-----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, PYAmE95ZpWG9cDa6dMtFWQMRjD9suAbg4uJgWwSGon3ohpPGOvmS9lhEWywVCNCQ 7ypqLpUSy8Rv8/1fZq+4mw== 0000950124-98-003381.txt : 19980615 0000950124-98-003381.hdr.sgml : 19980615 ACCESSION NUMBER: 0000950124-98-003381 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19980528 ITEM INFORMATION: ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980612 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MORTON INDUSTRIAL GROUP INC CENTRAL INDEX KEY: 0000064247 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 380811650 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 000-13198 FILM NUMBER: 98646849 BUSINESS ADDRESS: STREET 1: 1021 WEST BIRCHWOOD STREET CITY: MORTON STATE: IL ZIP: 61550 BUSINESS PHONE: 3092667176 MAIL ADDRESS: STREET 1: 1021 WEST BIRCHWOOD STREET CITY: MORTON STATE: IL ZIP: 61550 FORMER COMPANY: FORMER CONFORMED NAME: MLX CORP /GA DATE OF NAME CHANGE: 19960823 FORMER COMPANY: FORMER CONFORMED NAME: MCLOUTH STEEL CORP DATE OF NAME CHANGE: 19850212 8-K 1 FORM 8-K 1 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) May 28, 1998 MORTON INDUSTRIAL GROUP, INC. (Exact name of registrant as specified in its charter) Georgia 0-13198 38-0811650 - ------------------------------------------------------------------------------- State or other jurisdiction of (Commission (I.R.S. Employer incorporation or organization File Number) Identification No.) 1021 West Birchwood, Morton, Illinois 61550 --------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code 309-266-7176 ------------- - ------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS Mid-Central Plastics, Inc. On May 29, 1998, the Company closed its acquisition of all of the issued and outstanding shares of MidCentral Plastics, Inc. ("Mid-Central"). The total purchase price was $23,825,000 (including debt assumed and refinanced), which was paid in cash at the closing. The Company borrowed the necessary funds under its new Credit Agreement described in Item 5, below. The selling shareholders also received payments under noncompetition agreements totaling $75,000. The purchase price was the result of arms length bargaining between the Company and the owners of Mid-Central. Mid-Central, based in West Des Moines, Iowa, is an ISO 9002 registered injection molder specializing in highly engineered products for construction, agricultural, and industrial equipment manufacturers. Mid Central has approximately 200 employees at its 113,000 square foot manufacturing facility. Mid-Central operates 27 injection molding machines ranging in size from 85 to 1760 tons. The Company intends to maintain Mid-Central as a separate subsidiary and to operate its assets in substantially the same manner in which Mid-Central employed them before the acquisition. SMP Steel Corporation. On June 1, 1998, a wholly owned subsidiary of the Company acquired substantially all of the assets of SMP Steel Corporation ("SMP"), a privately held company located in Honea Path, South Carolina. The total purchase price was not material to the Company. SMP is a manufacturer of precision sheet metal components, enclosures, and assemblies for original equipment manufacturers primarily located in the Southeast. SMP's major capabilities include laser cutting, punching, folding, forming, and welding. SMP primarily produces carbon steel and stainless steel products, as well as a limited amount of aluminum products. The Company intends to operate SMP's assets in substantially the same manner in which SMP employed them before the acquisition. ITEM 5. OTHER EVENTS. On May 28, 1998, the Company entered into a new credit agreement with Harris Trust and Savings Bank, as Agent. All subsidiaries of the Company, including any subsequently acquired subsidiaries, are guarantors of the Company's indebtedness. The credit agreement is a $90 million facility, with the following components: (i) a $35 million revolving credit facility with a $10 million sub limit for letters of credit; (ii) a $25 million secured term loan that matures 5 years from the date of the credit agreement closing; and (iii) a $30 million secured term loan that matures 7 years from the date of the credit agreement closing. Both term loans are fully amortized over their respective terms with quarterly payments. The interest rates on the loans, at Morton's option, are (i) Harris Trust and Savings Bank Base Rate (which is the greater of the prime rate or the Federal Funds Rate plus 0.5%) or (ii) the reserve adjusted LIBOR plus the applicable LIBOR margin, fixed for 30, 60, 90 or 180 day period, plus an interest rate margin that is determined by the Company's cash flow leverage ratio. The proceeds under the facility are to be used to refinance the existing indebtedness, to finance acquisitions, and general corporate purposes. The facility is fully secured by a first priority security interest in all of the assets of the Company and the guarantors except for permitted liens, as well as a pledge of all of the stock the Company's subsidiaries (including subsequently acquired subsidiaries). The credit agreement requires that at least 50% of the term loans be hedged through an interest rate cap, swap or collar for a minimum of three years from the date of closing. The conditions of the credit agreement contain the usual conditions for facilities and transactions of this type, including a prohibition on the payment of dividends. 2 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. The Company will file audited financial statements of Mid-Central and pro-forma financial statements giving effect to the acquisition by amendment to this Form 8-K within 75 days after May 29, 1998. The following exhibits are included in this filing: EXHIBIT NO. DESCRIPTION. 10.1 Stock Purchase Agreement among the Company and Richard L. Goreham, Delores A. Staples, and William B. Goreham dated April 27, 1998 10.2 Credit Agreement dated May 28, 1998, among the Company, Harris Trust and Savings Bank, and the lenders signatory thereto 10.3 Mortgage and Security Agreement with Assignment of Rents executed by Carroll George, Inc., dated May 28, 1998 10.4 Deed of Trust and Security Agreement with Assignment of Rents, executed by B&W Metal Fabricators, Inc. 10.5 Amended and Restated Security Agreement executed by the Company, Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina, Morton Metalcraft Co. of South Carolina, Carroll George, Inc., and B&W Metal Fabricators, Inc., dated May 28, 1998 10.6 Amended and Restated Pledge Agreement executed by Morton Industrial Group, Inc., Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina, Morton Metalcraft Co. of South Carolina, Carroll George, Inc., and B&W \Metal Fabricators, Inc., dated May 28, 1998 10.7 Amended and Restated Mortgage and Security Agreement with Assignment of Rents executed by Morton Metalcraft Co. dated May 28, 1998 10.8 Mortgage and Security Agreement with Assignment of Rents executed by Mid-Central Plastics, Inc., dated May 28, 1998 99.1 Press release dated May 29, 1998 99.2 Press Release dated June 2, 1998 3 4 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. MORTON INDUSTRIAL GROUP, INC. (Registrant) Date: June 11, 1998 By: /S/William D. Morton -------------------------------- William D. Morton Chairman, President, and Chief Executive Officer 4 5 EXHIBIT INDEX EXHIBIT NO. DESCRIPTION. 10.1 Stock Purchase Agreement among the Company and Richard L. Goreham, Delores A. Staples, and William B. Goreham dated April 27, 1998 10.2 Credit Agreement dated May 28, 1998, among the Company, Harris Trust and Savings Bank, and the lenders signatory thereto 10.3 Mortgage and Security Agreement with Assignment of Rents executed by Carroll George, Inc., dated May 28, 1998. 10.4 Deed of Trust and Security Agreement with Assignment of Rents, executed by B&W Metal Fabricators, Inc., dated May 28, 1998 10.5 Amended and Restated Security Agreement executed by the Company, Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina, Morton Metalcraft Co. of South Carolina, Carroll George, Inc., and B&W Metal Fabricators, Inc., dated May 28, 1998 10.6 Amended and Restated Pledge Agreement executed by Morton Industrial Group, Inc., Morton Metalcraft Co., Morton Metalcraft Co. of North Carolina, Morton Metalcraft Co. of South Carolina, Carroll George, Inc., and B&W Metal Fabricators, Inc., dated May 28, 1998 10.7 Amended and Restated Mortgage and Security Agreement with Assignment of Rents executed by Morton Metalcraft Co. dated May 28, 1998 10.8 Mortgage and Security Agreement with Assignment of Rents executed by Mid-Central Plastics, Inc., dated May 28, 1998 99.1 Press release dated May 29, 1998 99.2 Press Release dated June 2, 1998 5 EX-10.1 2 EX-10.1 1 EXHIBIT 10.1 STOCK PURCHASE AGREEMENT THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made as of April 27, 1998, by and between Morton Industrial Group, Inc., a Georgia corporation ("Buyer"); Richard L. Goreham an individual resident of Des Moines, Iowa ("Richard"); Dolores A. Staples an individual resident of Des Moines, Iowa ("Dee"); and William B. Goreham, an individual resident of LaJolla, California ("William"). Richard, Dee and William are collectively referred to herein as ("Sellers"). RECITALS Sellers own that number of shares of Mid-Central Plastics, Inc., an Iowa corporation (the "Company"), set opposite their respective names on Exhibit A attached. Such shares are referred to herein as the "Shares," and constitute all of the issued and outstanding shares of capital stock of Company. Sellers desire to sell, and Buyer desires to purchase, the Shares for the consideration and on the terms set forth in this Agreement. AGREEMENT The parties, intending to be legally bound, agree as follows: 1. SALE AND TRANSFER OF SHARES; CLOSING 1.1 SHARES. Subject to the terms and conditions of this Agreement, at the Closing, Sellers will sell and transfer to Buyer, and Buyer will purchase from Sellers, the Shares. 1.2 PURCHASE PRICE. The purchase price (the "Purchase Price") for the Shares will be the aggregate amount set forth in Exhibit A reduced by any negative Adjustment Amount. 1.3 CLOSING. The purchase and sale (the "Closing") provided for in this Agreement will take place at the offices of Buyer's counsel at Husch & Eppenberger, LLC, 101 S.W. Adams Street, Suite 800, Peoria, Illinois 61602, at 10:00 a.m. (local time) on the later of (i) May 29, 1998, and (ii) the last business day of the month in which the termination of the applicable waiting period under the HSR Act occurs, or at such other time and place as the parties may mutually agree. Subject to the provisions of Section 9, failure to consummate the purchase and sale provided for in this Agreement on the date and time and at the place determined pursuant to this Section 1.3 will not result in the termination of this Agreement and will not relieve any party of any obligation under this Agreement. 1.4 CLOSING OBLIGATIONS. At the Closing: 2 (a) Sellers will deliver to Buyer: (i) Certificates representing the Shares, duly endorsed (or accompanied by duly executed stock powers), for transfer to Buyer; (ii) Release in the form of Exhibit 1.4(a)(ii) executed by Sellers (collectively, "Sellers' Release"); (iii) Noncompetition agreements in the form of Exhibit 1.4(a)(iii), executed by Sellers (collectively, the "Noncompetition Agreements"); (iv) A certificate executed by Sellers representing and warranting to Buyer that each of Sellers' representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date (giving full effect to any supplements to the Schedules that were delivered by Sellers to Buyer prior to the Closing Date in accordance with Section 4.5); (v) The legal opinion required by Section 7.4 hereof; (vi) Their resignations as officers and/or directors of the Company; and (vii) Any amounts paid or incurred prior to the Closing Date by the Company on account of expenses or assessments in connection with the Tax Audit (the "Tax Audit Credit"), payable by the reduction of the escrow amount set forth in Exhibit A. (b) Buyer will deliver to Sellers: (i) The Purchase Price set forth opposite such Seller's name on Exhibit A minus the escrow amount set forth therein by bank cashier's or certified check or by wire transfer to accounts specified by Richard, Dee and William, respectively; (ii) The sum of the escrow amount set forth in Exhibit A (reduced by the Tax Audit Credit) to the escrow agent referred to in Section 1.4(c) by bank cashier's or certified check; (iii) A certificate executed by Buyer to the effect that, except as otherwise stated in such certificate, each of Buyer's representations and warranties in this Agreement was accurate in all respects as of the date of this Agreement and is accurate in all respects as of the Closing Date as if made on the Closing Date; and (iv) The legal opinion required by Section 8.4 hereof. (c) Buyer and Sellers will enter into an escrow agreement in the form of Exhibit 1.4(c) (the "Escrow Agreement") with South Side - 2 - 3 Trust & Savings Bank of Peoria, Illinois or other escrow agent mutually acceptable to the parties. 1.5 ADJUSTMENT AMOUNT. The Adjustment Amount, but only if negative, will be equal to (a) the stockholders' equity of the Company as of the Closing Date determined in accordance with GAAP, minus (b) the stockholders' equity of the Company as of December 31, 1997 as set forth in the Balance Sheet. 1.6 ADJUSTMENT PROCEDURE. (a) Sellers shall prepare and cause Northrup, Haines, Kaduce, Schmid, Marklin, P.C., the Company's certified public accountants, at Sellers' expense, to audit, within sixty (60) days following the Closing Date, financial statements ("Closing Financial Statements") of the Company as of the Closing Date and for the period from the date of the Balance Sheet through the Closing Date, including a computation of stockholders' equity as of the Closing Date. If within thirty (30) days following delivery of the Closing Financial Statements, Buyer has not given Sellers notice of its objection to the Closing Financial Statements (such notice must contain a statement of the basis of Buyer's objection), then the stockholders' equity reflected in the Closing Financial Statements will be used in computing the Adjustment Amount. If Buyer gives such notice of objection, then the issues in dispute will be submitted to McGladrey & Pullen LLP, certified public accountants (the "Accountants"), for resolution. If issues in dispute are submitted to the Accountants for resolution, (i) each party will furnish to the Accountants such workpapers and other documents and information relating to the disputed issues as the Accountants may request and are available to that party (or its independent public accountants), and will be afforded the opportunity to present to the Accountants any material relating to the determination and to discuss the determination with the Accountants, (ii) the determination by the Accountants, as set forth in a notice delivered to both parties by the Accountants, will be binding and conclusive on the parties, and (iii) Buyer and Sellers will each bear 50% of the fees of the Accountants for such determination. (b) On the tenth (10th) business day following the final determination of the Adjustment Amount, if the Purchase Price is less than the aggregate of the payments made pursuant to Sections 1.4(b)(i) and 1.4(b)(ii) Sellers will pay the difference to Buyer. All payments will be made together with interest at the rate of 10% per annum beginning on the Closing Date and ending on the date of payment. 1.7 EMPLOYMENT AGREEMENTS. Immediately following the Closing, Buyer shall cause the Company to offer Employment Agreements to certain of its key managers in the form of the Agreements attached hereto as Exhibit 1.7. - 3 - 4 2. REPRESENTATIONS AND WARRANTIES OF SELLERS Sellers represent and warrant to Buyer as follows: 2.1 ORGANIZATION AND GOOD STANDING. (a) Schedule 2.1 contains a complete and accurate list of the Company's jurisdiction of incorporation, other jurisdictions in which it is authorized to do business, and its capitalization (including the identity of each stockholder and the number of shares held by each). The Company is a corporation duly organized, validly existing, and in good standing under the laws of its jurisdiction of incorporation, with full corporate power and authority to conduct its business as it is now being conducted, to own or use the properties and assets that it purports to own or use, and to perform all its obligations under Applicable Contracts. The Company is duly qualified to do business as a foreign corporation and is in good standing under the laws of each state or other jurisdiction in which either the ownership or use of the properties owned or used by it, or the nature of the activities conducted by it, requires such qualification, and where the failure to so qualify would have a material adverse effect on the Company. (b) Sellers have delivered to Buyer copies of the Organizational Documents of the Company, as currently in effect. (c) The Company has no Subsidiaries. 2.2 AUTHORITY; NO CONFLICT. (a) This Agreement constitutes the legal, valid, and binding obligation of Sellers, enforceable against Sellers in accordance with its terms. Upon the execution and delivery by Sellers of the Escrow Agreement, the Sellers' Releases, and the Noncompetition Agreements (collectively, the "Sellers' Closing Documents"), the Sellers' Closing Documents will constitute the legal, valid, and binding obligations of Sellers, enforceable against Sellers in accordance with their respective terms. Sellers have the absolute and unrestricted right, power, authority, and capacity to execute and deliver this Agreement and the Sellers' Closing Documents and to perform their obligations under this Agreement and the Sellers' Closing Documents. (b) Except as set forth in Schedule 2.2, neither the execution and delivery of this Agreement nor the consummation or performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time): (i) Contravene, conflict with, or result in a violation of (A) any provision of the Organizational Documents of the Company, or (B) any resolution adopted by the board of directors or the stockholders of the Company; - 4 - 5 (ii) Contravene, conflict with, or result in a violation of, or give any Governmental Body or other Person the right to challenge any of the Contemplated Transactions or to exercise any remedy or obtain any relief under, any Legal Requirement or any Order to which the Company or either Seller, or any of the assets owned or used by the Company, may be subject; (iii) Contravene, conflict with, or result in a violation of any of the terms or requirements of, or give any Governmental Body the right to revoke, withdraw, suspend, cancel, terminate, or modify, any Governmental Authorization that is held by the Company or that otherwise relates to the business of, or any of the assets owned or used by, the Company; (iv) To the Knowledge of Sellers based on current tax law, cause Buyer or the Company to become subject to, or to become liable for the payment of, any Tax; (v) Contravene, conflict with, or result in a violation or breach of any provision of, or give any Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; or (vi) Result in the imposition or creation of any Encumbrance upon or with respect to any of the assets owned or used by the Company. Except as set forth in Schedule 2.2, no Seller or the Company is or will be required to give any notice to or obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 2.3 CAPITALIZATION. The authorized equity securities of the Company consists of 200,000 shares of Class A stock, par value $10.00 per share, and 200,000 shares of Class B stock, par value $10.00 per share. Of the authorized shares, the number of issued and outstanding shares are as set forth in Schedule 2.3. Sellers are and will be on the Closing Date the record and beneficial owners and holders of the Shares, free and clear of all Encumbrances. Each of the Sellers owns the number of Shares set forth opposite his name on Exhibit A. All of the outstanding equity securities of the Company have been duly authorized and validly issued and are fully paid and nonassessable. There are no Contracts relating to the issuance, sale, or transfer of any equity securities or other securities of the Company. None of the outstanding equity securities or other securities of the Company were issued in violation of the Securities Act or any other Legal Requirement. The Company does not own, or have any Contract to acquire, any equity securities or other securities of any Person or any direct or indirect equity or ownership interest in any other business. - 5 - 6 2.4 FINANCIAL STATEMENTS. Sellers have delivered to Buyer: (a) audited balance sheets of the Company as at December 31 in each of the years 1993 through 1996, and the related audited statements of income, retained earnings and cash flow for each of the fiscal years then ended, together with the report thereon of Northrup, Haines, Kaduce, Schmid, Macklin, P.C., independent certified public accountants, (b) an unaudited balance sheet of the Company as at December 31, 1997 (the "Balance Sheet"), and the related unaudited statements of income, retained earnings and cash flow for the fiscal year then ended attached hereto as Schedule 2.4, together with the report thereon of Northrup, Haines, Kaduce, Schmid, Macklin, P.C., independent certified public accountants, and (c) an unaudited balance sheet of the Company as at April 4, 1998 (the "Interim Balance Sheet") and the related unaudited statement of income, retained earnings, and cash flow for the period then ended. Such financial statements and notes fairly present the financial condition and the results of operations, changes in stockholders' equity, and cash flow of the Company as at the respective dates of and for the periods referred to in such financial statements, all in accordance with GAAP, subject, in the case of the 1997 and interim financial statements, to normal recurring year-end adjustments (the effect of which will not, individually or in the aggregate, be materially adverse) and the absence of notes (that if presented would not differ materially from those included in the Balance Sheet); the financial statements referred to in this Section 2.4 reflect the consistent application of such accounting principles throughout the periods involved, except as disclosed in the notes to such financial statements. No financial statements of any Person other than the Company are required by GAAP to be included in the financial statements of the Company. 2.5 BOOKS AND RECORDS. The books of account, minute books, stock record books, and other records of the Company, all of which have been made available to Buyer at the Company's offices, or will be made so available to Buyer within ten (10) days of the date of this Agreement, are complete and correct and have been maintained in accordance with sound business practices, including the maintenance of an adequate system of internal controls. To the Knowledge of Sellers, the minute books of the Company contain materially accurate and complete records of all meetings held of, and corporate action taken by, the stockholders, the Board of Directors, and committees of the Boards of Directors of the Company, and no meeting of any such stockholders, Board of Directors, or committee has been held for which minutes have not been prepared and are not contained in such minute books. At the Closing, all of those books and records will be in the possession of the Company. 2.6 TITLE TO PROPERTIES; ENCUMBRANCES. Schedule 2.6 contains a complete and accurate list of all real property, leaseholds, or other interests therein owned by the Company. Sellers have delivered or made available to Buyer at the Company's - 6 - 7 offices (or will deliver or make so available to Buyer within ten (10) days of the date of this Agreement), copies of the deeds and other instruments (as recorded) by which the Company acquired such real property and interests, and copies of all title insurance policies, opinions, abstracts, and surveys in the possession of Sellers or the Company and relating to such property or interests. The Company owns (with good and marketable title in the case of real property, subject only to the matters permitted by the following sentence) all the properties and assets (whether real, personal, or mixed and whether tangible or intangible) that they purport to own located in the facilities owned or operated by the Company or reflected as owned in the books and records of the Company, including all of the properties and assets reflected in the Balance Sheet and the Interim Balance Sheet (except for assets held under capitalized leases disclosed or not required to be disclosed in Schedule 2.6 and personal property sold since the date of the Balance Sheet and the Interim Balance Sheet, as the case may be, in the Ordinary Course of Business), and all of the properties and assets purchased or otherwise acquired by the Company since the date of the Balance Sheet (except for personal property acquired and sold since the date of the Balance Sheet in the Ordinary Course of Business and consistent with past practice). All material properties and assets reflected in the Balance Sheet and the Interim Balance Sheet are free and clear of all Encumbrances and are not, in the case of real property, subject to any rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature except, with respect to all such properties and assets, (a) mortgages or security interests shown on the Balance Sheet or the Interim Balance Sheet as securing specified liabilities or obligations, with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists, (b) mortgages or security interests incurred in connection with the purchase of property or assets after the date of the Interim Balance Sheet (such mortgages and security interests being limited to the property or assets so acquired), with respect to which no default (or event that, with notice or lapse of time or both, would constitute a default) exists, (c) liens for current taxes not yet due, and (d) with respect to real property, (i) minor imperfections of title, if any, none of which is substantial in amount, materially detracts from the value or impairs the use of the property subject thereto, or impairs the operations of the Company, and (ii) zoning laws and other land use restrictions that do not impair the present or anticipated use of the property subject thereto. All buildings, plants, and structures owned by the Company lie wholly within the boundaries of the real property owned by the Company and do not encroach upon the property of, or otherwise conflict with the property rights of, any other Person. 2.7 CONDITION AND SUFFICIENCY OF ASSETS. To the Knowledge of Sellers, the buildings, plants, structures, and equipment of the Company are structurally sound, are in good operating condition and repair, and are adequate for the uses to which they are being put, - 7 - 8 and none of such buildings, plants, structures, or equipment is in need of maintenance or repairs except for ordinary, routine maintenance and repairs that are not material in nature or cost. To the Knowledge of Sellers, the building, plants, structures, and equipment of the Company are sufficient for the continued conduct of the Company's businesses after the Closing in substantially the same manner as conducted prior to the Closing. 2.8 ACCOUNTS RECEIVABLE. All accounts receivable of the Company that are reflected on the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Company as of the Closing Date (collectively, the "Accounts Receivable") represent or will represent valid obligations arising from sales actually made or services actually performed in the Ordinary Course of Business. Unless paid prior to the Closing Date, the Accounts Receivable are or will be as of the Closing Date current and collectible net of the respective reserves shown on the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Company as of the Closing Date (which reserves are adequate and calculated consistent with past practice and, in the case of the reserve as of the Closing Date, will not represent a greater percentage of the Accounts Receivable as of the Closing Date than the reserve reflected in the Interim Balance Sheet represented of the Account Receivable reflected therein and will not represent a material adverse change in the composition of such Accounts Receivable in terms of aging). Subject to such reserves, each of the Accounts Receivable either has been or will be collected in full, without any set-off, within ninety (90) days after the day on which it first becomes due and payable. There is no contest, claim, or right of set-off, other than returns in the Ordinary Course of Business, under any Contract with any debtor of an Accounts Receivable relating to the amount or validity of such Accounts Receivable. Schedule 2.8 contains a complete and accurate list of all Accounts Receivable as of the date of the Interim Balance Sheet, which list sets forth the aging of such Accounts Receivable. 2.9 INVENTORY. All inventory of the Company, whether or not reflected in the Balance Sheet or the Interim Balance Sheet, consists of a quality and quantity usable and salable in the Ordinary Course of Business, except for obsolete items and items of below-standard quality, all of which have been written off or written down to net realizable value in the Balance Sheet or the Interim Balance Sheet or on the accounting records of the Company as of the Closing Date, as the case may be. All inventories not written off have been priced at the lower of cost or market on a first in, first out basis. The quantities of each item of inventory (whether raw materials, work-in-process, or finished goods) are not excessive, but are reasonable in the present circumstances of the Company. 2.10 NO UNDISCLOSED LIABILITIES. Except as set forth in Schedule 2.10, the Company has no liabilities or obligations of any nature (whether known or unknown and whether absolute, accrued, - 8 - 9 contingent, or otherwise) except for liabilities or obligations reflected or reserved against in the Balance Sheet or the Interim Balance Sheet and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof. 2.11 TAXES. (a) The Company has filed or caused to be filed (on a timely basis since January 1, 1990) all Tax Returns that are or were required to be filed by or with respect to any of them, either separately or as a member of a group of corporations, pursuant to applicable Legal Requirements. Sellers have delivered or made available to Buyer at the Company's offices (or will deliver or make so available to Buyer within ten (10) days of the date of this Agreement) copies of, and Schedule 2.11 contains a complete and accurate list of, all such Tax Returns relating to income or franchise taxes filed since January 1, 1994. The Company has paid, or made provision for the payment of, all Taxes that have or may have become due pursuant to those Tax Returns or otherwise, or pursuant to any assessment received by Sellers or the Company, except such Taxes, if any, as are listed in Schedule 2.11 and are being contested in good faith and as to which adequate reserves (determined in accordance with GAAP) have been provided in the Balance Sheet and the Interim Balance Sheet. (b) The United States federal and state income Tax Returns of the Company subject to such Taxes have been audited by the IRS or relevant state tax authorities or are closed by the applicable statute of limitations for all taxable years through December 31, 1994. Schedule 2.11 contains a complete and accurate list of all audits of all such Tax Returns, including a reasonably detailed description of the nature and outcome of each audit. All deficiencies proposed as a result of such audits have been paid, reserved against, settled, or, as described in Schedule 2.11, are being contested in good faith by appropriate proceedings. Schedule 2.11 describes all adjustments to the United States federal income Tax Returns filed by the Company or any group of corporations including the Company for all taxable years since January 1, 1990, and the resulting deficiencies proposed by the IRS. Except as described in Schedule 2.11, no Seller or the Company has given or been requested to give waivers or extensions (or is or would be subject to a waiver or extension given by any other Person) or any statute of limitations relating to the payment of Taxes of the Company or for which the Company may be liable. (c) The charges, accruals, and reserves with respect to Taxes on the respective books of the Company are adequate (determined in accordance with GAAP) and are at least equal to the Company's liability for Taxes. There exists no proposed tax assessment against the Company except as disclosed in the Balance Sheet or in Schedule 2.11. No consent to the application of Section 341(f)(2) of the Code has been filed with respect to any property or assets held, acquired, or to be acquired by the - 9 - 10 Company. All Taxes that the Company is or was required by Legal Requirements to withhold or collect have been fully withheld or collected and, to the extent required, have been paid to the proper Governmental Body or other Person. (d) All Tax Returns filed by (or that include on a consolidated basis) the Company are true, correct, and complete. There is no tax sharing agreement that will require any payment by the Company after the date of this Agreement. 2.12 NO MATERIAL ADVERSE CHANGE. Since the date of the Balance Sheet, there has not been any material adverse change in the business, operations, properties, prospects, assets, or condition of the Company, and no event has occurred or circumstance exists that may result in such a material adverse change. 2.13 EMPLOYEE BENEFITS. (a) As used in this Section 2.13, the following terms have the meanings set forth below. "Company Other Benefit Obligation" means an Other Benefit Obligation owed, adopted, or followed by the Company or an ERISA Affiliate of the Company. "Company Plan" means all Plans of which the Company or an ERISA Affiliate of the Company is or was a Plan Sponsor, or to which the Company or an ERISA Affiliate of the Company otherwise contributes or has contributed, or in which the Company or an ERISA Affiliate of the Company otherwise participates or has participated. All references to Plans are to Company Plans unless the context requires otherwise. "Company VEBA" means a VEBA whose members include employees of the Company or any ERISA Affiliate of the Company. "ERISA Affiliate" means, with respect to the Company, any other person that, together with the Company, would be treated as a single employer under Code Section 414. "Multi-Employer Plan" has the meaning given in ERISA Section 3(37)(A). "Other Benefit Obligations" means all obligations, arrangements, or customary practices, whether or not legally enforceable, to provide benefits, other than salary, as compensation for services rendered, to present or former directors, employees, or agents, other than obligations, arrangements, and practices that are Plans. Other Benefit Obligations include consulting agreements under which the compensation paid does not depend upon the amount of service rendered, sabbatical policies, severance payment policies, and fringe benefits within the meaning - 10 - 11 of Code Section 132. "PBGC" means the Pension Benefit Guaranty Corporation, or any successor thereto. "Pension Plan" has the meaning given in ERISA Section 3(2)(A). "Plan" has the meaning given in ERISA Section 3(3). "Plan Sponsor" has the meaning given in ERISA Section 3(16)(B). "Qualified Plan" means any Plan that meets or purports to meet the requirements or Code Section 401(a). "Title IV Plans" means all Pension Plans that are subject to Title IV of ERISA, 29 U.S.C. Section 1301 et seq., other than Multi-Employer Plans. "VEBA" means a voluntary employees' beneficiary association under Code Section 501(c)(9). "Welfare Plan" has the meaning given in ERISA Section 3(1). (b) (i) Schedule 2.13(i) contains a complete and accurate list of all Company Plans, Company Other Benefit Obligations, and Company VEBAs, and identifies as such all Company Plans that are (A) defined benefit Pension Plans, (B) Qualified Plans, (C) Title IV Plans, or (D) Multi-Employer Plans. (ii) Schedule 2.13(ii) contains a complete and accurate list of (A) all ERISA Affiliates of the Company, and (B) all Plans of which any such ERISA Affiliate is or was a Plan Sponsor, in which any such ERISA Affiliate participates or has participated, or to which any such ERISA Affiliate contributes or has contributed. (iii) Schedule 2.13(iii) sets forth, for each Multi-Employer Plan, as of its last valuation date, the amount of potential withdrawal liability of the Company and the Company's other ERISA Affiliates, calculated according to information made available pursuant to ERISA Section 4221(e). (iv) Schedule 2.13(iv) sets forth a calculation of the liability of the Company for post-retirement benefits other than pensions, made in accordance with Financial Accounting Statement 106 of the Financial Accounting Standards Board, regardless of whether the Company is required by this Statement to disclose such information. (v) Schedule 2.13(v) sets forth the financial cost of all obligations owed under any Company Plan or Company Other Benefit Obligation that is not subject to the disclosure and - 11 - 12 reporting requirements of ERISA. (c) Sellers have delivered to Buyer, or will deliver to Buyer within ten (10) days of the date of this Agreement: (i) All documents that set forth the terms of each Company Plan, Company Other Benefit Obligation, or Company VEBA and of any related trust, including (A) all plan descriptions and summary plan descriptions of Company Plans for which Sellers or the Company is required to prepare, file, and distribute plan descriptions and summary plan descriptions, and (B) all summaries and descriptions furnished to participants and beneficiaries regarding Company Plans, Company Other Benefit Obligations, and Company VEBAs for which a plan description or summary plan description is not required; (ii) All personnel, payroll, and employment manuals and policies; (iii) All collective bargaining agreements pursuant to which contributions have been made or obligations incurred (including both pension and welfare benefits) by the Company and the ERISA Affiliates of the Company, and all collective bargaining agreements pursuant to which contributions are being made or obligations are owed by such entities; (iv) A written description of any Company Plan or Company Other Benefit Obligation that is not otherwise in writing; (v) All registration statements filed with respect to any Company Plan; (vi) All insurance policies purchased by or to provide benefits under any Company Plan; (vii) All contracts with third party administrators, actuaries, investment managers, consultants, and other independent contractors that relate to any Company Plan, Company Other Benefit Obligation, or Company VEBA; (viii) All reports submitted within the four (4) years preceding the date of this Agreement by third party administrators, actuaries, investment managers, consultants, or other independent contractors with respect to any Company Plan, Company Other Benefit Obligation, or Company VEBA; (ix) All notifications to employees of their rights under ERISA Section 601 et seq. and Code Section 4980B; (x) The Form 5500 filed in each of the most recent three (3) plan years with respect to each Company Plan, including all schedules thereto and the opinions of independent accountants; - 12 - 13 (xi) All notices that were given by the Company or any ERISA Affiliate of the Company or any Company Plan to the IRS, the PBGC, or any participant or beneficiary, pursuant to statute, within the four (4) years preceding the date of this Agreement, including notices that are expressly mentioned elsewhere in this Section 2.13; (xii) All notices that were given by the IRS, the PBGC, or the Department of Labor to the Company, any ERISA Affiliate of the Company, or any Company Plan within the four (4) years preceding the date of this Agreement; (xiii) With respect to Qualified Plans and VEBAs, the most recent determination letter for each Plan of the Company that is a Qualified plan; and (xiv) With respect to Title IV Plans, the Form PBGC-1 filed for each of the three (3) most recent plan years. (d) Except as set forth in Schedule 2.13(vi): (i) The Company has performed all of its obligations under the Company Plans, Company Other Benefit Obligations, and Company VEBAs. The Company has made appropriate entries in its financial records and statements for all obligations and liabilities under such Plan, VEBAs, an Other Benefit Obligations that have accrued but are not due. (ii) No statement, either written or oral, has been made by the Company to any Person with regard to any Plan or Other Benefit Obligation that was not in accordance with the Plan or Other Benefit Obligation and that could have an adverse economic consequence to the Company or to Buyer. (iii) The Company, with respect to all Company Plans, Company Other Benefits Obligations, and Company VEBAs, are, and each Company Plan, Company Other Benefit Obligation, and Company VEBA is, in full compliance with ERISA, the Code, and other applicable Laws including the provisions of such Laws expressly mentioned in this Section 2.13, and with any applicable collective bargaining agreement. (A) No transaction prohibited by ERISA Section 406 and no "prohibited transaction" under Code Section 4975(c) have occurred with respect to any Company Plan. (B) No Seller or acquired Company has any liability to the IRS with respect to any Plan, including any liability imposed by Chapter 43 of the Code. (C) No Seller or Company has any liability to the PBGC with respect to any Plan or has any liability under ERISA Section 502 or Section 4071. - 13 - 14 (D) All filings required by ERISA and the Code as to each Plan have been timely filed, and all notices and disclosures to participants required by either ERISA or the Code have been timely provided. (E) All contributions and payments made or accrued with respect to all Company Plans, Company Other Benefit Obligations, and Company VEBAs are deductible under Code Section 162 or Section 404. No amount, or any asset of any Company Plan or Company VEBA, is subject to tax as unrelated business taxable income. (iv) Each Company Plan can be terminated within thirty (30) days, without payment of any additional contribution or amount and without the vesting or acceleration of any benefits promised by such Plan. (v) Since January 1, 1998, there has been no establishment or amendment of any Company Plan, Company VEBA, or Company Other Benefit Obligation. (vi) No event has occurred or circumstance exists that could result in a material increase in premium costs of Company Plans and Company Other Benefit Obligations that are insured, or a material increase in benefit costs of such Plans and Obligations that are self-insured. (vii) Other than claims for benefits submitted by participants or beneficiaries, no claim against, or legal proceeding involving, any Company Plan, Company Other Benefit Obligation, or Company VEBA is pending or, to Sellers' Knowledge, is threatened. (viii) No Company Plan is a stock bonus, pension, or profit-sharing plan within the meaning of Code Section 401(a). (ix) Each Qualified Plan of the Company is qualified in form and operation under Code Section 401(a); each trust for each such Plan is exempt from federal income tax under Code Section 501(a). Each Company VEBA is exempt from federal income tax. No event has occurred or circumstance exists that will or could give rise to disqualification or loss of tax-exempt status of any such Plan or trust. (x) Each Company and each ERISA Affiliate of the Company has met the minimum funding standard, and has made all contributions required, under ERISA Section 302 and Code Section 402. (xi) No Company Plan is subject to Title IV of ERISA. (xii) The Company has paid all amounts due to PBGC pursuant to ERISA Section 4007. - 14 - 15 (xiii) No Company or any ERISA Affiliate of the Company has ceased operations of any facility or has withdrawn from any Title IV Plan in a manner that would subject to any entity or Sellers to liability under ERISA Section 4062(e), Section 4063, or Section 4064. (xiv) No Company or any ERISA Affiliate of the Company has filed a notice of intent to terminate any Plan or has adopted any amendment to treat a Plan as terminated. The PBGC has not instituted proceedings to treat any Company Plan as terminated. No event has occurred or circumstance exists that may constitute grounds under ERISA Section 4042 for the termination of, or the appointment of a trustee to administer, any Company Plan. (xv) No amendment has been made, or is reasonably expected to be made, to any Plan that has required or could require the provision of security under ERISA Section 307 or Code Section 401(a)(29). (xvi) No accumulated funding deficiency, whether or not waived, exists with respect to any Company Plan; no event has occurred or circumstance exists that may result in an accumulated funding deficiency as of the last day of the current plan year of any such Plan. (xvii) The actuarial report for each Pension Plan of the Company and each ERISA Affiliate of the Company fairly presents the financial condition and the results of operations of each such Plan in accordance with GAAP. (xviii) Since the last valuation date for each Pension Plan of the Company and each ERISA Affiliate of the Company, no event has occurred or circumstance exists that would increase the amount of benefits under any such Plan or that would cause the excess of Plan assets over benefit liabilities (as defined in ERISA Section 4001) to decrease, or the amount by which benefit liabilities exceed assets to increase. (xix) No reportable event (as defined in ERISA Section 4043) and in regulations issued thereunder) has occurred. (xx) No Seller or Company has Knowledge of any facts or circumstances that may give rise to any liability of any Seller, any Company, or Buyer to the PBGC under Title IV of ERISA. (xxi) No Company or any ERISA Affiliate of the Company has ever established, maintained, or contributed to or otherwise participated in, or had an obligation to maintain, contribute to, or otherwise participate in, any Multi-Employer Plan. (xxii) No Company or any ERISA Affiliate of the Company has withdrawn from any Multi-Employer Plan with respect to which there is any outstanding liability as of the date of this - 15 - 16 Agreement. No event has occurred or circumstance exists that presents a risk of the occurrence of any withdrawal from, or the participation, termination, reorganization, or insolvency of, any Multi-Employer Plan that could result in any liability of either any acquired Company or Buyer to a Multi-Employer Plan. (xxiii) No Company or any ERISA Affiliate of the Company has received notice from any Multi-Employer Plan that it is in reorganization or is insolvent, that increased contributions may be required to avoid a reduction in plan benefits or the imposition of any excise tax, or that such Plan intends to terminate or has terminated. (xxiv) No Multi-Employer Plan to which the Company or any ERISA Affiliate of the Company contributes or has contributed is a party to any pending merger or asset or liability transfer or is subject to any proceeding brought by the PBGC. (xxv) Except to the extent required under ERISA Section 601 et seq. and Code Section 4980B, no Company provides health or welfare benefits for any retired or former employee or is obligated to provide health or welfare benefits to any active employee following such employee's retirement or other termination of service. (xxvi) The Company has the right to modify and terminate benefits to retirees (other than pensions) with respect to both retired and active employees. (xxvii) Sellers and the Company have complied with the provisions of ERISA Section 601 et seq. and Code Section 4980B. (xxviii) No payment that is owed or may become due to any director, officer, employee, or agent of the Company will be non-deductible to the Company or subject to tax under Code Section 280G or Section 4999; nor will the Company be required to "gross up" or otherwise compensate any such person because of the imposition of any excise tax on a payment to such person. (xxix) The consummation of the Contemplated Transactions will not result in the payment, vesting, or acceleration of any benefit. 2.14 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS. (a) Except as set forth in Schedule 2.14: (i) To the Knowledge of Sellers, the Company is, and at all times since January 1, 1990 has been, in full compliance with each Legal Requirement that is or was applicable to it or to the conduct or operation of its business or the ownership or use of any of its assets; - 16 - 17 (ii) To the Knowledge of Sellers, no event has occurred or circumstance exists that (with or without notice or lapse of time) (A) may constitute or result in a violation by the Company of, or a failure on the part of the Company to comply with, any Legal Requirement, or (B) may give rise to any obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature; and (iii) The Company has not received, at any time since January 1, 1990, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of, or failure to comply with, any Legal Requirement, or (B) any actual, alleged, possible, or potential obligation on the part of the Company to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. (b) Schedule 2.14 contains a complete and accurate list of each Governmental Authorization that is held by the Company or that otherwise relates to the business of, or to any of the assets owned or used by, the Company. Each Governmental Authorization listed or required to be listed in Schedule 2.14 is valid and in full force and effect. Except as set forth in Schedule 2.14: (i) The Company is, and at all times since January 1, 1990 has been, in full compliance with all of the terms and requirements of each Governmental Authorization identified or required to be identified in Schedule 2.14; (ii) No event has occurred or circumstance exists that may (with or without notice or lapse of time) (A) constitute or result directly or indirectly in a violation of or a failure to comply with any term or requirement of any Governmental Authorization listed or required to be listed in Schedule 2.14, or (B) result directly or indirectly in the revocation, withdrawal, suspension, cancellation, or termination of, or any modification to, any Governmental Authorization listed or required to be listed in Schedule 2.14; (iii) The Company has not received, at any time since January 1, 1990, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding (A) any actual, alleged, possible, or potential violation of or failure to comply with any term or requirement of any Governmental Authorization, or (B) any actual, proposed, possible, or potential revocation, withdrawal, suspension, cancellation, termination of, or modification to any Governmental Authorization; and (iv) All applications required to have been filed for the renewal of the Governmental Authorizations listed or required to be listed in Schedule 2.14 have been duly filed on a timely basis with the appropriate Governmental Bodies, and all other - 17 - 18 filings required to have been made with respect to such Governmental Authorizations have been duly made on a timely basis with the appropriate Governmental Bodies. The Governmental Authorizations listed in Schedule 2.14 collectively constitute all of the Governmental Authorizations necessary to permit the Company to lawfully conduct and operate its business in the manner it currently conducts and operates such business and to permit the Company to own and use its assets in the manner in which it currently owns and uses such assets. 2.15 LEGAL PROCEEDINGS; ORDERS. (a) Except as set forth in Schedule 2.15, there is no pending Proceeding: (i) That has been commenced by or against the Company or that otherwise relates to or may affect the business of, or any of the assets owned or used by, the Company; or (ii) That challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Contemplated Transactions. To the Knowledge of Sellers and the Company, (1) no such Proceeding has been threatened, and (2) no event has occurred or circumstance exists that may give rise to or serve as a basis for the commencement of any such Proceeding. Sellers have delivered to Buyer copies of all pleadings, correspondence, and other documents relating to each Proceeding listed in Schedule 2.15. The Proceedings listed in Schedule 2.15 will not have a material adverse effect on the business, operations, assets, condition, or prospects of the Company. (b) Except as set forth in Schedule 2.15: (i) There is no Order to which any of the Company, or any of the assets owned or used by the Company, is subject; (ii) None of Sellers is subject to any Order that relates to the business of, or any of the assets owned or used by, the Company; and (iii) To the Knowledge of Sellers and the Company, no officer, director, agent, or employee of the Company is subject to any Order that prohibits such officer, director, agent, or employee from engaging in or continuing any conduct, activity, or practice relating to the business of the Company. (c) Except as set forth in Schedule 2.15: (i) The Company is, and at all times since January 1, - 18 - 19 1990 has been, in full compliance with all of the terms and requirements of each Order to which it, or any of the assets owned or used by it, is or has been subject; (ii) No event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which the Company, or any of the assets owned or used by the Company, is subject; and (iii) The Company, to the Knowledge of Sellers, has not received, at any time since January 1, 1990, any notice or other communication (whether oral or written) from any Governmental Body or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which the Company, or any of the assets owned or used by the Company, is or has been subject. 2.16 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in Schedule 2.16, since the date of the Balance Sheet, the Company has conducted its business only in the Ordinary Course of Business and there has not been any: (a) Change in the Company's authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock of the Company; issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition by the Company of any shares of any such capital stock; or declaration or payment of any dividend or other distribution or payment in respect of shares of capital stock; (b) Amendment to the Organizational Documents of the Company; (c) Payment or increase by the Company of any bonuses, salaries, or other compensation to any stockholder, director, officer, or (except in the Ordinary Course of Business) employee or entry into any employment, severance, or similar Contract with any director, officer, or employee; (d) Adoption of, or increase in the payments to or benefits under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of the Company; (e) Damage to or destruction or loss of any asset or property of the Company, whether or not covered by insurance, materially and adversely affecting the properties, assets, business, financial condition, or prospects of the Company, taken as a whole; (f) Entry into, termination of, or receipt of notice of - 19 - 20 termination of (i) any license, distributorship, dealer, sales representative, joint venture, credit, or similar agreement, or (ii) any Contract or transaction involving a total remaining commitment by the Company of at least $50,000; (g) Sale (other than sales of inventory in the Ordinary Course of Business), lease, or other disposition of any asset or property of the Company or mortgage, pledge, or imposition of any lien or other encumbrance on any material asset or property of the Company, including the sale, lease, or other disposition of any of the Intellectual Property Assets; (h) Cancellation or waiver of any claims or rights with a value to the Company in excess of $50,000; (i) Material change in the accounting methods used by the Company; or (j) Agreement, whether oral or written, by the Company to do any of the foregoing. 2.17 CONTRACTS; NO DEFAULTS. (a) Schedule 2.17(a) contains a complete and accurate list, and Sellers have delivered to Buyer (or will deliver to Buyer within ten (10) days of the date of this Agreement) true and complete copies, of: (i) Each Applicable Contract that involves performance of services or delivery of goods or materials by the Company of an amount or value in excess of $50,000; (ii) Each Applicable Contract that involves performance of services or delivery of goods or materials to the Company of an amount or value in excess of $50,000; (iii) Each Applicable Contract that was not entered into in the Ordinary Course of Business and that involves expenditures or receipts of the Company in excess of $50,000; (iv) Each lease, rental or occupancy agreement, license, installment and conditional sale agreement, and other Applicable Contract affecting the ownership of, leasing of, title to, use of, or any leasehold or other interest in, any real or personal property (except personal property leases and installment and conditional sales agreements having a value per item or aggregate payments of less than $50,000 and with terms of less than one (1) year); (v) Each licensing agreement or other Applicable Contract with respect to patents, trademarks, copyrights, or other intellectual property, including agreements with current or former employees, consultants, or contractors regarding the appropriation - 20 - 21 or the non-disclosure of any of the Intellectual Property Assets; (vi) Each collective bargaining agreement and other Applicable Contract to or with any labor union or other employee representative of a group of employees relating to wages, hours, and other conditions of employment; (vii) Each joint venture, partnership, and other Applicable Contract (however named) involving a sharing of profits, losses, costs, or liabilities by the Company with any other Person; (viii) Each Applicable Contract containing covenants that in any way purport to restrict the Company's business activity or limit the freedom of the Company to engage in any line of business or to compete with any Person; (ix) Each Applicable Contract providing for payments to or by any Person based on sales, purchases, or profits, other than direct payments for goods; (x) Each power of attorney that is currently effective and outstanding; (xi) Each Applicable Contract entered into other than in the Ordinary Course of Business that contains or provides for an express undertaking by the Company to be responsible for consequential damages; (xii) Each Applicable Contract for capital expenditures in excess of $50,000; (xiii) Each written warranty, guaranty, and/or other similar undertaking with respect to contractual performance extended by the Company other than in the Ordinary Course of Business; and (xiv) Each amendment, supplement, and modification (whether oral or written) in respect of any of the foregoing. Schedule 2.17(a) sets forth reasonably complete details concerning such Contracts, including the parties to the Contracts, the amount of the remaining commitment of the Company under the Contracts, and the Company's office where details relating to the Contracts are located. (b) Except as set forth in Schedule 2.17(b): (i) Neither Seller has or may acquire any rights under, and neither Seller has or may become subject to any obligation or liability under, any Contract that relates to the business of, or any of the assets owned or used by, the Company; and (ii) To the Knowledge of Sellers and the Company, no - 21 - 22 officer, director, agent, employee, consultant, or contractor of the Company is bound by any Contract that purports to limit the ability of such officer, director, agent, employee, consultant, or contractor to (A) engage in or continue any conduct, activity, or practice relating to the business of the Company, or (B) assign to the Company or to any other Person any rights to any invention, improvement, or discovery. (c) Except as set forth in Schedule 2.17(c): (i) Each Contract identified or required to be identified in Schedule 2.17(a) is in full force and effect and is valid and enforceable in accordance with its terms; and (ii) No Contract identified or required to be identified in Schedule 2.17(a) contains, in the opinion of Sellers, any term or requirement that is unreasonable, extraordinary, or not customary in the industries in which the Company operates. (d) Except as set forth in Schedule 2.17(d): (i) The Company is, and at all times since January 1, 1990 has been, in full compliance with all applicable terms and requirements of each Contract under which such Company has or had any obligation or liability or by which such Company or any of the assets owned or sued by such Company is or was bound; (ii) Each other Person that has or had any obligation or liability under any Contract under which the Company has or had any rights is, and at all times since January 1, 1990 has been, in full compliance with all applicable terms and requirements of such Contract; (iii) No event has occurred or circumstance exists that (with or without notice or lapse of time) may contravene, conflict with, or result in a violation or breach of, or give the Company or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any Applicable Contract; and (iv) The Company has not given to or received from any other Person, at any time since January 1, 1990, any notice or other communication (whether oral or written) regarding any actual, alleged, possible, or potential violation or breach of, or default under, any Contract. (e) There are no renegotiations of, attempts to renegotiate, or outstanding rights to renegotiate any material amounts paid or payable to the Company under current or completed Contracts with any Person having the contractual or statutory right to demand or require such renegotiation and, to the Knowledge of Sellers and the Company, no such Person has made written demand for such renegotiation. - 22 - 23 (f) The Contracts relating to the sale, design, manufacture, or provision of products or services by the Company has been entered into in the Ordinary Course of Business and has been entered into without the commission of any act alone or in concert with any other Person, or any consideration having been paid or promised, that is or would be in violation of any Legal Requirement. 2.18 INSURANCE. (a) Sellers have delivered to Buyer (or will deliver to Buyer within ten (10) days of the date of this Agreement): (i) True and complete copies of all policies of insurance to which the Company is a party or under which the Company, or any director of the Company, is or has been covered at any time within the three (3) years preceding the date of this Agreement; (ii) True and complete copies of all pending applications for policies of insurance; and (iii) Any statement by the auditor of the Company's financial statements with regard to the adequacy of such entity's coverage or of the reserves for claims. (b) Schedule 2.18(b) describes: (i) Any self-insurance arrangement by or affecting the Company, including any reserves established thereunder; (ii) Any contract or arrangement, other than a policy of insurance, for the transfer or sharing of any risk by the Company; and (iii) All obligations of the Company to provide coverage to third parties (for example, under leases or service agreements) and identifies the policy under which such coverage is provided. (c) Schedule 2.18(c) sets forth, by year, for the current policy year and each of the three (3) preceding policy years: (i) A summary of the loss experience under each policy; (ii) A statement describing each claim under an insurance policy for an amount in excess of $50,000, which sets forth: (A) The name of the claimant; (B) A description of the policy by insurer, type of insurance, and period of coverage; and - 23 - 24 (C) The amount and a brief description of the claim; and (iii) A statement describing the loss experience for all claims that were self-insured, including the number and aggregate cost of such claims. (d) Except as set forth on Schedule 2.18(d): (i) All policies to which the Company is a party or that provide coverage to the Company or director thereof: (A) Are valid, outstanding, and enforceable; (B) Are issued by an insurer that is financially sound and reputable; (C) Taken together, provide adequate insurance coverage for the assets and the operations of the Company for all risks normally insured against by a Person carrying on the same business or businesses as the Company; (D) Are sufficient for compliance with all Legal Requirements and Contracts to which the Company is a party or by which it is bound; and (E) To the Knowledge of Sellers, will continue in full force and effect following the consummation of the Contemplated Transactions. (ii) No Seller or the Company has received (A) any refusal of coverage or any notice that a defense will be afforded with reservation of rights, or (B) any notice of cancellation or any other indication that any insurance policy is no longer in full force or effect or that the issuer of any policy is not willing or able to perform its obligations thereunder. (iii) The Company has paid all premiums due, and have otherwise performed all of their respective obligations, under each policy to which the Company is a party or that provides coverage to the Company or director thereof. (iv) The Company has given notice to the insurer of all claims that may be insured thereby. 2.19 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 2.19: (a) The Company is, and at all times prior to the date hereof has been, in full compliance with, and has not been and is not in violation of or liable under, any Environmental Law. No Seller or the Company has any basis to expect, nor has any of them - 24 - 25 or any other Person for whose conduct they are or may be held to be responsible received, any actual or threatened order, notice, or other communication from (i) any Governmental Body orcitizen acting in the public interest, or (ii) the current or prior owner or operator of any Facilities, of any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which Sellers or the Company has had an interest, or with respect to any property or Facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by Sellers, the Company, or any other Person for whose conduct they are or may be held responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received. (b) There are no pending or, to the Knowledge of Sellers and the Company, threatened claims, Encumbrances, or other restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting any of the Facilities or any other properties and assets (whether real, personal, or mixed) in which Sellers or the Company has or had an interest. (c) No Seller or the Company has Knowledge of any basis to expect, nor has any of them or any other Person for whose conduct they are or may be held responsible, received, any Order, notice, communications, inquiry, warning, citation, summons, directive, or any other indication that relates to Hazardous Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply with any Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities or any other properties or assets (whether real, personal, or mixed) in which Sellers or the Company had an interest, or with respect to any property or facility to which Hazardous Materials generated, manufactured, refined, transferred, imported, used, or processed by Sellers, the Company, or any other Person for whose conduct they are or may be held responsible, have been transported, treated, stored, handled, transferred, disposed, recycled, or received. (d) No Seller or the Company, or any other Person for whose conduct they are or may be held responsible, has any Environmental, Health, and Safety Liabilities with respect to the Facilities or to the Knowledge of Sellers and the Company, with respect to any other properties and assets (whether real, personal, or mixed) in which Sellers or the Company (or any predecessor), has or had an interest, or at any property geologically or hydrologically adjoining the Facilities or any such other property or assets. - 25 - 26 (e) There are no Hazardous Materials present on or in the Environment at the Facilities or at any geologically or hydrologically adjoining property, including any Hazardous Materials contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the Facilities or such adjoining property, or incorporated into any structure therein or thereon. No Seller, the Company, any other Person for whose conduct they are or may be held responsible, or to the Knowledge of Sellers and the Company, any other Person, has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the Facilities or any other properties or assets (whether real, personal, or mixed) in which Sellers or the Company has or had an interest except in full compliance with all applicable Environmental Laws. (f) There has been no Release or, to the Knowledge of Sellers and the Company, threat of Release, of any Hazardous Materials at or from the Facilities or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in which Sellers or the Company has or had an interest, or to the Knowledge of Sellers and the Company any geologically or hydrologically adjoining property, whether by Sellers, the Company, or any other Person. (g) Sellers have delivered to Buyer true and complete copies and results of any reports, studies, analyses, tests, or monitoring possessed or initiated by Sellers or the Company pertaining to Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerning compliance by Sellers, the Company, or any other Person for whose conduct they are or may be held responsible, with Environmental Laws. 2.20 EMPLOYEES. (a) Schedule 2.20 contains a complete and accurate list of the following information for each employee or director of the Company, including each employee on leave of absence or layoff status: name; job title; current compensation paid or payable and any change in compensation since January 1, 1998; vacation accrued; and service credited for purposes of vesting and eligibility to participate under the Company's pension, retirement, profit-sharing, thrift-savings, deferred compensation, stock bonus, stock option, cash bonus, employee stock ownership (including investment credit or payroll stock ownership), severance pay, insurance, medical, welfare, or vacation plan, other Employee Pension Benefit Plan or Employee Welfare Benefit Plan, or any other employee benefit plan or any Director Plan. (b) No former or current employee or current or former - 26 - 27 director of the Company is a party to, or is otherwise bound by, any agreement or arrangement, including any confidentiality, non-competition, or proprietary rights agreement, between such employee or director and any other entity or person other than the Company ("Proprietary Rights Agreement") that in any way adversely affected, affects, or will affect (i) the performance of his duties as an employee or director of the Company, or (ii) the ability of the Company to conduct its business, including any Proprietary Rights Agreement with Sellers or the Company by any such employee or director. To Sellers' Knowledge, no director, officer, or other key employee of the Company intends to terminate his employment with the Company. (c) Schedule 2.20 also contains a complete and accurate list of the following information for each retired employee or director of the Company, or their dependents, receiving benefits or scheduled to receive benefits in the future: name, pension benefit, pension option election, retiree medical insurance coverage, retiree life insurance coverage, and other benefits. 2.21 LABOR DISPUTES; COMPLIANCE. Since January 1, 1990, the Company has not been or is not a party to any collective bargaining or other labor Contract. Since January 1, 1990, there has not been, there is not presently pending or existing, and to Sellers' Knowledge there is not threatened any strike, slowdown, picketing, work stoppage, labor arbitration or proceeding in respect of the grievance of any employee, application or complaint filed by an employee or union with the National Labor Relations Board or any comparable Governmental Body, organizational activity, or other labor dispute against or affecting any of the Company or its premises, and no application for certification of a collective bargaining agent is pending or to Sellers' Knowledge is threatened. To Sellers' Knowledge no event has occurred or circumstance exists that could provide the basis for any work stoppage or other labor dispute. There is no lockout of any employees by the Company, and no such action is contemplated by the Company. The Company has complied in all respects with all Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar taxes, occupational safety and health, and plant closing. The Company is not liable for the payment of any taxes, fines, penalties, or other amounts, however designated, for failure to comply with any of the foregoing Legal Requirements. 2.22 INTELLECTUAL PROPERTY. (a) Intellectual Property Assets -- The term "Intellectual Property Assets" includes: (i) The name Mid Central Plastics, Inc., all fictional business names, trading names, registered and unregistered trademarks, service marks, and applications (collectively, - 27 - 28 "Marks"); (ii) All patents and patent applications (collectively, "Patents"); (iii) All copyrights in both published works and unpublished works that are material to the Company's businesses (collectively, "Copyrights"); (iv) All rights in mask works (collectively, "Rights in Mask Works"); and (v) All know-how, trade secrets, confidential information, software, technical information, process technology, plans, drawings, and blueprints (collectively, "Trade Secrets"); owned, used, or licensed by the Company as licensee or licensor. (b) Agreements -- Schedule 2.22(b) contains a complete and accurate list and summary description, including any royalties paid or received by the Company, of all agreements relating to the Intellectual Property Assets to which the Company is a party or by which the Company is bound, except for any license implied by the sale of a product and common software programs with a value of less than $50,000. There are no outstanding and, to Sellers' Knowledge, no threatened disputes or disagreements with respect to any such agreement. (c) Know-How Necessary for the Business -- Except as otherwise disclosed in Schedule 2.22(c): (i) The Intellectual Property Assets are all those necessary for the operation of the Company's business as it is currently conducted or as reflected in the business plan given to Buyer. The Company is the owner of all right, title, and interest in and to each of the Intellectual Property Assets, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims, and has the right to use without payment to a third party all of the Intellectual Property Assets. (ii) All employees of the Company have executed written agreements with the Company that assign to the Company all rights to any inventions, improvements, discoveries, or information relating to the business of the Company. No employee of the Company has entered into any agreement that restricts or limits in any way the scope or type of work in which the employee may be engaged or requires the employee to transfer, assign, or disclose information concerning his work to anyone other than the Company. - 28 - 29 (d) Patents (i) Schedule 2.22(d) contains a complete and accurate list and summary description of all Patents. The Company is the owner of all right, title, and interest in and to each of the Patents, free and clear of all liens, security interests, charges, encumbrances, entities, and other adverse claims. (ii) All of the Patents are currently in compliance with formal legal requirements (including payment of filing, examination, and maintenance fees and proofs of working or use), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date. (iii) No Patent has been or is now involved in any interference, reissue, reexamination, or opposing proceeding. To Sellers' Knowledge, there is no potentially interfering patent or patent application of any third party. (iv) No Patent is infringed or, to Sellers' Knowledge, has been challenged or threatened in any way. None of the products manufactured and sold, nor any process or know-how used, by the Company infringes or is alleged to infringe any patent or other proprietary right of any other Person. (e) Trademarks (i) Schedule 2.22(e) contains a complete and accurate list and summary description of all Marks. The Company is the owner of all right, title, and interest in and to each of the Marks, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims. (ii) Except as otherwise set forth in Schedule 2.22(e), all Marks have been registered with the United States Patent and Trademark Office and are currently in compliance with all formal legal requirements (including the timely post-registration filing of affidavits of use and incontestability and renewal applications), are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the Closing Date. (iii) No Mark has been or is now involved in any opposition, invalidation, or cancellation and, to Sellers' Knowledge, no such action is threatened with respect to any of the Marks. (iv) To Sellers' Knowledge, there is no potentially interfering trademark or trademark application of any third party. (v) No Mark is infringed or, to Sellers' Knowledge, has been challenged or threatened in any way. None of the Marks used - 29 - 30 by the Company infringe or is alleged to infringe any trade name, trademark, or service mark of any third party. (f) Copyrights (i) Schedule 2.22(f) contains a complete and accurate list and summary description of all Copyrights. The Company is the owner of all right, title, and interest in and to each of the Copyrights, free and clear of all liens, security interests, charges, encumbrances, equities, and other adverse claims. (ii) Except as otherwise disclosed in Schedule 2.22(f), all Copyrights have been registered and are currently in compliance with formal legal requirements, are valid and enforceable, and are not subject to any maintenance fees or taxes or actions falling due within ninety (90) days after the date of Closing. (iii) No Copyright is infringed or, to Sellers' Knowledge, has been challenged or threatened in any way. None of the subject matter of any of the Copyrights infringes or is alleged to infringe any copyright of any third party. (g) Trade Secrets (i) With respect to each Trade Secret, the documentation relating to such Trade Secret is current, accurate, and sufficient in detail and content to identify and explain it and to allow its full and proper use without reliance on the special knowledge or memory of others. (ii) Sellers and the Company have taken all reasonable precautions to protect the secrecy, confidentiality, and value of their Trade Secrets. (iii) The Company has good title and an absolute (but not necessarily exclusive) right to use the Trade Secrets. The Trade Secrets are not part of the public knowledge or literature, and, to Sellers' Knowledge, have not been used, divulged, or appropriated either for the benefit of any Person (other than the Company) or to the detriment of the Company. No Trade Secret is subject to any adverse claim or has been challenged or threatened in any way. 2.23 CERTAIN PAYMENTS. Since January 1, 1990, no director, officer, agent, or employee of the Company, or to Sellers' Knowledge any other Person associated with or acting for or on behalf of the Company, has directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff, influence payment, kickback, or other payment to any Person,or public, regardless of form, whether in money, property, or services (i) to obtain favorable treatment in securing business, (ii) to pay for favorable treatment for business secured, or (iii) to obtain special concessions or for special concessions already obtained, for or in - 30 - 31 respect of the Company or any affiliate of the Company, or (b) established or maintained any fund or asset that has not been recorded in the books and records of the Company. 2.24 DISCLOSURE. (a) To the Knowledge of Sellers, no representation or warranty of Sellers in this Agreement and no statement in the Schedules omits to state a material fact necessary to make the statements herein or therein, in light of the circumstances in which they were made, not misleading. (b) No notice given pursuant to Section 4.5 will contain any untrue statement or omit to state a material fact necessary to make the statements therein or in this Agreement, in light of the circumstances in which they were made, not misleading. (c) There is no fact known to any Seller that has specific application to any Seller or the Company (other than general economic or industry conditions) and that materially adversely affects or, as far as either Seller can reasonably foresee, materially threatens, the assets, business, prospects, financial condition, or results of operations of the Company (on a consolidated basis) that has not been set forth in this Agreement or the Schedules. 2.25 RELATIONSHIPS WITH RELATED PERSONS. Except as otherwise disclosed in Schedule 2.25, no Seller or any Related Person of Sellers or of the Company has, or since the first day of the next to last completed fiscal year of the Company has had, any interest in any property (whether real, personal, or mixed and whether tangible or intangible), used in or pertaining to the Company's business. No Seller or any Related Person of Sellers or of the Company owns, or since the first day of the next to last completed fiscal year of the Company has owned, of record or as a beneficial owner, an equity interest or any other financial or profit interest in any Person that has (i) had business dealings or a material financial interest in any transaction with the Company other than business dealings or transactions conducted in the Ordinary Course of Business with the Company at substantially prevailing market prices and on substantially prevailing market terms, or (ii) engaged in competition with the Company with respect to any line of the products or services of the Company (a "Competing Business") in any market presently served by the Company except for less than one percent of the outstanding capital stock of any Competing Business that is publicly traded on any recognized exchange or in the over-the-counter market. Except as set forth in Schedule 2.25, no Seller or any Related Person of Sellers or of the Company is a party to any Contract with, or has any claim or right against, the Company. 2.26 BROKERS OR FINDERS. Sellers and their agents have incurred no obligation or liability, contingent or otherwise, for - 31 - 32 brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement. 3. REPRESENTATIONS AND WARRANTIES OF BUYER 3.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized, validly existing, and in good standing under the laws of the State of Georgia. 3.2 AUTHORITY; NO CONFLICT. (a) This Agreement constitutes the legal, valid, and binding obligation of Buyer, enforceable against Buyer in accordance with its terms. Upon the execution and delivery by Buyer of the Escrow Agreement and the Noncompetition Agreements (collectively, the "Buyer's Closing Documents"), the Buyer's Closing Documents will constitute the legal, valid, and binding obligations of Buyer, enforceable against Buyer in accordance with their respective terms. Buyer has the absolute and unrestricted right, power, and authority to execute and deliver this Agreement and the Buyer's Closing Documents and to perform its obligations under this Agreement and the Buyer's Closing Documents. (b) Except as set forth in Schedule 3.2, neither the execution and delivery of this Agreement by Buyer nor the consummation or performance of any of the Contemplated Transactions by Buyer will give any Person the right to prevent, delay, or otherwise interfere with any of the Contemplated Transactions pursuant to: (i) Any provision of Buyer's Organizational Documents; (ii) Any resolution adopted by the board of directors or the stockholders of Buyer; (iii) Any Legal Requirement or Order to which Buyer may be subject; or (iv) Any Contract to which Buyer is a party or by which Buyer may be bound. Except as set forth in Schedule 3.2, Buyer is not and will not be required to obtain any Consent from any Person in connection with the execution and delivery of this Agreement or the consummation or performance of any of the Contemplated Transactions. 3.3 INVESTMENT INTENT. Buyer is acquiring the Shares for its own account and not with a view to their distribution within the meaning of Section 2(11) of the Securities Act or the Securities Laws of the State of Iowa. 3.4 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been commenced against Buyer and that challenges, or may - 32 - 33 have the effect of preventing, delaying, making illegal, or otherwise interfering with,, any of the Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been threatened. 3.5 BROKERS OR FINDERS. Buyer and its officers and agents have incurred no obligation or liability, contingent or otherwise, for brokerage or finders' fees or agents' commissions or other similar payment in connection with this Agreement and will indemnify and hold Sellers harmless from any such payment alleged to be due by and through Buyer as a result of the action of Buyer or its officers or agents. 4. COVENANTS OF SELLERS PRIOR TO CLOSING DATE 4.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the Closing Date, Sellers will, and will cause the Company and its Representatives to, (a) afford Buyer and its Representatives and prospective lenders and their Representatives (collectively, "Buyer's Advisors") reasonable access to the Company's personnel, properties (including subsurface testing), contracts, books and records, and other documents and data at reasonable times so as not to unreasonably interfere with the business of the Company, (b) furnish Buyer and Buyer's Advisors with copies of all such contracts, books and records, and other existing documents and data as Buyer may reasonably request, and (c) furnish Buyer and Buyer's Advisors with such additional financial, operating, and other data and information as Buyer may reasonably request. 4.2 OPERATION OF THE BUSINESS OF THE COMPANY. Between the date of this Agreement and the Closing Date, Sellers will, and will cause the Company to: (a) Conduct the business of the Company only in the Ordinary Course of Business; (b) Use their Best Efforts to preserve intact the current business organization of the Company, keep available the services of the current officers, employees and agents of the Company, and maintain the relations and goodwill with suppliers, customers, landlords, creditors, employees, agents, and others having business relationships with the Company; (c) Confer with Buyer concerning operational matters of a material nature; and (d) Otherwise report periodically to Buyer concerning the status of the business, operations, and finances of the Company. 4.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this Agreement, between the date of this Agreement and the Closing Date, Sellers will not, and will cause the Company not to, without the prior consent of Buyer, take any affirmative - 33 - 34 action, or fail to take any reasonable action within their or its control, as a result of which any of the changes or events listed in Section 2.16 is likely to occur. 4.4 REQUIRED APPROVALS. As promptly as practicable after the date of this Agreement, Sellers will, and will cause the Company to, make all filings required by Legal Requirements to be made by them in order to consummate the Contemplated Transactions (including all filings under the HSR Act). Between the date of this Agreement and the Closing Date, Sellers will, and will cause the Company to, (a) cooperate with Buyer with respect to all filings that Buyer elects to make or is required by Legal Requirements to make in connection with the Contemplated Transactions, and (b) cooperate with Buyer in obtaining all consents identified in Schedule 3.2 (including taking all actions requested by Buyer to cause early termination of any applicable waiting period under the HSR Act). 4.5 NOTIFICATION. Between the date of this Agreement and the Closing Date, each Seller will promptly notify Buyer in writing if such Seller or the Company becomes aware of any fact or condition that causes or constitutes a Breach of any of Sellers' representations and warranties as of the date of this Agreement, or if such Seller or the Company becomes aware of the occurrence after the date of this Agreement of any fact or condition that would (except as expressly contemplated by this Agreement) cause or constitute a Breach of any such representation or warranty had such representation or warranty been made as of the time of occurrence or discovery of such fact or condition. Should any such fact or condition require any change in the Schedules if the Schedules were dated the date of the occurrence or discovery of any such fact or condition, Sellers will promptly deliver to Buyer a supplement to the Schedules specifying such change. During the same period, each Seller will promptly notify Buyer of the occurrence of any Breach of any covenant of Sellers in this Section 4 or of the occurrence of any event that may make the satisfaction of the conditions in Section 7 impossible or unlikely. 4.6 PAYMENT OF INDEBTEDNESS BY RELATED PERSONS. Except as expressly provided in this Agreement, Sellers will cause all indebtedness of any Related Person to the Company to be paid in full at or prior to Closing. 4.7 NO NEGOTIATION. Until such time, if any, as this Agreement is terminated pursuant to Section 9, Sellers will not, and will cause the Company and each of their Representatives not to, directly or indirectly solicit, initiate, or encourage any inquiries or proposals from, discuss or negotiate with, provide any non-public information to, or consider the merits of any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to any transaction involving the sale of the business or assets (other than in the Ordinary Course of Business) of the Company, or any of the capital stock of the Company, or any - 34 - 35 merger, consolidation, business combination, or similar transaction involving the Company. 4.8 BEST EFFORTS. Between the date of this Agreement and the Closing Date, Sellers will use their Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied. 4.9 1997 AUDITED FINANCIAL STATEMENTS. On or before May 19, 1998, Sellers shall deliver to Buyer the balance sheet of the Company as at December 31, 1997 and the related statements of income, retained earnings and cash flow for the fiscal year then ended, together with the report thereon of Northrup, Haines, Kaduce, Schmid, Macklin, P.C., independent certified public accountants, which report shall state that the financial statements were audited by the firm in accordance with generally accepted auditing standards and that, in the opinion of Northrup, Haines, Kaduce, Schmid, Macklin, P.C., such financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 1997, and the results of its operations and its cash flow for the year then ended, in conformity with GAAP. 5. COVENANTS OF BUYER PRIOR TO CLOSING DATE 5.1 APPROVALS OF GOVERNMENTAL BODIES. As promptly as practicable after the date of this Agreement, Buyer will, and will cause each of its Related Persons to, make all filings required by Legal Requirements to be made by them to consummate the Contemplated Transactions (including all filings under the HSR Act). Between the date of this Agreement and the Closing Date, Buyer will, and will cause each Related Person to, cooperate with Sellers with respect to all filings that Sellers are required by Legal Requirements to make in connection with the Contemplated Transactions, and (ii) cooperate with Sellers in obtaining all consents identified in Schedule 2.2; provided that this Agreement will not require Buyer to dispose of or make any change in any portion of its business or to incur any other burden to obtain a Governmental Authorization. 5.2 BEST EFFORTS. Except as set forth in the proviso to Section 5.1, between the date of this Agreement and the Closing Date, Buyer will use its Best Efforts to cause the conditions in Sections 7 and 8 to be satisfied. 