and expenses of in-house counsel and legal staff) that may be imposed on,
incurred by, or asserted against, the Trustee and its directors, officers,
agents and employees or any of them for following any instruction or other
direction upon which the Trustee is authorized to rely pursuant to the terms of
this Agreement, the Indenture, the Bonds and the Letter of Credit. In addition
to and not in limitation of the immediately preceding

                                       18
<PAGE>

sentence, the Borrower will indemnify and hold the Trustee and its directors,
officers, agents and employees and each of them harmless from and against any
and all claims, liabilities, losses, damages, fines, penalties and expenses
(including out-of-pocket, incidental expenses, legal fees and expenses, and the
allocated costs and expenses of in-house counsel and legal staff) that may be
imposed on, incurred by, or asserted against the Trustee and its directors,
officers, agents and employees or any of them in connection with or arising out
of the Trustee's performance under this Agreement, the Indenture, the Bonds and
the Letter of Credit; provided the Trustee has not acted with gross negligence
or engaged in willful misconduct. The provisions of this paragraph shall survive
the termination of this Agreement and the Indenture and the resignation or
removal of the Trustee for any reason.

          The Borrower will indemnify and hold harmless the Remarketing Agent
for and against all liabilities, claims, costs and expenses incurred without
gross negligence or bad faith on the part of the Remarketing Agent on account of
any action taken or omitted to be taken by the Remarketing Agent in accordance
with the terms of this Agreement, the Bonds, the Reimbursement Agreement, the
Letter of Credit, the Remarketing Agreement or the Indenture or any action taken
at the request of or with the consent of the Borrower, including the costs and
expenses incurred by the Remarketing Agent in defending itself against any such
claims.

          In case any action or proceeding is brought against the Issuer, the
Remarketing Agent or the Trustee in respect of which indemnity may be sought
hereunder, the party seeking indemnity promptly shall give notice of that action
or proceeding to the Borrower, and the Borrower upon receipt of that notice
shall have the obligation and the right to assume the defense of the action or
proceeding; provided that failure of a party to give that notice shall not
relieve the Borrower from any of its obligations under this Section unless (and
then only to the extent) that failure prejudices the defense of the action or
proceeding by the Borrower. At its own expense, an indemnified party may employ
separate counsel and participate in the defense. The Borrower shall not be
liable for any settlement made without its consent, which shall not be
unreasonably withheld. The Borrower shall not settle any claim or action
affecting the Issuer, the Trustee or the Remarketing Agent without the consent
of the Issuer, the Trustee or the Remarketing Agent, as applicable, which
consent shall not be unreasonably withheld.

          The indemnification set forth above is intended to and shall (i)
include the indemnification of all affected directors, officers, agents and
employees of the Issuer, the Remarketing Agent and the Trustee, respectively,
and (ii) be enforceable by the Issuer, the Remarketing Agent and the Trustee,
respectively, to the full extent permitted by law.

          Section 5.11  Tax Covenants of Borrower and Issuer. The Borrower
                        ------------------------------------
covenants and represents that it will at all times do and perform all acts and
things necessary or desirable and within its reasonable control in order to
assure that interest paid on the Bonds shall not be includable in the gross
income of any Holder for federal income tax purposes, unless such Holder is a
"substantial user" of the Project or a "related person" of such a user within
the meaning of Section 147(a) of the Code. The Borrower also covenants and
represents that it shall not take or omit to take, or permit to be taken on its
behalf, any actions which, if taken or omitted, would adversely affect the
excludability from the gross income of the Holders of interest paid on the Bonds
for federal income tax purposes. The Issuer and the Borrower mutually covenant
for the benefit of the Holders that they will not use the proceeds of the Bonds,
any moneys derived, directly or indirectly, from the use or investment thereof
or any other

                                       19
<PAGE>

moneys on deposit in any fund or account maintained in respect of the Bonds
(whether such moneys were derived from the proceeds of the sale of the Bonds or
from other sources) in a manner which would cause the Bonds to be treated as
"arbitrage bonds" within the meaning of Section 148 of the Code or would
otherwise violate Section 6.08 of the Indenture.

          Section 5.12   Further Tax Covenants of Borrower. The Borrower further
                         ---------------------------------
represents and covenants as follows:

                    (a)  Action to Maintain Tax-Exempt Status. The Borrower will
                         ------------------------------------
take such actions as shall be necessary or desirable, from time to time and
within its reasonable control, to cause all of the representations and
warranties in this Section to remain true and correct during such periods as
shall be necessary to maintain at all times the exclusion of interest paid on
the Bonds from the gross income of the Holders for federal income tax purposes
(other than a Holder who is a "substantial user" of the Project or a "related
person" as those terms are used in Section 147(a) of the Code), pursuant to the
requirements of the Code.

                    (b)  Operation as Manufacturing Facility. Until payment in
                         -----------------------------------
full of the Bonds, the Borrower shall operate the Project as a "manufacturing
facility" within the meaning of Section 144(a)(12)(C) of the Code. Without
limiting the generality of the foregoing definition, a "manufacturing facility"
is, generally, any facility which is used in the manufacturing or production of
tangible personal property, including processing resulting in a change of
condition of such property. The Borrower shall use no more than 25% of the net
proceeds of the Bonds to provide on-site facilities which are directly related
and ancillary to the manufacturing facility, including temporary warehousing of
raw materials and finished product, office facilities and product development
facilities.

                    (c)  Ninety-five Percent Capital Costs Test. The Borrower
                         --------------------------------------
shall spend not less than 95% of the net proceeds of the Bonds for capital costs
of the manufacturing facility being financed. Capital costs are defined as costs
of land or property of a character subject to allowance for depreciation under
Section 167 of the Code and do not include inventory or working capital.

                    (d)  Land Acquisition Limitation. The Borrower will not use,
                         ---------------------------
directly or indirectly, 25% or more of the net proceeds of the Bonds for the
acquisition of land or an interest therein.

