-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MTDikKz6qwUqHTPxtw3KHZAcpax/Zi6EHFqPFnasexgtW0L7RN6iREVB9XmnIrnG 9B005IAHXESrK1donpw5Zg== 0000905729-98-000224.txt : 19981118 0000905729-98-000224.hdr.sgml : 19981118 ACCESSION NUMBER: 0000905729-98-000224 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HASTINGS MANUFACTURING CO CENTRAL INDEX KEY: 0000046109 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 380633740 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03574 FILM NUMBER: 98752604 BUSINESS ADDRESS: STREET 1: 325 N HANOVER ST CITY: HASTINGS STATE: MI ZIP: 49058 BUSINESS PHONE: 6169452491 MAIL ADDRESS: STREET 1: 325 NORTH HANOVER STREET STREET 2: 325 NORTH HANOVER STREET CITY: HASTINGS STATE: MI ZIP: 49058 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 =============================================================================== FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended Commission File Number September 30, 1998 1-3574 HASTINGS MANUFACTURING COMPANY (Exact Name of Registrant as Specified in its Charter) MICHIGAN 38-0633740 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 325 NORTH HANOVER STREET HASTINGS, MICHIGAN 49058 (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, Including Area Code: 616-945-2491 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.
OUTSTANDING AT CLASS OCTOBER 23, 1998 ----- ---------------- Common stock, $2 par value 783,926 shares
=============================================================================== Hastings Manufacturing Company and Subsidiaries Contents ==================== PART I - FINANCIAL INFORMATION PAGE Item 1 - Financial Statements: Report on Review by Independent Certified Public Accountants 3 Condensed Consolidated Balance Sheets - September 30, 1998 and December 31, 1997 4-5 Condensed Consolidated Statements of Income - Three Months and Nine Months Ended September 30, 1998 and 1997 6 Condensed Consolidated Statements of Cash Flows - Nine Months Ended September 30, 1998 and 1997 7-8 Notes to Condensed Consolidated Financial Statements 9-11 Review by Independent Certified Public Accountants 12 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 13-20 Item 3 - Quantitative and Qualitative Disclosure About Market Risk 20 PART II - OTHER INFORMATION Item 6 - Exhibits and Reports on Form 8-K 21-22 -2- Report on Review by Independent Certified Public Accountants =========================== Board of Directors Hastings Manufacturing Company Hastings, Michigan We have reviewed the accompanying condensed consolidated balance sheets of Hastings Manufacturing Company and subsidiaries as of September 30, 1998, and the related condensed consolidated statements of income for the three- month and nine-month periods ended September 30, 1998 and 1997, and cash flows for the nine-month period ended September 30, 1998 and 1997, included in the accompanying Securities and Exchange Commission Form 10-Q for the period ended September 30, 1998. These condensed consolidated financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet as of December 31, 1997, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended (not presented herein). In our report dated February 27, 1998, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, 1997, is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived. /s/ BDO Seidman, LLP BDO Seidman, LLP Grand Rapids, Michigan October 23, 1998 -3- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Hastings Manufacturing Company and Subsidiaries Condensed Consolidated Balance Sheets ===========================
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ ASSETS CURRENT ASSETS Cash $ 339,854 $ 558,172 Accounts receivable, less allowance for possible losses of $175,000 and $215,000 6,110,314 5,148,906 Refundable income taxes 5,205 13,475 Inventories: Finished products 7,370,245 7,460,534 Work in process 558,286 572,307 Raw materials 2,296,231 1,239,657 Prepaid expenses and other assets 84,321 75,669 Future income tax benefits 2,391,463 2,351,687 Other current assets - 958,517 -------------- ------------- TOTAL CURRENT ASSETS 19,155,919 18,378,924 -------------- ------------- PROPERTY AND EQUIPMENT Land and improvements 637,241 658,243 Buildings 4,793,922 4,633,937 Machinery and equipment 18,810,548 18,180,840 -------------- ------------- 24,241,711 23,473,020 Less accumulated depreciation 16,151,160 15,156,120 -------------- ------------- NET PROPERTY AND EQUIPMENT 8,090,551 8,316,900 -------------- ------------- PREPAID PENSION ASSET (Note 2) 2,675,688 - INTANGIBLE PENSION ASSET 815,189 815,189 -4- FUTURE INCOME TAX BENEFITS 5,052,764 5,828,923 OTHER ASSETS 11,966 50,395 -------------- ------------- $ 35,802,077 $ 33,390,331 ============== =============
-5- Hastings Manufacturing Company and Subsidiaries Condensed Consolidated Balance Sheets ===========================
SEPTEMBER 30, DECEMBER 31, 1998 1997 ------------- ------------ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable to banks $ 1,100,000 $ 3,400,000 Accounts payable 1,397,290 1,475,098 Accruals: Compensation 744,386 494,781 Pension plan contribution - 608,786 Taxes other than income 115,173 172,854 Income taxes 109,656 - Miscellaneous 417,598 217,731 Current portion of postretirement benefit obligation 1,044,175 1,110,442 Current maturities of long-term debt (Note 2) 1,320,000 1,462,500 -------------- --------------- TOTAL CURRENT LIABILITIES 6,248,278 8,942,192 LONG-TERM DEBT, less current maturities (Note 2) 5,280,000 565,625 PENSION AND DEFERRED COMPENSATION OBLIGATIONS, less current portion 3,222,993 3,243,618 POSTRETIREMENT BENEFIT OBLIGATION, less current portion 14,827,367 15,318,770 -------------- --------------- TOTAL LIABILITIES 29,578,638 28,070,205 -------------- --------------- STOCKHOLDERS' EQUITY Preferred stock, $2 par value, authorized and unissued 500,000 shares - - Common stock, $2 par value, 1,750,000 shares authorized; 783,926 and 780,626 shares issued and outstanding 1,567,852 1,561,252 Additional paid-in capital 245,532 145,788 Retained earnings 6,804,525 5,793,219 -6- Accumulated other comprehensive income (Note 4): Cumulative foreign currency translation adjustment (964,992) (750,655) Pension liability adjustment (1,429,478) (1,429,478) -------------- --------------- TOTAL STOCKHOLDERS' EQUITY 6,223,439 5,320,126 -------------- --------------- $ 35,802,077 $ 33,390,331 ============== ===============
See accompanying independent accountants' review report and notes to condensed consolidated financial statements. -7- Hastings Manufacturing Company and Subsidiaries Condensed Consolidated Statements of Income ===========================
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- SEPTEMBER 30, 1998 1997 1998 1997 ---- ---- ---- ---- NET SALES $ 9,255,806 $ 8,838,664 $ 29,829,994 $ 27,193,053 COST OF SALES 6,503,789 5,990,310 20,538,990 18,519,107 ------------- -------------- --------------- -------------- Gross profit 2,752,017 2,848,354 9,291,004 8,673,946 ------------- -------------- --------------- -------------- OPERATING EXPENSES Advertising 50,234 107,343 240,288 306,485 Selling 717,858 749,305 2,311,676 2,282,202 General and administrative 1,417,429 1,469,236 4,365,661 4,401,980 ------------- -------------- --------------- -------------- 2,185,521 2,325,884 6,917,625 6,990,667 ------------- -------------- --------------- -------------- Operating income 566,496 522,470 2,373,379 1,683,279 ------------- -------------- --------------- -------------- OTHER EXPENSE (INCOME) Interest expense 114,223 127,899 336,793 385,022 Interest income (16,205) (8,670) (35,982) (31,449) Other, net (5,060) 17,892 (5,261) 13,516 ------------- -------------- --------------- -------------- 92,958 137,121 295,550 367,089 ------------- -------------- --------------- -------------- Income before income tax expense 473,538 385,349 2,077,829 1,316,190 INCOME TAX EXPENSE 218,000 153,000 879,000 526,000 ------------- -------------- --------------- -------------- NET INCOME $ 255,538 $ 232,349 $ 1,198,829 $ 790,190 ============= ============== =============== ============== BASIC AND DILUTED NET INCOME PER SHARE OF COMMON STOCK (Notes 3 and 5) $.33 $.30 $1.55 $1.03 DIVIDENDS PER SHARE OF COMMON STOCK (Note 5) $.08 $.075 $.235 $.175
See accompanying independent accountants' review report and notes to condensed consolidated financial statements. -8- Hastings Manufacturing Company and Subsidiaries Condensed Consolidated Statements of Cash Flows ===========================
NINE MONTHS ENDED SEPTEMBER 30, 1998 1997 ------------- ------------ OPERATING ACTIVITIES Net income $ 1,198,829 $ 790,190 Adjustments to reconcile net income to net cash from (for) operating activities: Depreciation 1,135,743 1,013,017 Deferred income taxes 748,000 447,000 Gain on sale of property and equipment (1,980) (9,534) Change in postretirement benefit obligation (557,670) (676,602) Changes in operating assets and liabilities: Accounts receivable (1,003,629) (630,906) Refundable income taxes - 15,282 Inventories (1,049,819) 205,810 Prepaid expenses and other current assets (1,299) 28,750 Other assets (2,637,259) (41,091) Accounts payable and accruals (77,003) (191,315) ------------- --------------- Net cash from (for) operating activities (2,246,087) 950,601 ------------- --------------- INVESTING ACTIVITIES Capital expenditures (1,010,120) (1,300,416) Proceeds from sale of property and equipment 17,972 5,386 Release of filter sale escrow funds 958,517 - ------------- --------------- Net cash for investing activities (33,631) (1,295,030) ------------- --------------- FINANCING ACTIVITIES Proceeds from issuance of notes payable to banks 6,000,000 5,300,000 Principal payments on notes payable to banks (8,300,000) (5,100,000) Proceeds from issuance of long-term debt to banks 6,600,000 - Principal payments on long-term debt (2,028,125) (1,096,875) Dividends paid (184,223) (136,669) ------------- --------------- -9- Net cash from (for) financing activities 2,087,652 (1,033,544) ------------- --------------- EFFECT OF EXCHANGE RATE CHANGES ON CASH (26,252) (3,540) ------------- --------------- NET DECREASE IN CASH (218,318) (1,381,513) CASH, beginning of period 558,172 1,457,783 ------------- --------------- CASH, end of period $ 339,854 $ 76,270 ============= =============== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest $ 372,709 $ 389,546 Income taxes, net of refunds 5,749 15,205
See accompanying independent accountants' review report and notes to condensed consolidated financial statements. -10- Hastings Manufacturing Company and Subsidiaries Notes to Condensed Consolidated Financial Statements ========================== NOTE 1 In the opinion of the management of Hastings Manufacturing Company and subsidiaries (the "Company"), the accompanying unaudited condensed consolidated financial statements include all normal recurring adjustments considered necessary to present fairly the financial position as of September 30, 1998, and the results of operations for the three months and nine months ended September 30, 1998 and 1997, and cash flows for the nine months ended September 30, 1998 and 1997. The results of operations for the nine months ended September 30, 1998, are not necessarily indicative of the anticipated results for all of 1998. The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances, transactions and stockholdings have been eliminated. The accompanying consolidated financial statements are condensed and do not contain all of the information and footnote disclosures required by generally accepted accounting principles in a complete set of financial statements. NOTE 2 In late August 1998, the Company entered into a loan agreement with its primary lender which provides for an unsecured $6,600,000 term loan and an unsecured $3,000,000 credit authorization for revolving credit loans and letters of credit. The entire $6,600,000 was borrowed and was used to additionally fund the Company's defined benefit plans, to pay off the previously outstanding long-term debt and to reduce short-term notes payable. The additional funding to the Company's defined benefit plans resulted in the $2,675,688 prepaid pension asset in the accompanying condensed consolidated balance sheet at September 30, 1998. The term loan is payable in quarterly principal payments of $330,000, plus interest. Under the agreement, the Company's short-term line with its primary lender was reduced from $5,000,000 to $3,000,000. Total short-term lines available to the Company as of September 30, 1998 totaled $5,200,000, of which $4,100,000 was unused. Under the new loan agreement, interest for both the short- and long- term borrowings is based on three different pricing options: a negotiated rate, a eurodollar rate (LIBOR plus a factor) and a floating rate (greater of the federal funds rate plus a factor or the prime rate). The effective eurodollar rate and floating rate -11- are increased by a margin rate, ranging from 1.50% to 2.00%, which is based upon certain Company performance parameters. In connection with the $6,600,000 term loan agreement, the Company entered into an interest rate swap agreement essentially to fix the interest rate on these long-term borrowings at 5.95% plus the above-mentioned margin rate, resulting in an interest rate range of 7.45% to 7.95%. As of September 30, 1998, the interest rate in effect on these long-term borrowings was 7.70%. NOTE 3 In February 1997, Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share," was issued. This Statement simplifies the standards for computing earnings per share (EPS) and makes them comparable to international EPS standards. It requires the presentation of both "basic" and "diluted" EPS on the face of the income statement with a supplementary reconciliation of the numerators and denominators used in the calculations. The Statement was effective for financial statements issued for periods after December 15, 1997, including interim periods. A reconciliation of the numerators and denominators used in the "basic" and "diluted" EPS calculations follows:
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- SEPTEMBER 30, 1998 1997 1998 1997 ---- ---- ---- ---- Numerator: Net income used for both "basic" and "diluted" EPS calculation $ 255,538 $ 232,349 $ 1,198,829 $ 790,190 ============ ============ =========== =========== Denominator: Weighted average shares outstanding for the period - used for "basic" EPS calculation 771,496 768,516 771,496 768,516 Dilutive effect of stock options 836 - 1,066 - ------------ ------------ ----------- ----------- Weighted average shares outstanding for the period - used for "diluted" EPS calculation $ 772,332 $ 768,516 $ 772,562 $ 768,516 ============ ============ =========== ===========
-12- SFAS No. 128 had no effect on EPS for the three-month and nine-month periods ended September 30, 1997. All outstanding shares have been adjusted for the two-for-one stock split discussed in Note 5. NOTE 4 SFAS No. 130, "Reporting Comprehensive Income," issued in September 1997, was adopted by the Company during the first quarter of 1998. This Statement requires that all components of comprehensive income and total comprehensive income be reported in one of the following: a statement of income and comprehensive income, a statement of comprehensive income or a statement of stockholders' equity. The Company has elected to report comprehensive income in its consolidated statement of stockholders' income (which is not presented for interim reporting purposes). Comprehensive income is comprised of net income and all changes to stockholders' equity, except those due to investments by owners and distributions to owners. For interim reporting purposes, SFAS 130 requires disclosures of total comprehensive income. Comprehensive income and its components consist of the following:
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- SEPTEMBER 30, 1998 1997 1998 1997 ---- ---- ---- ---- Net income $ 255,538 $ 232,349 $ 1,198,829 $ 790,190 Other comprehensive income, net of tax: Foreign currency translation adjustments (124,376) (21,424) (214,337) (49,538) Minimum pension liability adjustment - - - - ----------- ----------- ------------ ----------- Other comprehensive income (124,376) (21,424) (214,337) (49,538) ----------- ----------- ------------ ----------- Comprehensive income $ 131,162 $ 210,925 $ 984,492 $ 740,652 =========== =========== ============ ===========