6. DEFINITIONS For purposes of this Agreement, the following terms shall have the meanings specified or referred to in this Section 6. "Adjustment Amount" -- As defined in Section 1.5. "Applicable Contract" -- Any Contract (a) under which the Company has or may acquire any rights, (b) under which the Company has or may become subject to any obligation or liability, or (c) by - 35 - 36 which the Company or any of the assets owned or used by the Company is or may become bound. "Balance Sheet" -- As defined in Section 2.4. "Best Efforts" -- The efforts that a prudent person desirous of achieving a result would use in similar circumstances to ensure that such result is achieved as expeditiously as possible. "Breach" -- A "Breach" of a representation, warranty, covenant, obligation, or other provision of this Agreement or any instrument delivered pursuant to this Agreement will be deemed to have occurred if there is or has been (a) any inaccuracy in or breach of, or any failure to perform or comply with, such representation, warranty, covenant, obligation, or other provision, or (b) any claim (by a Person) or other occurrence or circumstance that is or was inconsistent with such representation, warranty, covenant, obligation, or other provision, and the term "Breach" means any such inaccuracy, breach, failure, claim, occurrence, or circumstance. "Buyer" -- As defined in the first paragraph of this Agreement. "Cap" -- As defined in Section 10.6. "Closing" -- As defined in Section 1.3. "Closing Date" -- The date and time as of which the Closing actually takes place. "Code" -- The Internal Revenue Code of 1986, as amended, or any successor law, and regulations issued by the IRS pursuant to the Internal Revenue Code of 1986, as amended, or any successor law. "Company" -- As defined in the second paragraph of this Agreement. "Consent" -- Any approval, consent, ratification, waiver, or other authorization (including any governmental Authorization). "Contemplated Transactions" -- All of the transactions contemplated by this Agreement, including without limitation: (a) the sale of the Shares by Sellers to Buyer; (b) the execution, delivery, and performance of the Noncompetition Agreements, the Sellers' Releases, and the Escrow Agreement; (c) the performance by Buyer and Sellers of their respective covenants and obligations under this Agreement; and (d) Buyer's acquisition and ownership of the Shares and exercise of control over the Company. "Contract" -- Any agreement, contract, obligation, promise, or undertaking (whether written or oral and whether express or - 36 - 37 implied) that is legally binding. "Damages" -- As defined in Section 10.2. "Encumbrances" -- Any charge, claim, community property interest, condition, equitable interest, lien, option, pledge, security interest, right of first refusal, or restriction of any kind, including any restriction on use, voting (in the case of any security), transfer, receipt of income, or exercise of any other attribute of ownership. "Environment" -- Soil, land surface or subsurface strata, surface waters (including navigable waters and ocean waters), groundwater, drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life, and any other environmental medium or natural resource. "Environmental, Health, and Safety Liabilities" -- Any cost, damages, expense, liability, obligation, or other responsibility arising from or under Environmental Law or Occupational Safety and Health Law and relating to: (a) Any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health, and regulation of chemical substances or products); (b) Fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (c) Financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any cleanup, removal, containment, or other remediation or response actions ("Cleanup") required by applicable Environmental Law of Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by an Governmental Body or any other Person) and for any natural resource damages; or (d) Any other compliance, corrective, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms "removal," "remedial," and "response action" will include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq., as amended ("CERCLA"). "Environmental Law" -- Any Legal Requirement designed: (a) To advise appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous - 37 - 38 substances or materials, violations or discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction or construction, that could have significant impact on the Environment; (b) To prevent or acceptably minimize the release of pollutants or hazardous substances or materials into the Environment; (c) To reduce the quantities, prevent the release, and minimize the hazardous characteristics of wastes that are generated; (d) To assure that products are designed, formulated, packaged, or used so that they do not present unreasonable risks to human health or the Environment when used or disposed of; (e) To protect resources, species, or ecological amenities; (f) To acceptably minimize the risks inherent in transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (g) To clean up pollutants that have been released, prevent the threat of release, or pay the costs of such clean up or prevention; or (h) To make responsible parties payparties, or groups of them, for damages done to their health or Environment, or to permit self-appointed representatives of the public interest to recover for injuries done to public assets. "ERISA" -- The Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. "Escrow Agreement" -- As defined in Section 1.4. "Facilities" -- Any real property, leaseholds, or other interests currently or formerly owned or operated by the Company (or any predecessor Person) and any buildings, plants, structures, or equipment currently or formerly owned, leased, or operated by the Company (or any predecessor Person). "GAAP" -- Generally accepted United States accounting principles, applied on a basis consistent with the basis on which the Balance Sheet and the other financial statements referred to in Section 2.4(b) were prepared. "Governmental Authorization" -- Any approval, consent, license, permit, waiver, or other authorization issued, granted, given, or otherwise made available by or under the authority of any Governmental Body or pursuant to any Legal Requirement. - 38 - 39 "Governmental Body" -- Any: (a) Nation, state, county, city, town, village, district, or other jurisdiction of any nature; (b) Federal, state, local, municipal, foreign, or other government; (c) Governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) Multi-national organization or body; or (e) Body exercising, or entitled or purporting to exercise any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. "Hazardous Activity" -- The distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of hazardous materials in, or under, about, or from the Facilities or any part thereof into the Environment, and any other act, business, operation, or thing that increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the value of the Facilities or the Company. "Hazardous Materials" -- Includes any (i) "hazardous substance," "pollutants," or "contaminant" (as defined in Sections 101(14), (33) of CERCLA or the regulations designated pursuant to Section 102 of CERCLA and found at 40 C.F.R. Section 302), including any element, compound, mixture, solution, or substance that is or may be designated pursuant to Section 102 of CERCLA; (ii) substance that is or may be designated pursuant to Section 311(b)(2)(A) of the Federal Water Pollution Control Act, as amended (33 U.S.C. Sections 1251, 1321(b)(2)(A)) ("FWPCA"); (iii) hazardous waste having the characteristics identified under or listed pursuant to Section 3001 of the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, 6921) ("RCRA") or having characteristics that may subsequently be considered under RCRA to constitute a hazardous waste; (iv) substance containing petroleum, as that term is defined in Section 9001(8) of RCRA; (v) toxic pollutant that is or may be listed under Section 307(a) of FWPCA; (vi) hazardous air pollutant that is or may be listed under Section 112 of the Clean Air Act, as amended (42 U.S.C. Sections 7401, 7412); (vii) imminently hazardous chemical substance or mixture with respect to which action has been or may be taken pursuant to Section 7 of the Toxic Substances Control Act, as amended (15 U.S.C. Sections 2601, 2606); (viii) source, special nuclear, or by-product material as defined by the Atomic - 39 - 40 Energy Act of 1954, as amended (42 U.S.C. Section 2001 et seq.); (ix) asbestos, asbestos-containing material, or urea formaldehyde or material that contains it; (x) waste oil and other petroleum products; and (xi) any other toxic materials, contaminants, or hazardous substances or wastes pursuant to any Environmental Law. "HSR Act" -- The Hart-Scott-Rodino Antitrust Improvements Act of 1976 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. "Indemnified Persons" -- As defined in Section 10.2. "Intellectual Property Assets" -- As defined in Section 2.22. "Interim Balance Sheet" -- As defined in Section 2.4. "IRS" -- The United States Internal Revenue Service or any successor agency, and, to the extent relevant, the United States Department of the Treasury. "Knowledge" -- An individual will be deemed to have "Knowledge" of a particular fact or other matter if: (a) Such individual is actually aware of such fact or other matter; or (b) A prudent individual could be expected to discover or otherwise become aware of such fact or other matter in the course of conducting a reasonably comprehensive investigation concerning the existence of such fact or other matter. A Person (other than an individual) will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving, or who has at any time served, as a director, officer, partner, executor, or trustee of such Person (or in any similar capacity) has, or at any time had, Knowledge of such fact or other matter. "Legal Requirement" -- Any federal, state, local, municipal, foreign, international, multinational, or other constitution, law, ordinance, principle of common law, regulation, statute, or treaty. "Noncompetition Agreements" -- As defined in Section 1.4(a)(iii). "Occupational Safety and Health Law" -- Any Legal Requirement designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or(such as those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions. "Order" -- Any award, decision, injunction, judgment, order, - 40 - 41 ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Governmental Body or by any arbitrator. "Ordinary Course of Business" -- An action taken by a Person will be deemed to have been taken in the "Ordinary Course of Business" only if: (a) Such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; (b) Such action is not required to be authorized by the board of directors of such Person (or by any Person or group of Persons exercising similar authority) and does not require any other separate or special authorization of any nature; and (c) Such action is similar in nature and magnitude to actions customarily taken, without any separate or special authorization, in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person. "Organizational Documents" -- (a) the articles or certificate of incorporation and the by-laws of the corporation; (b) the partnership agreement and any statement of partnership of a general partnership; (c) the limited partnership agreement and the certificate of limited partnership of a limited partnership; (d) any charter or similar document adopted or filed in connection with the creation, formation, or organization of a Person; and (e) any amendment to any of the foregoing. "Person" -- Any individual, corporation (including any non-profit corporation), general or limited partnership, limited liability company, joint venture, estate, trust, association, organization, or other entity or Governmental Body. "Plan" -- As defined in Section 2.13. "Proceeding" -- Any action, arbitration, audit, hearing, investigation, litigation, or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Body or arbitrator. "Related Person" -- With respect to a particular individual: (a) Each other member of such individual's Family; (b) Any Person that is directly or indirectly controlled by any one or more members of such individual's Family; (c) Any Person in which members of such individual's Family - 41 - 42 hold (individually or in the aggregate) a Material Interest; and (d) Any Person with respect to which one or more members of such individual's Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity). With respect to a specified Person other than an individual: (a) Any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) Any Person that holds a Material Interest in such specified Person; (c) Each Person that serves as a director, officer, partner, executor, or trustee of such specified Person (or in a similar capacity); (d) Any Person in which such specified Person holds a Material Interest; and (e) Any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity). For purposes of this definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse and former spouses, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting securities or other voting interests representing at least 5% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 5% of the outstanding equity securities or equity interests in a Person. "Release" -- Any spilling, leading, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the Environment. "Representative" -- With respect to a particular Person, any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. "Schedules" -- The schedules delivered by Sellers to Buyer concurrently with the execution and delivery of this Agreement. "Securities Act" -- The Securities Act of 1933 or any successor law, and regulations and rules issued pursuant to that - 42 - 43 Act or any successor law. "Sellers" -- As defined in the first paragraph of this Agreement. "Sellers' Release" -- As defined in Section 1.4. "Shares" -- As defined in the second paragraph of this Agreement. "Subsidiary" -- With respect to any Person (the "Owner"), any corporation or other Person of which securities or other interests having the power to elect a majority of that corporation's or other Person's board of directors or similar governing body, or otherwise having the power to direct the business and policies of that corporation or other Person (other than securities or other interests having such power only upon the happening of a contingency that has not occurred) are held by the Owner or one or more of its Subsidiaries; when used without reference to a particular Person, "Subsidiary" means a Subsidiary of the Company. "Tax" -- Any tax (including any income tax, capital gains tax, value-added tax, sales tax, property tax, gift tax, or estate tax), levy, assessment, tariff, duty (including any customs duty), deficiency, or other fee, and any related charge or amount (including any fine, penalty, interest, or addition to tax), imposed, assessed, or collected by or under the authority of any Governmental Body. "Tax Audit" -- The pending IRS tax audit of the Company as disclosed in Schedule 2.11. "Tax Audit Credit" -- As defined in Section 1.4. 7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE Buyer's obligation to purchase the Shares and to take the other actions required to be taken by Buyer at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Buyer, in whole or in part). 7.1 ACCURACY OF REPRESENTATION. (a) All of Sellers' representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement, and must be accurate in all material respects as of the Closing Date as if made on the Closing Date, without giving effect to any supplement to the Schedules. (b) Each of Sellers' representations and warranties in - 43 - 44 sections 2.3, 2.4, 2.12, and 2.24 must have been accurate in all respects as of the date of this Agreement, and must be accurate in all respects as of the Closing Date as if made on the Closing Date, without giving effect to any supplement to the Schedules. 7.2 SELLERS' PERFORMANCE. (a) All of the covenants and obligations that Sellers are required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been duly performed and complied with in all material respects. (b) Each Seller must have delivered each of the documents required to be delivered by such Seller pursuant to Section 1.4, and each of the other covenants and obligations in Sections 4.4 and 4.8 must have been performed and complied with in all respects. 7.3 CONSENTS. Each of the Consents identified in Schedule 2.2 or Schedule 3.2 must have been obtained and must be in full force and effect. 7.4 ADDITIONAL DOCUMENTS. Sellers must have caused the following documents to be delivered to Buyer: (a) An opinion of Smith, Schneider, Stiles, Hudson, Serangeli, Mallaney & Shindler, P.C. dated the Closing Date, in the form of Exhibit 7.4(a); (b) Such other documents as Buyer may reasonably request for the purpose of (i) enabling its counsel to provide the opinion referred to in Section 8.4(a), (ii) evidencing the accuracy of any of Sellers' representations and warranties, (iii) evidencing the performance by either Seller of, or the compliance by either Seller with, any covenant or obligation required to be performed or complied with by such Seller, (iv) evidencing the satisfaction of any condition referred to in this Section 7, or (v) otherwise facilitating the consummation or performance of any of the Contemplated Transactions. 7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not have been commenced or threatened against Buyer, or against any Person affiliated with Buyer, an Proceeding (a) involving any challenge to, or seeking damages or other relief in connection with, any of the Contemplated Transactions, or (b) that may have the effect of preventing, delaying, making illegal, or otherwise interfering with any of the Contemplated Transactions. 7.6 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not have been made or threatened by any Person any claim asserting that such Person (a) is the holder or the beneficial owner of, or has the right to acquire or to obtain beneficial - 44 - 45 ownership of, any stock of, or any other voting, equity, or ownership interest in, the Company or (b) is entitled to all or any portion of the Purchase Price payable for the Shares. 7.7 NO PROHIBITION. Neither the consummation nor the performance of any of the Contemplated Transactions will, directly or indirectly (with or without notice or lapse of time), materially contravene, or conflict with, or result in a material violation of, or cause Buyer or any Person affiliated with Buyer to suffer any material adverse consequence under, (a) any applicable Legal Requirement or Order, or (b) any Legal Requirement or Order that has been published, introduced, or otherwise formally proposed by or before any Governmental Body. Buyer represents to Sellers that it has no Knowledge of any prohibition under any such Legal Requirement or Order except as otherwise set forth in Schedule 3.2. 7.8 FINANCING. Buyer shall have obtained a commitment or commitments for financing the acquisition of the Shares upon such terms and conditions as Buyer deems satisfactory. Buyer shall make a diligent effort to obtain such financing commitments on or before May 29, 1998. If Buyer, after such diligent effort, is unable to obtain such a commitment or commitments and serves written notice of termination upon the Sellers on or before May 29, 1998 citing such an inability, then this Agreement shall be deemed terminated. 7.9 DUE DILIGENCE RESULTS. Buyer shall have completed such environmental audits or site assessments with respect to the Company's assets and business as are deemed necessary or advisable by the Buyer (with the results thereof being satisfactory to the Buyer in its sole and absolute discretion). Buyer's due diligence investigation provided for in Section 4.1 of this Agreement shall have been completed to the satisfaction of the Buyer, and the results of such investigation shall be satisfactory to the Buyer in its sole and absolute discretion. 8. CONDITIONS PRECEDENT TO SELLERS' OBLIGATION TO CLOSE Sellers' obligation to sell the Shares and to take the other actions required to be taken by Sellers at the Closing is subject to the satisfaction, at or prior to the Closing, of each of the following conditions (any of which may be waived by Sellers, in whole or in part): 8.1 ACCURACY OF REPRESENTATIONS. All of Buyer's representations and warranties in this Agreement (considered collectively), and each of these representations and warranties (considered individually), must have been accurate in all material respects as of the date of this Agreement and must be accurate in all material respects as of the Closing Date as if made on the Closing Date. 8.2 BUYER'S PERFORMANCE. - 45 - 46 (a) All of the covenants and obligations that Buyer is required to perform or to comply with pursuant to this Agreement at or prior to the Closing (considered collectively), and each of these covenants and obligations (considered individually), must have been performed and complied with in all material respects. (b) Buyer must have delivered each of the documents required to be delivered by Buyer pursuant to Section 1.4 and must have made the cash payments required to be made by Buyer pursuant to Sections 1.4(b)(i) and 1.4(b)(ii). 8.3 CONSENTS. Each of the Consents identified in Schedule 2.2 must have been obtained and must be in full force and effect. 8.4 ADDITIONAL DOCUMENTS. Buyer must have caused the following documents to be delivered to Sellers: (a) An opinion of Husch & Eppenberger, LLC dated the Closing Date, in the form of Exhibit 8.4; and (b) Such other documents as Sellers may reasonably request for the purpose of (i) enabling their counsel to provide the opinion referred to in Section 7.4(a), (ii) evidencing the accuracy of any representation or warranty of Buyer, (iii) evidencing the performance by Buyer with, any covenant or obligation required to be performed or complied with by Buyer, (iv) evidencing the satisfaction of any condition referred to in this Section 8, or (v) otherwise facilitating the consummation or performance of any of the Contemplated Transactions. 8.5 NO INJUNCTION. There must not be in effect any Legal Requirement or any injunction or other Order that (a) prohibits the sale of the Shares by Sellers to Buyer, and (b) has been adopted or issued, or has otherwise become effective, since the date of this Agreement. 9. TERMINATION 9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or at the Closing, be terminated: (a) By either Buyer or Sellers if a material Breach of any provision of this Agreement has been committed by the other party and such Breach has not been waived; (b) (i) By Buyer if any of the conditions in Section 7 has not been satisfied as of the Closing Date or if satisfaction of such condition is or becomes impossible (other than through the failure of Buyer to comply with its obligations under this Agreement) and Buyer has not waived such condition on or before the Closing Date; or (ii) By Sellers, if any of the conditions in Section 8 - 46 - 47 has not been satisfied of the Closing Date or if satisfaction of such a condition is or becomes impossible (other than through the failure of Sellers to comply with their obligations under this Agreement) and Sellers have not waived such condition on or before the Closing Date; (c) By mutual consent of Buyer and Sellers; or (d) By either Buyer or Sellers if the Closing has not occurred (other than through the failure of any party seeking to terminate this Agreement to comply fully with its obligations under this Agreement) on or before July 31, 1998, or such later date as the parties may agree upon. 9.2 EFFECT OF TERMINATION. Each party's right of termination under Section 9.1 is in addition to any other rights it may have under this Agreement or otherwise, and the exercise of a right of termination will not be an election of remedies. If this Agreement is terminated pursuant to Section 9.1, all further obligations of the parties under this Agreement will terminate, except that the obligations in Section 11.1 and 11.3 will survive; provided, however, that if this Agreement is terminated by a party because of the Breach of the Agreement by the other party or because one or more of the conditions to the terminating party's obligations under this Agreement is not satisfied as a result of the other party's failure to comply with its obligations under this Agreement, the terminating party's right to pursue all legal remedies will survive such termination unimpaired. 10. INDEMNIFICATION; REMEDIES 10.1 SURVIVAL. All representations, warranties, covenants, and obligations in this Agreement, the Schedules, the supplements to the Schedules, the certificate delivered pursuant to Section 1.4, and any other certificate or document delivered pursuant to this Agreement will survive the Closing; the right to indemnification, reimbursement, or other remedy based on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired) about the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, reimbursement, or other remedy based on such representations, warranties, covenants, and obligations. 10.2 INDEMNIFICATION AND REIMBURSEMENT BY SELLERS -- GENERALLY. Sellers, jointly and severally, will indemnify and hold harmless Buyer, the Company, and their respective Representatives, stockholders, controlling persons, and affiliates (collectively, the "Indemnified Persons"), and will reimburse the Indemnified - 47 - 48 Persons, for any loss, liability, claim, damage, expense (including costs of investigation and defense and reasonable attorneys' fees) or diminution of value, whether or not involving a third-party claim (collectively, "Damages"), arising from or in connection with: (a) Any Breach of any representation or warranty made by Sellers in this Agreement, giving effect to any supplement to the Schedules, the certificate delivered pursuant to Section 1.4(a)(iv), or any other certificate or document delivered by Sellers pursuant to this Agreement; (b) Any breach by any Seller of any covenant or obligation of such Seller in this Agreement; (c) Any product shipped or manufactured by, or any services provided by, the Company prior to the Closing Date; (d) Any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by any such Person with either Seller or the Company (or any Person acting on their behalf) in connection with any of the Contemplated Transactions; or (e) Damages incurred in connection with Tax Audit. 10.3 INDEMNIFICATION AND REIMBURSEMENT BY SELLERS -- ENVIRONMENTAL MATTERS. In addition to the provisions of Section 10.2, Sellers, jointly and severally, will indemnify and hold harmless Buyer, the Company, and the other Indemnified Persons, and will reimburse Buyer, the Company, and any other Indemnified Person, for any Damages (including costs of cleanup, containment, or other remediation) arising from or in connection with: (a) Any Environmental, Health, and Safety Liabilities arising out of or relating to: (i)(A) the ownership, operation, or condition at any time on or prior to the Closing Date of the Facilities or any other properties and assets (whether real, personal, or mixed and whether tangible or intangible) in which Sellers or the Company has or had an interest, or (B) any Hazardous Materials or other contaminants that were present on the Facilities or such other properties and assets at any time on or prior to the Closing Date; or (ii)(A) any Hazardous Materials or other contaminants, wherever located, that were, or were allegedly, generated, transported, stored, treated, Released, or otherwise handled by Sellers or the Company or by any other Person for whose conduct they are or may be held responsible at any time on or prior to the Closing Date, or (B) any Hazardous Activities that were, or were allegedly, conducted by Sellers or the Company or by any other Person for whose conduct they are or may be held responsible; or (b) Any bodily injury (including illness, disability, and death, and regardless of when any such bodily injury occurred, was - 48 - 49 incurred, or manifested itself), personal injury, property damage (including trespass, nuisance, wrongful eviction, and deprivation of the use of real property), or other damage of or to any Person, including any employee or former employee of Sellers or the Company or any other Person for whose conduct they are or may be held responsible, in any way arising from or allegedly arising from any Hazardous Activity conducted or allegedly conducted with respect to the Facilities or the operation of the Company prior to the Closing Date, or from Hazardous Material that was (i) present or suspected to be present on or before the Closing Date on or at the Facilities (or present or suspected to be present on any other property, if such Hazardous Material emanated or allegedly emanated from any of the Facilities and was present or suspected to be present on any of the Facilities on or prior to the Closing Date) or (ii) Released or allegedly Released by Sellers or the Company or any other Person for whose conduct they are or may be held responsible, at any time on or prior to the Closing Date. Buyer will be entitled to control any Cleanup, any related Proceeding, and, except as provided in the following sentence, any other Proceeding with respect to which indemnity may be sought under this Section 10.3. The procedure described in Section 10.9 will apply to any claim solely for monetary damages relating to a matter covered by this Section 10.3. 10.4 INDEMNIFICATION AND REIMBURSEMENT BY BUYER. Buyer will indemnify and hold harmless Sellers, and will reimburse Sellers, for any Damages arising from or in connection with (a) any Breach of any representation or warranty made by Buyer in this Agreement or in any certificate delivered by Buyer pursuant to this agreement, (b) any Breach by Buyer of any covenant or obligation of Buyer in this Agreement, or (c) any claim by any Person for brokerage or finder's fees or commissions or similar payments based upon any agreement or understanding alleged to have been made by such Person with Buyer (or any Person acting on its behalf) in connection with any of the Contemplated Transactions. 10.5 TIME LIMITATIONS. If the Closing occurs, Sellers will have no liability (for indemnification or otherwise) with respect to any representation or warranty, or covenant or obligation to be performed and complied with prior to the Closing Date, other than those in Sections 2.3, 2.11, 2.13, and 2.19, unless on or before three (3) years after the Closing Date Sellers are given notice of claim specifying the factual basis of that claim in reasonable detail to the extent then known by Buyer; a claim with respect to Section 2.3, 2.11, 2.13, or 2.19, or a claim for indemnification or reimbursement not based upon any representation or warranty or any covenant or obligation to be performed and complied with prior to the Closing Date, may be made at any time subject to any applicable statute of limitations. If the Closing occurs, Buyer will have no liability (for indemnification or otherwise) with respect to any representation or warranty, or covenant or obligation to be performed and complied with prior to the Closing Date, unless on or - 49 - 50 before three (3) years after the Closing Date Buyer is given notice of a claim specifying the factual basis of that claim in reasonable detail to the extent then known by Sellers. 10.6 LIMITATIONS ON AMOUNT -- SELLERS. Sellers will have no liability (for indemnification or otherwise) with respect to the matters described in clauses (a) or (c) or, to the extent relating to any failure to perform or comply prior to the Closing Date, clause (b) of Section 10.2 until the total of all Damages with respect to such matters exceeds $50,000, and then only for the amount by which such Damages exceed $50,000, up to an aggregate maximum of $750,000 (the "Cap"). In addition, Damages on account of any Breach of a covenant, obligation, representation, or warranty regarding Taxes or Environmental, Health, and Safety Liabilities shall not be limited by the Cap or applied in computing the amount paid in satisfaction of the Cap. However, this Section 10.6 will not apply to any Breach of any of Sellers' representa-tions and warranties of which either Seller had Knowledge at any time prior to the date on which such representation and warranty is made or any intentional Breach by either Seller of any covenant or obligation, and Sellers will be jointly and severally liable for all Damages with respect to such Breaches. 10.7 LIMITATIONS ON AMOUNT -- BUYER. Buyer will have no liability (for indemnification or otherwise) with respect to the matters described in clause (a) or (b) of Section 10.4 until the total of all Damages with respect to such matters exceeds $50,000, and then only for the amount by which such Damages exceed $50,000, up to an aggregate maximum of $750,000. However, this Section 10.7 will not apply to any Breach of any of Buyer's representations and warranties of which Buyer had Knowledge at any time prior to the date on which such representation and warranty is made or any intentional Breach by Buyer of any covenant or obligation, and Buyer will be liable for all Damages with respect to such Breaches. 10.8 ESCROW. Upon notice to Sellers specifying in reasonable detail the basis for such set-off, Buyer may give notice of a Claim in such amount under the Escrow Agreement. Neither the exercise of nor the failure to give a notice of a Claim under the Escrow Agreement will constitute an election of remedies or limit Buyer in any manner in the enforcement of any other remedies that may be available to it. 10.9 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS; TAX AUDIT. (a) Promptly after receipt by an indemnified party under Section 10.2, 10.4, or (to the extent provided in the last sentence of Section 10.3) Section 10.3 of notice of the commencement of any Proceeding against it, such indemnified party will, if a claim is to be made against an indemnifying party under such section, give notice to the indemnifying party of the commencement of such claim, but the failure to notify the indemnifying party will not relieve - 50 - 51 the indemnifying party of any liability that it may have to any indemnified party, except to the extent that the indemnifying party demonstrates that the defense of such action is prejudiced by the indemnifying party's failure to give such notice. (b) If any Proceeding referred to in Section 10.9(a) is brought against an indemnified party and it gives notice to the indemnifying party of the commencement of such Proceeding, the indemnifying party will, unless the claim involves Taxes, be entitled to participate in such Proceeding and, to the extent that it wishes (unless (i) the indemnifying party is also a party to such proceeding and the indemnified party determines in good faith that joint representation would be inappropriate, or (ii) the indemnifying party fails to provide reasonable assurance to the indemnified party of its financial capacity to defend such Proceeding and provide indemnification with respect to such Proceeding), to assume the defense of such Proceeding with counsel satisfactory to the indemnified party and, after notice from the indemnifying party to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will not, as long as it diligently conducts such defense, be liable to the indemnified party under this Section 10 for any fees of other counsel or any other expenses with respect to the defense of such Proceeding, in each case subsequently incurred by the indemnified party in connection with the defense of such Proceeding, other than reasonable costs of investigation. If the indemnifying party assumes the defense of a Proceeding, (i) it will be conclusively established for purposes of this Agreement that the claims made in that Proceeding are within the scope of and subject to indemnification; (ii) no compromise or settlement of such claims may be effected by the indemnifying party without the indemnified party's consent unless (A) there is no finding or admission of any violation of Legal Requirements or any violation of the rights of any Person and no effect on any other claims that may be made against the indemnified party, and (B) the sole relief provided is monetary damages that are paid in full by the indemnifying party; and (iii) the indemnifying party will have no liability with respect to any compromise or settlement of such claims effected without its consent. If notice is given to an indemnifying party of the commencement of any proceeding and indemnifying party does not, within ten (10) days after the indemnified party's notice is given, give notice to the indemnified party of its election to assume the defense of such Proceeding, the indemnifying party will be bound by any determination made in such Proceeding or any compromise or settlement effected by the indemnified party. (c) Notwithstanding the foregoing, if an indemnified party determines in good faith that there is a reasonable probability that a Proceeding may adversely affect it other than as a result of monetary damages for which it would be entitled to indemnification under this Agreement, the indemnified party may, by notice to the indemnifying party, assume the exclusive right to defend, compromise, or settle such Proceeding, but the indemnifying party - 51 - 52 will not be bound by any determination of a Proceeding so defended or any compromise or settlement effected without its consent (which may not be unreasonably withheld). (d) Sellers hereby consent to the non-exclusive jurisdiction of any court in which a Proceeding is brought against any Indemnified Person for purposes of any claim that an Indemnified Person may have under this Agreement with respect to such Proceeding or the matters alleged therein, and agree that process may be served on Sellers with respect to such claim anywhere in the world. (e) Notwithstanding the foregoing, Sellers shall assume the defense of the Tax Audit after the Closing and shall be free to enter into any compromise or settlement of it without the consent of the Company or the Buyer so long as the Company or Buyer has no liability arising out of the same. Buyer will reasonably cooperate in the defense. Funds from the escrow account created pursuant to the Escrow Agreement may be used to defend and resolve the Tax Audit. 10.10 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for indemnification for any matter not involving a third-party claim may be asserted by notice to the party from whom indemnification is sought. 11. GENERAL PROVISIONS 11.1 EXPENSES. Except as otherwise expressly provided in this Agreement, each party to this Agreement will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the Contemplated Transactions, including all fees and expenses of agents, representatives, counsel, and accountants. Buyer will pay one-half and Sellers will pay one-half of the HSR Act filing fee. Sellers will cause the Company not to incur any out-of-pocket expenses in excess of $5,000.00 in connection with this Agreement. In the event of termination of this Agreement, the obligation of each party to pay its own expenses will be subject to any rights of such party arising from a breach of this Agreement by another party. 11.2 PUBLIC ANNOUNCEMENTS. Any public announcement or similar publicity with respect to this Agreement or the Contemplated Transactions will be issued, if at all, at such time and in such manner as Buyer determines. Unless consented to by Buyer in advance or required by Legal Requirements, prior to the Closing Sellers shall, and shall cause the Company to, keep this Agreement strictly confidential and may not make any disclosure of this Agreement to any Person. Sellers and Buyer will consult with each other concerning the means by which the Company's employees, customers, and suppliers and others having dealings with the Company will be informed of the Contemplated Transactions, and Buyer will have the right to be present for any such communication. - 52 - 53 11.3 CONFIDENTIALITY. Between the date of this Agreement and the Closing Date, Buyer and Sellers will maintain in confidence, and will cause the directors, officers, employees, agents, and advisors of Buyer and the Company to maintain in confidence, any written, oral, or other information obtained in confidence from another party or the Company in connection with this Agreement or the Contemplated Transactions, unless (a) such information is already known to such party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such party, (b) the use of such information is necessary or appropriate in making any filing or obtaining any consent or approval required for the consummation of the Contemplated Transactions, or (c) the furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings. If the Contemplated Transactions are not consummated, each party will return or destroy as much of such written information as the other party may reasonably request. Whether or not the Closing takes place, Sellers waive, and will upon Buyer's request cause the Company to waive, any cause of action, right, or claim arising out of the access of Buyer or its representatives to any trade secrets or other confidential information of the Company except for the intentional competitive misuse by Buyer of such trade secrets or confidential information. 11.4 NOTICES. All notices, consents, waivers, and other communications under this Agreement must be in writing and will be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by telecopier (with written confirmation of receipt), provided that a copy is mailed by first class mail, postage prepaid, or (c) when received by the addressee, if sent by a national recognized overnight delivery service (receipt requested), in each case to the appropriate addresses and telecopier numbers set forth below (or to such other addresses and telecopier numbers as a party may designate by notice to the other parties): Sellers: Mid-Central Plastics, Inc. 2360 Grand Avenue West Des Moines, Iowa 50265 Attention: Richard L. Goreham Telecopy No. (515) 225-9673 With Copy To: William R. Stiles, Esq. Smith, Schneider, Stiles, Hudson, Serangeli, Mallaney & Shindler, P.C. 1000 Equitable Building Des Moines, IA 50265 Telecopy No. (515) 244-1328 - 53 - 54 Buyer: Morton Industrial Group, Inc. 1021 West Birchwood P.O. Box 429 Morton, Illinois 61550 Attention: William D. Morton, President Telecopy No.: (309) 263-1841 With Copy To: Gene A. Petersen, Esq. Husch & Eppenberger, LLC 101 S.W. Adams, Suite 800 Peoria, Illinois 61602 Telecopy No.: (309) 637-4928 11.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon request to each other such further information, (b) to execute and deliver to each other such other documents, and (c) to do such other acts and things, all as the other party may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement. 11.6 WAIVER. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instances for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 11.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all prior agreements between the parties with respect to its subject matter (including the letter of intent between Buyer and Sellers dated March 4, 1998 and agreed to on March 6, 1998, and the Confidentiality Agreement between the Company and the Buyer dated April 17, 1998) and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the party to be charged with the amendment. - 54 - 55 11.8 SCHEDULES. The Schedules and Exhibits attached hereto are hereby incorporated as a part of this Agreement. 11.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Neither party may assign any of its rights under this Agreement without the prior consent of the other parties, which will not be unreasonably withheld, except that Buyer may assign any of its rights under this Agreement to any Subsidiary of Buyer. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the parties. Nothing expressed or referred to in this Agreement will be construed to give any Person other than the parties to this Agreement any legal or equitable right, remedy, or claim under or with respect to this Agreement or any provision of this Agreement. This Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this agreement and their successors and assigns. 11.10 SEVERABILITY. If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable. 11.11 SECTION HEADINGS; CONSTRUCTION. The headings of sections of this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Sections" refer to the corresponding sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 11.12 TIME OF ESSENCE. With regard to all dates and time periods set forth or referred to in this Agreement, time is of the essence. 11.13 GOVERNING LAW. This Agreement will be governed by and construed under the laws of the State of Illinois without regard to conflicts of laws principles. 11.14 COUNTERPARTS. This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. [REST OF PAGE INTENTIONALLY LEFT BLANK] - 55 - 56 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. Buyer: Sellers: MORTON INDUSTRIAL GROUP, INC. By:/S/William D. Morton /S/Richard L. Goreham ---------------------------------- William D. Morton, President Richard L. Goreham /S/Dolores A. Staples ---------------------------------- Dolores A. Staples /S/William B. Goreham ---------------------------------- William B. Goreham - 56 - EX-10.2 3 EX-10.2 1 EXHIBIT 10.2 ================================================================================ U.S. $90,000,000 CREDIT AGREEMENT by and among MORTON INDUSTRIAL GROUP, INC. and HARRIS TRUST AND SAVINGS BANK individually and as Agent and the Lenders which are or become parties hereto Dated as of May __, 1998 ================================================================================ 2 TABLE OF CONTENTS SECTION HEADING PAGE SECTION 1. THE CREDITS.............................................1 Section 1.1. Revolving Credit........................................1 (a) Generally...............................................1 (b) Revolving Loans.........................................1 Section 1.2. Term Credit.............................................2 Section 1.3. Letters of Credit.......................................3 (a) General Terms...........................................3 (b) Applications............................................3 (c) The Reimbursement Obligation............................4 (d) The Participating Interests.............................5 (e) Indemnification.........................................6 (f) Change in Laws..........................................6 Section 1.4. Manner and Disbursement of Borrowings...................7 (a) Generally...............................................7 (b) Reimbursement Obligation................................7 (c) Agent Reliance on Bank Funding..........................7 Section 1.5. Manner of Obtaining Letters of Credit...................8 Section 1.6. The Swing Line..........................................8 SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES...................11 Section 2.1. Interest Rate Options..................................11 Section 2.2. Minimum Amounts........................................12 Section 2.3. Computation of Interest................................12 Section 2.4. Manner of Rate Selection...............................12 Section 2.5. Change of Law..........................................13 Section 2.6. Unavailability of Deposits or Inability to Ascertain Adjusted LIBOR...................................13 Section 2.7. Taxes and Increased Costs..............................14 Section 2.8. Change in Capital Adequacy Requirements................15 Section 2.9. Funding Indemnity......................................15 Section 2.10. Lending Branch.........................................16 Section 2.11. Lender's Duty to Mitigate..............................16 Section 2.12. Discretion of Lenders as to Manner of Funding..........17 Section 2.13. Replacement of Lender..................................17 -i- 3 SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, APPLICATIONS AND NOTATIONS..............................................18 Section 3.1. Fees...................................................18 Section 3.2. Voluntary Prepayments of Revolving Credit and Term Notes............................................19 Section 3.3. Mandatory Prepayments..................................20 Section 3.4. Terminations of Revolving Credit Commitments...........22 Section 3.5. Place and Application of Payments......................22 Section 3.6. Notations and Requests.................................24 SECTION 4. COLLATERAL.............................................24 Section 4.1. Collateral.............................................24 Section 4.2. Guaranties.............................................24 Section 4.3. Further Assurances.....................................25 SECTION 5. DEFINITIONS; INTERPRETATION............................25 Section 5.1. Definitions............................................25 Section 5.2. Interpretation.........................................40 Section 5.3. Change in Accounting Principles........................41 SECTION 6. REPRESENTATIONS AND WARRANTIES.........................41 Section 6.1. Organization and Qualification.........................41 Section 6.2. Subsidiaries...........................................42 Section 6.3. Margin Stock...........................................43 Section 6.4. Financial Reports......................................43 Section 6.5. Full Disclosure........................................43 Section 6.6. Good Title.............................................43 Section 6.7. Litigation and Other Controversies.....................44 Section 6.8. Taxes..................................................44 Section 6.9. Approvals..............................................44 Section 6.10. Affiliate Transactions.................................44 Section 6.11. Investment Company; Public Utility Holding Company.....44 Section 6.12. ERISA..................................................45 Section 6.13. Compliance with Laws...................................45 Section 6.14. Other Agreements.......................................45 Section 6.15. Mid-Central and SMP Acquisitions.......................45 Section 6.16. Year 2000 Compliance...................................47 -ii- 4 Section 6.17. No Default.............................................47 SECTION 7. CONDITIONS PRECEDENT...................................47 Section 7.1. All Advances...........................................47 Section 7.2. Initial Advance........................................48 Section 7.3. Initial Loans..........................................51 Section 7.4. Real Estate Surveys....................................51 SECTION 8. COVENANTS..............................................51 Section 8.1. Maintenance of Business................................52 Section 8.2. Maintenance of Property................................52 Section 8.3. Taxes and Assessments..................................52 Section 8.4. Insurance..............................................52 Section 8.5. Financial Reports......................................52 Section 8.6. Interest Coverage Ratio................................54 Section 8.7. Cash Flow Leverage Ratio...............................54 Section 8.8. EBITDA.................................................54 Section 8.9. Fixed Charge Coverage Ratio............................55 Section 8.10. Capital Expenditures...................................55 Section 8.11. Indebtedness...........................................55 Section 8.12. Liens..................................................56 Section 8.13. Investments, Loans, Advances and Guaranties............57 Section 8.14. Leases. (a) Sales and Leasebacks......................58 Section 8.15. Dividends and Certain Other Restricted Payments........59 Section 8.16. Mergers, Consolidations and Sales......................59 Section 8.17. Acquisitions...........................................60 Section 8.18. Maintenance of Subsidiaries............................61 Section 8.19. Formation of Subsidiaries..............................62 Section 8.20. ERISA..................................................62 Section 8.21. Compliance with Laws...................................62 Section 8.22. Burdensome Contracts With Affiliates...................62 Section 8.23. Changes in Fiscal Year.................................63 Section 8.24. Change in the Nature of Business.......................63 Section 8.25. Use of Loan Proceeds...................................63 Section 8.26. Interest Rate Protection...............................63 SECTION 9. EVENTS OF DEFAULT AND REMEDIES.........................63 SECTION 10. THE AGENT..............................................67 -iii- 5 Section 10.1. Appointment and Authorization..........................67 Section 10.2. Rights as a Lender.....................................67 Section 10.3. Standard of Care.......................................67 Section 10.4. Costs and Expenses.....................................68 Section 10.5. Indemnity..............................................68 Section 10.6. Interest Rate Hedging Arrangements.....................69 SECTION 11. JOINT AND SEVERAL LIABILITY AND GUARANTIES.............69 Section 11.1. Joint and Several Liability and Guaranties.............69 Section 11.2. Guaranty Unconditional.................................70 Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances'.............................71 Section 11.4. Waivers................................................71 Section 11.5. Limit on Recovery......................................71 Section 11.6. Stay of Acceleration...................................72 Section 11.7. Benefit to Guarantors..................................72 Section 11.8. Guarantor Covenants....................................72 SECTION 12. MISCELLANEOUS..........................................72 Section 12.1. Holidays...............................................72 Section 12.2. No Waiver, Cumulative Remedies.........................72 Section 12.3. Waivers, Modifications and Amendments..................73 Section 12.4. Costs and Expenses.....................................73 Section 12.5. Documentary Taxes......................................74 Section 12.6. Survival of Representations............................74 Section 12.7. Survival of Indemnities................................74 Section 12.8. Notices................................................74 Section 12.9. Headings...............................................75 Section 12.10. Severability of Provisions.............................75 Section 12.11. Counterparts...........................................75 Section 12.12. Binding Nature, Governing Law, Etc.....................75 Section 12.13. Entire Understanding...................................75 Section 12.14. Participations.........................................76 Section 12.15. Assignment Agreements..................................76 Section 12.16. Confidentiality........................................77 Signature....................................................................78 -iv- 6 Exhibit A -- Revolving Credit Note Exhibit B -- Term Note Exhibit C -- Term Note Exhibit D -- Swing Line Note Exhibit E -- Compliance Certificate Attachment to Compliance Certificate Exhibit F -- Notice of Payment Request Exhibit G -- Guaranty Exhibit H -- Opinion of Counsel Schedule 6.2 -- Subsidiaries Schedule 8.12 -- Other Liens -v- 7 MORTON INDUSTRIAL GROUP, INC. CREDIT AGREEMENT To Each of the Lenders Signatory Hereto Ladies and Gentlemen: The undersigned, Morton Industrial Group, Inc., a Georgia corporation (the "Borrower") applies to you for your several commitments, subject to all of the terms and conditions hereof and on the basis of the representations and warranties hereinafter set forth, to make a revolving credit (the "Revolving Credit"), a term credit (the "Term Credit") and a swing line (the "Swing Line") in each case available to the Borrower, all as more fully hereinafter set forth. SECTION 1. THE CREDITS. Section 1.1. Revolving Credit. (a) Generally. Subject to the terms and conditions hereof, each Lender severally agrees to extend credit to the Borrower on a revolving basis under the Revolving Credit which may be availed of by the Borrower from time to time, and borrowings thereunder may be repaid and used again, during the period from the date hereof to and including the Termination Date, at which time the commitments of the Lenders to extend credit under the Revolving Credit shall expire. The maximum amount of the Revolving Credit which each Lender agrees to extend to the Borrower, taken together, shall not exceed its Revolving Credit Commitment. The Revolving Credit may be utilized by the Borrower in the form of Revolving Loans and Letters of Credit, all as more fully hereinafter set forth; provided, however, that the aggregate amount of Revolving Loans, L/C Obligations and Swing Loans outstanding at any one time from the Borrower shall not exceed the Revolving Credit Commitments then in effect. For all purposes of this Agreement, where a determination of the unused or available amount of the Revolving Credit Commitments is necessary, the Revolving Loans and L/C Obligations shall be deemed to utilize the Revolving Credit Commitments then in effect. The obligations of the Lenders hereunder are several and not joint, and no Lender shall under any circumstances be obligated to extend credit under the Revolving Credit in excess of its Revolving Credit Commitment. (b) Revolving Loans. Subject to the terms and conditions hereof, the Revolving Credit may be availed of by the Borrower in the form of loans in U.S. Dollars (individually a "Revolving Loan" and collectively the "Revolving Loans"). Each Revolving Loan by the Lenders shall be in a minimum amount of $500,000 or such greater amount which is an integral 8 multiple of $100,000, except to the extent Section 2 provides otherwise in the case of LIBOR Portions. Each Revolving Loan shall be made pro rata by the Lenders in accordance with the amounts of their respective Revolver Percentages. Each advance made by a Lender of its pro rata share of each Revolving Loan shall be evidenced by the same Revolving Credit Note of the Borrower (individually, for each Lender, its "Revolving Credit Note" and collectively, for all the Lenders, their "Revolving Credit Notes"), jointly and severally, payable to the order of such Lender in the amount of its Revolving Credit Commitment, with each Revolving Credit Note to be in the form (with appropriate insertions) attached hereto as Exhibit A. Each Revolving Credit Note shall be dated the date of issuance thereof, be expressed to bear interest as provided in Section 2 hereof and be expressed to mature on the Termination Date. Without regard to the principal amount of each Revolving Credit Note stated on its face, the actual principal amount at any time outstanding and owing by the Borrower on account thereof shall be the sum of all advances then or theretofore made thereon less all payments of principal actually received. Section 1.2. Term Credit. (a) Term A Loan. Subject to all of the terms and conditions hereof, the Lenders severally agree to make a term loan in U.S. Dollars (the "Term A Loan") to the Borrower under the Term Credit in an amount not to exceed their Term A Credit Commitments. Term A Loan shall be disbursed in a single advance made, if at all, on or before June 15, 1998, at which time the commitments of the Lenders to make Term A Loan shall expire. Each Lender shall advance a pro rata share of Term A Loan in accordance with the amounts of their respective Term A Percentages. Each Lender's pro rata share of the Term A Loan shall be evidenced by a Term A Note of the Borrower (individually a "Term A Note" and collectively the "Term A Notes") payable to the order of such Lender in the amount of its pro rata share of Term A Loan, each Term A Note to be in the form (with appropriate insertions) attached hereto as Exhibit B. Each Term A Note shall be expressed to mature in installments, commencing on September 30, 1998 and continuing on the last day of each calendar quarter occurring thereafter to and including March 31, 2003 plus the final installment due on May 31, 2003, with the principal installments on the Term A Notes to aggregate $500,000 per installment through and including December 31, 1998, $1,000,000 per installment thereafter and through and including December 31, 1999, $1,250,000 per installment thereafter and through and including December 31, 2001, $1,500,000 per installment thereafter and through and including December 31, 2002, $2,000,000 on March 31, 2003 and with the final principal installment on all the Term A Notes to aggregate in an amount equal to all principal and interest not sooner paid, and with the amount of each installment due on the Term A Note held by each Lender to be equal to such Lender's Term A Percentage of such installment. (b) Term B Loan. Subject to all of the terms and conditions hereof, the Lenders severally agree to make a term loan in U.S. Dollars (the "Term B Loan") to the Borrower under -2- 9 the Term Credit in an amount not to exceed their Term B Credit Commitments. Term B Loan shall be disbursed in a single advance made, if at all, on or before June 15, 1998, at which time the commitments of the Lenders to make Term B Loan shall expire. Each Lender shall advance a pro rata share of Term B Loan in accordance with the amounts of their respective Term B Percentages. Each Lender's pro rata share of Term B Loan shall be evidenced by a Term B Note of the Borrower (individually a "Term B Note" and collectively the "Term B Notes") payable to the order of such Lender in the amount of its pro rata share of Term B Loan, each Term B Note to be in the form (with appropriate insertions) attached hereto as Exhibit C. Each Term B Note shall be expressed to mature in twenty-eight (28) installments, commencing on September 30, 1998 and continuing on the last day of each calendar quarter occurring thereafter to and including March 31, 2005 plus the final twenty-eighth installment due on May 31, 2005, with the principal installments on the Term B Notes to aggregate $125,000 per installment through and including June 30, 2003, $3,437,500 per installment thereafter and through and including March 31, 2005 and with the final principal installment on all the Term B Notes to aggregate in an amount equal to all principal and interest not sooner paid, and with the amount of each installment due on the Term B Note held by each Lender to be equal to such Lender's Term B Percentage of such installment. Section 1.3. Letters of Credit. (a) General Terms. Subject to the terms and conditions hereof, as part of the Revolving Credit, the Agent shall issue standby and commercial letters of credit (each a "Letter of Credit") for the account of the Borrower (whether for its own account individually or also for the account of any Subsidiary) in U.S. Dollars in an aggregate undrawn face amount up to the amount of the L/C Commitment as then in effect; provided, however, that the aggregate L/C Obligations at any time outstanding shall not exceed the difference between the Revolving Credit Commitments in effect at such time and the aggregate principal amount of Revolving Loans and Swing Loans then outstanding. Each Letter of Credit shall be issued by the Agent, but each Lender shall be obligated to reimburse the Agent for its Revolver Percentage of the amount of each drawing thereunder and, accordingly, the undrawn face amount of each Letter of Credit shall constitute usage of the Revolving Credit Commitment of each Lender pro rata in accordance with each Lender's Revolver Percentage. (b) Applications. At any time before the Termination Date, the Agent shall, at the request of the Borrower, issue one or more Letters of Credit for the account of the Borrower (whether for its own account individually or also for the account of any Subsidiary), in a form satisfactory to the Agent, in an aggregate face amount as set forth above, upon the receipt of an application for the Letter of Credit in the form customarily prescribed by the Agent duly executed by the Borrower for whose account such Letter of Credit was issued (each an "Application"). Each Letter of Credit issued hereunder which is a standby letter of credit shall -3- 10 expire not later than the earlier of (i) twelve (12) months from the date of issuance and each renewal or (ii) the Termination Date. Each Letter of Credit issued hereunder which is a commercial letter of credit shall expire not later than the earlier of (i) one hundred eighty (180) days from the date of issuance and each renewal or (ii) the Termination Date. The current forms of the Agent's Applications for standby and commercial Letters of Credit attached hereto as Schedule 1.3 (Standby) and Schedule 1.3 (Commercial), respectively. The Agent shall provide the Borrower and each Lender with copies of any new form of Application that may, from time to time, be adopted by the Agent. Notwithstanding anything contained in any Application to the contrary (i) the Borrower shall be liable for all obligations in respect of each Letter of Credit, (ii) the Borrower's obligation to pay fees in connection with each Letter of Credit shall be as exclusively set forth in Section 3.1(b) hereof, (iii) except during the continuance of an Event of Default, the Agent will not call for the funding by the Borrower of any amount under a Letter of Credit, or any other form of collateral security for the Borrower's obligations in connection with such Letter of Credit, before being presented with a drawing thereunder, and (iv) if the Agent is not timely reimbursed for the amount of any drawing under a Letter of Credit on the date such drawing is paid, the Borrower's obligation to reimburse the Agent for the amount of such drawing shall bear interest (which the Borrower hereby promises to pay) from and after the date such drawing is paid at a rate per annum equal to the sum of 2-1/4% plus the Domestic Rate from time to time in effect. The Agent will promptly notify the Lenders of each issuance by it of a Letter of Credit. If the Agent issues any Letters of Credit with expiration dates that are automatically extended unless the Agent gives notice that the expiration date will not so extend beyond its then scheduled expiration date, the Agent will give such notice of non-renewal before the time necessary to prevent such automatic extension if before such required notice date (i) the expiration date of such Letter of Credit if so extended would be after the Termination Date, (ii) the Revolving Credit Commitments have been terminated or (iii) an Event of Default exists and the Required Lenders have given the Agent instructions not to so permit the extension of the expiration date of such Letter of Credit. The Agent agrees to issue amendments to the Letter(s) of Credit increasing the amount, or extending the expiration date, thereof at the request of the Borrower subject to the conditions of Section 7 and the other terms of this Section 1.3. Without limiting the generality of the foregoing, the Agent's obligation to issue, amend or extend the expiration date of a Letter of Credit is subject to the conditions of Section 7 and the other terms of this Section 1.3 and the Agent will not issue, amend or extend the expiration date of any Letter of Credit if any Lender notifies the Agent of any failure to satisfy or otherwise comply with such conditions and terms and directs the Agent not to take such action. (c) The Reimbursement Obligation. Subject to Section 1.3(b) hereof, the obligation of the Borrower to reimburse the Agent for all drawings under a Letter of Credit (a "Reimbursement Obligation") shall be governed by the Application related to such Letter of Credit, except that reimbursement of each drawing shall be made in immediately available funds at the Agent's principal office in Chicago, Illinois by no later than 12:30 p.m. (Chicago time) on -4- 11 the date when such drawing is paid or, if drawing was paid after 11:30 a.m. (Chicago time), by the end of such day. If the Borrower does not make any such reimbursement payment on the date due and the Participating Lenders fund their participations therein in the manner set forth in Section 1.3(d) below, then all payments thereafter received by the Agent in discharge of any of the relevant Reimbursement Obligations shall be distributed in accordance with Section 1.3(d) below. (d) The Participating Interests. Each Lender (other than the Lender then acting as Agent in issuing Letters of Credit), by its acceptance hereof, severally agrees to purchase from the Agent, and the Agent hereby agrees to sell to each such Lender (a "Participating Lender"), an undivided percentage participating interest (a "Participating Interest"), to the extent of its Revolver Percentage, in each Letter of Credit issued by, and each Reimbursement Obligation owed to, the Agent. Upon any failure by the Borrower to pay any Reimbursement Obligation in respect of a Letter of Credit issued for the Borrower's account at the time required on the date the related drawing is paid, as set forth in Section 1.3(c) above, or if the Agent is required at any time to return to the Borrower or to a trustee, receiver, liquidator, custodian or other Person any portion of any payment of any Reimbursement Obligation, each Participating Lender shall, not later than the Business Day it receives a certificate in the form of Exhibit F hereto from the Agent to such effect, if such certificate is received before 1:00 p.m. (Chicago time), or not later than the following Business Day, if such certificate is received after such time, pay to the Agent an amount equal to its Revolver Percentage of such unpaid or recaptured Reimbursement Obligation together with interest on such amount accrued from the date the related payment was made by the Agent to the date of such payment by such Participating Lender at a rate per annum equal to (i) from the date the related payment was made by the Agent to the date two (2) Business Days after payment by such Participating Lender is due hereunder, the Federal Funds Rate for each such day and (ii) from the date two (2) Business Days after the date such payment is due from such Participating Lender to the date such payment is made by such Participating Lender, the Domestic Rate in effect for each such day. Each such Participating Lender shall thereafter be entitled to receive its Revolver Percentage of each payment received in respect of the relevant Reimbursement Obligation and of interest paid thereon, with the Agent retaining its Revolver Percentage as a Lender hereunder. The several obligations of the Participating Lenders to the Agent under this Section 1.3 shall be absolute, irrevocable and unconditional under any and all circumstances whatsoever (except to the extent the Borrower is relieved from its obligation to reimburse the Agent for a drawing under a Letter of Credit because of the Agent's gross negligence or willful misconduct in determining that documents received under the Letter of Credit comply with the terms thereof) and shall not be subject to any set-off, counterclaim or defense to payment which any Participating Lender may have or have had against the Borrower, the Agent, any other Lender or any other Person whatsoever. Without limiting the generality of the foregoing, such obligations -5- 12 shall not be affected by any Default or Event of Default or by any reduction or termination of any Revolving Credit Commitment of any Lender, and each payment by a Participating Lender under this Section 1.3 shall be made without any offset, abatement, withholding or reduction whatsoever. The Agent shall be entitled to offset amounts received for the account of a Lender under this Agreement against unpaid amounts due from such Lender to the Agent hereunder (whether as fundings of participations, indemnities or otherwise), but shall not be entitled to offset against amounts owed to the Agent by any Lender arising outside this Agreement. (e) Indemnification. Each Participating Lender shall, to the extent of its respective Revolver Percentage, indemnify the Agent (to the extent not reimbursed by the Borrower) against any cost, expense (including reasonable counsel fees and disbursements), claim, demand, action, loss or liability (except such as result from the Agent's gross negligence or willful misconduct) that the Agent may suffer or incur in connection with any Letter of Credit. The obligations of the Participating Lenders under this Section 1.3(d) and all other parts of this Section 1.3 shall survive termination of this Agreement and of all other L/C Documents. (f) Change in Laws. If the Agent or any Lender shall determine in good faith that any change in any applicable law, regulation or guideline (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System) or any new law, regulation or guideline, or any interpretation of any of the foregoing by any governmental authority charged with the administration thereof or any central bank or other fiscal, monetary or other authority having jurisdiction over the Agent or such Lender (whether or not having the force of law), shall: (i) impose, modify or deem applicable any reserve, special deposit or similar requirement against the Letters of Credit, or the Agent's or such Lender's or the liability of the Borrower with respect thereto; or (ii) impose on the Agent or such Lender any penalty with respect to the foregoing or any other condition regarding this Agreement, the Applications or the Letters of Credit; and the Agent or such Lender shall determine in good faith that the result of any of the foregoing is to increase the cost (whether by incurring a cost or adding to a cost) to the Agent or such Lender of issuing, maintaining or participating in the Letters of Credit hereunder (without benefit of, or credit for, any prorations, exemptions, credits or other offsets available under any such laws, regulations, guidelines or interpretations thereof), then the Borrower shall pay on demand to the Agent or such Lender from time to time as specified by the Agent or such Lender such additional amounts as the Agent or such Lender shall determine are sufficient to compensate and indemnify it for such increased cost in respect of each such Letter of Credit; -6- 13 provided, however, that the Borrower shall not be obligated to pay any such amount or amounts to the extent such additional cost was incurred or paid by such Lender more than sixty (60) days prior to the date of the delivery of the certificate referred to in the immediately following sentence (nothing herein to impair or otherwise affect the Borrower's liability hereunder for costs subsequently incurred or paid by such Lender). Section 1.4. Manner and Disbursement of Borrowings. (a) Generally. The Borrower shall give written or telephonic notice to the Agent (which notice shall be irrevocable once given and, if given by telephone, shall be promptly confirmed in writing) by no later than 11:00 a.m. (Chicago time) on any Business Day of each request for a Loan, in each case specifying the type of Loan (whether a Revolving Loan or a Term Credit Loan) which is to be made, the amount of such Loan and the date such Loan is to be made. The Agent shall promptly notify each Lender of the Agent's receipt of each such notice. Each Loan shall initially constitute part of the applicable Domestic Rate Portion except to the extent the Company has otherwise timely elected as provided in Section 2 hereof. Not later than 12:00 noon (Chicago time) on the date specified for any Loan to be made by a Lender hereunder, such Lender shall make the proceeds of its pro rata share of such Loan available to the Agent in Chicago in immediately available funds. Subject to the provisions of Section 7 hereof, the proceeds of each Loan shall be made available to the Borrower at the principal office of the Agent in Chicago, Illinois, in immediately available funds, upon receipt by the Agent from each Lender of its pro rata share of such Loan. (b) Reimbursement Obligation. In the event the Borrower fails to give notice pursuant to Section 1.4(a) above of a Revolving Loan equal to the amount of a Reimbursement Obligation and has not notified the Agent by 11:00 a.m. (Chicago time) on the day such Reimbursement Obligation becomes due that it intends to repay such Reimbursement Obligation through funds not borrowed under this Agreement, the Borrower shall be deemed to have requested a Revolving Loan constituting part of the Domestic Rate Portion on such day in the amount of the Reimbursement Obligation then due, subject to Section 7.1 hereof, which Revolving Loan shall be applied to pay the Reimbursement Obligation then due. (c) Agent Reliance on Bank Funding. Unless the Agent shall have been notified by a Lender prior to 11:30 a.m. (Chicago time) on the date a Loan is to be made hereunder that such Lender does not intend to make its pro rata share of such Loan available to the Agent, the Agent may assume that such Lender has made such share available to the Agent on such date and the Agent may in reliance upon such assumption make available to the Borrower a corresponding amount. If such corresponding amount is not in fact made available to the Agent by such Lender and the Agent has made such amount available to the Borrower, the Agent shall be entitled to receive such amount from such Lender forthwith upon the Agent's demand, together with interest thereon in respect of each day during the period commencing on the date such amount -7- 14 was made available to the Borrower and ending on but excluding the date the Agent recovers such amount at a rate per annum equal to the effective rate charged to the Agent for overnight federal funds transactions with member banks of the federal reserve system for each day as determined by the Agent (or in the case of a day which is not a Business Day, then for the preceding day). If such amount is not received from such Lender by the Agent immediately upon demand, the Borrower will, on demand, repay to the Agent the proceeds of the Loan attributable to such Lender with interest thereon at a rate per annum equal to the interest rate applicable to the relevant Loan, but without such payment being considered a payment or prepayment of a Loan, so that the Borrower will have no liability under Section 2.9 hereof with respect to such payment. Section 1.5. Manner of Obtaining Letters of Credit. The Borrower shall provide at least four (4) Business Days' advance written notice to the Agent of a Borrower's request for the issuance for the Borrower's account of a Letter of Credit, such notice in each case to be accompanied by an Application for such Letter of Credit properly completed and executed by the Borrower and in the case of an extension or an increase in the amount of a Letter of Credit, a written request therefor, in a form acceptable to the Agent, in each case, together with the fees called for by this Agreement. The Agent shall promptly notify each Lender of the Agent's receipt of each such notice. Section 1.6. The Swing Line. (a) Swing Loans. Subject to all of the terms and conditions hereof, Harris Trust and Savings Bank ("Harris") agrees to make loans in U.S. Dollars to the Borrower under the Swing Line ("Swing Loans") which shall not in the aggregate at any time outstanding exceed the lesser of (i) the Swing Line Commitment or (ii) the difference between the Revolving Credit Commitments in effect at such time and the sum of Revolving Loans and L/C Obligations outstanding at the time of computation. The Swing Line Commitment shall be available to the Borrower and may be availed of by the Borrower from time to time and borrowings thereunder may be repaid and used again during the period ending on the Termination Date; provided that each Swing Loan must be repaid on the last day of the Interest Period applicable thereto. All Swing Loans shall be evidenced by a single promissory note of the Borrower issued to Harris in the form of Exhibit D hereto (the "Swing Line Note"). Without regard to the face principal amount of the Swing Line Note, the actual principal amount at any time outstanding and owing by the Borrower on account of the Swing Line Note during the period ending on the Termination Date shall be the sum of all Swing Loans then or theretofore made thereon less all payments actually received thereon during such period. (b) Payment. Each Swing Loan shall be due and payable on the last day of the Interest Period selected therefor. The Borrower may voluntarily prepay any Swing Loan bearing interest at the Domestic Rate before its maturity at any time upon notice to Harris prior to 1:00 p.m. (Chicago time) on the date fixed for prepayment, each such prepayment to be made by the -8- 15 payment of the principal amount to be prepaid and accrued interest thereon to the date of prepayment; provided, however, the Borrower may not voluntarily prepay any Swing Loan bearing interest at Harris' Quoted Rate before its maturity. (c) Minimum Borrowing Amount. Each Swing Loan which bears interest with reference to the Domestic Rate shall be in an amount not less than $100,000. Each Swing Loan which bears interest at Harris' Quoted Rate shall be in an amount not less than $500,000. (d) Interest on Swing Loans. Each Swing Loan shall bear interest at (x) the sum of the Domestic Rate from time to time in effect plus the Applicable Margin or (y) if the Borrower so elects in accordance with the following provisions, Harris' Quoted Rate; provided, however, that if any Swing Loan is not paid when due (whether by lapse of time, acceleration or otherwise) such Swing Loan shall bear interest, whether before or after judgment, until payment in full thereof through the end of the Interest Period then applicable thereto at a rate per annum equal to the sum of two percent (2%) plus the interest rate which would otherwise be applicable thereto and, thereafter, at a rate per annum equal to the sum of two percent (2%) plus the Applicable Margin plus the Domestic Rate from time to time in effect. Interest on each Swing Loan shall be due and payable on the last day of each Interest Period applicable thereto, and interest after maturity (whether by lapse of time, acceleration or otherwise) shall be due and payable upon demand. (e) Requests for Swing Loans. The Borrower shall give Harris prior notice (which may be written or oral) no later than 12:00 Noon (Chicago time) on the date upon which the Borrower requests that any Swing Loan be made, of the amount and date of such Swing Loan and the Interest Period selected therefor. Within thirty (30) minutes after receiving such notice, Harris shall in its discretion quote an interest rate to the Borrower at which Harris would be willing to make such Swing Loan available to the Borrower for a given Interest Period (the rate so quoted for a given Interest Period being herein referred to as "Harris' Quoted Rate"). The Borrower acknowledges and agrees that the interest rate quote is given for immediate and irrevocable acceptance, and if the Borrower does not so immediately accept Harris' Quoted Rate for the full amount requested by the Borrower for such Swing Loan, the Harris' Quoted Rate shall be deemed immediately withdrawn and such Swing Loan shall bear interest at the sum of the Applicable Margin plus the Domestic Rate from time to time in effect. Subject to all of the terms and conditions hereof, the proceeds of such Swing Loan shall be made available to the Borrower on the date so requested at the offices of the Agent in Chicago, Illinois. Anything contained in the foregoing to the contrary notwithstanding, (i) the obligation of Harris to make Swing Loans shall be subject to all of the terms and conditions of this Agreement and (ii) Harris shall not be obligated to make more than one Swing Loan during any one day. -9- 16 (f) Refunding Loans. In its sole and absolute discretion, Harris may at any time, on behalf of the Borrower (which hereby irrevocably authorizes Harris to act on its behalf for such purpose) and with notice to the Borrower, request each Lender to make a Revolving Loan constituting the Domestic Rate Portion of the Revolving Credit Notes in an amount equal to such Lender's Revolver Percentage of the amount of the Swing Loans outstanding on the date such notice is given. Unless any of the conditions of Section 7.2 are not fulfilled on such date, each Bank shall make the proceeds of its requested pro rata share of such Revolving Loan available to Harris, in immediately available funds, at Harris' principal office in Chicago, Illinois, before 12:00 Noon (Chicago time) on the Business Day following the day such notice is given. The proceeds of such Revolving Loan shall be immediately applied to repay the outstanding Swing Loans; provided, however, that unless any Default or Event of Default has occurred and is continuing or the Borrower otherwise permits, the proceeds of such Revolving Loan shall not be applied to repay any outstanding Swing Loan bearing interest at Harris' Quoted Rate prior to the end of the Interest Period applicable thereto. (g) Participations. If any Lender refuses or otherwise fails to make its pro rata share of a Revolving Loan when requested by Harris pursuant to Section 1.6(f) above (because the conditions in Section 7.2 are not satisfied or otherwise), such Lender will, by the time and in the manner such share of such Revolving Loan was to have been funded to Harris, purchase from Harris an undivided participating interest in the outstanding Swing Loans in an amount equal to its Revolver Percentage of the aggregate principal amount of Swing Loans that were to have been repaid with such Revolving Loans, provided no purchase of a participation in a Swing Loan bearing interest at Harris' Quoted Rate need be made until after expiration of the Interest Period applicable thereto. Each Lender that so purchases a participation in a Swing Loan shall thereafter be entitled to receive its Revolver Percentage of each payment of principal received on the Swing Loan and of interest received thereon accruing from the date such Bank funded to Harris its participation in such Loan. The several obligations of the Lenders under this Section 1.6(g) shall be absolute, irrevocable and unconditional under any and all circumstances whatsoever and shall not be subject to any set-off, counterclaim or defense to payment which any Lender may have or have had against the Borrower, any other Lender or any other Person whatever. Without limiting the generality of the foregoing, such obligations shall not be affected by any Default or Event of Default or by any reduction or termination of the Commitments of any Lender, and each payment made by a Lender under this Section 1.6(g) shall be made without any offset, abatement, withholding or reduction whatsoever. SECTION 2. INTEREST AND CHANGE IN CIRCUMSTANCES. Section 2.1. Interest Rate Options. (a) Subject to the terms and conditions of this Section 2, portions of the principal indebtedness evidenced by the Revolving Credit Notes and Term Notes (all of the indebtedness evidenced by such Notes, whether or not such Notes are of -10- 17 the same class, bearing interest at the same rate for the same period of time being hereinafter referred to as a "Portion") may, at the option of the Borrower, bear interest with reference to the Domestic Rate (the "Domestic Rate Portion") or with reference to the Adjusted LIBOR ("LIBOR Portions"), and Portions of a particular class of Notes may be converted from time to time from one basis for such Notes to the other. All of the indebtedness evidenced by the Revolving Credit Notes and Term Notes which is not part of a LIBOR Portion shall constitute a single Domestic Rate Portion. All of the indebtedness evidenced by the Revolving Credit Notes and Term Notes which bears interest with reference to a particular Adjusted LIBOR for a particular Interest Period shall constitute a single LIBOR Portion. Anything contained herein to the contrary notwithstanding, the obligation of the Lenders to create, continue or effect by conversion any LIBOR Portion shall be conditioned upon the fact that at the time no Default or Event of Default shall have occurred and be continuing. The Borrower hereby promises to pay interest on each Portion at the rates and times specified in this Section 2. (b) Domestic Rate Portion. Each Domestic Rate Portion shall bear interest (which the Borrower hereby promises to pay at the times herein provided) at the rate per annum determined by adding the Applicable Margin to the Domestic Rate as in effect from time to time, provided that if a Domestic Rate Portion or any part thereof is not paid when due (whether by lapse of time, acceleration or otherwise) such Portion shall bear interest (which the Borrower hereby promises to pay at the times herein provided), before as well as after judgment, until payment in full thereof at the rate per annum determined by adding 2% to the interest rate which would otherwise be applicable thereto from time to time. Interest on the Domestic Rate Portion shall be payable monthly on the last day of each month in each year (commencing June 30, 1998) and at maturity of the applicable Notes, and interest after maturity shall be due and payable upon demand. Any change in the interest rate on the Domestic Rate Portions resulting from a change in the Domestic Rate shall be effective on the date of the relevant change in the Domestic Rate. (c) LIBOR Portions. Each LIBOR Portion shall bear interest (which the relevant Borrower hereby promises to pay at the times herein provided) for each Interest Period selected therefor at a rate per annum determined by adding the Applicable Margin to the Adjusted LIBOR for such Interest Period, provided that if any LIBOR Portion is not paid when due (whether by lapse of time, acceleration or otherwise) such Portion shall bear interest (which the Borrower hereby promises to pay at the times herein provided), whether before or after judgment, until payment in full thereof through the end of the Interest Period then applicable thereto at the rate per annum determined by adding 2% to the interest rate which would otherwise be applicable thereto, and effective at the end of the Interest Period such LIBOR Portion shall automatically be converted into and added to the Domestic Rate Portion and shall thereafter bear interest at the interest rate applicable to the Domestic Rate Portion of the applicable Notes after default. Interest on each LIBOR Portion shall be due and payable on the -11- 18 last day of each Interest Period applicable thereto and, with respect to any Interest Period applicable to a LIBOR Portion in excess of three (3) months, on the date occurring every three (3) months after the date such Interest Period began and at the end of such Interest Period, and interest after maturity shall be due and payable upon demand. The Borrower shall notify the Agent on or before 11:00 a.m. (Chicago time) on the third Business Day preceding the end of an Interest Period applicable to a LIBOR Portion whether such LIBOR Portion is to continue as a LIBOR Portion, in which event the Borrower shall notify the Agent of the new Interest Period selected therefor, and in the event the Borrower shall fail to so notify the Agent, such LIBOR Portion shall automatically be converted into and added to the Domestic Rate Portion of the applicable Notes as of and on the last day of such Interest Period. The Agent shall promptly notify each Lender of each notice received from the Borrower pursuant to the foregoing provision. Section 2.2. Minimum Amounts. Each LIBOR Portion shall be in a minimum amount of $1,000,000 or such greater amount which is an integral multiple of $100,000. Section 2.3. Computation of Interest. All interest on each LIBOR Portion shall be computed on the basis of a year of 360 days for the actual number of days elapsed. All interest on the Domestic Rate Portion shall be computed on the basis of a year of 365 days (or, in a leap year, 366 days) for the actual number of days elapsed. Section 2.4. Manner of Rate Selection. The Borrower shall notify the Agent by 11:00 a.m. (Chicago time) at least three (3) Business Days prior to the date upon which it requests that any LIBOR Portion be created or that any part of the Domestic Rate Portion be converted into a LIBOR Portion (each such notice to specify in each instance the amount thereof and the Interest Period selected therefor), and the Agent shall advise each Lender of each notice by 2:00 p.m. (Chicago time) on the same Business Day the Agent receives such notice. If any request is made to convert a LIBOR Portion into the Domestic Rate Portion, such conversion shall only be made so as to become effective as of the last day of the Interest Period applicable thereto. All requests for the creation, continuance or conversion of Portions under this Agreement shall be irrevocable. Section 2.5. Change of Law. Notwithstanding any other provisions of this Agreement or of the Notes, if at any time any Lender shall determine in good faith that any change in applicable laws, treaties or regulations or in the interpretation thereof makes it unlawful for such Lender to create or continue to maintain any LIBOR Portion, it shall promptly so notify the Agent (which shall in turn promptly notify the Borrower and the other Lenders) and the obligation of such Lender to create, continue or maintain LIBOR Portions under this Agreement shall terminate until it is no longer unlawful for such Lender to create, continue or maintain LIBOR Portions. The Borrower, on demand, shall, if the continued maintenance of -12- 19 any such LIBOR Portion is unlawful, thereupon prepay the outstanding principal amount of the affected LIBOR Portions, together with all interest accrued thereon and all other amounts payable to the affected Lender with respect thereto under this Agreement; provided, however, that the Borrower may instead elect to convert the principal amount of the affected LIBOR Portion into the Domestic Rate Portion of the applicable Notes, subject to the terms and conditions of this Agreement. Section 2.6. Unavailability of Deposits or Inability to Ascertain Adjusted LIBOR. Notwithstanding any other provision of this Agreement or of the Notes, if prior to the commencement of any Interest Period: (a) the Agent or Required Lenders in good faith determine that deposits in the amount of any LIBOR Portion scheduled to be outstanding during such Interest Period are not readily available to the Lenders in the relevant market; (b) the Agent or Required Lenders in good faith determine that by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining Adjusted LIBOR; or (c) the Agent or Required Lenders in good faith determine that (i) LIBOR as determined by the Agent will not adequately and fairly reflect the cost to the Lenders of funding their LIBOR Portions for such Interest Period and (ii) the Lenders' rights to payment under Section 2.7 hereof will not reasonably compensate them for such inadequate or unfair reflection of such cost; then the Agent or Required Lenders, as the case may be, shall promptly give notice thereof to the other Lenders and the Company and the obligations of the Lenders to create, continue or effect by conversion any LIBOR Portion in such amount and for such Interest Period shall terminate until deposits in such amount and for the Interest Period selected by or on behalf of the relevant Borrower shall again be readily available in the relevant market and adequate and reasonable means exist for ascertaining Adjusted LIBOR. Section 2.7. Taxes and Increased Costs. With respect to any LIBOR Portion, if any Lender shall determine in good faith that any change in any applicable law, treaty, regulation or guideline (including, without limitation, Regulation D of the Board of Governors of the Federal Reserve System) or any new law, treaty, regulation or guideline, or any interpretation of any of the foregoing by any governmental authority charged with the administration thereof or any central bank or other fiscal, monetary or other authority having jurisdiction over such Lender or its lending branch or the LIBOR Portions contemplated by this Agreement (whether or not having the force of law) shall: -13- 20 (i) impose, increase, or deem applicable any reserve, special deposit or similar requirement against assets held by, or deposits in or for the account of, or loans by, or any other acquisition of funds or disbursements by, such Lender which is not in any instance already accounted for in computing Adjusted LIBOR; (ii) subject such Lender, any LIBOR Portion or a Note to the extent it evidences such a Portion, to any tax (including, without limitation, any United States interest equalization tax or similar tax however named applicable to the acquisition or holding of debt obligations and any interest or penalties with respect thereto), duty, charge, stamp tax, fee, deduction or withholding in respect of this Agreement, any LIBOR Portion or a Note to the extent it evidences such a Portion, except such taxes as may be measured by the overall net income or gross receipts of such Lender or its lending branches and imposed by the jurisdiction, or any political subdivision or taxing authority thereof, in which such Lender's principal executive office or its lending branch is located; (iii) change the basis of taxation of payments of principal and interest due from the Borrower to such Lender hereunder or under a Note to the extent it evidences any LIBOR Portion (other than by a change in taxation of the overall net income or gross receipts of such Lender); or (iv) impose on such Lender any penalty with respect to the foregoing or any other condition regarding this Agreement, the disbursement of credit hereunder, any LIBOR Portion or a Note to the extent it evidences any LIBOR Portion; and such Lender shall determine that the result of any of the foregoing is to increase the cost (whether by incurring a cost or adding to a cost) to such Lender of creating or maintaining any LIBOR Portion hereunder or to reduce the amount of principal or interest received or receivable by such Lender (without benefit of, or credit for, any prorations, exemption, credits or other offsets available under any such laws, treaties, regulations, guidelines or interpretations thereof), then the Borrower shall pay on demand to such Lender from time to time as specified by such Lender such additional amounts as such Lender shall reasonably determine are sufficient to compensate and indemnify it for such increased cost or reduced amount; provided, however, that the Borrower shall not be obligated to pay any such amount or amounts to the extent such additional cost or payment was incurred or paid by such Lender more than sixty (60) days prior to the date of the delivery of the certificate referred to in the immediately following sentence (nothing herein to impair or otherwise affect the Borrower's liability hereunder for costs or payments subsequently incurred or paid by such Lender). If a Lender makes such a claim for compensation, it shall provide to the Borrower (with a copy to the Agent) a certificate setting forth the computation of the increased cost or reduced amount as a result of any event -14- 21 mentioned herein in reasonable detail and such certificate shall be conclusive if reasonably determined. Section 2.8. Change in Capital Adequacy Requirements. If any Lender shall determine that the adoption after the date hereof of any applicable law, rule or regulation regarding capital adequacy, or any change in any existing law, rule or regulation, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by such Lender (or any of its branches or any corporation controlling such Lender) with any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on such Lender's or such corporation's capital, as the case may be, as a consequence of such Lender's obligations hereunder or for the credit which is the subject matter hereof to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration such Lender's or such corporation's policies with respect to liquidity and capital adequacy) by an amount deemed by such Lender to be material, then from time to time, within fifteen (15) days after demand by such Lender, the Borrower shall pay to the Lender such additional amount or amounts reasonably determined by such Lender as will compensate such Lender for such reduction; provided, however, that the Borrower shall not be obligated to compensate such Lender to the extent its rate of return was so reduced more than sixty (60) days prior to the date of such demand (nothing herein to impair or otherwise affect the Borrower's liability hereunder to compensate for subsequent reductions in such Lender's rate of return). Section 2.9. Funding Indemnity. In the event any Lender shall incur any loss, cost or expense (including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired or contracted to be acquired by such Lender to fund or maintain its part of any Fixed Rate Loan or the relending or reinvesting of such deposits or other funds or amounts paid or prepaid to such Lender) as a result of: (i) any payment of a Fixed Rate Loan on a date other than the last day of the then applicable Interest Period for any reason, whether before or after default, and whether or not such payment is required by any provisions of this Agreement; or (ii) any failure by any Borrower to create, borrow, continue or effect by conversion a Fixed Rate Loan on the date specified in a notice given pursuant to this Agreement, unless such failure results from the Lenders' inability or unwillingness pursuant to Sections 2.5 and 2.6 hereof to create, continue or effect by conversion a LIBOR Portion; -15- 22 then, upon the demand of such Lender, the Borrower shall pay to such Lender such amount as will reimburse such Lender for such loss, cost or expense. If a Lender requests such a reimbursement, it shall provide to the Borrower (with a copy to the Agent) a certificate setting forth the computation of the loss, cost or expense giving rise to the request for reimbursement in reasonable detail and such certificate shall be conclusive if reasonably determined; provided, however, that the Borrower shall not be obligated to pay any such amount or amounts to the extent such loss, cost or expense was incurred by such Lender more than sixty (60) days prior to the date of the delivery of such certificate (nothing herein to impair or otherwise affect the Borrower's liability hereunder to compensate for any subsequent loss, cost, or expense incurred by such Lender). Section 2.10. Lending Branch. Each Lender may, at its option, elect to make, fund or maintain its pro rata share of the Loans hereunder at the branches or offices specified on the signature pages hereof or on any Assignment Agreement executed and delivered pursuant to Section 12.15 hereof or at such of its branches or offices as such Lender may from time to time elect. Section 2.11. Lender's Duty to Mitigate. Each Lender agrees that, as promptly as practicable after it becomes aware of the occurrence of an event or the existence of a condition that would cause it to be affected under Section 2.5, 2.6 or 2.7 hereof, such Lender will, after notice to the Borrower, to the extent not inconsistent with such Lender's internal policies and customary business practices, use its best efforts to make, fund or maintain the affected LIBOR Portion or issue or participate in the affected Letter of Credit, as the case may be, through another lending office of such Lender if as a result thereof the unlawfulness which would otherwise require payment of such Portion pursuant to Section 2.5 hereof would cease to exist or the circumstances which would otherwise terminate such Lender's obligation to make such Portion under Section 2.6 hereof would cease to exist or the increased costs which would otherwise be required to be paid in respect of such Portion or Letter of Credit pursuant to Section 2.7 hereof would be materially reduced, and if, as determined by such Lender, in its sole discretion, the making, funding or maintaining of such Portion, or issuance or participation in such Letter of Credit, as the case may be, through such other lending office would not otherwise adversely affect such Portion or such Lender. The Borrower hereby agrees to pay all reasonable expenses incurred by each such Lender in utilizing another lending office pursuant to this Section 2.11. Section 2.12. Discretion of Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of its Notes in any manner it sees fit, it being understood, however, that for the purposes of this Agreement all determinations hereunder (including, without limitation, determinations under Sections 2.5, 2.6, 2.7 and 2.9 hereof) shall be made as if each -16- 23 Lender had actually funded and maintained each LIBOR Portion during each Interest Period applicable thereto through the purchase of deposits in the relevant market in the amount of its share of such LIBOR Portion, having a maturity corresponding to such Interest Period, and bearing an interest rate equal to the LIBOR for such Interest Period. Section 2.13. Replacement of Lender. (a) In the event that (x) the Borrower receives from a Lender a certificate requesting an amount be paid to such Lender under Section 1.3(f), 2.7 or 2.8 hereof and the Required Lenders have not similarly made requests for payment arising out of the same circumstances or (y) the obligation of any Lender to make or maintain any LIBOR Portion has terminated under Section 2.5 or 2.6 hereof and the obligations of the Required Lenders to make or maintain LIBOR Portions have not similarly terminated by reason of the same circumstances or (z) any Lender becomes a Defaulting Lender, then the Borrower may request other Lenders hereunder to assume in full the Commitments then in effect of the Lender requesting such amount be paid or whose obligations with respect to LIBOR Portions have so terminated or of such Defaulting Lender, as the case may be (such Lender in each case being herein referred to as the "Replaceable Lender"), and to purchase the Notes issued to the Replaceable Lender at a price equal to the outstanding principal amount of such Notes and the Replaceable Lender's share of any accrued and unpaid interest on such Notes plus accrued and unpaid commitment fees owed to the Replaceable Lender, and if any Lender or Lenders (each an "Assuming Lender") in their sole discretion agree so to assume in full the Commitments of the Replaceable Lender (provided only one Assuming Lender shall assume the Swing Line Commitment, if relevant), and after payment by the Borrower to the Replaceable Lender of all amounts due under this Agreement to such Lender (including any amount specified as due in a certificate submitted under Section 1.3(f), 2.7 or 2.8 hereof) not so paid by the Assuming Lender, then such assumption shall take place in the manner set forth in subsection (b) below. In the event no Lender or Lenders agrees to assume in full the Commitments of the Replaceable Lender, then the Borrower may nominate one or more Lenders not then party to this Agreement so to assume in full the Commitments of the Replaceable Lender, and if such nominated Lender or Lenders are acceptable to the Agent and Required Lenders (excluding the Replaceable Lender), such assumption shall take place in the manner set forth in subsection (b) below and each such Lender or Lenders shall become a Lender hereunder (each a "New Lender") and the Replaceable Lender shall no longer be a party hereto or have any rights hereunder. (b) In the event a Replaceable Lender's Commitments are to be assumed in full by an Assuming Lender or a New Lender, then such assumption shall take place on a date acceptable to the Borrower, the Replaceable Lender and the Assuming Lender or New Lender, as the case may be, and such assumption shall take place through the payment of all amounts due under this Agreement to the Replaceable Lender and the execution of such instruments and documents as shall, in the reasonable opinion of the Agent, be reasonably necessary or appropriate for the Assuming Lender or New Lender to assume in full the Commitments of the Replaceable Lender -17- 24 (including, without limitation, the issuance of new Notes and the execution of an amendment hereto making any New Lender a party hereto). In the event no Assuming Lender or New Lender agrees to assume in full the Commitments of the Replaceable Lender, then such Replaceable Lender shall remain a party hereto and its Commitments shall remain in effect. (c) The rights and remedies against a Defaulting Lender under this Agreement, including without limitation this Section 2.13, are in addition to other rights and remedies that the Borrower may have against such Defaulting Lender with respect to any Loan which such Defaulting Lender has not funded, and that the Agent, or any Lender may have against such Defaulting Lender with respect to any such Loan. SECTION 3. FEES, PREPAYMENTS, TERMINATIONS, APPLICATIONS AND NOTATIONS. Section 3.1. Fees. (a) Commitment Fee. For the period from and including the date hereof to but not including the Termination Date, the Borrower shall pay to the Agent for the ratable benefit of the Lenders as hereinafter set forth, a commitment fee at the Applicable Margin (computed on the basis of a year of 360 days for the actual number of days elapsed) on the average daily Unused Revolving Credit Commitments. Such commitment fee shall be payable quarterly in arrears on the last day of each March, June, September and December in each year (commencing June 30, 1998) and on the Termination Date. Such commitment fee shall be allocated among the Lenders ratably in accordance with the amount of their respective Revolving Credit Commitments which is not in use in the form of Revolving Loans, but with Swing Loans to be deemed Revolving Loans which use exclusively the Revolving Credit Commitment of Harris (or if different, any other Lender which then holds the Swing Line Commitment). (b) Letter of Credit Fees. On the date of issuance or extension, or increase in the amount, of each Letter of Credit pursuant to Section 1.3 hereof, the Borrower shall pay to the Agent for its own account an issuance fee equal to .125% of the face amount of (or the increase in the face amount of) such Letter of Credit. On the last day of each calendar quarter (commencing on June 30, 1998) to, and on, the Termination Date, the Borrower shall pay to the Agent for the ratable benefit of the Lenders in accordance with their percentages a fee equal to the Applicable Margin for LIBOR Portions of the Revolving Loans (computed on the basis of a year of 360 days for the actual number of days elapsed) on the average daily outstanding undrawn amounts during the immediately preceding calendar quarter of the Letters of Credit. In addition to the letter of credit fees called for above, the Borrower further agrees to pay to the Agent for its own account such processing and transaction fees and charges as the Agent from -18- 25 time to time customarily imposes in connection with any issuance, amendment, cancellation, negotiation and/or payment of letters of credit and drafts drawn thereunder. (c) Audit Fees. The Borrower shall pay to the Agent for its own use and benefit charges for audits of the Collateral by the Agent or its agents or representatives in such amounts as the Agent may from time to time request (the Agent acknowledging and agreeing that such charges shall be computed in the same manner as it at the time customarily uses for the assessment of charges for similar collateral audits actually performed by it); provided, however, that in the absence of any Default or Event of Default, (i) the Borrower shall not be required to reimburse the Agent for more than two (2) such audits per year (a "Scheduled Field Audit") plus one (1) audit of each target of an Acquisition and (ii) the Borrower shall in no event be liable for more than $5,000 for any one Scheduled Field Audit. (d) Agent's Fee. The Borrower shall pay to the Agent the fees agreed to in a letter exchanged between them. Section 3.2. Voluntary Prepayments of Revolving Credit and Term Notes. (a) Revolving Credit Notes. The Borrower shall have the privilege of prepaying the Revolving Credit Notes in whole or in part (but if in part, then in a minimum amount of $100,000 or such greater amount which is an integral multiple of $100,000) on any Business Day upon notice thereof to the Agent not later than 11:00 a.m. (Chicago time) on such day, the Agent to promptly so notify the Lenders, by the Borrower paying to the Agent for the account of the Lenders the principal amount to be prepaid and (i) if such a prepayment prepays such Notes in full and is accompanied by the termination in whole of the Revolving Credit Commitments pursuant to which such Notes were issued, accrued interest thereon to the date of prepayment plus any commitment fee which has accrued and is unpaid and (ii) any amount due the Lenders under Section 2.9 hereof. Any amount so prepaid on the Revolving Credit Notes may, subject to the terms and conditions of this Agreement, be reborrowed. (b) Term Notes. The Borrower shall have the privilege of prepaying the Term Notes in whole or in part (but if in part, then in a minimum amount of $100,000 or such greater amount which is an integral multiple of $100,000 as to any particular class of Term Notes being prepaid) at any time upon one (1) Business Day's prior notice to the Agent (such notice, if received subsequent to 11:00 a.m. (Chicago time) on a given day, to be treated as though received at the opening of business on the next Business Day), which shall promptly so notify the Lenders, by paying to the Agent for the account of the Lenders the principal amount to be prepaid and (i) if such a prepayment prepays such Notes in full, accrued interest thereon to the date of prepayment and (ii) any amounts due to the Lenders under Section 2.9 hereof. Voluntary prepayments of the principal of each class of the Term Notes shall be applied in several installments thereof due on -19- 26 such class of Notes in the inverse order of their respective maturities. No amount paid or prepaid on the Term Notes may be reborrowed. Section 3.3. Mandatory Prepayments. (a) Excess Cash Flow. No later than April 30 of each calendar year (commencing April 30, 1999), the Borrower shall pay over to the Agent for the ratable benefit of the Lenders, as and for a mandatory prepayment on the Term Notes an amount equal to 75% (the "Cash Flow Recapture Percentage") of Excess Cash Flow for the then most recently completed fiscal year. Notwithstanding anything contained herein to the contrary, if (i) the Cash Flow Leverage Ratio is less than 3.00 to 1.00 for any two consecutive fiscal quarters of the Borrower and (ii) no Default or Event of Default shall have occurred and then be continuing, the Cash Flow Recapture Percentage shall be permanently reduced to 50%. (b) Equity Offering. Within five (5) Business Days of receipt by the Borrower of cash proceeds from any public offering or private placement of any capital stock or other equity securities of the Borrower (other than proceeds from (i) any sale of capital stock of Borrower pursuant to an employee stock ownership plan or (ii) any sale of capital stock of Borrower, or any options to acquire any such stock, to officers, directors or key employees of the Borrower or any of its Subsidiaries as compensation for services rendered or (iii) any exercise by such officers or directors of such options), the Borrower shall make a mandatory prepayment in an amount equal to 100% of the net cash proceeds of such issuance (net only of underwriting discounts and commissions and any other reasonable out-of-pocket costs and expenses directly incurred and payable in connection therewith). (c) Asset Sales. Any and all proceeds derived from the sale or disposition (whether voluntary or involuntary), or on account of damage or destruction, of the real estate, furniture, fixtures, equipment or other fixed assets of the Borrower or any Subsidiary shall be paid over to the Agent as and for a mandatory prepayment on the Term Notes; provided, however, that (i) the foregoing provisions shall be inapplicable to proceeds received by the Agent under the Collateral Documents if and so long as, pursuant to the terms of the Collateral Documents, the same are to be held by the Agent and disbursed for the restoration, repair or replacement of the property in respect of which such proceeds were received, (ii) no prepayment shall be required with respect to the first $100,000 of net proceeds (i.e., gross proceeds net of out-of-pocket expenses incurred in effecting the sale or other disposition) received during any one calendar year from the sale or other disposition of equipment, furniture and fixtures of the Borrower and its Subsidiaries, taken together, which are worn out, obsolete or, in the good faith judgment of the Borrower or such Subsidiary, no longer desirable to the efficient conduct of its business as then conducted, (iii) no prepayment shall be required with respect to proceeds received from the sale, damage or destruction of any of the equipment or other assets subject to Liens permitted by Section 8.12 -20- 27 hereof if and to the extent such proceeds are applied to reduce the indebtedness secured by such Liens and (iv) so long as no Default or Event of Default has occurred or is continuing the Borrower or such Subsidiary, as the case may be, may retain the proceeds derived from the sale, damage or destruction of fixtures, furniture and equipment if and to the extent that the Borrower or such Subsidiary establishes to the reasonable satisfaction of the Agent that the equipment sold, damaged, or destroyed has been replaced (or repaired in the case of damaged property) with fixtures, furniture or equipment of at least equal value and utility to that replaced (before any such damage or destruction) which is subject to a first lien in favor of the Agent for the benefit of the Lenders. Nothing herein contained shall in any manner impair or otherwise affect the prohibitions against the sale or other disposition of Collateral contained herein and in the Collateral Documents. (d) Application. Each such prepayment required by this Section 3.3 shall, subject to Section 3.3(e) hereof, be applied to the Term Notes ratably in accordance with the unpaid principal balances thereof, with the amount allocable to each class of Term Notes to be applied ratably in reduction of all the remaining installments of such class of Term Notes. (e) Waiver. Notwithstanding anything to the contrary contained in this Section 3.3 or elsewhere in this Agreement, any Lender with a share of an outstanding Term B Loan shall have the option to waive any mandatory prepayment of such Term B Loan pursuant to this Section 3.3 (each such prepayment a "Waiveable Mandatory Term B Loan Prepayment") upon the terms and provisions set forth in this Section 3.3(e). In the event any such Lender desires to waive such Lender's right to receive any such Waiveable Mandatory Term B Loan Prepayment in whole or in part, such Lender shall so advise the Agent no later than the date on which such prepayment is to occur, which notice shall also include the amount such Lender desires to receive in respect of such prepayment. If any such Lender does not provide such notice, it will be deemed to have accepted 100% of the total amount. In the event that any such Lender waives all or any part of such right to receive any such Waiveable Mandatory Term B Loan Prepayment, the Agent shall apply 100% of the amount so waived by such Lender to the Term A Loan in accordance with the relevant clause of this Section 3.3, provided that no such waiver request shall be honored following the prepayment in full of the Term A Loans. Section 3.4. Terminations of Revolving Credit Commitments. The Borrower shall have the right as of the close of any calendar quarter, upon five (5) Business Days' prior notice to the Agent (which shall promptly notify the Lenders), to ratably terminate the Revolving Credit Commitments without premium or penalty and in whole or in part (but if in part, then in an amount not less than $5,000,000 or such greater amount which is an integral multiple of $100,000), provided that the Revolving Credit Commitments may not be reduced to an amount less than the aggregate principal amount of the Revolving Loans, Swing Loans and L/C Obligations then outstanding. Any termination of the Revolving Credit Commitments pursuant -21- 28 to this Section may not be reinstated. Any reduction of the Revolving Credit Commitments to a level below the L/C Commitment shall effect a concurrent reduction in the L/C Commitment so as to equal the total Revolving Credit Commitments after giving effect to such reduction. Each reduction of the Revolving Credit Commitments shall concurrently reduce the Swing Line Commitment by the same percentage as such reduction in the Revolving Credit Commitments. Section 3.5. Place and Application of Payments. All payments of principal, interest, fees and all other amounts payable hereunder shall be made to the Agent at its office at 111 West Monroe Street, Chicago, Illinois (or at such other place as the Agent may specify) on the date any such payment is due and payable. All such payments shall be made in lawful money of the United States of America, in immediately available funds at the place of payment, without setoff or counterclaim and without reduction for, and free from, any and all present or future taxes, levies, imposts, duties, fees, charges, deductions, withholdings, restrictions or conditions of any nature imposed by any government or any political subdivision or taxing authority thereof (but excluding any taxes imposed on or measured by the net income of the Lender). Payments received by the Agent after 11:00 a.m. (Chicago time) shall be deemed received as of the opening of business on the next Business Day. Except as herein provided, all payments shall be received by the Agent for the ratable account of the Lenders and shall be promptly distributed by the Agent ratably to the Lenders. Unless the Borrower otherwise directs or this Agreement otherwise requires, principal payments on any particular class of Notes shall be first applied to the Domestic Rate Portion of such Notes until payment in full thereof, with any balance applied to the LIBOR Portions of such Notes in the order in which their Interest Periods expire. Any amount paid or prepaid on the Revolving Credit Notes or Swing Line Note may, subject to all of the terms and conditions hereof, be borrowed, repaid and borrowed again. No amount paid or prepaid on the Term Notes may be reborrowed. Anything contained herein to the contrary notwithstanding, all payments and collections received in respect of the Loans and other Obligations or the Hedging Liability by the Agent or any of the Lenders after the occurrence of an Event of Default shall be remitted to the Agent and distributed as follows: (a) first, to the payment of any outstanding costs and expenses incurred by the Agent in protecting, preserving or enforcing rights under this Agreement and the other Loan Documents and in any event including all costs and expenses of a character which the Borrower has agreed to pay under Section 12.4 hereof (such funds to be retained by the Agent for its own account unless it has previously been reimbursed for such costs and expenses by the Lenders, in which event such amounts shall be remitted to the Lenders to reimburse them for payments theretofore made to the Agent); -22- 29 (b) second, to the payment of any outstanding interest or other fees or indemnification amounts due under the Loan Documents other than for principal of the Loans and L/C Obligations, ratably as among the Agent and the Lenders in accord with the amount of such interest and other fees or Obligations owing each; (c) third, to the payment of the principal of the Swing Loans; (d) fourth, to the payment of the principal of the other Loans and any liabilities in respect of Reimbursement Obligations and to the Agent to be held as collateral security for any undrawn Letters of Credit (until the Agent is holding an amount of cash equal to the then outstanding amount of all such Letters of Credit), the aggregate amount paid to or held as collateral security for the Lenders to be allocated pro rata as among the Lenders in accord with the then respective aggregate unpaid principal balances of such Loans and the L/C Obligations; (e) fifth, to the Agent, the Lenders ratably in accord with the amounts of other Obligations and the Hedging Liability owing to each of them (including their Affiliates in the case of Hedging Liability) unless and until all such Obligations and the Hedging Liability have been fully paid and satisfied; and (f) sixth, to the Borrower or to whoever the Agent reasonably determines to be lawfully entitled thereto. Section 3.6. Notations and Requests. All Loans made by a Lender against a Note, the status of all amounts evidenced by a Note (if relevant) as constituting part of the Domestic Rate Portion or a LIBOR Portion, and the rates of interest and Interest Periods applicable to such Portions shall be recorded by such Lender on its books and records or, at its option in any instance, endorsed on a schedule to its Note and the unpaid principal balance and status, rates and Interest Periods so recorded or endorsed by such Lender shall be prima facie evidence in any court or other proceeding brought to enforce its Note of the principal amount remaining unpaid thereon, the status of the Loans evidenced thereby and the interest rates and Interest Periods applicable thereto; provided that the failure of a Lender to record any of the foregoing shall not limit or otherwise affect the obligation of the Borrower to repay the principal amount of each Note together with accrued interest thereon. Prior to any Lender's negotiation of a Revolving Credit or Term Note, such Lender shall record on a schedule thereto the status of all amounts evidenced thereby as constituting part of the Domestic Rate Portion or LIBOR Portion and the rates of interest and the Interest Periods applicable thereto. -23- 30 SECTION 4. COLLATERAL. Section 4.1. Collateral. The payment and performance of the Obligations and Hedging Liability shall at all times be secured by, among other things, (a) all of the Borrower's and its Subsidiaries' accounts, chattel paper, documents, instruments, general intangibles, inventory, equipment and certain other assets and property of the Borrower and its Subsidiaries, in each case whether now owned or held or hereafter acquired or arising, pursuant to that certain Security Agreement from the Borrower and its Subsidiaries dated as of even date herewith, as the same may be amended, modified or supplemented from time to time (the "Security Agreement"), (b) all of the capital stock of the Subsidiaries and certain other assets and property of the Borrower and its Subsidiaries, in each case whether now owned or held or hereafter acquired or arising, pursuant to that certain Pledge Agreement from the Borrower dated as of even date herewith, as the same may be amended, modified or supplemented from time to time (the "Pledge Agreement"), and (c) the real estate and related assets and properties of the Borrower and its Subsidiaries, in each case whether now owned or held or hereafter acquired or arising, pursuant to mortgages and trust deeds reasonably acceptable to the Agent as to form and substance (collectively the "Mortgages" and individually a "Mortgage"). Section 4.2. Guaranties. Payment of the Notes and the other Obligations, as well as the Hedging Liability, shall at all times be jointly and severally guaranteed by each Subsidiary pursuant hereto or pursuant to a Guaranty issued by such Subsidiary. In the event any Subsidiary is hereafter acquired or formed, the Borrower shall also cause such Subsidiary to execute such Collateral Documents (having terms and conditions substantially similar to those executed by the Borrower and its Subsidiaries in connection with the initial Loans under this Agreement) as the Agent may then require granting the Agent for the benefit of the Lenders a security interest in and lien on the assets of such Subsidiary as collateral security for the Notes and the other Obligations, as well as the Hedging Liability, together with such other instruments, documents, certificates and opinions required by the Agent in connection therewith. Section 4.3. Further Assurances. The Borrower covenants and agrees that it shall, and shall cause each Subsidiary to, comply with all terms and conditions of each of the Collateral Documents and that the Borrower shall, and shall cause each Subsidiary to, at any time and from time to time as requested by the Agent, execute and deliver such further instruments and do such other acts as the Agent or the Required Lenders may deem necessary or desirable to provide for or protect or perfect the Lien of the Agent in the Collateral. SECTION 5. DEFINITIONS; INTERPRETATION. Section 5.1. Definitions. The following terms when used herein shall have the following meanings: -24- 31 "Acquiree" means and includes each of SMP and Mid-Central. "Acquisition" means (i) the acquisition of all or any substantial part of the assets, property or business of any other person, firm or corporation, (ii) any acquisition of a majority of the common stock or other equity securities of any firm or corporation. "Adjusted LIBOR" means a rate per annum determined by the Agent pursuant to the following formula: Adjusted LIBOR = LIBOR -------------------- 100%-Reserve Percentage "Reserve Percentage" means, for the purpose of computing Adjusted LIBOR, the maximum rate of all reserve requirements (including, without limitation, any marginal, emergency, supplemental or other special reserves) imposed by the Board of Governors of the Federal Reserve System (or any successor) under Regulation D on Eurocurrency liabilities (as such term is defined in Regulation D) for the applicable Interest Period as of the first day of such Interest Period, but subject to any amendments to such reserve requirement by such Board or its successor, and taking into account any transitional adjustments thereto becoming effective during such Interest Period. For purposes of this definition, LIBOR Portions shall be deemed to be Eurocurrency liabilities as defined in Regulation D without benefit of or credit for prorations, exemptions or offsets under Regulation D. "LIBOR" means, for an Interest Period, (a) the LIBOR Index Rate for such Interest Period, if such rate is available, and (b) if the LIBOR Index Rate cannot be determined, the arithmetic average of the rate of interest per annum (rounded upwards, if necessary, to nearest 1/100 of 1%) at which deposits in U.S. dollars in immediately available funds are offered to the Agent at 11:00 a.m. (London, England time) two (2) Business Days before the beginning of such Interest Period by major banks in the interbank eurodollar market for a period equal to such Interest Period and in an amount equal or comparable to the principal amount of such LIBOR Portion which is scheduled to be made by the Agent. Each determination of LIBOR made by the Agent shall be conclusive and binding absent manifest error. "Affiliate" means any Person, directly or indirectly controlling or controlled by, or under direct or indirect common control with, another Person. A Person shall be deemed to control another Person for the purposes of this definition if such Person possesses, directly or indirectly, the power to direct, or cause the direction of, the management and policies of the other Person, whether through the ownership of voting securities, common directors, trustees or officers, by contract or otherwise; provided that, in any event, any Person that owns, directly or indirectly, 5% or more of the securities having the ordinary voting power for the election of directors or governing body of a corporation or 5% or more of the partnership or other ownership interests of -25- 32 any other Person (other than as a limited partner of such other Person) will be deemed to control such corporation or other Person. "Agent" means Harris Trust and Savings Bank and any successor thereto appointed pursuant to Section 10.1 hereof. "Applicable Margin" means, for Revolving Loans, Term A Loans, Term B Loans, the commitment fee and (to the extent bearing interest with reference to the Domestic Rate) Swing Loans, the rate specified below, subject to quarterly adjustment as hereinafter provided:
Applicable Margin Applicable For Domestic Rate Margin Portion of For LIBOR Portions Applicable Applicable Revolving Loans, of Revolving Loans Margin Margin When Following Status Term A Loan and and Term A Loan For Domestic Rate For LIBOR Portions Exists For Any Margin such Swing Loans Is: Portion of of Term B Loan Determination Date Is: Term B Loan Is: Commitment Fee Is Is: Level I Status 0% 1.00% .25% 2.25% .25% Level II Status 0% 1.25% .25% 2.25% .25% Level III Status 0% 1.625% .25 2.25% .375% Level IV Status .25% 2.00% .50 2.75% .50% Level V Status .25% 2.25% .50 2.75% .50%
provided, however, that all of the foregoing is subject to the following: (i) the initial Applicable Margin in effect through the first Margin Determination Date shall be the Applicable Margin for Level V Status; (ii) on or before the date that is ten (10) Business Days after the date on which the Borrower has delivered a Compliance Certificate to the Agent for a given quarterly accounting period of the Borrower (commencing with the quarterly accounting period ending on or about December 31, 1998) pursuant to Section 8.5 hereof (such date that is ten (10) Business Days after the date on which the Company delivered a Compliance Certificate to the Agent being herein referred to as the "Margin Determination Date"), the Agent shall determine whether Level I Status, Level II Status, Level III Status, Level IV Status or Level V Status exists as of the close of the applicable accounting -26- 33 period, based upon the Compliance Certificate and financial statements delivered to the Agent under Section 8.5 hereof for such accounting period, and shall promptly notify the Borrower and the Lenders of such determination and of any change in the Applicable Margin resulting therefrom. Any such change in the Applicable Margin shall be effective as of such Margin Determination Date, with such new Applicable Margin to continue in effect until the next Margin Determination Date. If the Borrower has not delivered a Compliance Certificate by the date such Compliance Certificate is required to be delivered under Section 8.5 hereof, until a Compliance Certificate is delivered before the next Margin Determination Date, the Applicable Margin shall be the Applicable Margin for Level V Status. If the Borrower subsequently delivers a Compliance Certificate before the next Margin Determination Date, the Applicable Margin established by such Compliance Certificate shall take effect from the date of delivery until the next Margin Determination Date; and (iii) if and so long as any Event of Default has occurred and is continuing hereunder, notwithstanding anything herein to the contrary, the Applicable Margin shall be the Applicable Margin for Level V. "Application" is defined in Section 1.3 hereof. "Authorized Representative" means those persons shown on the list of officers and employees of the Borrower pursuant to Section 7.2(a) hereof or on any update of any such list provided by the Borrower to the Agent, or any further or different officers and employees so named by any Authorized Representative in a written notice to the Agent. "Borrower" is defined in the introductory paragraph hereof. "Business Day" means any day (other than a Saturday or Sunday) on which banks are not authorized or required to close in Chicago, Illinois and, when used with respect to LIBOR Portions, a day on which banks are dealing in United States Dollar deposits in the interbank market of London, England and Nassau, Bahamas. "Capital Expenditures" means for any period capital expenditures of the Borrower and its Subsidiaries during such period as defined and classified in accordance with GAAP, but in any event excluding amounts expended to effect a Permitted Acquisition. "Capital Lease" means any lease of Property which in accordance with GAAP is required to be capitalized on the balance sheet of the lessee. -27- 34 "Capitalized Lease Obligation" means the amount of the liability shown on the balance sheet of any Person in respect of a Capital Lease determined in accordance with GAAP. "Cash Flow Leverage Ratio" means, as of any date the same is to be determined, the ratio of (x) Total Funded Debt as of such date to (y) EBITDA for the four consecutive fiscal quarters of the Borrower ending on, or (if none so end) most recently completed prior to such date; provided, however, that: (a) the Cash Flow Leverage Ratio means, as of any date prior to the fiscal quarter of the Borrower ending on or about June 30, 1998, the ratio of (i) Total Funded Debt as of the relevant date to (ii) $19,272,000; (b) the Cash Flow Leverage Ratio means, as of the close of the fiscal quarter of the Borrower ending on or about June 30, 1998 and as of each date thereafter to (but not including) the close of the immediately following fiscal quarter of the Borrower, the ratio of (i) Total Funded Debt as of the relevant date to (ii) the product of (1) EBITDA for the single fiscal quarter of the Borrower ending on or about June 30, 1998 and (2) four; (c) the Cash Flow Leverage Ratio means, as of the close of the fiscal quarter of the Borrower ending on or about September 30, 1998 and as of each date thereafter to (but not including) the close of the immediately following fiscal quarter of the Borrower, the ratio of (i) Total Funded Debt as of the relevant date to (ii) the product of (1) EBITDA for the two consecutive fiscal quarters of the Borrower ending on or about September 30, 1998 and (2) two; and (d) the Cash Flow Leverage Ratio means, as of the close of the fiscal quarter of the Borrower ending on or about December 31, 1998 and as of each date thereafter to (but not including) the close of the immediately following fiscal quarter of the Borrower, the ratio of (i) Total Funded Debt as of the relevant date to (ii) the product of (1) EBITDA for the three consecutive fiscal quarters of the Borrower ending on or about December 31, 1998 and (2) a fraction, the numerator of which is four and the denominator of which is three. "Cash Maturities" means, with reference to any period, the aggregate amount of payments required to be made by the Borrower and its Subsidiaries during such period with respect to principal on all Indebtedness (whether at maturity, as a result of mandatory sinking fund redemption, scheduled mandatory prepayment or otherwise). -28- 35 "Cash Prepayments" means, with reference to any period, the aggregate amount of payments voluntarily made by the Borrower and its Subsidiaries during such period with respect to principal on all Indebtedness. "Change of Control" means the occurrence, at any time after the date hereof, of (i) any Person or two or more Persons acting in concert acquiring beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended), directly or indirectly, of securities of Borrower (or other securities convertible into such securities) representing more than 25% of the combined voting power of all securities of the Borrower entitled to vote in the election of directors; or (ii) commencing after the date hereof, individuals who as of the date hereof were directors of the Borrower ceasing for any reason to constitute a majority of the Board of Directors of the Borrower unless the Persons replacing such individuals were nominated by William D. Morton or the Board of Directors of the Borrower; or (iii) any Person or two or more Persons acting in concert acquiring by contract or otherwise, or entering into a contract or arrangement which upon consummation will result in its or their acquisition of, or control over, securities of the Borrower (or other securities convertible into such securities) representing more than 25% of the combined voting power of all securities of the Borrower entitled to vote in the election of directors. "Code" means the Internal Revenue Code of 1986, as amended, and any successor statute thereto. "Collateral Documents" means the Security Agreement and all other mortgages, deeds of trust, security agreements, assignments, financing statements and other documents as shall from time to time secure the Obligations. "Commitments" means and includes the Revolving Credit Commitments, the Swing Line Commitment and the Term Credit Commitments. "Compliance Certificate" means a certificate in the form Exhibit E hereto. "Consolidated Net Income" means, with reference to any period, the net income (or net deficit) of the Borrower and its Subsidiaries for such period as computed on a consolidated basis in accordance with GAAP; provided, however, that if any Permitted Acquisition occurs at any time during such period, Consolidated Net Income shall be calculated on a proforma basis to include earnings of the acquired entity or business for the entire period prior to such Permitted Acquisition as if such Permitted Acquisition had taken place on the first day of such period, all as reasonably calculated by the Borrower based on actual results of operations of the acquired entity or business (without giving retroactive effect to any operating efficiencies realized after such Acquisition). -29- 36 "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Borrower or any Subsidiary, are treated as a single employer under Section 414 of the Code. "Default" means any event or condition the occurrence of which would, with the passage of time or the giving of notice, or both, constitute an Event of Default. "Defaulting Lender" shall mean a Lender which has failed to fund as and when required by the terms and conditions of this Agreement such Lender's ratable share of any Loan hereunder, if any so long as such failure continues unremedied. "Domestic Rate" means, for any day, the greater of (i) the rate of interest announced by the Agent from time to time as its prime commercial rate, as in effect on such day; and (ii) the sum of (x) the rate determined by the Agent to be the average (rounded upwards, if necessary, to the next higher 1/100 of 1%) of the rates per annum quoted to the Agent at approximately 10:00 a.m. (Chicago time) (or as soon thereafter as is practicable) on such day (or, if such day is not a Business Day, on the immediately preceding Business Day) by two or more Federal funds brokers selected by the Agent for the sale to the Agent at face value of Federal funds in an amount equal or comparable to the principal amount owed to the Agent for which such rate is being determined, plus (y) 1/2 of 1% (0.5%). "Domestic Rate Portion" is defined in Section 2.1(a) hereof. "EBIT" means, with reference to any period, Consolidated Net Income for such period plus all amounts deducted in arriving at such Consolidated Net Income for such period in respect of (i) Interest Expense for such period plus (ii) federal, state and local income taxes for such period. "EBITDA" means, with reference to any period, Consolidated Net Income for such period plus all amounts deducted in arriving at such Consolidated Net Income for such period in respect of (i) Interest Expense for such period, plus (ii) federal, state and local income taxes for such period, plus (iii) all amounts properly charged for depreciation of fixed assets and amortization of intangible assets during such period on the books of the Borrower and its Subsidiaries. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended, or any successor statute thereto. "Event of Default" means any event or condition identified as such in Section 9.1 hereof. -30- 37 "Excess Cash Flow" means, as of any date the same is to be computed, EBITDA for the period consisting of the four most recently completed fiscal quarters of the Borrower, less Interest Expense paid in cash by the Borrower and its Subsidiaries during such period, less payments in cash by the Borrower and its Subsidiaries in respect of taxes on or measured by net income during such period, less the aggregate amount of all Capital Expenditures during such period other than any Capital Expenditures financed through any Capitalized Lease, less (without duplication) Cash Maturities and Cash Prepayments during such period. "Existing Bank Loans" means the loans outstanding from certain Subsidiaries of the Borrower under their Credit Agreement dated as of January 20, 1998 with Harris as agent and certain other lenders party thereto. "Fixed Charge Coverage Ratio" means, as of any date the same is to be determined, the ratio of (i) the amount (if any) by which (a) EBITDA for the four consecutive fiscal quarters of the Borrower ending on, or (if none so end) most recently completed prior to such date exceeds (b) Capital Expenditures during the same four fiscal quarters to (ii) the sum (during the same four fiscal quarters) of (a) Interest Expense and (b) Cash Maturities and (c) Permitted Redemptions. "Fixed Rate Loan" means any LIBOR Portion and (to the extent bearing interest with reference to Harris' Quoted Rate) any Swing Loan. "GAAP" means generally accepted accounting principles as in effect from time to time, applied by the Borrower and its Subsidiaries on a basis consistent with the preparation of the Borrower's most recent financial statements furnished to the Lenders pursuant to Section 6.4 hereof. "Guarantor" means each Subsidiary that is a signatory hereto or that executes and delivers to the Agent a Guaranty along with the accompanying closing documents required by Section 4.2 hereof. "Guaranteed Obligations" is defined in Section 11.1 hereof. "Guaranty" means this Agreement as to Guarantors party hereto and otherwise, a letter to the Agent in the form of Exhibit G hereto executed by a Subsidiary whereby it acknowledges it is party hereto as a Guarantor under Section 11 hereof and also in the case of any Subsidiary not organized under the laws of the United States of any State thereof, such other form of guaranty as shall be reasonably acceptable to the Agent and the Required Lenders. "Harris" is defined in Section 1.6(a) hereof. -31- 38 "Harris' Quoted Rate" is defined in Section 1.6(c) hereof. "Hedging Arrangements" is defined in Section 8.26 hereof. "Hedging Liability" means the liability of the Borrower to any of the Lenders or their Affiliates in respect of any interest rate swaps, interest rate caps, interest rate collars, or other interest rate hedging arrangements as the Borrower may from time to time enter into with any one or more of the Lenders or their Affiliates. Unless and until the amount of the Hedging Liability is fixed and determined, the Hedging Liability shall be deemed to be the market value of the notional amount of the hedge from the date of computation to the date the hedge expires. "Indebtedness" means for any Person (without duplication) (i) all indebtedness created, assumed or incurred in any manner by such Person representing money borrowed (including by the issuance of debt securities), (ii) all indebtedness for the deferred purchase price of property or services (other than trade accounts payable arising in the ordinary course of business which are not more than 180 days past due), (iii) all indebtedness secured by any Lien upon Property of such Person, whether or not such Person has assumed or become liable for the payment of such indebtedness, (iv) all Capitalized Lease Obligations of such Person, (v) all obligations of such Person on or with respect to letters of credit, bankers' acceptances and other extensions of credit whether or not representing obligations for borrowed money and (vi) each "non-compete" and like payment owed by such Person in connection with an Acquisition, to the extent such payment would be classified as a liability under GAAP. "Interest Coverage Ratio" means, as of any date the same is to be determined, the ratio of (i) EBIT for the four consecutive fiscal quarters of the Borrower ending on, or (if none so end) most recently completed prior to such date to (ii) Interest Expense for the same four fiscal quarters; provided, however, that: (a) the Interest Coverage Ratio means, as of the fiscal quarter of the Borrower ending on or about June 30, 1998, the ratio of (i) EBIT for such fiscal quarter of the Borrower to (ii) Interest Expense for such fiscal quarter; (b) the Interest Coverage Ratio means, as of the fiscal quarter of the Borrower ending on or about September 30, 1998, the ratio of (i) EBIT for the two consecutive fiscal quarters of the Borrower ending on such date to (ii) Interest Expense for the same two fiscal quarters; and (c) the Interest Coverage Ratio means, as of the fiscal quarter of the Borrower ending on or about December 31, 1998, the ratio of (i) EBIT for the three consecutive -32- 39 fiscal quarters of the Borrower ending on such date to (ii) Interest Expense for the same three fiscal quarters. "Interest Expense" means, with reference to any period (the "measurement period"), the sum of all interest charges with respect to Indebtedness (including imputed interest charges with respect to Capitalized Lease Obligations and all amortization of debt discount and expense) of the Borrower and its Subsidiaries for such measurement period determined in accordance with GAAP; provided, however, that if any Permitted Acquisition occurs at any time during such measurement period, Interest Expense shall be equal to the product of (x) interest charges with respect to Indebtedness, as reasonably determined on a consolidated basis, from and including the date of (and after giving effect to) the most recent such Permitted Acquisition occurring during such period through the close of such measurement period, multiplied by (y) a fraction, the numerator of which is the number of days in such measurement period and the denominator of which is the number of those days in such measurement period including and following the date of such Permitted Acquisition. "Interest Period" means, (a) with respect to any Swing Loan, the period commencing on the date such Swing Loan is made and ending one to five, inclusive, days thereafter as selected by the Borrower in the notice provided herein and (b) with respect to any LIBOR Portion, the period commencing on, as the case may be, the creation, continuation or conversion date with respect to such LIBOR Portion and ending one (1), two (2), three (3) or six (6) months thereafter as selected by the Borrower in its notice as provided herein; provided that, all of the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period would otherwise end on a day which is not a Business Day, that Interest Period shall be extended to the next succeeding Business Day, unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; (ii) no Interest Period may extend beyond the final maturity date of any Note evidencing such Portion; (iii) the interest rate to be applicable to each LIBOR Portion or Swing Loan for each Interest Period shall apply from and including the first day of such Interest Period to but excluding the last day thereof; (iv) no Interest Period may be selected if after giving effect thereto any Borrower will be unable to make a principal payment scheduled to be made during such -33- 40 Interest Period without paying part of a LIBOR Portion on a date other than the last day of the Interest Period applicable thereto; and (v) prior to July 2, 1998, unless the Agent in its discretion agrees otherwise, no Interest Period over one month in length shall be selected for any LIBOR Portion. For purposes of determining an Interest Period, a month means a period starting on one day in a calendar month and ending on a numerically corresponding day in the next calendar month, provided, however, if an Interest Period begins on the last day of a month or if there is no numerically corresponding day in the month in which an Interest Period is to end, then such Interest Period shall end on the last Business Day of such month. "L/C Commitment" shall mean $10,000,000, in each case as the same may be reduced pursuant to Section 3.4 hereof. "L/C Document" shall mean the Letters of Credit, any draft or other document presented in connection with a drawing thereunder, the Applications and this Agreement. "L/C Obligations" means as of any date the same is to be determined, the sum of (i) the aggregate undrawn amount then available under the Letters of Credit then outstanding (with the undrawn amount available under a Letter of Credit to be the maximum amount which can then be drawn thereunder (after giving effect to any prior reductions in such amount, whether scheduled on the face of such Letter of Credit or due to prior partial drawings) under any circumstances and over any period of time plus (ii) all unpaid Reimbursement Obligations then outstanding (other than any such Reimbursement Obligations as are being repaid the same day directly out of the proceeds of a Revolving Loan requested for such purpose). "Lender" means Harris Trust and Savings Bank, the other signatories hereto (other than the Borrower) and all other lenders becoming parties hereto pursuant to Section 11.16 hereof. "Letters of Credit" is defined in Section 1.3 hereof. "Level I Status" means, for any Margin Determination Date, that as of the close of the most recently completed fiscal quarter with reference to which such Margin Determination Date was set, the Cash Flow Leverage Ratio is less than 1.50 to 1. "Level II Status" means, for any Margin Determination Date, that as of the close of the most recently completed fiscal quarter with reference to which such Margin Determination Date was set, the Cash Flow Leverage Ratio is greater than or equal to 1.50 to 1 but less than 2.00 to 1. -34- 41 "Level III Status" means, for any Margin Determination Date, that as of the close of the most recently completed fiscal quarter with reference to which such Margin Determination Date was set, the Cash Flow Leverage Ratio is greater than or equal to 2.00 to 1 but less than 3.00 to 1. "Level IV Status" means, for any Margin Determination Date, that as of the close of the most recently completed fiscal quarter with reference to which such Margin Determination Date was set, the Cash Flow Leverage Ratio is greater than or equal to 3.00 to 1 but less than 3.50 to 1. "Level V Status" means, for any Margin Determination Date, that as of the close of the most recently completed fiscal quarter with reference to which such Margin Determination Date was set, the Cash Flow Leverage Ratio is greater than or equal to 3.5 to 1. "LIBOR Index Rate" means, for any Interest Period, the rate per annum (rounded upwards, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a period equal to such Interest Period, which appears on the Telerate Page 3750 as of 11:00 a.m. (London, England time) on the day two (2) Business Days before the commencement of such Interest Period. "LIBOR Portions" is defined in Section 2.1(a) hereof. "Lien" means any mortgage, lien, security interest, pledge, charge or encumbrance of any kind in respect of any Property, including the interests of a vendor or lessor under any conditional sale, capital lease or other title retention arrangement. "Loan Documents" means this Agreement, the Notes, the Applications, the L/C Documents, the Guaranties and the Collateral Documents. "Loans" means and includes Revolving Loans, the Term Loans and the Swing Loans. "Material Plan" is defined in Section 9.1(h) hereof. "Mid-Central" means Mid-Central Plastics, Inc., an Iowa corporation. "Mid-Central Acquisition" means the acquisition by the Borrower of Mid-Central pursuant to the Mid-Central Purchase Agreement. "Mid-Central Purchase Agreement" means that certain Stock Purchase Agreement dated as of April 27, 1998 by and among the Borrower and shareholders of Mid-Central, all exhibits, -35- 42 schedules, and attachments thereto, and all instruments and documents to be executed and delivered therewith. "Morton South Carolina" means Morton Metalcraft Co. of South Carolina, a South Carolina corporation. "Notes" means and includes the Revolving Credit Notes, the Swing Line Note and the Term Notes. When used with reference to the Notes, the term "class" of Notes refers to the status of such Notes as one of the following four types, Revolving Credit Notes, Term A Notes, Term B Notes and the Swing Line Note, such Notes to constitute four separate classes of Notes. "Obligations" means all obligations of the Borrower to pay the principal and interest on the Loans, all Reimbursement Obligations, all fees and charges payable hereunder, and all other payment obligations of the Borrower arising under or in relation to any Loan Document, in each case whether now existing or hereafter arising, due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired. "PBGC" means the Pension Benefit Guaranty Corporation or any Person succeeding to any or all of its functions under ERISA. "Percentages" means, for each Lender, such Lender's Revolver Percentage, Term A Percentage and Term B Percentage, unless the context in which such term is used shall otherwise require. "Permitted Acquisitions" means the Acquisitions permitted pursuant to Section 8.17 hereof. "Permitted Redemptions" is defined in Section 8.15 hereof. "Person" means an individual, partnership, corporation, association, trust, unincorporated organization or any other entity or organization, including a government or agency or political subdivision thereof. "Plan" means any employee pension benefit plan covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code that either (i) is maintained by a member of the Controlled Group for employees of a member of the Controlled Group, (ii) is maintained pursuant to a collective bargaining agreement or any other arrangement under which more than one employer makes contributions and to which a member of the Controlled Group is then making or accruing an obligation to make contributions or has within the preceding five plan years made contributions, or (iii) under which a member of the -36- 43 Controlled Group has any liability, including any liability by reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five years or by reason of being deemed a contributing sponsor under Section 4064 of ERISA. "Portion" is defined in Section 2.1(a) hereof. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible. "Reimbursement Obligation" is defined in Section 1.3(c) hereof. "Required Lenders" means, as of the date of determination thereof, any two (2) or more Lenders holding (including through participation interests) at least 66-2/3% in aggregate principal amount of the Loans, L/C Obligations and Unused Revolving Credit Commitments outstanding hereunder. "Restricted Payments" is defined in Section 8.16 hereof. "Revolver Percentage" means, for each Lender, the percentage of the Revolving Credit Commitments represented by such Lender's Revolving Credit Commitment or, if the Revolving Credit Commitments have been terminated, the percentage held by such Lender (including through participation interests in L/C Obligations) of the aggregate principal amount of all outstanding Revolving Loans and L/C Obligations. "Revolving Credit" is defined in the introductory paragraph hereof. "Revolving Credit Commitments" means the aggregate amount of the commitments of the Lenders to extend credit under the Revolving Credit, as such amount may be reduced pursuant hereto. The Revolving Credit Commitments are $35,000,000 as of the date hereof. "Revolving Credit Notes" is defined in Section 1.1 hereof. "Revolving Loans" is defined in Section 1.1 hereof. "SMP" means SMP Steel Corporation, a South Carolina corporation. "SMP Acquisition" means the acquisition by Morton South Carolina of the operating assets of SMP pursuant to the SMP Purchase Agreement. -37- 44 "SMP Purchase Agreement" means that certain Asset Purchase Agreement dated as of May 19, 1998 by and among Morton South Carolina, SMP and John W. Robinson, a North Carolina resident, all exhibits, schedules, and attachments thereto, and all instruments and documents to be executed and delivered therewith. "Swing Line" is defined in the introductory paragraph hereof. "Swing Line Commitment" means $5,000,000, as reduced pursuant to the terms hereof. "Swing Line Note" is defined in Section 1.6(a) hereof. "Swing Loans" is defined in Section 1.6(a) hereof. "Subordinated Debt" means (x) the currently outstanding Indebtedness of the Borrower evidenced by those two Non-Negotiable Promissory Notes (subordinated) each dated as of April 8, 1998, one payable to the order of Joseph T. Buie, Jr. in the face principal amount of $2,474,000 and the second payable to the order of Ernest J. Butler in the face principal amount of $1,176,000 and (y) any other indebtedness for borrowed money subordinated in right of payment to the prior payment of the Obligations by written provisions acceptable to the Agent and Required Lenders in form and substance and otherwise pursuant to documentation, in an amount, and containing interest rates, payment terms, maturities, amortization schedules, covenants, defaults, remedies and other material terms in form and substance satisfactory to the Agent and Required Lenders. "Subsidiary" means any corporation or other Person more than 50% of the outstanding ordinary voting shares or other equity interests of which is at the time directly or indirectly owned by the Borrower, by one or more of its Subsidiaries, or by the Borrower and one or more of such Subsidiaries. "Telerate Page 3750" means the display designated as "Page 3750" on the Telerate Service (or such other page as may replace Page 3750 on that service or such other service as may be nominated by the British Bankers' Association as the information vendor for the purpose of displaying British Bankers' Association Interest Settlement Rates for U.S. Dollar deposits). "Term A Percentage" means, for each Lender, the percentage held by such Lender of the aggregate principal amount of the outstanding Term A Loan. "Term B Percentage" means, for each Lender, the percentage held by such Lender of the aggregate principal amount of the outstanding Term B Loan. -38- 45 "Term Credit" is defined in the introductory paragraph hereof. "Term Credit Commitments" means the Term A Loan Commitments and the Term B Loan Commitments. The Term Credit Commitments are $55,000,000 as of the date hereof. "Term A Loan" is defined in Section 1.2(a) hereof. "Term A Loan Commitments" means the commitments of the Lenders to make Term A Loan in the amounts set forth opposite their signature hereto under the headings "Term A Loan" and opposite their signatures on Assignment Agreements delivered pursuant to Section 12.15 hereof under the heading "Term A Loan", as such amount may be reduced pursuant hereto. The Term A Loan Commitments are $25,000,000 as of the date hereof. "Term Loans" means Term A Loan and Term B Loan. "Term B Loan " is defined in Section 1.2(b) hereof. "Term B Loan Commitments" means the commitments of the Lenders to make Term B Loan in the amounts set forth opposite their signature hereto under the headings "Term B Loan" and opposite their signatures on Assignment Agreements delivered pursuant to Section 12.15 hereof under the heading "Term B Loan", as such amount may be reduced pursuant hereto. The Term B Loan Commitments are $30,000,000 as of the date hereof. "Term A Note" is defined in Section 1.2(a) hereof. "Term B Note" is defined in Section 1.2(b) hereof. "Termination Date" means (x) May 31, 2003, or (y) if earlier, such earlier date on which the Revolving Credit Commitments are terminated in whole pursuant to Sections 3.4, 9.2 or 9.3 hereof, or (z) if later, such later date to which the Revolving Credit Commitments are extended pursuant to Section 11.14 hereof. "Term Notes" means Term A Notes and Term B Notes. "Total Funded Debt" means, at any time the same is to be determined, the aggregate of all Indebtedness of the Borrower and its Subsidiaries at such time, plus all Indebtedness of any other Person which is directly or indirectly guaranteed by the Borrower or any of its Subsidiaries or which the Company of any of its Subsidiaries has agreed (contingently or otherwise) to purchase or otherwise acquire or in respect of which the Borrower or any of its Subsidiaries has otherwise assured a creditor against loss. -39- 46 "Unfunded Vested Liabilities" means, for any Plan at any time, the amount (if any) by which the present value of all vested nonforfeitable accrued benefits under such Plan exceeds the fair market value of all Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plan, but only to the extent that such excess represents a potential liability of a member of the Controlled Group to the PBGC or the Plan under Title IV of ERISA. "Unused Revolving Credit Commitments" means, at any time, the difference between the Revolving Credit Commitments then in effect and the aggregate outstanding principal amount of Revolving Loans, Swing Loans and L/C Obligations. "Welfare Plan" means a "welfare plan" as defined in Section 3(1) of ERISA. "Wholly Owned Subsidiary" means a Subsidiary of the Borrower all of the issued and outstanding shares of capital stock (other than directors' qualifying shares as required by law) or other equity interests are owned by the Borrower and/or one or more Wholly Owned Subsidiaries within the meaning of this definition. Section 5.2. Interpretation. The foregoing definitions are equally applicable to both the singular and plural forms of the terms defined. All references to time of day herein are references to Chicago, Illinois time unless otherwise specifically provided. Where the character or amount of any asset or liability or item of income or expense is required to be determined or any consolidation or other accounting computation is required to be made for the purposes of this Agreement, it shall be done in accordance with GAAP except where such principles are inconsistent with the specific provisions of this Agreement. Section 5.3. Change in Accounting Principles. If, after the date of this Agreement, there shall occur any change in generally accepted accounting principles from those used in the preparation of the financial statements referred to in Section 6.4 hereof and such change shall result in a change in the method of calculation of any financial covenant, standard or term found in this Agreement, either the Borrower or the Required Lenders may by notice to the Lenders and the Borrower, respectively, require that the Lenders and the Borrower negotiate in good faith to amend such covenant, standard and term so as equitably to reflect such change in accounting principles, with the desired result being that the criteria for evaluating the financial condition of the Borrower and its Subsidiaries shall be the same as if such change had not been made. No delay by the Borrower or the Required Lenders in requiring such negotiation shall limit their right to so require such a negotiation at any time after such a change in accounting principles. Without limiting the generality of the foregoing, the Borrower shall neither be deemed to be in compliance with any financial covenant hereunder nor out of compliance with any financial covenant hereunder if such state of compliance or noncompliance, as the case may be, would not exist but for the occurrence of a change in accounting principles after the date hereof. -40- 47 SECTION 6. REPRESENTATIONS AND WARRANTIES. The Borrower represents and warrants to the Lenders as follows: Section 6.1. Organization and Qualification. The Borrower is duly organized, validly existing and in good standing as a corporation under the laws of the State of Georgia, and has full and adequate corporate power to own its Property and carry on its business as now conducted. The Borrower is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying unless and to the extent that the failure to be so licensed or qualified or to be in such good standing would not have any material adverse effect on the financial condition, Properties, business, or operations of the Borrower or in its ability to perform or the Agent's ability to enforce performance of the Borrower's obligations under the Loan Documents. The Borrower has full right and authority to enter into this Agreement, to obtain the credit herein provided for, to issue its Notes in evidence of the borrowings herein provided for, to execute and deliver each Loan Document delivered by it, and to perform each and all of the matters and things therein provided for; and the Loan Documents do not, nor does the performance or observance by the Borrower of any of the matters and things therein provided for, contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon the Borrower or any charter or by-law provision of the Borrower or any covenant, indenture or agreement of or affecting the Borrower or any of its respective Properties, or result in the creation or imposition of any Lien on any Property of the Borrower. Section 6.2. Subsidiaries. Each Subsidiary is duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized, as the case may be, has full and adequate power to own its Property and carry on its business as now conducted, and is duly licensed or qualified and in good standing in each jurisdiction in which the nature of the business conducted by it or the nature of the Property owned or leased by it requires such licensing or qualifying unless and to the extent that the failure to be so licensed or qualified or to be in such good standing would not have any material adverse effect on the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole or in its ability to perform or the Agent's ability to enforce performance of the Borrower's obligations under the Loan Documents. Each Subsidiary has full right, power and authority to execute and deliver each Loan Document delivered by it and to observe and perform each and all of the matters and things therein provided for, and the Loan Documents do not, nor will the performance or observance by any Subsidiary of any of the matters and things therein provided for, contravene any provision of law or any charter or by-law provision of any Subsidiary or any covenant, indenture or agreement of or affecting the Borrower or any Subsidiary or any of their respective Properties or require any governmental approval or consent. Schedule 6.2 hereto identifies each Subsidiary, the jurisdiction of its incorporation or -41- 48 organization, as the case may be, the percentage of issued and outstanding shares of each class of its capital stock or other equity interests owned by the Borrower and the Subsidiaries and, if such percentage is not 100% (excluding directors' qualifying shares as required by law), a description of each class of its authorized capital stock and other equity interests and the number of shares of each class issued and outstanding. All of the outstanding shares of capital stock and other equity interests of each Subsidiary are validly issued and outstanding and fully paid and nonassessable and all such shares and other equity interests indicated on Schedule 6.2 as owned by the Borrower or a Subsidiary are owned, beneficially and of record, by the Borrower or such Subsidiary free and clear of all Liens. There are no outstanding commitments or other obligations of any Subsidiary to issue, and no options, warrants or other rights of any Person to acquire, any shares of any class of capital stock or other equity interests of any Subsidiary. Section 6.3. Margin Stock. Neither the Borrower nor any of its Subsidiaries is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any Loan or Letter of Credit issued hereunder will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock. Section 6.4. Financial Reports. The consolidated balance sheet of the Borrower and its Subsidiaries as at June 30, 1997 and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the fiscal year then ended, and accompanying notes thereto, which financial statements are accompanied by the audit report of Clifton Gunderson L.L.C., independent public accountants, and the unaudited interim consolidated balance sheet of the Borrower and its Subsidiaries as at March 31, 1998, and the related consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for the three (3) months then ended, heretofore furnished to the Lenders, fairly present the consolidated financial condition of the Borrower and its Subsidiaries as at said dates and the consolidated results of their operations and cash flows for the periods then ended in conformity with GAAP applied on a consistent basis. Neither the Borrower nor any of its respective Subsidiaries has contingent liabilities which are material to it other than as indicated on such financial statements or, with respect to future periods, on the financial statements furnished pursuant to Section 8.5 hereof. Since March 31, 1998, or if later, the date as of which were prepared the most recent financial statements for the Borrower furnished pursuant to Section 8.5(a) or (b) hereof, there has been no material adverse change in the condition (financial or otherwise) or business prospects of the Borrower and its Subsidiaries taken as a whole. Section 6.5. Full Disclosure. The statements and information furnished to the Agent and the Lenders in connection with the negotiation of this Agreement and the commitments by the Lenders to provide all or part of the financing contemplated hereby do not contain any untrue -42- 49 statements of a material fact or omit a material fact necessary to make the material statements contained therein or herein not misleading, the Lenders acknowledging that as to any projections furnished to any Lender and the Borrower only represent that the same were prepared on the basis of information and estimates the Borrower believed to be reasonable. Section 6.6. Good Title. The Borrower and its respective Subsidiaries have good and defensible title to their respective material assets as reflected on the most recent consolidated balance sheet of the Borrower and its Subsidiaries furnished to the Lenders (except for sales of assets by the Borrower and such Subsidiaries in the ordinary course of their respective businesses), subject to no Liens other than such thereof as are permitted by Section 8.12 hereof. Section 6.7. Litigation and Other Controversies. There is no litigation or governmental proceeding or labor controversy pending, nor to the knowledge of the Borrower threatened, against the Borrower or any of its Subsidiaries which if adversely determined would result in any material adverse change in the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. Section 6.8. Taxes. All tax returns with respect to any income tax or other material tax required to be filed by the Borrower or any Subsidiary in any jurisdiction have, in fact, been filed, and all taxes, assessments, fees and other governmental charges upon the Borrower or any Subsidiary or upon any of their respective Properties, income or franchises, which are shown to be due and payable in such returns, have been paid. The Borrower does not know of any proposed additional tax assessment against the Borrower or any Subsidiary which if paid (taking into consideration any cash segregated for such purpose) would result in any material adverse change in the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. Adequate provisions in accordance with GAAP for taxes on the books of the Borrower and each Subsidiary have been made, or (to the extent such provisions have not been made) adequate cash reserves for such taxes have been segregated, in each case for all open years, and for its current fiscal period. Section 6.9. Approvals. No authorization, consent, license, exemption, filing or registration with any court or governmental department, agency or instrumentality, nor any approval or consent of the stockholders of the Borrower or any other Person, is or will be necessary to the valid execution, delivery or performance by the Borrower of this Agreement, the Applications or the Notes. Section 6.10. Affiliate Transactions. Neither the Borrower nor any of its Subsidiaries is a party to any contracts or agreements with any of its Affiliates (other than with Wholly Owned Subsidiaries) on terms and conditions which are less favorable to the Borrower or such -43- 50 Subsidiary than would be usual and customary in similar contracts or agreements between Persons not affiliated with each other. Section 6.11. Investment Company; Public Utility Holding Company. Neither the Borrower nor any of its Subsidiaries is an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or a "public utility holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Section 6.12. ERISA. The Borrower and each other member of its Controlled Group has fulfilled its obligations under the minimum funding standards of and is in compliance in all material respects with ERISA and the Code to the extent applicable to it and has not incurred any liability to the PBGC or a Plan under Title IV of ERISA other than a liability to the PBGC for premiums under Section 4007 of ERISA. Neither the Borrower nor any Subsidiary has any contingent liabilities with respect to any post-retirement benefits under a Welfare Plan, other than liability for continuation coverage described in article 6 of Title I of ERISA. Section 6.13. Compliance with Laws. The Borrower and its Subsidiaries are in compliance with the requirements of all federal, state and local laws, rules and regulations applicable to or pertaining to the Properties or business operations of the Borrower or any such Subsidiary (including, without limitation, the Occupational Safety and Health Act of 1970, the Americans with Disabilities Act of 1990, and laws and regulations establishing quality criteria and standards for air, water, land and toxic or hazardous wastes or substances), non-compliance with which would reasonably be expected to have a material adverse effect on the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. Neither the Borrower nor any of its Subsidiaries has received notice to the effect that its operations are not in compliance with any of the requirements of applicable federal, state or local environmental, health and safety statutes and regulations or are the subject of any governmental investigation evaluating whether any remedial action is needed to respond to a release of any toxic or hazardous waste or substance into the environment, which non-compliance or remedial action would reasonably be expected to have a material adverse effect on the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. Section 6.14. Other Agreements. Neither the Borrower nor any of its Subsidiaries is in default under the terms of any covenant, indenture or agreement of or affecting the Borrower or any such Subsidiary or any of their Properties, which default would have a material adverse effect on the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. -44- 51 Section 6.15. Mid-Central and SMP Acquisitions. (a) Mid-Central. The Borrower has heretofore delivered to the Agent a true and correct copy of the Mid-Central Purchase Agreement and, except to the extent consented to in writing by the Agent, the Mid-Central Purchase Agreement has not been amended or modified in any material respect and no condition to the effectiveness thereof or the obligations of the Borrower thereunder has been waived. The Borrower and, to the best of the Borrower's knowledge, the shareholders of Mid-Central have all necessary right, power, and authority to consummate the transactions contemplated by the Mid-Central Purchase Agreement and to perform all of their obligations thereunder. The Mid-Central Purchase Agreement has been duly authorized, executed, and delivered by the Borrower and, to the best of the Borrower's knowledge, the shareholders of Mid-Central, and the Mid-Central Purchase Agreement constitutes the valid and binding obligation of the Borrower and to the best of the Borrower's knowledge, such shareholders, enforceable against each of them in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law); and the Mid-Central Purchase Agreement does not, nor does the observance or performance by the Borrower or, to the best of the Borrower's knowledge, the shareholders of Mid-Central of any of the matters and things therein provided for, contravene or constitute a default under any provision of law or any judgment, injunction, order, or decree binding upon such Person or any provision of the charter, articles of incorporation, or by-laws of such Person or any covenant, indenture, or agreement of or affecting such Person or any of its Property, or result in the creation or imposition of any Lien on any such Person's Property. No authorization, consent, license, or exemption from, or filing or registration with, any court or governmental department, agency, or instrumentality, nor any approval or consent of any other Person, is or will be necessary to the valid execution, delivery, or performance by the Borrower, to the best of the Borrower's knowledge, such shareholders of the Mid-Central Purchase Agreement or of any other instrument or document executed and delivered in connection therewith, except for such thereof that have heretofore been obtained and remain in full force and effect. Neither the Borrower nor, to the best of the Borrower's knowledge, any shareholder of the Mid-Central are in default in any of their respective obligations under the Mid-Central Purchase Agreement. (b) SMP Acquisition. Morton Metalcraft Co. of South Carolina ("Morton South Carolina") has heretofore delivered to the Agent a true and correct copy of the SMP Purchase Agreement and, except to the extent consented to in writing by the Agent, the SMP Purchase Agreement has not been amended or modified in any material respect and no condition to the effectiveness thereof or the obligations of Morton South Carolina thereunder has been waived. Morton South Carolina and, to the best of Morton South Carolina's knowledge, the Acquiree has all necessary right, power, and authority to consummate the transactions contemplated by the SMP Purchase Agreement and to perform all of their obligations thereunder. The SMP Purchase Agreement has been duly authorized, executed, and delivered by Morton South Carolina and, to -45- 52 the best of Morton South Carolina's knowledge, the Acquiree and the SMP Purchase Agreement constitutes the valid and binding obligation of Morton South Carolina and to the best of Morton South Carolina's knowledge, the Acquiree, enforceable against each of them in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance or similar laws affecting creditors' rights generally and general principles of equity (regardless of whether the application of such principles is considered in a proceeding in equity or at law); and the SMP Purchase Agreement does not, nor does the observance or performance by Morton South Carolina or, to the best of Morton South Carolina's knowledge, the Acquiree of any of the matters and things therein provided for, contravene or constitute a default under any provision of law or any judgment, injunction, order, or decree binding upon such Person or any provision of the charter, articles of incorporation, or by-laws of such Person or any covenant, indenture, or agreement of or affecting such Person or any of its Property, or result in the creation or imposition of any Lien on any such Person's Property. No authorization, consent, license, or exemption from, or filing or registration with, any court or governmental department, agency, or instrumentality, nor any approval or consent of any other Person, is or will be necessary to the valid execution, delivery, or performance by Morton South Carolina, to the best of Morton South Carolina's knowledge, the Acquiree of the SMP Purchase Agreement or of any other instrument or document executed and delivered in connection therewith, except for such thereof that have heretofore been obtained and remain in full force and effect. Neither Morton South Carolina nor, to the best of Morton South Carolina's knowledge, any Acquiree are in default in any of their respective obligations under the SMP Purchase Agreement. Section 6.16. Year 2000 Compliance. The Borrower and its Subsidiaries are conducting a comprehensive review and assessment of its computer applications, and have made inquiry of their material suppliers, vendors and customers, with respect to any defect in computer software, data bases, hardware, controls and peripherals related to the occurrence of the year 2000 or the use of any date after December 31, 1999, in connection therewith. Based on the foregoing review, assessment and inquiry, the Borrower believes that no such defect could reasonably be expected to have a material adverse effect on the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole. Section 6.17. No Default. No Default or Event of Default has occurred and is continuing. SECTION 7. CONDITIONS PRECEDENT. The obligation of the Lenders to make any Loan or of the Agent to issue any Letter of Credit under this Agreement is subject to the following conditions precedent: -46- 53 Section 7.1. All Advances. As of the time of the making of each Loan and the issuance of each Letter of Credit (including the initial Loan and the initial Letter of Credit) hereunder: (a) each of the representations and warranties set forth in Section 6 hereof and the Applications shall be true and correct in all material respects as of such time, except to the extent the same relate expressly to an earlier date; (b) the Borrower shall be in compliance with all of the terms and conditions hereof, and no Default or Event of Default shall have occurred and be continuing hereunder; (c) in the case of each Revolving Loan and Letter of Credit, after giving effect to such extension of credit, the aggregate principal amount of all Revolving Loans, Swing Loans and L/C Obligations outstanding under the Revolving Credit shall not exceed the Revolving Credit Commitments then in effect; (d) in the case of each Swing Loan, after giving effect to such extension of credit, the aggregate principal amount of all Swing Loans shall not exceed the Swing Line Commitment then in effect; (e) such extension of credit shall not violate any order, judgment or decree of any court or other authority or any provision of law or regulation applicable to the Agent or any Lender (including, without limitation, Regulation U of the Board of Governors of the Federal Reserve System) as then in effect; and (f) in the case of the issuance of any Letter of Credit, the Agent shall have received a properly completed Application therefor and, in the case of an extension or increase in the amount of the Letter of Credit, the Agent shall have received a written request therefor, in a form acceptable to the Agent, with such Application or written request, in each case to be accompanied by the fees required by this Agreement. Each Borrower's request for any Loan or for any Letter of Credit, shall constitute its warranty to the Agent and the Lenders on the date such credit is to be extended as to the facts specified in paragraphs (a) and (b) of this Section. Section 7.2. Initial Advance. Prior to the making of the initial Loan or the issuance of the initial Letter of Credit hereunder, the following conditions precedent shall also have been satisfied: -47- 54 (a) the Agent shall have received the following for the account of the Lenders (each to be properly executed and completed) and the same shall have been approved as to form and substance by the Lenders: (i) the Notes; (ii) the Guaranties; (iii) the Collateral Documents and the UCC financing statements requested by the Agent in connection therewith; (iv) a mortgagee's policy of title insurance (or a binding commitment therefor) for each Mortgage (the "Initial Mortgages") on the following real estate (the "Initial Mortgaged Real Estate") insuring the Lien of such Mortgage in the amount set forth below to be a valid first Lien subject to no defects or objections which are unacceptable to the Agent, together with endorsements (including, without limitation, a revolving credit endorsement and a comprehensive endorsement) as the Agent may require; PROPERTY TITLE INSURANCE COVERAGE Illinois $8,250,000 Iowa (a) Carroll George, Inc. $2,250,000 (b) Mid-Central $2,200,000 North Carolina $4,050,000 (v) an ALTA survey prepared by a licensed surveyor on the Initial Mortgaged Real Estate in Illinois; (vi) a certification from a licensed surveyor or independent firm acceptable to the Agent as to whether or not any portion of the Initial Mortgaged Real Estate is in a designated flood hazard area; (vii) a report of an independent firm of environmental engineers acceptable to the Agent concerning the environmental hazards and matters with respect to the Initial Mortgaged Real Estate; (viii) certified copies of resolutions of the Board of Directors of the Borrower and each Guarantor authorizing the execution and delivery of the Loan -48- 55 Documents delivered by them and indicating the authorized signers of such Loan Documents; (ix) copies of the articles of incorporation and by-laws of the Borrower and each Guarantor certified as true and correct by the Secretary or other appropriate officer of the Borrower or such Guarantor, as the case may be; (x) a good standing certificate for the Borrower and each Guarantor, dated as of a date no earlier than thirty days prior to the date hereof, from the appropriate governmental office in the jurisdiction of its incorporation; and (xi) an incumbency certificate containing the name, title and genuine signatures of the Borrower's Authorized Representatives; and (b) the Agent shall have received for the account of and addressed to the Lenders the favorable written opinion of counsel for the Borrower and certain Guarantors in the form attached hereto as Exhibit H; (c) the Agent shall have received for itself and for the Lenders the initial fees called for hereby; (d) the Agent shall have received a Compliance Certificate showing a computation of the calculation of the Cash Flow Leverage Ratio as of, and after giving effect to, the initial extension of credit hereunder, such computation to be in form and substance reasonably satisfactory to the Agent and otherwise in reasonable detail; (e) the Liens granted to the Agent under the Collateral Documents shall have been perfected in a manner satisfactory to each Lender and its counsel; (f) all conditions precedent to the Mid-Central Acquisition and the SMP Acquisition shall have been satisfied except for the Lenders' funding of not more than $26,000,000 of the purchase price for the Mid-Central Acquisition and the SMP Acquisition and the Lenders shall have received assurances satisfactory to them of the foregoing; (g) The Agent shall have received and approved as to form and substance: (i) the annual audit report and the Company financial statements for Mid-Central for its fiscal year ending December 31, 1997; (ii) an internally prepared balance sheet for the Company and each Subsidiary (other than Mid-Central) as at March 31, 1998 and an internally prepared income statement for the quarter then ended; (iii) the Mid-Central -49- 56 Purchase Agreement for the Mid-Central Acquisition; (iv) the SMP Purchase Agreement for the SMP Acquisition; (v) the due diligence reports relating to the Mid-Central Acquisition; and (vi) the field audit by the Agent of Mid-Central relating to the Mid-Central Acquisition; (h) the Agent shall have received a payoff and lien release letter from Banker's Trust Company setting forth, among other things, the total amount of Indebtedness outstanding to it from Mid-Central (including any outstanding letters of credit issued for Mid-Central's account) and containing an undertaking to cause to be delivered to the Agent each UCC termination statement and any other lien release instrument necessary to release Banker's Trust Company's Lien on all Assets on all Property of Mid-Central and its subsidiaries, if any, which payoff and lien release letter shall be in form and substance reasonably acceptable to the Agent; and (i) the Agent shall have received for the account of the Lenders such other agreements, instruments, documents, certificates and opinions as the Agent or the Lenders may reasonably request. References in this Section to Subsidiaries shall be deemed to include each Acquiree and its subsidiaries prior to, as well as after, consummation of each of the Mid-Central Acquisition and the SMP Acquisition. Section 7.3. Initial Loans. The Borrower shall use the proceeds of the initial Loans to finance the Mid-Central Acquisition and (at the Borrower's option) the SMP Acquisition and to repay the Existing Bank Loans in full and terminate the loan agreement under which such credit was extended. The Borrower hereby irrevocably authorizes and directs the Lenders to so disburse such proceeds. Section 7.4. Real Estate Surveys. Not later than 60 days from the date hereof, the Agent shall have received for the account of the Lenders and shall have been approved as to form and substance by the Lenders, an ALTA survey prepared by a licensed surveyor on the Initial Mortgaged Real Estate in Honea Path, South Carolina, Northwood, Iowa, Welcome, North Carolina and West Des Moines, Iowa. Any failure of the Borrower to satisfy the above conditions precedent by the deadline also set forth above in this Section 7.4 will constitute an Event of Default unless such Event of Default shall be waived by the Required Lenders. -50- 57 SECTION 8. COVENANTS. The Borrower agrees that, so long as any Loans, Letters of Credit or Commitments are available to or in use by the Borrower hereunder, except to the extent compliance in any case or cases is waived in writing by the Required Lenders: Section 8.1. Maintenance of Business. The Borrower shall, and shall cause each of its Subsidiaries to, preserve and keep in force and effect its corporate existence (except to the extent such existence terminates in mergers and consolidations permitted by Section 8.16 hereof) and all licenses, permits and franchises necessary to the proper conduct of its business. Section 8.2. Maintenance of Property. The Borrower will maintain, preserve and keep those of its Properties material to its business in good repair, working order and condition (ordinary wear and tear excepted) and will from time to time make all needful and proper repairs, renewals, replacements, additions and betterments thereto so that at all times the efficiency thereof shall be fully preserved and maintained, and will cause each of their respective Subsidiaries to do so in respect of Property owned or used by it. Section 8.3. Taxes and Assessments. The Borrower will duly pay and discharge, and will cause each of its Subsidiaries to duly pay and discharge, all federal and other material taxes, rates, assessments, fees and governmental charges upon or against it or its Properties, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith and by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves are provided therefor. Section 8.4. Insurance. The Borrower will insure and keep insured, and will cause each of its Subsidiaries to insure and keep insured, with good and responsible insurance companies, all insurable Property owned by it which is of a character usually insured by Persons similarly situated and operating like Properties against loss or damage from such hazards and risks, and in such amounts, as are insured by Persons similarly situated and operating like Properties; and the Borrower will insure, and cause each of their respective Subsidiaries to insure, such other hazards and risks (including employers' and public liability risks) with other good and responsible insurance companies as and to the extent usually insured by Persons similarly situated and conducting similar businesses. The Borrower will upon request of the Agent furnish a certificate setting forth in summary form the nature and extent of the insurance maintained pursuant to this Section. Section 8.5. Financial Reports. The Borrower will, and will cause each of its Subsidiaries to, maintain a standard system of accounting in accordance with GAAP, will permit the Agent, each Lender and their representatives to visit and inspect the properties and assets (including books and records) of the Borrower and its Subsidiaries at all reasonable times and -51- 58 will furnish to the Agent, each Lender and their duly authorized representatives such information respecting the business and financial condition of the Borrower and its Subsidiaries as the Agent or such Lender may reasonably request; and without any request, the Borrower will furnish to the Lenders: (a) as soon as available, and in any event within 45 days after the close of each quarterly fiscal period of the Borrower, a copy of the balance sheet and statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for such period, all prepared on a consolidated basis and in reasonable detail showing in comparative form the figures for the corresponding date and period in the previous fiscal year, prepared by the Borrower in accordance with GAAP (subject to normal year-end audit adjustments and the absence of notes) and certified to by the chief financial officer of the Borrower; (b) as soon as available, and in any event within 90 days after the close of each fiscal year of the Borrower, a copy of the consolidated balance sheet of the Borrower and its Subsidiaries as of the close of such fiscal year and the consolidated statements of income, retained earnings and cash flows of the Borrower and its Subsidiaries for such period, and accompanying notes thereto, all in reasonable detail showing in comparative form the figures for the previous fiscal year, accompanied by an unqualified opinion thereon of Clifton Gunderson L.L.C. or another firm of independent public accountants of recognized national standing, selected by the Borrower and satisfactory to the Agent, to the effect that the financial statements have been prepared in accordance with GAAP and present fairly in accordance with GAAP the consolidated financial condition of the Borrower and its Subsidiaries as of the close of such fiscal year and the results of their operations and cash flows for the fiscal year then ended and that an examination of such accounts in connection with such financial statements has been made in accordance with generally accepted auditing standards and, accordingly, such examination included such tests of the accounting records and such other auditing procedures as were considered necessary in the circumstances; (c) if any Lender so requests, the Borrower, not later than 10 days after receipt thereof, a copy of any management letters on internal accounting controls of the Borrower or any Subsidiary prepared by its independent public accountants; (d) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports the Borrower sends to its shareholders, and copies of all other regular, periodic and special reports (other than SEC Form 3, Form 4, Form 5, Form S-8 or similar administrative reports) and all registration statements the Borrower files -52- 59 with the Securities and Exchange Commission or any successor thereto, or with any national securities exchanges; and (e) promptly after knowledge thereof shall have come to the attention of any responsible officer of the Borrower, written notice of any threatened or pending litigation or governmental proceeding or labor controversy against the Borrower or any Subsidiary which, if adversely determined, would have a material adverse effect on the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole or of the occurrence of any Default or Event of Default hereunder. Each of the financial statements furnished to the Lenders pursuant to clauses (a) and (b) of this Section shall be accompanied by a written certificate in the form attached hereto as Exhibit E signed by the chief financial officer of the Borrower to the effect that to the best of the chief financial officer's knowledge and belief no Default or Event of Default is continuing as of the close of the period covered by such statements or, if any such Default or Event of Default is continuing as of the close of such period, setting forth a description of such Default or Event of Default and specifying the action, if any, taken by the Borrower to remedy the same. Such certificate shall also set forth the calculations supporting such statements in respect of Sections 8.6, 8.7, 8.8, 8.9 and 8.10 of this Agreement. The Borrower will, and will cause each Subsidiary to, permit the Agent, the Lenders and their duly authorized representatives to visit and inspect any of the Properties of the Borrower and its Subsidiaries, to examine all of their books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers, employees and independent public accountants (and by this provision the Borrower authorizes such accountants to discuss with the Lenders (and such Persons as any Lender may designate) the finances and affairs of the Borrower and its Subsidiaries) all at such reasonable times and as often as may be reasonably requested. Section 8.6. Interest Coverage Ratio. The Borrower will, as of the last day of each fiscal quarter of the Borrower, maintain an Interest Coverage Ratio of not less than (i) 1.75 to 1.0 from the date hereof through and including September 30, 1999 and (ii) 2.00 to 1.0 at all times thereafter. Section 8.7. Cash Flow Leverage Ratio. The Borrower will at all times maintain its Cash Flow Leverage Ratio at not more than (i) 4.00 to 1.0 from the date hereof through and including December 30, 1999 and (ii) 3.50 to 1.0 at all times thereafter. -53- 60 Section 8.8. EBITDA. The Borrower will, maintain EBITDA for the fiscal quarter ending on or about the date specified below in an amount not less than the sum indicated to the right of such date below: FOR FISCAL QUARTER ENDING EBITDA SHALL NOT BE LESS THAN: September 30, 1998 $3,750,000 December 31, 1998 $4,500,000 March 31, 1999 $5,250,000 Section 8.9. Fixed Charge Coverage Ratio. The Borrower will, as of the last day of each fiscal quarter of the Borrower (commencing with the fiscal quarter of the Borrower ending on or about June 30, 1999), maintain the Fixed Charge Coverage Ratio at not less than (i) 1.05 to 1.0 through and including December 30, 1999, (ii) 1.15 to 1.0 from December 31, 1999 through and including December 30, 2000 and (iii) 1.25 to 1.0 at all times thereafter. Section 8.10. Capital Expenditures. The Borrower will not, nor will it permit any Subsidiary to, expend during any fiscal year, or (without duplication) become obligated to expend during such fiscal year, in each case for Capital Expenditures an aggregate amount in excess of $12,000,000 for the Borrower and its Subsidiaries taken together. Section 8.11. Indebtedness. The Borrower will not, nor will it permit any of its Subsidiaries to, issue, incur, assume, create or have outstanding any Indebtedness; provided, however, that the foregoing provisions shall not restrict nor operate to prevent: (a) the Obligations; (b) purchase money indebtedness and Capitalized Lease Obligations secured by Liens permitted by Section 8.12(d) hereof in an aggregate amount which does not exceed $5,000,000 at any one time outstanding; (c) intercompany borrowings by and from the Borrower and its Subsidiaries; (d) indebtedness secured by Liens permitted by Section 8.12(e) hereof in an aggregate amount which does not exceed $1,000,000 at any one time outstanding; (e) non-compete payments owing by Morton to Roland Linder and Lee Hinnen aggregating not more than $500,000; -54- 61 (f) non-compete payments owing to sellers as part of the consideration due them for the Borrower's Acquisition of Carroll George, Inc.; (g) unsecured Subordinated Debt; (h) after consummation of the SMP Acquisition, the liability of Morton Metalcraft Co. of South Carolina for the currently outstanding indebtedness of SMP to Little River Electric Cooperative, Inc. ("Little River") evidenced by that certain Mortgage Note of SMP dated as of November 22, 1996 payable to the order of Little River in the face principal amount of $400,000 provided such liability at no time aggregates in excess of $400,000; and (i) unsecured indebtedness not otherwise permitted by this Section 8.11 provided the aggregate amount at any one time outstanding does not exceed $100,000. Section 8.12. Liens. The Borrower will not, and will not permit any of its Subsidiaries to, create, incur or permit to exist any Lien of any kind on any Property owned by the Borrower or any such Subsidiary; provided, however, that this Section shall not apply to nor operate to prevent: (a) Liens arising by statute in connection with worker's compensation, unemployment insurance, old age benefits, social security obligations, taxes, assessments, statutory obligations or other similar charges, good faith cash deposits in connection with tenders, contracts or leases to which the Borrower or any of its Subsidiaries is a party or other cash deposits required to be made in the ordinary course of business, provided in each case that the obligation is not for borrowed money and that the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest and adequate reserves have been established therefor; (b) mechanics', workmen's, materialmen's, landlords', carriers', or other similar Liens arising in the ordinary course of business with respect to obligations which are not overdue or which are being contested in good faith by appropriate proceedings which prevent enforcement of the matter under contest; (c) the pledge of assets for the purpose of securing an appeal, stay or discharge in the course of any legal proceeding, provided that the aggregate amount of liabilities of the Borrower and its Subsidiaries secured by a pledge of assets permitted under this clause, including interest and penalties thereon, if any, shall not be in excess of $250,000 at any one time outstanding; -55- 62 (d) Liens securing indebtedness permitted by Section 8.11(b) hereof in respect of Property now owned or hereafter acquired by the Borrower or any of its Subsidiaries (not extending to any other Property), or Liens on Property so acquired (not extending to any other Property) existing at the time of acquisition thereof, or renewals, extensions and refundings of any such Liens (not extending to any other Property); (e) any Lien existing on any Property (other than (i) shares of stock in any Subsidiary, (ii) receivables, inventory and similar working capital assets and (iii) patents, trademarks and similar intangibles) prior to the acquisition thereof by the Borrower or any Subsidiary, provided that such Lien is not created in contemplation of or in connection with such acquisition; (f) Liens on the real estate of Morton Metalcraft Co. of South Carolina in Honea Path, Abbeville County, South Carolina and the buildings and other improvements situated on such real estate securing the indebtedness permitted by Section 8.11(h) hereof provided such liens do not in any event after August 31, 1998 encumber any trade fixtures or similar equipment; (g) the Liens described on Schedule 8.12 hereof; and (h) with respect to real property, easements, rights of way, reservations and other minor defects or irregularities in title which do not materially impair the use thereof for the purposes for which it is held by the Borrower or any of its Subsidiaries. Section 8.13. Investments, Loans, Advances and Guaranties. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly, make, retain or have outstanding any investments (whether through purchase of stock or obligations or otherwise) in, or loans or advances (other than for travel advances and other similar cash advances made to employees in the ordinary course of business) to, any other Person, or be or become liable as endorser, guarantor, surety or otherwise for any debt, obligation or undertaking of any other Person, or otherwise agree to provide funds for payment of the obligations of another, or supply funds thereto or invest therein or otherwise assure a creditor of another against loss or apply for or become liable to the issuer of a letter of credit which supports an obligation of another, or subordinate any claim or demand it may have to the claim or demand of any other Person; provided, however, that the foregoing provisions shall not apply to nor operate to prevent: (a) investments in direct obligations of the United States of America or of any agency or instrumentality thereof whose obligations constitute full faith and credit obligations of the United States of America, provided that any such obligations shall mature within one year of the date of issuance thereof; -56- 63 (b) investments in commercial paper rated at least P-1 by Moody's Investors Services, Inc. and at least A-1 by Standard & Poor's Corporation maturing within 270 days of the date of issuance thereof; (c) investments in certificates of deposit issued by any United States commercial bank having capital and surplus of not less than $100,000,000 which have a maturity of one year or less; (d) endorsement of items for deposit or collection of commercial paper received in the ordinary course of business; (e) intercompany loans and advances by and from the Borrower and its Subsidiaries; (f) Permitted Acquisitions; and (g) the Guaranties. In determining the amount of investments, loans, advances and guarantees permitted under this Section, investments shall always be taken at the original cost thereof (regardless of any subsequent appreciation or depreciation therein); loans and advances shall be taken at the principal amount thereof then remaining unpaid; and guarantees shall be taken at the amount of obligations guaranteed thereby. Section 8.14. Leases. (a) Sales and Leasebacks. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any arrangement with any bank, insurance company or any other lender or investor providing for the leasing by the Borrower or any such Subsidiary of any Property theretofore owned by it and which has been or is to be sold or transferred by such owner to such lender or investor. (b) Operating Leases. The Borrower shall not, nor shall it permit any of its Subsidiaries to, acquire the use or possession of any Property under a lease or similar arrangement, whether or not the Borrower or any of its Subsidiaries have the express or implied right to acquire title to or purchase such Property, at any time if, after giving effect thereto, the aggregate amount of fixed rentals and other consideration payable by the Borrower and its Subsidiaries under all such leases and similar arrangements would exceed $7,500,000 during any fiscal year of the Borrower. Capital Leases shall not be included in computing compliance with this Section to the extent the Borrower's and its Subsidiaries' liability in respect of the same is permitted by Section 8.11(b) hereof. -57- 64 Section 8.15. Dividends and Certain Other Restricted Payments. The Borrower will not (a) declare or pay any dividends on or make any other distributions in respect of any class or series of its capital stock or (b) directly or indirectly purchase, redeem or otherwise acquire or retire any of its capital stock; provided, however, that the foregoing shall neither apply to nor operate to prevent the Borrower's expenditure of up to $63,000 in the aggregate to redeem fractional shares of its common stock resulting from a previous reverse stock split of the Borrower (the "Permitted Redemptions"). Section 8.16. Mergers, Consolidations and Sales. The Borrower will not, and will not permit any of its Subsidiaries to, be a party to any merger or consolidation, or sell, transfer, lease or otherwise dispose of any operating unit or division or any rights to any trade name or similar intangible or all or any substantial part of its Property (except for sales of inventory in the ordinary course of business), or in any event sell or discount (with or without recourse) any of its notes or accounts receivable; provided, however, that: (a) any Subsidiary of the Borrower (including any corporation which immediately after giving effect to an Acquisition permitted by Section 8.16 hereof becomes such a Subsidiary, but in any event excluding the Borrower) may merge or consolidate with or into the Borrower or any Wholly Owned Subsidiary of the Borrower; provided that in any such merger or consolidation involving the Borrower, the Borrower shall be the surviving or continuing corporation, or, in the case of any other merger or consolidation of a Subsidiary and a Wholly Owned Subsidiary of the Borrower, such Wholly Owned Subsidiary shall be the continuing or surviving corporation; and provided, further, that, in the case of such a merger or consolidation involving a Guarantor, the net worth of the continuing or surviving corporation shall not be less than the net worth of such Guarantor immediately prior to such merger or consolidation; (b) any Subsidiary may in the ordinary course of its business sell, lease or otherwise dispose of all or any substantial part of its equipment to the Borrower or any Wholly Owned Subsidiary of the Borrower; and (c) the Borrower may merge with a Wholly Owned Subsidiary incorporated in Delaware and directly owned by the Borrower solely for the purpose of changing the Borrower's state of incorporation to Delaware, with such Wholly Owned Subsidiary surviving such merger, provided that: (i) at the time of such merger, no Default or Event of Default shall occur or be continuing; -58- 65 (ii) such Wholly Owned Subsidiary shall have acknowledged in writing (in form and substance reasonably satisfactory to the Agent and Required Lenders) its assumption of all the Borrower's obligations under the Loan Documents to the same extent, with the same force and effect, as if such Wholly Owned Subsidiary were originally the Borrower identified and defined therein; (iii) the Agent shall have received an opinion of counsel of the Borrower, and such other assurances that the Agent or Required Lenders shall reasonably require, to confirm that such merger has been effected in accordance with all applicable laws and that the foregoing conditions set forth in this subsection (c) have been satisfied; and (iv) such merger shall have no adverse effect on the financial condition Properties, business or operations the Borrower or any Subsidiary or on the ability of any Subsidiary to perform or the Agent's ability to enforce performance of the obligations of any of them under the Loan Documents. The term "substantial" as used herein shall mean the sale, transfer, lease or other disposition in any fiscal year of five percent (5%) or more of the Properties of the Borrower and its Subsidiaries taken as a whole. Section 8.17. Acquisitions. Other than the Mid-Central Acquisition and the SMP Acquisition, the Borrower will not, and will not permit any of its Subsidiaries to, make or commit to make any Acquisitions; provided, however, that the Borrower and its Wholly Owned Subsidiaries may make Acquisitions of assets located primarily in the United States used or useful in a business similar or related to the business of the Borrower, such Borrower or such Subsidiary (or Acquisitions of the capital stock of a corporation engaged primarily in such a business if (a) the corporation's primary operations are in the United States and (b) immediately after giving effect to such Acquisition, the corporation so acquired becomes a Subsidiary) if and only if: (i) the Borrower has, prior to committing to the acquisition, notified the Lenders thereof and demonstrated to the satisfaction of the Lenders that no Default or Event of Default shall occur or be continuing at the time of or after giving effect to the Acquisition in question, (ii) the board of directors or other governing body of such Person whose Property, or voting stock or other interests in which, are being so acquired has approved the terms of such Acquisition, (iii) the Borrower shall have delivered to the Lenders an updated Schedule 6.2 to reflect any new Subsidiary resulting from such Acquisition, (iv) the aggregate amount expended by the Borrower and its Subsidiaries as consideration for such Acquisition (and in any event (1) including as such consideration, any Indebtedness assumed or incurred as a result of such Acquisition, and (2) excluding as such consideration, any equity securities issued by the Borrower as consideration for such Acquisition), when taken together with the aggregate amount expended as consideration -59- 66 (including Indebtedness and excluding equity securities as aforesaid) for all other Acquisitions permitted under this Section 8.17 (other than the Mid-Central Acquisition, the SMP Acquisition and other Acquisitions consummated prior to the date hereof) during the then twelve most recently completed calendar months does not exceed $5,000,000, (v) the Borrower has informed the Lenders of such Acquisition at least twenty (20) Business Days in advance of its closing and promptly informed the Lenders of any terms and conditions applicable to the Acquisition which the Borrower in good faith believe are material, (vi) the Borrower can demonstrate on a pro forma basis after giving effect to such Acquisition that (x) the Cash Flow Leverage Ratio (such pro forma calculation of the Cash Flow Leverage Ratio to be made on the basis of the information contained in the then most recent Compliance Certificate required to be submitted to each Lender with the following adjustments: (i) Total Funded Debt shall include all indebtedness incurred directly or indirectly to finance such Acquisition and (ii) EBITDA shall be computed as if such Acquisition had occurred at the commencement of the four-quarter period with reference to which the Cash Flow Leverage Ratio is being calculated) is less than 3.0 to 1.0 and (y) the Borrower will continue to comply through the term of this Agreement with Sections 8.6, 8.7, 8.9 and 8.10 of this Agreement (the Borrower to be liable to reimburse the Agent and Lenders for their reasonable out-of-pocket costs of conducting due diligence to verify such demonstration), (vii) at least twenty (20) Business Days in advance of the closing of such Acquisition, the Borrower has provided to the Lenders such financial and other information regarding the Person whose Property or capital stock is being so acquired, including financial statements, and a description of such Person, as the Agent or any Lender may reasonably request and (viii) after giving effect to such Acquisition, the Revolving Loans and L/C Obligations are at least $5,000,000 below the Revolving Credit Commitments then in effect. Capital Expenditures for Property in compliance with Section 8.10 hereof shall not be considered Acquisitions subject to this Section. Section 8.18. Maintenance of Subsidiaries. The Borrower will not assign, sell or transfer, or permit any of its Subsidiaries to issue, assign, sell or transfer, any shares of capital stock of a Subsidiary, provided that the foregoing shall not operate to prevent the issuance, sale and transfer to any person of any shares of capital stock of a Subsidiary solely for the purpose of qualifying, and to the extent legally necessary to qualify, such person as a director of such Subsidiary. Section 8.19. Formation of Subsidiaries. In the event any Subsidiary is formed or acquired after the date hereof, the Borrower shall within thirty (30) Business Days thereof (x) furnish an update to Schedule 6.2 hereof to reflect such new Subsidiary and (y) cause such newly-formed or acquired Subsidiary to execute a Guaranty and execute such Collateral Documents to the extent required by Section 4 hereof (on terms substantially similar to those executed in connection with this Agreement) as the Agent may then require granting the Agent for the benefit of the Lenders a security interest in and lien on the personal property of such -60- 67 Subsidiary as collateral security for the Notes and the other Obligations, as well as the Hedging Liability, together with documentation (including a legal opinion) similar to that described in Section 7.2 hereof relating to the authorization for, execution and delivery of, and validity of such Subsidiary's obligations as a Guarantor hereunder and otherwise under its Loan Documents in form and substance satisfactory to the Agent and such other instruments, documents, certificates and opinions as are required by the Agent in connection therewith. Section 8.20. ERISA. The Borrower will, and will cause each of its Subsidiaries to, promptly pay and discharge all obligations and liabilities arising under ERISA of a character which if unpaid or unperformed might result in the imposition of a Lien against any material portion of its Properties. The Borrower will, and will cause each of its Subsidiaries to, promptly notify the Lenders of (i) the occurrence of any reportable event (as defined in ERISA) with respect to a Plan, (ii) receipt of any notice from the PBGC of its intention to seek termination of any Plan or appointment of a trustee therefor, (iii) its intention to terminate or withdraw from any Plan, and (iv) the occurrence of any event with respect to any Plan which would result in the incurrence by the Borrower or any of its Subsidiaries of any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower or any such Subsidiary with respect to any post-retirement Welfare Plan benefit. Section 8.21. Compliance with Laws. The Borrower will, and will cause each of its Subsidiaries to, comply in all respects with the requirements of all federal, state and local laws, rules, regulations, ordinances and orders applicable to or pertaining to the Properties or business operations of the Borrower or any such Subsidiary, non-compliance with which could have a material adverse effect on the financial condition, Properties, business or operations of the Borrower and its Subsidiaries taken as a whole or would reasonably be expected to result in a Lien upon any of their Property. Section 8.22. Burdensome Contracts With Affiliates. The Borrower will not, and will not permit any of its Subsidiaries to, enter into any contract, agreement or business arrangement with any of its Affiliates (other than with Wholly Owned Subsidiaries) on terms and conditions which are less favorable to the Borrower or such Subsidiary than would be usual and customary in similar contracts, agreements or business arrangements between Persons not affiliated with each other. Section 8.23. Changes in Fiscal Year. Except to change (with notice to the Lenders) its fiscal year to correspond with the calendar year, neither the Borrower nor any of its Subsidiaries will change its fiscal year from its present basis without the prior written consent of the Required Lenders. -61- 68 Section 8.24. Change in the Nature of Business. The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business or activity if as a result the general nature of the business of the Borrower or any such Subsidiary would be changed in any material respect from the general nature of the business engaged in by the Borrower or such Subsidiary on the date of this Agreement. Section 8.25. Use of Loan Proceeds. The Borrower will use the Revolving Credit and Term Loans solely to refinance currently outstanding Indebtedness, to finance general corporate needs and to finance Permitted Acquisitions. Section 8.26. Interest Rate Protection. On or before the date hereof, the Borrower will hedge its interest rate risk on 50% of the principal amount outstanding on the Term Loans, through the use of one or more interest rate swaps, interest rate caps, interest rate collars or other recognized interest rate hedging arrangements for a minimum of three years (collectively, "Hedging Arrangements"), with all of the foregoing to effectively limit the amount of interest that the Borrower must pay on notional amounts of not less than such portion of the Term Loans to not more than a rate acceptable to the Agent in its discretion for a period ending no earlier than June 1, 2001 and to be with the Lenders, their respective Affiliates or with other parties reasonably acceptable to the Required Lenders. If the Borrower enters into any Hedging Arrangements with any Lender, the Borrower's obligations to such Lender in connection with such Hedging Arrangements do not constitute usage of the Commitments of such Lender. SECTION 9. EVENTS OF DEFAULT AND REMEDIES. Section 9.1. Any one or more of the following shall constitute an Event of Default hereunder: (a) default in the payment when due of all or any part of the principal of any Note (whether at the stated maturity thereof or at any other time provided for in this Agreement) or default in the reimbursement when due of amounts drawn under a Letter of Credit; or (b) default for five (5) days or more in the payment when due of all or any part of interest on any Note (whether at the stated maturity thereof or at any other time provided for in this Agreement) or of any fee or other amount payable by the Borrower hereunder or under any Application; or (c) default in the observance or performance of any covenant set forth in Sections 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13, 8.15, 8.16, 8.17, 8.18 or 8.25 hereof; or -62- 69 (d) default in the observance or performance of any covenant set forth in Section 8.5 hereof which is not remedied within ten (10) days after written notice thereof to any Borrower by the Agent or any Lender; or (e) default in the observance or performance of any other provision hereof or of any Application which is not remedied within thirty (30) days after written notice thereof to any Borrower by the Agent or any Lender; or (f) any representation or warranty made by the Borrower herein or in any Application, or in any statement or certificate furnished by it pursuant hereto or thereto, or in connection with any Loan made or Letter of Credit issued hereunder, proves untrue in any material respect as of the date of the issuance or making thereof; or (g) any Guaranty shall for any reason not be or shall cease to be in full force and effect, or any Guarantor shall purport to disavow, revoke, repudiate or terminate its Guaranty; or (h) default shall occur under any evidence of Indebtedness aggregating $1,000,000 or more issued, assumed or guaranteed by the Borrower or any Subsidiary or under any indenture, agreement or other instrument under which the same may be issued, and such default shall continue for a period of time sufficient to permit the acceleration of the maturity of any such Indebtedness (whether or not such maturity is in fact accelerated) or any such Indebtedness shall not be paid when due (whether by lapse of time, acceleration or otherwise); or (i) any judgment or judgments, writ or writs, or warrant or warrants of attachment, or any similar process or processes in an aggregate amount in excess of $250,000 shall be entered or filed against the Borrower or any of its Subsidiaries or against any of their Property and which remains unvacated, unbonded, unstayed or unsatisfied for a period of thirty (30) days; or (j) the Borrower or any member of its Controlled Group shall fail to pay when due an amount or amounts aggregating in excess $250,000 which it shall have become liable to pay to the PBGC or to a Plan under Title IV of ERISA; or notice of intent to terminate a Plan or Plans having aggregate Unfunded Vested Liabilities in excess of $250,000 (collectively, a "Material Plan") shall be filed under Title IV of ERISA by the Borrower or any other member of its Controlled Group, any plan administrator or any combination of the foregoing; or the PBGC shall institute proceedings under Title IV of ERISA to terminate or to cause a trustee to be appointed to administer any Material Plan or a proceeding shall be instituted by a fiduciary of any -63- 70 Material Plan against the Borrower or any member of its Controlled Group to enforce Section 515 or 4219(c)(5) of ERISA and such proceeding shall not have been dismissed within thirty (30) days thereafter; or a condition shall exist by reason of which the PBGC would be entitled to obtain a decree adjudicating that any Material Plan must be terminated; or (k) the Borrower or any Subsidiary makes any payment or other distribution on account of the principal of or interest on any indebtedness which payment or other distribution is prohibited under the terms of any instrument subordinating such indebtedness to the Notes or the Borrower's other obligations hereunder; (l) a Change of Control shall occur; or (m) the Borrower or any Subsidiary shall (i) have entered involuntarily against it an order for relief under the United States Bankruptcy Code, as amended, (ii) not pay, or admit in writing its inability to pay, its debts generally as they become due, (iii) make an assignment for the benefit of creditors, (iv) apply for, seek, consent to, or acquiesce in, the appointment of a receiver, custodian, trustee, examiner, liquidator or similar official for it or any substantial part of its Property, (v) institute any proceeding seeking to have entered against it an order for relief under the United States Bankruptcy Code, as amended, to adjudicate it insolvent, or seeking dissolution, winding up, liquidation, reorganization, arrangement, adjustment or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors or fail to file an answer or other pleading denying the material allegations of any such proceeding filed against it, or (vi) fail to contest in good faith any appointment or proceeding described in Section 9.1(m) hereof; or (n) a custodian, receiver, trustee, examiner, liquidator or similar official shall be appointed for the Borrower or any of its Subsidiaries or any substantial part of any of their Property, or a proceeding described in Section 9.1(l)(v) shall be instituted against the Borrower or any of its Subsidiaries, and such appointment continues undischarged or such proceeding continues undismissed or unstayed for a period of sixty (60) days. Section 9.2. When any Event of Default described in clauses (a) through (k), both inclusive, of Section 9.1 has occurred and is continuing, the Agent shall, upon request of the Required Lenders, by notice to the Borrower, take either or both of the following actions: (a) terminate the obligations of the Lenders to extend any further credit hereunder on the date (which may be the date thereof) stated in such notice; -64- 71 (b) declare the principal of and the accrued interest on the Notes to be forthwith due and payable and thereupon the Notes, including both principal and interest and all fees, charges and other amounts payable hereunder, shall be and become immediately due and payable without further demand, presentment, protest or notice of any kind. Section 9.3. When any Event of Default described in clauses (m) or (n) of Section 9.1 has occurred and is continuing, then the Notes, including both principal and interest, and all fees, charges and other amounts payable hereunder, shall immediately become due and payable without presentment, demand, protest or notice of any kind, and the obligations of the Lenders to extend further credit pursuant to any of the terms hereof shall immediately terminate. Section 9.4. When any Event of Default, other than an Event of Default described in subsections (m) or (n) of Section 9.1, has occurred and is continuing, the relevant Borrower shall, upon demand of the Agent (which demand shall be made upon the request of the Required Lenders), and when any Event of Default described in subsections (m) or (n) of Section 9.1 has occurred the Borrower shall, without notice or demand from the Agent, immediately pay to the Agent the full outstanding amount of each Letter of Credit (such amount to be held as cash collateral for the Borrower's obligations in respect of the Letters of Credit), the Borrower agreeing to immediately make each such payment and acknowledging and agreeing the Agent and the Lenders would not have an adequate remedy at law for failure of the Borrower to honor any such demand and that the Agent shall have the right to require the Borrower to specifically perform such undertaking whether or not any draws had been made under any such Letter of Credit. SECTION 10. THE AGENT. Section 10.1. Appointment and Authorization. Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers hereunder and under the Guaranties and the Applications as are designated to the Agent by the terms hereof and thereof together with such powers as are reasonably incidental thereto. The Lenders expressly agree that the Agent is not acting as a fiduciary of the Lenders in respect of the Loan Documents, the Borrower or otherwise, and nothing herein or in any of the other Loan Documents shall result in any duties or obligations on the Agent or any of the Lenders except as expressly set forth herein. The Agent may resign at any time by sending twenty (20) days prior written notice to the Borrower and the Lenders and may be removed by the Required Lenders upon twenty (20) days prior written notice to the Borrower and the Lenders. In the event of any such resignation or removal the Required Lenders may appoint a new agent after consultation with the Borrower, which shall succeed to all the rights, powers and duties of the Agent hereunder and under the Guaranties and Applications. Any resigning or removed Agent shall be -65- 72 entitled to the benefit of all the protective provisions hereof with respect to its acts as an agent hereunder, but no successor Agent shall in any event be liable or responsible for any actions of its predecessor. If the Agent resigns or is removed and no successor is appointed, the rights and obligations of such Agent shall be automatically assumed by the Required Lenders and (i) the Borrower shall be directed to make all payments due each Lender hereunder directly to such Lender and (ii) the Agent's rights in the Guaranties and Applications shall be assigned without representation, recourse or warranty to the Lenders as their interests may appear. Section 10.2. Rights as a Lender. The Agent has and reserves all of the rights, powers and duties hereunder and under its Notes and the Guaranties and Applications as any Lender may have and may exercise the same as though it were not the Agent and the terms "Lender" or "Lenders" as used herein and in all of such documents shall, unless the context otherwise expressly indicates, include the Agent in its individual capacity as a Lender. Section 10.3. Standard of Care. The Lenders acknowledge that they have received and approved copies of the Guaranties and such other information and documents concerning the transactions contemplated and financed hereby as they have requested to receive and/or review. The Agent makes no representations or warranties of any kind or character to the Lenders with respect to the validity, enforceability, genuineness, perfection, value, worth or collectibility hereof or of the Notes or the Guaranties or of any other documents called for hereby or thereby. Neither the Agent nor any director, officer, employee, agent or representative thereof shall in any event be liable for any clerical errors or errors in judgment, inadvertence or oversight, or for action taken or omitted to be taken by it or them hereunder or under the Guaranties or Applications or in connection herewith or therewith except for its or their own gross negligence or willful misconduct. The Agent shall incur no liability under or in respect of this Agreement or the Guaranties or Applications by acting upon any notice, certificate, warranty, instruction or statement (oral or written) of anyone (including anyone in good faith believed by it to be authorized to act on behalf of the Borrower), unless it has actual knowledge of the untruthfulness of same. The Agent may execute any of its duties hereunder by or through employees, agents, and attorneys-in-fact and shall not be answerable to the Lenders for the default or misconduct of any such agents or attorneys-in-fact selected with reasonable care except for the gross negligence or willful misconduct of its employees. The Agent shall be entitled to advice of counsel concerning all matters pertaining to the agencies hereby created and its duties hereunder, and shall incur no liability to anyone and be fully protected in acting upon the advice of such counsel. The Agent shall be entitled to assume that no Default or Event of Default exists unless notified to the contrary by a Lender. The Agent shall in all events be fully protected in acting or failing to act in accord with the instructions of the Required Lenders. The Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall be indemnified to its satisfaction by the Lenders against any and all liability and expense which may be incurred by the Agent by reason of taking or continuing to take any such action. The Agent may treat the owner of any -66- 73 Note as the holder thereof until written notice of transfer shall have been filed with the Agent signed by such owner in form satisfactory to the Agent. Each Lender acknowledges that it has independently and without reliance on the Agent or any other Lender and based upon such information, investigations and inquiries as it deems appropriate made its own credit analysis and decision to extend credit to the Borrower. It shall be the responsibility of each Lender to keep itself informed as to the creditworthiness of the Borrower and the Agent shall have no liability to any Lender with respect thereto. Section 10.4. Costs and Expenses. Each Lender agrees to reimburse the Agent for all costs and expenses suffered or incurred by the Agent in performing its duties hereunder and under the Guaranties and Applications, or in the exercise of any right or power imposed or conferred upon the Agent hereby or thereby, to the extent that the Agent is not promptly reimbursed for same by the Borrower, all such costs and expenses to be borne by the Lenders ratably in accordance with the amounts of their respective Commitments. If any Lender fails to reimburse the Agent for such Lender's share of any such costs and expenses, such costs and expenses shall be paid pro rata by the remaining Lenders, but without in any manner releasing the defaulting Lender from its liability hereunder. Section 10.5. Indemnity. The Lenders, to the extent not prohibited by applicable law, shall ratably indemnify and hold the Agent, and its directors, officers, employees, agents or representatives harmless from and against any liabilities, losses, costs and expenses suffered or incurred by them hereunder or under the Guaranties or Applications or in connection with the transactions contemplated hereby or thereby, regardless of when asserted or arising, except to the extent they are promptly reimbursed for the same by the relevant Borrower and except to the extent that any event giving rise to a claim was caused by the gross negligence or willful misconduct of the party seeking to be indemnified. If any Lender defaults in its obligations hereunder, its share of the obligations shall be paid pro rata by the remaining Lenders, but without in any manner releasing the defaulting Lender from its liability hereunder. Section 10.6. Interest Rate Hedging Arrangements. By virtue of a Lender's execution of this Agreement or an Assignment Agreement, as the case may be, any Affiliate of such Lender with whom the Borrower has entered into an agreement creating Hedging Liability shall be deemed a Lender party hereto for purpose of any reference in a Loan Document to the parties for whom the Agent is acting, it being understood and agreed that the rights and benefits of such Affiliate under the Loan Documents consist exclusively of such Affiliate's right to share in payments and collections out of the Collateral and the Guaranties as more fully set forth in other provisions hereof. -67- 74 SECTION 11. JOINT AND SEVERAL LIABILITY AND GUARANTIES. Section 11.1. Joint and Several Liability and Guaranties. To induce the Lenders to provide the credit described herein and in consideration of benefits expected to accrue to each Guarantor by reason of the Commitments and for other good and valuable consideration, receipt of which is hereby acknowledged, each Subsidiary party hereto and each Subsidiary which executes and delivers a Guaranty (each such Subsidiary being hereinafter referred to individually as a "Guarantor" and collectively as the "Guarantors") hereby unconditionally and irrevocably guarantee jointly and severally to the Agent, the Lenders, their Affiliates and each other holder of any of the Obligations or Hedging Liability, (x) the due and punctual payment of all present and future Obligations, including, but not limited to, the due and punctual payment of principal of and interest on the Loans and Reimbursement Obligations, as and when the same shall become due and payable, whether at stated maturity, by acceleration or otherwise, according to the terms hereof and thereof and (y) the due and punctual payment of all present and future Hedging Liability as and when the same shall become due and payable, whether at its stated maturity, by acceleration or otherwise, according to the terms thereof (the Obligations and Hedging Liability so guaranteed being hereinafter referred to collectively as the "Guaranteed Obligations"). In case of failure by the Borrower punctually to pay any Guaranteed Obligations, each Guarantor hereby unconditionally agrees jointly and severally to make such payment or to cause such payment to be made punctually as and when the same shall become due and payable, whether at stated maturity, by acceleration or otherwise, and as if such payment were made by the Borrower. Section 11.2. Guaranty Unconditional. The obligations of each Guarantor as a guarantor or joint and several obligor under the Loan Documents, the instruments or documents governing any Hedging Liability (the loan documents and such other instruments and documents governing the Hedging Liability being hereinafter referred to collectively as the "Guaranteed Debt Documents" and individually as a "Guaranteed Debt Document," including this Section 11, shall be unconditional and absolute and, without limiting the generality of the foregoing, shall not be released, discharged or otherwise affected by: (a) any extension, renewal, settlement, compromise, waiver or release in respect of any obligation of the Borrower or of any other Guarantor under this Agreement or any other Guaranteed Debt Document or by operation of law or otherwise; (b) any modification or amendment of or supplement to this Agreement or any other Guaranteed Debt Document; (c) any change in the corporate existence, structure or ownership of, or any insolvency, bankruptcy, reorganization or other similar proceeding affecting, the -68- 75 Borrower, any other Guarantor, or any of their respective assets, or any resulting release or discharge of any obligation of the Borrower or of any other Guarantor contained in any Guaranteed Debt Document; (d) the existence of any claim, set-off or other rights which the Guarantor may have at any time against the Agent, any Lender or any other Person, whether or not arising in connection herewith; (e) any failure to assert, or any assertion of, any claim or demand or any exercise of, or failure to exercise, any rights or remedies against the Borrower, any other Guarantor or any other Person or Property; (f) any application of any sums by whomsoever paid or howsoever realized to any obligation of the Borrower, regardless of what obligations of the Borrower remain unpaid; (g) any invalidity or unenforceability relating to or against the Borrower or any other Guarantor for any reason of this Agreement or of any other Guaranteed Debt Document or any provision of applicable law or regulation purporting to prohibit the payment by the Borrower or any other Guarantor of the principal of or interest on any Note or any other amount payable by them under the Guaranteed Debt Documents; or (h) any other act or omission to act or delay of any kind by the Agent, any Lender or any other Person or any other circumstance whatsoever that might, but for the provisions of this paragraph, constitute a legal or equitable discharge of the obligations of the Guarantors under the Guaranteed Debt Documents. Section 11.3. Discharge Only Upon Payment in Full; Reinstatement in Certain Circumstances. Each Guarantor's obligations under this Section 11 shall remain in full force and effect until the Commitments are terminated and the principal of and interest on the Notes and all other Guaranteed Obligations shall have been paid in full. If at any time any payment of the principal of or interest on any Note or any other amount payable by the Borrower under any of the Guaranteed Debt Documents is rescinded or must be otherwise restored or returned upon the insolvency, bankruptcy or reorganization of the Borrower or of any Guarantor, or otherwise, each Guarantor's obligations under this Section 11 with respect to such payment shall be reinstated at such time as though such payment had become due but had not been made at such time. -69- 76 Section 11.4. Waivers. (a) General. Each Guarantor irrevocably waives acceptance hereof, presentment, demand, protest and any notice not provided for herein, as well as any requirement that at any time any action be taken by the Agent, any Lender or any other Person against the Borrower, another Guarantor or any other Person. (b) Subrogation and Contribution. Each Guarantor hereby agrees not to exercise or enforce any right of exoneration, contribution, reimbursement, recourse or subrogation available to such Guarantor against any Person liable for payment of the Guaranteed Obligations, or as to any security therefor, unless and until the full amount owing on the Guaranteed Obligations has been paid and the Commitments have terminated; and the payment by such Guarantor of any amount pursuant to any of the Guaranteed Debt Documents on account of credit extended to the Borrower shall not in any way entitle such Guarantor to any right, title or interest (whether by way of subrogation or otherwise) in and to any of the Guaranteed Obligations or any proceeds thereof or any security therefor unless and until the full amount owing on the Guaranteed Obligations has been paid and the Commitments have terminated. Section 11.5. Limit on Recovery. Notwithstanding any other provision hereof, the right of recovery against each Guarantor under this Section 11 shall not (to the extent required by or as may be necessary or desirable to ensure the enforceability against such Guarantor of its obligations hereunder or thereunder in accordance with the laws of the jurisdiction of its incorporation or where it carries on business) exceed (x) the amount which would render such Guarantor's obligations under this Section 11 void or voidable under applicable law, including without limitation fraudulent conveyance law minus (y) $1.00. Section 11.6. Stay of Acceleration. If acceleration of the time for payment of any amount payable by the Borrower under this Agreement or any other Loan Document is stayed upon the insolvency, bankruptcy or reorganization of the Borrower, all such amounts otherwise subject to acceleration under the terms of this Agreement or the other Guaranteed Debt Documents shall nonetheless be payable jointly and severally by the Guarantors hereunder forthwith on demand by the Agent made at the request of the Required Lenders. Section 11.7. Benefit to Guarantors. All of the Guarantors are engaged in related businesses and integrated to such an extent that the financial strength and flexibility of each Guarantor has a direct impact on the success of each other Guarantor. Each Guarantor will derive substantial direct and indirect benefit from the extension of credit hereunder. Section 11.8. Guarantor Covenants. Each Guarantor shall take such action as the Borrower is required by this Agreement to cause such Guarantor to take, and shall refrain from -70- 77 taking such action as the Borrower is required by this Agreement to prohibit such Guarantor from taking. SECTION 12. MISCELLANEOUS. Section 12.1. Holidays. If any payment of principal or interest on any Note or any fee hereunder shall fall due on a day which is not a Business Day, principal together with interest at the rate the Note bears for the period prior to maturity or any fee at the rate such fee accrues shall continue to accrue from the stated due date thereof to and including the next succeeding Business Day, on which the same is payable. Section 12.2. No Waiver, Cumulative Remedies. No delay or failure on the part of the Agent or any Lender or on the part of any other holder of any Note in the exercise of any power or right shall operate as a waiver thereof, nor as an acquiescence in any default, nor shall any single or partial exercise of any power or right preclude any other or further exercise thereof, or the exercise of any other power or right, and the rights and remedies hereunder of the Agent, each Lender and each other holder of any Note are cumulative to, and not exclusive of, any rights or remedies which any of them would otherwise have. Section 12.3. Waivers, Modifications and Amendments. Any provision hereof or of the Notes or the Guaranties may be amended, modified, waived or released and any Default or Event of Default and its consequences may be rescinded and annulled upon the written consent of the Required Lenders; provided, however, that without the consent of all Lenders no such amendment, modification or waiver shall increase the amount or extend the terms of any Lender's Commitment or increase the L/C Commitment or reduce the interest rate applicable to or extend the maturity (including any scheduled installment) of its Notes or reduce the amount of the principal or interest or fees to which such Lender is entitled hereunder or release any substantial (in value) part of the collateral security afforded by the Collateral Documents (except in connection with a sale or other disposition required to be effected by the provisions hereof or of the Collateral Documents) or release any Guarantor or change this Section or change the definition of "Required Lenders" or change the number of Lenders required to take any action hereunder or under the Guaranties. No amendment, modification or waiver of the Agent's protective provisions shall be effective without the prior written consent of the Agent. Section 12.4. Costs and Expenses. The Borrower agrees to pay on demand the costs and expenses of the Agent in connection with the negotiation, preparation, execution and delivery of the Loan Documents and the other instruments and documents to be delivered hereunder or thereunder or in connection with the transactions contemplated hereby or thereby or in connection with any consents hereunder or waivers or amendments hereto or thereto, including the fees and expenses of Messrs. Chapman and Cutler, counsel for the Agent, with respect to all -71- 78 of the foregoing (whether or not the transactions contemplated hereby are consummated), and all costs and expenses (including attorneys' fees), if any, incurred by the Agent, the Lenders or any other holders of a Note in connection with a default under or the enforcement of the Loan Documents or any other instrument or document to be delivered hereunder or thereunder. The Borrower agrees to pay on demand all costs and expenses for which it is liable in accordance with the preceding sentence in connection with Letters of Credit issued for its account. The Borrower agrees to indemnify and save the Lenders and the Agent harmless from any and all liabilities, losses, costs and expenses (collectively, "indemnified liabilities") incurred by the Lenders or the Agent in connection with any action, suit or proceeding brought against the Agent or any Lender by any Person (but excluding attorneys' fees for litigation solely between the Lenders to which the Borrower is not a party) which arises out of the transactions contemplated or financed hereby or out of any action or inaction by the Agent or any Lender hereunder or thereunder, except for such thereof as is caused by the gross negligence or willful misconduct of the party seeking to be indemnified. The Borrower agrees to similarly indemnify and save the Lenders and the Agent harmless from any and all indemnified liabilities as relate to Letters of Credit issued for its account. The provisions of this Section and the protective provisions of Section 2 hereof shall survive payment of the Notes. Section 12.5. Documentary Taxes. The Borrower agrees to pay on demand any documentary, stamp or similar taxes payable in respect of this Agreement, the Notes, the Applications, or any Guaranty including interest and penalties, in the event any such taxes are assessed, irrespective of when such assessment is made and whether or not any credit is then in use or available hereunder. Section 12.6. Survival of Representations. All representations and warranties made herein or in any other Loan Documents or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Agreement and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder. Section 12.7. Survival of Indemnities. All indemnities and other provisions relative to reimbursement to the Lenders of amounts sufficient to protect the yield of the Lenders with respect to the Loans and Letters of Credit, including, but not limited to, Sections 1.3, 2.7, 2.8 and 2.9 hereof, shall survive the termination of this Agreement and the payment of the Notes. Section 12.8. Notices. Except as otherwise specified herein, all notices hereunder shall be in writing (including cable or telecopy) and shall be given to the relevant party at its address or telecopier number set forth below, in the case of the Borrower, or on the appropriate signature page hereof, in the case of the Lenders and the Agent, or such other address or telecopier number as such party may hereafter specify by notice to the Agent and the Borrower -72- 79 given by United States certified or registered mail or by telecopy. Notices hereunder to the Borrower shall be addressed to the name of such Person at: 1021 West Birchwood Morton, Illinois 61550-0429 Attention: Chief Financial Officer Telephone: (309)266-7176 Telecopy: (309)263-1841 Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified in this Section and a confirmation of such telecopy has been received by the sender, (ii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iii) if given by any other means, when delivered at the addresses specified in this Section; provided that any notice given pursuant to Section 1 or Section 2 hereof shall be effective only upon receipt. Section 12.9. Headings. Section headings used in this Agreement are for convenience of reference only and are not a part of this Agreement for any other purpose. Section 12.10. Severability of Provisions. Any provision of this Agreement which is unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. All rights, remedies and powers provided in this Agreement and the Notes may be exercised only to the extent that the exercise thereof does not violate any applicable mandatory provisions of law, and all the provisions of this Agreement and the Notes are intended to be subject to all applicable mandatory provisions of law which may be controlling and to be limited to the extent necessary so that they will not render this Agreement or the Notes invalid or unenforceable. Section 12.11. Counterparts. This Agreement may be executed in any number of counterparts, and by different parties hereto on separate counterpart signature pages, and all such counterparts taken together shall be deemed to constitute one and the same instrument. Section 12.12. Binding Nature, Governing Law, Etc. This Agreement shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Agent and the Lenders and the benefit of their successors and assigns, including any subsequent holder of an interest in the Notes. This Agreement and the rights and duties of the parties hereto shall be governed by, and construed in accordance with, the internal laws of the State of Illinois without -73- 80 regard to principles of conflicts of laws. The Borrower may not assign its rights hereunder without the written consent of the Lenders. Section 12.13. Entire Understanding. This Agreement, together with the Notes, constitute the entire understanding of the parties with respect to the subject matter hereof and any prior agreements, whether written or oral, with respect thereto are superseded hereby except for prior understandings related to fees payable to the Agent upon the initial closing of the transactions contemplated hereby. Section 12.14. Participations. Any Lender may, upon the prior written consent of any Borrower (which consent shall not be unreasonably withheld), grant participations in its extensions of credit hereunder to any other bank or other lending institution (a "Participant") provided that (i) no Participant shall thereby acquire any direct rights under this Agreement, (ii) no Lender shall agree with a Participant not to exercise any of such Lender's rights hereunder without the consent of such Participant except for rights which under the terms hereof may only be exercised by all Lenders and (iii) no sale of a participation in extensions of credit shall in any manner relieve the selling Lender of its obligations hereunder. Section 12.15. Assignment Agreements. Each Lender may, from time to time upon at least five (5) Business Days' prior written notice to the Agent, assign to other commercial lenders part of its rights and obligations under this Agreement (including without limitation the indebtedness evidenced by any Note then owned by such assigning Lender, together with an equivalent proportion of the related Commitment for which such Note was issued) pursuant to written agreements executed by such assigning Lender, such assignee lender or lenders, the Borrower and the Agent, which agreements shall specify in each instance the portion of the indebtedness evidenced by the Notes which is to be assigned to each such assignee lender and the portion of the Commitments of the assigning Lender to be assumed by it (the "Assignment Agreements"); provided, however, that (i) the assignment of a Revolving Credit Note shall cover the same percentage of such Lender's Revolving Credit Commitment, Revolving Loans and interests in Letters of Credit; (ii) unless the Agent otherwise consents, the aggregate amount of the Commitments, Loans and Notes of the assigning Lender being assigned pursuant to each such assignment (determined as of the effective date of the relevant Assignment Agreement) shall in no event be less than $5,000,000 and shall be an integral multiple of $1,000,000; (iii) the Swing Loans and Swing Line Commitment shall only be assigned (if at all) in total, (iv) the Agent, each Lender originally party hereto and the Borrower must each consent (such consent to not be unreasonably withheld by any such party), to each such assignment to a party which was not an original signatory of this Agreement (provided no such consent is required from the Borrower (x) for any assignment to any Lender party hereto, whether an original signatory of this Agreement or a party hereto by reason of an Assignment Agreement, (y) for any assignment to any Affiliate of any such Lender and (z) for any such assignment made during the continuance of -74- 81 any Event of Default); and (v) the assigning Lender must pay to the Agent a processing and recordation fee of $2,500 and any out-of-pocket attorneys' fees and expenses incurred by the Agent in connection with such Assignment Agreement. Upon the execution of each Assignment Agreement by the assigning Lender thereunder, the assignee lender thereunder, the Borrower and the Agent and payment to such assigning Lender by such assignee lender of the purchase price for the portion of the indebtedness of the Borrower being acquired by it, (i) such assignee lender shall thereupon become a "Lender" for all purposes of this Agreement with Commitments in the amounts set forth in such Assignment Agreement and with all the rights, powers and obligations afforded a Lender hereunder, (ii) such assigning Lender shall have no further liability for funding the portion of its Commitments assumed by such other Lender and (iii) the address for notices to such assignee Lender shall be as specified in the Assignment Agreement executed by it. Concurrently with the execution and delivery of such Assignment Agreement, the Borrower shall execute and deliver Notes to the assignee Lender in the respective amounts of its Commitments under the Revolving Credit and Swing Line and its Term Loans and new Notes to the assigning Lender in the respective amounts of its Commitments under the Revolving Credit and its Term Loans after giving effect to the reduction occasioned by such assignment, all such Notes to constitute "Notes" for all purposes of this Agreement. Section 12.16. Confidentiality. The Agent and each Lender shall hold in confidence any material nonpublic information delivered or made available to them by the Borrower or any Subsidiary. The foregoing to the contrary notwithstanding, nothing herein shall prevent any Lender from disclosing any information delivered or made available to it by the Borrower or any Subsidiary (i) to any other Lender, (ii) to any other Person if reasonably incidental to the administration of the credit contemplated hereby, (iii) upon the order of any court or administrative agency, (iv) upon the request or demand of any regulatory agency or authority, (v) which has been publicly disclosed other than as a result of a disclosure by the Agent or any Lender which is not permitted by this Agreement, (vi) in connection with any litigation to which the Agent, any Lender, or any of their respective Affiliates may be a party, along with the Borrower, any Subsidiary or any of their respective Affiliates, (vii) to the extent reasonably required in connection with the exercise of any right or remedy under this Agreement, the other L/C Documents or otherwise, (viii) to such Lender's legal counsel and financial consultants and independent auditors, and (ix) to any actual or proposed participant or assignee of all or part of its rights under the credit contemplated hereby provided such participant or assignee agrees in writing to be bound by the duty of confidentiality under this Section to the same extent as if it were a Lender hereunder. -75- 82 Upon your acceptance hereof in the manner hereinafter set forth, this Agreement shall constitute a contract between us for the uses and purposes hereinabove set forth. Dated as of this day of May, 1998. ----- MORTON INDUSTRIAL GROUP, INC. By Its: ----------------------------------- MORTON METALCRAFT CO. By Its: ----------------------------------- MORTON METALCRAFT CO. OF NORTH CAROLINA By Its: ----------------------------------- MORTON METALCRAFT CO. OF SOUTH CAROLINA By Its: ----------------------------------- CARROLL GEORGE, INC. By -76- 83 Its: ----------------------------------- -77- 84 B&W METAL FABRICATORS, INC. By Its: ----------------------------------- -78- 85 Accepted and Agreed to at Chicago, Illinois as of the day and year last above written. Each of the Lenders hereby agrees with each other Lender that if it should receive or obtain any payment (whether by voluntary payment, by realization upon collateral, by the exercise of rights of setoff or banker's lien, by counterclaim or cross action, or by the enforcement of any rights under this Agreement, the Notes, the Guaranties or otherwise) in respect of the obligations of the Borrower under this Agreement, the Notes and the Guaranties in a greater amount than such Lender would have received had such payment been made to the Agent and been distributed among the Lenders as contemplated by Section 2.4 hereof then in that event the Lender receiving such disproportionate payment shall purchase for cash without recourse from the other Lenders an interest in the obligations of the Borrower to such Lenders arising under this Agreement the Notes, and the Guaranties in such amount as shall result in a distribution of such payment as contemplated by Section 2.4 hereof. In the event any payment made to a Lender and shared with the other Lenders pursuant to the provisions hereof is ever recovered from such Lender, the Lenders receiving a portion of such payment hereunder shall restore the same to the payor Lender, but without interest. Amount and Percentage of Commitments: Revolving Credit Commitment: HARRIS TRUST AND SAVINGS BANK $26,250,000 (75%) Term A Loan Commitment: By ------------------------------ - ----- $18,750,000 (75%) Its Vice President Term B Loan Commitment: 111 West Monroe Street $22,500,000 (75%) Chicago, Illinois 60603 Attention: Agency Services Telephone: (312) 461-2359 Telecopy: (312) 765-1655 LIBOR Funding Office: Nassau Branch c/o 111 West Monroe Street Chicago, Illinois 60690 -79- 86 Amount and Percentage of Commitments: Revolving Credit Commitment: FIRSTAR BANK MILWAUKEE, N.A. $4,861,111.11 (13.888889%) Term A Loan Commitment: By $3,472,222.22 (13.888889%) ------------------------------ Its ------------------------- Term B Loan Commitment: 777 East Wisconsin Avenue $4,166,666.67 (13.888889%) Milwaukee, Wisconsin 53202 Attention: Corporate Banking, John Falb Telephone: (414) 765-6044 Telecopy: (414) 765-4632 LIBOR Funding Office 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 -80- 87 Amount and Percentage of Commitments: Revolving Credit Commitment: NATIONAL CITY BANK $3,888,888.89 (11.111111%) Term A Loan Commitment: By ------------------------------ - ---- Its $2,777,777.78 (11.111111%) ------------------------- - ---- Term B Loan Commitment: 1900 East Ninth Street $3,333,333.33 (11.111111%) Locator #2094 Cleveland, Ohio 44114-3484 Attention: Margaret Moek Telephone: (216) 575-2577 Telecopy: (216) 575-2162 LIBOR Funding Office 1900 East Ninth Street Locator #2094 Cleveland, Ohio 44114-3484 -81- EX-10.3 4 EX-10.3 1 EXHIBIT 10.3 This Document Prepared By and After Recording Return To: Thomas M. Quirk Chapman and Cutler 111 West Monroe Street Chicago, Illinois 60603 SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE ONLY MORTGAGE AND SECURITY AGREEMENT WITH ASSIGNMENT OF RENTS This Mortgage and Security Agreement with Assignment of Rents dated as of ___________, 1998 from Carroll George, Inc., an Iowa corporation with its principal place of business and mailing address at 91 16th Street South, Northwood, Iowa 50459 (hereinafter referred to as the "Mortgagor") to Harris Trust and Savings Bank, an Illinois banking corporation with its principal place of business and mailing address at 111 West Monroe Street, Chicago, Illinois 60603 ("Harris"), as agent hereunder for the Secured Creditors hereinafter identified and defined (Harris acting as such agent and any successor or successors to Harris in such capacity being hereinafter referred to as the "Mortgagee"); WITNESSETH THAT: WHEREAS, Morton Industrial Group, Inc. (the "Borrower") has entered into with Harris (individually and as agent for the Lenders identified and defined below) that certain Credit Agreement dated as of May 29, 1998 (such Credit Agreement as the same may from time to time be modified, amended or restated being hereinafter referred to as the "Credit Agreement") pursuant to which Harris and the other lenders named therein and which may thereafter become parties thereto (Harris and such other lenders being herein referred to collectively as the "Lenders" and individually as a "Lender") committed, subject to certain terms and conditions, (i) to make a revolving credit facility available to the Borrower in the form of loans and letters of credit (the "Revolving Credit") in the aggregate principal amount not to exceed $35,000,000 at 2 any one time outstanding during the period ending on May 31, 2003 (the "Termination Date") with all loans made under the Revolving Credit being repayable on the Termination Date and (ii) to make term loans in the aggregate principal amount of $25,000,000 (in the case of Term A Loan) and $30,000,000 (in the case of Term B Loan) to Mortgagor payable in installments with a final maturity of all principal and interest not required to be sooner paid of May 31, 2003 (in the case of Term A Loan) and May 31, 2005 (in the case of Term B Loan) (the "Term Loans"), a true and correct copy of which Credit Agreement is on file at the offices of the Mortgagee; and WHEREAS, advances from time to time made under the Revolving Credit are evidenced by Revolving Credit Notes (such Revolving Credit Notes and any extensions thereof or modifications thereto and any and all notes issued in renewal thereof or in substitution or replacement therefor being hereinafter referred to as the "Revolving Credit Notes") aggregating $35,000,000 in face principal amount and payable to the order of the respective Lenders named thereon, whereby the Borrower promises to pay the advances evidenced thereby on or before the Termination Date with interest and premium as set forth in the Credit Agreement; and WHEREAS, the Term Loans are evidenced by Term Notes (the "Term Notes") aggregating $25,000,000 (in the case of Term A Loan) and $30,000,000 (in the case of Term B Loan) in principal amount and payable to the order of the respective Lenders named thereon, whereby the Borrower promises to pay the term loans evidenced thereby, with interest and premium as set forth in the Credit Agreement, in installments with a final maturity of all principal and interest and premium not required to be sooner paid of May 31, 2003 (in the case of Term A Loan) and May 31, 2005 (in the case of Term B Loan); and WHEREAS, pursuant to the terms of the Credit Agreement, any Lender or Lenders may, from time to time, assign to other Lenders portions of the indebtedness evidenced by the Notes then owned by such assigning Lender together with an equivalent proportion of such assigning Lender's obligation to make advances under the Credit Agreement (each such assignment being hereinafter referred to as an "Assignment"); and WHEREAS, in the event of each Assignment under the Credit Agreement, the Borrower has agreed pursuant to the terms of the Credit Agreement to execute and deliver to each new assignee Lender by reason of such Assignment, new Notes evidencing that portion of the indebtedness so assigned to such new assignee Lender and advances to be thereafter made by such new assignee Lender pursuant to the Credit Agreement and to execute new Notes to such assigning Lender evidencing the portion of such indebtedness not so assigned and advances to be thereafter made by such assigning Lender pursuant to the Credit Agreement; and WHEREAS, it is the intention of the Mortgagor that all such Notes constitute "Notes" for the purposes hereof and to be secured hereby; and -2- 3 WHEREAS, pursuant to the terms of the Credit Agreement, the Mortgagee may from time to time issue letters of credit (the "Letters of Credit") for the account of the Borrower in an aggregate face amount not to exceed $10,000,000 and with expiry dates on or before the Termination Date, and which Letters of Credit, when combined with the principal amount of loans outstanding under the Revolving Credit from time to time, shall not exceed $35,000,000; WHEREAS, the Borrower may from time to time enter into one or more interest rate exchange, cap, collar, floor or other agreements with one or more of the Lenders party to the Credit Agreement, or their affiliates, for the purpose of hedging or otherwise protecting the Borrower against changes in interest rates (the liability of the Borrower in respect of such agreements with such Lenders and their affiliates being hereinafter referred to as the "Hedging Liability") (the affiliate of the Lenders to which any Hedging Liability is owed, together with the Lenders and the Mortgagee, being collectively referred to herein as the "Secured Creditors"); and NOW, THEREFORE, in order to secure (i) payment of all principal of and interest and premium on the Notes (ratably among the Notes without preference or priority to one over the others) as and when the same become due and payable (whether by lapse of time, acceleration or otherwise) and all advances now or hereafter evidenced thereby, (ii) the payment and performance of all obligations arising under any applications executed by the Borrower in connection with any of the Letters of Credit, including the obligation of the Borrower to reimburse the Mortgagee for any draws under the Letters of Credit, (iii) payment of all fees and charges payable by the Borrower under the terms of the Credit Agreement, (iv) any and all liability of the Borrower arising under or in connection with or otherwise evidenced by agreements with any one or more of the Secured Creditors with respect to any Hedging Liability; (v) payment of all other sums at any time due or owing from or required to be paid by the Borrower under the terms of the Mortgage and the performance and observance of all the covenants and agreements in the Mortgage provided to be performed or observed by the Mortgagor, and (vi) the performance and observance of all covenants and agreements contained in the Mortgage or in the Notes or in the Credit Agreement or in any other instrument or document at any time evidencing or securing any of the foregoing indebtedness, obligations or liabilities or setting forth terms and conditions applicable thereto (all of such indebtedness, obligations and liabilities referred to in clauses (i), (ii), (iii), (iv), (v) and (vi) above being hereinafter collectively referred to as the "indebtedness hereby secured"), Mortgagor does hereby grant, bargain, sell, convey, mortgage, warrant, assign, and pledge unto the Mortgagee, its successors and assigns, and grant to the Mortgagee, its successors and assigns a security interest in all and singular the properties, rights, interests and privileges described in Granting Clauses I, II, III, IV, V and VI below, all of the same being collectively referred to herein as the "Mortgaged Premises": -3- 4 GRANTING CLAUSE I That certain real estate lying and being in the County of Worth in the State of Iowa, more particularly described in Schedule I attached hereto and made a part hereof. GRANTING CLAUSE II All buildings and improvements of every kind and description heretofore or hereafter erected or placed on the property described in Granting Clause I and all materials intended for construction, reconstruction, alteration and repairs of the buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the premises immediately upon the delivery thereof to the said real estate, and all fixtures, machinery, apparatus, equipment, fittings and articles of personal property of every kind and nature whatsoever now or hereafter attached to or contained in or used or useful in connection with said real estate and the buildings and improvements now or hereafter located thereon and the operation, maintenance and protection thereof, including but not limited to all machinery, motors, fittings, radiators, awnings, shades, screens, all gas, coal, steam, electric, oil and other heating, cooking, power and lighting apparatus and fixtures, all fire prevention and extinguishing equipment and apparatus, all cooling and ventilating apparatus and systems, all plumbing, incinerating, and sprinkler equipment and fixtures, all elevators and escalators, all communication and electronic monitoring equipment, all window and structural cleaning rigs and all other machinery and equipment of every nature and fixtures and appurtenances thereto and all items of furniture, appliances, draperies, carpets, other furnishings, equipment and personal property used or useful in the operation, maintenance and protection of the said real estate and the buildings and improvements now or hereafter located thereon and all renewals or replacements thereof or articles in substitution therefor or insurance proceeds relating thereto, whether or not the same are or shall be attached to said real estate, buildings or improvements in any manner, and all proceeds thereof; it being mutually agreed, intended and declared that all the aforesaid property shall, so far as permitted by law, be deemed to form a part and parcel of the real estate and for the purpose of this Mortgage to be real estate and covered by this Mortgage; and as to the balance of the property aforesaid, this Mortgage is hereby deemed to be as well a Security Agreement under the provisions of the Uniform Commercial Code for the purpose of creating hereby a security interest in said property, which is hereby granted by Mortgagor as debtor to Mortgagee as secured party, securing the indebtedness hereby secured. The addresses of Mortgagor (debtor) and Mortgagee (secured party) appear at the beginning hereof. -4- 5 GRANTING CLAUSE III All right, title and interest of Mortgagor now owned or hereafter acquired in and to all and singular the estates (including without limitation leasehold estates), leases, tenements, hereditaments, privileges, easements, licenses, franchises, appurtenances and royalties, mineral, oil, and water rights belonging or in any wise appertaining to the property described in the preceding Granting Clause I and the buildings and improvements now or hereafter located thereon and the reversions, rents, issues, revenues and profits thereof and insurance proceeds therefrom, including all interest of Mortgagor in all rents, issues and profits of and insurance proceeds from the aforementioned property and all rents, issues, profits, revenues, royalties, bonuses, rights and benefits due, payable or accruing (including all deposits of money as advanced rent or for security) under any and all leases or subleases and renewals thereof of, or under any contracts or options for the sale of all or any part of, said property (including during any period allowed by law for the redemption of said property after any foreclosure or other sale), together with the right, but not the obligation, to collect, receive and receipt for all such rents and other sums and apply them to the indebtedness hereby secured and to demand, sue for and recover the same when due or payable; provided that the assignments made hereby shall not impair or diminish the obligations of Mortgagor under the provisions of such leases or other agreements nor shall such obligations be imposed upon Mortgagee. By acceptance of this Mortgage, Mortgagee agrees, not as a limitation or condition hereof, but as a personal covenant available only to Mortgagor that until an event of default (as hereinafter defined) shall occur giving Mortgagee the right to foreclose this Mortgage, Mortgagor may collect, receive (but not more than 30 days in advance) and enjoy such rents. GRANTING CLAUSE IV All judgments, awards of damages, settlements and other compensation heretofore or hereafter made resulting from condemnation proceedings or the taking of the property described in Granting Clause I or any part thereof or any building or other improvement now or at any time hereafter located thereon or any easement or other appurtenance thereto under the power of eminent domain, or any similar power or right (including any award from the United States Government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for the payment thereof), whether permanent or temporary, or for any damage (whether caused by such taking or otherwise) to said property or any part thereof or the improvements thereon or any part thereof, or to any rights appurtenant thereto, including severance and consequential damage, and any award for change of grade of streets (collectively "Condemnation Awards"). -5- 6 GRANTING CLAUSE V All property and rights, if any, which are by the express provisions of this instrument required to be subjected to the lien hereof and any additional property and rights that may from time to time hereafter, by installation or writing of any kind, be subjected to the lien hereof by Mortgagor or by anyone in Mortgagor's behalf. GRANTING CLAUSE VI All rights in and to common areas and access roads on adjacent properties heretofore or hereafter granted to Mortgagor and any after-acquired title or reversion in and to the beds of any ways, roads, streets, avenues and alleys adjoining the property described in Granting Clause I or any part thereof. TO HAVE AND TO HOLD the Mortgaged Premises and the properties, rights and privileges hereby granted, bargained, sold, conveyed, mortgaged, warranted, pledged and assigned, and in which a security interest is granted, or intended so to be, unto Mortgagee, its successors and assigns, forever; provided, however, that this instrument is upon the express condition that if the principal of and interest on the Notes shall be paid in full and all other indebtedness hereby secured shall be fully paid and performed and no Letters of Credit shall remain outstanding, then this instrument and the estate and rights hereby granted shall cease, determine and be void and this instrument shall be released by Mortgagee upon the written request and at the expense of Mortgagor, otherwise to remain in full force and effect. It is expressly understood and agreed that the indebtedness hereby secured will in no event exceed two hundred percent (200%) of (i) the total face amount of the Notes and the Letters of Credit plus (ii) the total interest which may hereafter accrue under the Notes and the Reimbursement Obligations (as defined in the Credit Agreement) on such face amount plus (iii) any fees, costs or expenses which may be payable hereunder or under the Credit Agreement. Mortgagor hereby covenants and agrees with Mortgagee as follows: 1. Payment of the Indebtedness. The indebtedness hereby secured will be promptly paid as and when the same becomes due without any relief whatever from valuation or appraisement laws of the State of Iowa. 2. Binding Obligation and Further Assurances. This Mortgage and all other documents, instruments and agreements executed in connection herewith are valid and binding obligations of Mortgagor, enforceable in accordance with their respective terms. -6- 7 Mortgagor will execute and deliver such further instruments and do such further acts as may be necessary or proper to carry out more effectively the purpose of this instrument and, without limiting the foregoing, to make subject to the lien hereof any property agreed to be subjected hereto or covered by the Granting Clauses hereof or intended so to be. 3. Ownership of the Mortgaged Premises. Mortgagor covenants and warrants that it is lawfully seized of and has good and marketable fee title to the Mortgaged Premises free and clear of all liens, charges and encumbrances whatsoever except those exceptions to title listed on Schedule II attached hereto (the "Permitted Exceptions") and Mortgagor has good right, full power and authority to convey, transfer and mortgage the same to Mortgagee for the uses and purposes set forth in this Mortgage; and Mortgagor will warrant and forever defend the title to the Mortgaged Premises subject to the Permitted Exceptions against all claims and demands whatsoever. 4. Possession. Provided no event of default has occurred and is continuing hereunder, Mortgagor shall be suffered and permitted to remain in full possession, enjoyment and control of the Mortgaged Premises, subject always to the observance and performance of the terms of this instrument. 5. Payment of Taxes. Mortgagor shall pay before any penalty attaches, all general taxes and all special taxes, special assessments, water, drainage and sewer charges and all other charges of any kind whatsoever, ordinary or extraordinary, which may be levied, assessed, imposed or charged on or against the Mortgaged Premises or any part thereof and which, if unpaid, might by law become a lien or charge upon the Mortgaged Premises or any part thereof, and shall, upon written request, exhibit to Mortgagee official receipts evidencing such payments, except that, unless and until foreclosure, distraint, sale or other similar proceedings shall have been commenced, no such charge or claim need be paid if being contested (except to the extent any full or partial payment shall be required by law), after notice to Mortgagee, by appropriate proceedings which shall operate to prevent the collection thereof or the sale or forfeiture of the Mortgaged Premises or any part thereof to satisfy the same, conducted in good faith and with due diligence and if Mortgagor shall have furnished such security, if any, as may be required in the proceedings or requested by Mortgagee. 6. Payment of Taxes on Notes, Letters of Credit, Mortgage or Interest of Mortgagee or Secured Creditors. Mortgagor agrees that if any tax, assessment or imposition upon this Mortgage or the indebtedness hereby secured or the Notes or any of the Letters of Credits or the interest of Mortgagee or any Secured Creditor in the Mortgaged Premises or upon Mortgagee or any Secured Creditor by reason of or as a -7- 8 holder of any of the foregoing (including, without limitation, excise taxes, but excepting therefrom any income tax on interest payments on the principal portion of the indebtedness hereby secured imposed by the United States or any state) is levied, assessed or charged, then, unless all such taxes are paid by Mortgagor to, for or on behalf of Mortgagee or any Secured Creditor as they become due and payable (which Mortgagor agrees to do upon demand of Mortgagee, to the extent permitted by law), or Mortgagee or any Secured Creditor is reimbursed for any such sum advanced by Mortgagee, all sums hereby secured shall become immediately due and payable, at the option of Mortgagee upon 30 days' notice to Mortgagor, notwithstanding anything contained herein or in any law heretofore or hereafter enacted, including any provision thereof forbidding Mortgagor from making any such payment. Mortgagor agrees to exhibit to Mortgagee, upon request, official receipts showing payment of all taxes and charges which Mortgagor is required to pay hereunder. 7. Recordation and Payment of Taxes and Expenses Incident Thereto. Mortgagor will maintain and preserve the lien of this Mortgage until all indebtedness hereby secured has been paid and satisfied in full. Without limiting the foregoing, Mortgagor will cause this Mortgage, all mortgages supplemental hereto and any financing statement or other notice of a security interest required by Mortgagee at all times to be kept, recorded and filed at its own expense in such manner and in such places as may be required by law for the recording and filing or for the rerecording and refiling of a mortgage, security interest, assignment or other lien or charge upon the Mortgaged Premises, or any part thereof, in order fully to preserve and protect the rights of Mortgagee hereunder and, without limiting the foregoing, Mortgagor will pay or reimburse Mortgagee and any Secured Creditor for the payment of any and all taxes, fees or other charges incurred in connection with any such recordation or rerecordation, including any documentary stamp tax or tax imposed upon the privilege of having this instrument or any instrument issued pursuant hereto recorded. 8. Insurance. Mortgagor will, at its expense, keep all buildings, improvements, equipment and other property now or hereafter constituting part of the Mortgaged Premises insured against loss or damage by fire, lightning, windstorm, explosion and such other risks as are usually included under extended coverage policies, or which are usually insured against by companies similarly situated conducting similar businesses and owning like properties, in amount sufficient to prevent Mortgagor, Mortgagee or the Secured Creditors from becoming a co-insurer of any partial loss under applicable policies and in any event not less than the then full insurable value (actual replacement value without deduction for physical depreciation) thereof, as determined at the request of Mortgagee and at Mortgagor's expense by the insurer or insurers or by an expert approved by Mortgagee, all under insurance policies payable, in case of loss or -8- 9 damage, to Mortgagee (and if Mortgagee so requests, naming Mortgagee and the Secured Creditors as additional insureds therein), such rights to be evidenced by the usual standard non-contributory form of mortgage clause to be attached to each policy. Mortgagor shall not carry separate insurance concurrent in kind or form and contributing in the event of loss, with any insurance required hereby. Mortgagor shall also obtain and maintain public liability, property damage and workmen's compensation insurance in each case in form and content satisfactory to Mortgagee and in amounts as are customarily carried by owners of like property and approved by Mortgagee. Mortgagor shall also obtain and maintain such other insurance with respect to the Mortgaged Premises in such amounts and against such insurable hazards as Mortgagee from time to time may require, including, without limitation, boiler and machinery insurance, insurance against flood risks for any improvements located in a flood plain when and to the extent obtainable from the United States Government or any agency thereof, and insurance against loss of rent due to fire and risks now or hereafter embraced by so-called "extended coverage". All insurance required hereby shall be maintained with good and responsible insurance companies satisfactory to Mortgagee and shall not provide for any deductible amount in excess of $250,000 not approved in writing by Mortgagee, shall provide that any losses shall be payable notwithstanding any act or negligence of Mortgagor, shall provide that no cancellation thereof shall be effective until at least thirty days after receipt by Mortgagor and Mortgagee of written notice thereof, and shall be satisfactory to Mortgagee in all other respects. Upon the execution of this Mortgage and thereafter not less than 15 days prior to the expiration date of any policy delivered pursuant to this instrument, Mortgagor will deliver to Mortgagee certificates evidencing the policy or renewal policy, as the case may be, required by this instrument, bearing notations evidencing the payment of all premiums. In the event of foreclosure, Mortgagor authorizes and empowers Mortgagee to effect insurance upon the Mortgaged Premises in amounts aforesaid for a period covering the time of redemption from foreclosure sale provided by law, and if necessary therefor to cancel any or all existing insurance policies. 9. Damage to or Destruction of Mortgaged Premises. (a) Notice. In case of any material damage to or destruction of the Mortgaged Premises or any part thereof, Mortgagor shall promptly give written notice thereof to Mortgagee, generally describing the nature and extent of such damage or destruction. (b) Restoration. In case of any damage to or destruction of the Mortgaged Premises or any part thereof, Mortgagor, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be -9- 10 sufficient for the purpose, at Mortgagor's expense, will promptly commence and complete (subject to unavoidable delays occasioned by strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions and similar causes beyond the reasonable control of Mortgagor) the restoration, replacement or rebuilding of the Mortgaged Premises as nearly as possible to its value, condition and character immediately prior to such damage or destruction, provided that any part of the Mortgaged Premises so damaged or destroyed need not be restored, replaced or rebuilt if (i) prior to its damage or destruction, it had become uneconomical, obsolete or worn out or (ii) it is not necessary for or of importance to the proper conduct of the Mortgagor's business in the ordinary course. (c) Adjustment of Loss. Mortgagor hereby authorizes Mortgagee, at Mortgagee's option, to adjust and compromise any losses under any insurance afforded at any time after the occurrence and during the continuation of any event of default hereunder or any event which with the lapse of time, the giving of notice, or both, would constitute an event of default hereunder (herein, a "default"), but unless Mortgagee elects to adjust the losses as aforesaid, said adjustment and/or compromise shall be made by Mortgagor, subject to final approval of Mortgagee (regardless of whether or not a default or event of default hereunder shall have occurred) in the case of losses exceeding $250,000. (d) Application of Insurance Proceeds. Net insurance proceeds (except in cases where (i) the amount payable in respect of any one loss, when combined with amounts paid in respect of all losses incurred during any calendar year, is less than $250,000 and (ii) an event of default hereunder shall not have occurred and be continuing, in which case the amount payable in respect of such loss may be received by Mortgagor and need not be applied toward the payment of the amount owing on the indebtedness hereby secured or for the restoration of the Mortgaged Premises damaged or destroyed) received by Mortgagee under the provisions of this Mortgage or any instruments supplemental hereto or thereto or under any policy or policies of insurance covering the Mortgaged Premises or any part thereof shall first be applied toward the payment of the amount owing on the indebtedness hereby secured in such order of application as Mortgagee may elect whether or not the same may then be due or be otherwise adequately secured; provided, however, that such proceeds shall be made available for the restoration of the portion of the Mortgaged Premises damaged or destroyed if written application for such use is made within thirty (30) days of receipt of such proceeds and the following conditions are satisfied: (i) Mortgagor has in effect business interruption insurance covering the income to be lost during the -10- 11 restoration period as a result of the damage or destruction to the Mortgaged Premises or provides Mortgagee with other evidence satisfactory to it that Mortgagor has cash resources sufficient to pay its obligations during the restoration period; (ii) no event of default, or event which, with the lapse of time, the giving of notice, or both, would constitute an event of default hereunder, shall have occurred or be continuing (and if such an event shall occur during restoration Mortgagee may, at its election, apply any insurance proceeds then remaining in its hands to the reduction of the indebtedness evidenced by the Notes and the other indebtedness hereby secured); (iii) Mortgagor shall have submitted to Mortgagee plans and specifications for the restoration which shall be satisfactory to it; (iv) Mortgagor shall submit to Mortgagee fixed price contracts with good and responsible contractors and materialmen covering all work and materials necessary to complete restoration and providing for a total completion price not in excess of the amount of insurance proceeds available for restoration, or, if a deficiency shall exist, Mortgagor shall have deposited the amount of such deficiency with Mortgagee and (v) Mortgagor shall have obtained a waiver of the right of subrogation from any insurer under such policies of insurance who at that time claims that no liability exists as to Mortgagor or the insured under such policies. Any insurance proceeds to be released pursuant to the foregoing provisions may at the option of Mortgagee be disbursed from time to time as restoration progresses to pay for restoration work completed and in place and such disbursements may at Mortgagee's option be made directly to Mortgagor or to or through any contractor or materialman to whom payment is due or to or through a construction escrow to be maintained by a title insurer acceptable to Mortgagee. Mortgagee may impose such further conditions upon the release of insurance proceeds (including the receipt of title insurance) as are customarily imposed by prudent construction lenders to insure the completion of the restoration work free and clear of all liens or claims for lien. All title insurance charges and other costs and expenses paid to or for the account of Mortgagor in connection with the release of such insurance proceeds shall constitute so much additional indebtedness hereby secured to be payable upon demand with interest at the Default Rate. Mortgagee may deduct any such costs and expenses from insurance proceeds at any time standing in its hands. If Mortgagor fails to request that insurance proceeds be applied to the restoration of the improvements or if Mortgagor makes such a request but fails to complete restoration within a reasonable time, Mortgagee shall have the right, but not the duty, to restore or rebuild said Mortgaged Premises or any part thereof for or on behalf of Mortgagor in lieu of applying said proceeds to the indebtedness hereby secured and for such purpose may do all necessary acts, including using funds deposited by Mortgagor as aforesaid and advancing additional funds for the purpose of restoration, all such -11- 12 additional funds to constitute part of the indebtedness hereby secured payable upon demand with interest at the Default Rate. 10. Eminent Domain. Mortgagor acknowledges that Condemnation Awards have been assigned to Mortgagee, which awards Mortgagee is hereby irrevocably authorized to collect and receive, and to give appropriate receipts and acquittances therefor, and at Mortgagee's option, to apply the same toward the payment of the amount owing on account of the indebtedness hereby secured in such order of application as Mortgagee may elect and whether or not the same may then be due and payable or otherwise adequately secured; provided, however, that a Condemnation Award in respect of any taking of a portion (but not all or any material portion) of the Mortgaged Premises shall be made available for the restoration of such Mortgaged Premises in the same manner and subject to the same conditions as are imposed on the release of insurance proceeds set forth in Section 9(d) hereof as if the Mortgaged Premises so taken were destroyed and the Condemnation Award for such taking was actually insurance proceeds in respect of the Mortgaged Premises so deemed as having been destroyed. In the event that any proceeds of a Condemnation Award shall be made available to Mortgagor for restoring the Mortgaged Premises so taken, Mortgagor hereby covenants to promptly commence and complete such restoration of the Mortgaged Premises as nearly as possible to its value, condition and character immediately prior to such taking. Mortgagor covenants and agrees that Mortgagor will give Mortgagee immediate notice of the actual or threatened commencement of any proceedings under condemnation or eminent domain affecting all or any material part of the Mortgaged Premises including any easement therein or appurtenance thereof or severance and consequential damage and change in grade of streets, and will deliver to Mortgagee copies of any and all papers served in connection with any such proceedings. Mortgagor further covenants and agrees to make, execute and deliver to Mortgagee, at any time or times upon request, free, clear and discharged of any encumbrances of any kind whatsoever, any and all further assignments and/or instruments deemed necessary by Mortgagee for the purpose of validly and sufficiently assigning all awards and other compensation heretofore and hereafter to be made to Mortgagor for any taking, either permanent or temporary, under any such proceeding. 11. Construction, Repair, Waste, Etc. Mortgagor agrees that no building or other improvement on the Mortgaged Premises and constituting a part thereof shall be materially altered, removed or demolished nor shall any material fixtures or appliances on, in or about said buildings or improvements be severed, removed, sold or mortgaged, without the consent of Mortgagee, and in the event of the demolition or destruction in whole or in part of any of the fixtures or articles of personal property covered hereby, Mortgagor covenants that the same will be replaced promptly by similar fixtures and -12- 13 articles of personal property at least equal in quality and condition to those replaced, free from any security interest in or encumbrance thereon or reservation of title thereto other than liens permitted by the Credit Agreement and the Permitted Exceptions; provided, however, that Mortgagor may alter, remove or demolish any such building, improvement, fixture or appliance, and need not replace any such fixtures or personal property, in each case to the extent such action (i) is desirable to the proper conduct of the business of Mortgagor in the ordinary course as presently conducted and otherwise in the best interest of Mortgagor, (ii) does not impair the overall value or utility of the Mortgaged Premises and Mortgagor's other related properties as an integrated facility, (iii) does not decrease the efficiency or capacity of the Mortgaged Premises and (iv) does not impair the rights and benefits under this Mortgage of the Secured Creditors. Mortgagor further agrees to permit, commit or suffer no material waste, impairment or deterioration of the Mortgaged Premises or any part thereof; to keep and maintain said Mortgaged Premises and every part thereof in good working condition (ordinary wear and tear excepted); to effect such repairs as Mortgagee may reasonably require and from time to time to make all needful and proper replacements and additions so that said buildings, fixtures, machinery and appurtenances will, at all times, be in good working condition (ordinary wear and tear excepted), fit and proper for the respective purposes for which they were originally erected or installed; to comply with all statutes, orders, requirements or decrees relating to the Mortgaged Premises by any federal, state or municipal authority if the failure to comply with such statutes, orders, requirements or decrees could have a material adverse effect on the Mortgaged Premises or the business or financial condition of the Mortgagor; to observe and comply with all conditions and requirements necessary to preserve and extend any and all rights, licenses, permits (including, but not limited to, zoning variances, special exceptions and non-conforming uses), privileges, franchises and concessions which are applicable to the Mortgaged Premises or which have been granted to or contracted for by Mortgagor in connection with any existing or presently contemplated use of the Mortgaged Premises or any part thereof and not to initiate or acquiesce in any changes to or terminations of any of the foregoing or of zoning classifications affecting the use to which the Mortgaged Premises or any part thereof may be put without the prior written consent of Mortgagee; and to make no material alterations in or improvements or additions to the Mortgaged Premises except as required by governmental authority or as permitted by Mortgagee. Mortgagor will not lease the Mortgaged Premises or any material part thereof without the prior written consent of Mortgagee, which consent shall not be unreasonably withheld. 12. Liens and Encumbrances. Mortgagor will not, without the prior written consent of Mortgagee, directly or indirectly, create or suffer to be created or to remain and will discharge or promptly cause to be discharged any mortgage, lien, encumbrance or charge on, pledge of, or conditional sale or other title retention agreement with respect -13- 14 to, the Mortgaged Premises or any part thereof, whether superior or subordinate to the lien hereof, except for this instrument, liens permitted by the Credit Agreement and the Permitted Exceptions. 13. Right of Mortgagee to Perform Mortgagor's Covenants, Etc. If Mortgagor shall fail to make any payment or perform any act required to be made or performed hereunder, Mortgagee, without waiving or releasing any obligation or default, may (but shall be under no obligation to) at any time after notice to the Mortgagor make such payment or perform such act for the account and at the expense of Mortgagor, and may enter upon the Mortgaged Premises or any part thereof for such purpose and take all such action thereon as, in the opinion of Mortgagee, may be reasonably necessary or appropriate therefor. All sums so paid by Mortgagee and all reasonable costs and expenses (including without limitation attorney's fees and expenses) so incurred, together with interest thereon from the date of payment or incurrence at the Default Rate, shall constitute so much additional indebtedness hereby secured and shall be paid by Mortgagor to Mortgagee on demand. Mortgagee in making any payment authorized under this Section relating to taxes or assessments may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim thereof. 14. After-Acquired Property. Any and all property hereafter acquired which is of the kind or nature herein provided, or intended to be and become subject to the lien hereof, shall ipso facto, and without any further conveyance, assignment or act on the part of Mortgagor, become and be subject to the lien of this Mortgage as fully and completely as though specifically described herein; but nevertheless Mortgagor shall from time to time, if requested by Mortgagee, execute and deliver any and all such further assurances, conveyances and assignments as Mortgagee may reasonably require for the purpose of expressly and specifically subjecting to the lien of this Mortgage all such property. 15. Inspection by Mortgagee. Mortgagee, any Secured Creditor and their respective representatives shall have the right to inspect the Mortgaged Premises at all reasonable times, and access thereto shall be permitted for that purpose; provided, however, that prior to the occurrence of any Default or Event of Default hereunder, any such access or inspection shall only be required during the Mortgagor's normal business hours and shall only be permitted with at least 24 hours advance notice. 16. Reports on Mortgaged Premises. Mortgagor will furnish to Mortgagee or any Secured Creditor such information and data with respect to the Mortgaged Premises as Mortgagee or such Secured Creditor may reasonably request. -14- 15 17. Subrogation. Mortgagor acknowledges and agrees that Mortgagee shall be subrogated to any lien discharged out of the proceeds of the loan evidenced by any Note or out of any advance by Mortgagee hereunder, irrespective of whether or not any such lien may have been released of record. 18. Events of Default. Any one or more of the following shall constitute an event of default hereunder: (a) Failure to pay when due any indebtedness hereby secured; or (b) Any event occurs or condition exists which is specified as an Event of Default under the Credit Agreement; or (c) The Mortgaged Premises or any material part thereof shall be sold, transferred, or conveyed, whether voluntarily or involuntarily, by operation of law or otherwise, except for sales of obsolete, worn out or unusable fixtures or personal property which are concurrently replaced (unless the Mortgagor, in the exercise of its commercially reasonable judgment deems such replacement not necessary or impractical and such failure to replace would cause no material adverse change in the Mortgaged Premises) with similar fixtures or personal property at least equal in quality and condition to those sold and owned by Mortgagor free of any lien, charge or encumbrance other than the lien hereof; or (d) Any indebtedness secured by a lien or charge on the Mortgaged Premises or any part thereof is not paid when due after the expiration of applicable grace periods and the giving of applicable notices, if any (unless such indebtedness is being contested in good faith by appropriate proceedings which prevent the enforcement of the matter under contest and adequate reserves have been established therefor), or proceedings are commenced to foreclose or otherwise realize upon any such lien or charge or to have a receiver appointed for the property subject thereto or to place the holder of such indebtedness or its representative in possession thereof; or (e) The Mortgaged Premises is abandoned. 