10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Fiscal Year Ended December 31, 2003
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period From           to

Commission file number 0-13198

Morton Industrial Group, Inc.

www.mortongroup.com

(Exact name of registrant as specified in its charter)

Georgia (State or other jurisdiction of Incorporation or organization)	38-0811650 (I.R.S. Employer Identification No.)
1021 W. Birchwood, Morton, Illinois 61550	(309) 266-7176
(Address of principal executive offices)	(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to section 12(g) of the Act:

Class A Common Stock, par value $.01 per share

(Title of class)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     þ

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     þ

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).     Yes o          No þ

      The aggregate market value of the common stock held by non-affiliates of the registrant (based upon the last reported sale price on the Nasdaq Small Cap Market) on the last day business day of the registrant’s most recently completed second fiscal quarter was approximately $850,000.

      As of March 19, 2004, the aggregate market value of the Class A Common Stock held by non-affiliates was approximately $2,000,000 and there were 4,560,547 shares of Class A Common Stock and 100,000 shares of Class B Common Stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the definitive Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held in June 2004 are incorporated by reference into Part III hereof.

TABLE OF CONTENTS

PART I
	Item 1. Business
	Item 2. Properties
	Item 3. Legal Proceedings
	Item 4. Submission of Matters to Vote of Security Holders
PART II
	Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.
	Item 6. Selected Financial Data
	Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 7A. Quantitative and Qualitative Disclosures about Market Risk
	Item 8. Financial Statements and Supplementary Data
	Item 9A. Controls and Procedures
PART III
	Item 10. Directors and Executive Officers of the Registrant.
	Item 11. Executive Compensation.
	Item 12. Security Ownership of Certain Beneficial Owners and Management.
	Item 13. Certain Relationships and Related Transactions.
	Item 14. Principal Accountant Fees and Services
PART IV
	Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sixth Amendment to Credit Agreement
Credit Agreement
Note and Warrant Purchase Agreement
Investor Rights Agreement
Annual Report
Subsidiaries of Registrant
Consent
Certification
Certification
Certification
Certification

      “Safe Harbor” Statement Under The Private Securities Litigation Reform Act Of 1995: This annual report contains “forward looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements containing the words “anticipates,” “believes,” “intends,” “estimates,” “expects,” “projects” and similar words. The forward looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results to be materially different from any future results expressed or implied by such forward looking statements. Such factors include, among others, the following: the loss of certain significant customers; the cyclicality of our construction and agricultural sales; the availability of working capital; general economic and business conditions, both nationally and in the markets in which we operate or will operate; competition; and other factors referenced in the Company’s reports and registration statements filed with the Securities and Exchange Commission. Given these uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements contained herein speak only of the Company’s expectation as of the date of this annual report. We disclaim any obligations to update any such factors or publicly announce the result of any revisions to any of the forward looking statements contained herein to reflect future events or developments.

PART I

Item 1. Business

General Development of Business

      On January 20, 1998, Morton Metalcraft Holding Co. and its subsidiaries (“Morton”) merged (the “Merger”) with MLX Corp. (“MLX”), with MLX being the surviving corporation. As a result of the Merger, Morton ceased to exist as a separate corporate entity and MLX amended its Articles of Incorporation to change the corporate name of MLX to Morton Industrial Group, Inc. (the Company). Morton was engaged in the business of manufacturing fabricated metal components for construction and agricultural original equipment manufacturers and other industrial customers.

      On April 15, 1999, we acquired from Worthington Custom Plastics three manufacturing facilities that produced plastic components for industrial original equipment manufacturers. The Worthington acquisition expanded our plastic product offerings to include appliance parts, electronics housings and other injection molded and thermoformed plastic products. These plastics facilities operated as Morton Custom Plastics, LLC (MCP, LLC). On November 1, 2002, MCP, LLC, filed for protection as debtor-in-possession under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Before filing, MCP, LLC had negotiated the terms of an agreement for sale of substantially all of its assets to Wilbert, Inc., pursuant to an Asset Purchase Agreement. Under the agreement, Wilbert, Inc. was also to assume the liabilities of MCP, LLC under certain of their contracts and leases. This sales transaction closed on December 24, 2002, with the cash consideration applied to the reduction of MCP, LLC’s senior secured debt. The Company also operated an injection molding business in Iowa until that operation was sold in June, 2003. These sales allowed the Company to focus on its core competency, manufacturing fabricated sheet metal components.

      The Company operates its metal fabrication operations in five facilities in Illinois, North Carolina and South Carolina.

Narrative Description of Business

Business

Overview

      We are a contract manufacturer of highly engineered metal components and subassemblies for industrial, construction, agricultural and recreational vehicle original equipment manufacturers (“OEM’s”). Our metal products include cabs, engine enclosures, panels, platforms, frames and complex weldments used in backhoes, excavators, tractors, motor homes, beverage coolers and similar industrial equipment. Our largest customers

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include Deere & Co. (“Deere”) and Caterpillar Inc. (“Caterpillar”) who together generated 88% of our 2003 net sales. Our five manufacturing facilities are located in the Midwestern and Southeastern United States in close proximity to their customers. We have no foreign operations.

Markets

      Customers use our products in industrial, construction, agricultural and recreational vehicle equipment. As OEM’s in these industries have intensified their focus on core competencies, they have increasingly outsourced more of their production parts to reduce costs. To effectively manufacture products for OEMs, suppliers must invest in technologically advanced equipment, develop in-house design capabilities, and coordinate manufacturing and product delivery with their customers.

      Historically, our largest customers, Deere and Caterpillar, have been supplied by a large number of local suppliers that would each produce a small number of products. As these OEMs have increased the complexity of their equipment and become more dependent on component and subassembly suppliers, they have reduced the size of their supplier base and have established close relationships with a smaller number of sophisticated suppliers who can provide a range of services, including design engineering, prototyping, sophisticated quality systems, and just-in-time delivery. The high levels of service necessary to serve these customers, coupled with significant tooling investments, have resulted in the sole-sourcing of many products rather than dual or multi-sourcing. Currently, we are the sole-source provider of over 85% of the products that we supply to our customers. As these customers continue to reduce the size of their supplier base and outsource a growing percentage of their product needs, we expect to become the sole-source provider on an increasing number of products.

      Virtually all of our customers are located in the United States, and we do not have material sales to foreign customers.

Industrial Equipment

      We produce a range of components and subassemblies for equipment used in a variety of industrial applications. Our products are used in store fixtures and power generators. Customers in the industrial equipment area generally serve stable or growth markets, and these customers include Caterpillar and Hallmark. Industrial equipment products account for approximately 22% of our 2003 net sales.

Construction Equipment

      The $18 billion U.S. construction equipment industry includes construction, earth moving and forestry equipment, as well as some material handling equipment, lifts, off-highway trucks and a variety of machines for specialized industrial applications. Caterpillar and Deere dominate the U.S. construction equipment industry, and together accounted for approximately 50% of total unit sales in 2003. We supply metal components and subassemblies, such as engine enclosures, cabs, platforms, frames and complex weldments. Our customers use these products in backhoes, excavators, wheel loaders, skid-steer loaders, lifts and similar construction equipment. Our sales per construction equipment vehicle range from $500 to $2,500. Construction equipment products account for approximately 65% of our 2003 net sales.