                    (e)  Existing Facility and Rehabilitation Limitations. The
                         ------------------------------------------------
Borrower will not use any proceeds of the Bonds to acquire any property of which
the Borrower would not be the first user, except as permitted by the next
sentence. If any proceeds of the Bonds are used to acquire (i) an existing
building, (ii) an existing building and equipment thereof, (iii) an existing
structure (other than a building), or (iv) an existing structure and equipment
thereof, then the Borrower will, within two years of the later of the Series
Issue Date or the date the Borrower acquires such building or structure, incur
Rehabilitation Expenditures in an amount at least equal to (x) 15% of the
portion of the cost of acquiring all existing buildings and equipment thereof
which is financed with net proceeds of the Bonds, plus (y) 100% of the portion
of the cost of acquiring all existing structures (other than a building) and
equipment thereof which is financed with net proceeds of the Bonds.

                                       20
<PAGE>

                    (f)  Limitation on Financing Certain Facilities. The
                         ------------------------------------------
Borrower will not use more than 25% of the net proceeds of the Bonds to provide
any portion of the Project the primary purpose of which is to provide retail
food or beverage services (exclusive of grocery stores), automobile sales or
services, or the provision of recreation or entertainment.

                    (g)  Prohibition on Financing Certain Facilities. The
                         -------------------------------------------
Borrower will not use any proceeds of the Bonds to provide any portion of the
Project to be used for a private or commercial golf course, country club,
massage parlor, tennis club, skating facility (including roller skating,
skateboard and ice skating), racquet sports facility (including any handball or
racquetball court), hot tub facility, suntan facility or racetrack. The Borrower
will not use any proceeds of the Bonds to provide any airplane, any sky box or
other private luxury box, any health club facility, any facility primarily used
for gambling, or any store the principal business of which is the sale of
alcoholic beverages for consumption off premises.

                    (h)  $10,000,000 Limitation. Neither the Borrower, any other
                         ----------------------
Principal User of the portion of the Project financed with Bond proceeds nor any
Related Person with respect to the Borrower or any such Principal User of the
Project will, during the six-year period beginning three years before the Series
Issue Date, pay or incur any capital expenditures, or become a Principal User of
a facility with respect to which capital expenditures have been made in such
period, if --

                         (i)   The capital expenditures are financed other than
     with the proceeds of the Bonds;

                         (ii)  The facility with respect to which the capital
     expenditures are paid or incurred is the Project or is located in the city,
     borough, town, township or other incorporated municipality in which the
     Project is located; and

                         (iii) The amount of the capital expenditures, when
     added to the face amount of the Bonds and any other prior tax-exempt
     obligations outstanding on the Series Issue Date subject to aggregation
     with the Bonds under the Code, would exceed $10,000,000.

Neither the Borrower, any other Principal User of the portion of the Project
financed with Bond proceeds nor any Related Person with respect to the Borrower
or any such Principal User of the Project will, during the Test Period in
respect of the Bonds, merge with, acquire more than 50% of the stock of or
otherwise become a Related Person to another entity so as to cause the foregoing
$10,000,000 limitation to be violated when the capital expenditures and prior
tax-exempt obligations with respect to such entity and all Related Persons with
respect to such entity are taken into account.

                    (i)  $40,000,000 Limitation on Acquisition of Other
                         ----------------------------------------------
Property, Mergers and Leases. If the taxability condition described below is
----------------------------
present, then neither Borrower, any other Principal User of the portion of the
Project financed with Bond proceeds nor any Related Person with respect to the
Borrower or any such Principal User of the Project will, during the Test Period
in respect of the Bonds, either (i) be or become a Principal User of a facility
financed with tax-exempt bonds issued prior to the Series Issue Date (a "prior
issue") or (ii) merge with or become a Related Person with respect to a
Principal User of a facility financed by a prior issue. The taxability condition
that, if present, shall prevent the Borrower, any other Principal User of

                                       21
<PAGE>

the portion of the Project financed with Bond proceeds and any Related Person
with respect to the Borrower or any such Principal User of the Project from
entering into the foregoing transactions during the Test Period, is that the
prior issue is either Exempt Facility Bonds, an issue of qualified redevelopment
bonds (as defined in Section 144(c) of the Code) or Small Issue Bonds, the Test
Period for the prior issue has not expired as of the Series Issue Date, and the
portion of the prior issue allocable under the Code to the Borrower (and all
Related Persons with respect to the Borrower) or any other Principal User of the
portion of the Project financed with Bond proceeds (and all Related Persons with
respect to such Principal User), when added to the outstanding amount of the
Bonds and any other prior tax-exempt financing allocable under the Code to the
Borrower (and such Related Persons) or such Principal User (and such Related
Persons), as the case may be, would exceed $40,000,000.

               (j)  Lease of Project. In connection with any lease or grant by
                    ----------------
the Borrower of the use of the portion of the Project financed with Bond
proceeds, the Borrower will require that the lessee or user of any portion of
the Project and all Related Persons with respect to such lessee or user will not
violate the covenants set forth herein.

               (k)  Bond Maturity Limitation. The average reasonably expected
                    ------------------------
economic life of the property financed with the proceeds of the Bonds,
disregarding land, will be at least 84% of the average maturity of the Bonds, as
determined pursuant to Section 147(b) of the Code.

               (l)  Aggregation of Issues with Respect to Single Project. The
                    ----------------------------------------------------
portion of the Project financed with Bond proceeds does not and will not
comprise a part of a single building, an enclosed shopping mall or a strip of
offices, stores or warehouses using substantial common facilities, any portion
of which has been financed through any other tax-exempt issue.

               (m)  Arbitrage Rebate. As required by Section 3.8, the Borrower
                    ----------------
will pay to or for the account of the Issuer all amounts needed to comply with
the requirements of Section 148 of the Code, concerning arbitrage bonds,
including Section 148(f), which requires generally a rebate payment to the
United States of America of arbitrage profit from investment of the proceeds of
the Bonds in obligations other than tax-exempt obligations. The obligation of
the Borrower to make such payments is unconditional and is not limited to funds
representing the proceeds of the Bonds or income from the investment thereof or
any other particular source.