Accumulated other comprehensive income totaled $2,394,470 and $2,180,133 at September 30, 1998 and December 31, 1997, respectively. -13- NOTE 5 On February 17, 1998, the Board of Directors authorized a two-for- one stock split, effected in the form of a stock dividend, effective March 23, 1998, payable to shareholders of record on March 2, 1998. All references to number of common shares, except shares authorized, and to all per share information have been adjusted to reflect the stock split on a retroactive basis. -14- Hastings Manufacturing Company and Subsidiaries Review by Independent Certified Public Accountants =========================== The September 30, 1998 and 1997, condensed consolidated financial statements included in this filing on Form 10-Q have been reviewed by BDO Seidman, LLP, Independent Certified Public Accountants, in accordance with established professional standards and procedures for such a review. -15- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS As noted in the Company's 1997 Annual Report, 1997 reflected four quarters of post-filter operating results following the sale of the Company's filter operations. As such, no 1998 versus 1997 comparisons are impacted by that event. Certain comparisons between 1997 and 1996, however, continued to be impacted by the transition period following the filter assets and operations sale. While most of the transition effects were phased out by the third quarter of 1996, certain items, as detailed in previous filings, carried through the 1996 year end. RESULTS OF OPERATIONS NET SALES Net sales in the third quarter of 1998 increased $417,142, or 4.7%, from $8,838,664 in the third quarter of 1997 to $9,255,806. Net sales for the nine-month period ended September 30, 1998 increased $2,636,941, or 9.7%, from $27,193,053 in 1997 to $29,829,994. The slower growth in the third quarter reflects a reduced trend of piston ring sales to the domestic aftermarket, combined with a slight reduction in the Company's original equipment volume. The domestic aftermarket volume was adversely impacted during the quarter by inventory shortages that followed the strong sales volume through the first half of this year. The Company is currently addressing that issue in an effort to minimize its effects in future periods. The original equipment volume was impacted slightly by a work stoppage at one of the Company's primary accounts early in the current quarter. The growth for the nine-month period, however, continues to reflect increases in piston ring sales volume within all areas of the business; domestic aftermarket, private brand and export. The growth in the domestic aftermarket is the result of the continued success of the Company's increased focus in this aspect of the piston ring market. The growth in the private brand area is the result of the increased volume to several major customers. The increase in the export area is the result of the on-going development and growth of the Company's direct export efforts, as detailed in previous reports. Net sales in the third quarter of 1997 decreased $282,157, or 3.1%, from the third quarter of 1996. Net sales for the nine-month period ended September 30, 1997 decreased $4,069,803, or 13.0%, from the same period in 1996. Filter operations accounted for $879,000 in net sales volume for the third quarter of 1996, and $5,785,000 through the first nine months of that same year, whereas no filter volume is included in the 1997 results. As such, net sales from the remaining products in 1997 increased $597,000, or 7.2%, and $1,715,000, or 6.7%, for the comparative third quarter and nine- month periods, respectively. -16- COST OF SALES AND GROSS PROFIT Cost of sales in the third quarter of 1998 increased $513,479, or 8.6%, from $5,990,310 in the third quarter of 1997, to $6,503,789. For the first nine months of 1998, cost of sales increased $2,019,883, or 10.9%, from $18,519,107 to $20,538,990. The increased cost of sales reflects the corresponding increase in net sales. The gross profit margins decreased for the third quarter of 1998, from 32.2% for the third quarter of 1997, to 29.7%. For the first nine months of 1998, gross margins also decreased, from 31.9% for the first nine months of 1997, to 31.1%. The decreases in the gross profit margins for both periods noted are the result of a sales mix change. The Company has maintained a significant increase in export piston ring activity throughout the year. The export piston ring sales market has traditionally generated a lower gross profit margin than domestic sales, due to the lower level of operating expenses that are required to service domestic sales volume. This item, when combined with the previously noted lower relative increase in domestic aftermarket piston ring sales and the slight reduction in private brand sales during the third quarter of 1998, resulted in decreased gross profit margins for both the third quarter and nine-month periods in 1998. In addition, during the third quarter of 1998, there was an increase in certain product-driven distribution and support operating costs that are included in cost of sales. This too had the effect of reducing the gross profit margins for the third quarter and nine months ending September 30, 1998, in comparison to the same periods in 1997. Through the first nine months of 1998, the individual product cost factors (material, labor and overhead) have changed slightly from 1997. While material costs have declined slightly, labor rates have increased by 3.0% in 1998. Overhead rates applied to these labor rates have declined, however, resulting in a minimal total cost per unit change. Cost of sales during the third quarter of 1997 decreased $625,692, or 9.5%, from the third quarter of 1996. For the first nine months of 1997, cost of sales decreased by $4,353,770, or 19.0%, from the same period in 1996. The reduced cost of sales totals primarily reflect the absence of any filter related activity in 1997. The gross profit margin for the first nine months of 1997 improved to 31.9% from 26.8% in the corresponding period in 1996. The 1996 results were affected by the transition agreement that the Company had with the purchaser of the Company's filter operations. This agreement resulted in minimal gross profit being generated on filter products in 1996. In addition to the specific filter production costs that are included in the 1996 results, certain product-driven distribution and support operating costs are included in cost of sales. Following the 1996 relocation from the Knoxville facility, these operating costs decreased from $2,805,000 in the first nine months of 1996, to $1,997,000 in the first nine months of 1997. -17- OPERATING EXPENSES Total operating expenses for the third quarter of 1998 decreased $140,363, or 6.0%, from $2,325,884 in the third quarter of 1997, to $2,185,521. For the first nine months of 1998 these expenses decreased $73,042, or 1.0%, from $6,990,667 to $6,917,625. Advertising costs for the third quarter of 1998 declined $57,109, or 53.2%, from the third quarter of 1997. This decrease reflects the further absorption of biannual product catalog expenses in 1997, combined with a decrease in cooperative advertising costs during the third quarter of 1998. Advertising costs for the first nine months of 1998 decreased $66,197, or 21.6%, from the same period in 1997, reflecting the effects of the aforementioned items. Selling expenses for the third quarter of 1998 decreased $31,447, or 4.2%, from the third quarter of 1997. This decrease is primarily the result of reductions in various sales personnel expenses. Selling costs for the first nine months of 1998 increased $29,474, or 1.3%, from the same period in 1997. This is primarily due to an increase in the volume-driven agency commissions costs, combined with a slight increase in sales promotion expense. General and administrative costs decreased $51,807, or 3.5%, from the third quarter of 1997. This decrease reflects the inclusion of costs associated with the completion of the restructuring of the Company's Canadian subsidiary in 1997, combined with a decrease in various salaried personnel costs during the third quarter of 1998. General and administrative costs for the first nine months of 1998 decreased $36,319, or 0.8%, from the same period in 1997. This decrease reflects the inclusion of the aforementioned 1997 restructuring costs, combined with cost savings that were attained in 1998 as a result of the amendment to the postretirement benefit plan in the second quarter of 1997. These reductions were offset in part by slight increases in various salaried personnel expenses, and in the accounts receivable allowance for possible losses. The personnel costs include approximately $50,000 of severance related to staffing reductions in early 1998. It should be noted that the Company's financial results have been impacted by the devaluation of the Canadian dollar against the U.S. dollar. The relative Canadian dollars of expenses at the Company's Canadian subsidiary have remained consistent over the time period reviewed in this report. The devaluation of the Canadian dollar, however, has resulted in the recognition of lower relative current year expenses when the Canadian financial statements are translated into U.S. dollars for consolidation purposes. As a result of this devaluation, selling expenses were approximately $11,000 and $35,000 lower during the third quarter and nine- month period of 1998, respectively, in comparison to the same periods in 1997. General and administrative expenses were approximately $10,000 and $30,000 lower for the same periods noted. Canadian advertising expenses are insignificant to the Company's consolidated financial statements, and as such were not materially affected by this devaluation. Total operating expenses for both the third quarter and first nine months of 1997 decreased significantly from the comparative periods in 1996. -18- These reductions reflect the full elimination of any filter sensitive expenses by the Company in 1997, as well as the favorable results of the restructuring plan as reported in the Company's 1996 Annual Report. OTHER EXPENSES (INCOME) Other expenses netted to $92,958 for the third quarter of 1998, compared to $137,121 for the third quarter of 1997. For the first nine months of 1998, these expenses netted to $295,550, compared to $367,089 for the first nine months of 1997. Short-term borrowings in 1998 remained above the 1997 levels through late August of this year, reflecting increased working capital requirements as driven by the net sales increase. Increased interest costs associated with these short-term borrowings, however, were offset by the lower interest costs realized from the lower long-term debt obligations through late August. The net effect was a reduction in interest expense in both the third quarter and the first nine months of 1998. As discussed in "Liquidity and Capital Resources," the Company restructured its debt obligations in late August of this year. This debt restructuring had a minimal effect on the interest expense amounts noted for both the third quarter and nine-month periods of 1998. The 1998 and 1997 interest income amounts are derived from the escrowed funds generated by the sale of the filter operations which were held until early September of this year. Excluding the $205,000 gain from termination of an interest rate swap agreement in March 1996, other expenses, net for both the third quarter and first nine months of 1997 decreased from the comparative periods in 1996. The net interest position reflects both lower expense and income in the 1997 comparative periods. This reflects a continued decline in the Company's net borrowed position resulting from normal long-term debt amortization combined with the use of interest earning funds that were previously held for capital equipment acquisitions. TAXES ON INCOME The effective tax rates for the nine-month periods September 30, 1998 and 1997 are 42.3% and 40.0%, respectively. These rates are higher than the domestic statutory rate primarily due to the impact of various state income taxes and the impact of a higher statutory rate applicable to the Canadian subsidiary. The 1998 rate was also affected by an adjustment arising from the filing of a prior year's amended tax return. As of September 30, 1998, the Company recorded net deferred income tax assets of $7,444,227. The major components of that asset are the tax effects of net operating loss carryforwards and accrued retirement and postretirement benefit obligations. The realization of this recorded benefit is dependent upon the generation of future taxable income. -19- Management believes it is more likely than not that adequate levels of future taxable income will be generated to absorb the net operating loss carryforwards, the deductible amounts related to the retirement and postretirement benefit obligations and the remaining net deductible temporary differences. YEAR 2000 READINESS DISCLOSURE The year 2000 (Y2K) issue is the result of computer programs having been written using two digits, rather than four, to define the applicable year. Any of the Company's computers, computer programs, manufacturing and administrative equipment or products that have date-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. If any of the Company's systems that have date-sensitive software use only two digits, system failures or miscalculations may result causing disruptions of operations, including, among other things, a temporary inability to process transactions or engage in similar normal business activities. During 1995, the Company's internal data processing personnel began an evaluation of the Company's exposure to the effects of the Y2K issue. As a member of certain automotive supplier trade associations, awareness of the Y2K issue was both highlighted and charted beginning in early 1996. At that point, a multi-disciplined committee was established to broaden and coordinate the Company's efforts in addressing the Y2K impact. This committee continues to include several members of the internal Executive Committee with responsibility for board level reporting on this issue. Through the efforts of this committee, the Company coordinates both internal and external reviews of its Y2K exposure. Internally, this committee evaluated the general operating systems for the Company as well as the security system, telecommunications network, manufacturing equipment and internal personal computer (PC) operations. Through the second half of 1996 and much of 1997, the Company utilized the services of an outside consultant, as well as its internal resources, to convert its computer systems to be Y2K compliant. As of December 31, 1997, the Company's core operating system and applications, its PC operating systems and the majority of its PC applications were believed to be compliant. The remaining PC applications are expected to be compliant by December 31, 1998, pending installation of the next software release or upgrade as needed. Manufacturing equipment testing has been completed with no Y2K exposure perceived there. At this point, the Company is targeting a full-scale, live test of its operating systems for Y2K compliance in early 1999. Costs related to the Y2K project, primarily consisting of expenses related to the consultant, approximated $110,000 through 1997 and were expensed as incurred in operating expenses. Current year and future costs to be incurred to complete Y2K compliance and testing procedures are not expected to be material. -20- With the inception of the committee in 1996, the Company began to focus externally as well. The committee identified suppliers of products and services deemed to be critical to the Company's operations as well as customers deemed to have the greatest Y2K exposure (i.e., EDI communications). The Company has sent surveys to these key contacts and has received back a majority of these surveys. While the Company cannot guarantee Y2K compliance by its key suppliers and customers, and in many cases will be relying on statements from outside vendors without independent verification, preliminary surveys indicate that these key suppliers and customers are aware of the issues and are working to assure their compliance before the year 2000. At this time, the Company is not aware of any key suppliers or customers who will not be Y2K compliant by the year 2000. The Company's next steps will be to complete the solicitation of key customers, obtain more detailed information from certain key suppliers and customers and follow up with those companies who did not respond to the original surveys. In addition, final plans must be developed for the 1999 internal compliance test procedures. Pending the results of that procedure, the Company intends to prepare a contingency plan that will specify what exposures it still perceives and what it plans to do if it or important external companies are not Y2K compliant in a timely manner. The Company expects to prepare and evaluate its contingency plan during 1999. LIQUIDITY AND CAPITAL RESOURCES The Company's primary cash requirements continue to be for operating expenses, such as labor costs and raw materials, and for funding accounts