19. Remedies. When any event of default has happened and is continuing (regardless of the pendency of any proceeding which has or might have the effect of preventing Mortgagor from complying with the terms of this instrument and of the adequacy of the security for the Notes, Letters of Credit and the other indebtedness -15- 16 hereby secured) and in addition to such other rights as may be available under applicable law, but subject at all times to any mandatory legal requirements: (a) Acceleration. As and to the extent expressly permitted by the Credit Agreement, Mortgagee may, by written notice to Mortgagor, declare the Notes and all unpaid indebtedness hereby secured, including the reimbursement obligations of the Mortgagor in connection with any Letters of Credit, including any interest then accrued thereon, to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without other notice or demand of any kind. (b) Uniform Commercial Code. Mortgagee shall, with respect to any part of the Mortgaged Premises constituting property of the type in respect of which realization on a lien or security interest granted therein is governed by the Uniform Commercial Code, have all the rights, options and remedies of a secured party under the Uniform Commercial Code of Illinois, including without limitation, the right to the possession of any such property, or any part thereof, and the right to enter without legal process any premises where any such property may be found. Any requirement of said Code for reasonable notification shall be met by mailing written notice to Mortgagor at its address above set forth at least 10 Business Days prior to the sale or other event for which such notice is required. The expenses of retaking, selling, and otherwise disposing of said property, including reasonable attorney's fees and legal expenses incurred in connection therewith, shall constitute so much additional indebtedness hereby secured and shall be payable upon demand with interest at the Default Rate. (c) Foreclosure. Mortgagee may proceed to protect and enforce the rights of Mortgagee or Secured Creditors hereunder (i) by any action at law, suit in equity or other appropriate proceedings, whether for the specific performance of any agreement contained herein, or for an injunction against the violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or by law, or (ii) by the foreclosure of this Mortgage. Without limiting anything to the contrary contained herein, to the extent permitted by applicable law, Mortgagee in Mortgagee's sole discretion, may elect to foreclose this Mortgage by means of non-judicial foreclosure as permitted by Chapter 655A of the Code of Iowa. By its execution hereof, Mortgagor hereby agrees that if Mortgagor's waiver of redemption rights in Section 20 hereof shall have no force and effect and if the real estate described in Granting Clause I hereof is ten acres or less in size, then the period of redemption after sale on any foreclosure of this Mortgage shall be reduced to six months, provided the Mortgagee waives in such -16- 17 foreclosure action any rights to a deficiency judgment against the Mortgagor which might arise out of such foreclosure proceedings, all to be consistent with the provisions of Chapter 628 of the Code of Iowa. It is further hereby agreed that if Mortgagee's waiver of redemption rights in Section 20 hereof shall have no force and effect and if the real estate described in Granting Clause I hereof is ten acres or more in size, then the period of redemption after sale on any foreclosure of this Mortgage shall be reduced to sixty days provided (i) the court with jurisdiction over such a foreclosure action finds affirmatively in a decree of foreclosure that said real estate has been abandoned by the owners and those persons personally liable under the Mortgage at the time of such foreclosure, and (ii) the Mortgagee waives any rights to a deficiency judgment against the Mortgagor or his successors in interest in the foreclosure action, all to be consisted with the provisions of Chapter 628 of the Code of Iowa. Nothing contained herein shall obligate Mortgagee to so waive its rights to such a deficiency judgment in either case, and the decision to do so shall be solely at the discretion of Mortgagee. By its execution hereof, Mortgagor further hereby agrees that, notwithstanding anything to the contrary contained herein, Mortgagee may, at Mortgagee's sole discretion, elect to foreclose upon the Mortgaged Premises without redemption pursuant to the provisions of Section 654.20 of the Code of Iowa and may elect, at Mortgagee's sole discretion, to so foreclose with or without a waiver of its rights to a deficiency judgment. (d) Appointment of Receiver. Mortgagee shall, as a matter of right, without notice and without giving bond to Mortgagor or anyone claiming by, under or through it, and without regard to the solvency or insolvency of Mortgagor or the then value of the Mortgaged Premises, be entitled to have a receiver appointed of all or any part of the Mortgaged Premises and the rents, issues and profits thereof, with such power as the court making such appointment shall confer, and Mortgagor hereby consents to the appointment of such receiver and shall not oppose any such appointment. Any such receiver may, to the extent permitted under applicable law, without notice, enter upon and take possession of the Mortgaged Premises or any part thereof by force, summary proceedings, ejectment or otherwise, and may remove Mortgagor or other persons and any and all property therefrom, and may hold, operate and manage the same and receive all earnings, income, rents, issues and proceeds accruing with respect thereto or any part thereof, whether during the pendency of any foreclosure or until any right of redemption shall expire or otherwise. (e) Taking Possession, Collecting Rents, Etc. Mortgagee may enter and take possession of the Mortgaged Premises or any part thereof and manage, -17- 18 operate, insure, repair and improve the same and take any action which, in Mortgagee's reasonable judgment, is necessary or proper to conserve the value of the Mortgaged Premises. Mortgagee may also take possession of, and for these purposes use, any and all personal property contained in the Mortgaged Premises and used in the operation, rental or leasing thereof or any part thereof. Mortgagee shall be entitled to collect and receive all earnings, revenues, rents, issues and profits of the Mortgaged Premises or any part thereof (and for such purpose Mortgagor does hereby irrevocably constitute and appoint Mortgagee its true and lawful attorney-in-fact for it and in its name, place and stead to receive, collect and receipt for all of the foregoing, Mortgagor irrevocably acknowledging that any payment made to Mortgagee hereunder shall be a good receipt and acquittance against Mortgagor to the extent so made) and to apply same to the reduction of the indebtedness hereby secured. The right to enter and take possession of the Mortgaged Premises and use any personal property therein, to manage, operate and conserve the same, and to collect the rents, issues and profits thereof, shall be in addition to all other rights or remedies of Mortgagee hereunder or afforded by law, and may be exercised concurrently therewith or independently thereof. The reasonable expenses (including any receiver's fees, counsel fees, costs and agent's compensation) incurred pursuant to the powers herein contained shall be so much additional indebtedness hereby secured which Mortgagor promises to pay upon demand together with interest at the Default Rate. Mortgagee shall not be liable to account to Mortgagor for any action taken pursuant hereto other than to account for any rents actually received by Mortgagee. Without taking possession of the Mortgaged Premises, Mortgagee may, in the event the Mortgaged Premises becomes vacant or is abandoned, take such steps as it deems appropriate to protect and secure the Mortgaged Premises (including hiring watchmen therefor) and all reasonable costs incurred in so doing shall constitute so much additional indebtedness hereby secured payable upon demand with interest thereon at the Default Rate. 20. Waiver of Right to Redeem From Sale - Waiver of Appraisement, Valuation, Etc. Mortgagor shall not and will not apply for or avail itself of any appraisement, valuation, stay, extension or exemption laws, or any so-called "Moratorium Laws", now existing or hereafter enacted in order to prevent or hinder the enforcement or foreclosure of this Mortgage, but hereby waives the benefit of such laws. Mortgagor for itself and all who may claim through or under it waives any and all right to have the property and estates comprising the Mortgaged Premises marshalled upon any foreclosure of the lien hereof and agrees that any court having jurisdiction to foreclose such lien may order the Mortgaged Premises -18- 19 sold as an entirety. In the event of any sale made under or by virtue of this instrument, the whole of the Mortgaged Premises may be sold in one parcel as an entirety or in separate lots or parcels at the same or different times, all as the Mortgagee may determine. Mortgagee or any Secured Creditor shall have the right to become the purchaser at any sale made under or by virtue of this instrument; and Mortgagee or any Secured Creditor so purchasing at any such sale shall have the right to be credited upon the amount of the bid made therefor by Mortgagee or such Secured Creditor with the amount payable to Mortgagee or such Secured Creditor, as the case may be, out of the net proceeds of such sale, and upon compliance with the terms of sale, may hold, retain and possess and dispose of such property in its own absolute right without further accountability. In the event of any such sale, the Notes, the Reimbursement Obligations and the other indebtedness hereby secured, if not previously due, shall be and become immediately due and payable without demand or notice of any kind. Mortgagor hereby waives any and all rights of redemption prior to or from sale under any order or decree of foreclosure pursuant to rights herein granted, on behalf of Mortgagor, and each and every person acquiring any interest in, or title to the Mortgaged Premises described herein subsequent to the date of this Mortgage, and on behalf of all other persons to the extent permitted by applicable law. 21. Costs and Expenses of Foreclosure. In any suit to foreclose the lien hereof there shall be allowed and included as additional indebtedness in the decree for sale all reasonable expenditures and expenses which may be paid or incurred by or on behalf of Mortgagee or any Secured Creditor for attorney's fees, appraiser's fees, outlays for documentary and expert evidence, stenographic charges, publication costs and costs (which may be estimated as to items to be expended after the entry of the decree) of procuring all such abstracts of title, title searches and examination, guarantee policies, Torrens certificates and similar data and assurances with respect to title as Mortgagee or any Secured Creditor may deem to be reasonably necessary either to prosecute any foreclosure action or to evidence to the bidder at any sale pursuant thereto the true condition of the title to or the value of the Mortgaged Premises, all of which expenditures shall become so much additional indebtedness hereby secured which Mortgagor agrees to pay and all of such shall be immediately due and payable with interest thereon from the date of expenditure until paid at the Default Rate. 22. Application of Proceeds. The proceeds and avails of the Mortgaged Premises, including without limitation the proceeds of any foreclosure sale of the Mortgaged Premises or of any sale of property pursuant to Section l9(b) hereof, shall, when received by Mortgagee in cash or its equivalent, be applied by the Mortgagee as set forth in Section 3.5 of the Credit Agreement. Mortgagor shall remain liable to Mortgagee and the Secured Creditors for any deficiency. Any surplus remaining after the full payment and satisfaction of the foregoing shall be returned to Mortgagor or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. -19- 20 23. Deficiency Decree. If at any foreclosure proceeding the Mortgaged Premises shall be sold for a sum less than the total amount of indebtedness for which judgment is therein given, the judgment creditor shall be entitled to the entry of a deficiency decree against Mortgagor and against the property of Mortgagor for the amount of such deficiency; and Mortgagor does hereby irrevocably consent to the appointment of a receiver for the Mortgaged Premises and the property of Mortgagor and of the rents, issues and profits thereof after such sale and until such deficiency decree is satisfied in full. 24. Mortgagee's Remedies Cumulative - No Waiver. No remedy or right of Mortgagee shall be exclusive of but shall be cumulative and in addition to every other remedy or right now or hereafter existing at law or in equity or by statute or otherwise. No delay in the exercise or omission to exercise any remedy or right accruing on any default shall impair any such remedy or right or be construed to be a waiver of any such default or acquiescence therein, nor shall it affect any subsequent default of the same or a different nature. Every such remedy or right may be exercised concurrently or independently, and when and as often as may be deemed expedient by Mortgagee. 25. Mortgagee Party to Suits. Mortgagee shall have the power and authority (but not the duty) to institute and maintain any suits and proceedings as Mortgagee may deem advisable (a) to prevent any impairment of the Mortgaged Premises by any acts which may be unlawful or which violate the terms of this Mortgage, (b) to preserve or protect its interest in the Mortgaged Premises or (c) to restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order might impair the security hereunder or be prejudicial to Mortgagee's or Secured Creditor's interest. If Mortgagee or any Secured Creditor shall be made a party to or shall intervene in any action or proceeding affecting the Mortgaged Premises or the title thereto or the interest of Mortgagee or any Secured Creditor under this Mortgage (including probate and bankruptcy proceedings), or if Mortgagee or any Secured Creditor employs an attorney to collect any or all of the indebtedness hereby secured or to enforce any of the terms hereof or realize hereupon or to protect the lien hereof, or if Mortgagee or any Secured Creditor shall incur any costs or expenses in preparation for the commencement of any foreclosure proceedings or for the defense of any threatened suit or proceeding which might affect the Mortgaged Premises or the security hereof, whether or not any such foreclosure or other suit or proceeding shall be actually commenced, then in any such case, Mortgagor agrees to pay to Mortgagee or such Secured Creditor, as the case may be, immediately and without demand, all reasonable costs, charges, expenses and attorney's fees incurred by Mortgagee or such -20- 21 Secured Creditor in any such case, and the same shall constitute so much additional indebtedness hereby secured payable upon demand with interest at the Default Rate. 26. Modifications Not to Affect Lien. Mortgagee, without notice to anyone (except the Secured Lenders), and without regard to the consideration, if any, paid therefor, or the presence of other liens on the Mortgaged Premises, may at the direction of the Secured Lenders release any part of the Mortgaged Premises or any person liable for any of the indebtedness hereby secured, may extend the time of payment of any of the indebtedness hereby secured and may grant waivers or other indulgences with respect hereto and thereto, and may agree with Mortgagor to modifications to the terms and conditions contained herein or otherwise applicable to any of the indebtedness hereby secured (including modifications in the rates of interest applicable thereto), without in any way affecting or impairing the liability of any party liable upon any of the indebtedness hereby secured or the priority of the lien of this Mortgage upon all of the Mortgaged Premises not expressly released, and any party acquiring any direct or indirect interest in the Mortgaged Premises shall take same subject to all of the provisions hereof. 27. Revolving Credit Loan. This Mortgage is given to secure, among other things, a revolving credit loan and shall secure not only presently existing indebtedness under the Credit Agreement but also future advances, or otherwise, as are made within twenty (20) years from the date hereof, to the same extent as if such future advances were made on the date of the execution of this Mortgage, although there may be no advance made at the time of execution of this Mortgage and although there may be no indebtedness hereby secured outstanding at the time any advance is made. The lien of this Mortgage shall be valid as to all indebtedness hereby secured, including future advances, from the time of its filing for record in the recorder's or registrar's office of the county in which the Mortgaged Premises are located. The total amount of indebtedness hereby secured may increase or decrease from time to time, but the total unpaid balance of indebtedness hereby secured (including disbursements which Mortgagee may make under this Mortgage, the Credit Agreement or any other documents related thereto) at any one time outstanding shall not exceed a maximum principal amount of One Hundred Million Dollars ($100,000,000) plus interest thereon and any disbursements made for payment of taxes, special assessments or insurance on the Mortgaged Premises and interest on such disbursements (all such indebtedness being hereinafter referred to as the "maximum amount secured hereby"). This Mortgage shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the Mortgaged Premises, to the extent of the maximum amount secured hereby. -21- 22 28. Notices. All communications provided for herein shall be in writing (including cable, telecopy or telex) and shall be given to the relevant party at its address, telecopier number or telex number set forth below, in the case of the Mortgagor or the Mortgagee, or on the signature pages of the Credit Agreement, in the case of the Lenders, or such other address, telecopier number or telex number as such party may hereafter specify by notice to the Mortgagor and the Mortgagee given by United States certified or registered mail, by telecopy or by other telecommunication device capable of creating a written record of such notice and its receipt: Morton Metalcraft Co. 1021 West Birchwood Morton, Illinois 61550-0429 Attention: Chief Financial Officer Telephone: (309) 266-7176 Telecopy: (309) 263-1841 Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60690 Attention: Richard Michalek Telephone: (312) 461-2272 Telecopy: (312) 461-2591 Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified herein and a confirmation of such telecopy has been received by the sender, (ii) if given by telex, when such telex is transmitted to the telex number specified herein and the answer back is received by sender, (iii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iv) if given by any other means, when delivered at the addresses specified herein. 29. Compliance with Environmental Laws. Mortgagor represents and warrants that, to the best of Mortgagor's knowledge, except as heretofore disclosed in writing to the Mortgagee, the Mortgaged Premises complies in all material respects with all applicable federal, state, regional, county or local laws, statutes, rules, regulations or ordinances (collectively, "Environmental Laws"), including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. SS.9601 et seq., the Resource Conservation and Recovery Act of 1976, as amended by the -22- 23 Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. SS.6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. SS.1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. SS.2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. SS.11001 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. SS.7401 et seq., the National Environmental Policy Act of 1975, 42 U.S.C. SS.4321, the Rivers and Harbours Act of 1899, 33 U.S.C. SS.401 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. SS.651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. SS.300(F) et seq., and all rules, regulations and guidance documents promulgated or published thereunder, and any state, regional, county or local statute, law, rule, regulation or ordinance relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), to exposure to toxic, hazardous, or other controlled, prohibited or regulated substances, to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any regulation, order, injunction, judgment, declaration, notice or demand issued thereunder. 30. Condition of Property. Mortgagor warrants and represents that, to the best of its knowledge, except as heretofore disclosed in writing to the Mortgagee, the Mortgaged Premises, including all personal property, is free from contamination, that there has not been thereon a release, discharge or emission, or threat of release, discharge or emission, of any hazardous substance, gas or liquid (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), or any other substance, gas or liquid, which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to safety, health or the environment, and that the Mortgaged Premises does not contain, or is not affected by, except to the extent not in violation of Environmental Laws: (i) asbestos, (ii) urea formaldehyde foam insulation, (iii) polychlorinated biphenyls (PCBs), (iv) underground storage tanks, (v) landfills, land disposals or dumps. 31. Notice of Environmental Problem. Except as heretofore disclosed in writing to the Mortgagee, Mortgagor represents and warrants that to the best of its knowledge it has not given, nor should it give, nor has it received, any notice, letter, citation, order, warning, complaint, inquiry, claim or demand that: (i) Mortgagor has violated, or is about to violate, any federal, state, regional, county or local environmental, health or safety statute, law, rule, regulation, ordinance, judgment or order on the Mortgaged Premises; (ii) there has been a release, or there is threat of release, of -23- 24 hazardous substances (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons) from the Mortgaged Premises; (iii) Mortgagor may be or is liable, in whole or in part, for the costs or cleaning up, remediating or responding to a release of hazardous substances (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons) on the Mortgaged Premises; (iv) any of the Mortgagor's property or assets are subject to a lien in favor of any governmental body for any liability, costs or damages, under federal, state or local environmental law, rule or regulation arising from or costs incurred by such governmental entity in response to a release of a hazardous substance (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons). In the event that Mortgagor receives any notice of the type described in this Section, Mortgagor shall promptly provide a copy to Mortgagee, and in no event, later than fifteen (15) days from Mortgagor's receipt or submission thereof. 32. Use of Property and Facilities. Mortgagor represents and warrants that to the best of its knowledge, except as heretofore disclosed in writing to the Mortgagee, it has never in the past engaged in, and agrees that in the future it shall not conduct, any business, operations or activity on the Mortgaged Premises, or employ or use the personal property or facilities, to manufacture, use, generate, treat, store, transport or dispose of any hazardous substance (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), or any other substance which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to safety, health or the environment, including, without limitation, any business, operation or activity which would cause Mortgagor, its property or facilities, to be in violation of the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. SS.6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. SS.9601 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. SS.7401 et seq., or any similar state, county, regional or local statute, law, regulation, rule or ordinance, including, without limitation, any state statute providing for financial responsibility for cleanup for the release or threatened release of substances provided for thereunder. The provisions of this Section shall apply to all real and personal property, without limitation, owned or controlled by Mortgagor or its subsidiaries. 33. Partial Invalidity. All rights, powers and remedies provided herein are intended to be limited to the extent necessary so that they will not render this Mortgage invalid, unenforceable or not entitled to be recorded, registered or filed under any applicable law. If any term of this Mortgage shall be held to be invalid, illegal or -24- 25 unenforceable, the validity and enforceability of the other terms of this Mortgage shall in no way be affected thereby. 34. Agent. Mortgagee has been appointed as agent pursuant to the Credit Agreement. In acting under or by virtue of this Mortgage, Mortgagee shall be entitled to all the rights, authority, privileges and immunities provided in Section 10 of the Credit Agreement, all of which provisions of said Section 10 are incorporated by reference herein with the same force and effect as if set forth herein. Mortgagee hereby disclaims any representation or warranty to Secured Creditors concerning the perfection of the security interest granted hereunder or the value of the Mortgaged Premises. 35. Restrictions on Secured Creditors' Right to Enforce. No Secured Creditor shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure of this Mortgage or for the execution of any trust or power hereof or for the appointment of a receiver, or for the enforcement of any other remedy under or upon this Mortgage; it being understood and intended that no one or more of the Secured Creditors shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Mortgage by its or their action or to enforce any right hereunder, and that all proceedings at law or in equity shall be instituted, had and maintained by the Mortgagee in the manner herein provided and for the ratable benefit of the Secured Creditors. 36. Successors and Assigns. Whenever any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all the covenants, promises and agreements in this Mortgage contained by or on behalf of Mortgagor, or by or on behalf of Mortgagee or Secured Creditors, shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. Without limiting the generality of the foregoing, and subject to the provisions of Sections 12.14 and 12.15 of the Credit Agreement, any Lender may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject, however, to the provisions of the Credit Agreement. 37. Default Rate. For purposes of this Mortgage, "Default Rate" shall mean the rate per annum as set forth in Section 2.1 of the Credit Agreement. 38. Liens Absolute, Etc. Mortgagor acknowledges and agrees that the lien and security interest hereby created and provided for are absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee or any other holder of any of the indebtedness hereby secured, and without -25- 26 limiting the generality of the foregoing, the lien and security hereof shall not be impaired by any acceptance by Mortgagee or any other holder of any of the indebtedness hereby secured of any other security for or guarantors upon any of the indebtedness hereby secured or by any failure, neglect or omission on the part of Mortgagee or any other holder of any of the indebtedness hereby secured to realize upon or protect any of the indebtedness hereby secured or any collateral or security therefor. The lien and security interest hereof shall not in any manner be impaired or affected by (and Mortgagee, without notice to anyone, is hereby authorized to make from time to time) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the indebtedness hereby secured, or of any collateral or security therefor, or of any guaranty thereof, or of any instrument or agreement setting forth the terms and conditions pertaining to any of the foregoing. The Secured Creditors may at their discretion at any time grant credit to the Borrower without notice to Mortgagor in such amounts and on such terms as such Secured Creditors may elect without in any manner impairing the lien and security interest created and provided for herein. In order to realize hereon and to exercise the rights granted Mortgagee hereby and under applicable law, there shall be no obligation on the part of Mortgagee or any other holder of any of the indebtedness hereby secured at any time to first resort for payment to the Borrower or to any guaranty of any of the indebtedness hereby secured or any portion thereof or to resort to any other collateral, security, property, liens or any other rights or remedies whatsoever, and Mortgagee shall have the right to enforce this Mortgage irrespective of whether or not other proceedings or steps seeking resort to or realization upon or from any of the foregoing are pending. 39. Direct and Primary Security - No Subrogation. The lien and security interest herein created and provided for stand as direct and primary security for the Notes as well as for any of the other indebtedness hereby secured. No application of any sums received by Mortgagee in respect of the Mortgaged Premises or any disposition thereof to the reduction of the indebtedness hereby secured or any part thereof shall in any manner entitle Mortgagor to any right, title or interest in or to the indebtedness hereby secured or any collateral or security therefor, whether by subrogation or otherwise, unless and until all indebtedness hereby secured has been fully paid and satisfied and any commitment of the Secured Creditors to extend credit to Mortgagor or to the Borrower shall have expired. 40. Multisite Real Estate Transaction. Mortgagor acknowledges that this Mortgage is one of a number of other mortgages and deeds of trusts and other security documents dated of even date herewith (such mortgages, deeds of trust and other security documents dated of even date herewith and any supplements or amendments thereto and -26- 27 any other mortgages, deeds of trust or security documents securing the indebtedness hereby secured are collectively called the "Other Mortgages") which secure the indebtedness hereby secured. Mortgagor agrees that the lien of this Mortgage shall be absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee and, without limiting the generality of the foregoing, the lien hereof shall not be impaired by any acceptance by Mortgagee of any security for or guarantors upon any of the indebtedness hereby secured, or by any failure, neglect or omission on the part of the Mortgagee to realize upon or protect any of the indebtedness hereby secured or any collateral security therefor including the Other Mortgages. The lien hereof shall not in any manner be impaired or affected by any release (except as to the property released) sale, pledge, surrender, compromise, settlement, renewal, extension, indulgence, alteration, changing, modification or disposition of any of the indebtedness hereby secured or of any of the collateral security therefor, including without limitation the Other Mortgages or of any guarantee thereof, and Mortgagee may at its discretion foreclose, exercise any power of sale, or exercise any other remedy available to it under any or all of the Other Mortgages without first exercising or enforcing any of its rights and remedies hereunder. Such exercise of Mortgagee's rights and remedies under any or all of the Other Mortgages shall not in any manner impair the indebtedness hereby secured or the lien of this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder shall not impair the lien of any of the Other Mortgages or any of Mortgagee's rights and remedies thereunder. The undersigned specifically consents and agrees that Mortgagee may exercise its rights and remedies hereunder and under the Other Mortgages separately or concurrently and in any order that it may deem appropriate. 41. Headings. The headings in this instrument are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof. 42. Changes, Etc. This instrument and the provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 43. Notice. This mortgage secures credit in the principal amount of $90,000,000. Loans and advances up to this amount, together with interest, are senior to indebtedness to other creditors under subsequently recorded or filed mortgages and liens. The $90,000,000 credit referred to in this Section 43 is the principal amount of such credit and this Mortgage also secures all other indebtedness hereby secured in addition to that part of the indebtedness hereby secured which represents the principal amount of such credit. -27- 28 44. Governing Law. The creation of this Mortgage, the perfection of the lien or security interest in the Mortgaged Premises, and the rights and remedies of the Mortgagee with respect to the Mortgaged Premises, as provided herein and by the laws of the state in which the Mortgaged Premises is located, shall be governed by and construed in accordance with the internal laws of the state in which the Mortgaged Premises is located without regard to principles of conflicts of law. OTHERWISE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE MORTGAGE, THE CREDIT AGREEMENT, THE NOTES, THE LETTERS OF CREDIT AND ALL OTHER OBLIGATIONS OF MORTGAGOR SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. -28- 29 IN WITNESS WHEREOF, Mortgagor has caused these presents to be signed the day and year first above written. CARROLL GEORGE, INC. By Its___________________ __________ (Type or Print Name) -29- 30 STATE OF _______ ) ) SS. COUNTY OF ______ ) On this ___ day of _____________________, 1998, before me, the undersigned, a Notary Public in and for the State of ___________________, personally appeared __________________________________ to me personally known, who being by me duly sworn did say that he is the _____________________________ of the corporation executing the within and foregoing instrument; that no seal has been procured by the corporation; that the instrument was signed on behalf of the corporation by authority of its Board of Directors; and that _________________________ as officer acknowledged the execution of the foregoing instrument to be the voluntary act and deed of the corporation, by it and by him voluntarily executed. ______________________________________ Notary Public in and for the State of ____________ (Notary Seal) Commission Expires: __________________________________ EX-10.4 5 EX-10.4 1 EXHIBIT 10.4 DEED OF TRUST AND SECURITY AGREEMENT WITH ASSIGNMENT OF RENTS (THE COLLATERAL IS OR INCLUDES FIXTURES) This Deed of Trust and Security Agreement with Assignment of Rents and Security Agreement with Assignment of Rents dated as of June__, 1998 from B&W Metal Fabricators, Inc., a North Carolina corporation with its principal place of business and mailing address at 2700 West Salem Road, Welcome, North Carolina 27374 (hereinafter referred to as the "Grantor") to Chicago Title Insurance Company, as Trustee having an office at P.O. Box 624, Lexington, North Carolina 27293-0624 (the "Trustee") and in trust for the benefit of Harris Trust and Savings Bank, an Illinois banking corporation with its principal place of business and mailing address at 111 West Monroe Street, Chicago, Illinois 60603 ("Harris"), as agent hereunder for the Secured Creditors hereinafter identified and defined (Harris acting as such agent and any successor or successors to Harris in such capacity being hereinafter referred to as the "Beneficiary"); WITNESSETH THAT: WHEREAS, Morton Industrial Group, Inc. (the "Borrower") has entered into with Harris (individually and as agent for the Lenders identified and defined below) that certain Credit Agreement dated as of May 29, 1998 (such Credit Agreement as the same may from time to time be modified, amended or restated being hereinafter referred to as the "Credit Agreement") pursuant to which Harris and the other lenders named therein and which may thereafter become parties thereto (Harris and such other lenders being herein referred to collectively as the "Lenders" and individually as a "Lender") committed, subject to certain terms and conditions, (i) to make a revolving credit facility available to the Borrower in the form of loans and letters of credit (the "Revolving Credit") in the aggregate principal amount not to exceed $35,000,000 at any one time outstanding during the period ending on May 31, 2003 (the "Termination Date") with all loans made under the Revolving Credit being repayable on the Termination Date and (ii) to make term loans in the aggregate principal amount of $25,000,000 (in the case of Term A Loan) and $30,000,000 (in the case of Term B Loan) to Grantor payable in installments with a final maturity of all principal and interest not required to be sooner paid of May 31, 2003 (in the case Term A Loan) and May 31, 2005 (in the case of Term B Loan) (the "Term Loans"), a true and correct copy of which Credit Agreement is on file at the offices of the Beneficiary; and WHEREAS, advances from time to time made under the Revolving Credit are evidenced by Revolving Credit Notes (such Revolving Credit Notes and any extensions thereof or modifications thereto and any and all notes issued in renewal thereof or in substitution or replacement therefor being hereinafter referred to as the "Revolving Credit Notes") aggregating 2 $35,000,000 in face principal amount and payable to the order of the respective Lenders named thereon, whereby the Borrower promises to pay the advances evidenced thereby on or before the Termination Date with interest and premium as set forth in the Credit Agreement; and WHEREAS, the Term Loans are evidenced by Term Notes (the "Term Notes") aggregating $25,000,000 (in the case of Term A Loan) and $30,000,000 (in the case of Term B Loan) in principal amount and payable to the order of the respective Lenders named thereon, whereby the Borrower promises to pay the term loans evidenced thereby, with interest and premium as set forth in the Credit Agreement, in installments with a final maturity of all principal and interest and premium not required to be sooner paid of May 31, 2003 (in the case of Term A Loan) and May 31, 2005 (in the case of Term B Loan); and WHEREAS, pursuant to the terms of the Credit Agreement, any Lender or Lenders may, from time to time, assign to other Lenders portions of the indebtedness evidenced by the Notes then owned by such assigning Lender together with an equivalent proportion of such assigning Lender's obligation to make advances under the Credit Agreement (each such assignment being hereinafter referred to as an "Assignment"); and WHEREAS, in the event of each Assignment under the Credit Agreement, the Borrower has agreed pursuant to the terms of the Credit Agreement to execute and deliver to each new assignee Lender by reason of such Assignment, new Notes evidencing that portion of the indebtedness so assigned to such new assignee Lender and advances to be thereafter made by such new assignee Lender pursuant to the Credit Agreement and to execute new Notes to such assigning Lender evidencing the portion of such indebtedness not so assigned and advances to be thereafter made by such assigning Lender pursuant to the Credit Agreement; and WHEREAS, it is the intention of the Grantor that all such Notes constitute "Notes" for the purposes hereof and to be secured hereby; and WHEREAS, pursuant to the terms of the Credit Agreement, the Beneficiary may from time to time issue letters of credit (the "Letters of Credit") for the account of the Borrower in an aggregate face amount not to exceed $10,000,000 and with expiry dates on or before the Termination Date, and which Letters of Credit, when combined with the principal amount of loans outstanding under the Revolving Credit from time to time, shall not exceed $35,000,000; WHEREAS, the Borrower may from time to time enter into one or more interest rate exchange, cap, collar, floor or other agreements with one or more of the Lenders party to the Credit Agreement, or their affiliates, for the purpose of hedging or otherwise protecting the Borrower against changes in interest rates (the liability of the Borrower in respect of such agreements with such Lenders and their affiliates being hereinafter referred to as the "Hedging -2- 3 Liability") (the affiliates of the Lenders to which any Hedging Liability is owed, together with the Lenders and the Beneficiary, being collectively referred to herein as the "Secured Creditors"); and NOW, THEREFORE, in order to secure (i) payment of all principal of and interest and premium on the Notes (ratably among the Notes without preference or priority to one over the others) as and when the same become due and payable (whether by lapse of time, acceleration or otherwise) and all advances now or hereafter evidenced thereby, (ii) the payment and performance of all obligations arising under any applications executed by the Borrower in connection with any of the Letters of Credit, including the obligation of the Borrower to reimburse the Beneficiary for any draws under the Letters of Credit, (iii) payment of all fees and charges payable by the Borrower under the terms of the Credit Agreement, (iv) any and all liability of the Borrower arising under or in connection with or otherwise evidenced by agreements with any one or more of the Secured Creditors with respect to any Hedging Liability, (v) payment of all other sums at any time due or owing from or required to be paid by the Borrower under the terms of the Deed of Trust and the performance and observance of all the covenants and agreements in the Deed of Trust provided to be performed or observed by the Grantor, and (vi) the performance and observance of all covenants and agreements contained in the Deed of Trust or in the Notes or in the Credit Agreement or in any other instrument or document at any time evidencing or securing any of the foregoing indebtedness, obligations or liabilities or setting forth terms and conditions applicable thereto (all of such indebtedness, obligations and liabilities referred to in clauses (i), (ii), (iii), (iv), (v) and (vi) above being hereinafter collectively referred to as the "indebtedness hereby secured"), Grantor does hereby grant, bargain, sell, convey, mortgage, warrant, assign, and pledge unto the Beneficiary, its successors and assigns, and grant to the Beneficiary, its successors and assigns a security interest in all and singular the properties, rights, interests and privileges described in Granting Clauses I, II, III, IV, V and VI below, all of the same being collectively referred to herein as the "Mortgaged Premises": GRANTING CLAUSE I That certain real estate lying and being in County of Davidson and State of North Carolina more particularly described in Schedule I attached hereto and made a part hereof. GRANTING CLAUSE II All buildings and improvements of every kind and description heretofore or hereafter erected or placed on the property described in Granting Clause I and all materials intended for construction, reconstruction, alteration and repairs of the buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the -3- 4 premises immediately upon the delivery thereof to the said real estate, and all fixtures, machinery, apparatus, equipment, fittings and articles of personal property of every kind and nature whatsoever now or hereafter attached to or contained in or located on said real estate and the buildings and improvements now or hereafter located thereon, whether or not said apparatus, machinery, equipment, fittings and articles of personal property are attached to or form a part of said real estate, including but not limited to all machinery, motors, fittings, radiators, all gas, coal, steam, electric, oil and other heating, cooking, power and lighting apparatus and fixtures, all fire prevention and extinguishing equipment and apparatus, all cooling and ventilating apparatus and systems, all plumbing, incinerating, and sprinkler equipment and fixtures, all elevators and escalators, all communication and electronic monitoring equipment, all window and structural cleaning rigs, and all other machinery and equipment of every nature and fixtures and appurtenances thereto and all items of furniture, appliances, draperies, carpets, other furnishings, equipment and personal property used or useful in the operation, maintenance and protection of the said real estate and the buildings and improvements now or hereafter located thereon and all renewals or replacements thereof or articles in substitution therefor, whether or not the same are or shall be attached to said real estate, buildings or improvements in any manner, but excluding (a) any and all of the grantor's automobiles, trucks, rail cars, fork lifts, track mobiles and other rolling stock and transportation equipment, office furnishings, office equipment (including without limitation all computers not used for operating the machinery and equipment in the Grantor's plant and all word processing equipment), (b) any and all replacements and substitutions therefor, all proceeds thereof and any insurance thereon, and (c) any and all inventory, accounts receivables and general intangibles; and this Deed of Trust is hereby deemed to be as well a Security Agreement under the provisions of the Uniform Commercial Code for the purpose of creating hereby a security interest in said property, which is hereby granted by Grantor as debtor to Beneficiary as secured party, securing the indebtedness hereby secured. The addresses of Grantor (debtor) and Beneficiary (secured party) appear at the beginning hereof. GRANTING CLAUSE III All right, title and interest of Grantor now owned or hereafter acquired in and to all and singular the estates, tenements, hereditaments, privileges, easements, licenses, franchises, appurtenances and royalties, mineral, oil, and water rights belonging or in any wise appertaining to the property described in the preceding Granting Clause I and the buildings and improvements now or hereafter located thereon and the reversions, rents, issues, revenues and profits thereof, including all interest of Grantor in all rents, issues and profits of the aforementioned property and all rents, issues, profits, revenues, royalties, bonuses, rights and benefits due, payable or accruing (including all deposits of money as advanced rent or for security) under any and all leases or subleases and renewals of, or under any contracts or options for the sale of all or any part of, said property (including during any period allowed by law for the redemption of said property after any foreclosure or other sale), (herein collectively referred to as the "Rents") and as further -4- 5 security for the payment of the indebtedness hereby secured and for the faithful performance of the covenants, agreements terms and provisions of this Deed of Trust, Grantor hereby sells, transfers and assigns to Beneficiary all right, title and interest of Grantor, and Grantor does hereby authorize, empower and grant to Beneficiary the right, but not the obligation, to collect, receive and receipt for all such rents and other sums and apply them to the indebtedness hereby secured and to demand, sue for and recover the same when due or payable; provided that the assignments made hereby shall not impair or diminish the obligations of Grantor under the provisions of such leases or other agreements nor shall such obligations be imposed upon Trustee. By acceptance of this Deed of Trust, Beneficiary agrees, not as a limitation or condition hereof, but as a personal covenant available only to Grantor, that until an event of default (as hereinafter defined) shall occur Grantor may collect, receive (but not more than 30 days in advance) and enjoy such rents. GRANTING CLAUSE IV All judgments, awards of damages, settlements and other compensation heretofore or hereafter made resulting from condemnation proceedings or the taking of the property described in Granting Clause I or any part thereof or any building or other improvement now or at any time hereafter located thereon or any easement or other appurtenance thereto under the power of eminent domain, or any similar power or right (including any award from the United States Government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for the payment thereof), whether permanent or temporary, or for any damage (whether caused by such taking or otherwise) to said property or any part thereof or the improvements thereon or any part thereof, or to any rights appurtenant thereto, including severance and consequential damage, and any award for change of grade of streets (collectively "Condemnation Awards"). GRANTING CLAUSE V All property and rights, if any, which are by the express provisions of this instrument required to be subjected to the lien hereof and any additional property and rights that may from time to time hereafter, by installation or writing of any kind, be subjected to the lien hereof by Grantor or by anyone on Grantor's behalf. GRANTING CLAUSE VI All rights in and to common areas and access roads on adjacent properties heretofore or hereafter granted to Grantor and any after-acquired title or reversion in and to the beds of any -5- 6 ways, roads, streets, avenues and alleys adjoining the property described in Granting Clause I or any part thereof. TO HAVE AND TO HOLD the Mortgaged Premises and the properties, rights and privileges hereby granted, bargained, sold, conveyed, warranted, pledged and assigned, and in which a security interest is granted, or intended so to be, in trust unto Trustee, its successors and assigns, in fee simple forever; provided, however, that this instrument is upon the express condition that if the principal of and interest on the Revolving Credit Notes shall be paid in full and all other indebtedness hereby secured shall be fully paid and performed, then this instrument and the estate and rights hereby granted shall cease, determine and be void and this instrument shall be released by Trustee upon the written request and at the expense of Grantor, otherwise to remain in full force and effect. IN TRUST NEVERTHELESS, upon the terms and trust herein set forth, for the equal and proportionate benefit, security and protection of all present and future holders of the indebtedness hereby secured; provided, however, that this instrument is upon the express condition that if all of the indebtedness hereby secured shall have been paid and performed in full and any commitment in the Credit Agreement to advance funds shall have terminated, then this instrument and the estate and rights hereby granted shall cease, determine and be void and upon the written request and at the expense of Grantor, the Beneficiary shall request Trustee to release this Deed of Trust and shall produce for Trustee the Revolving Credit Notes duly cancelled, the Trustee to then release this Deed of Trust without further inquiry or liability; otherwise this Deed of Trust is to remain in full force and effect. Grantor hereby covenants and agrees with Trustee and the Beneficiary as follows: Section 1. Payment of the Indebtedness. The indebtedness hereby secured will be promptly paid as and when the same becomes due. Section 2. Further Assurances. Grantor will execute and deliver such further instruments and do such further acts as may be necessary or proper to carry out more effectively the purpose of this instrument and, without limiting the foregoing, to make subject to the lien hereof any property agreed to be subjected hereto or covered by the Granting Clauses hereof or intended so to be. Section 3. Possession. While Grantor is not in default hereunder, Grantor shall be suffered and permitted to remain in full possession, enjoyment and control of the Mortgaged Premises, subject always to the observance and performance of the terms of this instrument. -6- 7 Section 4. Payment of Taxes. Grantor shall pay before any penalty attaches, all general taxes and all special taxes, special assessments, water, drainage and sewer charges and all other charges of any kind whatsoever, ordinary or extraordinary, which may be levied, assessed, imposed or charged on or against the Mortgaged Premises or any part thereof and which, if unpaid, might by law become a lien or charge upon the Mortgaged Premises or any part thereof, and shall, upon written request, exhibit to Trustee or Beneficiary official receipts evidencing such payments, except that, unless and until foreclosure, distraint, sale or other similar proceedings shall have been commenced, no such charge or claim need be paid if being contested (except to the extent any full or partial payment shall be required by law), after notice to Trustee or Beneficiary, by appropriate proceedings which shall operate to prevent the collection thereof or the sale or forfeiture of the Mortgaged Premises or any part thereof to satisfy the same, conducted in good faith and with due diligence. Section 5. Payment of Taxes on Notes, Deed of Trust or Interest of Trustee or Beneficiary. Without duplication of the Grantor's obligations under Section 12 of the Credit Agreement, Grantor agrees that if any tax, assessment or imposition upon this Deed of Trust or the indebtedness hereby secured or the Revolving Credit Notes or the interest of Trustee or Beneficiary in the Mortgaged Premises or upon Trustee or Beneficiary by reason of or as a holder of any of the foregoing (including, without limitation, corporate privilege, franchise and excise taxes, but excepting therefrom any income tax on interest payments on the principal portion of the indebtedness hereby secured imposed by the United States or any state) is levied, assessed or charged, then, unless all such taxes are paid by Grantor to, for or on behalf of Trustee or Beneficiary as they become due and payable (which Grantor agrees to do upon demand of Trustee or Beneficiary, to the extent permitted by law), or Trustee or Beneficiary is reimbursed for any such sum advanced by Trustee or Beneficiary, all sums hereby secured shall become immediately due and payable, at the option of Trustee or Beneficiary upon 30 days' notice to Grantor, notwithstanding anything contained herein or in any law heretofore or hereafter enacted, including any provision thereof forbidding Grantor from making any such payment. Grantor agrees to exhibit to Trustee or Beneficiary, upon request, official receipts showing payment of all taxes and charges which Grantor is required to pay hereunder. Beneficiary shall provide to Grantor a statement setting forth the nature and amount of any such tax or charge. Grantor may contest any such tax, assessment or imposition in good faith and in appropriate proceedings which prevent enforcement of the matter under contest. Section 6. Recordation and Payment of Taxes and Expenses Incident Thereto. Grantor will pay or reimburse Trustee or Beneficiary for the payment of any and all taxes, fees or other charges incurred in connection with any such recordation or rerecordation, including any documentary stamp tax or tax imposed upon the privilege of having this instrument or any instrument issued pursuant hereto recorded. -7- 8 Section 7. Insurance. Grantor will, at its expense, keep all buildings, improvements, equipment and other property now or hereafter constituting part of the Mortgaged Premises insured against loss or damage by fire, lightning, windstorm, explosion and such other risks as are usually included under extended coverage policies, or which are usually insured against by companies similarly situated conducting similar businesses and owning like properties, in amount sufficient to prevent Grantor, Beneficiary or the Secured Creditors from becoming a co-insurer of any partial loss under applicable policies and in any event not less than the then full insurable value (actual replacement value without deduction for physical depreciation) thereof, as determined at the reasonable request of Beneficiary and at Grantor's expense by the insurer or insurers, all under insurance policies payable, in case of loss or damage, to Beneficiary (and if Beneficiary so requests, naming Beneficiary and the Secured Creditors as additional insureds therein), such rights to be evidenced by the usual standard non-contributory form of mortgage clause to be attached to each policy. Grantor shall not carry separate insurance concurrent in kind or form and contributing in the event of loss, with any insurance required hereby. Grantor shall also obtain and maintain public liability, property damage and workmen's compensation insurance in each case in form and content reasonably satisfactory to Beneficiary and in amounts as are customarily carried by owners of like property. Grantor shall also obtain and maintain such other insurance with respect to the Mortgaged Premises in such amounts and against such insurable hazards as Beneficiary from time to time may reasonably require, including, without limitation, boiler and machinery insurance and insurance against risks now or hereafter embraced by so called "extended coverage." All insurance required hereby shall be maintained with good and responsible insurance companies reasonably satisfactory to Beneficiary and may provide for deductible amounts as are customary for Persons similarly situated, conducting similar businesses and operating like properties, shall provide that any losses shall be payable notwithstanding any act or negligence of Grantor, shall provide that no cancellation thereof shall be effective until at least thirty days after receipt by Grantor and Beneficiary of written notice thereof, and shall be reasonably satisfactory to Beneficiary in all other respects. Upon the execution of this Deed of Trust and thereafter not less than fifteen (15) days prior to the expiration date of any policy delivered pursuant to this instrument, Grantor will deliver to Beneficiary certificates evidencing the insurance required by this instrument. In the event of foreclosure, Grantor authorizes and empowers Beneficiary to effect insurance upon the Mortgaged Premises in amounts aforesaid for a period covering the time of redemption from foreclosure sale provided by law, and if necessary therefor to cancel any or all existing insurance policies. Section 8. Damage to or Destruction of Mortgaged Premises. (a) Notice. In case of any material damage to or destruction of the Mortgaged Premises or any part thereof, Grantor shall promptly give written notice thereof to Trustee or Beneficiary, generally describing the nature and extent of such damage or destruction. -8- 9 (b) Restoration. In case of any damage to or destruction of the Mortgaged Premises or any part thereof, Grantor, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for the purpose, at Grantor's expense, will promptly commence and complete (subject to unavoidable delays occasioned by strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions and similar causes beyond the reasonable control of Grantor) the restoration, replacement or rebuilding of the Mortgaged Premises as nearly as possible to its value, condition and character immediately prior to such damage or destruction unless the Grantor, in the exercise of its commercially reasonable judgment, deems it unnecessary or inappropriate to replace, restore or rebuild the Mortgaged Premises; provided, however, that (i) Grantor need not restore, replace or rebuild the Mortgaged Premises so damaged or destroyed to the extent Grantor could have demolished and not replaced such property without Beneficiary's consent in compliance with Section 11 hereof and (ii) Grantor shall not be in default of its obligation hereunder to promptly commence such restoration, replacement or rebuilding by delaying such commencement until its receipt of the insurance proceeds on account of such damage or destruction if (a) Grantor has in effect the insurance required by this Deed of Trust, (b) Grantor is in compliance with the conditions hereinafter set forth to Beneficiary's obligation to release such proceeds to Grantor for such restoration, replacement or rebuilding, (c) such delay does not in any event exceed ninety (90) days and (c) pending its receipt of such proceeds, Grantor diligently follows the procedures set out in the policies of such insurance for making a claim thereon against the insurer. (c) Adjustment of Loss. Grantor hereby authorizes Beneficiary, upon the occurrence and during the continuation of any event of default hereunder, at Beneficiary's option, to adjust and compromise any losses under any insurance afforded, but unless Beneficiary elects to adjust the losses as aforesaid, said adjustment and/or compromise shall be made by Grantor, subject to final approval of Beneficiary in the case of losses exceeding $250,000. (d) Application of Insurance Proceeds. Net insurance proceeds (except in cases where (i) the amount payable in respect of any one loss is less than $250,000 and (ii) and an event of default hereunder shall not have occurred and be continuing, in which case the amount payable in respect of such loss may be received by Grantor, and to the extent required by subdivision (b) of this Section, used by Grantor in paying for restoration, replacement or rebuilding of the damaged or destroyed property) received by Beneficiary under the provisions of this Deed of Trust or any instruments supplemental hereto or thereto or under any policy or policies of insurance covering the Mortgaged Premises or any part thereof shall first be applied toward the payment of the amount owing on the indebtedness hereby secured in such order of application as Beneficiary -9- 10 may elect whether or not the same may then be due or be otherwise adequately secured; provided, however, that such proceeds shall be made available for the restoration of the portion of the Mortgaged Premises damaged or destroyed if written application for such use is made within thirty (30) days of receipt of such proceeds and the following conditions are satisfied: (i) in the reasonable judgment of Beneficiary, the Mortgaged Premises can be restored within a reasonable time to an architectural and economic unit of the same character and such that the overall value and utility of the Mortgaged Premises and the Grantor's other properties as an integrated operating facility, including the efficiency and capacity thereof, after such restoration shall be no less than was the case prior to such damage or destruction; (ii) Grantor has in effect business interruption insurance covering the income to be lost during the restoration period as a result of the damage or destruction to the Mortgaged Premises or provides Beneficiary with other evidence reasonably satisfactory to it that Grantor has cash resources sufficient to pay its obligations during the restoration period; (iii) at the time of release no event of default hereunder, or event which, with the lapse of time, the giving of notice, or both, would constitute an event of default, shall have occurred or be continuing; (iv) Grantor shall have submitted to Beneficiary plans and specifications for the restoration which shall be reasonably satisfactory to it; (v) Grantor shall submit to Beneficiary contracts reasonably acceptable to Beneficiary with good and responsible contractors and materialmen covering substantially all work and materials necessary to complete restoration and providing for a total completion price not in excess of the amount of insurance proceeds available for restoration, or, if a deficiency shall exist, Grantor shall have deposited the amount of such deficiency with Beneficiary; and (vi) Grantor shall have obtained a waiver of the right of subrogation from any insurer under such policies of insurance who at that time claims that no liability exists as to Grantor or the insured under such policies. Any insurance proceeds to be released pursuant to the foregoing provisions may at the option of Beneficiary be disbursed from time to time as restoration progresses to pay for restoration work completed and in place and such disbursements may at Beneficiary's option be made directly to Grantor or to or through any contractor or materialman to whom payment is due or to or through a construction escrow to be maintained by a title insurer acceptable to Beneficiary. Beneficiary may impose such further conditions upon the release of insurance proceeds (including the receipt of title insurance) as are customarily imposed by prudent construction lenders to insure the completion of the restoration work free and clear of all liens or claims for lien other than liens permitted by the Credit Agreement and the Permitted Exceptions (as hereinafter defined). All title insurance charges and other costs and expenses paid to or for the account of Grantor in connection with the release of such insurance proceeds shall constitute so much additional indebtedness hereby secured to be payable upon demand with interest at the Default Rate (as hereinafter defined). Beneficiary may deduct any such costs and expenses from insurance proceeds at any time standing in its hands. If Grantor fails to -10- 11 request that insurance proceeds be applied to the restoration of the improvements or if Grantor makes such a request but fails to complete restoration within a reasonable time, Beneficiary shall have the right, but not the duty, to restore or rebuild said Mortgaged Premises or any part thereof for or on behalf of Grantor in lieu of applying said proceeds to the indebtedness hereby secured and for such purpose may do all necessary acts, including using funds deposited by Grantor as aforesaid and advancing additional funds for the purpose of restoration, all such additional funds to constitute part of the indebtedness hereby secured payable upon demand with interest at the Default Rate. Section 9. Eminent Domain. Grantor acknowledges that Condemnation Awards have been assigned to Beneficiary, which awards Beneficiary is hereby irrevocably authorized to collect and receive, and to give appropriate receipts and acquittances therefor, and at Beneficiary's option, to apply the same toward the payment of the amount owing on account of the indebtedness hereby secured in such order of application as Beneficiary may elect and whether or not the same may then be due and payable or otherwise adequately secured; provided, however, that a Condemnation Award in respect of any taking of a portion (but not all or any material portion) of the Mortgaged Premises shall be made available for the restoration of such Mortgaged Premises in the same manner and subject to the same conditions as are imposed on the release of insurance proceeds set forth in Section 9(d) hereof (including the provision of such Section relating to net insurance proceeds less than $250,000) as if the Mortgaged Premises so taken were destroyed and the Condemnation Award for such taking was actually insurance proceeds in respect of the Mortgaged Premises so deemed as having been destroyed. In the event that any proceeds of a Condemnation Award shall be made available to Grantor for restoring the Mortgaged Premises so taken, Grantor hereby covenants to promptly commence and complete such restoration of the Mortgaged Premises as nearly as possible to its value, condition and character immediately prior to such taking. Grantor covenants and agrees that Grantor will give Beneficiary prompt notice of the actual or threatened commencement of any proceedings under condemnation or eminent domain affecting all or any part of the Mortgaged Premises including any easement therein or appurtenance thereof or severance and consequential damage and change in grade of streets, and will deliver to Beneficiary copies of any and all papers served in connection with any such proceedings. Grantor further covenants and agrees to make, execute and deliver to Beneficiary, at any time or times upon request, free, clear and discharged of any encumbrances of any kind whatsoever, any and all further assignments and/or instruments deemed necessary by Beneficiary for the purpose of validly and sufficiently assigning all awards and other compensation heretofore and hereafter to be made to Grantor for any taking, either permanent or temporary, under any such proceeding. Section 10. Construction, Repair, Waste, Etc. Grantor agrees that no building or other improvement on the Mortgaged Premises and constituting a part thereof shall be materially altered, removed or demolished nor shall any material fixtures or appliances on, in or about said -11- 12 buildings or improvements be severed, removed, sold or mortgaged, without the consent of Beneficiary or the holder of the indebtedness hereby secured and in the event of the demolition or destruction in whole or in material part of any of the fixtures, chattels or similar articles of personal property covered hereby, Grantor covenants that the same will be replaced promptly by similar fixtures, chattels and articles of personal property at least equal in quality and condition to those replaced (unless the Grantor, in the exercise of its commercially reasonable judgment, deems it unnecessary to replace such property), free from any security interest in or encumbrance thereon or reservation of title thereto other than liens permitted by the Credit Agreement and the Permitted Exceptions; provided, however, that Grantor may alter, remove or demolish any such building, improvement, fixture or appliance, and need not replace any such fixtures or personal property, in each case to the extent such action (i) is desirable to the proper conduct of the business of Grantor in the ordinary course as presently conducted and otherwise in the best interest of Grantor, (ii) does not impair the overall value or utility of the Mortgaged Premises and Grantor's other related properties as an integrated facility, (iii) does not decrease the efficiency or capacity of the Mortgaged Premises and (iv) does not impair the rights and benefits under this Deed of Trust of the Secured Creditors. Grantor further agrees to permit, commit or suffer no material waste, impairment or deterioration of the Mortgaged Premises or any part thereof; to keep and maintain said Mortgaged Premises and every part thereof in good working condition (ordinary wear and tear excepted); to effect such repairs as Beneficiary or the holder of the indebtedness hereby secured may reasonably require and from time to time to make all needful and proper replacements and additions so that said buildings, fixtures, machinery and appurtenances will, at all times, be in good working condition (ordinary wear and tear excepted), fit and proper for the respective purposes for which they are being used by Grantor; to comply with all statutes, orders, requirements or decrees relating to the Mortgaged Premises by any Federal, State or municipal authority, noncompliance with which could have a material adverse effect on the financial condition, properties, business or operations of the Grantor; to observe and comply with all conditions and requirements necessary to preserve and extend any and all rights, licenses, permits (including, but not limited to, zoning variances, special exceptions and non-conforming uses), privileges, franchises and concessions which are applicable to the Mortgaged Premises or which have been granted to or contracted for by Grantor in connection with any existing or presently contemplated use of the Mortgaged Premises or any part thereof and which are necessary in the operation of the Grantor's business and not to initiate or acquiesce in any changes to or terminations of any of the foregoing or of zoning classifications affecting the use to which the Mortgaged Premises or any part thereof may be put and which are necessary in the operation of the Grantor's business without the prior written consent of Beneficiary or the holder of the indebtedness hereby secured; and to make no material alterations in or improvements or additions to the Mortgaged Premises which would impair the overall value or utility of the Mortgaged Premises and Grantor's other related properties as an integrated facility or which would impair the rights and benefits under this Deed of Trust of the Trustee or the holder of any indebtedness hereby secured, except as required by governmental authority or pursuant to the -12- 13 Credit Agreement or as permitted by Beneficiary or the holder of the indebtedness hereby secured. Section 11. Liens and Encumbrances. Grantor covenants with Trustee and Beneficiary that it is seized of the Mortgaged Premises in fee and has the right to convey in fee simple; that the same are free and clear of all encumbrances (except as set forth below) and that Grantor will warrant and defend the said title against the claims of all persons whatsoever. Grantor will not, without the prior written consent of Trustee or Beneficiary or the holder of the indebtedness hereby secured, directly or indirectly, create or suffer to be created or to remain and will discharge or promptly cause to be discharged any mortgage, lien, encumbrance or charge on, pledge of, or conditional sale or other title retention agreement with respect to, the Mortgaged Premises or any part thereof, whether superior or subordinate to the lien hereof, except for this instrument, liens permitted by the Credit Agreement and those exceptions to title listed on Schedule II attached hereto (the "Permitted Exceptions"). Section 12. Right of Trustee or Beneficiary to Perform Grantor's Covenants, Etc. If Grantor shall fail to make any payment or perform any act required to be made or performed hereunder, Trustee or Beneficiary or the holder of the indebtedness hereby secured, without waiving or releasing any obligation or default, may (but shall be under no obligation to) at any time thereafter and upon giving written notice to Grantor of such failure, make such payment or perform such act for the account and at the expense of Grantor, and may enter upon the Mortgaged Premises or any part thereof for such purpose and take all such action thereon as, in the opinion of Trustee or Beneficiary, may be necessary or appropriate therefor. All sums so paid by Trustee or Beneficiary or the holder of the indebtedness hereby secured and all costs and expenses (including without limitation reasonable attorney's fees and expenses) so incurred, together with interest thereon from the date of payment or incurrence at the Default Rate shall constitute so much additional indebtedness hereby secured and shall be paid by Grantor to Trustee or Beneficiary or the holder of the indebtedness hereby secured on demand. Trustee or Beneficiary or the holder of the indebtedness hereby secured in making any payment authorized under this Section relating to taxes or assessments may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim thereof. Trustee or Beneficiary or the holder of the indebtedness hereby secured, in performing any act hereunder, shall be the sole judge of whether Grantor is required to perform same under the terms of this Deed of Trust. Section 13. After-Acquired Property. Any and all property hereafter acquired which is of the kind or nature herein provided, or intended to be and become subject to the lien hereof, shall ipso facto, and without any further conveyance, assignment or act on the part of Grantor, become and be subject to the lien of this Deed of Trust as fully and completely as though -13- 14 specifically described herein; but nevertheless Grantor shall from time to time, if requested by Trustee or Beneficiary, execute and deliver any and all such further assurances, conveyances and assignments as Trustee or Beneficiary may reasonably require for the purpose of expressly and specifically subjecting to the lien of this Deed of Trust all such property. Notwithstanding anything to the contrary contained in this Deed of Trust, there shall not be subject to the lien hereof any property hereafter acquired by Grantor which is of the kind or nature herein provided which (a) is not a replacement of or substitute for property subject to the lien hereof, and (b) is subject to a lien or security interest that secures the purchase price, or indebtedness incurred to pay the purchase price, thereof and that attaches to no other property of the Grantor. Section 14. Inspection by Trustee or Beneficiary. Trustee, Beneficiary, the holder of the indebtedness hereby secured and any Secured Creditor shall have the right to inspect the Mortgaged Premises upon reasonable notice and during normal business hours, and access thereto shall be permitted for that purpose provided, however, that prior to the occurrence of an event of default hereunder any such access or inspection shall be during the Grantor's normal business hours and upon reasonable notice to Grantor. Section 15. Financial Reports. Grantor will furnish to the Trustee, Beneficiary, or any Lender such information and data with respect to the financial condition, business affairs and operations of Grantor and the Mortgaged Premises as may be required by the Credit Agreement. Section 16. Subrogation. Grantor acknowledges and agrees that Trustee or Beneficiary or the holder of the indebtedness hereby secured shall be subrogated to any lien discharged out of the proceeds of any drafts presented under any Letter of Credit, the proceeds of any loans evidenced by the Notes or out of any advance by Trustee or Beneficiary or the holder of the indebtedness hereby secured hereunder, irrespective of whether or not any such lien may have been released of record. Section 17. Events of Default. Any one or more of the following shall constitute an event of default hereunder: (a) Default for a period of five (5) days in the payment when due of (i) all or any part of the interest on any Note (whether at stated maturity or at any other time provided for in the Credit Agreement) or (ii) any obligation of the Grantor to reimburse the Beneficiary for any draft drawn under any Letter of Credit; or (b) Default in the payment when due (whether by lapse of time, acceleration, or otherwise) of the principal of any of the Notes or of any other indebtedness hereby secured and the lapse of any period of grace expressly applicable to such default; or -14- 15 (c) The Mortgaged Premises or any part thereof shall be sold, transferred, or conveyed, whether voluntarily or involuntarily, by operation of law or otherwise, except for (i) dispositions permitted by the Credit Agreement or any Collateral Document and (ii) sales of obsolete, worn out or unusable fixtures or personal property which are concurrently replaced (unless the Grantor, in the exercise of its commercially reasonable judgment deems such replacement unnecessary or impractical and such failure to replace would cause no material adverse change in the Mortgaged Premises) with similar fixtures or personal property at least equal in quality and condition to those sold and owned by Grantor free of any lien, charge or encumbrance other than the lien hereof and other liens permitted under the Credit Agreement; or (d) The occurrence of any event or the existence of any condition in each case constituting an Event of Default under the Credit Agreement which is not cured within the applicable grace period, if any; or (e) Any indebtedness secured by a lien or charge on the Mortgaged Premises or any part thereof is not paid when due after the expiration of applicable grace periods and the giving of applicable notices, if any, or proceedings are commenced to foreclose or otherwise realize upon any such lien or charge or to have a receiver appointed for the property subject thereto or to place the holder of such indebtedness or its representative in possession thereof; or (f) The Mortgaged Premises is abandoned. Section 18. Remedies. When any event of default has happened and is continuing, regardless of the pendency of any proceeding which has or might have the effect of preventing Grantor from complying with the terms of this instrument and of the adequacy of the security for the Revolving Credit Notes, and in addition to such other rights as may be available under applicable law, but subject at all times to any mandatory legal requirements: (a) Acceleration. Beneficiary may, by written notice to Grantor, declare the Revolving Credit Notes, the obligations of Grantor under the Credit Agreement and all unpaid indebtedness of Grantor hereby secured, including any interest then accrued thereon, to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without other notice or demand of any kind. The foregoing right of acceleration is in addition to and not in substitution for any such rights which are available under the Credit Agreement or otherwise. (b) Uniform Commercial Code. Trustee or Beneficiary shall, with respect to any part of the Mortgaged Premises constituting property of the type in respect of which -15- 16 realization on a lien or security interest granted therein is governed by the Uniform Commercial Code, have all the rights, options and remedies of a secured party under the Uniform Commercial Code of North Carolina, including without limitation, the right to the possession of any such property, or any part thereof, and the right to enter without legal process any premises where any such property may be found. Any requirement of said Code for reasonable notification shall be met by mailing written notice to Grantor at its address above set forth at least 10 days prior to the sale or other event for which such notice is required. The expenses of retaking, selling, and otherwise disposing of said property, including reasonable attorney's fees and legal expenses incurred in connection therewith, shall constitute so much additional indebtedness hereby secured and shall be payable upon demand with interest at the Default Rate. (c) Foreclosure. Trustee or Beneficiary may proceed to protect and enforce the rights of Trustee or Beneficiary hereunder (i) by any action at law, suit in equity or other appropriate proceedings, whether for the specific performance of any agreement contained herein, or for an injunction against the violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or by law, or (ii) by the foreclosure of or other sale proceeding under this Deed of Trust. (d) Appointment of Receiver. Trustee or Beneficiary shall, as a matter of right, without notice and without giving bond to Grantor or anyone claiming by, under or through it, and without regard to the solvency or insolvency of Grantor or the then value of the Mortgaged Premises, be entitled to have a receiver appointed of all or any part of the Mortgaged Premises and the rents, issues and profits thereof, with such power as the court making such appointment shall confer, and Grantor hereby consents to the appointment of such receiver and shall not oppose any such appointment. Any such receiver may, to the extent permitted under applicable law, without notice, enter upon and take possession of the Mortgaged Premises or any part thereof by force, summary proceedings, ejectment or otherwise, and may remove Grantor or other persons and any and all property therefrom, and may hold, operate and manage the same and receive all earnings, income, rents, issues and proceeds accruing with respect thereto or any part thereof, whether during the pendency of any foreclosure or until any right of redemption shall expire or otherwise. (e) Taking Possession, Collecting Rents, Etc. Trustee or Beneficiary may enter and take possession of the Mortgaged Premises or any part thereof and manage, operate, insure, repair and improve the same and take any action which, in Trustee's or Beneficiary's judgment, is necessary or proper to conserve the value of the Mortgaged Premises. Trustee or Beneficiary may also take possession of, and for these purposes use, any and all personal property contained in the Mortgaged Premises and in which a lien is -17- 17 granted hereby and used in the operation, rental or leasing thereof or any part thereof. Trustee or Beneficiary shall be entitled to collect and receive all earnings, revenues, rents, issues and profits of the Mortgaged Premises or any part thereof (and for such purpose Grantor does hereby irrevocably constitute and appoint Trustee or Beneficiary its true and lawful attorney-in-fact for it and in its name, place and stead to receive, collect and receipt for all of the foregoing, Grantor irrevocably acknowledging that any payment made to Trustee or Beneficiary hereunder shall be a good receipt and acquittance against Grantor to the extent so made) and to apply same to the reduction of the indebtedness hereby secured. The right to enter and take possession of the Mortgaged Premises and use any personal property therein, to manage, operate and conserve the same, and to collect the rents, issues and profits thereof, shall be in addition to all other rights or remedies of Trustee or Beneficiary hereunder or afforded by law, and may be exercised concurrently therewith or independently thereof. The expenses (including any receiver's fees, counsel fees, costs and agent's compensation) incurred pursuant to the powers herein contained shall be so much additional indebtedness hereby secured which Grantor promises to pay upon demand together with interest at the Default Rate. Trustee or Beneficiary shall not be liable to account to Grantor for any action taken pursuant hereto other than to account for any rents actually received by Trustee or Beneficiary. Without taking possession of the Mortgaged Premises, Trustee or Beneficiary may, in the event the Mortgaged Premises becomes vacant or is abandoned, take such steps as it deems appropriate to protect and secure the Mortgaged Premises (including hiring watchmen therefor) and all costs incurred in so doing shall constitute so much additional indebtedness hereby secured payable upon demand with interest thereon at the Default Rate. (f) After the occurrence of an event of default, and on the application of the Beneficiary it shall be lawful for and the duty of the Trustee, and he is hereby authorized and empowered to expose to sale and to sell the Mortgaged Premises at public auction for cash, after having first complied with all applicable requirements of North Carolina law with respect to the exercise of powers of sale contained in deeds of trust and upon such sale, the Trustee shall convey title to the purchase in fee simple. After retaining from the proceeds of such sale a commission for his services and all expense incurred by him, including reasonable attorney's fees for legal services actually performed, the Trustee shall apply the residue of the proceeds, first to the payment of all sums expended by the Beneficiary under the terms of this Deed of Trust; second, to the payment of the Note and interest thereon; and the balance, if any, shall be paid to the Grantor or other person lawfully entitled thereto. The Grantor agrees that in the event of a sale hereunder, the Beneficiary shall have the right to bid at such sale. The Trustee may require the successful bidder at any sale to deposit immediately with the Trustee cash or certified check in an amount up to twenty-five percent (25%) of the bid, provided notice of such -17- 18 requirement is contained in the advertisement of the sale. The bid may be rejected if the deposit is not immediately made and thereupon the next highest bidder may be declared to be the purchaser. Such deposit shall be refunded in case a resale is had; otherwise it shall be applied to the purchase price. If personal property is sold hereunder, it need not be at the place of sale. The published notice, however, shall state the time and place where such personal property may be inspected prior to sale. The Trustee's commission shall be five percent (5%) of the gross proceeds of the sale or five hundred dollars ($500.00), whichever is greater, for a completed foreclosure. In the event foreclosure is commenced, but not completed, the Grantor shall pay all expenses incurred by the Trustee, including reasonable attorneys' fees, and a partial commission computed on five percent (5%) of the outstanding indebtedness or five hundred dollars ($500.00), whichever is greater, in accordance with the following schedule: one-fourth (1/4th) thereof before the Trustee issues a notice of hearing on the right to foreclose; one-half (1/2) thereof after issuance of said notice, three fourths (3/4ths) thereof after such hearing; and the greater of the full commission or minimum sum after the initial sale. Section 19. Waiver of Right to Redeem From Sale - Waiver of Appraisement, Valuation, Etc. Grantor shall not and will not apply for or avail itself of any appraisement, valuation, stay, extension or exemption laws, or any so-called "Moratorium Laws", now existing or hereafter enacted in order to prevent or hinder the enforcement or foreclosure of this Deed of Trust, but hereby waives the benefit of such laws, to the extent provided by applicable law. Grantor for itself and all who may claim through or under it waives any and all right to have the property and estates comprising the Mortgaged Premises marshalled upon any foreclosure of the lien hereof and agrees that any court having jurisdiction to foreclose such lien may order the Mortgaged Premises sold as an entirety. In the event of any sale made under or by virtue of this instrument, the whole of the Mortgaged Premises may be sold in one parcel as an entirety or in separate lots or parcels at the same or different times, all as the Trustee or Beneficiary may determine. Beneficiary and/or any Secured Creditor shall have the right to become the purchaser at any sale made under or by virtue of this instrument and Beneficiary and/or any Secured Creditor so purchasing at any such sale shall have the right to be credited upon the amount of the bid made therefor by Beneficiary and/or any Secured Creditor with the amount payable to Beneficiary or such Secured Creditor, as the case may be, out of the net proceeds of such sale. In the event of any such sale, the Revolving Credit Notes, Grantor's obligation under the Credit Agreement and the other indebtedness hereby secured, if not previously due, shall be and become immediately due and payable without demand or notice of any kind. Grantor hereby waives any and all rights of redemption from sale under any order or decree of foreclosure pursuant to rights herein granted, on behalf of Grantor, and each and every person acquiring any interest in, or title to the Mortgaged Premises described herein subsequent to the date of this Deed of Trust, and on behalf of all other persons to the extent permitted by applicable law. -18- 19 Section 20. Costs and Expenses of Foreclosure. In any suit to foreclose the lien hereof or in connection with any sale pursuant to powers herein or by applicable law granted, there shall be allowed and included as additional indebtedness in the decree for sale all expenditures and expenses which may be paid or incurred by or on behalf of Trustee, Beneficiary and/or any Secured Creditor for reasonable attorney's fees, outside appraiser's fees, outlays for documentary and expert evidence, outside stenographic charges, publication costs and costs (which may be estimated as the items to be expended after the entry of the decree) of procuring all such abstracts of title, title searches and examination, guarantee policies, and similar data and assurances with respect to title as Trustee or Beneficiary may deem to be reasonably necessary either to prosecute any foreclosure action or to evidence to the bidder at any sale pursuant thereto the true condition of the title to or the value of the Mortgaged Premises, all of which expenditures shall become so much additional indebtedness hereby secured which Grantor agrees to pay and all of such shall be immediately due and payable with interest thereon from the date of expenditure until paid at the Default Rate. Section 2l. Application of Proceeds. Except as provided in Section 18(g), the proceeds of any foreclosure or other sale of the Mortgaged Premises, including any sale of property pursuant to Section 18(b) hereof, shall be distributed as set forth in Section 3.5 of the Credit Agreement. Grantor shall remain liable to Trustee and the Beneficiary for any deficiency. Any surplus remaining after the full payment and satisfaction of the foregoing shall be returned to Grantor or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. If the Hedging Liability has not become firm, an amount equal to the amount thereof shall be held by Beneficiary unless and until the same becomes due and then applied to the payment of same. Section 22. Deficiency Decree. If at any foreclosure proceeding the Mortgaged Premises shall be sold for a sum less than the total amount of indebtedness for which judgment is therein given, the judgment creditor shall be entitled to the entry of a deficiency decree against Grantor and against the property of Grantor for the amount of such deficiency; and Grantor does hereby irrevocably consent to the appointment of a receiver for the Mortgaged Premises and the property of Grantor and of the rents, issues and profits thereof after such sale and until such deficiency decree is satisfied in full. Section 23. Trustee, Beneficiary's and Secured Creditors' Remedies Cumulative - No Waiver. No remedy or right of Trustee, Beneficiary, any Secured Creditor or the holder of the indebtedness hereby secured shall be exclusive of but shall be cumulative and in addition to every other remedy or right now or hereafter existing at law or in equity or by statute or otherwise. No delay in the exercise or omission to exercise any remedy or right accruing on any default shall impair any such remedy or right or be construed to be a waiver of any such default or acquiescence therein, nor shall it affect any subsequent default of the same or a different -19- 20 nature. Every such remedy or right may be exercised concurrently or independently, and when and as often as may be deemed expedient by Trustee, Beneficiary, any Secured Creditor or the holder of the indebtedness hereby secured. Section 24. Trustee and Beneficiary Party to Suits. If Trustee, Beneficiary or any holder of the indebtedness hereby secured shall be made a party to or shall intervene in any action or proceeding affecting the Mortgaged Premises or the title thereto or the interest of Trustee, Beneficiary or any holder of the indebtedness hereby secured under this Deed of Trust (including probate and bankruptcy proceedings), or if Trustee, Beneficiary or any holder of the indebtedness hereby secured employs an attorney to collect any or all of the indebtedness hereby secured or to enforce any of the terms hereof or realize hereupon or to protect the lien hereof, or if Trustee, Beneficiary or any holder of the indebtedness hereby secured shall incur any costs or expenses in preparation for the commencement of any foreclosure proceedings or for the defense of any threatened suit or proceeding which might affect the Mortgaged Premises or the security hereof, whether or not any such foreclosure or other suit or proceeding shall be actually commenced, then in any such case, Grantor agrees to pay to Trustee, Beneficiary or any holder of the indebtedness hereby secured, immediately and without demand, all reasonable costs, charges, expenses and attorney's fees incurred by Trustee, Beneficiary or any holder of the indebtedness hereby secured in any such case, and the same shall constitute so much additional indebtedness hereby secured payable upon demand with interest at the Default Rate from the time of expenditure. Section 25. Modifications Not to Affect Lien. Trustee and Beneficiary, without notice to anyone (except the Lenders), and without regard to the consideration, if any, paid therefor, or the presence of other liens on the Mortgaged Premises, may in its discretion, in the case of the Trustee, or at the discretion of the Lenders required to consent thereto by the terms of the Credit Agreement, in the case of the Beneficiary, release any part of the Mortgaged Premises or any person liable for any of the indebtedness hereby secured, may extend the time of payment of any of the indebtedness hereby secured and may grant waivers or other indulgences with respect hereto and thereto, and may agree with Grantor to modifications to the terms and conditions contained herein or otherwise applicable to any of the indebtedness hereby secured (including modifications in the rates of interest applicable thereto), without in any way affecting or impairing the liability of any party liable upon any of the indebtedness hereby secured or the priority of the lien of this Deed of Trust upon all of the Mortgaged Premises not expressly released, and any party acquiring any direct or indirect interest in the Mortgaged Premises shall take same subject to all of the provisions hereof. Section 26. Compliance with Environmental Laws. Grantor represents and warrants that, to the best of Grantor's knowledge, after due inquiry, and except to the extent disclosed in the Phase I Environmental Site Assessment Update dated March 12, 1998, prepared by Trizon -20- 21 Engineering Consultants, Inc. (the "Site Assessment") and as disclosed in writing to the Beneficiary before the date hereof, the Mortgaged Premises complies in all material respects with all applicable federal, state, regional, county or local laws, statutes, rules, regulations or ordinances (collectively "Governmental Regulations"), including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. SS.9601 et seq., the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. SS.6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. SS.1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. SS.2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. SS.11001 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. SS.7401 et seq., the National Environmental Policy Act of 1975, 42 U.S.C. SS.4321, the Rivers and Harbours Act of 1899, 33 U.S.C. SS.401 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. SS.651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. SS.300(F) et seq., and all rules, regulations and guidance documents promulgated or published thereunder, and any state, regional, county or local statute, law, rule, regulation or ordinance relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use, handling or disposal of polychlorinated biphenyls (PCB's), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, its derivatives by-products or other hydrocarbons), to exposure to toxic, hazardous, or other controlled, prohibited or regulated substances, to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any regulation, order, injunction, judgment, declaration, notice or demand issued thereunder. Section 27. Condition of Property. Grantor warrants and represents that, except as disclosed in the Site Assessment and to the best of its knowledge, after due inquiry (except to the extent that no applicable Governmental Regulations are violated) in all material respects: the Mortgaged Premises, including all personal property, is free from contamination, that there has not been thereon a release, discharge or emission, or threat of release, discharge or emission, of any hazardous substance, gas or liquid (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), or any other substance, gas or liquid, which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to safety, health or the environment, and that the Mortgaged Premises does not contain, or is not affected by: (i) asbestos, (ii) urea formaldehyde foam insulation, (iii) polychlorinated biphenyls (PCB's), (iv) underground storage tanks, (v) landfills, land disposals or dumps. Section 28. Notice of Environmental Problem. Grantor represents and warrants that it has not given, nor to the best of its knowledge should it give, nor has it received, any notice, -21- 22 letter, citation, order, warning, complaint, inquiry, claim or demand that: (i) Grantor has violated, or is about to violate, any federal, state, regional, county or local environmental, health