               (n)  Nonpurpose Investments. After the expiration of any
                    ----------------------
applicable temporary period under Section 148(c) of the Code, (i) at no time
during any bond year will the aggregate amount of gross proceeds of the Bonds
invested in nonpurpose investments with a yield higher than the yield on the
Bonds exceed 150% of the debt service on the Bonds for such bond year, and the
aggregate amount of gross proceeds of the Bonds invested in nonpurpose
investments with a yield higher than the yield on the Bonds, if any, will be
promptly and appropriately reduced as the amount of outstanding Bonds is
reduced, provided that the foregoing shall not require the sale or disposition
of any investments in nonpurpose investments if such sale or disposition would
result in a loss which exceeds the amount which would be paid to the United
States pursuant to Section 5.08 of the Indenture (but for such sale or
disposition) at the time of such sale or disposition if a payment under Section
5.08 of the Indenture were due at such time and (ii) not more than the lesser of
5% of the proceeds of the Bonds or $100,000 (in addition to the amounts allowed
under Sections 148(c) and (d) of the Code and subject to the

                                       22
<PAGE>

yield adjustment provisions of Treasury Regulations ss.1.148-5(C)) of the
proceeds of the Bonds will be invested in higher yielding investments.

               At no time will any funds constituting gross proceeds of the
Bonds be used to acquire investments at other than fair market value within the
meaning of the applicable Treasury Regulations pertaining to, or in any other
fashion as would constitute failure of compliance with, Section 148 of the Code.
Investments or deposits in certificates of deposit or pursuant to investment
contracts shall not be made without compliance, at or prior to such investment
or deposit, with the requirements of Treasury Regulations Section 1.148-
5(d)(6)(ii) and (iii), respectively, or with any successor provisions thereto.

               Theterms "bond year", "proceeds", "gross proceeds", "nonpurpose
investments", "yield", "higher yielding investments" and "debt service" have the
meanings assigned to them for purposes of Section 148 of the Code.

               (o)    No Higher Yield Collateral to Bank. In no event will the
                      ----------------------------------
Borrower provide collateral to the Bank which bears a yield higher than the
yield on the Bonds within the meaning of Section 148 of the Code and any lawful
regulations promulgated thereunder, except upon receipt by the Borrower of an
opinion of Bond Counsel to the effect that the pledge of such collateral shall
not cause the interest on the Bonds to be included in the gross income of the
Holders for federal income tax purposes; provided that no such yield restriction
or opinion is required with respect to the pledge of any collateral that
consists of obligations, the interest on which is excluded from the gross income
of the holders thereof for federal income tax purposes.

               (p)    No Same Issue Bonds. Neither the Borrower nor any other
                      -------------------
Principal User of the portion of the Project financed with Bond proceeds nor any
Related Person has participated, or will participate, in the offering for sale
or sale of any issue of Exempt Facility Bonds, Small Issue Bonds or qualified
redevelopment bonds (as defined in Section 144(b) of the Code), which are or
will be required to be aggregated with the Bonds as part of the "same issue"
within the meaning of Section 144(a)(6) of the Code.

        Section 5.13  No Control of Bank. The Bank does not control,
                      ------------------
either directly or indirectly through one or more intermediaries, the Borrower.
Likewise, the Borrower does not control, either directly or indirectly, through
one or more intermediaries, the Bank. "Control" for this purpose has the meaning
given to such term in Section 2(a)(9) of the Investment Company Act of 1940, as
amended and as interpreted by the Securities and Exchange Commission. (Under
Section 2(a)(9), "control" means the power to exercise a controlling influence
over the management or policies of a company, unless such power is solely the
result of an official position with such company. Any Person who owns
beneficially, either directly or through one or more controlled companies, more
than 25% of the voting securities of a company shall be presumed to control such
company. Any Person who does not own more than 25% of the voting securities of
any company shall be presumed not to control such company.) The Borrower will
provide written notice to the Trustee and the Remarketing Agent 30 days prior to
consummation of any transaction that would result in the Borrower controlling or
being controlled by the Bank.

        Section 5.14  Annual Certificate. The Borrower will furnish to
                      ------------------
the Issuer and to the Trustee within 120 days after the close of each fiscal
year of the Borrower, a certificate of the Borrower signed by the Authorized
Representative of the Borrower stating that the Borrower has

                                       23
<PAGE>

made a review of its activities during such fiscal year for the purpose of
determining whether or not the Borrower has complied with all of the terms,
provisions and conditions of this Agreement and the Borrower has kept, observed,
performed and fulfilled each and every covenant, provision and condition of this
Agreement on its part to be performed, and is not in default in the performance
or observance of any of the terms, covenants, provisions or conditions hereof,
or if the Borrower shall be in default such certificate shall specify all such
defaults and the nature thereof.

        Section 5.15  Nondiscrimination.  The Borrower hereby accepts and agrees
                      -----------------
to be bound by the nondiscrimination clause set forth in Exhibit D attached
hereto.

                              (End of Article V)

                                       24
<PAGE>

                                  ARTICLE VI

                              REDEMPTION OF BONDS

          Section 6.1  Optional Redemption. Provided no Event of Default shall
                       -------------------
have occurred and be subsisting, at any time and from time to time, the Borrower
may deliver or cause to be delivered Loan Payments to the Trustee in addition to
the scheduled Loan Payments required to be made under Section 4.2 and direct the
Trustee to use the Loan Payments so delivered for the purpose of calling Bonds
for optional redemption in accordance with the applicable provisions of the
Indenture and redeeming such Bonds at the redemption price stated in the
Indenture. Such Loan Payments shall be held and applied as provided in Section
5.04 of the Indenture and delivery thereof shall not operate to abate or
postpone Loan Payments otherwise becoming due or to alter or suspend any other
obligations of the Borrower under this Agreement. Whenever the Bonds are subject
to optional redemption pursuant to the Indenture, the Issuer will, but only upon
direction of the Borrower, direct the Trustee to call the same for redemption as
provided in the Indenture.

          Section 6.2  Extraordinary Optional Redemption. The Borrower shall
                       ---------------------------------
have, subject to the conditions hereinafter imposed, the option to direct the
redemption of the Bonds in accordance with the applicable provisions of the
Indenture upon the occurrence of any of the following events:

                 (a)   The Project shall have been damaged or destroyed to such
an extent that (1) it cannot reasonably be expected by the Borrower to be
restored, within a period of six months, to the condition thereof immediately
preceding such damage or destruction or (2) its normal use and operation is
reasonably expected by the Borrower to be prevented for a period of six
consecutive months.