Agricultural Equipment

      The $15 billion U.S. agricultural equipment industry includes large, relatively expensive products such as tractors, combines and other farming equipment. Deere and Caterpillar accounted for approximately 35% of total agricultural equipment unit sales in 2003. We supply metal components and subassemblies such as steps, grills, and landing decks. Our sales per agricultural equipment vehicle range from $200 to $3,000. Agricultural equipment products account for approximately 13% of our 2003 net sales.

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Products and Services

Products

      Our investments in modern equipment and systems have allowed us to produce a broad line of highly engineered components and subassemblies. We strive to meet customers’ needs for design engineering, prototyping, product fabrication and just-in-time delivery.

Sheet Metal Fabrication

      Our sheet metal fabrication capabilities include laser and plasma cutting, forming, punching, welding, painting and assembly processes. Our sheet metal fabrication processes operate on information created by CAD/ CAM software, utilize optic laser cutting machines to cut parts at high speeds and use robotic welders to complement manual welding operations. Our painting operations are capable of producing the wide variety of paint finishes required by customers.

      Fabricated Sheet Metal Products Include:

•  Sheet Metal Enclosures and Boxes — generator set enclosures, electrical and battery boxes, panels, doors, hoods and covers used in backhoes, excavators and tractors.

•  Special Weldments — lift arms, seat modules, frames, guards, platforms, step assemblies and cabs used in backhoes, excavators, crawlers, tractors and skid steer loaders; and components for refuse haulers.

•  Fabricated Steel Tanks — fuel and hydraulic fluid reservoirs used in motor graders, trucks, crawlers, wheel loaders and excavators.

•  Sheet Metal Component Packages — laser cut and formed parts that are used in higher level assemblies at customer locations. These products include brackets, plates and frame components that are used in a wide variety of customer end products.

•  Store Fixtures — backframes, lights and brackets used in store displays and commercial refrigeration units.

Services

      We offer our customers a number of services described below:

Product Design and Development

      This service category includes design, development, analysis and costing for our products. We prefer to and often work with customers in the early stages of designing their products.

Prototyping/ Tooling

      This service category includes prototyping, tooling and pre-production steps in the manufacturing process. Our dedicated prototype and tooling departments work with customers throughout development efforts, allowing for a smooth introduction of new products.

Part Decorating and Exterior Finishing

      This service category includes a number of decorating operations such as liquid and powder coat painting and decal application.

Just-In-Time Delivery

      This service category includes providing customers the ability to order products in low lot sizes with minimal lead time enabling them to reduce their overall order cycle time. We also provide deliveries that are specially sequenced to customers’ manufacturing schedules.

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Engineering and Design Capabilities

      Engineering capabilities have become increasingly emphasized as suppliers provide design services for new projects. Computer aided design capabilities include Pro/ENGINEER, Anvil 1000/5000, Apollo, Merry Mechanization and CADKEY. We have focused our computer aided design investment on the Pro/ENGINEER system during the last several years because Pro/ENGINEER is the preferred system of the majority of our customers. Computer aided design allows us to download completed and approved designs directly to production equipment in most plants. The resulting direct interaction between customers’ designers and our engineers facilitates joint development of new components and redesigns of old parts.

Systems and Controls

      Consistent with our emphasis on technology, computer systems and controls are an integral part of our operating strategy. We have invested heavily in management information systems and computer aided design capabilities and control functions, particularly during the last several years. We also use computer systems to provide timely performance measurements of shop floor quality and activity, daily actual cost information for each factory, electronic data interchange with major customers, real-time dispatching of work orders, integration of purchasing information with production scheduling, capacity management and inventory information.

Sales and Marketing

      To better serve our customers, we have combined our sales and engineering organizations. The sales and engineering group has primary responsibility for managing relationships with customers and working with them to design new products. Our customers are serviced by account teams led by an account manager and include representatives from our primary functional areas. These areas include engineering and customer service. Account teams work with the customer to design products and produce prototypes, schedule production and monitor quality and customer satisfaction. Our account managers also lead the new business development process, working with customers to obtain details of new outsourcing programs, new products currently being designed and existing products which will be redesigned. We believe that the structure of our sales and marketing organization helps to ensure cooperation in product design and helps us to gain repeat and new business from our customers.

Manufacturing/ Production

      We use a range of manufacturing processes to serve the needs of our customers. Using these processes, we can manufacture products ranging from simple metal parts to more complex metal subassemblies. Our design and engineering capabilities provide us with a competitive edge in obtaining and maintaining preferred supplier status with our customers.

      Sheet Metal Fabrication. Our sheet metal fabrication capabilities include laser cutting, punching, forming, folding, welding, painting and assembly processes. Our sheet metal fabrication processes, operating on information created by Pro/ENGINEERING software, use optic laser cutting machines to cut parts at high speeds. We use robotic welders to complement our manual welding operations. Our painting operations are capable of producing the wide variety of paint finishes required by our customers.

Raw Materials

      The primary raw materials that we use are sheet steel, assembly parts and paint. Prices of these raw materials fluctuate, although the price of our most significant raw material, steel, has been slowly increasing since 2002. Recently, steel prices have increased as steel supply has tightened, due in part to the national economic recovery, China’s growing steel consumption, and reduced domestic steel production capacity. We expect that this trend will continue through 2004, and there could be periods when steel is not available on demand. We will work with our steel suppliers to attempt to address these issues. Historically we have been able to negotiate with our customers to have them absorb increases in our raw material costs. In addition, we have generally passed on reductions in our raw material costs to our customers. We also participate in the steel

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purchase programs of certain major customers which lowers our cost for steel. Generally, we purchase our raw materials from multiple suppliers, and we believe that the prices we obtain are competitive.

Competition

      The manufacturing and supplying of highly engineered metal products to original equipment manufacturers is a fragmented and highly competitive business, with no single supplier having significant market share. We believe suppliers with a strong management team, a range of capabilities, modernized facilities and technologically sophisticated equipment like us are more likely to benefit from original equipment manufacturers’ increased outsourcing of production than other participants in the industry lacking such assets. However, competitive pressures or other factors could cause us to lose market share or could result in a significant price erosion with respect to our products.

Regulatory/ Environmental Matters

      Our operations are subject to numerous federal, state and local environmental and worker health and safety laws and regulations. We believe that we are in substantial compliance with such laws and regulations and have not budgeted any material capital expenditures for environmental control facilities.

Financial Information about Industry Segments

      We have one continuing reportable segment — contract metal fabrication. The contract metal fabrication segment provides full-service fabrication of parts and sub-assemblies for the construction, agricultural, and industrial equipment industry.

Backlog

      Our backlog of orders was approximately $99 million at December 31, 2003, and $95 million at December 31, 2002. We anticipate that we will substantially fill all of the December 31, 2003, backlog orders during the current year.