receivable, capital expenditures and long-term debt service. Historically, the Company's primary sources of cash have been from operations and from bank borrowings. As a result of the full transition out of filter operations, and the favorable impact of the subsequent restructuring effort, the Company expects to generate sufficient future funds from operations and bank borrowings to fund its growth and operating needs. In late August 1998, the Company entered into a $6,600,000 long-term debt agreement with its primary lender. This new agreement allowed the Company to take advantage of favorable interest rate conditions. Borrowings under this new long-term debt agreement were used for several purposes including: bringing the Company's defined benefit plans up to funding levels that would alleviate the payment of the variable rate PBGC premiums; paying off the remaining long-term debt obligations; and paying down certain short- term notes payable. As a result of this new long-term debt agreement, the Company's short-term line with its primary lender was reduced from $5,000,000 to $3,000,000. Total short-term lines available to the Company as of September 30, 1998 totaled $5,200,000, of which $4,100,000 was unused. In connection with the floating rate debt agreement, the Company entered into an interest rate swap agreement essentially to fix the interest rate on that debt within a small range. The rate will fluctuate -21- within a range of 7.45% to 7.95% depending upon certain Company performance parameters. As of September 30, the "fixed" rate on those borrowings was 7.70%. During the first nine months of 1998, the Company used $2,246,087 of net cash for operating activities. The realized net income, depreciation, and decreases in deferred income taxes, were offset by increases in accounts receivable, inventories and other assets, and a decrease in the periodic postretirement benefit obligation. The decline in the deferred income tax asset is the result of the partial utilization of the tax net operating loss carryforward. The increased accounts receivable and inventory reflect the additional working capital requirements that are necessary to support the higher sales level. The increase in other assets primarily reflects the prepaid pension asset of $2,675,688 that was generated when the Company funded the defined benefit plans to specified limits. As such, it did not have a direct effect on operations during the current period. Excluding this item, net cash generated from operating activities amounted to $429,601. Capital expenditures for the first nine months of 1998 were at $1,010,120, which represents a slight decrease in comparison to expenditures of $1,300,416 in the first half of 1997. While third quarter capital expenditures have slowed to $252,172 from $757,948 in the first half of 1998, total capital expenditures for 1998 may approach the 1997 total of $1,770,302, as several significant capital projects are currently in process. Investing activities also reflect the September 1998 release of escrow funds relating to the 1995 sale of filter operations. These funds were subsequently used to reduce short-term notes payable. Financing activities for the first nine months of 1998 reflect the increased reliance on upon short-term borrowings to help satisfy increased working capital needs. Financing activities also reflect the proceeds from the new long- term debt agreement, and the subsequent utilization of those proceeds to pay down short-term and long-term debt. Dividends paid increased in the first nine months of 1998. During the first nine months of 1997, the Company generated $950,601 of net cash from operations. The realized net income and absorbed depreciation, combined with the reductions in the deferred income tax asset and inventories, was offset slightly by the increase in accounts receivable, and the decreases in the periodic postretirement benefit obligation and accounts payable and accruals. Investing activities in the first nine months of 1997 were quite high, reflecting the timing of several major capital expenditures. Financing activities for the first nine months of 1997 reflected the normal amortization of the Company's long-term debt obligation, as well as reduced reliance on the Company's short-term lines subsequent to the filter operations transition. As noted throughout the above discussion, the Company has realized increased sales activity through the first nine months of 1998. This growth has resulted in an increased net income level combined with -22- increased working capital demands. The Company will continue to monitor its working capital needs in order to balance its cash and growth demands. At this time, the Company anticipates that operations (which will be subject to minimal current cash outflows for U.S. income taxes due to the utilization of the net operating loss carryforwards), in combination with the balancing of available short-term lines with our operations, will generate cash flows that will be sufficient to fund its working capital, capital outlays and dividend requirements for the remainder of 1998. NEW ACCOUNTING STANDARDS Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information," issued in June 1997 and which supersedes SFAS No. 14, "Financial Reporting for Segments of a Business Enterprise," establishes standards for the way that public companies report information about operating segments in annual financial statements and requires reporting of selected information about operating segments in interim financial statements issued to the public. It also establishes standards for disclosures regarding products and services, geographic areas and major customers. SFAS No. 131 defines operating segments as components of a company about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," issued in February 1998, revises employers' disclosures about pension and other postretirement benefit plans. It does not change the measurement or recognition of those plans. SFAS No. 132 standardizes the disclosure requirements to the extent practicable, requires additional information on changes in the benefit obligations and fair values of plan assets that will facilitate financial analysis and eliminates certain disclosures that are no longer as useful as when they were first required to be presented. SFAS No. 131 and 132 are effective for the Company's 1998 year-end financial statements and require restatement of prior year comparative information. The implementation of these new Statements will not affect results of operations and financial position, but may have an impact on future financial statement disclosures. With respect to SFAS No. 131, the Company does not expect to change its operating segment groupings. SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," issued in June 1998, requires companies to recognize all derivatives contracts as either assets or liabilities in the balance sheet and to measure them at fair value. If certain conditions are met, a derivative may be specifically designated as a hedge, the objective of which is to match the timing of gain or loss recognition on the hedging -23- derivative with the recognition of (i) the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk or (ii) the earnings effect of the hedged forecasted transaction. For a derivative not designated as a hedging instrument, the gain or loss is recognized in income in the period of change. SFAS No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 1999. Historically, the Company has not entered into derivatives contracts for speculative purposes. The Company does periodically enter into interest rate swap and collar agreements to reduce the impact of changes in interest rates on its floating rate borrowings. However, the fair value of such derivatives are not significant. Accordingly, the Company does not expect adoption of the new standard on January 1, 2000 to materially affect its financial statements. FORWARD-LOOKING STATEMENTS With the exception of historical matters, the matters discussed in this commentary include certain predictions and projections that may be considered forward-looking statements under securities laws, including, but not limited to, those statements under the captions "Results of Operations," "Year 2000" and "Liquidity and Capital Resources." These statements are subject to a number of important risks and uncertainties that could cause actual results to differ materially including, but not limited to, economic, competitive, governmental and technological factors affecting the Company's operations, markets, products, services and prices. The Company undertakes no obligation to update, amend or clarify forward- looking statements, whether as a result of new information, future events or otherwise. -24- ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company is exposed to potential market risks on interest rates relating to a swap agreement transacted with its primary lender in connection with its long-term debt agreement. Management believes that the fluctuation in interest rates in the near future will not have a material impact on the consolidated financial statements taken as a whole. The Company does not use derivative financial instruments for trading purposes. -25- PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following documents are filed as exhibits to this report on Form 10-Q: EXHIBIT NUMBER DOCUMENT 3(a) Articles of Incorporation of Hastings Manufacturing Company, as amended to date. 3(b) Bylaws of Hastings Manufacturing Company, as amended to date. 4(a) Articles of Incorporation of Hastings Manufacturing Company, as amended to date. See Exhibit 3(a). 4(b) Bylaws of Hastings Manufacturing Company, as amended to date. See Exhibit 3(b). 4(c) Instruments defining the rights of security holders, including indentures filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1983, are incorporated herein by reference. 4(d) NBD Bank, N.A. $3,312,500 Term Loan Agreement and Term Note, filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1993, is incorporated herein by reference. 4(e) NBD Bank, N.A. $4,000,000 Term Loan Agreement and Term Note, filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1994, is incorporated herein by reference. 4(f) NBD Bank Amended and Restated Letter Agreement for $6,600,000 Term Loan and $3,000,000 Credit Authorization to Make Revolving Credit Loans and Issue Letters of Credit, dated August 28, 1998. 4(g) Restated Master Agreement, dated August 10, 1998, regarding an interest rate swap transaction between Hastings Manufacturing Company and NBD Bank. -26- 4(h) Confirmation, dated as of March 12, 1996, regarding an interest rate collar transaction between Hastings Manufacturing Company and NBD Bank, filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1996, is incorporated herein by reference. 4(i) Commercial Line of Credit Agreement and Note, dated as of January 23, 1998, between Hastings Manufacturing Company and Hastings City Bank, filed as an exhibit to the Form 10-Q Quarterly Report for the period ended June 30, 1998, is incorporated herein by reference. 4(j) Preferred Stock Purchase Rights, filed as an exhibit to Form 8-K filed with the Securities and Exchange Commission on February 15, 1996, is incorporated herein by reference. 27 Financial Data Schedule (b) REPORTS ON FORM 8-K. The Company did not file any reports on Form 8-K during the quarter for which this report is filed. -27- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on his behalf by the undersigned thereunto duly authorized. HASTINGS MANUFACTURING COMPANY Date: November 16, 1998 /S/MONTY C. BENNETT Monty C. Bennett Its Vice-President, Employee Relations, Secretary and Director Date: November 16, 1998 /S/THOMAS J. BELLGRAPH Thomas J. Bellgraph Its Vice-President, Finance -28- EXHIBIT INDEX EXHIBIT NUMBER DOCUMENT 3(a) Articles of Incorporation of Hastings Manufacturing Company, as amended to date. 3(b) Bylaws of Hastings Manufacturing Company, as amended to date. 4(a) Articles of Incorporation of Hastings Manufacturing Company, as amended to date. See Exhibit 3(a). 4(b) Bylaws of Hastings Manufacturing Company, as amended to date. See Exhibit 3(b). 4(c) Instruments defining the rights of security holders, including indentures filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1983, are incorporated herein by reference. 4(d) NBD Bank, N.A. $3,312,500 Term Loan Agreement and Term Note, filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1993, is incorporated herein by reference. 4(e) NBD Bank, N.A. $4,000,000 Term Loan Agreement and Term Note, filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1994, is incorporated herein by reference. 4(f) NBD Bank Amended and Restated Letter Agreement for $6,600,000 Term Loan and $3,000,000 Credit Authorization to Make Revolving Credit Loans and Issue Letters of Credit, dated August 28, 1998. 4(g) Restated Master Agreement, dated August 10, 1998, regarding an interest rate swap transaction between Hastings Manufacturing Company and NBD Bank. 4(h) Confirmation, dated as of March 12, 1996, regarding an interest rate collar transaction between Hastings Manufacturing Company and NBD Bank, filed as an exhibit to the Form 10-K Annual Report for the year ended December 31, 1996, is incorporated herein by reference. 4(i) Commercial Line of Credit Agreement and Note, dated as of January 23, 1998, between Hastings Manufacturing Company and Hastings City Bank, filed as an exhibit to the Form 10-Q Quarterly Report for the period ended June 30, 1998, is incorporated herein by reference. 4(j) Preferred Stock Purchase Rights, filed as an exhibit to Form 8-K filed with the Securities and Exchange Commission on February 15, 1996, is incorporated herein by reference. 27 Financial Data Schedule EX-4 2 EXHIBIT 4(f) NBD Bank 611 Woodward Avenue Detroit, Michigan 48226 August 28, 1998 Hastings Manufacturing Company 325 North Hanover Hastings, Michigan 49058 Attention: Mr. Thomas J. Bellgraph, Treasurer Re: $6,600,000 TERM LOAN AND $3,000,000 CREDIT AUTHORIZATION TO MAKE REVOLVING CREDIT LOANS AND ISSUE LETTERS OF CREDIT Gentlemen: This Amended and Restated Letter Agreement (this "Agreement") contains the terms and conditions under which NBD Bank, a Michigan banking corporation (the "Bank"), may, in its sole discretion, make loans to and issue commercial and standby letters of credit for the benefit of Hastings Manufacturing Company, a Michigan corporation (the "Company"). This Agreement is intended to amend and restate that certain Letter Agreement dated May 31, 1994, as amended by First Amendment to Letter Agreement dated as of May 2, 1995, Second Amendment to Letter Agreement dated as of September 30, 1995, Third Amendment to Letter Agreement dated as of May 31, 1996, Fourth Amendment to Credit Agreement dated as of May 31, 1996 and Fifth Amendment to Letter Agreement dated as of May 31, 1998, each by and between the Company and the Bank. 1. DEFINITIONS. As used herein the following terms shall have the following respective meanings: "ADVANCES" shall mean the Revolving Credit Loans and the Letter of Credit Advances made or issued under this Agreement. "APPLICABLE MARGIN" shall mean, with the respect to any Eurodollar Rate Loan, Floating Rate Loan, commitment fees payable under paragraph 4 or standby letter of credit fees payable pursuant to paragraph 3(d), as the case may be, the applicable margin set forth in the table below based on the Funded Debt Ratio and the ratio of Total Liabilities to Tangible Net Worth, as adjusted on the first day of each fiscal quarter based on each Hastings Manufacturing Company August 28, 1998 Page 2 such ratio as of the last day of the fiscal quarter immediately preceding such fiscal quarter, commencing with the fiscal quarter ending September 30, 1998, PROVIDED that the Applicable Margin in effect on the first day of any Eurodollar Interest Period for any Eurodollar Rate Loan shall remain in effect for the entire Eurodollar Interest Period and, notwithstanding anything herein to the contrary, upon or during the continuance of any Event of Default the Applicable Margin shall be based on the highest possible Applicable Margin described in the table below, regardless of the Funded Debt Ratio or the ratio of Total Liabilities to Tangible Net Worth:
APPLICABLE MARGIN OTHER FEES - -------------------------------------------------------------------------------------- FUNDED DEBT TOTAL PRIME LIBOR COMMIT- STANDBY TO EBITDA LIABILITIES TO MENT FEE LETTER OF TANGIBLES NET CREDIT WORTH COMMISSION - -------------------------------------------------------------------------------------- >2.50: 1.00 or >1.90: 1.00 0 b.p. 200 b.p. 25 b.p. 200 b.p. >1.40: 1.00 or >1.40: 1.00 0 b.p. 175 b.p. 25 b.p. 175 b.p. <1.40: 1.00 and <1.40: 1.00 0 b.p. 150 b.p. 25 b.p. 150 b.p.