or safety statute, law, rule, regulation, ordinance, judgment or order; (ii) there has been a release, or there is threat of release, of hazardous substances (including, without limitation, petroleum, its by-products or derivatives or other hydrocarbons) from the Mortgaged Premises; (iii) Grantor may be or is liable, in whole or in part, for the costs or cleaning up, remediating or responding to a release of hazardous substances (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons); (iv) any of the Grantor's property or assets are subject to a lien in favor of any governmental body for any liability, costs or damages, under federal, state or local environmental law, rule or regulation arising from or costs incurred by such governmental entity in response to a release of a hazardous substance (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons). In the event that Grantor receives any notice of the type described in this Section 30, Grantor shall promptly provide a copy to Beneficiary, and in no event, later than fifteen (15) days from Grantor's receipt or submission thereof. Section 29. Use of Property and Facilities. Grantor represents and warrants that to the best of its knowledge, after due inquiry, except to the extent that no applicable Governmental Regulations were, are or will be violated in connection therewith: it has never in the past engaged in, and agrees that in the future it shall not conduct, any business, operations or activity on the Mortgaged Premises, or employ or use the personal property or facilities, to manufacture, use, generate, treat, store, transport or dispose of any hazardous substance (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), or any other substance (collectively "Hazardous Materials") which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to safety, health or the environment, including, without limitation, any business, operation or activity which would bring Grantor, its property or facilities, within the ambit of the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. SS.6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. SS.9601 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. SS.7401 et seq., or any similar state, county, regional or local statute, law, regulation, rule or ordinance, including, without limitation, any state statute providing for financial responsibility for cleanup for the release or threatened release of substances provided for thereunder. Grantor agrees to diligently pursue remediation of any condition which would violate or violates any Governmental Regulation or which is likely to result in the creation or imposition of liability on Grantor thereunder, and to in any event complete the remediation of each of such prior to the time that the same has a material adverse impact on the financial condition of the Grantor or materially interferes with the use and operation of the Mortgaged Premises for its intended purposes. -22- 23 Section 30. Liens Absolute, Etc. The Grantor acknowledges and agrees that the liens and security interests hereby created are absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of the Trustee or the Beneficiary or any other holders of any of the indebtedness hereby secured, and without limiting the generality of the foregoing, the lien and security hereof shall not be impaired by any acceptance by the Trustee or the Beneficiary or any other holder of any of the indebtedness hereby secured of any other security for or guarantors upon any of the indebtedness hereby secured or by any failure, neglect or omission on the part of the Trustee or the Beneficiary or any other holder of any of the indebtedness hereby secured to realize upon or protect any of the indebtedness hereby secured or any collateral security therefor. The lien and security hereof shall not in any manner be impaired or affected by any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the indebtedness hereby secured, or of any collateral security therefor, or of any guaranty thereof, or of any loan agreement executed in connection therewith. In order to realize hereon and to exercise the rights granted Trustee and/or Beneficiary hereby and under applicable law, there shall be no obligation on the part of Trustee or the Beneficiary or any other holder of any of the indebtedness hereby secured at any time to first resort for payment to the obligor on any note evidencing any of the indebtedness hereby secured or to any guaranty of any of the indebtedness hereby secured or any part thereof or to resort to any other collateral security, property, liens or any other rights or remedies whatsoever, and Beneficiary shall have the right to enforce this instrument irrespective of whether or not other proceedings or steps are pending seeking resort to or realization upon or from any of the foregoing are pending. Section 31. Notice of Environmental Problem. Except as heretofore disclosed in writing to the Beneficiary, Grantor represents and warrants that to the best of its knowledge it has not given, nor should it give, nor has it received, any notice, letter, citation, order, warning, complaint, inquiry, claim or demand that: (i) Grantor has violated, or is about to violate, any federal, state, regional, county or local environmental, health or safety statute, law, rule, regulation, ordinance, judgment or order on the Mortgaged Premises; (ii) there has been a release, or there is threat of release, of hazardous substances (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons) from the Mortgaged Premises; (iii) Grantor may be or is liable, in whole or in part, for the costs or cleaning up, remediating or responding to a release of hazardous substances (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons) on the Mortgaged Premises; (iv) any of the Grantor's property or assets are subject to a lien in favor of any governmental body for any liability, costs or damages, under federal, state or local environmental law, rule or regulation arising from or costs incurred by such governmental entity in response to a release of a hazardous substance (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons). In the event that Grantor receives any notice of the type described in this -23- 24 Section, Grantor shall promptly provide a copy to Beneficiary, and in no event, later than fifteen (15) days from Grantor's receipt or submission thereof. Section 32. Direct and Primary Security - No Subrogation. The lien and security herein created and provided for stands as direct and primary security for the Notes and the Applications as well as for any of the other indebtedness hereby secured. No application of any sums received by the Trustee or the Beneficiary in respect of the Mortgaged Premises or any disposition thereof to the reduction of the indebtedness hereby secured or any part thereof shall in any manner entitle Grantor to any right, title or interest in or to the indebtedness hereby secured or any collateral security therefor, whether by subrogation or otherwise, unless and until all indebtedness hereby secured has been fully paid and satisfied. Section 33. Notices. All communications provided for herein shall be in writing and shall be deemed to have been given when delivered personally or mailed by first class mail, postage prepaid, addressed to the parties hereto at their addresses as shown at the beginning of this Deed of Trust or to such other and different address as Grantor, Trustee, Beneficiary and Secured Creditors may designate pursuant to a written notice sent in accordance with the provisions of this Section 33; provided that notice of a default hereunder shall be deemed to have been given or made when actually received by Grantor by certified mail, telex, telecopier, or other facsimile communication method. Section 34. Partial Invalidity. All rights, powers and remedies provided herein are intended to be limited to the extent necessary so that they will not render this Deed of Trust invalid, unenforceable or not entitled to be recorded, registered or filed under any applicable law. If any term of this Deed of Trust shall be held to be invalid, illegal or unenforceable, the validity and enforceability of the other terms of this Deed of Trust shall in no way be affected thereby. Section 35. Successors and Assigns. Whenever any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all the covenants, promises and agreements in this Deed of Trust contained by or on behalf of Grantor, or by or on behalf of Trustee and Beneficiary, shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. If more than one party signs this instrument as Grantor, then the term "Grantor" as used herein shall mean all of such parties, jointly and severally. Section 36 Headings. The headings in this instrument are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof. -24- 25 Section 37. Changes, Etc. This instrument and the provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. Section 38. Future Advances and Revolving Credit Loan. This Deed of Trust is given to secure present and future obligations of Grantor to Beneficiary, and this Deed of Trust is executed to secure all such obligations. The period in which future obligations may be incurred and secured by this Deed of trust is the period within 10 years from the date hereof; provided, however, that said period may be extended by Beneficiary up to but not more than 15 years from the date hereof. The amount of present obligations secured by this Deed of Trust is Ninety Million Dollars ($90,000,000), and the maximum principal amount, including present and future obligations, which may be secured by this Deed of Trust at any one time is One Hundred Eighty Million Dollars ($180,000,000). Any additional amounts advanced by Beneficiary pursuant to the provisions of this Deed of Trust shall be deemed necessary expenditures for the protection of the security. Each future advance need not be evidenced by a written instrument or notation signed by Grantor stipulating that such advance is secured by this Deed of Trust. All future obligations shall be considered to be made pursuant to the requirements of North Carolina General Statutes Section 45-67, et seq., or any amendments thereto. Subject to the terms and provisions of the Credit Agreement, the principal amount of the Revolving Credit Notes may be borrowed, repaid and reborrowed again, from time to time, on a revolving basis, provided that the maximum principal amount of obligations outstanding at any one time and secured hereby shall not exceed the maximum principal amount set forth above. Section 39. Demand Nature of Indebtedness. Nothing herein contained shall be deemed to affect or impair the demand character of any of the indebtedness hereby secured which is payable upon demand and payment thereof may be demanded irrespective of whether or not the Grantor is in compliance with the terms hereof and that upon doing so Trustee and Beneficiary shall be entitled to invoke the remedies upon default herein and by applicable law provided for. Section 40. Multisite Real Estate Transaction. Grantor acknowledges that this Deed of Trust is one of a number of other mortgages and deeds of trusts and other security documents dated of even date herewith (such mortgages, deeds of trust and other security documents dated of even date herewith and any supplements or amendments thereto and any other mortgages, deeds of trust or security documents securing the indebtedness hereby secured are collectively called the "Other Mortgages") which secure the indebtedness hereby secured. Grantor agrees that the lien of this Deed of Trust shall be absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Trustee or Beneficiary and, without limiting the generality of the foregoing, the lien hereof shall not be impaired by any acceptance by Trustee or Beneficiary of any security for or guarantors upon any of the -25- 26 indebtedness hereby secured, or by any failure, neglect or omission on the part of the Trustee or Beneficiary to realize upon or protect any of the indebtedness hereby secured or any collateral security therefor including the Other Mortgages. The lien hereof shall not in any manner be impaired or affected by any release (except as to the property released) sale, pledge, surrender, compromise, settlement, renewal, extension, indulgence, alteration, changing, modification or disposition of any of the indebtedness hereby secured or of any of the collateral security therefor, including without limitation the Other Mortgages or of any guarantee thereof, and Beneficiary may at its discretion foreclose, exercise any power of sale, or exercise any other remedy available to it under any or all of the Other Mortgages without first exercising or enforcing any of its rights and remedies hereunder. Such exercise of Beneficiary's rights and remedies under any or all of the Other Mortgages shall not in any manner impair the indebtedness hereby secured or the lien of this Deed of Trust and any exercise of the rights or remedies of Beneficiary or Trustee hereunder shall not impair the lien of any of the Other Mortgages or any of Beneficiary's rights and remedies thereunder. The undersigned specifically consents and agrees that Beneficiary may exercise its rights and remedies hereunder and under the Other Mortgages separately or concurrently and in any order that it may deem appropriate. Section 41. Default Rate. As used herein, the term "Default Rate" shall mean the rate per annum set forth in Section 2.1 of the Credit Agreement. Section 42. Agent. Beneficiary has been appointed as agent pursuant to the Credit Agreement. In acting under or by virtue of this Deed of Trust, Beneficiary shall be entitled to all the rights, authority, privileges and immunities provided in Section 10 of the Credit Agreement, all of which provisions of said Section 10 are incorporated by reference herein with the same force and effect as if set forth herein. Beneficiary hereby disclaims any representation or warranty to Secured Creditors concerning the perfection of the security interest granted hereunder or the value of the Mortgaged Premises. Section 43. Substitute Trustee. Trustee, or any substitute Trustee, may be removed at any time with or without cause, at the option of Harris Trust and Savings Bank, by written declaration of such removal signed by Harris Trust and Savings Bank, without any notice to or demand upon Trustee or substitute Trustee so removed, or Grantor or any other person. If at any time Trustee or any substitute Trustee should be so removed, die or refuse, fail or be unable to act as such Trustee or substitute Trustee, Harris Trust and Savings Bank may appoint any person, including itself, as substitute Trustee hereunder, without any formality other than a written declaration of such appointment executed by Harris Trust and Savings Bank; and immediately upon such appointment, the substitute Trustee so appointed shall automatically become vested with all the estate and title in the Mortgaged Premises, and with all of the rights, powers, privileges, authority, options and discretions, and charged with all of the duties and liabilities, vested in or imposed upon Trustee by this Deed of Trust, and any conveyance executed by such -26- 27 substitute Trustee, including the recitals therein contained, shall have the same effect and validity as if executed by Trustee. Section 44. Environmental Indemnity. Grantor hereby agrees to indemnify Trustee and Beneficiary and hold Beneficiary harmless from and against any and all claims, losses, damages, liabilities, fines, penalties, charges, administrative and judicial proceedings and orders, judgments, remedial action requirements, enforcement actions of any kind, and all costs and expenses (other than any of the foregoing resulting in whole or in part from acts or omissions of Trustee or Beneficiary or from Beneficiary's or Trustee's gross negligence or wilful misconduct) incurred in connection therewith (including but not limited to reasonable outside attorneys' fees, paralegal charges and expenses), arising directly or indirectly, whole or in part, out of (a) the presence on or under the Mortgaged Premises of any Hazardous Materials or releases or discharges of Hazardous Materials on, under or from the Mortgaged Premises, (b) any activity carried on or undertaken on or off the Mortgaged Premises, whether prior to or during the term of this Deed of Trust, and whether by Grantor or any predecessor in title or any employees, agents, contractors or subcontractors of Grantor or any predecessor in title, or third persons at any time occupying or present on the Mortgaged Premises in connection with the treatment, decontamination, handling, removal, storage, clean-up, transport or disposal of any Hazardous Materials at any time located or present on or under the Mortgaged Premises; and (c) any breach of the covenants contained in this Section. The foregoing indemnity shall further apply to any residual contamination on or under the Mortgaged Premises or affecting any natural resources, any contamination of any property or natural resources arising in connection with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any such activities were or will be undertaken in accordance with applicable laws, regulations, codes and ordinances. The obligation of Grantor to indemnify and hold harmless under this Section shall survive any foreclosure of this Deed of Trust or any transfer of the Mortgaged Premises by deed in lieu of foreclosure or upon the exercise of the power of sale contained herein. Section 45. Restrictions on Secured Creditor's Right to Enforce. No Secured Creditor shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure of this Deed of Trust or for the execution of any trust or power hereof or for the appointment of a receiver, or for the enforcement of any other remedy under or upon this Deed of Trust; it being understood and intended that no one or more of the Secured Creditors shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Deed of Trust by its or their action or to enforce any right hereunder, and that all proceedings at law or in equity shall be instituted, had and maintained by the Beneficiary in the manner herein provided and for the ratable benefit of the Secured Creditors . -27- 28 Section 46. Governing Law. The creation of the Deed of Trust, the perfection of the lien or security interest in the Mortgaged Premises, and the rights and remedies of Grantor, Trustee and Beneficiary with respect to the Mortgaged Premises, as provided herein and by the laws of the state in which the Mortgaged Premises is located, shall be governed by and construed in accordance with the internal laws of the state in which the Mortgaged Premises is located without regard to principles of conflicts of law. Otherwise, the Credit Agreement, the Notes, and all other obligations of Grantor (including, but not limited to, the liability of Grantor for any deficiency following a foreclosure of all or any part of the Mortgaged Premises) shall be governed by and construed in accordance with the internal laws of the State of Illinois without regard to principles of conflicts of laws, such state being the state where such documents were deemed to be executed and delivered. Section 47. Acceptance of Trust. Trustee accepts this Trust when this Deed of Trust, duly executed and acknowledged, is made a public record as provided by law. Trustee is not obligated to notify any party hereto of pending sale under any other deed of trust or any action or proceeding in which Grantor, Beneficiary, or Trustee shall be a party, unless brought by Trustee. Section 48. No Liability on Trustee. Notwithstanding anything contained herein, this Deed of Trust is only intended as security for the indebtedness hereby secured, and Trustee shall not be obligated to perform or discharge, and does not hereby undertake to perform or discharge, any obligation, duty or liability of Grantor with respect to any of the Mortgaged Premises. Except for its gross negligence or willful and wanton misconduct, no liability shall be enforced or asserted against Trustee in its exercise of the powers herein respectively granted to it, and Grantor expressly waives and releases any such liability. Grantor shall and does hereby agree to indemnify and hold Trustee harmless of and from any and all liability, loss or damage which it may or might incur under or by reason of the exercise of its rights hereunder and of and from any and all claims and demands whatsoever which may be asserted against it by reason of any alleged obligations or undertakings on its part to perform or discharge any of the terms, covenants or agreements of Grantor contained herein or with respect to any of the Mortgaged Premises, except in the case of actions by the Trustee that constitute gross negligence or willful misconduct. Trustee shall have no responsibility for the control, care, management or repair of the Mortgaged Premises, nor shall it be responsible or liable for any negligence in the management, operation, upkeep, repair or control of the Mortgaged Premises resulting in loss or injury or death to any licensee, employee, tenant or stranger. Without limiting the foregoing, Trustee shall not be responsible for any recitals herein or for insuring the Mortgaged Premises, or for the recording, filing or refiling of this Deed of Trust; nor shall the Trustee be bound to ascertain or inquire as to the performance or observance of any covenants, conditions or agreements on the part of the Grantor contained herein. -28- 29 Section 49 Controlling Document; Defined Terms. In the event of a conflict between the terms of this Deed of Trust and the Credit Agreement, the terms of the Credit Agreement shall be controlling. All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. -29- 30 IN WITNESS WHEREOF, Grantor has caused these presents to be signed and sealed the day and year first above written. B&W METAL FABRICATORS, INC. By (CORPORATE SEAL) Its___________________________ ATTEST: ______________________________ Its___________________________ -30- 31 STATE OF ___________ ) ) SS COUNTY OF __________ ) I, a Notary Public of the County and State aforesaid, certify that _______________________ personally came before me this day and acknowledged that __he is _______________________ of B&W Metal Fabricators, Inc., a North Carolina corporation, and that by authority duly given and as the act of the corporation, the foregoing instrument was signed in its name by its _______________________, sealed with its corporate seal and attested by _______________________ as its _______________________ Secretary. Witness my hand and official seal, this ____ day of June, 1998. ____________________________ Notary Public My Commission Expires:______ 32 SCHEDULE I LEGAL DESCRIPTION 33 SCHEDULE II PERMITTED EXCEPTIONS Those exceptions listed on Schedule B to Chicago Title Insurance Company's Commitment for Title Insurance as of May 21, 1998. EX-10.5 6 EX-10.5 1 EXHIBIT 10.5 AMENDED AND RESTATED SECURITY AGREEMENT This Amended and Restated Security Agreement (the "Agreement") is dated as of May ___, 1998, by and among the parties executing this Agreement under the heading "Debtors" (such parties, along with any parties who execute and deliver to the Agent an agreement in the form attached hereto as Exhibit D, being hereinafter referred to collectively as the "Debtors" and individually as a "Debtor"), and HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation ("Harris"), with its mailing address at 111 West Monroe Street, Chicago, Illinois 60603, acting as agent hereunder for the Secured Creditors hereinafter identified and defined (Harris acting as such agent and any successor or successors to Harris acting in such capacity being hereinafter referred to as the "Agent"); PRELIMINARY STATEMENTS A. Morton Industrial Group, Inc., a Georgia corporation (the "Company"), and certain subsidiaries of the Company, Harris, individually and as agent, and certain lenders are currently party to a Credit Agreement dated as of January 20, 1998 (such Credit Agreement, as the same may have been amended or modified from time to time, including amendments and restatements thereof in its entirety, being hereinafter referred to as the "Prior Credit Agreement"), pursuant to which Harris and other lenders from time to time party to the Prior Credit Agreement agreed, subject to certain terms and conditions, to extend credit and make certain other financial accommodations available to the "Borrowers" identified therein. B. The Company and certain subsidiaries of the Company are currently party to a Security Agreement dated as of January 20, 1998, with Harris, individually and as agent for the lenders party to the Prior Credit Agreement (the "Prior Security Agreement"), pursuant to which the Company and such other subsidiaries have granted liens on certain personal property as collateral security for the indebtedness, obligations, and liabilities of the "Borrowers" owing to such lenders under the Prior Credit Agreement. C. Concurrently herewith, Harris and the other lenders party to the Prior Credit Agreement are refinancing all indebtedness, obligations, and liabilities owed to such lenders by the "Borrowers" under the Prior Credit Agreement (the "Prior Obligations"). D. The Company and Harris, individually and as Agent, have also entered into a Credit Agreement dated of even date herewith (such Credit Agreement, as the same may be amended or modified from time to time, including amendments and restatements thereof in its entirety, being hereinafter referred to as the "Credit Agreement") pursuant to which Harris and other lenders which 2 from time to time become party thereto (Harris and such other lenders which from time to time become party thereto being hereinafter referred to collectively as the "Lenders" and individually as a "Lender") have agreed to modify the terms and conditions applicable to the Prior Obligations and to provide for additional credit and financial accommodations to be made available to the Company thereunder, all subject to the terms and conditions therein set forth. E. The Company may from time to time enter into one or more interest rate exchange, cap, collar, floor or other agreements with one or more of the Lenders party to the Credit Agreement, or their affiliates, for the purpose of hedging or otherwise protecting the Company against changes in interest rates (the liability of the Company in respect of such agreements with such Lenders and their affiliates being hereinafter referred to as the "Hedging Liability") (the affiliates of the Lenders to which any Hedging Liability is owed, together with the Lenders and the Agent, being collectively referred to herein as the "Secured Creditors"). F. As a condition precedent to extending credit or otherwise making financial accommodations available to the Company under the Credit Agreement, the Lenders have required, among other things, that each Debtor grant to the Agent for the benefit of the Secured Creditors a lien on and security interest in certain personal property of such Debtor pursuant to this Agreement. G. The Company owns, directly or indirectly, all or substantially all of the equity interests in each Debtor (other than the Company) and the Company provides each Debtor with financial, management, administrative, and technical support which enables such Debtor to conduct its business in an orderly and efficient manner in the ordinary course. H. Each Debtor will benefit, directly or indirectly, from credit and other financial accommodations extended by the Secured Creditors to the Company. NOW, THEREFORE, for and in consideration of the execution and delivery by the Lenders of the Credit Agreement, and other good and valuable consideration, receipt whereof is hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Terms Defined in Credit Agreement. All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. The term "Debtor" and "Debtors" as used herein shall mean and include the Debtors collectively and also each individually, with all grants, representations, warranties and covenants of and by the Debtors, or any of them, herein contained to constitute joint and several grants, representations, warranties and covenants of and by the Debtors; provided, however, that unless the context in which the same is used shall otherwise require, any grant, representation, -2- 3 warranty or covenant contained herein related to the Collateral shall be made by each Debtor only with respect to the Collateral owned by it or represented by such Debtor as owned by it. Section 2. Grant of Security Interest in the Collateral; Obligations Secured. (a) Each Debtor hereby grants to the Agent for the benefit of the Secured Creditors a lien on and security interest in, and right of set-off against, and acknowledges and agrees that the Agent has and shall continue to have for the benefit of the Secured Creditors a continuing lien on and security interest in, and right of set-off against, any and all right, title and interest of each Debtor, whether now owned or existing or hereafter created, acquired or arising, in and to the following: (i) Receivables. Receivables, whether now owned or existing or hereafter created, acquired or arising, and however evidenced or acquired, or in which such Debtor now has or hereafter acquires any rights (the term "Receivables" means and includes all accounts, accounts receivable, contract rights, instruments, notes, drafts, acceptances, documents, chattel paper, any right of such Debtor to payment for goods sold or leased or for services rendered, whether arising out of the sale of Inventory (as hereinafter defined) or otherwise and whether or not earned by performance, and all other forms of obligations owing to such Debtor, and all of such Debtor's rights to any merchandise and other goods (including without limitation any returned or repossessed goods and the right of stoppage in transit) which is represented by, arises from or is related to any of the foregoing); (ii) General Intangibles. All general intangibles, whether now owned or existing or hereafter created, acquired or arising, or in which such Debtor now has or hereafter acquires any rights, including, without limitation all patents, patent applications, patent licenses, trademarks, trademark registrations, trademark licenses, trade styles, trade names, copyrights, copyright registrations, copyright licenses and other licenses and similar intangibles and all customer, client and supplier lists (in whatever form maintained) and all rights in leases and other agreements relating to real or personal property, all causes of action and tax refunds of every kind and nature, all privileges, franchises, immunities, licenses, permits and similar intangibles, all rights to receive payments in connection with the termination of any pension plan or employee stock ownership plan or trust established for the benefit of employees of such Debtor and all other personal property (including things in action) not otherwise covered by this Agreement; (iii) Inventory. Inventory, whether now owned or existing or hereafter created, acquired or arising, or in which such Debtor now has or hereafter acquires any rights and all documents of title at any time evidencing or representing any part thereof (the term "Inventory" means and includes all goods which are held for sale or lease or are to be furnished under contracts of service or consumed in such Debtor's business, and all goods -3- 4 which are raw materials, work-in-process, finished goods, materials and supplies of every kind and nature, in each case used or usable in connection with the acquisition, manufacture, processing, supply, servicing, storing, packing, shipping, advertising, selling, leasing or furnishing of such goods, and any constituents or ingredients thereof, and all goods which are returned or repossessed goods); (iv) Equipment. Equipment, whether now owned or existing or hereafter created, acquired or arising, or in which such Debtor now has or hereafter acquires any rights (the term "Equipment" means and includes all equipment, machinery, tools, trade fixtures, furniture, furnishings, office equipment and vehicles (including vehicles subject to a certificate of title law) and all other goods, in each case now or hereafter used or usable in connection with such Debtor's business, together with all parts, accessories and attachments relating to any of the foregoing); (v) Investment Property. All Investment Property, whether now owned or existing or hereafter created, acquired or arising, or in which such Debtor now has or hereafter acquires any rights (the term "Investment Property" means and includes all investment property and any other securities (whether certificated or uncertificated), security entitlements, securities accounts, commodity contracts and commodity accounts, including all substitutions and additions thereto, all dividends, distributions and sums distributable or payable from, upon, or in respect of such property, and all rights and privileges incident to such property); (vi) Records and Cabinets. Supporting evidence and documents relating to any of the above-described property, including without limitation, computer programs, disks, tapes and related electronic data processing media, rights of such Debtor to retrieve the same from third parties, written applications, credit information, account cards, payment records, correspondence, delivery and installation certificates, invoice copies, delivery receipts, notes and other evidences of indebtedness, insurance certificates and the like, together with all books of account, ledgers and cabinets in which the same are reflected or maintained, all whether now existing or hereafter arising; (vii) Deposits and Property in Possession. All deposit accounts (whether general, special or otherwise) maintained with the Agent or any of the Secured Creditors and all sums now or hereafter on deposit therein or payable thereon, and any and all other property or interests in property which now is or may from time to time hereafter come into the possession, custody or control of the Agent or any of the Secured Creditors, or any agent or affiliate of the Agent or any of the Secured Creditors, in any way and for any purpose (whether for safekeeping, custody, pledge, transmission, collection or otherwise); -4- 5 (viii) Accessions and Additions. All accessions and additions to and substitutions and replacements of any of the foregoing, whether now existing or hereafter arising; and (ix) Proceeds and Products. All proceeds and products of the foregoing and all insurance of the foregoing and proceeds thereof, whether now existing or hereafter arising; all of the foregoing being herein sometimes referred to as the "Collateral." (b) This Agreement is made and given to secure, and shall secure, the payment and performance of (i) (x) any and all indebtedness, obligations and liabilities of the Company to the Agent, the Lenders, or any of them individually, evidenced by or otherwise arising out of or relating to the Credit Agreement or any promissory note of the Company issued at any time under the Credit Agreement (including all notes issued in extension or renewal thereof or in substitution or replacement therefor), and (y) any liability of any of the Debtors, or any of them individually, arising out of the Credit Agreement, as well as for any and all other indebtedness, obligations and liabilities of the Debtors, or any of them individually, to the Secured Creditors with respect to any Hedging Liability, or any of them individually, evidenced by or otherwise arising out of or relating to this Agreement or any other Loan Document or (in the case of any Hedging Liability) any other agreement with any one or more of the Secured Creditors, in each case, whether now existing or hereafter arising (and whether arising before or after the filing of a petition in bankruptcy), due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired, and (ii) any and all expenses and charges, legal or otherwise, suffered or incurred by the Secured Creditors, or any of them individually, in collecting or enforcing any of such indebtedness, obligations or liabilities or in realizing on or protecting or preserving any security therefor, including, without limitation, the lien and security interest granted hereby (all of the foregoing being hereinafter referred to as the "Obligations"). Notwithstanding anything in this Agreement to the contrary, the right of recovery against any Debtor (other than the Company to which this limitation shall not apply) under this Agreement shall not exceed $1 less than the amount which would render such Debtor's obligations under this Agreement void or voidable under applicable law, including fraudulent conveyance law. Section 3. Covenants, Agreements, Representations and Warranties. Each Debtor hereby covenants and agrees with, and represents and warrants to the Secured Creditors that: (a) Such Debtor is duly organized and existing under the laws of the state of its organization, is the sole and lawful owner of its Collateral and has full right, power and authority to enter into this Agreement and to perform each and all of the matters and things herein provided for; and the execution and delivery of this Agreement, and the -5- 6 observance and performance of any of the matters and things herein set forth, will not violate or contravene any provision of law or of the articles of incorporation, by-laws or operating agreement of such Debtor, as applicable, or of any indenture, loan agreement or other agreement of or affecting such Debtor or any of its properties, or result in the creation or imposition of any liens or encumbrance on any property of such Debtor. (b) The Collateral is in each Debtor's possession at the locations listed under Column 1 on Schedule A attached hereto. Each Debtor's respective chief executive office and chief place of business is listed opposite its name on Schedule A attached hereto and the Debtors have no other places of business other than those listed under Column 4 on Schedule A attached hereto. No Debtor will remove its Collateral from the locations specified in the first sentence of this Section 3(b) without prior written notice to the Agent, unless such Collateral will be moved to a location outside the United States, in which event, the Agent's prior written consent shall be required, which consent shall not be unreasonably withheld (provided that if for any reason Collateral is at any time kept or located at locations other than its present location or locations hereafter consented to by the Agent shall nevertheless have and retain a security interest therein). (c) The Collateral and every part thereof is and will be free and clear of all security interests, liens (including, without limitation, mechanic's, laborer's and statutory liens), attachments, levies and encumbrances of every kind, nature and description and whether voluntary or involuntary except for the security interest of the Agent therein and as otherwise provided in the Credit Agreement, and each Debtor will warrant and defend its Collateral against any claims and demands of all persons at any time claiming the same or any interest therein adverse to any Secured Creditor. (d) Each Debtor will pay promptly when due all taxes, assessments, and governmental charges and levies upon or against its Collateral in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings. (e) Each Debtor at its own cost and expense will maintain, keep and preserve its Collateral in good repair and condition and will not waste or destroy such Collateral or any part thereof and will not be negligent in the care and use of any Collateral and will not use or permit to be used any Collateral in violation of any statute, ordinance or other governmental requirement. Each Debtor will perform its obligations under any contract or other agreement constituting part of the Collateral, it being understood and agreed that the Secured Creditors have no responsibility to perform such obligations. -6- 7 (f) Except for liens expressly permitted by the Credit Agreement, and subject to Sections 5(a), 7(b) and 7(c) hereof, no Debtor will, without the Agent's prior written consent, sell, assign, mortgage, lease or otherwise dispose of its Collateral or any interest therein. (g) Each Debtor will insure its Collateral which is insurable against such risks and hazards as other companies similarly situated insure against, and including in any event loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards as the Agent may specify, in amounts and under policies containing loss payable clauses to the Agent as its interest may appear (and, if the Agent requests, naming the Secured Creditors as additional insureds therein) by insurers acceptable to the Agent. In case of any material loss, damage to or destruction of its Collateral or any part thereof, the appropriate Debtor shall promptly give written notice thereof to the Agent generally describing the nature and extent of such damage or destruction. In the event any Debtor shall receive any proceeds of such insurance, such Debtor will immediately pay over such proceeds to the Agent. Net insurance proceeds received by the Agent under the provisions hereof or under any policy or policies of insurance covering the Collateral or any part thereof shall be applied to the reduction of the Obligations (whether or not then due); provided, however, that the Agent may in its sole discretion release any or all such insurance proceeds to the appropriate Debtor. All insurance proceeds shall be subject to the lien and security interest of the Agent hereunder. UNLESS THE DEBTORS PROVIDE THE AGENT WITH EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY PURCHASE INSURANCE AT THE DEBTORS' EXPENSE TO PROTECT THE AGENT'S INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT ANY DEBTOR'S INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY THE AGENT MAY NOT PAY ANY CLAIMS THAT ANY DEBTOR MAKES OR ANY CLAIM THAT IS MADE AGAINST SUCH DEBTOR IN CONNECTION WITH THE COLLATERAL. THE DEBTORS MAY LATER CANCEL ANY SUCH INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER PROVIDING THE AGENT WITH EVIDENCE THAT THE DEBTORS HAVE OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE AGENT PURCHASES INSURANCE FOR THE COLLATERAL, THE DEBTORS WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT THE AGENT MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE OBLIGATIONS SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE THE DEBTORS MAY BE ABLE TO OBTAIN ON THEIR OWN. -7- 8 (h) Each Debtor will at all times allow the Agent, any Secured Creditor or their respective representatives free access to and right of inspection of the Collateral. Each Debtor will, to the extent it is within its power so to do, authorize and instruct all bailees and other parties at any time holding, storing, shipping or transferring all or any part of such Debtor's Collateral to permit the Agent, any Secured Creditor or their respective or its designees to examine and inspect any of such Collateral then in such party's possession and to verify from such party's own books and records any information concerning such Collateral or any part thereof which the Agent or such Secured Creditor may seek to verify. As to any premises not owned by any of the Debtors wherein any of the Collateral is located, if any, the appropriate Debtor shall, unless the Agent requests otherwise, cause each Person having any right, title or interest in, or lien on, any of such premises to enter into an agreement (any such agreement to contain a legal description of such premises) whereby such party disclaims any right, title and interest in, and lien on, the Collateral, allowing the removal of such Collateral by the Agent or its designee and otherwise in form and substance acceptable to the Agent. (i) Each Debtor agrees from time to time to deliver to the Agent and any Secured Creditor such evidence of the existence and identity of such Debtor's Collateral and of its availability as collateral security pursuant hereto (including, without limitation, schedules describing all Receivables created or acquired by such Debtor, copies of customer invoices or the equivalent and original shipping or delivery receipts for all merchandise and other goods sold or leased or services rendered, together with such Debtor's warranty of the genuineness thereof, and reports stating the book value of Inventory and Equipment by major category and location), as the Agent or such Secured Creditor may request. Each Debtor will promptly notify the Agent and each Secured Creditor of any Collateral which such Debtor has determined to have been rendered obsolete, stating the prior book value of such Collateral, its type and location. (j) Each Debtor will comply with the terms and conditions of any leases, easements, right-of-way agreements or other agreements covering the premises wherein its Collateral is located and any orders, ordinances, laws or statutes of any city, state or other governmental entity, department or agency having jurisdiction with respect to such premises or the conduct of business thereon. (k) On failure of any Debtor to perform any of the covenants and agreements herein contained, the Agent may, at its option, perform the same and in so doing may expend such sums as the Agent may deem advisable in the performance thereof, including without limitation the payment of any insurance premiums, the payment of any taxes, liens and encumbrances, expenditures made in defending against any adverse claim and all other expenditures which the Agent may be compelled to make by operation of -8- 9 law or which the Agent may make by agreement or otherwise for the protection of the security hereof. All such sums and amounts so expended shall be repayable by the Debtors immediately without notice or demand, shall constitute so much additional Obligations hereby secured and shall bear interest from the date said amounts are expended at the rate per annum (computed on the basis of a 365-day or 366 day year, as the case may be, for the actual number of days elapsed) determined by adding 2% to the Base Rate (such rate per annum as so determined being hereinafter referred to as the "Default Rate"). No such performance of any covenant or agreement by the Agent on behalf of any Debtor and no such advancement or expenditure therefor, shall relieve any Debtor of any default under the terms of this Agreement or in any way obligate the Agent or any Secured Creditor to take any further or future action with respect thereto. The Agent, in making any payment hereby authorized, may do so according to any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim. The Agent, in performing any act hereunder, shall be the sole judge of whether the relevant Debtor is required to perform same under the terms of this Agreement. The Agent is authorized to charge any depository account of any Debtor maintained with the Agent for the amount of such sums and amounts so expended. (l) Each Debtor warrants that such Debtor has not transacted business, and does not transact business, under any trade names except as set forth on Schedule B. Each Debtor agrees that it will not change its name or transact business under any trade names without first giving the Agent 30 days' prior written notice of its intent to do so. (m) Each Debtor agrees to execute and deliver to the Agent such further agreements and assignments or other instruments and to do all such other things as the Agent may deem necessary or appropriate to assure the Agent its security interest hereunder, including such financing statement or statements or amendments thereof or supplements thereto or other instruments as the Agent or the Required Lenders may from time to time require in order to comply with the Uniform Commercial Code as enacted in the State of Illinois and any successor statute(s) thereto (the "Code"). Each Debtor hereby agrees that a carbon, photographic or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Agent without notice thereof to any Debtor wherever the Agent in its sole discretion desires to file the same. In the event for any reason the law of any other jurisdiction than Illinois becomes or is applicable to the Collateral or any part thereof, or to any of the Obligations, each Debtor agrees to execute and deliver all such instruments and to do all such other things as the Agent in its sole discretion deems necessary or appropriate to preserve, protect and enforce the security interests of the Agent under the law of such other -9- 10 jurisdiction to at least the same extent as such security interests would be protected under the Code. If any Collateral is in the possession or control of any Debtor's agents or processors and unless the Agent requests otherwise, such Debtor agrees to notify such agents or processors in writing of the Agent's security interests therein, and upon the Agent's request instruct them to hold all such Collateral for the Agent's account and subject to the Agent's instructions. The Debtors agree to mark their books and records to reflect the security interests of the Agent in the Collateral. Section 4. Special Provisions Re: Receivables. (a) As of the time any Receivable becomes subject to the security interest provided for hereby and at all times thereafter, each Debtor shall be deemed to have warranted as to each and all of such Receivables that all warranties of such Debtor set forth in this Agreement are true and correct with respect to such Receivables; that each Receivable and all papers and documents relating thereto are genuine and in all respects what they purport to be; that each Receivable is valid and subsisting and, if such Receivable is an account, arises out of a bona fide sale of goods sold and delivered by such Debtor to, or in the process of being delivered to, or out of and for services theretofore actually rendered by such Debtor to, the account debtor named therein; that no such Receivable is evidenced by any instrument or chattel paper unless such instrument or chattel paper has theretofore been endorsed by such Debtor and delivered to the Agent (except to the extent the Agent specifically requests such Debtor not to do so with respect to any such instrument or chattel paper); that no surety bond was required or given in connection with said Receivable or the contracts or purchase orders out of which the same arose; that the amount of the Receivable represented as owing is the correct amount actually and unconditionally owing, except for normal cash discounts on normal trade terms in the ordinary course of business if such Receivable is an account and that the amount of such Receivable represented as owing is not disputed and is not subject to any set-offs, credits, deductions or countercharges other than those arising in the ordinary course of such Debtor's business which are disclosed to the Agent in writing promptly upon such Debtor becoming aware thereof; provided, however, that the untruth of the foregoing warranties of this sentence as to Receivables aggregating not more than $100,000 shall not constitute a breach of this sentence. Without limiting the foregoing, if any Receivable arises out of a contract with the United States of America or any of its departments, agencies or instrumentalities, if and to the extent the Agent so requests, each Debtor agrees to notify the Agent and execute whatever instruments and documents are required by the Agent in order that such Receivable shall be assigned to the Agent and that proper notice of such assignment shall be given under the federal Assignment of Claims Act (or any successor statute). (b) Each Debtor shall keep all of its books and records relating to the Receivables only at its chief executive office described in Section 3(b) hereof. -10- 11 (c) Unless and until an Event of Default occurs, any merchandise which is returned by a customer or account debtor or otherwise recovered may be resold by the Debtors in the ordinary course of their respective businesses in accordance with Section 5(b) hereof; after an Event of Default occurs, such merchandise shall be set aside and held by each of the Debtors as trustee for the Secured Creditors and shall remain part of the Agent's Collateral. Unless and until an Event of Default occurs, each Debtor may settle and adjust disputes and claims with its customers and account debtors, handle returns and recoveries and grant discounts, credits and allowances in the ordinary course of its business and otherwise for amounts and on terms which such Debtor considers advisable. However, after an Event of Default has occurred and unless the Agent requests otherwise, each Debtor shall notify the Agent promptly of all returns and recoveries and on request deliver the merchandise to the Agent. After an Event of Default has occurred and unless the Agent requests otherwise, each Debtor shall also notify the Agent promptly of all disputes and claims and settle or adjust them at no expense to the Agent or the Secured Creditors, but no discount, credit or allowance other than on normal trade terms in the ordinary course of business shall be granted to any customer or account debtor and no returns of merchandise shall be accepted by such Debtor without the Agent's consent. The Agent may, at all times after such an Event of Default has occurred, settle or adjust disputes and claims directly with customers or account debtors for amounts and upon terms which the Agent considers advisable. (d) From time to time, as the Agent may request of any Debtor, such Debtor shall provide the Agent with schedules describing all Receivables created or acquired by such Debtor, provided, however, that the failure of such Debtor to execute and deliver such schedules shall not affect or limit the Agent's security interest or other rights in and to any such Receivables. Together with each schedule, each Debtor shall if requested by the Agent, furnish copies of customers' invoices or the equivalent, and original shipping or delivery receipts, for all merchandise sold, and each Debtor warrants the genuineness thereof. Section 5. Collection of Receivables. (a) Except as otherwise provided in this Agreement each Debtor shall make collection of all of its Receivables and may use the same to carry on its business in accordance with sound business practice and otherwise subject to the terms hereof. (b) Whether or not the Agent has exercised any or all of its rights under other provisions of this Section 5 and whether or not any Event of Default has occurred, at the request of the Agent, each Debtor agrees that: (i) all instruments and chattel paper at any time constituting part of the Collateral (including any post-dated checks) shall, upon receipt by the relevant Debtor, be immediately endorsed to and deposited with Agent; and (ii) such Debtor shall instruct all account debtors to remit all payments in respect of its Receivables to a lockbox or lockboxes from which deposits will be made into one or more accounts maintained with the -11- 12 Agent or under the control by agreement of the Agent (whether or not maintained with the Agent), the Debtors acknowledging that each such account and all funds contained therein constitute Collateral hereunder. (c) Whether or not any Event of Default has occurred and whether or not the Agent has exercised any or all of its rights under other provisions of this Section 5, in the event the Agent requests any Debtor to do so, all instruments and chattel paper at any time constituting part of the Receivables (including any postdated checks) shall, upon receipt by such Debtor, be immediately endorsed to and deposited with the Agent. (d) Upon the occurrence and during the continuation of any Event of Default and whether or not the Agent has exercised any or all of its rights under other provisions of this Section 5, the Agent or its designee may notify any Debtor's customers or account debtors at any time that Receivables have been assigned to the Agent or of the Agent's security interest therein and either in its own name, or such Debtor's or both, demand, collect (including without limitation through a lockbox analogous to that described in Section 5(b) hereof), receive, receipt for, sue for, compound and give acquittance for any or all amounts due or to become due on Receivables, and in the Agent's discretion file any claim or take any other action or proceeding which the Agent may deem necessary or appropriate to protect and realize upon the security interest of the Agent in the Receivables. (e) Any proceeds of Receivables or other Collateral transmitted to or otherwise received by the Agent pursuant to any of the provisions of Sections 5(b), 5(c) or 5(d) hereof shall be handled and administered by the Agent in and through a remittance account maintained at the Agent and each Debtor acknowledges that the maintenance of such remittance account by the Agent is solely for the Agent's own convenience and that such Debtor does not have any right, title or interest in such remittance account or any amounts at any time standing to the credit thereof. The Agent may apply all or any part of any proceeds of Receivables or other Collateral received by it from any source to the payment of the Obligations (whether or not then due and payable), such applications to be made in such amounts, in such manner and order and at such intervals as the Agent may from time to time in its discretion determine, but not less often than once each week. The Agent need not apply or give credit for any item included in proceeds of Receivables or other Collateral until the Agent has received final payment therefor at its office in cash or final solvent credits current in Chicago, Illinois, acceptable to the Agent as such. However, if the Agent does give credit for any item prior to receiving final payment therefor and the Agent fails to receive such final payment or an item is charged back to the Agent for any reason, the Agent may at its election in either instance charge the amount of such item back against the remittance account, together with interest thereon at the Default Rate. Each Debtor shall accompany each transmission of any proceeds of Receivables or other Collateral to the Agent with a report in such form as the Agent shall require identifying the particular Receivable -12- 13 or other Collateral from which the same arises or relates. The Debtors hereby jointly and severally indemnify the Secured Creditors from and against all liabilities, damages, losses, actions, claims, judgments, costs, expenses, charges and attorney's fees suffered or incurred by the Agent or the Secured Creditors because of the maintenance of the foregoing arrangements. The Secured Creditors shall have no liability or responsibility to any Debtor for accepting any check, draft or other order for payment of money bearing the legend "payment in full" or words of similar import or any other restrictive legend or endorsement whatsoever or be responsible for determining the correctness of any remittance. Section 6. Special Provisions Re: Investment Property. (a) Unless and until an Event of Default has occurred and is continuing and thereafter until notified to the contrary by the Agent pursuant to Section 9(e) hereof: (i) Each Debtor shall be entitled to exercise all voting and/or consensual powers pertaining to the Investment Property or any part thereof owned or held by it, for all purposes not inconsistent with the terms of this Agreement, the Credit Agreement or any other document evidencing or otherwise relating to any Obligations; and (ii) Each Debtor shall be entitled to receive and retain all cash dividends paid upon or in respect of the Investment Property owned or held by it. (b) Certificates for all securities now or at any time constituting Investment Property hereunder shall be promptly delivered by the relevant Debtor to the Agent duly endorsed in blank for transfer or accompanied by an appropriate assignment or assignments or an appropriate undated stock power or powers, in every case sufficient to transfer title thereto, and, with respect to any Investment Property held by a securities intermediary, commodity intermediary, or other financial intermediary of any kind, the relevant Debtor shall execute and deliver, and shall cause any such intermediary to execute and deliver, an agreement among such Debtor, the Agent, and such intermediary in form and substance satisfactory to the Agent which provides, among other things, for the intermediary's agreement that it will comply with entitlement orders, and apply any value distributed on account of any Investment Property maintained in an account with such intermediary, as directed by the Agent without further consent by such Debtor at any time after the occurrence of any Event of Default; provided, however, that, prior to the existence of an Event of Default and thereafter until otherwise required by the Agent or the Required Lenders, a Debtor shall not be required to deliver any such certificates or cause any such agreement to be entered into with the relevant financial intermediary if and so long as (i) the fair market value of any such Investment Property held by such Debtor is less than $100,000 and (ii) the aggregate fair market value of all such Investment Property held by the Debtors and not subject to the control (as such term is defined in the Code) of the Agent under the Collateral Documents is less than $250,000 at any one time outstanding. The Agent may at any time after the occurrence of -13- 14 an Event of Default cause to be transferred into its name or the name of its nominee or nominees any and all of the Investment Property hereunder. (c) Unless and until an Event of Default has occurred and is continuing, each Debtor may sell or otherwise dispose of any Investment Property to the extent permitted by the Credit Agreement, provided that no Debtor shall sell or otherwise dispose of any capital stock or other equity interests in any other Debtor or any direct or indirect Subsidiary of any Debtor without the Agent's prior written consent. During the existence of any Event of Default, no Debtor shall sell or otherwise dispose of all or any part of the Investment Property without the prior written consent of the Agent. (d) Each Debtor represents that on the date of this Agreement, none of the Investment Property consists of margin stock (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System) except to the extent such Debtor has delivered to the Agent a duly executed and completed Form U-1 with respect to such stock. If at any time the Investment Property or any part thereof consists of margin stock, the relevant Debtor shall promptly so notify the Agent and deliver to the Agent a duly executed and completed Form U-1 and such other instruments and documents reasonably requested by the Agent in form and substance satisfactory to the Agent. (e) Notwithstanding anything to the contrary contained herein, in the event any Investment Property is subject to the terms of a separate security agreement (including, without limitation, the Pledge Agreement bearing even date herewith relating to the equity interests issued by certain of the Debtors hereunder) in favor of the Agent, the terms of such separate security agreement shall govern and control unless otherwise agreed to in writing by the Secured Creditors. Section 7. Special Provisions Re: Inventory and Equipment. (a) Each Debtor will at its own cost and expense maintain, keep and preserve its Inventory in good and merchantable condition and keep and preserve its Equipment in good repair, working order and condition, ordinary wear and tear excepted, and without limiting the foregoing make all necessary and proper repairs, replacements and additions to the Equipment so that the efficiency thereof shall be fully preserved and maintained. (b) Each Debtor may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Agent, use, consume and sell its Inventory in the ordinary course of its business as presently conducted, but a sale in the ordinary course of business shall not under any circumstance include any transfer or sale in satisfaction, partial or complete, of a debt owing by any Debtor. -14- 15 (c) Each Debtor may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Agent, sell (i) obsolete, worn out or unusable Equipment which is concurrently replaced with similar Equipment at least equal in quality and condition to that sold and owned by such Debtor free of any lien, charge or encumbrance other than the lien hereof and (y) Equipment which is not necessary for, or of importance to, the proper conduct of any Debtor's business in the ordinary course and failure to repair or replace such Equipment would not be disadvantageous to the rights hereunder of the Secured Creditors. (d) As of the time any Inventory or Equipment becomes subject to the security interest provided for hereby and at all times thereafter, each Debtor shall be deemed to have warranted as to any and all of its Inventory and Equipment that all warranties of such Debtor set forth in this Agreement are true and correct with respect to such Inventory and Equipment and that all of such Inventory and Equipment is located at a location set forth pursuant to Section 3(b) hereof. Each Debtor warrants and agrees that no Inventory is or will be consigned to any other person without the Agent's prior written consent. (e) Each Debtor shall at its own cost and expense cause the lien of the Agent in and to any portion of its Collateral subject to a certificate of title law to be duly noted on such certificate of title or to be otherwise filed in such manner as is prescribed by law in order to perfect such lien and shall cause all such certificates of title and evidences of lien to be deposited with the Agent unless otherwise permitted by the Required Lenders in their sole discretion; provided that no Debtor shall be obligated to cause the Agent's lien to be so noted or to deliver any such certificate of title to the Agent to the extent such certificate is held by another creditor with a purchase money security interest permitted by the Credit Agreement on the Collateral represented by such certificate. (f) Each Debtor shall at its own cost and expense cause any certificate of title evidencing any of the Collateral to be amended to reflect the current and correct name of such Debtor as and when required by applicable law, but in any event no later than such date on which such Debtor must renew its registration of such Collateral under applicable law. Each Debtor shall cause the lien of the Agent in such Collateral to continue to be duly noted on such amended or reissued certificate of title. (g) Except for Equipment from time to time located on the real estate described on Schedule C attached hereto and as otherwise disclosed to the Agent in writing, none of the Equipment is or will be attached to real estate in such a manner that the same may become a fixture. (h) If any of its Inventory is at any time evidenced by a document of title, such document shall be promptly delivered by the appropriate Debtor to the Agent. -15- 16 Section 8. Power of Attorney. In addition to any other powers of attorney contained herein, each Debtor appoints the Agent, its nominee, or any other person whom the Agent may designate as such Debtor's attorney in fact, with full power to endorse such Debtor's names on any checks, notes, acceptances, money orders, drafts or other forms of payment or security that may come into the Agent's possession, to sign such Debtor's names on any invoice or bill of lading relating to any Receivables, on drafts against customers, on schedules and assignments of Receivables, on notices of assignment, on public records, on verifications of accounts and on notices to customers, to send requests for verification of Receivables to customers or account debtors, to notify the post office authorities to change the address for delivery of such Debtor's mail to an address designated by the Agent and to receive, open and dispose of all mail addressed to such Debtor and to do all other things necessary to carry out this Agreement. Each Debtor hereby ratifies and approves all acts of any such attorney and agree that neither the Agent nor any such attorney nor any Secured Creditor will be liable for any acts or omissions nor for any error of judgment or mistake of fact or law other than their own gross negligence or willful misconduct. The foregoing power of attorney, being coupled with an interest, is irrevocable until the Obligations have been fully satisfied and any commitment of the Secured Creditors to extend credit constituting Obligations has terminated. The Agent may file one or more financing statements disclosing its security interest in any or all of the Collateral without any Debtor's signature appearing thereon. Each Debtor also hereby grants the Agent a power of attorney to execute any such financing statement, or amendments and supplements to financing statements, on behalf of such Debtor without notice thereof to any Debtor, which power of attorney is coupled with an interest and is irrevocable until the Obligations have been fully satisfied and any commitment of the Secured Creditors to extend credit constituting Obligations to the Company has terminated. Section 9. Defaults and Remedies. (a) The occurrence of any event or the existence of any condition which is specified as an Event of Default under the Credit Agreement shall constitute an "Event of Default" hereunder. (b) Upon the occurrence of any Event of Default, the Agent shall have, in addition to all other rights provided herein or by law, the rights and remedies of a secured party under the Code (regardless of whether the Code is the law of the jurisdiction where the rights or remedies are asserted and regardless of whether the Code applies to the affected Collateral), and further the Agent may, without demand and without advertisement, notice, hearing or process of law, all of which each Debtor hereby waives to the extent permitted by law, at any time or times, sell and deliver any or all Collateral held by or for it at public or private sale, for cash, upon credit or otherwise, at such prices and upon such terms as the Agent deems advisable, in its sole discretion. In addition to all other sums due the Agent and the Secured Creditors hereunder, the Debtors jointly and severally agree to pay to the Agent and the Secured Creditors all costs and expenses incurred by the Agent and the Secured Creditors, including reasonable attorneys' fees -16- 17 and court costs, in obtaining, liquidating or enforcing payment of Collateral or Obligations or in the prosecution or defense of any action or proceeding by or against the Agent or such other Secured Creditor or the Debtors or any of them concerning any matter arising out of or connected with this Agreement or the Collateral or Obligations, including without limitation any of the foregoing arising in, arising under or related to a case under the Bankruptcy Code. Any requirement of reasonable notice shall be met if such notice is personally served on or mailed, postage prepaid, to the Debtors in accordance with Section 14(b) hereof at least ten days before the time of sale or other event giving rise to the requirement of such notice; however, no notification need be given to a Debtor if that Debtor has signed, after an Event of Default has occurred, a statement renouncing any right to notification of sale or other intended disposition. The Agent shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. The Agent or any Secured Creditor may be the purchaser at any such sale. To the extent permitted by applicable law, each Debtor hereby waives all of its rights of redemption from any such sale. Subject to the provisions of applicable law, the Agent may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, be made at the time and place to which the sale was postponed or the Agent may further postpone such sale by announcement made at such time and place. (c) Without in any way limiting the foregoing, during the existence of any Event of Default, the Agent shall have the right, in addition to all other rights provided herein or by law, to take physical possession of any and all of the Collateral and anything found therein, the right for that purpose to enter without legal process any premises where the Collateral may be found (provided such entry be done lawfully), and the right to maintain such possession on each Debtor's premises (each Debtor hereby agreeing to lease warehouses without cost or expense to the Agent or its designee if the Agent so requests) or to remove its Collateral or any part thereof to such other places as the Agent may desire. During the existence of any Event of Default, the Agent shall have the right to exercise any and all rights with respect to deposit accounts of any Debtor maintained with the Agent or any Secured Creditor, including, without limitation, the right to collect, withdraw and receive all amounts due or to become due or payable under each such deposit account. During the existence of any Event of Default, each Debtor shall, upon the Agent's demand, assemble its Collateral and make it available to the Agent at a place designated by the Agent. If the Agent exercises its right to take possession of the Collateral, each Debtor shall also at its expense perform any and all other steps requested by the Agent to preserve and protect the security interest hereby granted in the Collateral, such as placing and maintaining signs indicating the security interest of the Agent, appointing overseers for the Collateral and maintaining stock records. (d) Without in any way limiting the foregoing, each Debtor hereby grants to the Agent and the Secured Creditors a royalty-free irrevocable license and right to use all of such -17- 18 Debtor's patents, patent applications, patent licenses, trademarks, trademark registrations, trademark licenses, trade names, trade styles, and similar intangibles in connection with any foreclosure or other realization by the Agent or the Secured Creditors on all or any part of the Collateral, provided that the license granted hereunder shall not include any rights in any license agreement under which the relevant Debtor is licensee which, by its terms, prohibits the license contemplated by this Section. The license and right granted the Secured Creditors hereby shall be without any royalty or fee or charge whatsoever. Such license and right shall only be exercisable upon the occurrence and continuation of an Event of Default. (e) Without in any way limiting the foregoing, during the existence of any Event of Default, all rights of a Debtor to exercise the voting and/or consensual powers which it is entitled to exercise pursuant to Section 6(a)(i) hereof and/or to receive and retain the distributions which it is entitled to receive and retain pursuant to Section 6(a)(ii) hereof, shall, at the option of the Agent, cease and thereupon become vested in the Agent, which, in addition to all other rights provided herein or by law, shall then be entitled solely and exclusively to exercise all voting and other consensual powers pertaining to the Investment Property and/or to receive and retain the distributions which such Debtor would otherwise have been authorized to retain pursuant to Section 6(a)(ii) hereof and shall then be entitled solely and exclusively to exercise any and all rights of conversion, exchange or subscription or any other rights, privileges or options pertaining to any Investment Property as if the Agent were the absolute owner thereof including, without limitation, the rights to exchange, at its discretion, any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization or other readjustment of the respective issuer thereof or upon the exercise by or on behalf of any such issuer or the Agent of any right, privilege or option pertaining to any Investment Property and, in connection therewith, to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer Agent, registrar or other designated agency upon such terms and conditions as the Agent may determine. Without limiting the foregoing, during the existence of any Event of Default, the Agent may, by written demand, direct any securities intermediary, commodities intermediary, or other financial intermediary at any time holding any Investment Property, or any issuer thereof, to deliver such Collateral, or any part thereof, and/or liquidate such Collateral, or any party thereof, and deliver the proceeds therefrom to the Agent. In the event the Agent in good faith believes any of the Collateral constitutes restricted securities within the meaning of any applicable securities laws, any disposition thereof in compliance with such laws shall not render the disposition commercially unreasonable. (f) The powers conferred upon the Agent hereunder are solely to protect its interest in the Collateral and shall not impose on it any duty to exercise such powers. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of Investment Property in its possession if such Collateral is accorded treatment substantially equivalent to that which the Agent accords its own property consisting of similar type assets, it being understood, -18- 19 however, that the Agent shall have no responsibility for ascertaining or taking any action with respect to calls, conversions, exchanges, maturities, tenders, or other matters relating to any such Collateral, whether or not the Agent has or is deemed to have knowledge of such matters. This Agreement constitutes an assignment of rights only and not an assignment of any duties or obligations of any Debtor in any way related to the Collateral, and the Agent shall have no duty or obligation to discharge any such duty or obligation. The Agent shall have no responsibility for taking any necessary steps to preserve rights against any parties with respect to any Collateral or initiating any action to protect the Collateral against the possibility of a decline in market value. Neither the Agent or any Secured Creditor, nor any party acting as attorney for the Agent or any Secured Creditor, shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than such person's gross negligence or willful misconduct. (g) Failure by the Agent or any Secured Creditor to exercise any right, remedy or option under this Agreement or any other agreement between the Debtors or any of them and the Agent or any Secured Creditor or Secured Creditors or provided by law, or delay by the Agent or any Secured Creditor in exercising the same, shall not operate as a waiver; no waiver shall be effective unless it is in writing, signed by the party against whom enforcement of the waiver is sought and then only to the extent specifically stated. Neither the Agent, any Secured Creditor nor any party acting as attorney for the Agent or such Secured Creditor, shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct. The rights and remedies of the Secured Creditors under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Agent or any Secured Creditor may have. For purposes of this Agreement, an Event of Default shall be construed as continuing after its occurrence until the same is waived in writing by the Lenders or the Required Lenders, as the case may be, in accordance with the Credit Agreement. Section 10. Application of Proceeds. The proceeds and avails of the Collateral at any time received by the Agent upon the occurrence and during the continuation of any Event of Default shall, when received by the Agent in cash or its equivalent, be applied by the Agent in reduction of the Obligations in accordance with the terms of the Credit Agreement. The Debtors shall remain liable to the Agent and the Secured Creditors for any deficiency. Any surplus remaining after the full payment and satisfaction of the Obligations shall be returned to the Debtors or to whomsoever the Agent reasonably determines is lawfully entitled thereto. Section 11. Continuing Agreement. This Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until all of the Obligations, both for principal and interest, have been fully paid and satisfied and any commitment to extend any credit constituting Obligations to the Company shall have terminated. -19- 20 Section 12. Primary Security; Obligations Absolute. The lien and security herein created and provided for stand as direct and primary security for the Obligations. No application of any sums received by the Agent in respect of the Collateral or any disposition thereof to the reduction of the Obligations or any portion thereof shall in any manner entitle any Debtor to any right, title or interest in or to the Obligations or any collateral security therefor, whether by subrogation or otherwise, unless and until all Obligations have been fully paid and satisfied and any commitment to extend credit constituting Obligations to the Company shall have terminated. Each Debtor acknowledges and agrees that the lien and security hereby created and provided for are absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of the Agent, any Secured Creditor or any other holder of any of the Obligations, and without limiting the generality of the foregoing, the lien and security hereof shall not be impaired by any acceptance by the Agent, any Secured Creditor or any holder of any of the Obligations of any other security for or guarantors upon any of the Obligations or by any failure, neglect or omission on the part of the Agent, any Secured Creditor or any other holder of any of the Obligations to realize upon or protect any of the Obligations or any collateral security therefor. The lien and security hereof shall not in any manner be impaired or affected by (and the Agent and the Secured Creditors, without notice to anyone, are hereby authorized to make from time to time) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the Obligations, or of any collateral security therefor, or of any guaranty thereof or of any obligor thereon. The Secured Creditors may at their discretion at any time grant credit to the Company without notice to any Debtor in such amounts and on such terms as the Secured Creditors may elect (all of such to constitute additional Obligations) without in any manner impairing the lien and security hereby created and provided for. No release, compromise or discharge of any Debtor hereunder or with respect to any of the Obligations or any Collateral provided by such Debtor shall release or discharge, or impair the agreements of, any other Debtor hereunder or in any manner impair the liens and security interests granted by any other Debtor hereunder; and the Agent may proceed against the Collateral provided hereunder by any one or more of the Debtors without proceeding against any or all of the other Debtors, their respective properties or any other security or guaranty whatsoever. Without limiting the generality of the foregoing, the Agent (acting at the direction of the Secured Creditors) may at any time or from time to time release any Debtor from its obligations hereunder or release any Collateral or effect any compromise with any Debtor, and no such release or compromise shall in any manner impair or otherwise effect the liens granted by, or the obligations of, the other Debtors hereunder. In order to foreclose or otherwise realize hereon and to exercise the rights granted the Agent hereunder and under applicable law as against any Debtor or any Collateral in which such Debtor has rights, there shall be no obligation on the part of the Agent, any Secured Creditor or any other holder of any of the Obligations at any time to first resort for payment to the Company or any other Debtor or any other Person, its property or estate or to any guaranty of the Obligations or any portion thereof or to resort to any other collateral security, property, liens or any other rights -20- 21 or remedies whatsoever, and the Agent shall have the right to enforce this instrument as against any Debtor or any Collateral in which such Debtor has rights, irrespective of whether or not other proceedings or steps are pending seeking resort to or realization upon or from any of the foregoing. Section 13. The Agent. In acting under or by virtue of this Agreement, the Agent shall be entitled to all the rights, authority, privileges and immunities provided in Section 10 of the Credit Agreement, all of which provisions of said Section 10 are incorporated by reference herein with the same force and effect as if set forth herein in their entirety. The Agent hereby disclaims any representation or warranty to the Secured Creditors concerning the perfection of the security interest granted hereunder or in the value of any of the Collateral. Section 14. Miscellaneous. (a) This Agreement cannot be changed or terminated orally. All of the rights, privileges, remedies and options given to the Agent and the Secured Creditors hereunder shall inure to the benefit of their respective successors and assigns, and all the terms, conditions, promises, covenants, representations and warranties of and in this Agreement shall bind each Debtor and its legal representatives, successors and assigns, provided that no Debtor may assign its rights or delegate its duties hereunder without the Agent's prior written consent. Without limiting the generality of the foregoing, and subject to the provisions of Sections 12.14 and 12.15 of the Credit Agreement, any Lender may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject, however, to the provisions of the Credit Agreement. Each Debtor hereby releases the Agent and each Secured Creditor from any liability for any act or omission relating to its Collateral or this Agreement, except the Agent's or such Secured Creditor's gross negligence or willful misconduct. (b) All communications provided for herein shall be in writing, except as otherwise specifically provided for hereinabove, and shall be deemed to have been given or made, if to any Debtor when given to the Company in accordance with Section 12.8 of the Credit Agreement, or if to the Agent or any Lender, when given to such party in accordance with Section 12.8 of the Credit Agreement. (c) No Secured Creditor shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure against any Collateral subject to this Agreement or for the execution of any trust or power hereof or for the appointment of a receiver, or for the enforcement of any other remedy under or upon this Agreement; it being understood and intended that no one or more of the Secured Creditors shall have any right in any manner whatsoever to affect, disturb or prejudice the lien and security interest of this Agreement by its or their action or to enforce any right hereunder, and that all proceedings at law or in equity shall be -21- 22 instituted, had and maintained by the Agent in the manner herein provided for the ratable benefit of the Secured Creditors. (d) In the event that any provision hereof shall be deemed to be invalid by reason of the operation of any law or by reason of the interpretation placed thereon by any court, this Agreement shall be construed as not containing such provision, but only as to such locations where such law or interpretation is operative, and the invalidity of such provision shall not affect the validity of any remaining provision hereof, and any and all other provisions hereof which are otherwise lawful and valid shall remain in full force and effect. Without limiting the generality of the foregoing, in the event that this Agreement shall be deemed to be invalid or otherwise unenforceable with respect to any Debtor, such invalidity or unenforceability shall not affect the validity of this Agreement with respect to the other Debtors. (e) Upon the execution and delivery of this Agreement by the Debtors hereunder, this Agreement shall supersede all provisions of the Prior Security Agreement as of such date. The Debtors hereby agree that, notwithstanding the execution and delivery of this Agreement, the lien and security interest created and provided for under the Prior Security Agreement continue in effect under and pursuant to the terms of this Agreement for the benefit of all of the Obligations secured hereby. Nothing herein contained shall in any manner affect or impair the priority of the liens and security interests created and provided for by the Prior Security Agreement as to the indebtedness and obligations which would otherwise be secured hereby prior to giving effect to this Agreement (f) This Agreement shall be deemed to have been made in the State of Illinois and shall be governed by the internal laws of the State of Illinois (without regard to the principles of conflicts of law). All terms which are used in this Agreement which are defined in the Code shall have the same meanings herein as said terms do in the Code unless this Agreement shall otherwise specifically provide. The headings in this instrument are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof. (g) This Agreement may be executed in any number of counterparts, each constituting an original, but all together one and the same instrument. Each Debtor acknowledges that this Agreement is and shall be effective upon its execution and delivery by such Debtor to the Agent, and it shall not be necessary for the Agent to execute this Agreement or any other acceptance hereof or otherwise to signify or express its acceptance hereof. (h) THE AGENT AND THE DEBTORS AGREE THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR -22- 23 FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, BUT EACH OF THE AGENT AND THE DEBTORS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. EACH OF THE DEBTORS WAIVES IN ALL DISPUTES ANY OBJECTION THAT SUCH DEBTOR MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE OR ANY OBJECTION THAT SUCH DEBTOR MAY HAVE THAT ANY OTHER PARTY HAS NOT BEEN JOINED IN SUCH PROCEEDING. EACH OF THE DEBTORS AGREES THAT THE AGENT SHALL HAVE THE RIGHT TO PROCEED AGAINST EACH AND ANY OF THE DEBTORS OR THEIR COLLATERAL IN A COURT IN ANY LOCATION TO ENABLE THE AGENT TO REALIZE ON THE COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE AGENT, WHETHER OR NOT PROCEEDING SEPARATELY AGAINST ANY DEBTOR AND ITS PROPERTY OR JOINTLY AGAINST THE COMPANY AND ANY ONE OR MORE OF THE DEBTORS AND THEIR PROPERTY. EACH OF THE DEBTORS WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH. [SIGNATURE PAGES TO FOLLOW] -23- 24 IN WITNESS WHEREOF, the Debtors have caused this Agreement to be duly executed as of the date first above written. DEBTORS: MORTON INDUSTRIAL GROUP, INC. By Its -------------------------------------- MORTON METALCRAFT CO. By Its -------------------------------------- MORTON METALCRAFT CO. OF NORTH CAROLINA By Its -------------------------------------- MORTON METALCRAFT CO. OF SOUTH CAROLINA By Its -------------------------------------- CARROLL GEORGE, INC. -24- 25 By Its -------------------------------------- B&W METAL FABRICATORS, INC. By Its -------------------------------------- -25- 26 Accepted and agreed to as of the date first above written. HARRIS TRUST AND SAVINGS BANK, as Agent By Its ------------------------------------- -26- EX-10.6 7 EX-10.6 1 EXHIBIT 10.6 AMENDED AND RESTATED PLEDGE AGREEMENT This Amended and Restated Pledge Agreement (the "Agreement") is dated as of May ___, 1998, by and among the parties executing this Agreement under the heading "Pledgors" (such parties, along with any parties who execute and deliver to the Agent an agreement in the form attached hereto as Schedule E, being hereinafter referred to collectively as the "Pledgors" and individually as a "Pledgor"), each with its mailing address as set forth on the signature page hereto and HARRIS TRUST AND SAVINGS BANK, an Illinois banking corporation ("Harris"), with its mailing address at 111 West Monroe Street, Chicago, Illinois 60603, acting as agent hereunder for the Secured Creditors hereinafter identified and defined (Harris acting as such agent and any successor or successors to Harris acting in such capacity being hereinafter referred to as the "Agent"); PRELIMINARY STATEMENTS A. Morton Industrial Group, Inc., a Georgia corporation (the "Company"), certain subsidiaries of the Company, Harris, individually and as agent, and certain lenders are currently party to a Credit Agreement dated as of January 20, 1998 (such Credit Agreement, as the same may have been amended or modified from time to time, including amendments and restatements thereof in its entirety, being hereinafter referred to as the "Prior Credit Agreement"), pursuant to which Harris and other lenders from time to time party to the Credit Agreement agreed, subject to certain terms and conditions, to extend credit and make certain other financial accommodations available to the "Borrowers" identified therein. B. The Company and certain subsidiaries of the Company are currently party to a Pledge Agreement dated as of January 20, 1998, with Harris, individually and as agent for the lenders party to the Prior Credit Agreement (the "Prior Pledge Agreement"), pursuant to which the Company and such other subsidiaries have granted liens on certain personal property as collateral security for the indebtedness, obligations, and liabilities of the "Borrowers" owing to such lenders under the Prior Credit Agreement. C. Concurrently herewith, Harris and the other lenders party to the Prior Credit Agreement are refinancing all indebtedness, obligations, and liabilities owed to such lenders by the "Borrowers" under the Prior Credit Agreement (the "Prior Obligations"). D. The Company and Harris, individually and as Agent, have also entered into a Credit Agreement dated of even date herewith (such Credit Agreement, as the same may be amended or modified from time to time, including amendments and restatements thereof in its entirety, being hereinafter referred to as the "Credit Agreement") pursuant to which Harris and 2 other lenders which from time to time become party thereto (Harris and such other lenders which from time to time become party thereto being hereinafter referred to collectively as the "Lenders" and individually as a "Lender") have agreed to modify the terms and conditions applicable to the Prior Obligations and to provide for additional credit and financial accommodations to be made available to the Company thereunder, all subject to the terms and conditions therein set forth. E. The Company may from time to time enter into one or more interest rate exchange, cap, collar, floor or other agreements with one or more of the Lenders party to the Credit Agreement, or their affiliates, for the purpose of hedging or otherwise protecting the Company against changes in interest rates (the liability of the Company in respect of such agreements with such Lenders and their affiliates being hereinafter referred to as the "Hedging Liability") (the affiliates of the Lenders to which any Hedging Liability is owed, together with the Lenders and the Agent, being collectively referred to herein as the "Secured Creditors"). F. As a condition precedent to extending credit or otherwise making financial accommodations available to the Company under the Credit Agreement, the Lenders have required, among other things, that each Pledgor grant to the Agent for the benefit of the Secured Creditors a lien on and security interest in certain personal property of such Pledgor pursuant to this Agreement. G. The Company owns, directly or indirectly, all or substantially all of the equity interests in each Pledgor (other than the Company) and provides each such Pledgor with financial, management, administrative, and technical support which enables such Pledgor to conduct its business in an orderly and efficient manner in the ordinary course. H. Each Pledgor will benefit, directly or indirectly, from credit and other financial accommodations extended by the Secured Creditors to the Company. NOW, THEREFORE, for and in consideration of the execution and delivery by the Lenders of the Credit Agreement, and other good and valuable consideration, receipt whereof is hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Terms Defined in Credit Agreement. All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. The term "Pledgor" and "Pledgors" as used herein shall mean and include the Pledgors collectively and also each individually, with all grants, representations, warranties and covenants of and by the Pledgors, or any of them, herein contained to constitute joint and several grants, representations, warranties and covenants of and by the Pledgors; provided, however, that unless the context in which the same is used shall otherwise require, any grant, representation, -2- 3 warranty or covenant contained herein related to the Collateral shall be made by each Pledgor only with respect to the Collateral owned by it or represented by such Pledgor as owned by it. Section 2. Grant of Security Interest in the Collateral. Each Pledgor hereby grants to the Agent a security interest in, in each case for the ratable benefit of the Secured Creditors, and acknowledges and agrees that the Agent has and shall continue to have for the ratable benefit of the Secured Creditors a continuing security interest in, any and all right, title and interest of each Pledgor, whether now owned or existing or hereafter created, acquired or arising, in and to the following (collectively, the "Collateral"): (a) Stock Collateral. (i) All shares of the capital stock of each of the issuers listed and described on Schedule A attached hereto owned or held by such Pledgor, whether now owned or hereafter acquired (those shares delivered to and deposited with the Agent on the date hereof being listed and described on Schedule A attached hereto), and all substitutions and additions to such shares (herein, the "Pledged Securities"), (ii) all dividends, distributions and sums distributable or payable from, upon or in respect of the Pledged Securities and (iii) all other rights and privileges incident to the Pledged Securities (all of the foregoing being hereinafter referred to collectively as the "Stock Collateral"); (b) Partnership Interest Collateral. (i) Each partnership identified on Schedule B attached hereto and made a part hereof (such partnerships being hereinafter referred to collectively as the "Partnerships" and individually as a "Partnership") and (ii) any and all payments and distributions of whatever kind or character, whether in cash or other property, at any time made, owing or payable to such Pledgor in respect of or on account of its present or hereafter acquired interests in the Partnerships, whether due or to become due and whether representing profits, distributions pursuant to complete or partial liquidation or dissolution of any such Partnership, distributions representing the complete or partial redemption of such Pledgor's interest in any such Partnership or the complete or partial withdrawal of such Pledgor from any such Partnership, repayment of capital contributions, payment of management fees or commissions, or otherwise, and the right to receive, receipt for, use and enjoy all such payments and distributions (all of the foregoing being hereinafter collectively called the "Partnership Interest Collateral"); and (c) Proceeds. All proceeds of the foregoing. All terms which are used in this Agreement which are defined in the Uniform Commercial Code of the State of Illinois ("UCC") shall have the same meanings herein as such terms are defined in the UCC, unless this Agreement shall otherwise specifically provide. -3- 4 Section 3. Obligations Hereby Secured. This Agreement is made and given to secure, and shall secure, the payment and performance of (i) (x) any and all indebtedness, obligations and liabilities of the Company to the Agent, the Lenders, or any of them individually, evidenced by or otherwise arising out of or relating to the Credit Agreement or any promissory note of the Company issued at any time under the Credit Agreement (including all notes issued in extension or renewal thereof or in substitution or replacement therefor) and (y) any liability of the Pledgors, or any of them individually, arising out of the Credit Agreement, as well as for any and all other indebtedness, obligations and liabilities of the Pledgors, or any of them individually, to the Secured Creditors with respect to any Hedging