                 (b)   Title to, or the temporary use of, all or a significant
part of the Project shall have been taken under the exercise of the power of
eminent domain (1) to such extent that the Project cannot reasonably be expected
by the Borrower to be restored within a period of six months to a condition of
usefulness comparable to that existing prior to the taking or (2) as a result of
the taking, normal use and operation of the Project is reasonably expected by
the Borrower to be prevented for a period of six consecutive months.

                 (c)   As a result of any changes in state or federal laws or as
a result of legislative or administrative action (whether state or federal) or
by final decree, judgment or order of any court or administrative body (whether
state or federal) entered after the contest thereof by the Issuer or the
Borrower in good faith, this Agreement shall have become void or unenforceable
or impossible of performance in accordance with the intent and purpose of the
parties as expressed in this Agreement, or if unreasonable burden or excessive
liability shall have been imposed with respect to the Project or the operation
thereof, including without limitation federal, state or other ad valorem,
property, income or other taxes not being imposed on the date of this Agreement
other than ad valorem taxes presently generally levied upon privately owned
property used for the same general purpose as the Project.

                                       25
<PAGE>

          (d)    Changes in the economic availability of raw materials,
operating supplies, energy sources or supplies, or facilities (including, but
not limited to, facilities in connection with the disposal of industrial wastes)
necessary for the operation of the Project shall have occurred or technological
or other changes shall have occurred which the Borrower cannot reasonably
overcome or control and which in the Borrower's reasonable judgment render the
Project uneconomic.

     To exercise such option, the Borrower shall, within 90 days following the
event giving rise to the exercise of that option, or at any time during the
continuation of the condition referred to in clause (d) above, give written
notice to the Issuer and the Trustee specifying the date on which the Borrower
will deliver the funds required for such redemption, which date shall be not
more than 90 days from the date such notice is mailed and shall make
arrangements satisfactory to the Trustee for the giving of the required notice
of redemption.

     The amount payable by the Borrower in the event of its exercise of the
option granted in this Section shall be the sum of (i) an amount of money which,
when added to the moneys and investments held to the credit of the Bond Fund,
will be sufficient pursuant to Section 5.04 and Article X of the Indenture to
pay, or provide for the payment of, the redemption price of Bonds on the
redemption date and to fully reimburse the Bank with respect to all drawings on
the Letter of Credit, such amount to be paid to the Trustee, plus (ii) an amount
of money equal to the Additional Payments accrued and to accrue until actual
final payment and redemption of the Bonds, such amount or applicable portions
thereof to be paid to the Trustee or to the Persons to whom those Additional
Payments are or will be due. The requirement of clause (ii) above with respect
to Additional Payments to accrue may be met if provisions satisfactory to the
Trustee and the Issuer are made for paying those amounts as they accrue.

     Section 6.3 Mandatory Redemption. The Borrower shall deliver or cause to be
                 --------------------
delivered to the Trustee the moneys needed to redeem the Bonds in accordance
with the mandatory redemption provisions set forth in the Bonds and the
Indenture and to fully reimburse the Bank with respect to all drawings on the
Letter of Credit with respect thereto. Whenever the Bonds are subject to
mandatory redemption pursuant to the Indenture, the Borrower will cooperate with
the Issuer and the Trustee in effecting such redemption.

     Section 6.4 Actions by Issuer. At the request of the Borrower or the
                 -----------------
Trustee, the Issuer shall take all steps required of it under the applicable
provisions of the Indenture or the Bonds to effect the redemption of all or a
portion of the Bonds pursuant to this Article.

                              (End of Article VI)

                                       26
<PAGE>

                                  ARTICLE VII

                        EVENTS OF DEFAULT AND REMEDIES

     Section 7.1 Events of Default. Each of the following shall be an Event of
                 -----------------
Default:

          (a)    Failure by the Borrower to make or cause to be made any Loan
Payment or Purchase Payment on or prior to the date on which such payment is due
and payable;

          (b)    Failure by the Borrower to observe and perform any other
agreement, term or condition contained in this Agreement and continuation of
such failure for a period of 30 days after notice thereof shall have been given
to the Borrower by the Issuer or the Trustee, or for such longer period as the
Issuer and the Trustee may agree to in writing; provided that if the failure is
other than the payment of money and is of such nature that it can be corrected
but not within the applicable period, such failure shall not constitute an Event
of Default so long as the Borrower institutes curative action within the
applicable period and diligently pursues such action to completion;

          (c)    The Borrower shall (i) apply for or consent to the appointment
of a receiver, trustee, liquidator or custodian or the like of itself or of its
property, or (ii) admit in writing its inability to pay its debts generally as
they become due, or (iii) make a general assignment for the benefit of
creditors, or (iv) be adjudicated a bankrupt or insolvent, or (v) commence a
voluntary case under the United States Bankruptcy Code, or file a voluntary
petition or answer seeking reorganization, an arrangement with creditors or an
order for relief, or seeking to take advantage of any insolvency law or file an
answer admitting the material allegations of a petition filed against it in any
bankruptcy, reorganization, or insolvency proceeding, or action shall be taken
by it for the purpose of effecting any of the foregoing, or (vi) have instituted
against it, without the application, approval or consent of the Borrower, a
proceeding in any court of competent jurisdiction, under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking in respect
of the Borrower an order for relief or an adjudication in bankruptcy,
reorganization, dissolution, winding up, liquidation, a composition or
arrangement with creditors, a readjustment of debts, the appointment of a
trustee, receiver, liquidator or custodian or the like of the Borrower or of all
or any substantial part of its assets, or other like relief in respect thereof
under any bankruptcy or insolvency law, and, if such proceeding is being
contested by the Borrower in good faith, the same shall (A) result in the entry
of an order for relief or any such adjudication or appointment or (B) remain
unvacated, undismissed and undischarged for a period of 60 days;