The middle tier set forth in the table above shall apply through and including September 30, 1998, until adjusted as provided above. "BUSINESS DAY" shall mean a day other than a Saturday, Sunday or other day on which the Bank is not open to the public for carrying on substantially all of its banking functions. "CAPITAL LEASE" of any person shall mean any lease which, in accordance with generally accepted accounting principles, is or should be capitalized on the books of such person. "CHANGE OF CONTROL" shall mean the following event: any Person or group of Persons (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) shall either (i) acquire beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 30% or more of the outstanding shares of voting stock of the Company or (ii) obtain the power (whether or not exercised) to elect a majority of the Company's directors. Hastings Manufacturing Company August 28, 1998 Page 3 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time to time, and the regulations thereunder. "CONSOLIDATED" shall mean, when used with reference to any financial term in this Agreement, the aggregate for two or more persons of the amounts signified by such term for all such persons determined on a consolidated basis in accordance with generally accepted accounting principles. "CONTINGENT LIABILITIES" of any person shall mean, as of any date, all obligations of such person or of others for which such person is contingently liable, as obligor, guarantor, surety, accommodation party, partner or in any other capacity, or in respect of which obligations such person assures a creditor against loss or agrees to take any action to prevent any such loss (other than endorsements of negotiable instruments for collection in the ordinary course of business), including without limitation all reimbursement obligations of such person in respect of any letters of credit, surety bonds or similar obligations (including, without limitation, bankers acceptances) and all obligations of such person to advance funds to, or to purchase assets, property or services from, any other person in order to maintain the financial condition of such other person. "CUMULATIVE NET INCOME" of any person shall mean, as of any date, the net income (after deduction for income and other taxes of such person determined by reference to income or profits of such person) for the period commencing on the specified date through the end of the most recently completed fiscal year of such person (but without reduction for any net loss incurred for any fiscal year during such period), taken as one accounting period, all as determined in accordance with generally accepted accounting principles. "DEBT SERVICE COVERAGE RATIO" shall mean, for any period, the ratio of (i) Cumulative Net Income plus all amounts deducted in determining such Cumulative Net Income on account of (a) Interest Expense and (b) income taxes and the State of Michigan single business tax to (ii) Interest Expense plus the current portion of Funded Debt, commencing June 30, 1998 for the four consecutive fiscal quarters most recently ended of the Company and its Subsidiaries on a consolidated basis in accordance with generally accepted accounting principles. "DEFAULT" shall mean any event or condition which might become an Event of Default with notice or lapse of time or both. "DOLLARS" and "$" shall mean the lawful money of the United States of America. Hastings Manufacturing Company August 28, 1998 Page 4 "EBITDA" shall mean, for any period, Cumulative Net Income for such period plus all amounts deducted in determining such Cumulative Net Income on account of (a) Interest Expense and (b) income taxes and the State of Michigan single business tax, and (c) depreciation and amortization expense, all as determined for the Company and its Subsidiaries on a consolidated basis in accordance with generally accepted accounting principles. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations thereunder. "ERISA AFFILIATE" shall mean any trade or business (whether or not incorporated) which, together with the Company, would be treated as a single employer under Section 414 of the Code and the regulations promulgated thereunder. "EURODOLLAR BUSINESS DAY" shall mean, with respect to any Eurodollar Rate Loan, a day which is both a Business Day and a day on which dealings in Dollar deposits are carried out in the London interbank market. "EURODOLLAR INTEREST PERIOD" shall mean, with respect to any Eurodollar Rate Loan, the period commencing on the day such Eurodollar Rate Loan is made or converted to a Eurodollar Rate Loan and ending on the day which is one, two, three or six months thereafter (or such other period as may be agreed to by the Bank), as the Company may elect under paragraph 6, and each subsequent period commencing on the last day of the immediately preceding Eurodollar Interest Period and ending on the day which is one, two, three or six months thereafter (or such other period as may be agreed to by the Bank), as the Company may elect under paragraph 6, PROVIDED, HOWEVER, that (a) any Eurodollar Interest Period which commences on the last Eurodollar Business Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Eurodollar Business Day of the appropriate subsequent calendar month, (b) each Eurodollar Interest Period which would otherwise end on a day which is not a Eurodollar Business Day shall end on the next succeeding Eurodollar Business Day or, if such next succeeding Eurodollar Business Day falls in the next succeeding calendar month, on the next preceding Eurodollar Business Day, and (c) no Eurodollar Interest Period shall be permitted which would end after Maturity Date A with respect to any Revolving Credit Loan or Maturity Date B with respect to the Term Loan. "EURODOLLAR RATE" shall mean, with respect to any Eurodollar Rate Loan and the related Eurodollar Interest Period, the per annum rate that is equal to the sum of the Applicable Margin plus the rate per annum obtained by dividing (A) the per annum rate of interest at which deposits in Dollars Hastings Manufacturing Company August 28, 1998 Page 5 for such Eurodollar Interest Period and in an aggregate amount comparable to the amount of such Eurodollar Rate Loan to be made by the Bank are offered to the Bank by other prime banks in the London interbank market at approximately 11:00 a.m. London time on the second Eurodollar Business Day prior to the first day of such Eurodollar Interest Period by (B) an amount equal to one minus the stated maximum rate (expressed as a decimal) of all reserve requirements (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that are specified on the first day of such Eurodollar Interest Period by the Board of Governors of the Federal Reserve System (or any successor agency thereto) for determining the maximum reserve requirement with respect to eurocurrency funding (currently referred to as "Eurocurrency liabilities" in Regulation D of such Board) maintained by a member bank of such System; all as conclusively determined by the Bank, such sum to be rounded up, if necessary, to the nearest whole multiple of one one-hundredth of one percent (1/100 of 1%). "EURODOLLAR RATE LOAN" shall mean any Loan which bears interest at the Eurodollar Rate. "EVENT OF DEFAULT" shall mean any of the events or conditions described in paragraph 13 of this Agreement. "FEDERAL FUNDS RATE" shall mean the per annum rate of interest established and announced by the Bank from time to time as the opening federal funds rate paid by the Bank in its regional federal funds market for overnight borrowings from other banks, which Federal Funds Rate shall change simultaneously with any change in such announced rate. "FLOATING RATE" shall mean the per annum rate equal to the sum of the Applicable Margin plus the greater of (i) the sum of (a) one percent (1%) per annum plus (b) the Federal Funds Rate in effect from time to time, or (ii) the Prime Rate in effect from time to time; which Floating Rate shall change simultaneously with any change in such Federal Funds Rate or Prime Rate, as the case may be. "FLOATING RATE LOAN" shall mean any Loan which bears interest at the Floating Rate. "FUNDED DEBT" of any person, as of any date, shall mean: (a) all debt for borrowed money and similar monetary obligations evidenced by bonds, notes, debentures, Capital Lease obligations or otherwise, including without limitation obligations in respect of the deferred purchase price of properties or assets, in each case whether direct or indirect; (b) all liabilities secured by any Lien existing on property owned or acquired subject thereto, whether or not the liability secured thereby shall have Hastings Manufacturing Company August 28, 1998 Page 6 been assumed; (c) all reimbursement obligations under outstanding letters of credit in respect of drafts which (i) may be presented or (ii) have been presented and have not yet been paid, and (d) all Contingent Liabilities relating to any of the obligations of others similar in character to those described in the foregoing clauses (a) through (c). "FUNDED DEBT RATIO" shall mean, as of any date, the ratio of (a) Funded Debt as of such date to (b) EBITDA, commencing June 30, 1998 for the four consecutive fiscal quarters most recently ended of the Company and its Subsidiaries on a consolidated basis in accordance with generally accepted accounting principles. "GENERALLY ACCEPTED ACCOUNTING PRINCIPLES" shall mean generally accepted accounting principles applied on a basis consistent with that reflected in the most recent financial statements of the Company submitted to the Bank prior to the date hereof. "GUARANTY" shall mean each guaranty agreement from time to time entered into by any Guarantor for the benefit of the Bank pursuant to this Agreement in substantially the form of Exhibit C hereto. "GUARANTOR" shall mean each Subsidiary of the Company. "INDEBTEDNESS" of any person shall mean, as of any date, (a) all obligations of such person for borrowed money, (b) all obligations of such person as lessee under any Capital Lease, (c) all obligations which are secured by any Lien existing on any asset or property of such person whether or not the obligation secured thereby shall have been assumed by such person, (d) the unpaid purchase price for goods, property or services acquired by such person, except for trade accounts payable arising in the ordinary course of business that are not past due, (e) all obligations of such person to purchase goods, property or services where payment therefor is required regardless of whether delivery of such goods or property or the performance of such services is ever made or tendered (generally referred to as "take or pay contracts"), (f) all liabilities of such person in respect of unfunded benefit liabilities under any plan of such person or of any member of a controlled group of which such person is a member, (g) all obligations of such person in respect of any interest rate or currency swap, rate cap or other similar transaction (valued in an amount equal to the highest termination payment, if any, that would be payable by such person upon termination for any reason on the date of determination), except any such obligations arising under any interest rate or currency swap, rate cap or other similar transaction entered into by and between such person and the Bank, and (h) all obligations of others similar in character to those described in clauses (a) through (g) of this definition for which such person is contingently liable, as obligor, guarantor, surety Hastings Manufacturing Company August 28, 1998 Page 7 or in any other capacity, or in respect of which obligations such person assures a creditor against loss or agrees to take any action to prevent any such loss (other than endorsements of negotiable instruments for collection in the ordinary course of business), including without limitation all reimbursement obligations of such person in respect of letters of credit, surety bonds or similar obligations and all obligations of such person to advance funds to, or to purchase assets, property or services from, any other person in order to maintain the financial condition of such other person. "INTEREST EXPENSE" shall mean, for any period, total interest and related expense (including, without limitation, that portion of any Capitalized Lease obligation attributable to interest expense in conformity with generally accepted accounting principles, amortization of debt discount, all capitalized interest, the interest portion of any deferred payment obligations, all commissions, discounts and other fees and charges owed with respect to letter of credit and bankers acceptance financing, the net costs and net payments under any interest rate hedging, cap or similar agreement or arrangement, prepayment charges, agency fees, administrative fees, commitment fees and capitalized transaction costs allocated to interest expense) and all dividends and other distributions on any preferred capital stock of the Company paid, payable or accrued during such period, without duplication for any period, with respect to all outstanding Indebtedness of the Company and its Subsidiaries, all as determined for the Company and its Subsidiaries on a consolidated basis for such period in accordance with generally accepted accounting principles. "INTEREST PAYMENT DATE" shall mean, (a) with respect to any Negotiated Rate Loan, the last day of each Negotiated Interest Period with respect to such Negotiated Rate Loan, (b) with respect to any Eurodollar Rate Loan, the last day of each Eurodollar Interest Period with respect to such Eurodollar Rate Loan, in either case of any Interest Period exceeding ninety days, those days that occur during such Interest Period at intervals of ninety days after the first day of such Interest Period, and (c) in all other cases, the last Business Day of each March, June, September and December occurring after the date hereof, commencing with the first such Business Day occurring after the date of this Agreement. "INTEREST PERIOD" shall mean any Eurodollar Interest Period or Negotiated Interest Period. "LETTER OF CREDIT" shall mean a standby or commercial letter of credit having a stated expiry date not later than one year from the date of issuance thereof, issued on or prior to Maturity Date A by the Bank for the account of the Company under an application and related documentation acceptable to the Bank requiring, among other things, immediate Hastings Manufacturing Company August 28, 1998 Page 8 reimbursement by the Company to the Bank in respect of all drafts or other demand for payment honored thereunder and all expenses paid or incurred by the Bank relative thereto. "LETTER OF CREDIT ADVANCE" shall mean any issuance of any Letter of Credit under paragraph 2. "LETTER OF CREDIT DOCUMENTS" shall have the meaning ascribed thereto in paragraph 3. "LIEN" shall mean any pledge, assignment, hypothecation, mortgage, security interest, deposit arrangement, option, conditional sale or title retaining contract, sale and leaseback transaction, financing statement filing, lessor's or lessee's interest under any lease, subordination of any claim or right, or any other type of lien, charge, encumbrance, preferential arrangement or other claim or right. "LOAN" shall mean any Revolving Credit Loan or Term Loan. "MATERIAL ADVERSE EFFECT" shall mean a material adverse effect on (a) the business, assets, operations or condition (financial or otherwise) of the Company and its Subsidiaries on a consolidated basis, (b) the ability of the Company or any Subsidiary to perform its obligations under this Agreement or any Note, or (c) the validity of enforceability of this Agreement or any Note or the rights or remedies of the Bank under this Agreement or any Note. "MATURITY DATE A" shall mean the earlier to occur of (a) May 31, 2000, and (b) the date on which the Advances shall be due and payable pursuant to paragraph 13 of this Agreement. "MATURITY DATE B" shall mean the earlier to occur of (a) June 30, 2003, and (b) the date on which the Term Loan shall be due and payable pursuant to paragraph 13 of this Agreement. "MAXIMUM AMOUNT" shall mean the maximum amount of the Advances that may be made hereunder pursuant to paragraph 2(a), which shall be $3,000,000 as such amount may be amended from time to time. "MULTIEMPLOYER PLAN" shall mean any "multiemployer plan" as defined in Section 4001(a)(3) of ERISA or Section 414(f) of the Code. "NEGOTIATED INTEREST PERIOD" shall mean with respect to any Negotiated Rate Loan, the period commencing on the date such Negotiated Rate Loan is made or converted to a Negotiated Rate Loan and ending on the date agreed upon between the Company and the Bank at the time such Hastings Manufacturing Company August 28, 1998 Page 9 Negotiated Rate Loan is made, and each subsequent period commencing on the last day of the immediately preceding Negotiated Interest Period and ending on the date agreed upon between the Company and the Bank at the time such Negotiated Rate Loan is elected to be continued as a Negotiated Rate Loan by the Company under paragraph 6 of this Agreement, PROVIDED, HOWEVER, that no Negotiated Interest Period which would end after Maturity Date A with respect to any Revolving Credit Loan or Maturity Date B with respect to the Term Loan shall be permitted. "NEGOTIATED RATE" shall mean, with respect to any Negotiated Rate Loan, the rate per annum agreed upon between the Company and the Bank at the time such Negotiated Rate Loan is made. "NEGOTIATED RATE LOAN" shall mean any Loan which bears interest at the Negotiated Rate. "NOTE" shall mean any Revolving Credit Note or Term Note. "OVERDUE RATE" shall mean, (a) in respect of principal of Floating Rate Loans or any other amount payable by the Company hereunder (other than interest and indebtedness described in clause (b) of this definition), an interest rate per annum that is equal to the sum of three percent (3%) per annum plus the Floating Rate, and (b) in respect of principal of Negotiated Rate Loans or Eurodollar Rate Loans, an interest rate per annum that is equal to the sum of three percent (3%) per annum plus the per annum rate in effect thereon until the end of the then current Interest Period for such Loan and, thereafter, an interest rate per annum that is equal to the sum of three percent (3%) per annum plus the Floating Rate. "PBGC" shall mean the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "PERMITTED LIENS" shall mean Liens permitted by paragraph 10(e) of this Agreement. "PERSON" shall include an individual, a corporation, a limited liability company, an association, a partnership, a trust or estate, a joint stock company, an unincorporated organization, a joint venture, a trade or business (whether or not incorporated), a government (foreign or domestic) and any agency or political subdivision thereof, or any other entity. "PLAN" shall mean any pension plan (including a Multiemployer Plan) subject to Title IV of