Liability, or any of them individually, evidenced by or otherwise arising out of or relating to this Agreement or any other Loan Document or (in the case of any Hedging Liability) any other agreement with any one or more of the Secured Creditors, in each case, whether now existing or hereafter arising (and whether arising before or after the filing of a petition in bankruptcy), due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired, and (ii) any and all expenses and charges, legal or otherwise, suffered or incurred by the Agent, the Secured Creditors, or any of them individually, in collecting or enforcing any of such indebtedness, obligations or liabilities or in realizing on or protecting or preserving any security therefor, including, without limitation, the lien and security interest granted hereby (all of the foregoing being hereinafter referred to as the "Obligations"). Notwithstanding anything in this Agreement to the contrary, the right of recovery against any Pledgor (other than the Company to which this limitation shall not apply) under this Agreement shall not exceed $1 less than the amount which would render such Pledgor's obligations under this Agreement void or voidable under applicable law, including fraudulent conveyance law. Section 4. Covenants, Agreements, Representations and Warranties. Each Pledgor hereby covenants and agrees with, and represents and warrants to, the Agent and the Secured Creditors that: (a) Each Pledgor is and shall be the sole and lawful legal, record and beneficial owner of its Collateral. Each Pledgor's chief executive office or place of business at the address listed under such Pledgor's name on Schedule A and Schedule B hereto, as applicable. Each Pledgor agrees that it will not change any location set forth on the applicable Schedule hereto without prior written notice to the Agent, unless such location shall be outside the United States, in which event, the Agent's prior written consent shall be required, which consent shall not be unreasonably withheld. No Pledgor shall, without the Agent's prior written consent, sell, assign, or otherwise dispose of the Collateral or any interest therein. The Collateral, and every part thereof, is and shall be free and clear of all security interests, liens, rights, claims, attachments, levies and encumbrances of every kind, nature and description and whether voluntary or involuntary, except for the security interest of the Agent hereunder and for other Liens -4- 5 which are expressly permitted by the Credit Agreement. Each Pledgor shall warrant and defend the Collateral against any claims and demands of all persons at any time claiming the same or any interest in the Collateral adverse to the Agent and the Secured Creditors. (b) Each Pledgor agrees to execute and deliver to the Agent such further agreements, assignments, instruments and documents and to do all such other things as the Agent may deem necessary or appropriate to assure the Agent its lien and security interest hereunder, including such assignments, acknowledgments (including acknowledgments of assignment in the form attached hereto as Schedule C) stock powers, financing statements, instruments and documents as the Agent may from time to time require in order to comply with the Uniform Commercial Code as enacted in the State of Illinois and any successor statute(s) thereto (the "UCC"). Each Pledgor hereby agrees that a carbon, photographic or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Agent without notice thereof to such Pledgor wherever the Agent in its discretion desires to file the same. In the event for any reason the law of any jurisdiction other than Illinois becomes or is applicable to the Collateral or any part thereof, or to any of the Obligations, each Pledgor agrees to execute and deliver all such agreements, assignments, instruments and documents and to do all such other things as the Agent in its sole discretion deems necessary or appropriate to preserve, protect and enforce the lien and security interest of the Agent under the law of such other jurisdiction to at least the same extent as such security interests would be protected under the UCC. (c) If, as and when any Pledgor (x) delivers any securities for pledge hereunder in addition to those listed on Schedule A hereto or (y) pledges interests in any Partnership in addition to those listed on Schedule B hereto, the Pledgors shall furnish to the Agent a duly completed and executed amendment to such Schedule in substantially the form (with appropriate insertions) of Schedule D hereto reflecting the securities pledged hereunder after giving effect to such addition. (d) None of the Collateral constitutes margin stock (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System). (e) On failure of any Pledgor to perform any of the agreements and covenants herein contained, the Agent may, at its option, perform the same and in so doing may expend such sums as the Agent may deem advisable in the performance thereof, including, without limitation, the payment of any taxes, liens and encumbrances, expenditures made in defending against any adverse claim, and all other expenditures which the Agent may be compelled to make by operation of law or which Agent may make by agreement or otherwise for the protection of the security hereof. All such sums -5- 6 and amounts so expended shall be repayable by the Pledgors immediately without notice or demand, shall constitute additional Obligations secured hereunder and shall bear interest from the date said amounts are expended at the rate per annum (computed on the basis of a 365-day or 366-day year, as the case may be, for the actual number of days elapsed) determined by adding 2% to the Base Rate (such rate per annum as so determined being hereinafter referred to as the "Default Rate"). No such performance of any covenant or agreement by the Agent on behalf of such Pledgor, and no such advancement or expenditure therefor, shall relieve such Pledgor of any default under the terms of this Agreement or in any way obligate the Agent or any Secured Creditor to take any further or future action with respect thereto. The Agent, in making any payment hereby authorized, may do so according to any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate, or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim. The Agent, in performing any act hereunder, shall be the sole judge of whether the relevant Pledgor is required to perform the same under the terms of this Agreement. The Agent is hereby authorized to charge any depository or other account of any Pledgor maintained with the Agent for the amount of such sums and amounts so expended. Section 5. Special Provisions Re: Stock Collateral. (a) Each Pledgor has the right to vote the Pledged Securities and there are no restrictions upon the voting rights associated with, or the transfer of, any of the Pledged Securities, except as provided by federal and state laws applicable to the sale of securities generally. (b) The certificates for all shares of the Pledged Securities shall be delivered by the relevant Pledgor to the Agent or any bailee of the Agent duly endorsed in blank for transfer or accompanied by an appropriate assignment or assignments or an appropriate undated stock power or powers, in every case sufficient to transfer title thereto. Each Pledgor acknowledges and agrees that National City Bank, Cleveland, Ohio ("NatCity") currently acts and shall continue to act as the Agent's bailee until such time as NatCity delivers the Pledged Securities and such stock powers to the Agent or any other bailee of the Agent. The Agent may at any time after the occurrence of an Event of Default cause to be transferred into its name or into the name of its nominee or nominees any and all of the Pledged Securities. The Agent shall at all times have the right to exchange the certificates representing the Pledged Securities for certificates of smaller or larger denominations. -6- 7 (c) The Pledged Securities have been validly issued and are fully paid and non-assessable. There are no outstanding commitments or other obligations of the issuers of any of the Pledged Securities to issue, and no options, warrants or other rights of any individual or entity to acquire, any share of any class or series of capital stock of such issuers. The Pledged Securities listed and described on Schedule A attached hereto and delivered concurrently herewith to NatCity as the Agent's bailee constitute the percentage of the issued and outstanding capital stock of each series and class of the issuers thereof as set forth thereon owned by the relevant Pledgor. Each Pledgor further agrees that in the event any such issuer shall issue any additional capital stock of any series or class (whether or not entitled to vote) to such Pledgor or otherwise on account of its ownership interest therein, each Pledgor will forthwith pledge and deposit hereunder, or cause to be pledged and deposited hereunder, all such additional shares of such capital stock. Section 6. Special Provisions Re: Partnership Interest Collateral. (a) Each Pledgor further warrants to and agrees with the Agent and the Secured Creditors as follows: (i) that said Partnerships are valid and existing entities of the type listed on Schedule B and are duly organized and existing under applicable law; (ii) that the Partnership Interest Collateral listed and described on Schedule B attached hereto constitutes the percentage of the equity interest in each Partnership set forth thereon owned by the relevant Pledgor; (iii) that the copies of the partnership agreements (each such agreement being hereinafter referred to as "Organizational Agreement") for the Partnerships heretofore delivered to the Agent are true and correct copies thereof and have not been amended or modified in any respect, except for such amendments or modifications as are attached to the copies thereof delivered to the Agent; and (iv) that the Partnerships have no loans outstanding to the Pledgors, and no Pledgor will borrow money from the Partnerships. (b) The Pledgors shall not, without the prior written consent of the Agent, consent to any amendment or modification to any of the Organizational Agreements which would in any manner adversely affect or impair the Partnership Interest Collateral or reduce or dilute the rights of the Pledgor with respect to any of the Partnerships, any of such done without such prior written consent to be null and void. The Pledgors shall promptly send to the Agent copies of all notices and communications with respect to each -7- 8 Partnership alleging the existence of a default by an Pledgor in the performance of any of its obligations under any Organizational Agreement. Each Pledgor agrees that it will promptly notify the Agent of any litigation which might adversely affect such Pledgor or a Partnership or any of their respective properties and of any material adverse change in the operations, business properties, assets or conditions, financial or otherwise, of any Pledgor or any Partnership. Each Pledgor shall promptly perform all of its obligations under each Organizational Agreement. In the event any Pledgor fails to pay or perform any obligation arising under any Organizational Agreement or otherwise related to any Partnership, the Agent may, but need not, pay or perform such obligation at the expense and for the account of the Pledgors and all funds expended for such purposes shall constitute Obligations secured hereby which the Pledgors promise to pay to the Agent together with interest thereon at the Default Rate. Section 7. Voting Rights and Dividends. Unless and until an Event of Default hereunder has occurred and thereafter until notified by the Agent pursuant to Section 9(b) hereof: (a) Each Pledgor shall be entitled to exercise all voting and/or consensual powers pertaining to the Collateral of such Pledgor, or any part thereof, for all purposes not inconsistent with the terms of this Agreement or any other document evidencing or otherwise relating to any of the Obligations. (b) Each Pledgor shall be entitled to receive and retain all dividends and distributions in respect of the Collateral which are paid in cash of whatsoever nature; provided, however, that such dividends and distributions representing: (i) stock or liquidating dividends or a distribution or return of capital upon or in respect of the Pledged Securities or any part thereof or resulting from a split-up, revision or reclassification of the Pledged Securities or any part thereof or received in addition to, in substitution of or in exchange for the Pledged Securities or any part thereof as a result of a merger, consolidation or otherwise, or (ii) distributions in complete or partial liquidation of any Partnership or the interest of such Pledgor therein, in each case, shall be paid, delivered or transferred, as appropriate, directly to the Agent immediately upon the receipt thereof by such Pledgor and shall, in the case of cash, be applied by the Agent to the satisfaction of Obligations in accordance with the provisions of Section 10 hereof, whether or not the same may then be due or otherwise adequately secured and shall, in the case of all other property, together with any cash received by the -8- 9 Agent and not applied as aforesaid, be held by the Agent pursuant hereto as part of the Pledged Securities as additional Pledged Securities pledged under and subject to the terms of this Agreement; or (c) In order to permit each Pledgor to exercise such voting and/or consensual powers which it is entitled to exercise under subsection (a) above and to receive such distributions which such Pledgor is entitled to receive and retain under subsection (b) above, the Agent will, if necessary, upon the written request of such Pledgor, from time to time execute and deliver to such Pledgor appropriate proxies and dividend orders. Section 8. Power of Attorney. Each Pledgor hereby appoints the Agent, and each of its nominees, officers, agents, attorneys, and any other person whom the Agent may designate, as such Pledgor's attorney-in-fact, with full power and authority to ask, demand, collect, receive, receipt for, sue for, compound and give acquittance for any and all sums or properties which may be or become due, payable or distributable in respect of the Collateral or any part thereof, with full power to settle, adjust or compromise any claim thereunder or therefor as fully as such Pledgor could itself do, to endorse or sign the Pledgor's name on any assignments, stock powers, or other instruments of transfer and on any checks, notes, acceptances, money orders, drafts, and any other forms of payment or security that may come into the Agent's possession and on all documents of satisfaction, discharge or receipt required or requested in connection therewith, and, in its discretion, to file any claim or take any other action or proceeding, either in its own name or in the name of such Pledgor, or otherwise, which the Agent may deem necessary or appropriate to collect or otherwise realize upon all or any part of the Collateral, or effect a transfer thereof, or which may be necessary or appropriate to protect and preserve the right, title and interest of the Agent in and to such Collateral and the security intended to be afforded hereby. Each Pledgor hereby ratifies and approves all acts of any such attorney and agrees that neither the Agent nor any such attorney will be liable for any such acts or omissions nor for any error of judgment or mistake of fact or law other than such person's gross negligence or willful misconduct. The Agent may file one or more financing statements disclosing its security interest in all or any part of the Collateral without any Pledgor's signature appearing thereon, and each Pledgor also hereby grants the Agent a power of attorney to execute any such financing statements, and any amendments or supplements thereto, on behalf of such Pledgor without notice thereof to such Pledgor. The foregoing powers of attorney, being coupled with an interest, are irrevocable until the Obligations have been fully satisfied and any commitment of the Secured Creditors to extend credit constituting Obligations to the Company has terminated; provided, however, that the Agent agrees, as a personal covenant to the relevant Pledgor, not to exercise the powers of attorney set forth in this Section unless an Event of Default exists. -9- 10 Section 9. Defaults and Remedies. (a) The occurrence of any event or the existence of any condition which is specified as an "Event of Default" under the Credit Agreement shall constitute an "Event of Default" hereunder. (b) Upon the occurrence of any Event of Default, all rights of the Pledgors to receive and retain the distributions which they are entitled to receive and retain pursuant to Section 7(b) hereof shall, at the option of the Agent cease and thereupon become vested in the Agent which, in addition to all other rights provided herein or by law, shall then be entitled solely and exclusively to receive and retain the distributions which the Pledgors would otherwise have been authorized to retain pursuant to Section 7(b) hereof and all rights of the Pledgors to exercise the voting and/or consensual powers which they are entitled to exercise pursuant to Section 7(a) hereof shall, at the option of the Agent, cease and thereupon become vested in the Agent which, in addition to all other rights provided herein or by law, shall then be entitled solely and exclusively to exercise all voting and other consensual powers pertaining to the Collateral and to exercise any and all rights of conversion, exchange or subscription and any other rights, privileges or options pertaining thereto as if the Agent were the absolute owner thereof including, without limitation, the right to exchange, at its discretion, the Collateral or any part thereof upon the merger, consolidation, reorganization, recapitalization or other readjustment of the respective issuer thereof or upon the exercise by or on behalf of any such issuer or the Agent of any right, privilege or option pertaining to the Collateral or any part thereof and, in connection therewith, to deposit and deliver the Collateral or any part thereof with any committee, depositary, transfer agent, registrar or other designated agency upon such terms and conditions as the Agent may determine. In the event the Agent in good faith believes any of the Collateral constitutes restricted securities within the meaning of any applicable securities law, any disposition thereof in compliance with such laws shall not render the disposition commercially unreasonable. (c) Upon the occurrence of any Event of Default, the Agent shall have, in addition to all other rights provided herein or by law, the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights or remedies are asserted and regardless of whether the UCC applies to the affected Collateral), and further the Agent may, without demand and without advertisement, notice, hearing or process of law, all of which each Pledgor hereby waives to the extent permitted by law, at any time or times, sell and deliver any or all of the Collateral held by or for it at public or private sale, at any securities exchange or broker's board or at any of the Agent's offices or elsewhere, for cash, upon credit or otherwise, at such prices and upon such terms as the Agent deems advisable, in its sole discretion. In the exercise of any such remedies, the Agent may sell the Collateral as a unit even though the sales price thereof may be in excess of the amount remaining unpaid on the Obligations. Also, if less than all the Collateral is sold, the Agent shall have no duty to marshal or apportion the part of the Collateral so sold as between the Pledgors, or any of them, but may sell and deliver any or all of the Collateral without regard to which of the Pledgors are the -10- 11 owners thereof. In addition to all other sums due the Agent or any Secured Creditor hereunder, each Pledgor shall pay the Agent and the Secured Creditors all costs and expenses incurred by the Agent and such Secured Creditors, including reasonable attorneys' fees and court costs, in obtaining, liquidating or enforcing payment of Collateral or the Obligations or in the prosecution or defense of any action or proceeding by or against the Agent, such Secured Creditors or any Pledgor concerning any matter arising out of or connected with this Agreement or the Collateral or the Obligations including, without limitation, any of the foregoing arising in, arising under or related to a case under the United States Bankruptcy Code (or any successor statute). Any requirement of reasonable notice shall be met if such notice is personally served on or mailed, postage prepaid, to the Pledgors in accordance with Section 14(b) hereof at least ten days before the time of sale or other event giving rise to the requirement of such notice; provided, however, no notification need be given to a Pledgor if such Pledgor has signed, after an Event of Default has occurred, a statement renouncing any right to notification of sale or other intended disposition. The Agent shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. The Agent or any Secured Creditor may be the purchaser at any sale or other disposition of the Collateral or any part thereof. Each Pledgor hereby waives all of its rights of redemption from any sale or other disposition of the Collateral or any part thereof. The Agent may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, be made at the time and place to which the sale was postponed or the Agent may further postpone such sale by announcement made at such time and place. EACH PLEDGOR AGREES THAT IF ANY PART OF THE COLLATERAL IS SOLD AT ANY PUBLIC OR PRIVATE SALE, THE AGENT MAY ELECT TO SELL ONLY TO A BUYER WHO WILL GIVE FURTHER ASSURANCES, SATISFACTORY IN FORM AND SUBSTANCE TO THE AGENT, RESPECTING COMPLIANCE WITH THE REQUIREMENTS OF THE FEDERAL SECURITIES ACT OF 1933, AS AMENDED, AND A SALE SUBJECT TO SUCH CONDITION SHALL BE DEEMED COMMERCIALLY REASONABLE. EACH PLEDGOR FURTHER AGREES THAT IN ANY SALE OF ANY PART OF THE COLLATERAL, THE AGENT IS HEREBY AUTHORIZED TO COMPLY WITH ANY LIMITATION OR RESTRICTION IN CONNECTION WITH SUCH SALE AS IT MAY BE ADVISED BY COUNSEL IS NECESSARY IN ORDER TO AVOID ANY VIOLATION OF APPLICABLE LAW (INCLUDING, WITHOUT LIMITATION, COMPLIANCE WITH SUCH PROCEDURES AS MAY RESTRICT THE NUMBER OF PROSPECTIVE BIDDERS AND PURCHASERS AND/OR FURTHER RESTRICT SUCH PROSPECTIVE BIDDERS OR PURCHASERS TO PERSONS WHO WILL REPRESENT AND AGREE THAT THEY ARE PURCHASING FOR THEIR OWN ACCOUNT FOR INVESTMENT AND NOT WITH A VIEW TO THE DISTRIBUTION OR RESALE OF SUCH COLLATERAL ), OR IN ORDER TO OBTAIN ANY REQUIRED APPROVAL OF THE SALE OR OF THE PURCHASER BY ANY GOVERNMENTAL REGULATORY AUTHORITY OR OFFICIAL, AND EACH PLEDGOR FURTHER AGREES THAT SUCH COMPLIANCE -11- 12 SHALL NOT RESULT IN SUCH SALE BEING CONSIDERED OR DEEMED NOT TO HAVE BEEN MADE IN A COMMERCIALLY REASONABLE MANNER, NOR SHALL THE AGENT BE LIABLE OR ACCOUNTABLE TO ANY PLEDGOR FOR ANY DISCOUNT ALLOWED BY REASON OF THE FACT THAT SUCH COLLATERAL IS SOLD IN COMPLIANCE WITH ANY SUCH LIMITATION OR RESTRICTION. (d) In the event the Agent shall sell any part of the Partnership Interest Collateral at a foreclosure sale, each Pledgor hereby grants the purchaser of such portion of the Partnership Interest Collateral to the fullest extent of its capacity, the ability (but not the obligation) to become a partner in the relevant Partnership (subject to the approval of the general partner of the relevant Partnership, in the exercise of its sole discretion), in the place and stead of such Pledgor. To exercise such right, the purchaser shall give written notice to the relevant Partnership of its election to become a partner in such Partnership. Following such election and giving of consent by all necessary partners of the relevant Partnership as to the purchaser becoming a partner, the purchaser shall have the right and powers and be subject to the liabilities of a partner under the relevant Organizational Agreement and the partnership act governing the Partnership. (e) Upon the occurrence and during the continuation of any Event of Default, in addition to all other rights provided herein or by law, the Agent shall have the right to cause all or any part of the Partnership Interest Collateral of any of the Pledgors in any one or more of the Partnerships to be redeemed and to cause a withdrawal, in whole or in part, of any Pledgor from any Partnership or any of its Partnership Interest Collateral therein. (f) The powers conferred upon the Agent hereunder are solely to protect its interest in the Collateral and shall not impose on it any duties to exercise such powers. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of the Collateral in its possession if the Collateral is accorded treatment substantially equivalent to that which the Agent accords its own property, consisting of similar types securities, it being understood, however, that the Agent shall have no responsibility for (i) ascertaining or taking any action with respect to calls, conversions, exchanges, maturities, tenders or other matters relating to any Collateral, whether or not the Agent has or is deemed to have knowledge of such matters, (ii) taking any necessary steps to preserve rights against any parties with respect to any Collateral, or (iii) initiating any action to protect the Collateral or any part thereof against the possibility of a decline in market value. This Agreement constitutes an assignment of rights only and not an assignment of any duties or obligations of the Pledgors in any way related to the Collateral, and the Agent shall have no duty or obligation to discharge any such duty or obligation. By its acceptance hereof, the Agent does not undertake to perform or discharge and shall not be responsible or liable for the performance or discharge of any such duties or responsibilities and shall not in any event become a "Substituted Limited Partner" or words of like import (as defined in the relevant Organizational Agreement) in the relevant Partnership. Neither the Agent or any Secured Creditor, nor any party acting as attorney for the Agent or any Secured Creditor, -12- 13 shall be liable hereunder for any acts or omissions or for any error of judgment or mistake of fact or law other than such person's gross negligence or willful misconduct. (g) Failure by the Agent to exercise any right, remedy or option under this Agreement or any other agreement between any Pledgor and the Agent or provided by law, or delay by the Agent in exercising the same, shall not operate as a waiver; and no waiver shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated. The rights and remedies of the Agent and the Secured Creditors under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Agent or the Secured Creditors may have. For purposes of this Agreement, an Event of Default shall be construed as continuing after its occurrence until the same is waived in writing by the Lenders or the Required Lenders, as the case may be, in accordance with the Credit Agreement. Section 10. Application of Proceeds. The proceeds and avails of the Collateral at any time received by the Agent during the existence of any Event of Default shall, when received by the Agent in cash or its equivalent, be applied by the Agent in reduction of, or as collateral security for, the Obligations in accordance with the terms of the Credit Agreement. The Pledgors shall remain liable to the Agent and the Secured Creditors for any deficiency. Any surplus remaining after the full payment and satisfaction of the Obligations shall be returned to the Pledgors, or to whomsoever the Agent reasonably determines is lawfully entitled thereto. Section 11. Continuing Agreement. This Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until all of the Obligations, both for principal and interest, have been fully paid and satisfied and any commitment to extend constituting Obligations to and of the Company shall have terminated. Upon such termination of this Agreement, the Agent shall, upon the request and at the expense of the Pledgors, forthwith release all its liens and security interests hereunder. Section 12. Primary Security; Obligations Absolute. The lien and security herein created and provided for stand as direct and primary security for the Obligations. No application of any sums received by the Agent in respect of the Collateral or any disposition thereof to the reduction of the Obligations or any portion thereof shall in any manner entitle any Pledgor to any right, title or interest in or to the Obligations or any collateral security therefor, whether by subrogation or otherwise, unless and until all Obligations have been fully paid and satisfied and any commitments to extend credit constituting Obligations to the Company shall have terminated. Each Pledgor acknowledges and agrees that the lien and security hereby created and provided for are absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of the Agent, any Secured Creditor or any other holder of any of the Obligations, and without limiting the generality of the foregoing, the lien and security -13- 14 hereof shall not be impaired by any acceptance by the Agent, any Secured Creditor or any other holder of any of the Obligations of any other security for or guarantors upon any Obligations or by any failure, neglect or omission on the part of the Agent, any Secured Creditor or any other holder of any of the Obligations to realize upon or protect any of the Obligations or any collateral security therefor. The lien and security hereof shall not in any manner be impaired or affected by (and the Agent and the Secured Creditors, without notice to anyone, are hereby authorized to make from time to time) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the Obligations, or of any collateral security therefor, or of any guaranty thereof, or of any instrument or agreement setting forth the terms and conditions pertaining to any of the foregoing. The Secured Creditors may at their discretion at any time grant credit to the Company without notice to any Pledgor in such amounts and on such terms as the Secured Creditors may elect without in any manner impairing the lien and security hereby created and provided for. In order to realize hereon and to exercise the rights granted the Agent hereunder and under applicable law as against any Pledgor or any portion of the Collateral in which any such Pledgor has rights, there shall be no obligation on the part of the Agent, any Secured Creditor or any other holder of any of the Obligations at any time to first resort for payment to the Company or any other Pledgor or any other Person, its property or estate or to any guaranty of the Obligations or any portion thereof or to resort to any other collateral security, property, liens or any other rights or remedies whatsoever, and the Agent shall have the right to enforce this Agreement as against any Pledgor or any portion of the Collateral in which any such Pledgor has rights, irrespective of whether or not other proceedings or steps are pending seeking resort to or realization upon or from any of the foregoing. Section 13. The Agent. In acting under or by virtue of this Agreement, Agent shall be entitled to all the rights, authority, privileges and immunities provided in Section 10 of the Credit Agreement, all of which provisions of said Section 10 are incorporated by reference herein with the same force and effect as if set forth herein in their entirety. The Agent hereby disclaims any representation or warranty to the Secured Creditors or any other holders of the Obligations concerning the perfection of the liens and security interests granted hereunder or in the value of the Collateral. Section 14. Miscellaneous. (a) This Agreement cannot be changed or terminated orally. This Agreement shall create a continuing lien on and security interest in the Collateral and shall be binding upon each Pledgor, its successors and assigns, and shall inure, together with the rights and remedies of the Agent and the Secured Creditors hereunder, to the benefit of the Agent and the Secured Creditors, and their successors and assigns; provided, however, that no Pledgor may assign its rights or delegate its duties hereunder without the Agent's prior written consent. Without limiting the generality of the foregoing, and subject to the provisions of the Credit Agreement, any Secured Creditor may assign or otherwise transfer any indebtedness held -14- 15 by it secured by this Agreement to any other person, and such other person shall thereupon become vested with all the benefits in respect thereof granted to such Secured Creditor herein or otherwise. (b) All communications provided for herein shall be in writing, except as otherwise specifically provided for hereinabove, and shall be deemed to have been given or made, if to any Pledgor when given to the Company in accordance with Section 12.8 of the Credit Agreement, or if to the Agent or any Lender, when given to such party in accordance with Section 12.8 of the Credit Agreement. (c) No Secured Creditor shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure or other realization upon any Collateral subject to this Agreement or for the execution of any trust or power hereof or for the appointment of a receiver, or for the enforcement of any other remedy under or upon this Agreement; it being understood and intended that no one or more of the Secured Creditors shall have any right in any manner whatsoever to affect, disturb or prejudice the lien and security interest of this Agreement by its or their action or to enforce any right hereunder, and that all proceedings at law or in equity shall be instituted, had and maintained by the Agent in the manner herein provided for the benefit of the Secured Creditors. (d) In the event that any provision hereof shall be deemed to be invalid by reason of the operation of any law or by reason of the interpretation placed thereon by any court, this Agreement shall be construed as not containing such provision, but only as to such locations where such law or interpretation is operative, and the invalidity of such provision shall not affect the validity of any remaining provision hereof, and any and all other provisions hereof which are otherwise lawful and valid shall remain in full force and effect. Without limiting the generality of the foregoing, in the event that this Agreement shall be deemed to be invalid or otherwise unenforceable with respect to any Pledgor, such invalidity or unenforceability shall not affect the validity of this Agreement with respect to the other Pledgors. (e) This Agreement shall be deemed to have been made in the State of Illinois and shall be governed by, and construed in accordance with, the laws of the State of Illinois. All terms which are used in this Agreement which are defined in the UCC shall have the same meanings herein as said terms do in the UCC unless this Agreement shall otherwise specifically provide. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof. (f) This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterpart signature pages, each constituting an original, but all together one and the same instrument. Each Pledgor acknowledges that this Agreement is and -15- 16 shall be effective upon its execution and delivery by such Pledgor to the Agent, and it shall not be necessary for the Agent to execute this Agreement or any other acceptance hereof or otherwise to signify or express its acceptance hereof. (g) In the event the Agent (with the consent of the requisite Lenders) shall at any time in their discretion permit a substitution of Pledgors hereunder or a party shall wish to become a Pledgor hereunder, such substituted or additional Pledgor shall, upon executing an agreement in the form attached hereto as Schedule E, become a party hereto and be bound by all the terms and conditions hereof to the same extent as though such Pledgor had originally executed this Agreement and, in the case of a substitution, in lieu of the Pledgor being replaced. No such substitution shall be effective absent the written consent of the Agent and the requisite Lenders nor shall it in any manner affect the obligations of the other Pledgors hereunder. (h) THE AGENT AND THE PLEDGORS AGREE THAT ALL DISPUTES AMONG THEM ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY, OR OTHERWISE, SHALL BE RESOLVED ONLY BY STATE OR FEDERAL COURTS LOCATED IN COOK COUNTY, ILLINOIS, BUT EACH OF THE AGENT AND THE PLEDGORS ACKNOWLEDGE THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF COOK COUNTY, ILLINOIS. EACH OF THE PLEDGORS WAIVES IN ALL DISPUTES ANY OBJECTION THAT SUCH PLEDGOR MAY HAVE TO THE LOCATION OF THE COURT CONSIDERING THE DISPUTE OR ANY OBJECTION THAT SUCH PLEDGOR MAY HAVE THAT ANY OTHER PARTY HAS NOT BEEN JOINED IN SUCH PROCEEDING. EACH OF THE PLEDGORS AGREES THAT THE AGENT SHALL HAVE THE RIGHT TO PROCEED AGAINST EACH AND ANY OF THE PLEDGORS OR THEIR COLLATERAL IN A COURT IN ANY LOCATION TO ENABLE THE AGENT TO REALIZE ON THE COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE AGENT, WHETHER OR NOT PROCEEDING SEPARATELY AGAINST ANY PLEDGOR AND ITS PROPERTY OR JOINTLY AGAINST THE COMPANY AND ANY ONE OR MORE OF THE PLEDGORS AND THEIR PROPERTY. EACH OF THE PLEDGORS WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE AGENT HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH. [SIGNATURE PAGES TO FOLLOW] -16- 17 IN WITNESS WHEREOF, each Pledgor has caused this Agreement to be duly executed and delivered as of the date first above written. PLEDGORS: MORTON INDUSTRIAL GROUP, INC. By Its ---------------------------------- MORTON METALCRAFT CO. By Its ---------------------------------- MORTON METALCRAFT CO. OF NORTH CAROLINA By Its ---------------------------------- MORTON METALCRAFT CO. OF SOUTH CAROLINA By Its ---------------------------------- CARROLL GEORGE, INC. By Its ---------------------------------- -17- 18 B&W METAL FABRICATORS, INC. By Its ---------------------------------- Acknowledged and agreed to as of the date first above written. HARRIS TRUST AND SAVINGS BANK, as Agent By Its: ----------------------------------- -18- EX-10.7 8 EX-10.7 1 EXHIBIT 10.7 This Document Prepared By and After Recording Return To: Thomas M. Quirk Chapman and Cutler 111 West Monroe Street Chicago, Illinois 60603 =============================================================================== SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE ONLY AMENDED AND RESTATED MORTGAGE AND SECURITY AGREEMENT WITH ASSIGNMENT OF RENTS This Amended and Restated Mortgage dated as of May 29, 1998 from Morton Metalcraft Co., an Illinois corporation with its principal place of business and mailing address at 1021 West Birchwood, Morton, Illinois 61550-0429 (hereinafter referred to as the "Mortgagor") to Harris Trust and Savings Bank, an Illinois banking corporation with its principal place of business and mailing address at 111 West Monroe Street, Chicago, Illinois 60690 ("Harris"), as agent hereunder for the Secured Creditors hereinafter identified and defined (Harris acting as such agent and any successor or successors to Harris in such capacity being hereinafter referred to as the "Mortgagee"); WITNESSETH THAT: WHEREAS, Morton Industrial Group, Inc., a Georgia corporation (the "Borrower"), and certain subsidiaries of the Borrower, Harris, individually and as agent, and certain lenders are currently party to a Credit Agreement dated as of January 20, 1998 (such Credit Agreement, as the same may have been amended or modified from time to time, including amendments and restatements thereof in its entirety, being hereinafter referred to as the "Prior Credit Agreement"), pursuant to which Harris and other lenders from time to time party to the Prior Credit Agreement agreed, subject to certain terms and conditions, to extend credit and make certain other financial accommodations available to the "Borrowers" identified therein. 2 WHEREAS, the Mortgagor is currently party to a Mortgage and Security Agreement with Assignment of Rents dated as of January 20, 1998, with Harris as agent for the lenders party to the Prior Credit Agreement (the "Prior Mortgage"), pursuant to which the Mortgagor granted a security interest in the Mortgaged Premises as collateral security for the indebtedness, obligations, and liabilities of the "Borrowers" owing to such lenders under the Prior Credit Agreement. WHEREAS, concurrently herewith, Harris and the other lenders party to the Prior Credit Agreement are refinancing all indebtedness, obligations, and liabilities owed to such lenders by the "Borrowers" under the Prior Credit Agreement (the "Prior Obligations"). WHEREAS, the Borrower and Harris, individually and as Agent, have also entered into a Credit Agreement dated of even date herewith (such Credit Agreement, as the same may be amended or modified from time to time, including amendments and restatements thereof in its entirety, being hereinafter referred to as the "Credit Agreement") pursuant to which Harris and other lenders which from time to time become party thereto (Harris and such other lenders which from time to time become party thereto being hereinafter referred to collectively as the "Lenders" and individually as a "Lender") have agreed to modify the terms and conditions applicable to the Prior Obligations and to provide for the following additional credit and financial accommodations to be made available to the Company thereunder, all subject to the terms and conditions therein set forth: (i) to make a revolving credit facility available to the Borrower in the form of loans and letters of credit (the "Revolving Credit") in the aggregate principal amount not to exceed $35,000,000 at any one time outstanding during the period ending on May 31, 2003 (the "Termination Date") with all loans made under the Revolving Credit being repayable on the Termination Date and (ii) to make term loans in the aggregate principal amount of $25,000,000 (in the case of Term A Loan) and $30,000,000 (in the case of Term B Loan) to the Borrower payable in installments with a final maturity of all principal and interest not required to be sooner paid of May 31 2003 (in the case of Term A Loan) and May 31, 2005 (in the case of Term B Loan) (the "Term Loans"), a true and correct copy of which Credit Agreement is on file at the offices of the Mortgagee; and WHEREAS, advances from time to time made under the Revolving Credit are evidenced and to be evidenced by Revolving Credit Notes (such Revolving Credit Notes and any extensions thereof or modifications thereto and any and all notes issued in renewal thereof or in substitution or replacement therefor being hereinafter referred to as the "Revolving Credit Notes") aggregating $35,000,000 in face principal amount and payable to the order of the respective Lenders named thereon, whereby the Borrower promises to pay the advances evidenced thereby on or before the Termination Date with interest and premium as set forth in the Credit Agreement; and -2- 3 WHEREAS, the Term Loans are evidenced and to be evidenced by Term Notes (the "Term Notes") aggregating $25,000,000 (in the case of Term A Loan) and $30,000,000 (in the case of Term B Loan) in principal amount and payable to the order of the respective Lenders named thereon, whereby the Borrower promises to pay the term loans evidenced thereby, with interest and premium as set forth in the Credit Agreement, in installments with a final maturity of all principal and interest and premium not required to be sooner paid of May 31, 2003 (in the case of Term A Loan) and May 31, 2005 (in the case of Term B Loan); and WHEREAS, pursuant to the terms of the Credit Agreement, any Lender or Lenders may, from time to time, assign to other Lenders portions of the indebtedness evidenced by the Notes then owned by such assigning Lender together with an equivalent proportion of such assigning Lender's obligation to make advances under the Credit Agreement (each such assignment being hereinafter referred to as an "Assignment"); and WHEREAS, in the event of each Assignment under the Credit Agreement, the Borrower has agreed pursuant to the terms of the Credit Agreement to execute and deliver to each new assignee Lender by reason of such Assignment, new Notes evidencing that portion of the indebtedness so assigned to such new assignee Lender and advances to be thereafter made by such new assignee Lender pursuant to the Credit Agreement and to execute new Notes to such assigning Lender evidencing the portion of such indebtedness not so assigned and advances to be thereafter made by such assigning Lender pursuant to the Credit Agreement; and WHEREAS, it is the intention of the Mortgagor that all such Notes constitute "Notes" for the purposes hereof and to be secured hereby; and WHEREAS, pursuant to the terms of the Credit Agreement, the Mortgagee may from time to time issue letters of credit (the "Letters of Credit") for the account of the Borrower in an aggregate face amount not to exceed $10,000,000 and with expiry dates on or before the Termination Date, and which Letters of Credit, when combined with the principal amount of loans outstanding under the Revolving Credit from time to time, shall not exceed $35,000,000; and WHEREAS, the Borrower may from time to time enter into one or more interest rate exchange, cap, collar, floor or other agreements with one or more of the Lenders party to the Credit Agreement, or their affiliates, for the purpose of hedging or otherwise protecting the Borrower against changes in interest rates (the liability of the Borrower in respect of such agreements with such Lenders and their affiliates being hereinafter referred to as the "Hedging Liability") (the affiliates of the Lenders to which any Hedging Liability is owed, together with the Lenders and the Mortgagee, being collectively referred to herein as the "Secured Creditors"); and -3- 4 NOW, THEREFORE, in order to secure (i) payment of all principal of and interest and premium on the Notes (ratably among the Notes without preference or priority to one over the others) as and when the same become due and payable (whether by lapse of time, acceleration or otherwise) and all advances now or hereafter evidenced thereby, (ii) the payment and performance of all obligations arising under any applications executed by the Borrower in connection with any of the Letters of Credit, including the obligation of the Borrower to reimburse the Mortgagee for any draws under the Letters of Credit, (iii) payment of all fees and charges payable by the Borrower under the terms of the Credit Agreement, (iv) any and all liability of the Company arising under or in connection with or otherwise evidenced by agreements with any one or more of the Secured Creditors with respect to any Hedging Liability, (v) payment of all other sums at any time due or owing from or required to be paid by the Borrower under the terms of the Mortgage and the performance and observance of all the covenants and agreements in the Mortgage provided to be performed or observed by the Mortgagor, and (vi) the performance and observance of all covenants and agreements contained in the Mortgage or in the Notes or in the Credit Agreement or in any other instrument or document at any time evidencing or securing any of the foregoing indebtedness, obligations or liabilities or setting forth terms and conditions applicable thereto (all of such indebtedness, obligations and liabilities referred to in clauses (i), (ii), (iii), (iv), (v) and (vi) above being hereinafter collectively referred to as the "indebtedness hereby secured"), Mortgagor does hereby grant, bargain, sell, convey, mortgage, warrant, assign, and pledge unto the Mortgagee, its successors and assigns, and grant to the Mortgagee, its successors and assigns a security interest in all and singular the properties, rights, interests and privileges described in Granting Clauses I, II, III, IV, V and VI below, all of the same being collectively referred to herein as the "Mortgaged Premises": GRANTING CLAUSE I That certain real estate lying and being in the County of Tazewell in the State of Illinois, more particularly described in Schedule I attached hereto and made a part hereof. GRANTING CLAUSE II All buildings and improvements of every kind and description heretofore or hereafter erected or placed on the property described in Granting Clause I and all materials intended for construction, reconstruction, alteration and repairs of the buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the premises immediately upon the delivery thereof to the said real estate, and all fixtures, machinery, apparatus, equipment, fittings and articles of personal property of every kind and nature whatsoever now or hereafter attached to or contained in or used or useful in connection -4- 5 with said real estate and the buildings and imp\ovements now or hereafter located thereon and the operation, maintenance and protection thereof, including but not limited to all machinery, motors, fittings, radiators, awnings, shades, screens, all gas, coal, steam, electric, oil and other heating, cooking, power and lighting apparatus and fixtures, all fire prevention and extinguishing equipment and apparatus, all cooling and ventilating apparatus and systems, all plumbing, incinerating, and sprinkler equipment and fixtures, all elevators and escalators, all communication and electronic monitoring equipment, all window and structural cleaning rigs and all other machinery and equipment of every nature and fixtures and appurtenances thereto and all items of furniture, appliances, draperies, carpets, other furnishings, equipment and personal property used or useful in the operation, maintenance and protection of the said real estate and the buildings and improvements now or hereafter located thereon and all renewals or replacements thereof or articles in substitution therefor or insurance proceeds relating thereto, whether or not the same are or shall be attached to said real estate, buildings or improvements in any manner, and all proceeds thereof; it being mutually agreed, intended and declared that all the aforesaid property shall, so far as permitted by law, be deemed to form a part and parcel of the real estate and for the purpose of this Mortgage to be real estate and covered by this Mortgage; and as to the balance of the property aforesaid, this Mortgage is hereby deemed to be as well a Security Agreement under the provisions of the Uniform Commercial Code for the purpose of creating hereby a security interest in said property, which is hereby granted by Mortgagor as debtor to Mortgagee as secured party, securing the indebtedness hereby secured. The addresses of Mortgagor (debtor) and Mortgagee (secured party) appear at the beginning hereof. GRANTING CLAUSE III All right, title and interest of Mortgagor now owned or hereafter acquired in and to all and singular the estates (including without limitation leasehold estates), leases, tenements, hereditaments, privileges, easements, licenses, franchises, appurtenances and royalties, mineral, oil, and water rights belonging or in any wise appertaining to the property described in the preceding Granting Clause I and the buildings and improvements now or hereafter located thereon and the reversions, rents, issues, revenues and profits thereof and insurance proceeds therefrom, including all interest of Mortgagor in all rents, issues and profits of and insurance proceeds from the aforementioned property and all rents, issues, profits, revenues, royalties, bonuses, rights and benefits due, payable or accruing (including all deposits of money as advanced rent or for security) under any and all leases or subleases and renewals thereof of, or under any contracts or options for the sale of all or any part of, said property (including during any period allowed by law for the redemption of said property after any foreclosure or other sale), together with the right, but not the obligation, to collect, receive and receipt for all such rents and other sums and apply them to the indebtedness hereby secured and to demand, sue for and recover the same when due or payable; provided that the assignments made hereby shall not -5- 6 impair or diminish the obligations of Mortgagor under the provisions of such leases or other agreements nor shall such obligations be imposed upon Mortgagee. By acceptance of this Mortgage, Mortgagee agrees, not as a limitation or condition hereof, but as a personal covenant available only to Mortgagor that until an event of default (as hereinafter defined) shall occur giving Mortgagee the right to foreclose this Mortgage, Mortgagor may collect, receive (but not more than 30 days in advance) and enjoy such rents. GRANTING CLAUSE IV All judgments, awards of damages, settlements and other compensation heretofore or hereafter made resulting from condemnation proceedings or the taking of the property described in Granting Clause I or any part thereof or any building or other improvement now or at any time hereafter located thereon or any easement or other appurtenance thereto under the power of eminent domain, or any similar power or right (including any award from the United States Government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for the payment thereof), whether permanent or temporary, or for any damage (whether caused by such taking or otherwise) to said property or any part thereof or the improvements thereon or any part thereof, or to any rights appurtenant thereto, including severance and consequential damage, and any award for change of grade of streets (collectively "Condemnation Awards"). GRANTING CLAUSE V All property and rights, if any, which are by the express provisions of this instrument required to be subjected to the lien hereof and any additional property and rights that may from time to time hereafter, by installation or writing of any kind, be subjected to the lien hereof by Mortgagor or by anyone in Mortgagor's behalf. GRANTING CLAUSE VI All rights in and to common areas and access roads on adjacent properties heretofore or hereafter granted to Mortgagor and any after-acquired title or reversion in and to the beds of any ways, roads, streets, avenues and alleys adjoining the property described in Granting Clause I or any part thereof. TO HAVE AND TO HOLD the Mortgaged Premises and the properties, rights and privileges hereby granted, bargained, sold, conveyed, mortgaged, warranted, pledged and assigned, and in which a security interest is granted, or intended so to be, unto Mortgagee, its successors and assigns, forever; provided, however, that this instrument is upon the express -6- 7 condition that if the principal of and interest on the Notes shall be paid in full and all other indebtedness hereby secured shall be fully paid and performed and no Letters of Credit shall remain outstanding, then this instrument and the estate and rights hereby granted shall cease, determine and be void and this instrument shall be released by Mortgagee upon the written request and at the expense of Mortgagor, otherwise to remain in full force and effect. It is expressly understood and agreed that the indebtedness hereby secured will in no event exceed two hundred percent (200%) of (i) the total face amount of the Notes and the Letters of Credit plus (ii) the total interest which may hereafter accrue under the Notes and the Reimbursement Obligations (as defined in the Credit Agreement) on such face amount plus (iii) any fees, costs or expenses which may be payable hereunder or under the Credit Agreement. Mortgagor hereby covenants and agrees with Mortgagee as follows: 1. Payment of the Indebtedness. The indebtedness hereby secured will be promptly paid as and when the same becomes due without any relief whatever from valuation or appraisement laws of the State of Illinois. 2. Binding Obligation and Further Assurances. This Mortgage and all other documents, instruments and agreements executed in connection herewith are valid and binding obligations of Mortgagor, enforceable in accordance with their respective terms. Mortgagor will execute and deliver such further instruments and do such further acts as may be necessary or proper to carry out more effectively the purpose of this instrument and, without limiting the foregoing, to make subject to the lien hereof any property agreed to be subjected hereto or covered by the Granting Clauses hereof or intended so to be. 3. Ownership of the Mortgaged Premises. Mortgagor covenants and warrants that it is lawfully seized of and has good and marketable fee title to the Mortgaged Premises free and clear of all liens, charges and encumbrances whatsoever except those exceptions to title listed on Schedule II attached hereto (the "Permitted Exceptions") and Mortgagor has good right, full power and authority to convey, transfer and mortgage the same to Mortgagee for the uses and purposes set forth in this Mortgage; and Mortgagor will warrant and forever defend the title to the Mortgaged Premises subject to the Permitted Exceptions against all claims and demands whatsoever. 4. Possession. Provided no event of default has occurred and is continuing hereunder, Mortgagor shall be suffered and permitted to remain in full possession, enjoyment and control of the Mortgaged Premises, subject always to the observance and performance of the terms of this instrument. -7- 8 5. Payment of Taxes. Mortgagor shall pay before any penalty attaches, all general taxes and all special taxes, special assessments, water, drainage and sewer charges and all other charges of any kind whatsoever, ordinary or extraordinary, which may be levied, assessed, imposed or charged on or against the Mortgaged Premises or any part thereof and which, if unpaid, might by law become a lien or charge upon the Mortgaged Premises or any part thereof, and shall, upon written request, exhibit to Mortgagee official receipts evidencing such payments, except that, unless and until foreclosure, distraint, sale or other similar proceedings shall have been commenced, no such charge or claim need be paid if being contested (except to the extent any full or partial payment shall be required by law), after notice to Mortgagee, by appropriate proceedings which shall operate to prevent the collection thereof or the sale or forfeiture of the Mortgaged Premises or any part thereof to satisfy the same, conducted in good faith and with due diligence and if Mortgagor shall have furnished such security, if any, as may be required in the proceedings or requested by Mortgagee. 6. Payment of Taxes on Notes, Letters of Credit, Mortgage or Interest of Mortgagee or Secured Creditors. Mortgagor agrees that if any tax, assessment or imposition upon this Mortgage or the indebtedness hereby secured or the Notes or any of the Letters of Credits or the interest of Mortgagee or any Secured Creditor in the Mortgaged Premises or upon Mortgagee or any Secured Creditor by reason of or as a holder of any of the foregoing (including, without limitation, excise taxes, but excepting therefrom any income tax on interest payments on the principal portion of the indebtedness hereby secured imposed by the United States or any state) is levied, assessed or charged, then, unless all such taxes are paid by Mortgagor to, for or on behalf of Mortgagee or any Secured Creditor as they become due and payable (which Mortgagor agrees to do upon demand of Mortgagee, to the extent permitted by law), or Mortgagee or any Secured Creditor is reimbursed for any such sum advanced by Mortgagee, all sums hereby secured shall become immediately due and payable, at the option of Mortgagee upon 30 days' notice to Mortgagor, notwithstanding anything contained herein or in any law heretofore or hereafter enacted, including any provision thereof forbidding Mortgagor from making any such payment. Mortgagor agrees to exhibit to Mortgagee, upon request, official receipts showing payment of all taxes and charges which Mortgagor is required to pay hereunder. 7. Recordation and Payment of Taxes and Expenses Incident Thereto. Mortgagor will maintain and preserve the lien of this Mortgage until all indebtedness hereby secured has been paid and satisfied in full. Without limiting the foregoing, Mortgagor will cause this Mortgage, all mortgages supplemental hereto and any financing statement or other notice of a security interest required by Mortgagee at all times to be kept, recorded and filed at its own expense in such manner and in such places as may be -8- 9 required by law for the recording and filing or for the rerecording and refiling of a mortgage, security interest, assignment or other lien or charge upon the Mortgaged Premises, or any part thereof, in order fully to preserve and protect the rights of Mortgagee hereunder and, without limiting the foregoing, Mortgagor will pay or reimburse Mortgagee and any Secured Creditor for the payment of any and all taxes, fees or other charges incurred in connection with any such recordation or rerecordation, including any documentary stamp tax or tax imposed upon the privilege of having this instrument or any instrument issued pursuant hereto recorded. 8. Insurance. Mortgagor will, at its expense, keep all buildings, improvements, equipment and other property now or hereafter constituting part of the Mortgaged Premises insured against loss or damage by fire, lightning, windstorm, explosion and such other risks as are usually included under extended coverage policies, or which are usually insured against by companies similarly situated conducting similar businesses and owning like properties, in amount sufficient to prevent Mortgagor, Mortgagee or the Secured Creditors from becoming a co-insurer of any partial loss under applicable policies and in any event not less than the then full insurable value (actual replacement value without deduction for physical depreciation) thereof, as determined at the request of Mortgagee and at Mortgagor's expense by the insurer or insurers or by an expert approved by Mortgagee, all under insurance policies payable, in case of loss or damage, to Mortgagee (and if Mortgagee so requests, naming Mortgagee and the Secured Creditors as additional insureds therein), such rights to be evidenced by the usual standard non-contributory form of mortgage clause to be attached to each policy. Mortgagor shall not carry separate insurance concurrent in kind or form and contributing in the event of loss, with any insurance required hereby. Mortgagor shall also obtain and maintain public liability, property damage and workmen's compensation insurance in each case in form and content satisfactory to Mortgagee and in amounts as are customarily carried by owners of like property and approved by Mortgagee. Mortgagor shall also obtain and maintain such other insurance with respect to the Mortgaged Premises in such amounts and against such insurable hazards as Mortgagee from time to time may require, including, without limitation, boiler and machinery insurance, insurance against flood risks for any improvements located in a flood plain when and to the extent obtainable from the United States Government or any agency thereof, and insurance against loss of rent due to fire and risks now or hereafter embraced by so-called "extended coverage". All insurance required hereby shall be maintained with good and responsible insurance companies satisfactory to Mortgagee and shall not provide for any deductible amount in excess of $250,000 not approved in writing by Mortgagee, shall provide that any losses shall be payable notwithstanding any act or negligence of Mortgagor, shall provide that no cancellation thereof shall be effective until at least thirty days after receipt by Mortgagor and Mortgagee of written notice thereof, and shall be -9- 10 satisfactory to Mortgagee in all other respects. Upon the execution of this Mortgage and thereafter not less than 15 days prior to the expiration date of any policy delivered pursuant to this instrument, Mortgagor will deliver to Mortgagee certificates evidencing the policy or renewal policy, as the case may be, required by this instrument, bearing notations evidencing the payment of all premiums. In the event of foreclosure, Mortgagor authorizes and empowers Mortgagee to effect insurance upon the Mortgaged Premises in amounts aforesaid for a period covering the time of redemption from foreclosure sale provided by law, and if necessary therefor to cancel any or all existing insurance policies. 9. Damage to or Destruction of Mortgaged Premises. (a) Notice. In case of any material damage to or destruction of the Mortgaged Premises or any part thereof, Mortgagor shall promptly give written notice thereof to Mortgagee, generally describing the nature and extent of such damage or destruction. (b) Restoration. In case of any damage to or destruction of the Mortgaged Premises or any part thereof, Mortgagor, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for the purpose, at Mortgagor's expense, will promptly commence and complete (subject to unavoidable delays occasioned by strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions and similar causes beyond the reasonable control of Mortgagor) the restoration, replacement or rebuilding of the Mortgaged Premises as nearly as possible to its value, condition and character immediately prior to such damage or destruction, provided that any part of the Mortgaged Premises so damaged or destroyed need not be restored, replaced or rebuilt if (i) prior to its damage or destruction, it had become uneconomical, obsolete or worn out or (ii) it is not necessary for or of importance to the proper conduct of the Mortgagor's business in the ordinary course. (c) Adjustment of Loss. Mortgagor hereby authorizes Mortgagee, at Mortgagee's option, to adjust and compromise any losses under any insurance afforded at any time after the occurrence and during the continuation of any event of default hereunder or any event which with the lapse of time, the giving of notice, or both, would constitute an event of default hereunder (herein, a "default"), but unless Mortgagee elects to adjust the losses as aforesaid, said adjustment and/or compromise shall be made by Mortgagor, subject to final -10- 11 approval of Mortgagee (regardless of whether or not a default or event of default hereunder shall have occurred) in the case of losses exceeding $250,000. (d) Application of Insurance Proceeds. Net insurance proceeds (except in cases where (i) the amount payable in respect of any one loss, when combined with amounts paid in respect of all losses incurred during any calendar year, is less than $250,000 and (ii) an event of default hereunder shall not have occurred and be continuing, in which case the amount payable in respect of such loss may be received by Mortgagor and need not be applied toward the payment of the amount owing on the indebtedness hereby secured or for the restoration of the Mortgaged Premises damaged or destroyed) received by Mortgagee under the provisions of this Mortgage or any instruments supplemental hereto or thereto or under any policy or policies of insurance covering the Mortgaged Premises or any part thereof shall first be applied toward the payment of the amount owing on the indebtedness hereby secured in such order of application as Mortgagee may elect whether or not the same may then be due or be otherwise adequately secured; provided, however, that such proceeds shall be made available for the restoration of the portion of the Mortgaged Premises damaged or destroyed if written application for such use is made within thirty (30) days of receipt of such proceeds and the following conditions are satisfied: (i) Mortgagor has in effect business interruption insurance covering the income to be lost during the restoration period as a result of the damage or destruction to the Mortgaged Premises or provides Mortgagee with other evidence satisfactory to it that Mortgagor has cash resources sufficient to pay its obligations during the restoration period; (ii) no event of default, or event which, with the lapse of time, the giving of notice, or both, would constitute an event of default hereunder, shall have occurred or be continuing (and if such an event shall occur during restoration Mortgagee may, at its election, apply any insurance proceeds then remaining in its hands to the reduction of the indebtedness evidenced by the NOTES and the other indebtedness hereby secured); (iii) Mortgagor shall have submitted to Mortgagee plans and specifications for the restoration which shall be satisfactory to it; (iv) Mortgagor shall submit to Mortgagee fixed price contracts with good and responsible contractors and materialmen covering all work and materials necessary to complete restoration and providing for a total completion price not in excess of the amount of insurance proceeds available for restoration, or, if a deficiency shall exist, Mortgagor shall have deposited the amount of such deficiency with Mortgagee and (v) Mortgagor shall have obtained a waiver of the right of subrogation from any insurer under such policies of insurance who at that time claims that no liability exists as to Mortgagor or the insured under such policies. Any insurance proceeds to be released pursuant to the foregoing -11- 12 provisions may at the option of Mortgagee be disbursed from time to time as restoration progresses to pay for restoration work completed and in place and such disbursements may at Mortgagee's option be made directly to Mortgagor or to or through any contractor or materialman to whom payment is due or to or through a construction escrow to be maintained by a title insurer acceptable to Mortgagee. Mortgagee may impose such further conditions upon the release of insurance proceeds (including the receipt of title insurance) as are customarily imposed by prudent construction lenders to insure the completion of the restoration work free and clear of all liens or claims for lien. All title insurance charges and other costs and expenses paid to or for the account of Mortgagor in connection with the release of such insurance proceeds shall constitute so much additional indebtedness hereby secured to be payable upon demand with interest at the Default Rate. Mortgagee may deduct any such costs and expenses from insurance proceeds at any time standing in its hands. If Mortgagor fails to request that insurance proceeds be applied to the restoration of the improvements or if Mortgagor makes such a request but fails to complete restoration within a reasonable time, Mortgagee shall have the right, but not the duty, to restore or rebuild said Mortgaged Premises or any part thereof for or on behalf of Mortgagor in lieu of applying said proceeds to the indebtedness hereby secured and for such purpose may do all necessary acts, including using funds deposited by Mortgagor as aforesaid and advancing additional funds for the purpose of restoration, all such additional funds to constitute part of the indebtedness hereby secured payable upon demand with interest at the Default Rate. 10. Eminent Domain. Mortgagor acknowledges that Condemnation Awards have been assigned to Mortgagee, which awards Mortgagee is hereby irrevocably authorized to collect and receive, and to give appropriate receipts and acquittances therefor, and at Mortgagee's option, to apply the same toward the payment of the amount owing on account of the indebtedness hereby secured in such order of application as Mortgagee may elect and whether or not the same may then be due and payable or otherwise adequately secured; provided, however, that a Condemnation Award in respect of any taking of a portion (but not all or any material portion) of the Mortgaged Premises shall be made available for the restoration of such Mortgaged Premises in the same manner and subject to the same conditions as are imposed on the release of insurance proceeds set forth in Section 9(d) hereof as if the Mortgaged Premises so taken were destroyed and the Condemnation Award for such taking was actually insurance proceeds in respect of the Mortgaged Premises so deemed as having been destroyed. In the event that any proceeds of a Condemnation Award shall be made available to Mortgagor for restoring the Mortgaged Premises so taken, Mortgagor hereby covenants to promptly commence and complete such restoration of the Mortgaged Premises as nearly as possible -12- 13 to its value, condition and character immediately prior to such taking. Mortgagor covenants and agrees that Mortgagor will give Mortgagee immediate notice of the actual or threatened commencement of any proceedings under condemnation or eminent domain affecting all or any material part of the Mortgaged Premises including any easement therein or appurtenance thereof or severance and consequential damage and change in grade of streets, and will deliver to Mortgagee copies of any and all papers served in connection with any such proceedings. Mortgagor further covenants and agrees to make, execute and deliver to Mortgagee, at any time or times upon request, free, clear and discharged of any encumbrances of any kind whatsoever, any and all further assignments and/or instruments deemed necessary by Mortgagee for the purpose of validly and sufficiently assigning all awards and other compensation heretofore and hereafter to be made to Mortgagor for any taking, either permanent or temporary, under any such proceeding. 11. Construction, Repair, Waste, Etc. Mortgagor agrees that no building or other improvement on the Mortgaged Premises and constituting a part thereof shall be materially altered, removed or demolished nor shall any material fixtures or appliances on, in or about said buildings or improvements be severed, removed, sold or mortgaged, without the consent of Mortgagee, and in the event of the demolition or destruction in whole or in part of any of the fixtures or articles of personal property covered hereby, Mortgagor covenants that the same will be replaced promptly by similar fixtures and articles of personal property at least equal in quality and condition to those replaced, free from any security interest in or encumbrance thereon or reservation of title thereto other than liens permitted by the Credit Agreement and the Permitted Exceptions; provided, however, that Mortgagor may alter, remove or demolish any such building, improvement, fixture or appliance, and need not replace any such fixtures or personal property, in each case to the extent such action (i) is desirable to the proper conduct of the business of Mortgagor in the ordinary course as presently conducted and otherwise in the best interest of Mortgagor, (ii) does not impair the overall value or utility of the Mortgaged Premises and Mortgagor's other related properties as an integrated facility, (iii) does not decrease the efficiency or capacity of the Mortgaged Premises and (iv) does not impair the rights and benefits under this Mortgage of the Secured Creditors. Mortgagor further agrees to permit, commit or suffer no material waste, impairment or deterioration of the Mortgaged Premises or any part thereof; to keep and maintain said Mortgaged Premises and every part thereof in good working condition (ordinary wear and tear excepted); to effect such repairs as Mortgagee may reasonably require and from time to time to make all needful and proper replacements and additions so that said buildings, fixtures, machinery and appurtenances will, at all times, be in good working condition (ordinary wear and tear excepted), fit and proper for the respective purposes for which they were originally erected or installed; to comply with all statutes, orders, requirements or decrees relating -13- 14 to the Mortgaged Premises by any federal, state or municipal authority if the failure to comply with such statutes, orders, requirements or decrees could have a material adverse effect on the Mortgaged Premises or the business or financial condition of the Mortgagor; to observe and comply with all conditions and requirements necessary to preserve and extend any and all rights, licenses, permits (including, but not limited to, zoning variances, special exceptions and non-conforming uses), privileges, franchises and concessions which are applicable to the Mortgaged Premises or which have been granted to or contracted for by Mortgagor in connection with any existing or presently contemplated use of the Mortgaged Premises or any part thereof and not to initiate or acquiesce in any changes to or terminations of any of the foregoing or of zoning classifications affecting the use to which the Mortgaged Premises or any part thereof may be put without the prior written consent of Mortgagee; and to make no material alterations in or improvements or additions to the Mortgaged Premises except as required by governmental authority or as permitted by Mortgagee. Mortgagor will not lease the Mortgaged Premises or any material part thereof without the prior written consent of Mortgagee, which consent shall not be unreasonably withheld. 12. Liens and Encumbrances. Mortgagor will not, without the prior written consent of Mortgagee, directly or indirectly, create or suffer to be created or to remain and will discharge or promptly cause to be discharged any mortgage, lien, encumbrance or charge on, pledge of, or conditional sale or other title retention agreement with respect to, the Mortgaged Premises or any part thereof, whether superior or subordinate to the lien hereof, except for this instrument, liens permitted by the Credit Agreement and the Permitted Exceptions. 13. Right of Mortgagee to Perform Mortgagor's Covenants, Etc. If Mortgagor shall fail to make any payment or perform any act required to be made or performed hereunder, Mortgagee, without waiving or releasing any obligation or default, may (but shall be under no obligation to) at any time after notice to the Mortgagor make such payment or perform such act for the account and at the expense of Mortgagor, and may enter upon the Mortgaged Premises or any part thereof for such purpose and take all such action thereon as, in the opinion of Mortgagee, may be reasonably necessary or appropriate therefor. All sums so paid by Mortgagee and all reasonable costs and expenses (including without limitation attorney's fees and expenses) so incurred, together with interest thereon from the date of payment or incurrence at the Default Rate, shall constitute so much additional indebtedness hereby secured and shall be paid by Mortgagor to Mortgagee on demand. Mortgagee in making any payment authorized under this Section relating to taxes or assessments may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the -14- 15 accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim thereof. 14. After-Acquired Property. Any and all property hereafter acquired which is of the kind or nature herein provided, or intended to be and become subject to the lien hereof, shall ipso facto, and without any further conveyance, assignment or act on the part of Mortgagor, become and be subject to the lien of this Mortgage as fully and completely as though specifically described herein; but nevertheless Mortgagor shall from time to time, if requested by Mortgagee, execute and deliver any and all such further assurances, conveyances and assignments as Mortgagee may reasonably require for the purpose of expressly and specifically subjecting to the lien of this Mortgage all such property. 15. Inspection by Mortgagee. Mortgagee, any Secured Creditor and their respective representatives shall have the right to inspect the Mortgaged Premises at all reasonable times, and access thereto shall be permitted for that purpose; provided, however, that prior to the occurrence of any Default or Event of Default hereunder, any such access or inspection shall only be required during the Mortgagor's normal business hours and shall only be permitted with at least 24 hours advance notice. 16. Reports on Mortgaged Premises. Mortgagor will furnish to Mortgagee or any Secured Creditor such information and data with respect to the Mortgaged Premises as Mortgagee or such Secured Creditor may reasonably request. 17. Subrogation. Mortgagor acknowledges and agrees that Mortgagee shall be subrogated to any lien discharged out of the proceeds of the loan evidenced by any Note or out of any advance by Mortgagee hereunder, irrespective of whether or not any such lien may have been released of record. 18. Events of Default. Any one or more of the following shall constitute an event of default hereunder: (a) Failure to pay when due any indebtedness hereby secured; or (b) Any event occurs or condition exists which is specified as an Event of Default under the Credit Agreement; or (c) The Mortgaged Premises or any material part thereof shall be sold, transferred, or conveyed, whether voluntarily or involuntarily, by operation of law or otherwise, except for sales of obsolete, worn out or unusable fixtures or personal property which are concurrently replaced (unless the Mortgagor, in the -15- 16 exercise of its commercially reasonable judgment deems such replacement not necessary or impractical and such failure to replace would cause no material adverse change in the Mortgaged Premises) with similar fixtures or personal property at least equal in quality and condition to those sold and owned by Mortgagor free of any lien, charge or encumbrance other than the lien hereof; or (d) Any indebtedness secured by a lien or charge on the Mortgaged Premises or any part thereof is not paid when due after the expiration of applicable grace periods and the giving of applicable notices, if any (unless such indebtedness is being contested in good faith by appropriate proceedings which prevent the enforcement of the matter under contest and adequate reserves have been established therefor), or proceedings are commenced to foreclose or otherwise realize upon any such lien or charge or to have a receiver appointed for the property subject thereto or to place the holder of such indebtedness or its representative in possession thereof; or (e) The Mortgaged Premises is abandoned. 19. Remedies. When any event of default has happened and is continuing (regardless of the pendency of any proceeding which has or might have the effect of preventing Mortgagor from complying with the terms of this instrument and of the adequacy of the security for the Notes, Letters of Credit and the other indebtedness hereby secured) and in addition to such other rights as may be available under applicable law, but subject at all times to any mandatory legal requirements: (a) Acceleration. As and to the extent expressly permitted by the Credit Agreement, Mortgagee may, by written notice to Mortgagor, declare the Notes and all unpaid indebtedness hereby secured, including the reimbursement obligations of the Mortgagor in connection with any Letters of Credit, including any interest then accrued thereon, to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without other notice or demand of any kind. (b) Uniform Commercial Code. Mortgagee shall, with respect to any part of the Mortgaged Premises constituting property of the type in respect of which realization on a lien or security interest granted therein is governed by the Uniform Commercial Code, have all the rights, options and remedies of a secured party under the Uniform Commercial Code of Illinois, including without limitation, the right to the possession of any such property, or any part thereof, and the right to enter without legal process any premises where any such property -16- 17 may be found. Any requirement of said Code for reasonable notification shall be met by mailing written notice to Mortgagor at its address above set forth at least 10 Business Days prior to the sale or other event for which such notice is required. The expenses of retaking, selling, and otherwise disposing of said property, including reasonable attorney's fees and legal expenses incurred in connection therewith, shall constitute so much additional indebtedness hereby secured and shall be payable upon demand with interest at the Default Rate. (c) Foreclosure. Mortgagee may proceed to protect and enforce the rights of Mortgagee or Secured Creditors hereunder (i) by any action at law, suit in equity or other appropriate proceedings, whether for the specific performance of any agreement contained herein, or for an injunction against the violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or by law, or (ii) by the foreclosure of this Mortgage. (d) Appointment of Receiver. Mortgagee shall, as a matter of right, without notice and without giving bond to Mortgagor or anyone claiming by, under or through it, and without regard to the solvency or insolvency of Mortgagor or the then value of the Mortgaged Premises, be entitled to have a receiver appointed of all or any part of the Mortgaged Premises and the rents, issues and profits thereof, with such power as the court making such appointment shall confer, and Mortgagor hereby consents to the appointment of such receiver and shall not oppose any such appointment. Any such receiver may, to the extent permitted under applicable law, without notice, enter upon and take possession of the Mortgaged Premises or any part thereof by force, summary proceedings, ejectment or otherwise, and may remove Mortgagor or other persons and any and all property therefrom, and may hold, operate and manage the same and receive all earnings, income, rents, issues and proceeds accruing with respect thereto or any part thereof, whether during the pendency of any foreclosure or until any right of redemption shall expire or otherwise. (e) Taking Possession, Collecting Rents, Etc. Mortgagee may enter and take possession of the Mortgaged Premises or any part thereof and manage, operate, insure, repair and improve the same and take any action which, in Mortgagee's reasonable judgment, is necessary or proper to conserve the value of the Mortgaged Premises. Mortgagee may also take possession of, and for these purposes use, any and all personal property contained in the Mortgaged Premises and used in the operation, rental or leasing thereof or any part thereof. Mortgagee shall be entitled to collect and receive all earnings, revenues, rents, issues and profits of the Mortgaged Premises or any part thereof (and for such purpose -17- 18 Mortgagor does hereby irrevocably constitute and appoint Mortgagee its true and lawful attorney-in-fact for it and in its name, place and stead to receive, collect and receipt for all of the foregoing, Mortgagor irrevocably acknowledging that any payment made to Mortgagee hereunder shall be a good receipt and acquittance against Mortgagor to the extent so made) and to apply same to the reduction of the indebtedness hereby secured. The right to enter and take possession of the Mortgaged Premises and use any personal property therein, to manage, operate and conserve the same, and to collect the rents, issues and profits thereof, shall be in addition to all other rights or remedies of Mortgagee hereunder or afforded by law, and may be exercised concurrently therewith or independently thereof. The reasonable expenses (including any receiver's fees, counsel fees, costs and agent's compensation) incurred pursuant to the powers herein contained shall be so much additional indebtedness hereby secured which Mortgagor promises to pay upon demand together with interest at the Default Rate. Mortgagee shall not be liable to account to Mortgagor for any action taken pursuant hereto other than to account for any rents actually received by Mortgagee. Without taking possession of the Mortgaged Premises, Mortgagee may, in the event the Mortgaged Premises becomes vacant or is abandoned, take such steps as it deems appropriate to protect and secure the Mortgaged Premises (including hiring watchmen therefor) and all reasonable costs incurred in so doing shall constitute so much additional indebtedness hereby secured payable upon demand with interest thereon at the Default Rate. 20. Waiver of Right to Redeem From Sale - Waiver of Appraisement, Valuation, Etc. Mortgagor shall not and will not apply for or avail itself of any appraisement, valuation, stay, extension or exemption laws, or any so-called "Moratorium Laws", now existing or hereafter enacted in order to prevent or hinder the enforcement or foreclosure of this Mortgage, but hereby waives the benefit of such laws. Mortgagor for itself and all who may claim through or under it waives any and all right to have the property and estates comprising the Mortgaged Premises marshalled upon any foreclosure of the lien hereof and agrees that any court having jurisdiction to foreclose such lien may order the Mortgaged Premises sold as an entirety. In the event of any sale made under or by virtue of this instrument, the whole of the Mortgaged Premises may be sold in one parcel as an entirety or in separate lots or parcels at the same or different times, all as the Mortgagee may determine. Mortgagee or any Secured Creditor shall have the right to become the purchaser at any sale made under or by virtue of this instrument; and Mortgagee or any Secured Creditor so purchasing at any such sale shall have the right to be credited upon the amount of the bid made therefor by Mortgagee or such Secured Creditor with the amount payable to Mortgagee or such Secured Creditor, as the case may be, out of the net proceeds of such sale, and upon compliance with the -18- 19 terms of sale, may hold, retain and possess and dispose of such property in its own absolute right without further accountability. In the event of any such sale, the Notes, the Reimbursement Obligations and the other indebtedness hereby secured, if not previously due, shall be and become immediately due and payable without demand or notice of any kind. Mortgagor hereby waives any and all rights of redemption prior to or from sale under any order or decree of foreclosure pursuant to rights herein granted, on behalf of Mortgagor, and each and every person acquiring any interest in, or title to the Mortgaged Premises described herein subsequent to the date of this Mortgage, and on behalf of all other persons to the extent permitted by applicable law. 21. Costs and Expenses of Foreclosure. In any suit to foreclose the lien hereof there shall be allowed and included as additional indebtedness in the decree for sale all reasonable expenditures and expenses which may be paid or incurred by or on behalf of Mortgagee or any Secured Creditor for attorney's fees, appraiser's fees, outlays for documentary and expert evidence, stenographic charges, publication costs and costs (which may be estimated as to items to be expended after the entry of the decree) of procuring all such abstracts of title, title searches and examination, guarantee policies, Torrens certificates and similar data and assurances with respect to title as Mortgagee or any Secured Creditor may deem to be reasonably necessary either to prosecute any foreclosure action or to evidence to the bidder at any sale pursuant thereto the true condition of the title to or the value of the Mortgaged Premises, all of which expenditures shall become so much additional indebtedness hereby secured which Mortgagor agrees to pay and all of such shall be immediately due and payable with interest thereon from the date of expenditure until paid at the Default Rate. 22. Application of Proceeds. The proceeds and avails of the Mortgaged Premises, including without limitation the proceeds of any foreclosure sale of the Mortgaged Premises or of any sale of property pursuant to Section l9(b) hereof, shall, when received by Mortgagee in cash or its equivalent, be applied by the Mortgagee as set forth in Section 3.5 of the Credit Agreement. Mortgagor shall remain liable to Mortgagee and the Secured Creditors for any deficiency. Any surplus remaining after the full payment and satisfaction of the foregoing shall be returned to Mortgagor or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. 23. Deficiency Decree. If at any foreclosure proceeding the Mortgaged Premises shall be sold for a sum less than the total amount of indebtedness for which judgment is therein given, the judgment creditor shall be entitled to the entry of a deficiency decree against Mortgagor and against the property of Mortgagor for the amount of such deficiency; and Mortgagor does hereby irrevocably consent to the appointment of a receiver for the Mortgaged Premises and the property of Mortgagor and -19- 20 of the rents, issues and profits thereof after such sale and until such deficiency decree is satisfied in full. 24. Mortgagee's Remedies Cumulative - No Waiver. No remedy or right of Mortgagee shall be exclusive of but shall be cumulative and in addition to every other remedy or right now or hereafter existing at law or in equity or by statute or otherwise. No delay in the exercise or omission to exercise any remedy or right accruing on any default shall impair any such remedy or right or be construed to be a waiver of any such default or acquiescence therein, nor shall it affect any subsequent default of the same or a different nature. Every such remedy or right may be exercised concurrently or independently, and when and as often as may be deemed expedient by Mortgagee. 25. Mortgagee Party to Suits. Mortgagee shall have the power and authority (but not the duty) to institute and maintain any suits and proceedings as Mortgagee may deem advisable (a) to prevent any impairment of the Mortgaged Premises by any acts which may be unlawful or which violate the terms of this Mortgage, (b) to preserve or protect its interest in the Mortgaged Premises or (c) to restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order might impair the security hereunder or be prejudicial to Mortgagee's or Secured Creditor's interest. If Mortgagee or any Secured Creditor shall be made a party to or shall intervene in any action or proceeding affecting the Mortgaged Premises or the title thereto or the interest of Mortgagee or any Secured Creditor under this Mortgage (including probate and bankruptcy proceedings), or if Mortgagee or any Secured Creditor employs an attorney to collect any or all of the indebtedness hereby secured or to enforce any of the terms hereof or realize hereupon or to protect the lien hereof, or if Mortgagee or any Secured Creditor shall incur any costs or expenses in preparation for the commencement of any foreclosure proceedings or for the defense of any threatened suit or proceeding which might affect the Mortgaged Premises or the security hereof, whether or not any such foreclosure or other suit or proceeding shall be actually commenced, then in any such case, Mortgagor agrees to pay to Mortgagee or such Secured Creditor, as the case may be, immediately and without demand, all reasonable costs, charges, expenses and attorney's fees incurred by Mortgagee or such Secured Creditor in any such case, and the same shall constitute so much additional indebtedness hereby secured payable upon demand with interest at the Default Rate. 26. Modifications Not to Affect Lien. Mortgagee, without notice to anyone (except the Lenders), and without regard to the consideration, if any, paid therefor, or the presence of other liens on the Mortgaged Premises, may at the direction of the Lenders release any part of the Mortgaged Premises or any person liable for any of the -20- 21 indebtedness hereby secured, may extend the time of payment of any of the indebtedness hereby secured and may grant waivers or other indulgences with respect hereto and thereto, and may agree with Mortgagor to modifications to the terms and conditions contained herein or otherwise applicable to any of the indebtedness hereby secured (including modifications in the rates of interest applicable thereto), without in any way affecting or impairing the liability of any party liable upon any of the indebtedness hereby secured or the priority of the lien of this Mortgage upon all of the Mortgaged Premises not expressly released, and any party acquiring any direct or indirect interest in the Mortgaged Premises shall take same subject to all of the provisions hereof. 27. Revolving Credit Loan. This Mortgage is given to secure, among other things, a revolving credit loan and shall secure not only presently existing indebtedness under the Credit Agreement but also future advances, or otherwise, as are made within twenty (20) years from the date hereof, to the same extent as if such future advances were made on the date of the execution of this Mortgage, although there may be no advance made at the time of execution of this Mortgage and although there may be no indebtedness hereby secured outstanding at the time any advance is made. The lien of this Mortgage shall be valid as to all indebtedness hereby secured, including future advances, from the time of its filing for record in the recorder's or registrar's office of the county in which the Mortgaged Premises are located. The total amount of indebtedness hereby secured may increase or decrease from time to time, but the total unpaid balance of indebtedness hereby secured (including disbursements which Mortgagee may make under this Mortgage, the Credit Agreement or any other documents related thereto) at any one time outstanding shall not exceed a maximum principal amount of One Hundred Million Dollars ($100,000,000) plus interest thereon and any disbursements made for payment of taxes, special assessments or insurance on the Mortgaged Premises and interest on such disbursements (all such indebtedness being hereinafter referred to as the "maximum amount secured hereby"). This Mortgage shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the Mortgaged Premises, to the extent of the maximum amount secured hereby. 28. Notices. All communications provided for herein shall be in writing (including cable, telecopy or telex) and shall be given to the relevant party at its address, telecopier number or telex number set forth below, in the case of the Mortgagor or the Mortgagee, or on the signature pages of the Credit Agreement, in the case of the Lenders, or such other address, telecopier number or telex number as such party may hereafter specify by notice to the Mortgagor and the Mortgagee given by United States certified or registered mail, by telecopy or by other telecommunication device capable of creating a written record of such notice and its receipt: -21- 22 Morton Metalcraft Co. 1021 West Birchwood Morton, Illinois 61550-0429 Attention: Chief Financial Officer Telephone: (309) 266-7176 Telecopy: (309) 263-1841 Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60690 Attention: Richard Michalek Telephone: (312) 461-2272 Telecopy: (312) 461-2591 Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified herein and a confirmation of such telecopy has been received by the sender, (ii) if given by telex, when such telex is transmitted to the telex number specified herein and the answer back is received by sender, (iii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iv) if given by any other means, when delivered at the addresses specified herein. 29. Compliance with Environmental Laws. Mortgagor represents and warrants that, to the best of Mortgagor's knowledge, except as heretofore disclosed in writing to the Mortgagee, the Mortgaged Premises complies in all material respects with all applicable federal, state, regional, county or local laws, statutes, rules, regulations or ordinances (collectively, "Environmental Laws"), including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. Section 1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. Section 2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. Section 7401 et seq., the National Environmental Policy Act of 1975, 42 U.S.C. Section 4321, the Rivers and Harbours Act of 1899, 33 U.S.C. Section 401 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. Section 651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. Section 300(F) et seq., and all rules, regulations and guidance documents promulgated or published -22- 23 thereunder, and any state, regional, county or local statute, law, rule, regulation or ordinance relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), to exposure to toxic, hazardous, or other controlled, prohibited or regulated substances, to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any regulation, order, injunction, judgment, declaration, notice or demand issued thereunder. 