          (d)    Any representation or warranty made by the Borrower herein or
any statement in any report, certificate, financial statement or other
instrument furnished in connection with this Agreement or with the purchase of
the Bonds shall at any time prove to have been false or misleading in any
material respect when made or given;

          (e)    For any reason the Bonds are declared due and payable by
acceleration in accordance with Section 7.03 of the Indenture;

                                       27
<PAGE>

          (f)    The Trustee receives written notice from the Bank (i) stating
that an Event of Default as defined in the Reimbursement Agreement has occurred
and is continuing and (ii) directing the Trustee to call the Bonds for mandatory
purchase (if the Bonds are in the Weekly Mode) or to declare the principal of
the outstanding Bonds immediately due and payable; or

          (g)    The Trustee receives notice from the Bank prior to the tenth
calendar day following payment of a drawing under the Letter of Credit for
interest on Bonds which remain outstanding after the application of the proceeds
of such drawing, stating that the Letter of Credit will not be reinstated with
respect to such interest.

     The declaration of an Event of Default under paragraph (c) above, and the
exercise of remedies upon any such declaration, shall be subject to any
applicable limitations of federal bankruptcy law affecting or precluding that
declaration or exercise during the pendency of or immediately following any
bankruptcy, liquidation or reorganization proceedings.

     Section 7.2 Remedies on Default.
                 -------------------

          (a)    Whenever an Event of Default shall have happened and be
subsisting, any one or more of the following remedial steps may be taken:

                 (i)   If acceleration of the principal amount of the Bonds has
     been declared pursuant to Section 7.03 of the Indenture, the Trustee shall
     declare all Loan Payments to be immediately due and payable, whereupon the
     same shall become immediately due and payable; and

                 (ii)  The Issuer or the Trustee may pursue any and all remedies
     now or hereafter existing at law or in equity to collect all amounts then
     due and thereafter to become due under this Agreement or the Letter of
     Credit or to enforce the performance and observance of any other obligation
     or agreement of the Borrower under this Agreement.

          (b)    The Borrower covenants that, in case it shall fail to pay or
cause to be paid any Loan Payments or Purchase Payments as and when the same
shall become due and payable whether at maturity, upon redemption prior to
maturity or by acceleration or otherwise, then, upon demand of the Trustee, the
Borrower will pay to the Trustee the whole amount that then shall have become
due and payable hereunder; and, in addition thereto, such further amounts as
shall be sufficient to cover the costs and expenses of collection, including a
reasonable compensation to the Trustee and its agents, and any expenses or
liabilities incurred by the Issuer or the Trustee (including reasonable legal
fees and expenses). In case the Borrower shall fail forthwith to pay such
amounts upon such demand, the Trustee shall be entitled and empowered to
institute any actions or proceedings at law or in equity for the collection of
the sums so due and unpaid.

          (c)    In case there shall be pending proceedings for the bankruptcy
or reorganization of the Borrower under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the benefit of the creditors or the property of the Borrower, the Trustee shall
be entitled and empowered, by intervention in such proceedings or otherwise, to
file and prove a claim or claims for the whole amount due

                                       28
<PAGE>

hereunder, including interest owing and unpaid in respect thereof, and, in case
of any judicial proceedings, to file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee allowed in such judicial proceedings relative to the Borrower, its
creditors or its property, and to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute the same
after the deduction of its charges and expenses. Any receiver, assignee or
trustee in bankruptcy or reorganization is hereby authorized to make such
payments to the Issuer or the Trustee, and to pay to the Issuer or the Trustee
any amount due it for compensation and expenses, including counsel fees and
expenses incurred by it up to the date of such distribution.

     Notwithstanding the foregoing, the Trustee shall not be obligated to take
any step which in its opinion will or might cause it to expend money or
otherwise incur liability unless and until a satisfactory indemnity bond or
other indemnity satisfactory to it has been furnished to the Trustee at no cost
or expense to the Trustee. Any amounts collected as Loan Payments or applicable
to Loan Payments and any other amounts which would be applicable to payment of
Bond Service 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 or, if the outstanding Bonds have been paid and discharged in
accordance with the provisions of the Indenture, shall be paid as provided in
Article X of the Indenture for transfers of remaining amounts in the Bond Fund.

     The provisions of this Section are subject to the further limitation that
the annulment by the Trustee of its declaration that all of the Bonds are
immediately due and payable also shall constitute an annulment of any
corresponding declaration made pursuant to Subsection 7.2(a)(i); provided that
no such waiver or rescission shall extend to or affect any subsequent or other
default or impair any right consequent thereon.

     Section 7.3 Remedies Not Exclusive. No remedy conferred upon or reserved to
                 ----------------------
the Issuer or the Trustee by this Agreement 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 the Letter of Credit, 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 that right or power or shall be construed to be a waiver
thereof, but any such right and power may be exercised from time to time and as
often as may be deemed expedient. In order to entitle the Issuer or the Trustee
to exercise any remedy reserved to it in this Article, it shall not be necessary
to give any notice, other than any notice required by law or for which express
provision is made herein.

     Section 7.4 Payment of Legal Fees and Expenses. If an Event of Default
                 ----------------------------------
should occur and the Issuer or the Trustee should incur expenses, including
attorneys' fees and expenses, in connection with the enforcement of this
Agreement or the Letter of Credit or the collection of sums due thereunder, the
Borrower shall reimburse the Issuer and the Trustee, as applicable, for the
expenses so incurred, upon demand.

     Section 7.5 No Waiver. No failure by the Issuer or the Trustee to insist
                 ---------
upon the strict performance by the Borrower of any provision hereof shall
constitute a waiver of their right to strict performance and no express waiver
shall be deemed to apply to any other existing or subsequent right to remedy the
failure by the Borrower to observe or comply with any provision hereof.

                                       29
<PAGE>

     The Issuer and the Trustee may waive any Event of Default hereunder only
with the prior written consent of the Bank.

     Section 7.6 Notice of Default. The Borrower shall notify the Trustee, the
                 -----------------
Issuer and the Bank in writing immediately if it becomes aware of the occurrence
of any Event of Default hereunder or of any fact, condition or event which, with
the giving of notice or passage of time or both, would become an Event of
Default.