ERISA or to the minimum funding standards of Section 412 of the Code which has been established or maintained by the Company or any ERISA Affiliate. Hastings Manufacturing Company August 28, 1998 Page 10 "PRIME RATE" shall mean the per annum rate of interest announced by the Bank from time to time as its "prime rate" (it being acknowledged that such announced rate may not necessarily be the lowest rate charged by the Bank to any of its customers), which Prime Rate shall change simultaneously with any change in such announced rate. "PROHIBITED TRANSACTION" shall mean any transaction involving any Plan which is proscribed by Section 406 of ERJSA or Section 4975 of the Code and to which no statutory or administrative exemption applies. "REPORTABLE EVENT" shall mean a reportable event with respect to any Plan as described in Section 4043(c) of ERISA, excluding those events as to which the thirty (30) day notice period is waived under Part 2615 of the regulations promulgated by the PBGC under ERISA. "REVOLVING CREDIT FACILITY" shall mean the credit facility described in paragraph 2(a). "REVOLVING CREDIT LOAN" shall mean any loan pursuant to paragraph 2(a). "REVOLVING CREDIT NOTE" shall mean the master promissory note of the Company evidencing a Revolving Credit Loan, in substantially the form annexed hereto as EXHIBIT A, as amended or modified from time to time and together with any promissory note or notes issued in exchange or replacement therefor. "SUBSIDIARY" of any person shall mean any other person (whether now existing or hereafter organized or acquired) in which (other than directors qualifying shares required by law) at least a majority of the securities or other ownership interests of each class having ordinary voting power or analogous right (other than securities or other ownership interests which have such power or right only by reason of the happening of a contingency), at the time as of which any determination is being made, are owned, beneficially and of record, by such person or by one or more of the other Subsidiaries of such person or by any combination thereof. Unless otherwise specified, reference to "Subsidiary" shall mean a Subsidiary of the Company. "SWAP AGREEMENT" shall mean the swap agreement dated as of even date herewith by and between the Company and the Bank, as the same may hereafter be amended or modified from time to time. "TANGIBLE NET WORTH" of any person shall mean, as of any date, (a) the amount of any capital stock, paid in capital and similar equity accounts plus (or minus in the case of a deficit) the capital surplus and retained Hastings Manufacturing Company August 28, 1998 Page 11 earnings of such person and the amount of any foreign currency translation adjustment account shown as a capital account of such person, less (b) the net book value of all items of the following character which are included in the assets of such person: (i) goodwill, including without limitation, the excess of cost over book value of any asset, (ii) organization or experimental expenses, (iii) unamortized debt discount and expense, (iv) patents, trademarks, trade names and copyrights, (v) treasury stock, (vi) deferred taxes and deferred charges, (vii) franchises, licenses and permits, and (viii) other assets which are deemed intangible assets under generally accepted accounting principles. "TERM LOAN" shall mean the term loan issued pursuant to paragraph 2(b). "TERM NOTE" shall mean the promissory note of the Company evidencing the Term Loan, in substantially the form annexed hereto as EXHIBIT B, as amended or modified from time to time and together with any promissory note or notes issued in exchange or replacement therefor. "TOTAL LIABILITIES" of any person shall mean, as of any date, all obligations which, in accordance with generally accepted accounting principles, are or should be classified as liabilities on a balance sheet of such person. 2. LOANS AND ADVANCES. (a) REVOLVING CREDIT LOANS AND ADVANCES. The Bank may, in its sole and uncontrolled discretion, make Revolving Credit Loans to the Company or issue Letters of Credit for the benefit of the Company. The aggregate outstanding principal amount of Advances made by the Bank to the Company hereunder shall not at any time exceed the Maximum Amount. The aggregate stated amount of Letter of Credit Advances issued by the Bank for the benefit of the Company under this Agreement shall not at any time exceed One Million Dollars ($1,000,000). The Revolving Credit Loans shall be evidenced by Revolving Credit Notes, payable on demand by the Bank but no later than Maturity Date A, with interest payable prior to maturity (whether by demand or otherwise) on demand by the Bank but no later than each Interest Payment Date and at maturity (whether by demand or otherwise) at the Negotiated Rate, the Eurodollar Rate or the Floating Rate, as elected by the Company hereunder and during such periods as may be permitted hereunder, and after maturity (whether by demand or otherwise) on demand at the Overdue Rate. The Letter of Credit Advances, if not promptly reimbursed pursuant to paragraph 3 hereof, shall bear interest on demand at the Overdue Rate. All Negotiated Rate Loans shall be in the minimum amount of $500,000 and in integral multiples of $100,000, all Eurodollar Rate Loans shall be in the minimum amount of $1,000,000 and in integral Hastings Manufacturing Company August 28, 1998 Page 12 multiples of $100,000, and all Floating Rate Loans shall be in the minimum amount of $50,000 and in integral multiples thereof. All Letter of Credit Advances shall be in a minimum amount of $50,000. (b) TERM LOAN. The Bank agrees to make a term loan to the Company in the amount of Six Million Six Hundred Thousand Dollars ($6,600,000). The Term Loan shall be evidenced by the Term Note, and, unless earlier payment is required under this Agreement, shall be payable in equal quarterly principal payments of $330,000, plus interest (at the Negotiated Rate, the Eurodollar Rate or the Floating Rate, as elected by the Company hereunder and during such periods as may be permitted hereunder, and after maturity, whether by demand or otherwise on demand at the Overdue Rate). (c) PREPAYMENT OF LOANS. The Company may at any time and from time to time prepay all or a portion of the Eurodollar Rate Loans or Floating Rate Loans, without premium or penalty, PROVIDED that (i) the Company may not prepay any portion of any such Loan as to which an election for a continuation of or a conversion to a Eurodollar Rate Loan is pending pursuant to this paragraph 2, and (ii) unless earlier payment is required under this Agreement, any Eurodollar Rate Loan or Negotiated Rate Loan may only be prepaid on the last day of the then current Interest Period with respect to such Loan. Upon the giving of such notice, the aggregate principal amount of such Loan or portion thereof so specified in such notice, together with such accrued interest and other amounts, shall become due and payable on the specified prepayment date. 3. LETTER OF CREDIT ADVANCES: REIMBURSEMENT PAYMENTS. (a) The Company agrees to pay to the Bank, on the day on which the Bank shall honor a draft or other demand for payment presented or made under any Letter of Credit, an amount equal to the amount paid by the Bank in respect of such draft or other demand under such Letter of Credit and all expenses paid or incurred by the Bank relative thereto. Unless the Company shall have made such payment to the Bank an such day, upon each such payment by the Bank, the Bank shall be deemed to have disbursed to the Company, and the Company shall be deemed to have elected to satisfy its reimbursement obligation by, a Loan bearing interest at the Floating Rate in an amount equal to the amount so paid by the Bank in respect of such draft or other demand under such Letter of Credit. Such Loan shall be disbursed notwithstanding any failure to satisfy any conditions for disbursement of any Loan set forth in paragraph 8 hereof and, to the extent of the Loan so disbursed, the reimbursement obligation of the Company under this paragraph 3 shall be deemed satisfied. Hastings Manufacturing Company August 28, 1998 Page 13 (b) The reimbursement obligation of the Company under this paragraph 3 shall be absolute, unconditional and irrevocable and shall remain in fall force and effect until all obligations of the Company to the Bank hereunder shall have been satisfied, and such obligations of the Company shall not be affected, modified or impaired upon the happening of any event, including without limitation, any of the following, whether or not with notice to, or the consent of, the Company: (i) Any lack of validity or enforceability of any Letter of Credit or any documentation relating to any Letter of Credit or to any transaction related in any way to such Letter of Credit (the "Letter of Credit Documents"); (ii) Any amendment, modification, waiver, consent, or any substitution, exchange or release of or failure to perfect any interest in collateral or security, with respect to any of the Letter of Credit Documents; (iii) The existence of any claim, setoff, defense or other right which the Company may have at any time against any beneficiary or any transferee of any Letter of Credit (or any persons or entities for whom any such beneficiary or any such transferee may be acting) Bank or any other person or entity, whether in connection with any of the Letter of Credit Documents, the transactions contemplated herein or therein or any unrelated transactions; (iv) Any draft or other statement or document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (v) Payment by the Bank to the beneficiary under any Letter of Credit against presentation of documents which do not comply with the terms of the Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit; (vi) Any failure, omission, delay or lack on the part of the Bank or any party to any of the Letter of Credit Documents to enforce, assert or exercise any right, power or remedy conferred upon the Bank or any such party under this Agreement or any of the Letter of Credit Documents, or any other acts or omissions on the part of the Bank or any such party; Hastings Manufacturing Company August 28, 1998 Page 14 (vii) Any other event or circumstance that would, in the absence of this clause, result in the release or discharge by operation of law or otherwise of the Company from the performance or observance of any obligation, covenant or agreement contained in this paragraph 3. (c) No setoff, counterclaim, reduction or diminution of any obligation or any defense of any kind or nature which the Company has or may have against the beneficiary of any Letter of Credit shall be available hereunder to the Company against the Bank. (d) On or before the date of issuance of any Letter of Credit, the Company agrees to pay to the Bank a fee computed: (i) at a rate equal to the Applicable Margin of the maximum amount available to be drawn from time to time under such Letter of Credit for the period from and including the date of issuance of such Letter of Credit to and including the stated expiry date of such Letter of Credit, in the case of standby letters of credit, and (ii) at a rate to be agreed upon between the Bank and the Company in the case of commercial letters of credit. Such fees are non- refundable and the Company shall not be entitled to any rebate of any portion thereof if such Letter of Credit does not remain outstanding through its stated expiry date or for any other reason. The Company further agrees to pay to the Bank, on demand, such other customary administrative fees, charges and expenses of the Bank in respect of the issuance, negotiation, acceptance, amendment, transfer and payment of such Letter of Credit or otherwise payable pursuant to the application and related documentation under which such Letter of Credit is issued. 4. COMMITMENT FEE. The Company agrees to pay to the Bank a commitment fee on the daily average unused amount of the Revolving Credit Facility (calculated on a 360-day basis), at a rate equal to the Applicable Margin. Accrued commitment fees shall be payable quarterly in arrears on the last Business Day of each March, June, September and December, commencing on the first such Business Day occurring after the date of this Agreement, and on Maturity Date A. 5. REQUEST FOR ADVANCES. The Company shall give the Bank a written request, or a verbal request followed immediately by a written request, for each requested Revolving Credit Loan not later than 11:00 a.m. Detroit time, on the date such Advance is requested to be made in the case of any requested Revolving Credit Loan, and three Business Days prior to the date such Advance is requested to be made in the case of any requested Letter of Credit Advance, which notice shall specify whether a Negotiated Rate Loan, Eurodollar Rate Loan, Floating Rate Loan or Letter of Credit Advance is Hastings Manufacturing Company August 28, 1998 Page 15 requested and, in the case of each requested Negotiated Rate Loan or Eurodollar Rate Loan, the Interest Period to be initially applicable to such Revolving Credit Loan. 6. CONTINUATION AND CONVERSION OF LOANS. The Company may elect, subject to the Bank's approval in its sole discretion, to continue a Negotiated Rate Loan as a Negotiated Rate Loan or may elect to convert a Floating Rate Loan to a Negotiated Rate Loan or a Eurodollar Rate Loan, or may elect to convert a Negotiated Rate Loan to a Floating Rate Loan or a Eurodollar Rate Loan, or may elect to convert a Eurodollar Rate Loan to a Negotiated Rate Loan or a Floating Rate Loan, in each case by giving written request therefor, or a verbal request followed immediately by a written request, not later than 11:00 a.m. Detroit time on the date such continuation or conversion is requested, PROVIDED that an outstanding Negotiated Rate Loan or Eurodollar Rate Loan may only be continued on the last day of the then-current Interest Period with respect to such Loan and PROVIDED, FURTHER, if a continuation of a Loan as, or conversion of a Loan to, a Negotiated Rate Loan or a Eurodollar Rate Loan is requested, such request shall also specify the applicable Interest Period to be applicable thereto. If the Company shall not deliver such a notice with respect to any Negotiated Rate Loan or Eurodollar Rate Loan, the Company shall be deemed to have elected to convert such Loan on the last day of the then current Negotiated Interest Period with respect to such Negotiated Rate Loan, or on the last day of the then current Eurodollar Interest Period with respect to such Eurodollar Rate Loan, to a Floating Rate Loan. 7. INCREASED COSTS; LIMITATIONS ON REQUESTS. The Company agrees that (a) in the event that any applicable law, treaty, rule or regulation (whether domestic or foreign) now or hereafter in effect (including without limitation the Federal Deposit Insurance Act) and whether or not presently applicable to the Bank, or any interpretation or administration thereof by any governmental authority or compliance by the Bank with any guideline, request or directive of any such authority (whether or not having the force of law), shall (i) affect the basis of taxation of payments to the Bank of any amounts payable by the Company pursuant to this Agreement, (ii) impose, modify or deem applicable any insurance assessment or reserve, special deposit or similar requirement against assets of, deposits with or for the account of, or credit extended by the Bank, or (iii) affect the amount of capital required or expected to be maintained by the Bank or its parent bank holding company, the Company shall pay to the Bank, from time to time upon request of the Bank, additional amounts sufficient to compensate the Bank for such increased costs or reduced sum receivable related thereto, (b) the Company shall indemnify the Bank for any and all losses the Bank may incur if the Company makes any payment of principal with respect to any Negotiated Rate Loan on any date other than the last day of an Negotiated Interest Period applicable thereto or if the Company fails to borrow any Hastings Manufacturing Company August 28, 1998 Page 16 Negotiated Rate Loan after notice requesting such Loan has been given to the Bank, and (c) the Company shall indemnify the Bank for any and all losses the Bank may incur if the Company makes any payment of principal with respect to any Eurodollar Rate Loan on any date other than the last day of an Eurodollar Interest Period applicable thereto or if the Company fails to borrow any Eurodollar Rate Loan after notice requesting such Loan has been given to the Bank. A detailed statement as to the amount of such increased cost or reduced sum receivable, prepared in good faith and submitted by the Bank to the Company, shall be conclusive and binding for all purposes absent manifest error in computation. The Company further agrees that it may not elect the Negotiated Rate if it is impracticable, unlawful or impossible for any reason for the Bank to make or maintain a Negotiated Rate Loan and, if it is unlawful or impossible for the Bank to maintain an outstanding Negotiated Rate Loan, such Loan shall be immediately due and payable, together with accrued interest and any amount specified in paragraph 7(b) hereof, on the last day of the then current Negotiated Interest Period applicable to such Loan if the Bank may lawfully continue to maintain such Loan to such day or immediately if the Bank may not continue to maintain such Loan to such day. 8. CONDITIONS OF LOANS. Prior to or simultaneously with its first request for an Advance hereunder, the Company shall furnish to the Bank the following documents, each in form and substance satisfactory to the Bank: (a) Certified copies of such corporate documents of the Company, including those evidencing necessary corporate action with respect to this Agreement, any Note and the Advances hereunder, as the Bank shall request. (b) The Revolving Credit Note and the Term Note. (c) An opinion of counsel to the Company, in form and substance satisfactory to the Bank, with respect to the matters set forth in subparagraphs (a) through (e) of paragraph 11 of this Agreement and such other matters as the Bank may request. (d) Payment of any fees due as of the date of this Agreement, including without limitation a closing fee in the amount of $5,000. (e) Certified copies of such corporate documents and resolutions as requested by the Bank. (f) A Guaranty executed by each Guarantor. (g) Such other documents and agreements requested by the Bank. Hastings Manufacturing Company August 28, 1998 Page 17 In addition to the above subparagraphs (a)-(d), no Advance shall be made under this Agreement if any of the representations and warranties contained in this Agreement are not true and correct as of the date on which such Advance is made or requested to be made or if any Default or Event of Default shall exist or shall have occurred and be continuing on the date such Advance is made or requested to be made. A request for Advance by the Company shall be deemed to be a representation that the conditions in this paragraph have been satisfied. 