Lackawanna Letter of Credit

Based on our discussion last week, here is some information under the
Lackawanna letter of credit. Under the letter of credit, the stated amount
is increased $4.5 million upon receipt from the trustee of notification of
the Completion Date. Completion Date is defined in the LC as in the
Indenture. However, this definition is exactly the same as used in the
subordinated loan agreement. I have attached my analysis of the requirements
for the Completion Date under the Loan Agreement.

Completion requires, among other things, the production within a 24 day
period of 3,000 units with certain quality specifications. Approval of these
specifications must be made by the independent engineer. To date, we have
taken a wait and see approach regarding completion. Please review and advise
on your thoughts on strategy going forward. Obviously, we want to hold them
to the letter of the agreement. The LC expires on June 30 and it does not
appear that under the loan agreement that we are required to fund after the
expiration of the letter of credit.

If you need the pertinent documents, I have them in my office.

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