Patents, Trademarks, Licenses, Franchises, and Concessions; Research and Development

      We hold no material patents, trademarks, franchises, or concessions. We are the licensee under a number of software licenses that we use in our design, production, and other business operations. All of these licenses have customary terms and conditions. Our research and development expenditures are not material.

Working Capital Items

      Our working capital requirements reflect several business factors. Our working capital requirements are typically greater during the second half of the calendar year because both Deere & Co. and Caterpillar, Inc. suspend operations for two weeks of vacation time during July and/or August. Production operations of both of these customers also slow during the last two weeks of December. During these periods, we must rely more heavily on our credit facilities for liquidity. Additional discussion regarding working capital can be found in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Employees

      As of February 28, 2004, we employed 1,167 employees, of which 977 were hourly and 190 were salaried. None of these employees was subject to a collective bargaining agreement. We believe our relationship with our employees is good.

Internet

      You can find our web site at www.mortongroup.com. At this website, “click” on the Annual Report link; you can choose to view the latest Annual Report on file, or you can “click” SEC Offsite Filings to link to the SEC website that provides all of the Company’s SEC filings since 1997.

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Item 2. Properties

      The following table presents summary information regarding our facilities. The properties are owned except where indicated by the word “leased”. Lease terms for these facilities expire between 2004 and 2008. Our facilities are generally located in close proximity to our customers.

		Approx.
Location		Sq. Ft.		Products Manufactured
1021 West Birchwood Street,
	Morton, IL		280,000	Sheet metal enclosures and boxes, sheet
				metal component packages, store fixtures
				and tractor frames
400 Detroit Avenue, Morton, IL
	(leased)		155,000	Special weldments, including seat modules,
				cabs and fabricated steel tanks
231 Detroit Avenue, Morton, IL
	(leased)		40,000	Raw materials and components storage
Apex, NC (leased)			100,000	Special weldments, sheet metal enclosures
				and boxes, sheet metal component packages
				and fabricated steel tanks
Honea Path, SC			30,000	Store fixtures and sheet metal component
				packages
Welcome, NC			185,000	Sheet metal enclosures and boxes, special
				weldments, fabricated steel tanks and sheet
				metal component packages

      In addition to manufacturing operations, our 1021 W. Birchwood Street complex in Morton, Illinois, houses the senior management of the Company.

      While we own much of the equipment used in our operations, we also use customer-owned tooling and equipment as well as equipment under operating leases. We believe our facilities are adequate to satisfy current and reasonably anticipated production requirements.

Item 3. Legal Proceedings

Worthington

      On May 1, 2000, Worthington Industries, Inc. (“Worthington”) filed suit (in the United States District Court for the Southern District of Ohio, Eastern Division (“the Court”)) against us and Morton Custom Plastics, LLC (“MCP, LLC”) related to MCP, LLC’s 1999 acquisition of the non-automotive plastics business from Worthington. Worthington claimed that it was owed additional amounts under the sale agreement and a related service agreement, and that it was owed dividends on shares of our preferred stock that it received. We believed that certain warranties and representations made by Worthington at the time of acquisition were breached and that amounts claimed by Worthington were not due. We had filed a counterclaim against Worthington related to these matters. In connection with a preferred stock redemption agreement dated December 23, 2003, the parties settled all litigation between the Company and Worthington. The Court entered an order of dismissal of the Worthington lawsuit on January 20, 2004.

      The Company is also involved in routine litigation. Management does not believe any legal proceedings would have a material adverse effect on the Company’s financial condition, results of operations or cash flows.

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Item 4. Submission of Matters to Vote of Security Holders

      Not applicable

PART II

Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters.

      Effective April 11, 2001, the Company’s ticker symbol on the Nasdaq Small Cap Market was MGRP. Effective August 1, 2002, trading of the Company’s Class A common stock moved to the OTC Bulletin Board (the Company elected not to appeal a notice from the Nasdaq Listing Qualifications Department to delist the Company’s Class A common stock). Subsequent to this change, the Company’s ticker symbol was changed to MGRPE. Effective September 27, 2002, the trading of the Company’s Class A common stock was moved to OTC. Upon this change, the Company’s ticker symbol changed to MGRP.

      The following table sets forth for 2002 and 2003 the quarterly high and low bid prices and, with respect to the OTC market high and low bid quotations. OTC market quotations reflect interdealer prices, without retail mark-up, mark-down, or commission, and may not necessarily represent actual transactions.

		High		Low
2003
	October 1 to December 31	$	0.850	$	0.200
	July 1 to September 30	$	0.700	$	0.150
	April 1 to June 30	$	0.650	$	0.200
	January 1 to March 31	$	0.550	$	0.100
2002
	October 1 to December 31	$	0.350	$	0.010
	July 1 to September 30	$	0.350	$	0.040
	April 1 to June 30	$	1.050	$	0.120
	January 1 to March 31	$	1.200	$	0.320

      We obtained the foregoing information from research services made available by Nasdaq for the first two quarters of 2002, and by Pink Sheets for the last two quarters of 2002 and all of 2003.

      As of March 19, 2004 there were 3,293 holders of record and 1,690 beneficial holders of our Class A Common Stock.

      We did not declare or pay any common stock dividends in our fiscal years ended December 31, 2003 and 2002. Our credit agreements preclude the payment of dividends.

      During the year ended December 31, 2003, we did not issue any shares of capital stock that were unregistered under the Securities Act of 1933.

      On September 20, 2000, the Company issued warrants to purchase 238,548 shares of its Class A common stock to its bank lenders. The warrants, as amended, were exercisable at any time through December 31, 2006 at an exercise price of $.01 per share. On March 26, 2004, in connection with a refinancing described in Item 7, the holders surrendered these warrants.

      On March 26, 2004, in connection with the refinancing described in Item 7, we issued our lenders 545,467 warrants to purchase Class A shares of common stock at an exercise price of $0.02 per share. The warrants expire March 26, 2014.

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      As of December 31, 2003, under our 1997 Stock Option Plan, issued and outstanding stock options are as follows:

					Number of
Number of		Exercise			Shares
Shares		Price		Expiration Date	Exercisable
	51,650	$	1.875	February 2011		34,433
	75,000		0.325	June 2012		25,000
	600,000		0.150	February 2013		—
	30,000		0.250	April 2013		30,000
	72,500		0.250	August 2013		72,500
	10,000		0.300	November 2013		—
	839,150					161,933

      In addition to these options, we could grant an additional 327,561 options.

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Item 6. Selected Financial Data

Selected Historical Financial Data

      Set forth below are certain selected historical financial data. This information should be read in conjunction with our financial statements and the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included herein. The financial data is derived from our audited financial statements.