                             (End of Article VII)

                                       30
<PAGE>

                                 ARTICLE VIII

                                 MISCELLANEOUS

      Section 8.1 Term of Agreement. This Agreement shall be and remain in full
                  -----------------
force and effect from the Series Issue Date until such time as all of the Bonds
shall have been fully paid (or provision made for such payment) pursuant to the
Indenture, the Indenture shall have been released pursuant to Section 10.01
thereof, and all other sums payable by the Borrower under this Agreement and the
Reimbursement Agreement shall have been paid, except for obligations of the
Borrower under Section 5.10, which shall survive any termination of this
Agreement.

      Section 8.2 Notices. All notices, certificates, requests or other
                  -------
communications hereunder shall be in writing and shall be deemed to be
sufficiently given when mailed by registered or certified mail, postage prepaid,
or hand delivered or sent by express delivery service or telecopy (with
transmission confirmed) and addressed as follows:

      If to the Borrower:     Innovative Solutions and Support, LLC
                              420 Lapp Road
                              Malvern, PA 19355
                              Attention: Mr. Roger Mitchell
                              Telephone: (610) 651-5570
                              Telecopier: (610) 651-5506

      If to the Issuer:       Chester County Industrial Development Authority
                              750 North Pottstown Pike
                              Exton, PA 19341
                              Attention: Mr. Gary Smith
                              Telephone: (610) 363-6110
                              Telecopier: (610) 363-2160

      If to the Trustee:      Chase Manhattan Trust Company, National
                              Association, Trustee
                              1650 Market Street, 52nd Floor
                              Philadelphia, PA 19103
                              Attention: Capital Markets Fiduciary Services
                              Telephone: (215) 988-1327
                              Telecopier: (215) 972-1685

      If to the Remarketing
      Agent:                  PNC Capital Markets, Inc.
                              249 Fifth Avenue
                              Pittsburgh, PA 15222-2707
                              Attention: Sales Department
                              Telephone: (412) 762-4287
                              Telecopier: (412) 762-9124

                                       31
<PAGE>

        If to the Bank:       PNC Bank, National Association
                              1000 Westlakes Drive, Suite 2000
                              Berwyn, PA 19312
                              Attention: Mr. Mark D. Lavelle
                              Telephone: (610) 725-5775
                              Telecopier: (610) 725-5799

The Borrower, the Issuer, the Trustee, the Bank and the Remarketing Agent, by
notice given hereunder to the Persons listed above, may designate any further or
different addresses or telecopier numbers to which subsequent notices,
certificates, requests or other communications shall be sent.

     Section 8.3 Limitation of Liability; No Personal Liability. In the exercise
                 ----------------------------------------------
of the powers of the Issuer, the Trustee or the Remarketing Agent hereunder or
under the Indenture, including without limitation the application of moneys and
the investment of funds, neither the Issuer, the Trustee, the Remarketing Agent
nor their members, directors, officers, employees or agents shall be accountable
to the Borrower for any action taken or omitted by any of them in good faith and
with the belief that it is authorized or within the discretion or rights or
powers conferred. The Issuer, the Trustee, the Remarketing Agent and their
members, directors, officers, employees and agents shall be protected in acting
upon any paper or document believed to be genuine, and any of them may
conclusively rely upon the advice of counsel and may (but need not) require
further evidence of any fact or matter before taking any action. In the event of
any default by the Issuer hereunder, the liability of the Issuer to the Borrower
shall be enforceable only out of the Issuer's interest under this Agreement and
there shall be no other recourse for damages by the Borrower against the Issuer,
its members, directors, officers, attorneys, agents and employees, or any of the
property now or hereafter owned by it or them. All covenants, obligations and
agreements of the Issuer contained in this Agreement or the Indenture shall be
effective to the extent authorized and permitted by applicable law. No such
covenant, obligation or agreement shall be deemed to be a covenant, obligation
or agreement of any present or future member, director, officer, agent or
employee of the Issuer, and no official executing the Bonds shall be liable
personally on the Bonds or be subject to any personal liability or
accountability by reason of the issuance thereof or by reason of the covenants,
obligations or agreements of the Issuer contained in this Agreement or the
Indenture.

     Section 8.4 Binding Effect. This Agreement shall inure to the benefit of
                 --------------
and shall be binding in accordance with its terms upon the Issuer, the Borrower
and their respective successors and assigns; provided that this Agreement may
not be assigned by the Borrower (except in connection with a sale or transfer of
assets pursuant to Section 5.1 or in compliance with Section 8.9) and may not be
assigned by the Issuer except to the Trustee pursuant to the Indenture or as
otherwise may be necessary to enforce or secure payment of Bond Service. This
Agreement may be enforced only by the parties, their assignees and others who
may, by law, stand in their respective places. In addition, the Remarketing
Agent and the Bank are hereby explicitly recognized as third party beneficiaries
of this Agreement.

     Section 8.5 Amendments. Except as otherwise expressly provided in this
                 ----------
Agreement or the Indenture, subsequent to the issuance of the Bonds and unless
and until all conditions provided for in the Indenture for release of the
Indenture having been met, this Agreement may not be effectively amended,
modified or terminated except by an instrument in

                                       32
<PAGE>

writing signed by the Borrower and the Issuer, consented to by the Trustee, and
in accordance with the provisions of Article IX of the Indenture, as applicable.

     Section 8.6  Counterparts. This Agreement may be executed in any number of
                  ------------
counterparts, each of which shall be regarded as an original and all of which
shall constitute one and the same instrument.

     Section 8.7  Severability. If any provision of this Agreement is determined
                  ------------
by a court to be invalid or unenforceable, such determination shall not affect
any other provision hereof, each of which shall be construed and enforced as if
the invalid or unenforceable portion were not contained herein. Such invalidity
or unenforceability shall not affect any valid and enforceable application
thereof, and each such provision shall be deemed to be effective, operative and
entered into in the manner and to the full extent permitted by applicable law.

     Section 8.8  Governing Law. This Agreement shall be deemed to be a contract
                  -------------
made under the laws of the Commonwealth of Pennsylvania and for all purposes
shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.