9. AFFIRMATIVE COVENANTS. The Company covenants and agrees that, until Maturity Date B and thereafter until payment in fall of the principal of and accrued interest on each Note and the performance of all other obligations of the Company under this Agreement, unless the Bank shall otherwise consent in writing, it shall, and shall cause each of its Subsidiaries to: (a) PRESERVATION OF CORPORATE EXISTENCE, ETC. Do or cause to be done all things necessary to preserve, renew and keep in full force and effect its legal existence and its qualification as a foreign corporation in good standing in each jurisdiction in which such qualification is necessary under applicable law, and the rights, licenses, permits (including those required under any environmental law), franchises, patents, copyrights, trademarks and trade names material to the conduct of its businesses; and defend all of the foregoing against all claims, actions, demands, suits or proceedings at law or in equity or by or before any governmental instrumentality or other agency or regulatory authority. (b) COMPLIANCE WITH LAWS, ETC. Comply in all material respects with all applicable laws, rules, regulations and orders of any governmental authority, whether federal, state, local or foreign (including without limitation ERISA, the Code and all federal, state and local environmental laws, regulations and orders), in effect from time to time; and pay and discharge promptly when due all taxes, assessments and governmental charges or levies imposed upon it or upon its income, revenues or property, before the same shall become delinquent or in default, as well as all lawful claims for labor, materials and supplies or otherwise, which, if unpaid, might give rise to Liens upon such properties or any portion thereof, except to the extent that payment of any of the foregoing is then being contested in good faith by appropriate legal proceedings and with respect to which adequate financial reserves have been established on the books and records of the Company or such Subsidiary. (c) MAINTENANCE OF PROPERTIES, INSURANCE. Maintain, preserve and protect all property that is material to the conduct of the business of the Company or any of its Subsidiaries and keep such property in good repair, working order and condition and from time to time make, or cause to Hastings Manufacturing Company August 28, 1998 Page 18 be made all needful and proper repairs, renewals, additions, improvements and replacements thereto necessary in order that the business carried on in connection therewith may be properly conducted at all times in accordance with customary and prudent business practices for similar businesses; and maintain in full force and effect insurance with responsible and reputable insurance companies or associations in such amounts, on such terms and covering such risks, including fire and other risks insured against by extended coverage, as is usually carried by companies engaged in similar businesses and owning similar properties similarly situated and maintain in full force and effect public liability insurance, insurance against claims for personal injury or death or property damage occurring in connection with any of its activities or any of any properties owned, occupied or controlled by it, in such amount as it shall reasonably deem necessary, and maintain such other insurance as may be required by law or as may be reasonably requested by the Bank for purposes of assuring compliance with this paragraph 9(c). (d) REPORTING REQUIREMENTS. Furnish to the Bank the following: (i) Promptly and in any event within three calendar days after becoming aware of the occurrence of (A) any Default or Event of Default, (B) the commencement of any material litigation against, by or affecting the Company or any of its Subsidiaries, and any material developments therein, or (C) any development in the business or affairs of the Company or any of its Subsidiaries which has resulted in or which is likely in the reasonable judgment of the Company, to result in a material adverse change in the business, properties, operations or condition (financial or otherwise) of the Company or any of its Subsidiaries, a statement of the chief financial officer of the Company setting forth details of such Default or Event of Default or event or condition and the action which the Company or such Subsidiary, as the case may be, has taken and proposes to take with respect thereto; (ii) As soon as available and in any event within 45 days after the end of each fiscal quarter of the Company, the consolidated balance sheet of the Company and its Subsidiaries as of the end of such quarter, and the related consolidated statements of income, retained earnings and changes in cash flow for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, setting forth in each case in comparative form the corresponding figures for the corresponding date or period of the preceding fiscal year, all in reasonable detail and duly certified (subject to year-end audit adjustments) by the chief financial officer of the Company as Hastings Manufacturing Company August 28, 1998 Page 19 having been prepared in accordance with generally accepted accounting principles, together with a certificate of the chief financial officer of the Company stating (A) that no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a statement setting forth the details thereof and the action which the Company has taken and proposes to take with respect thereto, and (B) that a computation (which computation shall accompany such certificate and shall be in reasonable detail) showing compliance with paragraph 10(a), (b), (c), (d), (h), (i) and (j) hereof is in conformity with the terms of this Agreement; (iii) As soon as available and in any event within 90 days after the end of each fiscal year of the Company, a copy of the consolidated balance sheet of the Company and its Subsidiaries as of the end of such fiscal year and the related consolidated statements of income, retained earnings and changes in cash flow of the Company and its Subsidiaries for such fiscal year, with a customary audit report of BDO Seidman or other independent certified public accountants selected by the Company and acceptable to the Bank, without qualifications unacceptable to the Bank, together with a certificate of such accountants stating (A) that they have reviewed this Agreement and stating further whether, in the course of their review of such financial statements, they have become aware of any Default or Event of Default and, if such Default or Event of Default exists and is continuing, a statement setting forth the nature and status thereof, and (B) that a computation by the Company (which computation shall accompany such certificate and shall be in reasonable detail) showing compliance with paragraph 10(a), (b), (c), (d), (h), (i) and (j) hereof is in conformity with the terms of this Agreement; (iv) Promptly after the sending or filing thereof, copies of all reports, proxy statements and financial statements which the Company or any of its Subsidiaries sends to or files with any of their respective security holders or any securities exchange or the Securities and Exchange Commission or any successor agency thereof; and (v) Promptly, such other information respecting the business, properties, operations or condition (financial or otherwise) of the Company or any of it Subsidiaries as Bank may from time to time reasonably request. Hastings Manufacturing Company August 28, 1998 Page 20 (e) ACCOUNTING; ACCESS TO RECORDS, BOOKS, ETC. Maintain a system of accounting established and administered in accordance with sound business practices to permit preparation of financial statements in accordance with generally accepted accounting principles and to comply with the requirements of this Agreement and, at any reasonable time and from time to time, permit the Bank or any agents or representatives thereof to examine and make copies of and abstracts from the records and books of account of, and visit the properties of, the Company and its Subsidiaries, and to discuss the affairs, finances and accounts of the Company and its Subsidiaries with their respective directors, officers, employees and independent auditors, and by this provision the Company does hereby authorize such persons to discuss such affairs, finances and accounts with the Bank. 10. NEGATIVE COVENANTS. Until Maturity Date B and thereafter until payment in full of the principal of and accrued interest on any outstanding Note and the performance of all other obligations of the Company under this Agreement, the Company agrees that, unless the Bank shall otherwise consent in writing it shall not, and shall not permit any of its Subsidiaries to: (a) FUNDED DEBT RATIO. Permit or suffer the Funded Debt Ratio of the Company and its Subsidiaries to be greater than: (i) 2.80 to 1.00 at any time from and including the date hereof to but excluding December 31, 1998 or (ii) 2.50 to 1.00 from and including December 31, 1998 to but excluding December 31, 1999 or (iii) 2.00 to 1.00 thereafter. (b) DEBT SERVICE COVERAGE RATIO. Permit or suffer the Debt Service Coverage Ratio of the Company and its Subsidiaries to be less than 1.20:1.00 at any time. (c) TOTAL LIABILITIES TO TANGIBLE NET WORTH. Permit or suffer the ratio of the consolidated Total Liabilities of the Company and its Subsidiaries to the consolidated Tangible Net Worth of the Company and its Subsidiaries to be greater than 2.00 to 1.00 at any time. (d) INDEBTEDNESS. Create, incur, assume or in any manner become liable in respect of, or suffer to exist, any Indebtedness other than: (i) The Advances; (ii) The Indebtedness described on SCHEDULE 10(D), having the same terms as those existing on the date of this Agreement, but no extension or renewal thereof shall be permitted; (iii) Indebtedness of any Subsidiary of the Company owing to the Company or to any other Subsidiary of the Company; and Hastings Manufacturing Company August 28, 1998 Page 21 (iv) Indebtedness under lines of credit to other banks in an aggregate principal amount not to exceed $2,500,000 at any time. (e) LIENS. Create, incur or suffer to exist any Lien on any of the assets, rights, revenues or property, real, personal or mixed, tangible or intangible, whether now owned or hereafter acquired, of the Company or any of its Subsidiaries, other than: (i) Liens for taxes not delinquent or for taxes being contested in good faith by appropriate proceedings and as to which adequate financial reserves have been established on its books and records; (ii) Liens (other than any Lien imposed by ERISA) created and maintained in the ordinary course of business which are not material in the aggregate, and which would not have a Material Adverse Effect and which constitute: (A) pledges or deposits under worker's compensation laws, unemployment insurance laws or similar legislation, (B) good faith deposits in connection with bids, tenders, contracts or leases to which the Company or any of its Subsidiaries is a party for a purpose other than borrowing money or obtaining credit, including rent security deposits, (C) Liens imposed by law, such as those of carriers, warehousemen and mechanics, if payment of the obligation secured thereby is not yet due, (D) Liens securing taxes, assessments or other governmental charges or levies not yet subject to penalties for nonpayment, and (E) pledges or deposits to secure public or statutory obligations of the Company or any of its Subsidiaries, or surety or customs bonds to which the Company or any of its Subsidiaries is a party; and (iii) Each Lien described in on SCHEDULE 10(E) may be suffered to exist upon the same terms as those existing on the date hereof, but no extension or renewal thereof shall be permitted. (f) MERGER; ACQUISITIONS; ETC. Purchase or otherwise acquire, whether in one or a series of transactions, all or a substantial portion of the business assets, rights, revenues or property, real, personal or mixed, tangible or intangible, of any person, or all or a substantial portion of the capital stock of or other ownership interest in any other person nor make any substantial change in the nature of its business; nor merge or consolidate or amalgamate with any other person or take any other action having a similar effect, nor enter into any joint venture or similar arrangement with any other person, PROVIDED, HOWEVER, that this paragraph 10(f) shall not prohibit any merger or acquisition if the Company shall be Hastings Manufacturing Company August 28, 1998 Page 22 the surviving or continuing corporation thereof and, immediately after such merger or acquisition, no Default or Event of Default shall exist or shall have occurred and be continuing. (g) DISPOSITION OF ASSETS, ETC. Sell, lease, license, transfer, assign or otherwise dispose of all or a substantial portion of its business, assets, rights, revenues or property, real, personal or mixed, tangible or intangible, whether in one or a series of transactions, other than inventory sold in the ordinary course of business upon customary credit terms and sales of scrap or obsolete material or equipment. (h) DIVIDENDS AND OTHER RESTRICTED PAYMENTS. Make, pay, declare or authorize any dividend, payment or other distribution in respect of any class of its capital stock or any dividend, payment or distribution in connection with the redemption, purchase, retirement or other acquisition, directly or indirectly, of any shares of its capital stock other than such dividends, payments or other distributions to the extent payable solely in shares of the capital stock of the Company, PROVIDED, HOWEVER, that, if no Default or Event of Default shall exist or shall have occurred and be continuing, the Company may make, pay, declare or authorize dividends, payments and other such distributions made after the date hereof which, in the aggregate, do not exceed the sum of (i) $2,000,000 at any time plus (ii) beginning January 1, 1998, fifty percent (50%) of the consolidated Cumulative Net Income of the Company and its Subsidiaries. For purposes of this paragraph 10(h), "capital stock" shall include capital stock and any securities exchangeable for or convertible into capital stock and any warrants, rights or other options to purchase or otherwise acquire capital stock or such securities. (i) INVESTMENTS, LOANS AND ADVANCES. Purchase or otherwise acquire any capital stock of or other ownership interest in, or debt securities of or other evidences of Indebtedness of, any other person; nor make any loan or advance of any of its funds or property or make any other extension of credit to, or make any investment or acquire any interest whatsoever in, any other person; nor incur any Material contingent liability, other than (i) extensions of trade credit made in the ordinary course of business on customary credit terms and commission, travel and similar advances made to officers and employees in the ordinary course of business, and (ii) amounts which do not exceed, in the aggregate, $1,000,000. (j) LEASES. Enter into, permit or suffer to remain outstanding any arrangement for the leasing of real or personal property, wherein the total annual liability for lease payments exceeds $750,000 in the aggregate for the Company and its Subsidiaries, excluding those lease obligations of the Company under the EDC bonds described on SCHEDULE 10(J). Hastings Manufacturing Company August 28, 1998 Page 23 (k) NEGATIVE PLEDGE LIMITATION. Enter into any agreement with any person other than the Bank pursuant hereto which prohibits or limits the ability of the Company or any Subsidiary to create, incur, assume or suffer to exist any Lien upon any of its assets, rights, revenue or property, real, personal or mixed, tangible or intangible, whether now owned or hereafter acquired. For purposes of this paragraph 10, compliance with the covenants shall be determined in accordance with generally accepted accounting principles; PROVIDED, HOWEVER, that (i) the terms "Tangible Net Worth" and "Cumulative Net Income," as such terms are defined and used herein, shall exclude the one-time effect of the application of Statement of Financial Accounting Standard 106 ("SFAS 106") on the financial condition of the Company in an approximate amount of $11,209,000, (ii) the term "Total Liabilities," as such term is defined and used herein, shall exclude the amount shown on the balance sheet of the Company under the heading "Post-Retirement Benefit Obligation" or similar title evidencing the liability of the Company under SFAS 106, such excluded amount not to exceed the initial adjustment of $16,916,167 to "Post-Retirement Benefit Obligation," (iii) the amount shown on the balance sheet of the Company under the heading "Intangible Pension Asset" shall not be deemed as an intangible asset for purposes of the definition of "Tangible Net Worth," as such term is defined and used herein, so long as there is a relate, offsetting figure of the same or greater amount in the "Stockholder's Equity" section of the balance sheet of the Company under the heading "Pension Liabilities Adjustment" and (iv) in all other respects generally accepted accounting principles shall be construed to include the charges to income and other accounting adjustments required under SFAS 106 from and after the date of such initial one-time SFAS 106 adjustment. 