		Year Ended December 31,
		1999			2000			2001			2002			2003
Operating data:
Net sales		$	102,885		$	147,417		$	127,103		$	116,567		$	131,431
Cost of sales			88,987			128,007			111,358			101,522			113,318
Gross profit			13,898			19,410			15,745			15,045			18,113
Selling and administrative expenses			14,120			12,874			13,131			12,170			13,362
Restructuring charges			—			—			1,323			—			—
Operating income (loss)			(222	)		6,536			1,291			2,875			4,751
Gain (loss) on sale of business units and other			2,327			(248	)		(610	)		365			442
Interest expense, net			(4,454	)		(7,376	)		(6,706	)		(4,228	)		(3,084	)
Interest on redeemable preferred stock			—			—			—			—			(427	)
Earnings (loss) before income taxes, accounting change and discontinued operations			(2,349	)		(1,088	)		(6,025	)		(988	)		1,682
Income taxes			(643	)		(632	)		1,242			(288	)		426
Earnings (loss) before discontinued operations and cumulative effect of change in accounting principle			(1,706	)		(456	)		(7,267	)		(700	)		1,256
Net income (loss) from operations of discontinued plastics operations			(5,951	)		1,048			(9,454	)		6,790			85
Earnings (loss) before cumulative effect of accounting change			(7,657	)		592			(16,721	)		6,090			1,341
Cumulative effect of change in accounting principle			(1,074	)		—			—			(8,118	)		—
Net earnings (loss)			(8,731	)		592			(16,721	)		(2,028	)		1,341
Accretion of discount on preferred shares			(1,129	)		(898	)		(1,066	)		(1,265	)		(715	)
Net earnings (loss) available to common shareholders			(9,860	)		(306	)		(17,787	)		(3,293	)		626
Earnings (loss) per share — basic:
	Earnings (loss) from continuing operations		(0.63	)		(0.30	)		(1.81	)		(0.42	)		0.12
	Earnings (loss) from discontinued operations		(1.32	)		0.23			(2.06	)		1.46			0.02
	Cumulative effect of a change in accounting principle		(0.24	)		—			—			(1.75	)		—
	Total earnings (loss) per share		(2.19	)		(0.07	)		(3.87	)		(0.71	)		0.14
Earnings (loss) per share — diluted:
	Earnings (loss) from continuing operations		(0.63	)		(0.30	)		(1.81	)		(0.42	)		0.11
	Earnings (loss) from discontinued operations		(1.32	)		0.23			(2.06	)		1.46			0.02
	Cumulative effect of a change in accounting principle		(0.24	)		—			—			(1.75	)		—
	Total earnings (loss) per share		(2.19	)		(0.07	)		(3.87	)		(0.71	)		0.13

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	Year Ended December 31,
	1999			2000			2001			2002			2003
Financial position (at end of period):
Working capital	$	10,011		$	12,774		$	(1,475	)	$	(2,294	)	$	(6,818	)
Total assets		125,908			130,533			106,517			56,853			48,822
Total debt		90,956			88,357			79,138			45,102			38,541
Stockholders’ equity (deficit)	$	(3,754	)	$	(3,157	)	$	(20,944	)	$	(24,224	)	$	(23,598	)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto included elsewhere in this annual report.

General

      We are a contract manufacturer of highly engineered metal components and subassemblies for construction, agricultural and industrial original equipment manufacturers. Our largest customers, Caterpillar Inc. and Deere & Co., accounted for approximately 88% and 87% of our net sales in 2003 and 2002, respectively.

      Historically, the Company has been a fabricator of sheet metal products. Subsequent to a merger in January, 1998, when the Company became a publicly-traded entity, the Company acquired six facilities that fabricated either injection molded or thermoformed plastic components. Two of the plastics fabrication facilities were acquired separately in 1998, and four were acquired together in 1999. One of the plastics fabrication facilities acquired in 1998 was sold at the end of 1999. The four plastics fabrication facilities acquired together in 1999 were sold in December, 2002. These four facilities, operating as Morton Custom Plastics, LLC, were incurring significant losses and filed for protection as debtor-in-possession under Chapter 11 of the United States Bankruptcy Code. At the time of the sale of Morton Custom Plastics, LLC, the Company determined that is was appropriate to focus solely on its core competency, sheet metal fabrication, and offered for sale its remaining plastics fabrication facility, which was sold in June, 2003. In the Company’s accompanying financial statements, all of the plastics fabrication results are reported as discontinued operations.

      As a part of the 1999 plastics facilities acquisition, the Company issued $10 million of redeemable preferred stock with a maturity date of April 2004. The Company negotiated a settlement in December 2003 with the holder of the preferred stock, and began making redemption payments in January, 2004. If the redemption payments are paid according to the terms of the settlement agreement, the payments will aggregate $1.5 million over a three-year period ending in 2006.

      Since June, 2003, the Company has focused solely on its core business, sheet metal fabrication (the Company’s continuing operations). The Company recognized earnings of over $1.2 million from its continuing operations in 2003, but had incurred losses from its continuing operations in 2001 and 2002 when demand by the Company’s customers was depressed. These losses from continuing operations as well as the acquisition and subsequent disposition of certain plastics facilities created pressure on our liquidity.

      To take advantage of the potential for growth in 2004 and beyond, and to be able to effectively serve our customers, we must be able to ensure an adequate flow of raw materials into our production processes, be able to hire and train additional employees and be able to fund our need for new manufacturing equipment and meet our other working capital needs. Accordingly, the Company entered into a new credit facility in March 2004 that is described below. The new credit facility provided additional availability at the closing of approximately $5 million. Management believes that the new credit facility will permit the Company to meet

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its liquidity requirements driven by raw material, manpower and capital expenditure requirements through the term of the facility, which matures in March, 2008.

      As noted above, two customers account for a significant portion of our net sales. Caterpillar, Inc. and Deere & Co. are both forecasting greater orders for fabricated parts supplied by Morton Metalcraft Co. for 2004. We believe that this demand is being fueled by the improved economic conditions in the United States. The Company is responding by hiring additional manpower, adding capital equipment as necessary and increasing the flow of purchased raw materials in a difficult steel market. The U.S. steel industry has restructured, consolidated and is challenged to meet growing domestic and international demand. The steel industry has been impacted by China’s growing consumption of scrap steel and coke, a raw material used in processing steel. Cosmetically sensitive sheet steel, our core commodity, is on allocation and has correspondingly seen inflationary pricing; most inflationary steel pricing becomes the responsibility of the customer.

      In pricing our products, we consider the volume of the product to be manufactured, required engineering resources and the complexity of the product. Our customers typically expect us to offset any manufacturing cost increases with improvements in production flow, efficiency, productivity or engineering redesigns. As a part of their supplier development programs, our primary customers initiate cost improvement efforts on a regular basis. At the conclusion of any such effort, when savings can be documented, we share the savings with our customer.

Results of Operations

      The following table presents certain historical financial information expressed as a percentage of our net sales.