     Section 8.9  Assignment. The Borrower shall not assign this Agreement or
                  ----------
any interest of the Borrower herein, either in whole or in part, without the
prior written consent of the Trustee, which consent shall be given if the
following conditions are fulfilled: (i) the assignee assumes in writing all of
the obligations of the Borrower hereunder; (ii) in the opinion of counsel to the
Borrower, neither the validity nor the enforceability of this Agreement shall be
adversely affected by such assignment; (iii) the Project shall continue in the
opinion of Bond Counsel to be a "project" as such term is defined in the Act
after such assignment; (iv) such assignment shall not, in the opinion of Bond
Counsel, have an adverse effect on the exclusion from gross income for federal
income tax purposes of interest on the Bonds; and (v) consent by the Issuer,
which consent shall not be unreasonably withheld. For purposes of this Section,
no foreclosure by the Bank, or conveyance in lieu thereof, or other transfer to
the Bank or an affiliate of the Bank, shall, of itself, be deemed an assignment
for purposes of this Section or a sale, transfer, assignment or other
disposition for purposes of Section 5.2. Subject to the foregoing, the terms
"Issuer", "Borrower", "Trustee" and "Remarketing Agent" shall, where the context
requires, include the respective successors and assigns of such Persons. No
assignment pursuant to this Section shall release the Borrower from its
obligations under this Agreement, unless the Bank has consented to such release.

     Section 8.10 Receipt of Indenture. The Borrower hereby acknowledges that it
                  --------------------
has received an executed copy of the Indenture and is familiar with its
provisions, and agrees that it is subject to and bound by the terms thereof and
it will take all such actions as are required or contemplated of it under the
Indenture to preserve and protect the rights of the Trustee and of the Holders
and the Bank thereunder and that it will not take any action which would cause a
default thereunder. Any redemption of Bonds prior to maturity shall be effected
as provided in the Indenture.

                             (End of Article VIII)

                                       33
<PAGE>

     IN WITNESS WHEREOF, the Issuer and the Borrower, intending to be legally
bound, have caused this Agreement to be duly executed in their respective names,
all as of the date first above written.

                                        CHESTER COUNTY INDUSTRIAL
                                        DEVELOPMENT AUTHORITY

Attest: _________________________       By: ________________________________
Name:                                   Name:
Title:                                  Title:

                                        INNOVATIVE SOLUTIONS AND
                                        SUPPORT, LLC, by its sole Member and
                                        Manager INNOVATIVE SOLUTIONS
                                        AND SUPPORT, INCORPORATED

                                        By: ________________________________
                                        Name: James Reilly
                                        Title: Chief Financial Officer

     This execution page is part of the Loan Agreement dated as of August 1,
2000 between Chester County Industrial Development Authority and Innovative
Solutions and Support, LLC.

                                       34
<PAGE>

                                   EXHIBIT A

                                 PROJECT SITE
                              [Legal Description]

                                      A-1
<PAGE>

                                   EXHIBIT B

                 INNOVATIVE SOLUTIONS AND SUPPORT, LLC PROJECT
                 ---------------------------------------------

                 The Project consists of an approximately 44,800 square foot
manufacturing facility and related equipment to be located on approximately 7.5
acres of land at 710 Pennsylvania Drive (Lot 7) in the Township of Upper
Uwchlan, Chester County, Pennsylvania, to be acquired, constructed and equipped
by the Borrower and operated by the Borrower as a facility for the manufacture
of airplane parts.

                 Sources and Uses of Funds to Acquire Project
                 --------------------------------------------
<TABLE>
<CAPTION>
                                                                         Other
                                                 Bond                  Borrowed
                                               Proceeds                 Funds            Equity             Total
                                               --------                --------          ------             -----
<S>                                            <C>                     <C>               <C>              <C>
Acquisition of Land                             $  200,000                   --         $  805,750         $1,005,750
New Construction                                 4,048,300                   --            755,950          4,804,250
Acquisition of New Equipment                            --                   --                 --                 --
Costs of Issuance                                   86,700                                 103,300            190,000
                                               -----------             --------          ---------        -----------
Total                                           $4,335,000                   --         $1,665,000         $6,000,000
</TABLE>

                                      B-1
<PAGE>

                                   EXHIBIT C

                         FORM OF DISBURSEMENT REQUEST
                         ----------------------------

         STATEMENT NO. ________ REQUESTING DISBURSEMENT OF FUNDS FROM
         PROJECT FUND PURSUANT TO SECTION 3.4 OF THE LOAN AGREEMENT
         DATED AS OF AUGUST 1, 2000 ("LOAN AGREEMENT") BETWEEN CHESTER
         COUNTY INDUSTRIAL DEVELOPMENT AUTHORITY ("ISSUER") AND
         INNOVATIVE SOLUTIONS AND SUPPORT, LLC ("BORROWER").

         The terms used herein shall have the meanings specified for such terms
in or pursuant to the Loan Agreement. Pursuant to Section 3.4 of the Loan
Agreement, the undersigned Authorized Representative of the Borrower hereby
requests and authorizes the Trustee to pay to the Borrower or to the Person(s)
listed on the Disbursement Schedule hereto out of the moneys deposited in the
Project Fund the aggregate sum of $___________ to reimburse the Borrower or to
pay such Person(s), as indicated in the Disbursement Schedule, for the items of
Project Cost listed in the Disbursement Schedule.

         In connection with the foregoing request and authorization,the
undersigned hereby certifies that:

         (a)  Each item for which disbursement is requested hereunder is due, is
              an item of incurred Project Cost properly reimbursable or payable
              out of the Project Fund in accordance with the terms and
              conditions of the Loan Agreement and none of those items has
              formed the basis for any disbursement heretofore made from the
              Project Fund.

         (b)  Each such item is or was necessary or appropriate in connection
              with the acquisition, construction or equipment of the Project.

         (c)  Each such item is as described in the information statement filed
              by the Issuer in connection with the issuance of the Bonds (as
              defined in the Loan Agreement), as required by Section 149(e) of
              the Code; provided that if any such item is not as described in
              that information statement, attached hereto is an opinion of Bond
              Counsel that such disbursement will not result in the interest on
              the Bonds becoming included in the gross income of the Holders for
              federal income tax purposes.