30. Condition of Property. Mortgagor warrants and represents that, to the best of its knowledge, except as heretofore disclosed in writing to the Mortgagee, the Mortgaged Premises, including all personal property, is free from contamination, that there has not been thereon a release, discharge or emission, or threat of release, discharge or emission, of any hazardous substance, gas or liquid (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), or any other substance, gas or liquid, which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to safety, health or the environment, and that the Mortgaged Premises does not contain, or is not affected by, except to the extent not in violation of Environmental Laws: (i) asbestos, (ii) urea formaldehyde foam insulation, (iii) polychlorinated biphenyls (PCBs), (iv) underground storage tanks, (v) landfills, land disposals or dumps. 31. Notice of Environmental Problem. Except as heretofore disclosed in writing to the Mortgagee, Mortgagor represents and warrants that to the best of its knowledge it has not given, nor should it give, nor has it received, any notice, letter, citation, order, warning, complaint, inquiry, claim or demand that: (i) Mortgagor has violated, or is about to violate, any federal, state, regional, county or local environmental, health or safety statute, law, rule, regulation, ordinance, judgment or order on the Mortgaged Premises; (ii) there has been a release, or there is threat of release, of hazardous substances (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons) from the Mortgaged Premises; (iii) Mortgagor may be or is liable, in whole or in part, for the costs or cleaning up, remediating or responding to a release of hazardous substances (including, without limitation, petroleum, its by- -23- 24 products or derivatives, or other hydrocarbons) on the Mortgaged Premises; (iv) any of the Mortgagor's property or assets are subject to a lien in favor of any governmental body for any liability, costs or damages, under federal, state or local environmental law, rule or regulation arising from or costs incurred by such governmental entity in response to a release of a hazardous substance (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons). In the event that Mortgagor receives any notice of the type described in this Section, Mortgagor shall promptly provide a copy to Mortgagee, and in no event, later than fifteen (15) days from Mortgagor's receipt or submission thereof. 32. Use of Property and Facilities. Mortgagor represents and warrants that to the best of its knowledge, except as heretofore disclosed in writing to the Mortgagee, it has never in the past engaged in, and agrees that in the future it shall not conduct, any business, operations or activity on the Mortgaged Premises, or employ or use the personal property or facilities, to manufacture, use, generate, treat, store, transport or dispose of any hazardous substance (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), or any other substance which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to safety, health or the environment, including, without limitation, any business, operation or activity which would cause Mortgagor, its property or facilities, to be in violation of the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. Section 6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. Section 9601 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. Section 7401 et seq., or any similar state, county, regional or local statute, law, regulation, rule or ordinance, including, without limitation, any state statute providing for financial responsibility for cleanup for the release or threatened release of substances provided for thereunder. The provisions of this Section shall apply to all real and personal property, without limitation, owned or controlled by Mortgagor or its subsidiaries. 33. Partial Invalidity. All rights, powers and remedies provided herein are intended to be limited to the extent necessary so that they will not render this Mortgage invalid, unenforceable or not entitled to be recorded, registered or filed under any applicable law. If any term of this Mortgage shall be held to be invalid, illegal or unenforceable, the validity and enforceability of the other terms of this Mortgage shall in no way be affected thereby. 34. Agent. Mortgagee has been appointed as agent pursuant to the Credit Agreement. In acting under or by virtue of this Mortgage, Mortgagee shall be entitled to all the rights, authority, privileges and immunities provided in Section 10 of the Credit Agreement, all of which provisions of said Section 10 are incorporated by reference herein with the same force and effect as if set forth herein. Mortgagee hereby disclaims any representation or warranty to Secured Creditors concerning the perfection of the security interest granted hereunder or the value of the Mortgaged Premises. -24- 25 35. Restrictions on Secured Creditors' Right to Enforce. No Secured Creditor shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure of this Mortgage or for the execution of any trust or power hereof or for the appointment of a receiver, or for the enforcement of any other remedy under or upon this Mortgage; it being understood and intended that no one or more of the Secured Creditors shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Mortgage by its or their action or to enforce any right hereunder, and that all proceedings at law or in equity shall be instituted, had and maintained by the Mortgagee in the manner herein provided and for the ratable benefit of the Secured Creditors. 36. Successors and Assigns. Whenever any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all the covenants, promises and agreements in this Mortgage contained by or on behalf of Mortgagor, or by or on behalf of Mortgagee or Secured Creditors, shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. Without limiting the generality of the foregoing, and subject to the provisions of Sections 12.14 and 12.15 of the Credit Agreement, any Lender may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject, however, to the provisions of the Credit Agreement. 37. Default Rate. For purposes of this Mortgage, "Default Rate" shall mean the rate per annum as set forth in Section 2.1 of the Credit Agreement. 38. Liens Absolute, Etc. Mortgagor acknowledges and agrees that the lien and security interest hereby created and provided for are absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee or any other holder of any of the indebtedness hereby secured, and without limiting the generality of the foregoing, the lien and security hereof shall not be impaired by any acceptance by Mortgagee or any other holder of any of the indebtedness hereby secured of any other security for or guarantors upon any of the indebtedness hereby secured or by any failure, neglect or omission on the part of Mortgagee or any other holder of any of the indebtedness hereby secured to realize upon or protect any of the indebtedness hereby secured or any collateral or security therefor. The lien and security interest hereof shall not in any manner be impaired or affected by (and Mortgagee, without notice to anyone, is hereby authorized to make from time to time) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the indebtedness hereby secured, or of any collateral or security therefor, or of any guaranty -25- 26 thereof, or of any instrument or agreement setting forth the terms and conditions pertaining to any of the foregoing. The Secured Creditors may at their discretion at any time grant credit to the Borrower without notice to Mortgagor in such amounts and on such terms as such Secured Creditors may elect without in any manner impairing the lien and security interest created and provided for herein. In order to realize hereon and to exercise the rights granted Mortgagee hereby and under applicable law, there shall be no obligation on the part of Mortgagee or any other holder of any of the indebtedness hereby secured at any time to first resort for payment to the Borrower or to any guaranty of any of the indebtedness hereby secured or any portion thereof or to resort to any other collateral, security, property, liens or any other rights or remedies whatsoever, and Mortgagee shall have the right to enforce this Mortgage irrespective of whether or not other proceedings or steps seeking resort to or realization upon or from any of the foregoing are pending. 39. Direct and Primary Security - No Subrogation. The lien and security interest herein created and provided for stand as direct and primary security for the Notes as well as for any of the other indebtedness hereby secured. No application of any sums received by Mortgagee in respect of the Mortgaged Premises or any disposition thereof to the reduction of the indebtedness hereby secured or any part thereof shall in any manner entitle Mortgagor to any right, title or interest in or to the indebtedness hereby secured or any collateral or security therefor, whether by subrogation or otherwise, unless and until all indebtedness hereby secured has been fully paid and satisfied and any commitment of the Secured Creditors to extend credit to Mortgagor or to the Borrower shall have expired. 40. Multisite Real Estate Transaction. Mortgagor acknowledges that this Mortgage is one of a number of other mortgages and deeds of trusts and other security documents dated of even date herewith (such mortgages, deeds of trust and other security documents dated of even date herewith and any supplements or amendments thereto and any other mortgages, deeds of trust or security documents securing the indebtedness hereby secured are collectively called the "Other Mortgages") which secure the indebtedness hereby secured. Mortgagor agrees that the lien of this Mortgage shall be absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee and, without limiting the generality of the foregoing, the lien hereof shall not be impaired by any acceptance by Mortgagee of any security for or guarantors upon any of the indebtedness hereby secured, or by any failure, neglect or omission on the part of the Mortgagee to realize upon or protect any of the indebtedness hereby secured or any collateral security therefor including the Other Mortgages. The lien hereof shall not in any manner be impaired or affected by any release (except as to the property released) sale, pledge, surrender, compromise, -26- 27 settlement, renewal, extension, indulgence, alteration, changing, modification or disposition of any of the indebtedness hereby secured or of any of the collateral security therefor, including without limitation the Other Mortgages or of any guarantee thereof, and Mortgagee may at its discretion foreclose, exercise any power of sale, or exercise any other remedy available to it under any or all of the Other Mortgages without first exercising or enforcing any of its rights and remedies hereunder. Such exercise of Mortgagee's rights and remedies under any or all of the Other Mortgages shall not in any manner impair the indebtedness hereby secured or the lien of this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder shall not impair the lien of any of the Other Mortgages or any of Mortgagee's rights and remedies thereunder. The undersigned specifically consents and agrees that Mortgagee may exercise its rights and remedies hereunder and under the Other Mortgages separately or concurrently and in any order that it may deem appropriate. 41. Prior Mortgage. Upon the execution and delivery of this Mortgage by the Mortgagor hereunder, this Mortgage shall supersede all provisions of the Prior Mortgage as of such date. The Mortgagor hereby agrees that, notwithstanding the execution and delivery of this Mortgage, the lien and security interest created and provided for under the Prior Mortgage continue in effect under and pursuant to the terms of this Mortgage for the benefit of all of the Obligations secured hereby. Nothing herein contained shall in any manner affect or impair the priority of the liens and security interests created and provided for by the Prior Mortgage as to the indebtedness and obligations which would otherwise be secured hereby prior to giving effect to this Mortgage. 42. Headings. The headings in this instrument are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof. 43. Changes, Etc. This instrument and the provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 44. Governing Law. The creation of this Mortgage, the perfection of the lien or security interest in the Mortgaged Premises, and the rights and remedies of the Mortgagee with respect to the Mortgaged Premises, as provided herein and by the laws of the state in which the Mortgaged Premises is located, shall be governed by and construed in accordance with the internal laws of the state in which the Mortgaged Premises is located without regard to principles of conflicts of law. OTHERWISE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE MORTGAGE, THE CREDIT AGREEMENT, THE NOTES, THE LETTERS OF CREDIT AND ALL OTHER OBLIGATIONS OF MORTGAGOR SHALL -27- 28 BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. -28- 29 IN WITNESS WHEREOF, Mortgagor has caused these presents to be signed the day and year first above written. MORTON METALCRAFT CO. By Its_____________________ ___________________________ (Type or Print Name) -29- 30 STATE OF ILLINOIS ) ) SS. COUNTY OF COOK ) I, _______________________________, a Notary Public in and for said County, in the State aforesaid, do hereby certify that _______________, ___________ of Morton Metalcraft Co., an Illinois corporation, who is personally known to me to be the same person whose name is subscribed to the foregoing instrument as such _____________, appeared before me this day in person and acknowledged that he signed and delivered the said instrument as his own free and voluntary act and as the free and voluntary act and deed of said corporation for the uses and purposes therein set forth. Given under my hand and notarial seal, this _____ day of May, 1998. ______________________________________ Notary Public ______________________________________ (Type or Print Name) (Notary Seal) Commission Expires: ______________________________ EX-10.8 9 EX-10.8 1 EXHIBIT 10.8 This Document Prepared By and After Recording Return To: Thomas M. Quirk Chapman and Cutler 111 West Monroe Street Chicago, Illinois 60603 ================================================================================ SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE ONLY MORTGAGE AND SECURITY AGREEMENT WITH ASSIGNMENT OF RENTS This Mortgage and Security Agreement with Assignment of Rents dated as of _________, 1998 from Mid-Central Plastics, Inc., an Iowa corporation with its principal place of business and mailing address at 2360 Grand Avenue, West Des Moines, Iowa 50265 (hereinafter referred to as the "Mortgagor") to Harris Trust and Savings Bank, an Illinois banking corporation with its principal place of business and mailing address at 111 West Monroe Street, Chicago, Illinois 60603 ("Harris"), as agent hereunder for the Secured Creditors hereinafter identified and defined (Harris acting as such agent and any successor or successors to Harris in such capacity being hereinafter referred to as the "Mortgagee"); WITNESSETH THAT: WHEREAS, Morton Industrial Group, Inc. (the "Borrower") has entered into with Harris (individually and as agent for the Lenders identified and defined below) that certain Credit Agreement dated as of May 29, 1998 (such Credit Agreement as the same may from time to time be modified, amended or restated being hereinafter referred to as the "Credit Agreement") pursuant to which Harris and the other lenders named therein and which may thereafter become parties thereto (Harris and such other lenders being herein referred to collectively as the "Lenders" and individually as a "Lender") committed, subject to certain terms and conditions, (i) to make a revolving credit facility available to the Borrower in the form of loans and letters of credit (the "Revolving Credit") in the aggregate principal amount not to exceed $35,000,000 at 2 any one time outstanding during the period ending on May 31, 2003 (the "Termination Date") with all loans made under the Revolving Credit being repayable on the Termination Date and (ii) to make term loans in the aggregate principal amount of $25,000,000 (in the case of Term A Loan) and $30,000,000 (in the case of Term B Loan) to Mortgagor payable in installments with a final maturity of all principal and interest not required to be sooner paid of May 31, 2003 (in the case of Term A Loan) and May 31, 2005 (in the case of Term B Loan) (the "Term Loans"), a true and correct copy of which Credit Agreement is on file at the offices of the Mortgagee; and WHEREAS, advances from time to time made under the Revolving Credit are evidenced by Revolving Credit Notes (such Revolving Credit Notes and any extensions thereof or modifications thereto and any and all notes issued in renewal thereof or in substitution or replacement therefor being hereinafter referred to as the "Revolving Credit Notes") aggregating $35,000,000 in face principal amount and payable to the order of the respective Lenders named thereon, whereby the Borrower promises to pay the advances evidenced thereby on or before the Termination Date with interest and premium as set forth in the Credit Agreement; and WHEREAS, the Term Loans are evidenced by Term Notes (the "Term Notes") aggregating $25,000,000 (in the case of Term A Loan) and $30,000,000 (in the case of Term B Loan) in principal amount and payable to the order of the respective Lenders named thereon, whereby the Borrower promises to pay the term loans evidenced thereby, with interest and premium as set forth in the Credit Agreement, in installments with a final maturity of all principal and interest and premium not required to be sooner paid of May 31, 2003 (in the case of Term A Loan) and May 31, 2005 (in the case of Term B Loan); and WHEREAS, pursuant to the terms of the Credit Agreement, any Lender or Lenders may, from time to time, assign to other Lenders portions of the indebtedness evidenced by the Notes then owned by such assigning Lender together with an equivalent proportion of such assigning Lender's obligation to make advances under the Credit Agreement (each such assignment being hereinafter referred to as an "Assignment"); and WHEREAS, in the event of each Assignment under the Credit Agreement, the Borrower has agreed pursuant to the terms of the Credit Agreement to execute and deliver to each new assignee Lender by reason of such Assignment, new Notes evidencing that portion of the indebtedness so assigned to such new assignee Lender and advances to be thereafter made by such new assignee Lender pursuant to the Credit Agreement and to execute new Notes to such assigning Lender evidencing the portion of such indebtedness not so assigned and advances to be thereafter made by such assigning Lender pursuant to the Credit Agreement; and WHEREAS, it is the intention of the Mortgagor that all such Notes constitute "Notes" for the purposes hereof and to be secured hereby; and -2- 3 WHEREAS, pursuant to the terms of the Credit Agreement, the Mortgagee may from time to time issue letters of credit (the "Letters of Credit") for the account of the Borrower in an aggregate face amount not to exceed $10,000,000 and with expiry dates on or before the Termination Date, and which Letters of Credit, when combined with the principal amount of loans outstanding under the Revolving Credit from time to time, shall not exceed $35,000,000; WHEREAS, the Borrower may from time to time enter into one or more interest rate exchange, cap, collar, floor or other agreements with one or more of the Lenders party to the Credit Agreement, or their affiliates, for the purpose of hedging or otherwise protecting the Borrower against changes in interest rates (the liability of the Borrower in respect of such agreements with such Lenders and their affiliates being hereinafter referred to as the "Hedging Liability") (the affiliates of the Lenders to which any Hedging Liability is owed, together with the Lenders and the Mortgagee, being collectively referred to herein as the "Secured Creditors"); and NOW, THEREFORE, in order to secure (i) payment of all principal of and interest and premium on the Notes (ratably among the Notes without preference or priority to one over the others) as and when the same become due and payable (whether by lapse of time, acceleration or otherwise) and all advances now or hereafter evidenced thereby, (ii) the payment and performance of all obligations arising under any applications executed by the Borrower in connection with any of the Letters of Credit, including the obligation of the Borrower to reimburse the Mortgagee for any draws under the Letters of Credit, (iii) payment of all fees and charges payable by the Borrower under the terms of the Credit Agreement, (iv) any and all liability of the Borrower arising under or in connection with or otherwise evidenced by agreements with any one or more of the Secured Creditors with respect to any Hedging Liability; (v) payment of all other sums at any time due or owing from or required to be paid by the Borrower under the terms of the Mortgage and the performance and observance of all the covenants and agreements in the Mortgage provided to be performed or observed by the Mortgagor, and (vi) the performance and observance of all covenants and agreements contained in the Mortgage or in the Notes or in the Credit Agreement or in any other instrument or document at any time evidencing or securing any of the foregoing indebtedness, obligations or liabilities or setting forth terms and conditions applicable thereto (all of such indebtedness, obligations and liabilities referred to in clauses (i), (ii), (iii), (iv), (v) and (vi) above being hereinafter collectively referred to as the "indebtedness hereby secured"), Mortgagor does hereby grant, bargain, sell, convey, mortgage, warrant, assign, and pledge unto the Mortgagee, its successors and assigns, and grant to the Mortgagee, its successors and assigns a security interest in all and singular the properties, rights, interests and privileges described in Granting Clauses I, II, III, IV, V and VI below, all of the same being collectively referred to herein as the "Mortgaged Premises": -3- 4 GRANTING CLAUSE I That certain real estate lying and being in the County of Polk in the State of Iowa, more particularly described in Schedule I attached hereto and made a part hereof. GRANTING CLAUSE II All buildings and improvements of every kind and description heretofore or hereafter erected or placed on the property described in Granting Clause I and all materials intended for construction, reconstruction, alteration and repairs of the buildings and improvements now or hereafter erected thereon, all of which materials shall be deemed to be included within the premises immediately upon the delivery thereof to the said real estate, and all fixtures, machinery, apparatus, equipment, fittings and articles of personal property of every kind and nature whatsoever now or hereafter attached to or contained in or used or useful in connection with said real estate and the buildings and improvements now or hereafter located thereon and the operation, maintenance and protection thereof, including but not limited to all machinery, motors, fittings, radiators, awnings, shades, screens, all gas, coal, steam, electric, oil and other heating, cooking, power and lighting apparatus and fixtures, all fire prevention and extinguishing equipment and apparatus, all cooling and ventilating apparatus and systems, all plumbing, incinerating, and sprinkler equipment and fixtures, all elevators and escalators, all communication and electronic monitoring equipment, all window and structural cleaning rigs and all other machinery and equipment of every nature and fixtures and appurtenances thereto and all items of furniture, appliances, draperies, carpets, other furnishings, equipment and personal property used or useful in the operation, maintenance and protection of the said real estate and the buildings and improvements now or hereafter located thereon and all renewals or replacements thereof or articles in substitution therefor or insurance proceeds relating thereto, whether or not the same are or shall be attached to said real estate, buildings or improvements in any manner, and all proceeds thereof; it being mutually agreed, intended and declared that all the aforesaid property shall, so far as permitted by law, be deemed to form a part and parcel of the real estate and for the purpose of this Mortgage to be real estate and covered by this Mortgage; and as to the balance of the property aforesaid, this Mortgage is hereby deemed to be as well a Security Agreement under the provisions of the Uniform Commercial Code for the purpose of creating hereby a security interest in said property, which is hereby granted by Mortgagor as debtor to Mortgagee as secured party, securing the indebtedness hereby secured. The addresses of Mortgagor (debtor) and Mortgagee (secured party) appear at the beginning hereof. -4- 5 GRANTING CLAUSE III All right, title and interest of Mortgagor now owned or hereafter acquired in and to all and singular the estates (including without limitation leasehold estates), leases, tenements, hereditaments, privileges, easements, licenses, franchises, appurtenances and royalties, mineral, oil, and water rights belonging or in any wise appertaining to the property described in the preceding Granting Clause I and the buildings and improvements now or hereafter located thereon and the reversions, rents, issues, revenues and profits thereof and insurance proceeds therefrom, including all interest of Mortgagor in all rents, issues and profits of and insurance proceeds from the aforementioned property and all rents, issues, profits, revenues, royalties, bonuses, rights and benefits due, payable or accruing (including all deposits of money as advanced rent or for security) under any and all leases or subleases and renewals thereof of, or under any contracts or options for the sale of all or any part of, said property (including during any period allowed by law for the redemption of said property after any foreclosure or other sale), together with the right, but not the obligation, to collect, receive and receipt for all such rents and other sums and apply them to the indebtedness hereby secured and to demand, sue for and recover the same when due or payable; provided that the assignments made hereby shall not impair or diminish the obligations of Mortgagor under the provisions of such leases or other agreements nor shall such obligations be imposed upon Mortgagee. By acceptance of this Mortgage, Mortgagee agrees, not as a limitation or condition hereof, but as a personal covenant available only to Mortgagor that until an event of default (as hereinafter defined) shall occur giving Mortgagee the right to foreclose this Mortgage, Mortgagor may collect, receive (but not more than 30 days in advance) and enjoy such rents. GRANTING CLAUSE IV All judgments, awards of damages, settlements and other compensation heretofore or hereafter made resulting from condemnation proceedings or the taking of the property described in Granting Clause I or any part thereof or any building or other improvement now or at any time hereafter located thereon or any easement or other appurtenance thereto under the power of eminent domain, or any similar power or right (including any award from the United States Government at any time after the allowance of the claim therefor, the ascertainment of the amount thereof and the issuance of the warrant for the payment thereof), whether permanent or temporary, or for any damage (whether caused by such taking or otherwise) to said property or any part thereof or the improvements thereon or any part thereof, or to any rights appurtenant thereto, including severance and consequential damage, and any award for change of grade of streets (collectively "Condemnation Awards"). -5- 6 GRANTING CLAUSE V All property and rights, if any, which are by the express provisions of this instrument required to be subjected to the lien hereof and any additional property and rights that may from time to time hereafter, by installation or writing of any kind, be subjected to the lien hereof by Mortgagor or by anyone in Mortgagor's behalf. GRANTING CLAUSE VI All rights in and to common areas and access roads on adjacent properties heretofore or hereafter granted to Mortgagor and any after-acquired title or reversion in and to the beds of any ways, roads, streets, avenues and alleys adjoining the property described in Granting Clause I or any part thereof. TO HAVE AND TO HOLD the Mortgaged Premises and the properties, rights and privileges hereby granted, bargained, sold, conveyed, mortgaged, warranted, pledged and assigned, and in which a security interest is granted, or intended so to be, unto Mortgagee, its successors and assigns, forever; provided, however, that this instrument is upon the express condition that if the principal of and interest on the Notes shall be paid in full and all other indebtedness hereby secured shall be fully paid and performed and no Letters of Credit shall remain outstanding, then this instrument and the estate and rights hereby granted shall cease, determine and be void and this instrument shall be released by Mortgagee upon the written request and at the expense of Mortgagor, otherwise to remain in full force and effect. It is expressly understood and agreed that the indebtedness hereby secured will in no event exceed two hundred percent (200%) of (i) the total face amount of the Notes and the Letters of Credit plus (ii) the total interest which may hereafter accrue under the Notes and the Reimbursement Obligations (as defined in the Credit Agreement) on such face amount plus (iii) any fees, costs or expenses which may be payable hereunder or under the Credit Agreement. Mortgagor hereby covenants and agrees with Mortgagee as follows: 1. Payment of the Indebtedness. The indebtedness hereby secured will be promptly paid as and when the same becomes due without any relief whatever from valuation or appraisement laws of the State of Iowa. 2. Binding Obligation and Further Assurances. This Mortgage and all other documents, instruments and agreements executed in connection herewith are valid and binding obligations of Mortgagor, enforceable in accordance with their respective terms. -6- 7 Mortgagor will execute and deliver such further instruments and do such further acts as may be necessary or proper to carry out more effectively the purpose of this instrument and, without limiting the foregoing, to make subject to the lien hereof any property agreed to be subjected hereto or covered by the Granting Clauses hereof or intended so to be. 3. Ownership of the Mortgaged Premises. Mortgagor covenants and warrants that it is lawfully seized of and has good and marketable fee title to the Mortgaged Premises free and clear of all liens, charges and encumbrances whatsoever except those exceptions to title listed on Schedule II attached hereto (the "Permitted Exceptions") and Mortgagor has good right, full power and authority to convey, transfer and mortgage the same to Mortgagee for the uses and purposes set forth in this Mortgage; and Mortgagor will warrant and forever defend the title to the Mortgaged Premises subject to the Permitted Exceptions against all claims and demands whatsoever. 4. Possession. Provided no event of default has occurred and is continuing hereunder, Mortgagor shall be suffered and permitted to remain in full possession, enjoyment and control of the Mortgaged Premises, subject always to the observance and performance of the terms of this instrument. 5. Payment of Taxes. Mortgagor shall pay before any penalty attaches, all general taxes and all special taxes, special assessments, water, drainage and sewer charges and all other charges of any kind whatsoever, ordinary or extraordinary, which may be levied, assessed, imposed or charged on or against the Mortgaged Premises or any part thereof and which, if unpaid, might by law become a lien or charge upon the Mortgaged Premises or any part thereof, and shall, upon written request, exhibit to Mortgagee official receipts evidencing such payments, except that, unless and until foreclosure, distraint, sale or other similar proceedings shall have been commenced, no such charge or claim need be paid if being contested (except to the extent any full or partial payment shall be required by law), after notice to Mortgagee, by appropriate proceedings which shall operate to prevent the collection thereof or the sale or forfeiture of the Mortgaged Premises or any part thereof to satisfy the same, conducted in good faith and with due diligence and if Mortgagor shall have furnished such security, if any, as may be required in the proceedings or requested by Mortgagee. 6. Payment of Taxes on Notes, Letters of Credit, Mortgage or Interest of Mortgagee or Secured Creditors. Mortgagor agrees that if any tax, assessment or imposition upon this Mortgage or the indebtedness hereby secured or the Notes or any of the Letters of Credits or the interest of Mortgagee or any Secured Creditor in the Mortgaged Premises or upon Mortgagee or any Secured Creditor by reason of or as a -7- 8 holder of any of the foregoing (including, without limitation, excise taxes, but excepting therefrom any income tax on interest payments on the principal portion of the indebtedness hereby secured imposed by the United States or any state) is levied, assessed or charged, then, unless all such taxes are paid by Mortgagor to, for or on behalf of Mortgagee or any Secured Creditor as they become due and payable (which Mortgagor agrees to do upon demand of Mortgagee, to the extent permitted by law), or Mortgagee or any Secured Creditor is reimbursed for any such sum advanced by Mortgagee, all sums hereby secured shall become immediately due and payable, at the option of Mortgagee upon 30 days' notice to Mortgagor, notwithstanding anything contained herein or in any law heretofore or hereafter enacted, including any provision thereof forbidding Mortgagor from making any such payment. Mortgagor agrees to exhibit to Mortgagee, upon request, official receipts showing payment of all taxes and charges which Mortgagor is required to pay hereunder. 7. Recordation and Payment of Taxes and Expenses Incident Thereto. Mortgagor will maintain and preserve the lien of this Mortgage until all indebtedness hereby secured has been paid and satisfied in full. Without limiting the foregoing, Mortgagor will cause this Mortgage, all mortgages supplemental hereto and any financing statement or other notice of a security interest required by Mortgagee at all times to be kept, recorded and filed at its own expense in such manner and in such places as may be required by law for the recording and filing or for the rerecording and refiling of a mortgage, security interest, assignment or other lien or charge upon the Mortgaged Premises, or any part thereof, in order fully to preserve and protect the rights of Mortgagee hereunder and, without limiting the foregoing, Mortgagor will pay or reimburse Mortgagee and any Secured Creditor for the payment of any and all taxes, fees or other charges incurred in connection with any such recordation or rerecordation, including any documentary stamp tax or tax imposed upon the privilege of having this instrument or any instrument issued pursuant hereto recorded. 8. Insurance. Mortgagor will, at its expense, keep all buildings, improvements, equipment and other property now or hereafter constituting part of the Mortgaged Premises insured against loss or damage by fire, lightning, windstorm, explosion and such other risks as are usually included under extended coverage policies, or which are usually insured against by companies similarly situated conducting similar businesses and owning like properties, in amount sufficient to prevent Mortgagor, Mortgagee or the Secured Creditors from becoming a co-insurer of any partial loss under applicable policies and in any event not less than the then full insurable value (actual replacement value without deduction for physical depreciation) thereof, as determined at the request of Mortgagee and at Mortgagor's expense by the insurer or insurers or by an expert approved by Mortgagee, all under insurance policies payable, in case of loss or -8- 9 damage, to Mortgagee (and if Mortgagee so requests, naming Mortgagee and the Secured Creditors as additional insureds therein), such rights to be evidenced by the usual standard non-contributory form of mortgage clause to be attached to each policy. Mortgagor shall not carry separate insurance concurrent in kind or form and contributing in the event of loss, with any insurance required hereby. Mortgagor shall also obtain and maintain public liability, property damage and workmen's compensation insurance in each case in form and content satisfactory to Mortgagee and in amounts as are customarily carried by owners of like property and approved by Mortgagee. Mortgagor shall also obtain and maintain such other insurance with respect to the Mortgaged Premises in such amounts and against such insurable hazards as Mortgagee from time to time may require, including, without limitation, boiler and machinery insurance, insurance against flood risks for any improvements located in a flood plain when and to the extent obtainable from the United States Government or any agency thereof, and insurance against loss of rent due to fire and risks now or hereafter embraced by so-called "extended coverage". All insurance required hereby shall be maintained with good and responsible insurance companies satisfactory to Mortgagee and shall not provide for any deductible amount in excess of $250,000 not approved in writing by Mortgagee, shall provide that any losses shall be payable notwithstanding any act or negligence of Mortgagor, shall provide that no cancellation thereof shall be effective until at least thirty days after receipt by Mortgagor and Mortgagee of written notice thereof, and shall be satisfactory to Mortgagee in all other respects. Upon the execution of this Mortgage and thereafter not less than 15 days prior to the expiration date of any policy delivered pursuant to this instrument, Mortgagor will deliver to Mortgagee certificates evidencing the policy or renewal policy, as the case may be, required by this instrument, bearing notations evidencing the payment of all premiums. In the event of foreclosure, Mortgagor authorizes and empowers Mortgagee to effect insurance upon the Mortgaged Premises in amounts aforesaid for a period covering the time of redemption from foreclosure sale provided by law, and if necessary therefor to cancel any or all existing insurance policies. 9. Damage to or Destruction of Mortgaged Premises. (a) Notice. In case of any material damage to or destruction of the Mortgaged Premises or any part thereof, Mortgagor shall promptly give written notice thereof to Mortgagee, generally describing the nature and extent of such damage or destruction. (b) Restoration. In case of any damage to or destruction of the Mortgaged Premises or any part thereof, Mortgagor, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be -9- 10 sufficient for the purpose, at Mortgagor's expense, will promptly commence and complete (subject to unavoidable delays occasioned by strikes, lockouts, acts of God, inability to obtain labor or materials, governmental restrictions and similar causes beyond the reasonable control of Mortgagor) the restoration, replacement or rebuilding of the Mortgaged Premises as nearly as possible to its value, condition and character immediately prior to such damage or destruction, provided that any part of the Mortgaged Premises so damaged or destroyed need not be restored, replaced or rebuilt if (i) prior to its damage or destruction, it had become uneconomical, obsolete or worn out or (ii) it is not necessary for or of importance to the proper conduct of the Mortgagor's business in the ordinary course. (c) Adjustment of Loss. Mortgagor hereby authorizes Mortgagee, at Mortgagee's option, to adjust and compromise any losses under any insurance afforded at any time after the occurrence and during the continuation of any event of default hereunder or any event which with the lapse of time, the giving of notice, or both, would constitute an event of default hereunder (herein, a "default"), but unless Mortgagee elects to adjust the losses as aforesaid, said adjustment and/or compromise shall be made by Mortgagor, subject to final approval of Mortgagee (regardless of whether or not a default or event of default hereunder shall have occurred) in the case of losses exceeding $250,000. (d) Application of Insurance Proceeds. Net insurance proceeds (except in cases where (i) the amount payable in respect of any one loss, when combined with amounts paid in respect of all losses incurred during any calendar year, is less than $250,000 and (ii) an event of default hereunder shall not have occurred and be continuing, in which case the amount payable in respect of such loss may be received by Mortgagor and need not be applied toward the payment of the amount owing on the indebtedness hereby secured or for the restoration of the Mortgaged Premises damaged or destroyed) received by Mortgagee under the provisions of this Mortgage or any instruments supplemental hereto or thereto or under any policy or policies of insurance covering the Mortgaged Premises or any part thereof shall first be applied toward the payment of the amount owing on the indebtedness hereby secured in such order of application as Mortgagee may elect whether or not the same may then be due or be otherwise adequately secured; provided, however, that such proceeds shall be made available for the restoration of the portion of the Mortgaged Premises damaged or destroyed if written application for such use is made within thirty (30) days of receipt of such proceeds and the following conditions are satisfied: (i) Mortgagor has in effect business interruption insurance covering the income to be lost during the -10- 11 restoration period as a result of the damage or destruction to the Mortgaged Premises or provides Mortgagee with other evidence satisfactory to it that Mortgagor has cash resources sufficient to pay its obligations during the restoration period; (ii) no event of default, or event which, with the lapse of time, the giving of notice, or both, would constitute an event of default hereunder, shall have occurred or be continuing (and if such an event shall occur during restoration Mortgagee may, at its election, apply any insurance proceeds then remaining in its hands to the reduction of the indebtedness evidenced by the NOTES and the other indebtedness hereby secured); (iii) Mortgagor shall have submitted to Mortgagee plans and specifications for the restoration which shall be satisfactory to it; (iv) Mortgagor shall submit to Mortgagee fixed price contracts with good and responsible contractors and materialmen covering all work and materials necessary to complete restoration and providing for a total completion price not in excess of the amount of insurance proceeds available for restoration, or, if a deficiency shall exist, Mortgagor shall have deposited the amount of such deficiency with Mortgagee and (v) Mortgagor shall have obtained a waiver of the right of subrogation from any insurer under such policies of insurance who at that time claims that no liability exists as to Mortgagor or the insured under such policies. Any insurance proceeds to be released pursuant to the foregoing provisions may at the option of Mortgagee be disbursed from time to time as restoration progresses to pay for restoration work completed and in place and such disbursements may at Mortgagee's option be made directly to Mortgagor or to or through any contractor or materialman to whom payment is due or to or through a construction escrow to be maintained by a title insurer acceptable to Mortgagee. Mortgagee may impose such further conditions upon the release of insurance proceeds (including the receipt of title insurance) as are customarily imposed by prudent construction lenders to insure the completion of the restoration work free and clear of all liens or claims for lien. All title insurance charges and other costs and expenses paid to or for the account of Mortgagor in connection with the release of such insurance proceeds shall constitute so much additional indebtedness hereby secured to be payable upon demand with interest at the Default Rate. Mortgagee may deduct any such costs and expenses from insurance proceeds at any time standing in its hands. If Mortgagor fails to request that insurance proceeds be applied to the restoration of the improvements or if Mortgagor makes such a request but fails to complete restoration within a reasonable time, Mortgagee shall have the right, but not the duty, to restore or rebuild said Mortgaged Premises or any part thereof for or on behalf of Mortgagor in lieu of applying said proceeds to the indebtedness hereby secured and for such purpose may do all necessary acts, including using funds deposited by Mortgagor as aforesaid and advancing additional funds for the purpose of restoration, all such -11- 12 additional funds to constitute part of the indebtedness hereby secured payable upon demand with interest at the Default Rate. 10. Eminent Domain. Mortgagor acknowledges that Condemnation Awards have been assigned to Mortgagee, which awards Mortgagee is hereby irrevocably authorized to collect and receive, and to give appropriate receipts and acquittances therefor, and at Mortgagee's option, to apply the same toward the payment of the amount owing on account of the indebtedness hereby secured in such order of application as Mortgagee may elect and whether or not the same may then be due and payable or otherwise adequately secured; provided, however, that a Condemnation Award in respect of any taking of a portion (but not all or any material portion) of the Mortgaged Premises shall be made available for the restoration of such Mortgaged Premises in the same manner and subject to the same conditions as are imposed on the release of insurance proceeds set forth in Section 9(d) hereof as if the Mortgaged Premises so taken were destroyed and the Condemnation Award for such taking was actually insurance proceeds in respect of the Mortgaged Premises so deemed as having been destroyed. In the event that any proceeds of a Condemnation Award shall be made available to Mortgagor for restoring the Mortgaged Premises so taken, Mortgagor hereby covenants to promptly commence and complete such restoration of the Mortgaged Premises as nearly as possible to its value, condition and character immediately prior to such taking. Mortgagor covenants and agrees that Mortgagor will give Mortgagee immediate notice of the actual or threatened commencement of any proceedings under condemnation or eminent domain affecting all or any material part of the Mortgaged Premises including any easement therein or appurtenance thereof or severance and consequential damage and change in grade of streets, and will deliver to Mortgagee copies of any and all papers served in connection with any such proceedings. Mortgagor further covenants and agrees to make, execute and deliver to Mortgagee, at any time or times upon request, free, clear and discharged of any encumbrances of any kind whatsoever, any and all further assignments and/or instruments deemed necessary by Mortgagee for the purpose of validly and sufficiently assigning all awards and other compensation heretofore and hereafter to be made to Mortgagor for any taking, either permanent or temporary, under any such proceeding. 11. Construction, Repair, Waste, Etc. Mortgagor agrees that no building or other improvement on the Mortgaged Premises and constituting a part thereof shall be materially altered, removed or demolished nor shall any material fixtures or appliances on, in or about said buildings or improvements be severed, removed, sold or mortgaged, without the consent of Mortgagee, and in the event of the demolition or destruction in whole or in part of any of the fixtures or articles of personal property covered hereby, Mortgagor covenants that the same will be replaced promptly by similar fixtures and -12- 13 articles of personal property at least equal in quality and condition to those replaced, free from any security interest in or encumbrance thereon or reservation of title thereto other than liens permitted by the Credit Agreement and the Permitted Exceptions; provided, however, that Mortgagor may alter, remove or demolish any such building, improvement, fixture or appliance, and need not replace any such fixtures or personal property, in each case to the extent such action (i) is desirable to the proper conduct of the business of Mortgagor in the ordinary course as presently conducted and otherwise in the best interest of Mortgagor, (ii) does not impair the overall value or utility of the Mortgaged Premises and Mortgagor's other related properties as an integrated facility, (iii) does not decrease the efficiency or capacity of the Mortgaged Premises and (iv) does not impair the rights and benefits under this Mortgage of the Secured Creditors. Mortgagor further agrees to permit, commit or suffer no material waste, impairment or deterioration of the Mortgaged Premises or any part thereof; to keep and maintain said Mortgaged Premises and every part thereof in good working condition (ordinary wear and tear excepted); to effect such repairs as Mortgagee may reasonably require and from time to time to make all needful and proper replacements and additions so that said buildings, fixtures, machinery and appurtenances will, at all times, be in good working condition (ordinary wear and tear excepted), fit and proper for the respective purposes for which they were originally erected or installed; to comply with all statutes, orders, requirements or decrees relating to the Mortgaged Premises by any federal, state or municipal authority if the failure to comply with such statutes, orders, requirements or decrees could have a material adverse effect on the Mortgaged Premises or the business or financial condition of the Mortgagor; to observe and comply with all conditions and requirements necessary to preserve and extend any and all rights, licenses, permits (including, but not limited to, zoning variances, special exceptions and non-conforming uses), privileges, franchises and concessions which are applicable to the Mortgaged Premises or which have been granted to or contracted for by Mortgagor in connection with any existing or presently contemplated use of the Mortgaged Premises or any part thereof and not to initiate or acquiesce in any changes to or terminations of any of the foregoing or of zoning classifications affecting the use to which the Mortgaged Premises or any part thereof may be put without the prior written consent of Mortgagee; and to make no material alterations in or improvements or additions to the Mortgaged Premises except as required by governmental authority or as permitted by Mortgagee. Mortgagor will not lease the Mortgaged Premises or any material part thereof without the prior written consent of Mortgagee, which consent shall not be unreasonably withheld. 12. Liens and Encumbrances. Mortgagor will not, without the prior written consent of Mortgagee, directly or indirectly, create or suffer to be created or to remain and will discharge or promptly cause to be discharged any mortgage, lien, encumbrance or charge on, pledge of, or conditional sale or other title retention agreement with respect -13- 14 to, the Mortgaged Premises or any part thereof, whether superior or subordinate to the lien hereof, except for this instrument, liens permitted by the Credit Agreement and the Permitted Exceptions. 13. Right of Mortgagee to Perform Mortgagor's Covenants, Etc. If Mortgagor shall fail to make any payment or perform any act required to be made or performed hereunder, Mortgagee, without waiving or releasing any obligation or default, may (but shall be under no obligation to) at any time after notice to the Mortgagor make such payment or perform such act for the account and at the expense of Mortgagor, and may enter upon the Mortgaged Premises or any part thereof for such purpose and take all such action thereon as, in the opinion of Mortgagee, may be reasonably necessary or appropriate therefor. All sums so paid by Mortgagee and all reasonable costs and expenses (including without limitation attorney's fees and expenses) so incurred, together with interest thereon from the date of payment or incurrence at the Default Rate, shall constitute so much additional indebtedness hereby secured and shall be paid by Mortgagor to Mortgagee on demand. Mortgagee in making any payment authorized under this Section relating to taxes or assessments may do so according to any bill, statement or estimate procured from the appropriate public office without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim thereof. 14. After-Acquired Property. Any and all property hereafter acquired which is of the kind or nature herein provided, or intended to be and become subject to the lien hereof, shall ipso facto, and without any further conveyance, assignment or act on the part of Mortgagor, become and be subject to the lien of this Mortgage as fully and completely as though specifically described herein; but nevertheless Mortgagor shall from time to time, if requested by Mortgagee, execute and deliver any and all such further assurances, conveyances and assignments as Mortgagee may reasonably require for the purpose of expressly and specifically subjecting to the lien of this Mortgage all such property. 15. Inspection by Mortgagee. Mortgagee, any Secured Creditor and their respective representatives shall have the right to inspect the Mortgaged Premises at all reasonable times, and access thereto shall be permitted for that purpose; provided, however, that prior to the occurrence of any Default or Event of Default hereunder, any such access or inspection shall only be required during the Mortgagor's normal business hours and shall only be permitted with at least 24 hours advance notice. 16. Reports on Mortgaged Premises. Mortgagor will furnish to Mortgagee or any Secured Creditor such information and data with respect to the Mortgaged Premises as Mortgagee or such Secured Creditor may reasonably request. -14- 15 17. Subrogation. Mortgagor acknowledges and agrees that Mortgagee shall be subrogated to any lien discharged out of the proceeds of the loan evidenced by any Note or out of any advance by Mortgagee hereunder, irrespective of whether or not any such lien may have been released of record. 18. Events of Default. Any one or more of the following shall constitute an event of default hereunder: (a) Failure to pay when due any indebtedness hereby secured; or (b) Any event occurs or condition exists which is specified as an Event of Default under the Credit Agreement; or (c) The Mortgaged Premises or any material part thereof shall be sold, transferred, or conveyed, whether voluntarily or involuntarily, by operation of law or otherwise, except for sales of obsolete, worn out or unusable fixtures or personal property which are concurrently replaced (unless the Mortgagor, in the exercise of its commercially reasonable judgment deems such replacement not necessary or impractical and such failure to replace would cause no material adverse change in the Mortgaged Premises) with similar fixtures or personal property at least equal in quality and condition to those sold and owned by Mortgagor free of any lien, charge or encumbrance other than the lien hereof; or (d) Any indebtedness secured by a lien or charge on the Mortgaged Premises or any part thereof is not paid when due after the expiration of applicable grace periods and the giving of applicable notices, if any (unless such indebtedness is being contested in good faith by appropriate proceedings which prevent the enforcement of the matter under contest and adequate reserves have been established therefor), or proceedings are commenced to foreclose or otherwise realize upon any such lien or charge or to have a receiver appointed for the property subject thereto or to place the holder of such indebtedness or its representative in possession thereof; or (e) The Mortgaged Premises is abandoned. 19. Remedies. When any event of default has happened and is continuing (regardless of the pendency of any proceeding which has or might have the effect of preventing Mortgagor from complying with the terms of this instrument and of the adequacy of the security for the Notes, Letters of Credit and the other indebtedness -15- 16 hereby secured) and in addition to such other rights as may be available under applicable law, but subject at all times to any mandatory legal requirements: (a) Acceleration. As and to the extent expressly permitted by the Credit Agreement, Mortgagee may, by written notice to Mortgagor, declare the Notes and all unpaid indebtedness hereby secured, including the reimbursement obligations of the Mortgagor in connection with any Letters of Credit, including any interest then accrued thereon, to be forthwith due and payable, whereupon the same shall become and be forthwith due and payable, without other notice or demand of any kind. (b) Uniform Commercial Code. Mortgagee shall, with respect to any part of the Mortgaged Premises constituting property of the type in respect of which realization on a lien or security interest granted therein is governed by the Uniform Commercial Code, have all the rights, options and remedies of a secured party under the Uniform Commercial Code of Illinois, including without limitation, the right to the possession of any such property, or any part thereof, and the right to enter without legal process any premises where any such property may be found. Any requirement of said Code for reasonable notification shall be met by mailing written notice to Mortgagor at its address above set forth at least 10 Business Days prior to the sale or other event for which such notice is required. The expenses of retaking, selling, and otherwise disposing of said property, including reasonable attorney's fees and legal expenses incurred in connection therewith, shall constitute so much additional indebtedness hereby secured and shall be payable upon demand with interest at the Default Rate. (c) Foreclosure. Mortgagee may proceed to protect and enforce the rights of Mortgagee or Secured Creditors hereunder (i) by any action at law, suit in equity or other appropriate proceedings, whether for the specific performance of any agreement contained herein, or for an injunction against the violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or by law, or (ii) by the foreclosure of this Mortgage. Without limiting anything to the contrary contained herein, to the extent permitted by applicable law, Mortgagee in Mortgagee's sole discretion, may elect to foreclose this Mortgage by means of non-judicial foreclosure as permitted by Chapter 655A of the Code of Iowa. By its execution hereof, Mortgagor hereby agrees that if Mortgagor's waiver of redemption rights in Section 20 hereof shall have no force and effect and if the real estate described in Granting Clause I hereof is ten acres or less in size, then the period of redemption after sale on any foreclosure of this Mortgage shall be reduced to six months, provided the Mortgagee waives in such -16- 17 foreclosure action any rights to a deficiency judgment against the Mortgagor which might arise out of such foreclosure proceedings, all to be consistent with the provisions of Chapter 628 of the Code of Iowa. It is further hereby agreed that if Mortgagee's waiver of redemption rights in Section 20 hereof shall have no force and effect and if the real estate described in Granting Clause I hereof is ten acres or more in size, then the period of redemption after sale on any foreclosure of this Mortgage shall be reduced to sixty days provided (i) the court with jurisdiction over such a foreclosure action finds affirmatively in a decree of foreclosure that said real estate has been abandoned by the owners and those persons personally liable under the Mortgage at the time of such foreclosure, and (ii) the Mortgagee waives any rights to a deficiency judgment against the Mortgagor or his successors in interest in the foreclosure action, all to be consisted with the provisions of Chapter 628 of the Code of Iowa. Nothing contained herein shall obligate Mortgagee to so waive its rights to such a deficiency judgment in either case, and the decision to do so shall be solely at the discretion of Mortgagee. By its execution hereof, Mortgagor further hereby agrees that, notwithstanding anything to the contrary contained herein, Mortgagee may, at Mortgagee's sole discretion, elect to foreclose upon the Mortgaged Premises without redemption pursuant to the provisions of Section 654.20 of the Code of Iowa and may elect, at Mortgagee's sole discretion, to so foreclose with or without a waiver of its rights to a deficiency judgment. (d) Appointment of Receiver. Mortgagee shall, as a matter of right, without notice and without giving bond to Mortgagor or anyone claiming by, under or through it, and without regard to the solvency or insolvency of Mortgagor or the then value of the Mortgaged Premises, be entitled to have a receiver appointed of all or any part of the Mortgaged Premises and the rents, issues and profits thereof, with such power as the court making such appointment shall confer, and Mortgagor hereby consents to the appointment of such receiver and shall not oppose any such appointment. Any such receiver may, to the extent permitted under applicable law, without notice, enter upon and take possession of the Mortgaged Premises or any part thereof by force, summary proceedings, ejectment or otherwise, and may remove Mortgagor or other persons and any and all property therefrom, and may hold, operate and manage the same and receive all earnings, income, rents, issues and proceeds accruing with respect thereto or any part thereof, whether during the pendency of any foreclosure or until any right of redemption shall expire or otherwise. (e) Taking Possession, Collecting Rents, Etc. Mortgagee may enter and take possession of the Mortgaged Premises or any part thereof and manage, -17- 18 operate, insure, repair and improve the same and take any action which, in Mortgagee's reasonable judgment, is necessary or proper to conserve the value of the Mortgaged Premises. Mortgagee may also take possession of, and for these purposes use, any and all personal property contained in the Mortgaged Premises and used in the operation, rental or leasing thereof or any part thereof. Mortgagee shall be entitled to collect and receive all earnings, revenues, rents, issues and profits of the Mortgaged Premises or any part thereof (and for such purpose Mortgagor does hereby irrevocably constitute and appoint Mortgagee its true and lawful attorney-in-fact for it and in its name, place and stead to receive, collect and receipt for all of the foregoing, Mortgagor irrevocably acknowledging that any payment made to Mortgagee hereunder shall be a good receipt and acquittance against Mortgagor to the extent so made) and to apply same to the reduction of the indebtedness hereby secured. The right to enter and take possession of the Mortgaged Premises and use any personal property therein, to manage, operate and conserve the same, and to collect the rents, issues and profits thereof, shall be in addition to all other rights or remedies of Mortgagee hereunder or afforded by law, and may be exercised concurrently therewith or independently thereof. The reasonable expenses (including any receiver's fees, counsel fees, costs and agent's compensation) incurred pursuant to the powers herein contained shall be so much additional indebtedness hereby secured which Mortgagor promises to pay upon demand together with interest at the Default Rate. Mortgagee shall not be liable to account to Mortgagor for any action taken pursuant hereto other than to account for any rents actually received by Mortgagee. Without taking possession of the Mortgaged Premises, Mortgagee may, in the event the Mortgaged Premises becomes vacant or is abandoned, take such steps as it deems appropriate to protect and secure the Mortgaged Premises (including hiring watchmen therefor) and all reasonable costs incurred in so doing shall constitute so much additional indebtedness hereby secured payable upon demand with interest thereon at the Default Rate. 20. Waiver of Right to Redeem From Sale - Waiver of Appraisement, Valuation, Etc. Mortgagor shall not and will not apply for or avail itself of any appraisement, valuation, stay, extension or exemption laws, or any so-called "Moratorium Laws", now existing or hereafter enacted in order to prevent or hinder the enforcement or foreclosure of this Mortgage, but hereby waives the benefit of such laws. Mortgagor for itself and all who may claim through or under it waives any and all right to have the property and estates comprising the Mortgaged Premises marshalled upon any foreclosure of the lien hereof and agrees that any court having jurisdiction to foreclose such lien may order the Mortgaged Premises sold as an entirety. In the event of any sale made under or by virtue of this instrument, the whole of the Mortgaged Premises may be -18- 19 sold in one parcel as an entirety or in separate lots or parcels at the same or different times, all as the Mortgagee may determine. Mortgagee or any Secured Creditor shall have the right to become the purchaser at any sale made under or by virtue of this instrument; and Mortgagee or any Secured Creditor so purchasing at any such sale shall have the right to be credited upon the amount of the bid made therefor by Mortgagee or such Secured Creditor with the amount payable to Mortgagee or such Secured Creditor, as the case may be, out of the net proceeds of such sale, and upon compliance with the terms of sale, may hold, retain and possess and dispose of such property in its own absolute right without further accountability. In the event of any such sale, the Notes, the Reimbursement Obligations and the other indebtedness hereby secured, if not previously due, shall be and become immediately due and payable without demand or notice of any kind. Mortgagor hereby waives any and all rights of redemption prior to or from sale under any order or decree of foreclosure pursuant to rights herein granted, on behalf of Mortgagor, and each and every person acquiring any interest in, or title to the Mortgaged Premises described herein subsequent to the date of this Mortgage, and on behalf of all other persons to the extent permitted by applicable law. 21. Costs and Expenses of Foreclosure. In any suit to foreclose the lien hereof there shall be allowed and included as additional indebtedness in the decree for sale all reasonable expenditures and expenses which may be paid or incurred by or on behalf of Mortgagee or any Secured Creditor for attorney's fees, appraiser's fees, outlays for documentary and expert evidence, stenographic charges, publication costs and costs (which may be estimated as to items to be expended after the entry of the decree) of procuring all such abstracts of title, title searches and examination, guarantee policies, Torrens certificates and similar data and assurances with respect to title as Mortgagee or any Secured Creditor may deem to be reasonably necessary either to prosecute any foreclosure action or to evidence to the bidder at any sale pursuant thereto the true condition of the title to or the value of the Mortgaged Premises, all of which expenditures shall become so much additional indebtedness hereby secured which Mortgagor agrees to pay and all of such shall be immediately due and payable with interest thereon from the date of expenditure until paid at the Default Rate. 22. Application of Proceeds. The proceeds and avails of the Mortgaged Premises, including without limitation the proceeds of any foreclosure sale of the Mortgaged Premises or of any sale of property pursuant to Section l9(b) hereof, shall, when received by Mortgagee in cash or its equivalent, be applied by the Mortgagee as set forth in Section 3.5 of the Credit Agreement. Mortgagor shall remain liable to Mortgagee and the Secured Creditors for any deficiency. Any surplus remaining after the full payment and satisfaction of the foregoing shall be returned to Mortgagor or to whomsoever a court of competent jurisdiction shall determine to be entitled thereto. -19- 20 23. Deficiency Decree. If at any foreclosure proceeding the Mortgaged Premises shall be sold for a sum less than the total amount of indebtedness for which judgment is therein given, the judgment creditor shall be entitled to the entry of a deficiency decree against Mortgagor and against the property of Mortgagor for the amount of such deficiency; and Mortgagor does hereby irrevocably consent to the appointment of a receiver for the Mortgaged Premises and the property of Mortgagor and of the rents, issues and profits thereof after such sale and until such deficiency decree is satisfied in full. 24. Mortgagee's Remedies Cumulative - No Waiver. No remedy or right of Mortgagee shall be exclusive of but shall be cumulative and in addition to every other remedy or right now or hereafter existing at law or in equity or by statute or otherwise. No delay in the exercise or omission to exercise any remedy or right accruing on any default shall impair any such remedy or right or be construed to be a waiver of any such default or acquiescence therein, nor shall it affect any subsequent default of the same or a different nature. Every such remedy or right may be exercised concurrently or independently, and when and as often as may be deemed expedient by Mortgagee. 25. Mortgagee Party to Suits. Mortgagee shall have the power and authority (but not the duty) to institute and maintain any suits and proceedings as Mortgagee may deem advisable (a) to prevent any impairment of the Mortgaged Premises by any acts which may be unlawful or which violate the terms of this Mortgage, (b) to preserve or protect its interest in the Mortgaged Premises or (c) to restrain the enforcement of or compliance with any legislation or other governmental enactment, rule or order that may be unconstitutional or otherwise invalid, if the enforcement of or compliance with such enactment, rule or order might impair the security hereunder or be prejudicial to Mortgagee's or Secured Creditor's interest. If Mortgagee or any Secured Creditor shall be made a party to or shall intervene in any action or proceeding affecting the Mortgaged Premises or the title thereto or the interest of Mortgagee or any Secured Creditor under this Mortgage (including probate and bankruptcy proceedings), or if Mortgagee or any Secured Creditor employs an attorney to collect any or all of the indebtedness hereby secured or to enforce any of the terms hereof or realize hereupon or to protect the lien hereof, or if Mortgagee or any Secured Creditor shall incur any costs or expenses in preparation for the commencement of any foreclosure proceedings or for the defense of any threatened suit or proceeding which might affect the Mortgaged Premises or the security hereof, whether or not any such foreclosure or other suit or proceeding shall be actually commenced, then in any such case, Mortgagor agrees to pay to Mortgagee or such Secured Creditor, as the case may be, immediately and without demand, all reasonable costs, charges, expenses and attorney's fees incurred by Mortgagee or such -20- 21 Secured Creditor in any such case, and the same shall constitute so much additional indebtedness hereby secured payable upon demand with interest at the Default Rate. 26. Modifications Not to Affect Lien. Mortgagee, without notice to anyone (except the Secured Lenders), and without regard to the consideration, if any, paid therefor, or the presence of other liens on the Mortgaged Premises, may at the direction of the Secured Lenders release any part of the Mortgaged Premises or any person liable for any of the indebtedness hereby secured, may extend the time of payment of any of the indebtedness hereby secured and may grant waivers or other indulgences with respect hereto and thereto, and may agree with Mortgagor to modifications to the terms and conditions contained herein or otherwise applicable to any of the indebtedness hereby secured (including modifications in the rates of interest applicable thereto), without in any way affecting or impairing the liability of any party liable upon any of the indebtedness hereby secured or the priority of the lien of this Mortgage upon all of the Mortgaged Premises not expressly released, and any party acquiring any direct or indirect interest in the Mortgaged Premises shall take same subject to all of the provisions hereof. 27. Revolving Credit Loan. This Mortgage is given to secure, among other things, a revolving credit loan and shall secure not only presently existing indebtedness under the Credit Agreement but also future advances, or otherwise, as are made within twenty (20) years from the date hereof, to the same extent as if such future advances were made on the date of the execution of this Mortgage, although there may be no advance made at the time of execution of this Mortgage and although there may be no indebtedness hereby secured outstanding at the time any advance is made. The lien of this Mortgage shall be valid as to all indebtedness hereby secured, including future advances, from the time of its filing for record in the recorder's or registrar's office of the county in which the Mortgaged Premises are located. The total amount of indebtedness hereby secured may increase or decrease from time to time, but the total unpaid balance of indebtedness hereby secured (including disbursements which Mortgagee may make under this Mortgage, the Credit Agreement or any other documents related thereto) at any one time outstanding shall not exceed a maximum principal amount of One Hundred Million Dollars ($100,000,000) plus interest thereon and any disbursements made for payment of taxes, special assessments or insurance on the Mortgaged Premises and interest on such disbursements (all such indebtedness being hereinafter referred to as the "maximum amount secured hereby"). This Mortgage shall be valid and have priority over all subsequent liens and encumbrances, including statutory liens, excepting solely taxes and assessments levied on the Mortgaged Premises, to the extent of the maximum amount secured hereby. -21- 22 28. Notices. All communications provided for herein shall be in writing (including cable, telecopy or telex) and shall be given to the relevant party at its address, telecopier number or telex number set forth below, in the case of the Mortgagor or the Mortgagee, or on the signature pages of the Credit Agreement, in the case of the Lenders, or such other address, telecopier number or telex number as such party may hereafter specify by notice to the Mortgagor and the Mortgagee given by United States certified or registered mail, by telecopy or by other telecommunication device capable of creating a written record of such notice and its receipt: Morton Metalcraft Co. 1021 West Birchwood Morton, Illinois 61550-0429 Attention: Chief Financial Officer Telephone: (309) 266-7176 Telecopy: (309) 263-1841 Harris Trust and Savings Bank 111 West Monroe Street Chicago, Illinois 60690 Attention: Richard Michalek Telephone: (312) 461-2272 Telecopy: (312) 461-2591 Each such notice, request or other communication shall be effective (i) if given by telecopier, when such telecopy is transmitted to the telecopier number specified herein and a confirmation of such telecopy has been received by the sender, (ii) if given by telex, when such telex is transmitted to the telex number specified herein and the answer back is received by sender, (iii) if given by mail, five (5) days after such communication is deposited in the mail, certified or registered with return receipt requested, addressed as aforesaid or (iv) if given by any other means, when delivered at the addresses specified herein. 29. Compliance with Environmental Laws. Mortgagor represents and warrants that, to the best of Mortgagor's knowledge, except as heretofore disclosed in writing to the Mortgagee, the Mortgaged Premises complies in all material respects with all applicable federal, state, regional, county or local laws, statutes, rules, regulations or ordinances (collectively, "Environmental Laws"), including, but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. SS.9601 et seq., the Resource Conservation and Recovery Act of 1976, as amended by the -22- 23 Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. SS.6901 et seq., the Federal Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33 U.S.C. SS.1251 et seq., the Toxic Substances Control Act of 1976, 15 U.S.C. SS.2601 et seq., the Emergency Planning and Community Right-to-Know Act of 1986, 42 U.S.C. SS.11001 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. SS.7401 et seq., the National Environmental Policy Act of 1975, 42 U.S.C. SS.4321, the Rivers and Harbours Act of 1899, 33 U.S.C. SS.401 et seq., the Occupational Safety and Health Act of 1970, 29 U.S.C. SS.651 et seq., and the Safe Drinking Water Act of 1974, as amended, 42 U.S.C. SS.300(F) et seq., and all rules, regulations and guidance documents promulgated or published thereunder, and any state, regional, county or local statute, law, rule, regulation or ordinance relating to public health, safety or the environment, including, without limitation, relating to releases, discharges, emissions or disposals to air, water, land or groundwater, to the withdrawal or use of groundwater, to the use, handling or disposal of polychlorinated biphenyls (PCBs), asbestos or urea formaldehyde, to the treatment, storage, disposal or management of hazardous substances (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), to exposure to toxic, hazardous, or other controlled, prohibited or regulated substances, to the transportation, storage, disposal, management or release of gaseous or liquid substances, and any regulation, order, injunction, judgment, declaration, notice or demand issued thereunder. 30. Condition of Property. Mortgagor warrants and represents that, to the best of its knowledge, except as heretofore disclosed in writing to the Mortgagee, the Mortgaged Premises, including all personal property, is free from contamination, that there has not been thereon a release, discharge or emission, or threat of release, discharge or emission, of any hazardous substance, gas or liquid (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), or any other substance, gas or liquid, which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to safety, health or the environment, and that the Mortgaged Premises does not contain, or is not affected by, except to the extent not in violation of Environmental Laws: (i) asbestos, (ii) urea formaldehyde foam insulation, (iii) polychlorinated biphenyls (PCBs), (iv) underground storage tanks, (v) landfills, land disposals or dumps. 31. Notice of Environmental Problem. Except as heretofore disclosed in writing to the Mortgagee, Mortgagor represents and warrants that to the best of its knowledge it has not given, nor should it give, nor has it received, any notice, letter, citation, order, warning, complaint, inquiry, claim or demand that: (i) Mortgagor has violated, or is about to violate, any federal, state, regional, county or local environmental, health or safety statute, law, rule, regulation, ordinance, judgment or order on the Mortgaged Premises; (ii) there has been a release, or there is threat of release, of hazardous substances (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons) from the Mortgaged Premises; (iii) Mortgagor may be or is liable, in whole or in part, for the costs or cleaning up, remediating or responding to a release of -23- 24 hazardous substances (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons) on the Mortgaged Premises; (iv) any of the Mortgagor's property or assets are subject to a lien in favor of any governmental body for any liability, costs or damages, under federal, state or local environmental law, rule or regulation arising from or costs incurred by such governmental entity in response to a release of a hazardous substance (including, without limitation, petroleum, its by-products or derivatives, or other hydrocarbons). In the event that Mortgagor receives any notice of the type described in this Section, Mortgagor shall promptly provide a copy to Mortgagee, and in no event, later than fifteen (15) days from Mortgagor's receipt or submission thereof. 32. Use of Property and Facilities. Mortgagor represents and warrants that to the best of its knowledge, except as heretofore disclosed in writing to the Mortgagee, it has never in the past engaged in, and agrees that in the future it shall not conduct, any business, operations or activity on the Mortgaged Premises, or employ or use the personal property or facilities, to manufacture, use, generate, treat, store, transport or dispose of any hazardous substance (including, without limitation, petroleum, its derivatives or by-products, or other hydrocarbons), or any other substance which is prohibited, controlled or regulated under applicable law, or which poses a threat or nuisance to safety, health or the environment, including, without limitation, any business, operation or activity which would cause Mortgagor, its property or facilities, to be in violation of the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. SS.6901 et seq., the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. SS.9601 et seq., the Clean Air Act of 1966, as amended, 42 U.S.C. SS.7401 et seq., or any similar state, county, regional or local statute, law, regulation, rule or ordinance, including, without limitation, any state statute providing for financial responsibility for cleanup for the release or threatened release of substances provided for thereunder. The provisions of this Section shall apply to all real and personal property, without limitation, owned or controlled by Mortgagor or its subsidiaries. 33. Partial Invalidity. All rights, powers and remedies provided herein are intended to be limited to the extent necessary so that they will not render this Mortgage invalid, unenforceable or not entitled to be recorded, registered or filed under any applicable law. If any term of this Mortgage shall be held to be invalid, illegal or -24- 25 unenforceable, the validity and enforceability of the other terms of this Mortgage shall in no way be affected thereby. 34. Agent. Mortgagee has been appointed as agent pursuant to the Credit Agreement. In acting under or by virtue of this Mortgage, Mortgagee shall be entitled to all the rights, authority, privileges and immunities provided in Section 10 of the Credit Agreement, all of which provisions of said Section 10 are incorporated by reference herein with the same force and effect as if set forth herein. Mortgagee hereby disclaims any representation or warranty to Secured Creditors concerning the perfection of the security interest granted hereunder or the value of the Mortgaged Premises. 35. Restrictions on Secured Creditors' Right to Enforce. No Secured Creditor shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure of this Mortgage or for the execution of any trust or power hereof or for the appointment of a receiver, or for the enforcement of any other remedy under or upon this Mortgage; it being understood and intended that no one or more of the Secured Creditors shall have any right in any manner whatsoever to affect, disturb or prejudice the lien of this Mortgage by its or their action or to enforce any right hereunder, and that all proceedings at law or in equity shall be instituted, had and maintained by the Mortgagee in the manner herein provided and for the ratable benefit of the Secured Creditors. 36. Successors and Assigns. Whenever any of the parties hereto is referred to, such reference shall be deemed to include the successors and assigns of such party; and all the covenants, promises and agreements in this Mortgage contained by or on behalf of Mortgagor, or by or on behalf of Mortgagee or Secured Creditors, shall bind and inure to the benefit of the respective successors and assigns of such parties, whether so expressed or not. Without limiting the generality of the foregoing, and subject to the provisions of Sections 12.14 and 12.15 of the Credit Agreement, any Secured Creditor may assign or otherwise transfer any indebtedness held by it secured by this Mortgage to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Secured Creditor herein or otherwise, subject, however, to the provisions of the Credit Agreement. 37. Default Rate. For purposes of this Mortgage, "Default Rate" shall mean the rate per annum as set forth in Section 2.1 of the Credit Agreement. 38. Liens Absolute, Etc. Mortgagor acknowledges and agrees that the lien and security interest hereby created and provided for are absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee or any other holder of any of the indebtedness hereby secured, and without -25- 26 limiting the generality of the foregoing, the lien and security hereof shall not be impaired by any acceptance by Mortgagee or any other holder of any of the indebtedness hereby secured of any other security for or guarantors upon any of the indebtedness hereby secured or by any failure, neglect or omission on the part of Mortgagee or any other holder of any of the indebtedness hereby secured to realize upon or protect any of the indebtedness hereby secured or any collateral or security therefor. The lien and security interest hereof shall not in any manner be impaired or affected by (and Mortgagee, without notice to anyone, is hereby authorized to make from time to time) any sale, pledge, surrender, compromise, settlement, release, renewal, extension, indulgence, alteration, substitution, exchange, change in, modification or disposition of any of the indebtedness hereby secured, or of any collateral or security therefor, or of any guaranty thereof, or of any instrument or agreement setting forth the terms and conditions pertaining to any of the foregoing. The Secured Creditors may at their discretion at any time grant credit to the Borrower without notice to Mortgagor in such amounts and on such terms as such Secured Creditors may elect without in any manner impairing the lien and security interest created and provided for herein. In order to realize hereon and to exercise the rights granted Mortgagee hereby and under applicable law, there shall be no obligation on the part of Mortgagee or any other holder of any of the indebtedness hereby secured at any time to first resort for payment to the Borrower or to any guaranty of any of the indebtedness hereby secured or any portion thereof or to resort to any other collateral, security, property, liens or any other rights or remedies whatsoever, and Mortgagee shall have the right to enforce this Mortgage irrespective of whether or not other proceedings or steps seeking resort to or realization upon or from any of the foregoing are pending. 39. Direct and Primary Security - No Subrogation. The lien and security interest herein created and provided for stand as direct and primary security for the Notes as well as for any of the other indebtedness hereby secured. No application of any sums received by Mortgagee in respect of the Mortgaged Premises or any disposition thereof to the reduction of the indebtedness hereby secured or any part thereof shall in any manner entitle Mortgagor to any right, title or interest in or to the indebtedness hereby secured or any collateral or security therefor, whether by subrogation or otherwise, unless and until all indebtedness hereby secured has been fully paid and satisfied and any commitment of the Secured Creditors to extend credit to Mortgagor or to the Borrower shall have expired. 40. Multisite Real Estate Transaction. Mortgagor acknowledges that this Mortgage is one of a number of other mortgages and deeds of trusts and other security documents dated of even date herewith (such mortgages, deeds of trust and other security documents dated of even date herewith and any supplements or amendments thereto and -26- 27 any other mortgages, deeds of trust or security documents securing the indebtedness hereby secured are collectively called the "Other Mortgages") which secure the indebtedness hereby secured. Mortgagor agrees that the lien of this Mortgage shall be absolute and unconditional and shall not in any manner be affected or impaired by any acts or omissions whatsoever of Mortgagee and, without limiting the generality of the foregoing, the lien hereof shall not be impaired by any acceptance by Mortgagee of any security for or guarantors upon any of the indebtedness hereby secured, or by any failure, neglect or omission on the part of the Mortgagee to realize upon or protect any of the indebtedness hereby secured or any collateral security therefor including the Other Mortgages. The lien hereof shall not in any manner be impaired or affected by any release (except as to the property released) sale, pledge, surrender, compromise, settlement, renewal, extension, indulgence, alteration, changing, modification or disposition of any of the indebtedness hereby secured or of any of the collateral security therefor, including without limitation the Other Mortgages or of any guarantee thereof, and Mortgagee may at its discretion foreclose, exercise any power of sale, or exercise any other remedy available to it under any or all of the Other Mortgages without first exercising or enforcing any of its rights and remedies hereunder. Such exercise of Mortgagee's rights and remedies under any or all of the Other Mortgages shall not in any manner impair the indebtedness hereby secured or the lien of this Mortgage and any exercise of the rights or remedies of Mortgagee hereunder shall not impair the lien of any of the Other Mortgages or any of Mortgagee's rights and remedies thereunder. The undersigned specifically consents and agrees that Mortgagee may exercise its rights and remedies hereunder and under the Other Mortgages separately or concurrently and in any order that it may deem appropriate. 41. Headings. The headings in this instrument are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof. 42. Changes, Etc. This instrument and the provisions hereof may be changed, waived, discharged or terminated only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. 43. Notice. This mortgage secures credit in the principal amount of $90,000,000. Loans and advances up to this amount, together with interest, are senior to indebtedness to other creditors under subsequently recorded or filed mortgages and liens. The $90,000,000 credit referred to in this Section 43 is the principal amount of such credit and this Mortgage also secures all other indebtedness hereby secured in addition to that part of the indebtedness hereby secured which represents the principal amount of such credit. -27- 28 44. Governing Law. The creation of this Mortgage, the perfection of the lien or security interest in the Mortgaged Premises, and the rights and remedies of the Mortgagee with respect to the Mortgaged Premises, as provided herein and by the laws of the state in which the Mortgaged Premises is located, shall be governed by and construed in accordance with the internal laws of the state in which the Mortgaged Premises is located without regard to principles of conflicts of law. OTHERWISE, TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE MORTGAGE, THE CREDIT AGREEMENT, THE NOTES, THE LETTERS OF CREDIT AND ALL OTHER OBLIGATIONS OF MORTGAGOR SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. -28- 29 IN WITNESS WHEREOF, Mortgagor has caused these presents to be signed the day and year first above written. MID-CENTRAL PLASTICS, INC. By Its --------------------------------------- --------------------- (Type or Print Name) -29- 30 STATE OF _______ ) ) SS. COUNTY OF ______ ) On this ___ day of _____________________, 1998, before me, the undersigned, a Notary Public in and for the State of ___________________, personally appeared __________________________________ to me personally known, who being by me duly sworn did say that he is the _____________________________ of the corporation executing the within and foregoing instrument; that no seal has been procured by the corporation; that the instrument was signed on behalf of the corporation by authority of its Board of Directors; and that _________________________ as officer acknowledged the execution of the foregoing instrument to be the voluntary act and deed of the corporation, by it and by him voluntarily executed. --------------------------------------- Notary Public in and for the State of ------------ (Notary Seal) Commission Expires: - ------------------------------ EX-99.1 10 EX-99.1 1 EXHIBIT 99.1 MORTON INDUSTRIAL GROUP COMPLETES ACQUISITION OF MID-CENTRAL PLASTICS, INC. MORTON, IL - MAY 29, 1998 - Morton Industrial Group, Inc. (OTC BB:MGRP) today announced that it has completed the acquisition of Mid-Central Plastics, Inc. ("Mid Central"), a privately held company based in West Des Moines, Iowa. Mid Central, an ISO 9002 registered injection molder, specializes in highly engineered products utilizing state-of-the-art injection molding technology. Injection molded parts represent the largest percentage of composite material used by the Construction, Agricultural and Industrial Equipment Manufacturers. William D. Morton, Chairman, President and Chief Executive Officer of Morton Industrial Group, Inc., stated: "It is a great pleasure to welcome the associates of Mid Central Plastics, Inc. to Morton Industrial Group's Contract Plastics Division. With the acquisition of Mid-Central and recently acquired Carroll George Inc., a vacuum former of plastic parts and sub assemblies, Morton has now established a presence in the plastics business." Morton Industrial Group's Contract Plastics Division provides full service injection Molding and Vacuum Formed parts and sub-assemblies for the Construction, Agricultural, and Industrial Equipment Manufacturers operating from over 225,000 square foot of manufacturing capacity with 500 associates. Full service plastics production includes custom injection molding, vacuum forming, die cutting and composite cutting and routing. Other services include design, prototypes, tooling development and management, product assembly and just-in-time delivery to the customers' assembly lines. Morton Industrial Group, Inc. ("Morton" or the "Company") is a supplier of both high quality metal fabricated and plastic component parts and subassemblies for the off-highway Construction, Agricultural and Industrial Equipment markets. Its annual revenues are approaching $175 million. It provides large original equipment manufacturers (OEMs) with a wide range of services including design, prototype development, precision tool making and production of both metal fabricated and plastic component parts. Additional services provided by Morton include painting, subassembly, packaging, warehousing and just-in-time delivery to customers' production lines. Over a five-year period, from 1993 to 1997, Morton's sales have grown at an average annual compounded rate of approximately 25 percent. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This press release contains forward looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of 1934), including, but not limited to, statements related to Morton's beliefs, expectations, or intentions. These statements involve risk and uncertainties that may cause Morton's actual results to differ significantly from those expected, suggested, or projected. Factors that could contribute to such differences include, but are not limited to, competition with other fabricators; the risks associated with Morton's acquisition strategy, including unanticipated problems, difficulties in integrating acquired businesses, diversion of management's attention from daily operations, possible increased interest costs, and possible adverse effects on earning resulting from increased goodwill amortization; introduction of new technologies that required significant capital expenditures; and general economic and business conditions. EX-99.2 11 EX-99.2 1 EXHIBIT 99.2 MORTON INDUSTRIAL GROUP, INC. ACQUIRES SMP STEEL CORPORATION; FOURTH ACQUISITION SINCE BEGINNING OF YEAR MORTON, IL - JUNE 2, 1998 - Morton Industrial Group, Inc., (OTC BB:MGRP) today announced that it has acquired SMP Steel Corporation ("SMP), a privately held company based in South Carolina. SMP is a manufacturer of precision sheet metal components, enclosures, and assemblies for leading southeastern original equipment manufacturers (OEM's). Its major capabilities include laser cutting, punching, folding, forming, and welding. Other activities include shearing, sawing, deburring, and painting. SMP produces primarily carbon steel and stainless steel products but also handles a limited amount of aluminum work. William D. Morton, Chairman, President, and Chief Executive Officer of Morton Industrial Group, Inc., stated: "We are pleased to welcome our colleagues at SMP Steel Corporation as members of our Morton Industrial Group family. This acquisition is another example of our commitment ot our goal of owning and operating highly respected Contract Manufacturing suppliers serving the Construction, Agricultural and Industrial Equipment Manufacturers." Morton Industrial Group has not completed four acquisitions since the beginning of the year. As a result of these acquisitions, Morton has increased the capacity and capabilities of its Contract Fabrication Division, established its Contract Plastics Division, increased its physical plant by over 4400,000 square feet, added approximately 675 new associates and added over $70 million in incremental revenues. Morton Industrial Group, Inc. ("Morton" or the "Company") is a supplier of both high quality metal fabricated and plastic component parts and subassemblies for the off-highway Construction, Agricultural and Industrial Equipment markets. Its annual revenues are approaching $175 million. It provides large original equipment manufacturers (OEMs) with a wide range of services including design, prototype development, precision tool making and production of both metal fabricated and plastic component parts. Additional services provided by Morton include painting, subassembly, packaging, warehousing and just-in-time delivery to customers' production lines. Over a five-year period, from 1993 to 1997, Morton's sales have grown at an average annual compounded rate of approximately 25 percent. "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: This press release contains forward looking statements (within the meaning of Section 27A of the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of 1934), including, but not limited to, statements related to Morton's beliefs, expectations, or intentions. These statements involve risk and uncertainties that may cause Morton's actual results to differ significantly from those expected, suggested, or projected. Factors that could contribute to such differences include, but are not limited to, competition with other fabricators; the risks associated with Morton's acquisition strategy, including unanticipated problems, difficulties in integrating acquired businesses, diversion of management's attention from daily operations, possible increased interest costs, and possible adverse effects on earning resulting from increased goodwill amortization; introduction of new technologies that required significant capital expenditures; and general economic and business conditions. -----END PRIVACY-ENHANCED MESSAGE-----