	Year Ended December 31,
	2001			2002			2003
Statements of Operations Data:
Net sales		100.0	%		100.0	%		100.0	%
Gross profit		12.4			12.9			13.8
Selling and administrative expenses		10.3			10.4			10.2
Restructuring charges		1.0			—			—
Operating income		1.0			2.5			3.6
Interest expense, net		5.3			3.6			2.3
Earnings (loss) before income taxes, discontinued operations and cumulative effect of accounting change		(4.7	)		(.8	)		1.3

Year Ended December 31, 2003 versus Year Ended December 31, 2002

      Net sales for the year ended December 31, 2003 were $131.4 million compared to $116.6 million for the year ended December 31, 2002, an increase of $14.8 million or 12.8%. The sales increase resulted primarily from increased unit demand by existing customers of construction-related equipment components. Our construction-related revenues increased by over 25% and accounted for nearly two-thirds of our 2003 revenue, while our agricultural-related revenues declined over 35%. Most of the revenue growth came from sales to our two largest customers, Deere & Co. and Caterpillar. Based upon customer forecasts and the addition of new customers, the Company currently anticipates revenue growth for 2004 that could exceed 15%. Our ability to increase revenues at that rate will be subject to a number of factors, including the continuing demand that we now forecast, the availability of raw materials, principally steel, and the availability of working capital to support that growth. Recently, steel prices have increased as steel supply has tightened, due in part to the national economic recovery, China’s growing steel consumption, and reduced domestic steel production capacity. We expect that this trend will continue through 2004, and there could be periods when steel is not available on demand. We will work with our steel suppliers to attempt to address these issues. Historically we have been able to negotiate with our customers to have them absorb increases in our raw material costs. In addition, we have generally passed on reductions in our raw material costs to our customers.

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      Sales to Caterpillar and Deere were approximately 88% and 87% of our net sales for 2003 and 2002, respectively.

      Gross profit for the year ended December 31, 2003 was $18.1 million compared with $15.0 million for the year ended December 31, 2002, an increase of $3.1 million or 20.0%. The Company’s gross profit percentage increased to 13.8% from 12.9%. The gross profit amount and percentage increased as a result of our absorbing fixed costs over a larger revenue base, as well as our continuing focus on cost savings programs including 6 Sigma and various lean manufacturing concepts. We use internal metrics to measure our success in achieving various productivity, quality, on-time delivery and profitability goals.

      Selling and administrative expenses for the year ended December 31, 2003 amounted to $13.3 million, or 10.2% of sales, compared with $12.2 million, or 10.5% of sales in the prior year. This increased cost relates primarily to a higher sales volume.

      Interest expense in the year ended December 31, 2003 amounted to $3.1 million compared to $4.2 million in 2002. This decrease resulted from lower average levels of debt from year-to-year. The debt decreased as a result of scheduled payments on the Company’s term debt and a reduction of revolving debt upon the sale of the operations of Mid-Central Plastics in June 2003.

      Other income of $442,000 for the year ended December 31, 2003, resulted primarily from an unrealized gain on interest rate swaps of $337,000 and interest income of $105,000 on the notes receivable related to the sale of the operations Mid-Central Plastics. Other income for the year ended December 31, 2002 resulted primarily from an unrealized gain of $365,000 on the Company’s interest rate swaps.

      “Interest on redeemable preferred stock” relates to the accretion of the discount on redeemable preferred stock for the six months ended December 31, 2003. This classification in other expense resulted from the implementation of FAS 150. For the first six months of 2003, the accretion was classified as “accretion of discount on preferred shares”.

      We recognized total income tax expense of $481,000 in 2003 on the total of pre-tax income from both continuing and discontinued operations; this represents income tax expense of $330,000 for Federal alternative minimum tax and state income taxes. Also included in the tax expense is $151,000 representing a decrease in the overall deferred tax asset recognized. The deferred tax assets represent the estimated utilization of Federal net operating loss carryforwards in 2004.

      The income from discontinued operations represents the results of the operations of Mid-Central Plastics, Inc. until the sale of those operations in June 2003.

Year Ended December 31, 2002 versus Year Ended December 31, 2001

      Net sales for the year ended December 31, 2002 were $116.6 million compared to $127.1 million for the year ended December 31, 2001, a decrease of $10.5 million or 8.3%. The sales decrease resulted primarily from decreased unit demand by customers, the soft status of the general economy and some continuing modest pricing pressure from major customers.

      Sales to Caterpillar and Deere were approximately 87% and 91% of our net sales for 2002 and 2001, respectively.

      Gross profit for the year ended December 31, 2002 was $15.0 million compared with $15.7 million for the year ended December 31, 2001, a decrease of $0.7 million or 4.4%. The Company’s gross profit percentage increased to 12.9% from 12.4%. The gross profit percentage was reduced by increased raw materials costs, but offset by reduced manufacturing costs resulting from various manufacturing costs saving initiatives.

      Selling and administrative expenses for the year ended December 31, 2002 amounted to $12.2 million, or 10.4% of sales, compared with $13.1 million, or 10.3% of sales in the prior year, a decrease of nearly $1.0 million or 7.3%. This decreased expense related primarily to a continuing effort to achieve appropriate employment levels for selling and administration functions.

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      Interest expense in the year ended December 31, 2002 amounted to $4.2 million compared to $6.7 million in 2001. This decrease resulted from both lower average levels of debt and lower average interest rates.

      Other income for the year ended December 31, 2002 resulted primarily from an unrealized gain of $365,000 on the Company’s interest rate swaps. Other expense of $610,000 for the year ended December 31, 2001, resulted primarily from an unrealized loss on the Company’s interest rate swap.

      We recognized an income tax benefit of approximately $0.3 million in 2002, which represents a Federal income tax refund. Deferred tax assets were decreased to reflect lower anticipated utilization of income tax net operating loss carryforwards than we estimated at the preceding year end, due significantly to the sale of Morton Custom Plastics, LLC. The charge related to the decrease in deferred tax assets is included in discontinued operations. The utilization of the income tax net operating loss carryforwards, and the realization of deferred tax assets, is based upon the Company’s future ability to generate the estimated taxable income.

      The net income of discontinued operations of approximately $6.8 million includes a gain on disposal of approximately $17.8 million, operating losses of approximately $8.9 million, an income tax benefit related to Federal income tax refunds of approximately $1.2 million and an income tax charge related to the decrease in deferred income tax assets of approximately $3.4 million. The operating losses of discontinued operations were comparable to the 2001 total of $8.6 million. The discontinued operations are discussed in more detail in Note 2 of the accompanying financial statements.

      In accordance with SFAS No. 142, the Company has not amortized goodwill during the year ended December 31, 2002. Had goodwill not been amortized during 2001, net earnings (loss) available to common stockholders for the year 2001 would have been $(17.4) million, or $(3.78) per share.

      Net loss available to common stockholders decreased from $(17.8) million for the year ended December 31, 2001 to $(3.3) million for the year ended December 31, 2002. This decreased net loss resulted primarily from improved manufacturing processes on reduced sales, reduced interest costs on lower debt levels, the benefits of a Federal income tax refund, and a gain recognized on the disposal of discontinued plastics operations, reduced by the cumulative effect of change in an accounting principal of $8.1 million to recognize impairment of goodwill.