         (d)  The reimbursement or payment of the Project Costs requisitioned
              hereby will comply with the restrictions contained in Sections
              3.4, 5.11 and 5.12 of the Loan Agreement.

                                      C-1
<PAGE>

         (e)  This statement and all exhibits hereto, including the Disbursement
              Schedule, shall constitute full warrant, protection and authority
              to the Trustee for its actions taken pursuant hereto.

Dated: ________________

                                      INNOVATIVE SOLUTIONS AND SUPPORT, LLC

                                      By: _______________________________
                                               Authorized Representative

Approved by PNC BANK, NATIONAL ASSOCIATION

By:_________________________
     Authorized Signatory

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

                             DISBURSEMENT SCHEDULE

                  TO STATEMENT NO. ___________ REQUESTING AND
                  AUTHORIZING DISBURSEMENT OF FUNDS FROM PROJECT FUND
                  PURSUANT TO SECTION 3.4 OF THE LOAN AGREEMENT DATED
                  AS OF AUGUST 1, 2000 BETWEEN CHESTER COUNTY
                  INDUSTRIAL DEVELOPMENT AUTHORITY AND INNOVATIVE
                  SOLUTIONS AND SUPPORT, LLC.

                    PAYEE               AMOUNT                PURPOSE
                    -----               ------                -------

                                      C-2
<PAGE>

                                   EXHIBIT D

                           NONDISCRIMINATION CLAUSE

         During the term of this contract, the Borrower agrees as to itself and
each tenant of the Project controlling, controlled by or under common control
with the Borrower (each of the Borrower and each such tenant, a "Contractor") as
follows:

         1. Contractor shall not discriminate against any employee, applicant
for employment, independent contractor or any other person because of race,
color, religious creed, handicap, ancestry, national origin, age or sex.
Contractor shall take affirmative action to insure that applicants are employed,
and that employees or agents are treated during employment, without regard to
their race, color, religious creed, handicap, ancestry, national original age or
sex. Such affirmative action shall include, but not limited to: employment,
upgrading, demotion or transfer, recruitment or recruitment advertising; layoff
or termination; rates of pay or other forms of compensation; and selection for
training. Contractor shall post in conspicuous places, available to employees,
applicants for employment and other persons, a notice to be provided by the
contracting agency setting forth the provisions of this nondiscrimination
clause.

         2. Contractor shall in advertisements or requests for employment placed
by it or on its behalf, state that all qualified applicants will receive
consideration for employment without regard to race, color, religious creed,
handicap, ancestry, national origin, age or sex.

         3. Contractor shall send to each labor union or workers' representative
with which it has a collective bargaining agreement or other contract or
understanding, a notice advising said labor union or workers' representative of
its commitment to this nondiscrimination clause. Similar notice shall be sent to
every other source of recruitment regularly utilized by Contractor.

         4. It shall be no defense to a finding of noncompliance with this
nondiscrimination clause that Contractor had delegated some of its employment
practices to any union, training program or other source of recruitment which
prevents it from meeting its obligations. However, if the evidence indicates
that Contractor was not on notice of the third-party discrimination or made a
good faith effort to correct it, such factor shall be considered a mitigating
circumstance in determining appropriate sanctions.

         5. Where the practices of a union or of any training program or other
program of recruitment will result in the exclusion of minority group persons,
so that Contractor will be unable to meet its obligations under this
nondiscrimination clause, Contractor shall then employ and fill vacancies
through other nondiscriminatory employment procedures.

         6. Contractor shall comply with all applicable state and federal laws
prohibiting discrimination in hiring or employment opportunities. In the event
of Contractor's noncompliance with the nondiscrimination clause of this contract
or with any such laws, the Loan Payments may be accelerated, and Contractor may
be declared temporarily ineligible for further Commonwealth of Pennsylvania
contracts, and other sanctions may be imposed and remedies invoked.

         7. Contractor shall furnish all necessary employment documents and
records to, and permit access to its books, records and accounts by, the
contracting agency for purposes

                                      D-1
<PAGE>

of investigation to ascertain compliance with the provisions of this clause. If
Contractor does not possess documents or records reflecting the necessary
information requested, it shall furnish such information on reporting forms
supplied by the contracting agency.

         8.  Contractor shall actively recruit minority subcontractors and women
subcontractors or subcontractors with substantial minority or women
representation among their employees.

         9.  Contractor shall include the provisions of this nondiscrimination
clause in every subcontract, so that such provisions will be binding upon each
subcontractor.

         10. Contractor obligations under this clause are limited to
Contractor's facilities within Pennsylvania or, where the contract is for
purchase of goods manufactured outside of Pennsylvania, the facilities at which
such goods are actually produced.

                                      D-2
<PAGE>

"WORD"

Long Document Name:               LOAN AGREEMENT - CHESTER COUNTY INDUSTRIAL
                                  DEVELOPMENT AUTHORITY AND INNOVATIVE
                                  SOLUTIONS & SUPPORT

System Document Number:           54609 - PTE

Additional Information:           converted from i:\wpd\loan agreement.doc and
                                  formatted
================================================================================
You will have line numbers down the side of each draft document unless you
indicate otherwise. 1.5 line spacing will be used on all drafts unless you
indicate otherwise.

Return To:                                                    Location:
           _______                                                      _______

Return:   _____draft     _____final     _____redlined     _____stapled

Line Spacing:     _____ same     _____ 1.0     _____ 1.5     _____ 2.0

Duplicate: _____ yes _____ no (New Client/Matter No: _        )
                                                     ---------
Save New Version For Redlining Prior To Revisions:  _____ yes _____ no

Caret Method _____  Standard Method _____
================================================================================
Notes:

Origination Date:     March 23, 2000

Author's Initials:    pte

Last Revised By:      aml/kad (toc only)/pte/lel/pte/kmc(@tr145)/laz/SJG/nb/
                      pte/nb

Last Edit Date:       3/24;3/24;3-27; 3-28;4-27;7-20;7-28;7-31;8-1

                                       3

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