11. REPRESENTATIONS AND WARRANTIES. The Company represents and warrants to the Bank that: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Michigan, and is duly qualified to do business and is in good standing in each additional jurisdiction where such qualification is necessary. (b) The execution, delivery and performance of this Agreement and by the Company and the issuance, delivery and performance of any Note by the Company are within its corporate powers, have been duly authorized by the Company, and are not in contravention of law or of the terms of its Articles of Incorporation or By-laws, or of any undertaking to which the Company is a party or by which it may be bound and do not result in any Lien (other than Permitted Liens). Hastings Manufacturing Company August 28, 1998 Page 24 (c) This Agreement is, and any Note when issued will be, valid, binding and enforceable against the Company in accordance with the respective terms thereof. (d) No consent, approval or authorization of or declaration or filing with any governmental authority or any other person on the part of the Company is required in connection with the execution, delivery and performance of this Agreement or any Note or the consummation of the transactions contemplated by this Agreement. (e) No litigation or governmental proceeding is pending or, to the knowledge of the officers of the Company, threatened against the Company which could have a Material Adverse Effect. (f) All financial statements famished by the Company to the Bank are complete and accurate in all material respects and present fairly the financial condition of the Company as of the dates of such statements and the results of its operations for the periods covered thereby, in accordance with generally accepted accounting principles, and there has been no material adverse change in the condition of the Company, financial or otherwise, since the date of the latest of such statements for the Company. (g) The Company is solvent, able to pay its Indebtedness (including Contingent Liabilities) as it matures, has capital sufficient to carry on its business and all business in which it is about to engage, and the present fair saleable value of its assets is greater than the amount of its Indebtedness (including Contingent Liabilities). (h) The Company is in compliance in all material respects with all laws, rules, regulations, orders or similar requirements of any federal, state or local governmental authority, including without limitation those relating to environmental matters. (i) Each of the representations and warranties in the Swap Agreement is true and correct in all respects as if made on and as of the date hereof (j) There exists no default, Event of Default or event or condition which, with notice or the lapse of time or both could become such a default or Event of Default, under the Swap Agreement. Hastings Manufacturing Company August 28, 1998 Page 25 12. FEES. The Company shall pay all fees and other expenses incurred by the Bank in connection with this Agreement, including without limitation the fees and expenses of Dickinson Wright PLLC, counsel for the Bank, in connection with preparation of this Agreement and the documents required hereunder, and any modification, amendment, waiver or consent under this Agreement or any enforcement or protection of any of the Bank's rights under this Agreement. 13. EVENTS OF DEFAULT. The Loans and all other indebtedness, obligations and liabilities of the Company to the Bank hereunder are payable upon demand, and the failure of the Company to make any payment demanded by the Bank immediately upon demand shall be deemed an Event of Default under this Agreement. In addition, each of the following shall also be deemed an Event of Default under this Agreement, and upon the occurrence of any of the following each Note and all accrued interest thereon and all other indebtedness, obligations and liabilities of the Company to the Bank shall be immediately due and payable, without notice or demand: (a) failure to make any payment when due (whether by demand or otherwise) of principal or failure to pay make any payment of interest on any Note or any other amount due under this Agreement within five days of the due date; or (b) any other default in the performance or observance of any term, covenant or agreement of the Company contained in this Agreement or any Note; or (c) any representation or warranty made by the Company herein or any statement or certificate furnished by the Company hereunder proves to be untrue in any material respect; or (d) failure to perform or observe any term, covenant or agreement contained in paragraph 10 hereof; or (e) the Company or any of its Subsidiaries shall fail to pay any part of the principal of, the premium, if any, or the interest on, or any other payment of money due under any other document, agreement or instrument now or hereafter evidencing any indebtedness, obligation or liability of any kind, beyond any period of grace provided with respect thereto, if the effect of such failure is to cause, or permit the holders of such indebtedness (or a trustee on behalf of such holders) to cause, any payment in respect of such indebtedness to become due prior to its due date; or Hastings Manufacturing Company August 28, 1998 Page 26 (f) the Company or any of its Subsidiaries becomes insolvent or bankrupt, or makes an assignment for the benefit of creditors or consents to the appointment of a trustee or receiver for itself or for the greater part of its properties; or a trustee or receiver is appointed for the Company or any of its Subsidiaries without its consent; or bankruptcy, reorganization or liquidation proceedings are instituted by or against the Company or any of its Subsidiaries; or (g) the Company or any of its Subsidiaries shall suffer any money judgment not covered by insurance, writ or warrant of attachment or similar process involving an amount in excess of $100,000 in the aggregate, and shall not discharge, vacate, bond or stay the same within a period of thirty (30) days or, in any event, within ten (10) days of the date of any proposed sale thereunder; or (h) any of the following events shall occur, if such event could alone or in combination with any other such event or events have a Material Adverse Effect: a Reportable Event that results in or could result in material liability of the Company to the PBGC or to any Plan 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 to administer any Plan or the filing by the Company or any ERISA Affiliate of a notice of intent to terminate a Plan or the institution of other proceedings to terminate a Plan; or the Company or any ERISA Affiliate shall fail to pay when due any material 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 Company; or failure by the Company 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 Company to the PBGC or any Plan; or the withdrawal of the Company or any ERISA Affiliate from a Plan during a plan year in which it was a "substantial employer" as defined in Section 4001(a)(2) of ERISA; or the Company or any ERISA Affiliate becomes an employer with respect to any Multiemployer Plan without the prior written consent of the Bank; or (i) any Change of Control; or (j) any material adverse change in the business or financial condition of the Company or any of its Subsidiaries. 14. SET-OFF. In addition to any rights and remedies of the Bank provided by law, the Bank shall have the right, without prior written notice to the Company, any such notice being expressly waived by the Hastings Manufacturing Company August 28, 1998 Page 27 Company to the extent permitted by applicable law, upon the occurrence of any Event of Default and so long as such Event of Default is continuing, to set off and apply against any obligations, whether matured or unmatured, of the Company to the Bank, any amount owing by the Bank to the Company, at or at any time after the happening of any of the above-mentioned events, and such right of set-off may be exercised by the Bank against the Company or against any assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor of Company, or against anyone else claiming through or against the Company of such assignee for the benefit of creditors, receiver, or execution, judgment or attachment creditor, notwithstanding the fact that such right of set-off shall not have been exercised by the Bank prior to the making, filing or issuance or service upon the Bank of, or of notice of, assignment for the benefit of creditors, appointment or application for the appointment of a receiver, or issuance of execution, subpoena or order or warrant. The Bank agrees promptly to notify the Company after any set-off and application made by the Bank, provided that the failure to give such notice shall not affect the validity of such set-off and application. 15. INTEREST LIMITATION. Notwithstanding any provision of this Agreement or any Note, in no event shall the amount of interest paid or agreed to be paid by the Company exceed an amount computed at the highest rate of interest permissible under applicable law. If, from any circumstances whatsoever, fulfillment of any provision of this Agreement or any Note, at the time performance of such provision shall be due, shall involve exceeding the interest rate limitation validly prescribed by law which a court of competent jurisdiction may deem applicable hereto, then, IPSO FACTO, the obligations to be fulfilled shall be reduced to an amount computed at the highest rate of interest permissible under applicable law, and if for any reason whatsoever the Bank shall ever receive as interest an amount which would be deemed unlawful under such applicable law such interest shall be automatically applied to the payment of principal of the loans outstanding hereunder (whether or not then due and payable) and not for the payment of interest, or shall be refunded to the Company if such principal and all other obligations of the Company to the Bank have been irrevocably paid in full. 16. NOTICES. All notices, demands, request and consents hereunder shall be in writing and shall be effective when received, except that any notice or demand which by any provision of this Agreement is required or provided to be given or served to or upon the Company shall be deemed to have been given or served for all purposes by being sent as registered mail, postage prepaid, addressed as follows: Hastings Manufacturing Company, 325 North Hanover, Hastings, Michigan 49058, Attention: Mr. Thomas J. Bellgraph, Treasurer, or, if any other address shall at any time be designated by the Company in writing to the Bank, to such other address. Hastings Manufacturing Company August 28, 1998 Page 28 17. PAYMENTS. All payments to be made by the Company hereunder shall be made in immediately available funds to the Bank at its banking office in Detroit, Michigan not later than 11:00 a.m. Detroit time on the date on which such payment shall become due, and all payments received after 11:00 a.m. shall be deemed received on the following Business Day. 18. MISCELLANEOUS. This Agreement embodies the entire agreement and understanding between the Company and the Bank and supersedes all prior agreements and understandings relating to the subject matter hereof. No amendment, modification or waiver of any provision of this Agreement nor any consent to a departure therefrom shall be effective unless the same shall be in writing and signed by the Company and the Bank. No failure of the Bank or of the holder of any Note in exercising any right, power or privilege hereunder shall affect such right, power or privilege, nor shall any single or partial exercise thereof preclude any further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies of the Bank and those of the holder of any Note under this Agreement are cumulative and not exclusive of any rights or remedies which either of them may otherwise have. Except as set forth in paragraph 10 hereof, all financial terms used but not defined herein shall be interpreted in accordance with generally accepted accounting principles. All amounts due hereunder which are not paid when due (other than interest) shall bear interest at the Overdue Rate. 19. EXPENSES, INDEMNIFICATION (a) The Company agrees to pay, or reimburse the Bank for the payment of, on demand, (i) the reasonable fees and expenses of counsel to the Bank, including without limitation the fees and expenses of Dickinson Wright PLLC, in connection with the preparation, execution, delivery and administration of this Agreement and the Notes, and in connection with advising the Bank as to its rights and responsibilities with respect thereto, and in connection with any amendments, waivers or consents in connection therewith, and (ii) all stamp and other taxes and fees payable or determined to be payable in connection with the execution, delivery, filing or recording of this Agreement or the Notes, or the consummation of the transactions contemplated hereby, and any and all liabilities with respect to or resulting from any delay in paying or omitting to pay such taxes or fees, and (iii) all reasonable costs and expenses of the Bank (including reasonable fees and expenses of counsel and whether incurred through negotiations, legal proceedings or otherwise) in connection with any Default or Event of Default or the enforcement of, or the exercise or preservation of any rights under, this Agreement or the Notes or in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement, and (iv) all reasonable costs and expenses of the Bank (including reasonable fees and expenses of counsel) in Hastings Manufacturing Company August 28, 1998 Page 29 connection with any action or proceeding relating to a court order, injunction or other process or decree restraining or seeking to restrain the Bank from paying any amount under, or otherwise relating in any way to, any Letter of Credit and any and all costs and expenses which any of them may incur relative to any payment under any Letter of Credit. (b) The Company hereby indemnifies and agrees to hold harmless the Bank, and its respective officers, directors, employees and agents, harmless from and against any and all claims, damages, losses, liabilities, costs or expenses of any kind or nature whatsoever which the Bank or any such person may incur or which may be claimed against any of them by reason of or in connection with any Letter of Credit, and neither the Bank or any of its respective officers, directors, employees or agents shall be liable or responsible for: (i) the use which may be made of any Letter of Credit or for any acts or omissions of any beneficiary in connection therewith; (ii) the validity, sufficiency or genuineness of documents or of any endorsement thereon, even if such documents should in fact prove to be in any or all respects invalid, insufficient, fraudulent or forged; (iii) payment by the Bank to the beneficiary under any Letter of Credit against presentation of documents which do not comply with the terms of any Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit; (iv) any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit; or (v) any other event or circumstance whatsoever arising in connection with any Letter of Credit; PROVIDED, HOWEVER, that the Company shall not be required to indemnify the Bank and such other persons, and the Bank shall be liable to the Company to the extent, but only to the extent, of any direct, as opposed to consequential or incidental, damages suffered by the Company which were caused by (A) the Bank's wrongful dishonor of any Letter of Credit after the presentation to it by the beneficiary thereunder of a draft or other demand for payment and other documentation strictly complying with the terms and conditions of such Letter of Credit, or (B) the Bank's payment by the Bank to the beneficiary under any Letter of Credit against presentation of documents which do not comply with the terms of the Letter of Credit to the extent, but only to the extent, that such payment constitutes gross negligence of willful misconduct of the Bank. It is understood that in making any payment under a Letter of Credit the Bank will rely on documents presented to it under such Letter of Credit as to any and all matters set forth therein without further investigation and regardless of any notice or information to the contrary, and such reliance and payment against documents presented under a Letter of Credit substantially complying with the terms thereof shall not be deemed gross negligence or willful misconduct of the Bank in connection with such payment. It is further acknowledged and agreed that the Company may have rights against the beneficiary or others in connection with any Letter of Hastings Manufacturing Company August 28, 1998 Page 30 Credit with respect to which the Bank are alleged to be liable and it shall be a precondition of the assertion of any liability of the Bank under this paragraph 20 that the Company shall first have exhausted all remedies in respect of the alleged loss against such beneficiary and any other parties obligated or liable in connection with such Letter of Credit and any related transactions. 20. WAIVER OF JURY TRIAL. The Bank and the Company, after consulting or having had the opportunity to consult with counsel, knowingly, voluntarily and intentionally waive any right either of them may have to a trial by jury in any litigation based upon or arising out of this Agreement or any related instrument or agreement or any of the transactions contemplated by this Agreement or any course of conduct, dealing, statements (whether oral or written) or actions of either of them. Neither the Bank nor the Company shall seek to consolidate, by counterclaim or otherwise, any such action in which a jury trial has been waived with any other action in which a jury trial cannot be or has not been waived. These provisions shall not be deemed to have been modified in any respect or relinquished by either the Bank or the Company except by a written instrument executed by both of them. 21. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Michigan applicable to contracts made and to be performed entirely within such State, without regard to the conflict of laws principles of such State. 22. BINDING EFFECT. This Agreement is, and the Notes to which the Company is a party when delivered hereunder will be, legal, valid and binding obligations of the Company enforceable against the Company in accordance with their respective terms. Hastings Manufacturing Company August 28, 1998 Page 31 Should the foregoing be agreeable to you, as it is to us, please indicate your agreement and acceptance by executing and returning the enclosed copy of this letter, whereupon this Agreement shall be effective as of the date of this letter. Very truly yours, NBD BANK By /S/ THOMAS GAMM Its: Vice President-Corporate Banking Agreed and accepted. HASTINGS MANUFACTURING COMPANY By /S/ THOMAS J. BELLGRAPH Its: Vice President - Finance Dated: August 28, 1998 EX-4 3 EXHIBIT 4(g) (Local Currency-Single Jurisdiction) ISDA[REGISTERED] International Swap Dealers Association, Inc. MASTER AGREEMENT dated as of August 10, 1998 HASTINGS MANUFACTURING COMPANY and NBD BANK have entered and/or anticipate entering into one or more transactions (each a "Transaction") that are or will be governed by this Master Agreement, which includes the schedule (the "Schedule"), and the documents and other confirming evidence (each a "Confirmation") exchanged between the parties confirming those Transactions. Accordingly, the parties agree as follows: 1. INTERPRETATION (a) DEFINITIONS. The terms defined in Section 12 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement. (b) INCONSISTENCY. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including, the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction. (c) SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this "Agreement"), and the parties would not otherwise enter into any Transactions. 2. OBLIGATIONS (a) GENERAL CONDITIONS. (i) Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement. Copyright 1992 by International Swap Dealers Association, Inc. (ii) Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement. (iii) Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement. (b) CHANGE OF ACCOUNT. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change. (c) NETTING. If on any date amounts would otherwise be payable: (i) in the same currency; and (ii) in respect of the same Transaction, by each party to the other, then, on such date, each party's obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount. The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such 2 ISDA[REGISTERED] 1992 Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of branches or offices through which the parties make and receive payments or deliveries. (d) DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement. 3. REPRESENTATIONS Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into) that: (a) BASIC REPRESENTATIONS. (i) STATUS. It is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing; (ii) POWERS. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement and any other documentation relating to this Agreement that it is required by this Agreement to deliver and to perform its obligations under this Agreement and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorize such execution, delivery and performance; (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its constitutional documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any contractual restriction binding on or affecting it or any of its assets; 3 ISDA[REGISTERED] 1992 (iv) CONSENTS. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and (v) OBLIGATIONS BINDING. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting creditors' rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)). (b) ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event with respect to it has occurred and is continuing and no such event or circumstance would occur as a result of its entering into or performing its obligations under this Agreement or any Credit Support Document to which it is a party. (c) ABSENCE OF LITIGATION. There is not pending or, to its knowledge, threatened against it or any of its Affiliates any action, suit or proceeding at law or in equity or before any court, tribunal, governmental body, agency or official or any arbitrator that is likely to affect the legality, validity or enforceability against it of this Agreement or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document. (d) ACCURACY OF SPECIFIED INFORMATION. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect. 4. AGREEMENTS Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party: (a) FURNISH SPECIFIED INFORMATION. It will deliver to the other party any forms, documents or certificates specified in the Schedule or any Confirmation by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable. (b) MAINTAIN AUTHORIZATIONS. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other 4 ISDA[REGISTERED] 1992 authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future. (c) COMPLY WITH LAWS. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party. 5. EVENTS OF DEFAULT AND TERMINATION EVENTS (a) EVENTS OF DEFAULT. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an "Event of Default") with respect to such party:- (i) FAILURE TO PAY OR DELIVER. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(d) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party; (ii) BREACH OF AGREEMENT. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(d) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party; (iii) CREDIT SUPPORT DEFAULT. (1) Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed; (2) the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or 5 ISDA[REGISTERED] 1992 (3) the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document; (iv) MISREPRESENTATION. A representation made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated; (v) DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf); (vi) CROSS DEFAULT. If "Cross Default" is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified Indebtedness becoming, or becoming capable at such time of being declared, due and payable under such agreements or instruments, before it would otherwise have been due and payable or (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period); (vii) BANKRUPTCY. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party:- 6 ISDA[REGISTERED] 1992 (1) is dissolved (other than pursuant to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable to pay its debts or fails or admits in writing its inability generally to pay its debts as they become due; (3) makes a general assignment, arrangement or composition with or for the benefit of its creditors; (4) institutes or has instituted against it a proceeding seeking a judgment of insolvency or bankruptcy or any other relief under any bankruptcy or insolvency law or other similar law affecting creditors' rights, or a petition is presented for its winding-up or liquidation, and, in the case of any such proceeding, or petition instituted or presented against it, such proceeding or petition (A) results in a judgment of insolvency or bankruptcy or the entry of an order for relief or the making, of an order for its winding-up or liquidation or (B) is not dismissed, discharged, stayed or restrained in each case within 30 days of the institution or presentation thereof; (5) has a resolution passed for its winding-up, official management or liquidation (other than pursuant to a consolidation, amalgamation or merger); (6) seeks or becomes subject to the appointment of an administrator, provisional liquidator, conservator, receiver, trustee, custodian or other similar official for it or for all or substantially all its assets; (7) has a secured party take possession of all or substantially all its assets or has a distress, execution, attachment, sequestration or other legal process levied, enforced or sued on or against all or substantially all its assets and such secured party maintains possession, or any such process is not dismissed, discharged, staved or restrained, in each case within 30 days thereafter; (8) causes or is subject to any event with respect to it which, under the applicable laws of any jurisdiction, has an analogous effect to any of the events specified in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the foregoing acts; or (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer:- (1) the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or 7 ISDA[REGISTERED] 1992 (2) the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement. (b) TERMINATION EVENTS. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (ii) below or an Additional Termination Event if the event is specified pursuant to (iii) below:- (i) ILLEGALITY. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, or due to the promulgation of, or any change in, the interpretation by any court, tribunal or regulatory authority with competent jurisdiction of any applicable law after such date, it becomes unlawful (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party):- (1) to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or (2) to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction; (ii) CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified in the Schedule as applying to the party, such party ("X"), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or (iii) ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event" is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party 8 ISDA[REGISTERED] 1992 or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation). (c) EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default. 6. EARLY TERMINATION (a) RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of Default with respect to a party (the "Defaulting Party") has occurred and is then continuing, the other party (the "Non-defaulting Party") may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, "Automatic Early Termination" is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8). (b) RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT. (i) NOTICE. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require. (ii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(1) occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event. (iii) RIGHT TO TERMINATE. If:- (1) an agreement under Section 6(b)(ii) has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or 9 ISDA[REGISTERED] 1992 (2) an Illegality other than that referred to in Section 6(b)(ii), a Credit Event Upon Merger or an Additional Termination Event occurs, either party in the case of an Illegality, any Affected Party in the case of an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions. (c) EFFECT OF DESIGNATION. (i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing. (ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(d) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e). (d) CALCULATIONS. (i) STATEMENT. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation. (ii) PAYMENT DATE. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days 10 ISDA[REGISTERED] 1992 after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment), from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. (e) PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the following provisions shall apply based on the parties' election in the Schedule of a payment measure, either "Market Quotation" or "Loss", and a payment method, either the "First Method" or the "Second Method". If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that "Market Quotation" or the "Second Method", as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off. (i) EVENTS OF DEFAULT. If the Early Termination Date results from an Event of Default:- (1) FIRST METHOD AND MARKET QUOTATION. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non- defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party over (B) the Unpaid Amounts owing to the Defaulting Party. (2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party's Loss in respect of this Agreement. (3) SECOND METHOD AND MARKER QUOTATION. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non- defaulting Party) in respect of the Terminated Transactions and the Unpaid Amounts owing to the Non-defaulting Party less (B) the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non- defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting 11 ISDA[REGISTERED] 1992 Party's Loss in respect of this Agreement. If that amount is a positive number, the Defaulting Party will pay it to the Non- defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party. (ii) TERMINATION EVENTS. If the Early Termination Date results from a Termination Event:- (1) ONE AFFECTED PARTY. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions. (2) TWO AFFECTED PARTIES. If there are two Affected Parties:- (A) if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount ("X") and the Settlement Amount of the party with the lower Settlement Amount ("Y") and (b) the Unpaid Amounts owing to X less (II) the Unpaid Amounts owing to Y; and (B) if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss ("X") and the Loss of the party with the lower Loss ("Y"). If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y. (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early Termination Date occurs because "Automatic Early Termination" applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are, appropriate and permitted by law to reflect any payments or deliveries made by one party to the 12 ISDA[REGISTERED] 1992 other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii). (iv) PRE-ESTIMATE. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre- estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses. 7. TRANSFER Neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that:- (a) a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and (b) a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e). Any purported transfer that is not in compliance with this Section will be void. 8. MISCELLANEOUS (a) ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto. (b) AMENDMENTS. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system. (c) SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction. (d) REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are 13 ISDA[REGISTERED] 1992 cumulative and not exclusive of any rights, powers, remedies and privileges provided by law. (e) COUNTERPARTS AND CONFIRMATIONS. (i) This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including, by facsimile transmission), each of which will be deemed an original. (ii) The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall be entered into as soon as practicable and may be executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding, supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation. (f) NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege. (g) HEADINGS. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement. 9. EXPENSES A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection. 10. NOTICES (a) EFFECTIVENESS. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice 14 ISDA[REGISTERED] 1992 or other communication under Section 5 or 6 may not be given by facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated:- (i) if in writing and delivered in person or by courier, on the date it is delivered; (ii) if sent by telex, on the date the recipient's answer back is received; (iii) if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender's facsimile machine); (iv) if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or (v) if sent by electronic messaging system, on the date that electronic message is received, unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day. (b) CHANGE OF ADDRESSES. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it. 11. GOVERNING LAW AND JURISDICTION (a) GOVERNING LAW. This Agreement will be governed by and construed in accordance with the law specified in the Schedule. (b) JURISDICTION. With respect to any suit, action or proceedings relating to this Agreement ("Proceedings"), each party irrevocably:- (i) submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non- exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in 15 ISDA[REGISTERED] 1992 New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and (ii) waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party. Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction. (c) WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings. 12. DEFINITIONS As used in this Agreement:- "ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b). "AFFECTED PARTY" has the meaning specified in Section 5(b). "AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event consisting of an Illegality, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions. "AFFILIATE" means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, 16 ISDA[REGISTERED] 1992 "control" of any entity or person means ownership of a majority of the voting power of the entity or person. "APPLICABLE RATE" means:- (a) in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate; (b) in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate; (c) in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and (d) in all other cases, the Termination Rate. "CONSENT" includes a consent, approval, action, authorization, exemption, notice, filing, registration or exchange control consent. "CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b). "CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as such in this Agreement. "CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule. "DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum. "DEFAULTING PARTY" has the meaning specified in Section 6(a). "EARLY TERMINATION DATE" means the date determined in accordance with Section 6(a) or 6(b)(iii). "EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable, in the Schedule. "ILLEGALITY" has the meaning specified in Section 5(b). "LAW" includes any treaty, law, rule or regulation and "LAWFUL" AND "UNLAWFUL" will be construed accordingly. "LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign 17 ISDA[REGISTERED] 1992 exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction. "LOSS" means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining, or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and out-of-pocket expenses referred to under Section 9. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets. "MARKET QUOTATION" means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the "Replacement Transaction") that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of 18 ISDA[REGISTERED] 1992 Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market- maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the biggest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined. "NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount. "NON-DEFAULTING PARTY" has the meaning specified in Section 6(a). "POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default. "REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city. "SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction. "SET-OFF" means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer 19 ISDA[REGISTERED] 1992 of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer. "SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination Date, the sum of:_______ (a) the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and (b) such party's Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result. "SPECIFIED ENTITY" has the meaning specified in the Schedule. "SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money. "SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, cellar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation. "TERMINATED TRANSACTIONS" means with respect to any Early Termination Date (a) if resulting from a Termination Event all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if "Automatic Early Termination" applies, immediately before that Early Termination Date). "TERMINATION EVENT" means an Illegality or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event. 20 ISDA[REGISTERED] 1992 "TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts. "UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the fair market values reasonably determined by both parties. IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document. HASTINGS MANUFACTURING COMPANY NBD BANK - ----------------------------------- ------------------------------ (Name of Party) (Name of Party) By: /S/ THOMAS J. BELLGRAPH /S/ DANIEL T. MUHLING Name: Thomas J. Bellgraph Name: Daniel T. Muhling Title: Vice President-Finance Title: V.P. Date: 9/3/98 Date: 8/31/98 21 ISDA[REGISTERED] 1992 EX-27 4 ART. 5 FDS FOR 3RD QUARTER FORM 10-Q
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE HASTINGS MANUFACTURING COMPANY AND SUBSIDIARIES FORM 10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCES TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 339,854 0 6,110,314 175,000 10,224,762 19,155,919 24,241,711 (16,151,160) 35,802,077 6,248,278 6,600,000 1,567,852 0 0 4,655,587 35,802,077 29,829,994 29,829,994 20,538,990 20,538,990 0 152,200 336,793 2,077,829 879,000 1,198,829 0 0 0 1,198,829 1.55 1.55
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