Financial Position and Liquidity

      Historically, we have funded our business with cash generated from operations, management of our working capital and borrowings under revolving credit and term loan facilities. In the years ended December 31, 2001, 2002 and 2003 we generated cash from operating activities of $12.4 million, $7.4 million and $10.3 million, respectively. Our capital expenditures for the years ended December 31, 2001, 2002 and 2003 were $4.4 million, $4.0 million and $4.1 million, respectively. These capital expenditures were principally for additions to improve or maintain our manufacturing capacity and efficiency. We reduced total debt by over $10.0 million in 2003, including term loan reductions of $4.5 million, and a reduction of the revolving line of credit of $5.3 million. The line of credit reduction related primarily to the sale of the operations of Mid-Central Plastics, Inc.

      Our consolidated working capital at December 31, 2003 was a deficit of $6.8 million compared to a working capital deficit of $2.3 million at December 31, 2002. This represents a decrease in working capital of approximately $4.5 million. This working capital decrease results from several factors, including the increase in accounts payable related to business growth, and the balance sheet reclassifications resulting from the sale of the operations of Mid-Central Plastics, and the above referenced reduction in long-term debt. The Company has addressed the need for improved working capital by entering into an amended and restated credit facility effective March 26, 2004.

      In May 1998, the Company entered into both a revolving credit facility and a term loan agreement with a syndicate of banks led by Harris Trust and Savings Bank (“the Harris syndicate”).

      In February 2002, the Company entered into a new secured revolving credit facility and a secured term loan with the Harris syndicate. This is the credit facility that was in effect as of December 31, 2003 and

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through March 25, 2004. The 2002 agreements have been amended six times, including the latest amendment on March 15, 2004. Amendments through February 28, 2003 have been described in previous filings with the SEC. A summary of the three amendments since February 28, 2003 is as follows:

•  An amendment dated June 20, 2003 in connection with the sale of the operations of Mid-Central Plastics, Inc., including the Harris syndicate consent to the sale

•  An amendment dated December 22, 2003 that provided an extension of the credit facility through April 1, 2005, and provided consent to enter into a settlement regarding the redeemable preferred stock held by Worthington Industries, Inc.

•  An amendment dated March 15, 2004 that amended the definition of the borrowing base and increased the limitation for capital expenditures for 2003.

The two following paragraphs describe the credit facility, as amended on March 15, 2004, that was effective as of December 31, 2003 and through March 25, 2004:

      The revolving credit agreement permitted the Company to borrow up to a maximum of $18.8 million. The agreement requires payment of a quarterly commitment fee of ..50% per annum of the average daily unused portion of the revolving credit facility. Interest was due monthly and was based upon bank prime plus 1.5% (effective rate of 5.75% at December 31, 2003). The Company, alternatively, could select a LIBOR plus 4.0% interest rate. The amount available under the revolving credit facility was limited to 85% of qualified accounts receivable, 60% of eligible inventory, plus $2.1 million of other assets. The revolving credit agreement was to mature April 1, 2005. At December 31, 2003, the Company had $13.3 million outstanding and $1.2 million available under this credit facility.

      In February 2002, the Company also entered into a secured term loan arrangement with the Harris syndicate for a term loan of $33.0 million. The new Harris syndicate term loan arrangement replaced existing term loans and did not provide additional availability. The term loan under this financing arrangement was amortized monthly with principal payments ranging from $500,000 on January 2, 2004, $250,000 for the months of January through March, 2004 and $500,000 for the months of April 2004 through March 2005 and the balance of $16.0 million was due on April 1, 2005. Interest was due monthly and is based upon bank prime plus 1.5% (effective rate of 5.75% at December 31, 2003). The Company, alternatively, could select a LIBOR plus 4.0% interest rate.

      In connection with these Harris syndicate loans, we granted the lender a first lien on all of the Company’s accounts receivable, inventory, equipment and various other assets. These Harris syndicate debt agreements contain restrictions on capital expenditures, additional debt or liens, investments, mergers and acquisitions, asset sales and payments such as dividends or stock repurchases. No amount was available for payment of dividends at December 31, 2002 and 2003.

      The agreements also impose various financial covenants, including financial performance ratios. These debt agreements contain restrictions on capital expenditures, incurring additional debt or liens, making investments, mergers and acquisitions, selling assets or making payments such as dividends or stock repurchases, as well as containing various financial covenants.

      Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc. (“Worthington”), the Company issued 10,000 shares of its preferred stock, without par value, to Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share. The Company and Worthington have entered into a stock redemption agreement, dated December 23, 2003, that provides for 30 monthly redemption payments of $50,000 each over a three year period (10 payments each year in 2004, 2005 and 2006) to fully redeem the preferred stock. Each $50,000 payment and redemption of 333 (or 334) shares reduces the fully accreted $10 million face value of the redeemable preferred stock by $333,000 (or $334,000). If shares are not redeemed under the provisions of this agreement, the redemption price remains at $1,000 per share.

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      We incurred $4.1 million of capital expenditures during 2003, primarily for updating and purchases of manufacturing equipment. Of the $4.1 million of capital expenditures, $3.9 million related to continuing operations.

      We estimate that our capital expenditures for continuing operations in 2004 will total approximately $5.0 million, of which $2.0 million will be for new production equipment and the remaining $3.0 million will be for normal replacement items.

      Historically, we have met our near term liquidity requirements for our businesses with cash flow from operations, the Harris line of credit, and management of our working capital to reflect current levels of operations.

      Management expects that cash flow from operations, working capital management and availability under the new bank revolving line of credit described below will permit us to meet our liquidity requirements through the term of the new credit facility.

March 26, 2004 Refinancing

      On March 26, 2004, the Company entered into a Second Amended and Restated Credit Agreement with a syndicate of banks led by Harris Trust and Savings Bank, As Agent, and also on March 26, 2004, entered into a Note and Warrant Purchase Agreement with BMO Nesbitt Burns Capital (U.S.) Inc., As Agent. These agreements were effective on March 26, 2004, and provided financing to replace the $13.25 million revolving credit facility with the Harris syndicate and the $23.3 million term note payable to the Harris syndicate as described in Note 8 in the accompanying financial statements. In connection with this transaction, the 238,584 warrants to purchase Class A Common Stock were surrendered by the holders.

      Under the terms of the new agreements, the Company has:

      1) A 4-year secured term loan in the amount of $22 million with variable rate interest; principal payments are due in quarterly installments of $500,000 beginning June 30, 2004 through March 31, 2005 and due in quarterly installments of $750,000 beginning June 30, 2005 through December 31, 2007 with the balance of $11,750,000 due on March 31, 2008. The Company will enter into interest rate protection contracts on at least 50% of the term loan.

      2) A secured revolving credit facility with a limit of $18 million, variable rate interest, and with an initial revolving credit balance of $8.7 million, and with initial availability of $5.4 million as of March 26, 2004. The balance is due March 31, 2008. The amount available under the revolving credit facility is limited to 85% of eligible accounts receivable and 60% of eligible inventory. The facility requires a commitment fee of 0.50% per annum on the unused portion of the facility.

      At the Company’s option, for both the secured term loan and the revolving credit facility, interest will be at either a bank base rate plus applicable margin, or an adjusted LIBOR plus a LIBOR margin. At inception, the bank rate plus applicable margin is 6.75% and the adjusted LIBOR plus a LIBOR margin is 5.35%.

      3) A senior secured subordinated note in the amount of $10 million bearing cash interest of 12% and PIK interest of 4% with no principal amortization, and the balance due March 26, 2009.

      Related to the senior secured subordinated note, the Company will issue 545,467 warrants to purchase shares of its Class A Common Stock at $0.02 per share; these warrants expire March 26, 2014. The warrants may be put to the Company, at the then fair market value, five years from the date of issue, or upon change of control or upon a default on the senior secured subordinated loan.

      In connection with these loans, we have granted the lenders a lien on all of the Company’s accounts receivable, inventory, equipment, land and buildings, and various other assets. These agreements contain restrictions on capital expenditures, additional debt or liens, investments, mergers and acquisitions, asset sales and payments such as dividends or stock repurchases. These agreements also impose various financial covenants, including financial performance ratios. Fees associated with the March 26, 2004 transactions, including underwriting and legal fees, were approximately $1.5 million, paid at closing.

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Quarterly Financial Information

      Selected quarterly financial information for the years ended December 31, 2003 and 2002 is as follows:

		First		Second			Third		Fourth		Total
		Quarter		Quarter			Quarter		Quarter		Year
		(In thousands, except per share data)
2003
Sales		$	32,380	$	34,398		$	31,452	$	33,201	$	131,431
Gross margin			4,591		5,010			4,063		4,449		18,113
Operating income			1,283		1,698			886		884		4,751
Net earnings available to common stockholders			119		140			106		261		626
Earnings per share of common stock — basic:
	From continuing operations		0.00		0.04			0.02		0.06		0.12
	From discontinued operations		0.03		(0.01	)		—		—		0.02
	Total		0.03		0.03			0.02		0.06		0.14
Earnings per share of common stock — diluted:
	From continuing operations		0.00		0.03			0.02		0.06		0.11
	From discontinued operations		0.03		(0.01	)		—		—		0.02
	Total		0.03		0.02			0.02		0.06		0.13

			First			Second			Third			Fourth			Total
			Quarter			Quarter			Quarter			Quarter			Year
			(In thousands, except per share data)
2002
Sales			$	29,177		$	32,241		$	28,981		$	26,168		$	116,567
Gross margin				4,117			4,850			3,385			2,693			15,045
Operating income (loss)				1,160			1,402			647			(334	)		2,875
Earnings (loss) before discontinued operations and cumulative effect of accounting change				184			(473	)		(321	)		(90	)		(700	)
Net earnings (loss) from discontinued operations				(526	)		(2,770	)		(4,326	)		14,412			6,790
Cumulative effect of change in accounting principle				(8,118	)		—			—			—			(8,118	)
Net earnings (loss) available to common stockholders				(8,739	)		(3,566	)		(4,978	)		13,990			(3,293	)
Earnings per share of common stock — basic and diluted
	From continuing operations			(0.02	)		(0.17	)		(0.14	)		(0.09	)		(0.42	)
	From discontinued operations			(0.12	)		(0.59	)		(0.92	)		3.09			1.46
	Cumulative effect of change in accounting principle			(1.75	)		—			—			—			(1.75	)
		Total		(1.89	)		(0.76	)		(1.06	)		3.00			(0.71	)

Off-Balance Sheet Arrangements

      The Company has no significant off-balance sheet arrangements, other than the operating lease obligations described below, nor has it given any guarantees for any unconsolidated entities.

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Significant Cash Commitments

      The Company has significant future cash commitments, primarily scheduled debt payments and scheduled lease payments. The commitments related to debt payments and lease payments are fully described in Notes 8 and 9 of the accompanying financial statements.

      The following table summarizes the Company’s contractual obligations at December 31, 2003:

		Payments Due by Period
				Less than						After
		Total		1 Year		1-3 Years		4-5 Years		5 Years
		(In thousands)
Bank indebtedness
	Term loan	$	23,253	$	5,750	$	17,503	$	—	$	—
	Revolving line of credit		13,250		—		13,250		—		—
Other debt obligations			2,038		460		1,341		237		—
Operating leases			17,504		6,007		10,615		882		—
Preferred stock redemption			1,500		500		1,000		—		—
Total contractual cash obligations		$	57,545	$	12,717	$	43,709	$	1,119	$	—

      Under its bank credit facility, the Company had $618,000 standby letters of credit outstanding at December 31, 2003 in connection with lease obligations. Management expects that cash flow from operations, working capital management and availability under its new bank revolving line of credit will permit us to meet our liquidity requirements through the term of the credit facility.

      Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc. (“Worthington”), the Company issued 10,000 shares of its preferred stock, without par value, to Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share. The Company and Worthington have entered into a preferred stock redemption agreement, dated December 23, 2003, that provides for 30 monthly redemption payments of $50,000 each over a three year period (10 payments each year in 2004, 2005 and 2006) to fully redeem the preferred stock. Each $50,000 payment and redemption of 333 (or 334) shares reduces the fully accreted $10 million face value of the redeemable preferred stock by $333,000 (or $334,000). If shares are not redeemed under the provision of this agreement, the redemption price remains at $1,000 per share. The significant cash commitments table above assumes that payments are made over the next three years and that the redeemable preferred stock is retired for $1.5 million.

Seasonality

      Our operating results vary significantly from quarter to quarter due to, among other things, the purchasing schedules of our key customers. Our sales and profits historically have been higher in the first half of the calendar year due to our largest customers’ preparation in the first two quarters for increased demand during the warmer months of the year.

Critical Accounting Policies

      In the preparation of the financial statements in accordance with generally accepted accounting principles, management must often make estimates and assumptions that affect the amounts reported in the financial statements and accompanying disclosures. Some of these estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. Such estimates and assumptions affect the Company’s most critical accounting policies: the allowance for doubtful accounts, inventory valuation and the recoverability of deferred tax assets.

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Allowance for Doubtful Accounts

      The Company provides for an allowance for doubtful accounts based on expected collectability of trade receivables. The allowance for doubtful accounts is determined based on the Company’s analysis of customer credit-worthiness, historical loss experience and general economic conditions and trends.

Inventories

      Inventories are valued at the lower of cost or market. The Company evaluates its inventories for excess or slow moving items based on sales order activity and expected market changes. If circumstances indicate the cost of inventories exceed their recoverable value, inventory is adjusted to its net realizable value.

Recoverability of Deferred Tax Assets

      In assessing the recoverability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon generation of future taxable income during the periods in which temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment, and the valuation allowance is adjusted as appropriate.

Impact of New Accounting Standards

      In January 2003, FASB issued Interpretation 46, Consolidation of Variable Interest Entities (“Interpretation 46”), which addresses consolidation of certain variable interest entities and is effective January 31, 2003. The Company does not anticipate that the adoption of Interpretation 46 will have a material impact on its financial statements.

      The FASB also recently issued Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“Statement 150”), which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. Statement 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. FASB Staff Position Financial Accounting Standard 150-3, Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interest under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, defers the effective date of Statement 150 for certain mandatorily redeemable noncontrolling interests of all entities. The Company adopted SFAS No. 150 as of July 1, 2003 and that adoption has had the following classification impact on the Company’s Condensed Consolidated Financial Statements:

      (i) related to the Condensed Consolidated Balance Sheet as of December 31, 2003, the redeemable preferred stock, previously reported as temporary equity is classified as a current liability.

      (ii) related to the Condensed Consolidated Statements of Operations, the expense reported in previous periods as “accretion of discount on preferred shares” is classified as “interest on redeemable preferred stock” from July 1, 2003 to December 31, 2003.

      On December 23, 2003, the Company entered into a stock redemption agreement for the redeemable preferred stock. See note 11 related to the terms of the redemption agreement

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Item 7A. Quantitative and Qualitative Disclosures about Market Risk

      The Company uses variable-rate debt to finance its operations. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes it is prudent to limit the variability of a portion of its interest payments. To meet this objective, management sometime enters into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk, the last of which expired June 30, 2003. These swaps changed the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company received variable interest rate payments and made fixed interest rate payments, thereby creating the equivalent of fixed rate debt during the first six months of 2003. The Company recorded other income (expense) of $(671,000), $418,000 and $337,000 for its interest rate swap contracts for the years ended December 31, 2001, 2002 and 2003 respectively.

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Item 8. Financial Statements and Supplementary Data

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

INDEX

	Page
Independent Auditors’ Report		21
Consolidated Balance Sheets as of December 31, 2002 and 2003		22
Consolidated Statements of Operations for the years ended December 31, 2001, 2002 and 2003		23
Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2001, 2002 and 2003		24
Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2002 and 2003		25
Notes to Consolidated Financial Statements		26
Schedule
Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2001, 2002 and 2003		52

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INDEPENDENT AUDITORS’ REPORT

The Board of Directors and Stockholders

Morton Industrial Group, Inc.:

      We have audited the accompanying consolidated balance sheets of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 2002 and 2003, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2003. In connection with our audit of the consolidated financial statements, we have also audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits.

      We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

      In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 2002 and 2003, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

      As discussed in note 6 to the consolidated financial statements, effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) 142, Goodwill and Other Intangible Assets.

/s/ KPMG LLP

Indianapolis, Indiana

March 19, 2004, except as to note 20

     which is as of March 29, 2004

21

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

December 31, 2002 and 2003

			December 31,
			2002			2003
			(Dollars in thousands)
ASSETS
Current assets:
	Trade accounts receivable, less allowance for doubtful accounts of $202 in 2003 and $84 in 2002		$	5,251		$	7,253
	Note receivable			—			100
	Inventories			14,322			13,863
	Prepaid expenses and other current assets			1,179			1,087
	Deferred income taxes			400			1,600
	Assets held for sale			8,990			—
		Total current assets		30,142			23,903
Property, plant, and equipment, net				23,364			22,432
Note receivable				—			1,183
Intangible assets, at cost, less accumulated amortization				1,336			1,100
Deferred income taxes				1,351			—
Other assets				660			204
			$	56,853		$	48,822
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
	Outstanding checks in excess of bank balance		$	1,289		$	943
	Current installments of long-term debt			5,331			6,210
	Accounts payable			14,731			17,343
	Accrued expenses			4,831			5,450
	Income taxes payable			—			275
	Liabilities held for sale			6,254			—
	Redeemable preferred stock			—			500
		Total current liabilities		32,436			30,721
Long-term debt, excluding current installments				39,771			32,331
Other liabilities				262			118
Redeemable preferred stock				—			9,250
		Total liabilities		72,469			72,420
Redeemable preferred stock				8,608			—
Stockholders’ equity (deficit):
	Class A common stock			45			46
	Class B common stock			2			1
	Additional paid-in capital			20,895			20,895
	Retained deficit			(45,166	)		(44,540	)
		Total stockholders’ equity (deficit)		(24,224	)		(23,598	)
			$	56,853		$	48,822

See accompanying notes to consolidated financial statements.

22

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2001, 2002 and 2003

			December 31,
			2001			2002			2003
			(Dollars in thousands,
			except per share data)
Net sales			$	127,103		$	116,567		$	131,431
Cost of sales				111,358			101,522			113,318
		Gross profit		15,745			15,045			18,113
Operating expenses:
	Selling expenses			2,809			2,723			2,948
	Administrative expenses			10,322			9,447			10,414
	Restructuring charges			1,323			—			—
		Total operating expenses		14,454			12,170			13,362
		Operating income		1,291			2,875			4,751
Other income (expense):
	Interest expense			(6,706	)		(4,228	)		(3,084	)
	Interest on redeemable preferred stock			—			—			(427	)
	Other			(610	)		365			442
		Total other expense		(7,316	)		(3,863	)		(3,069	)
		Earnings (loss) before income taxes, discontinued operations and cumulative effect of accounting change		(6,025	)		(988	)		1,682
Income taxes				1,242			(288	)		426
		Earnings (loss) before discontinued operations and cumulative effect of accounting change		(7,267	)		(700	)		1,256
Discontinued operations:
	Net earnings (loss) from operations of discontinued plastics operations			(8,596	)		8,947			140
	Income taxes			858			2,157			55
				(9,454	)		6,790			85
		Earnings (loss) before cumulative effect of accounting change		(16,721	)		6,090			1,341
Cumulative effect of change in accounting principle, net of tax of $0				—			(8,118	)		—
		Net earnings (loss)		(16,721	)		(2,028	)		1,341
Accretion of discount on preferred shares				(1,066	)		(1,265	)		(715	)
		Net earnings (loss) available to common shareholders	$	(17,787	)	$	(3,293	)	$	626
Earnings (loss) available to common shareholders per common share — basic:
	Earnings (loss) from continuing operations		$	(1.81	)	$	(0.42	)	$	0.12
	Earnings (loss) from discontinued operations			(2.06	)		1.46			0.02
	Earnings (loss) available to common shareholders before cumulative effect of a change in accounting principle			(3.87	)		1.04			0.14
	Cumulative effect of a change in accounting principle			—			(1.75	)		—
	Net earnings (loss) available to common shareholders		$	(3.87	)	$	(0.71	)	$	0.14
Earnings (loss) available to common shareholders per common share — diluted:
	Earnings (loss) from continuing operations		$	(1.81	)	$	(0.42	)	$	0.11
	Earnings (loss) from discontinued operations			(2.06	)		1.46			0.02
	Earnings (loss) available to common shareholders before cumulative effect of a change in accounting principle			(3.87	)		1.04			0.13
	Cumulative effect of a change in accounting principle			—			(1.75	)		—
		Net earnings (loss) available to common shareholders	$	(3.87	)	$	(0.71	)	$	0.13

See accompanying notes to consolidated financial statements.

23

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (DEFICIT)

Years Ended December 31, 2001, 2002 and 2003

		Class A				Class B
		Common Stock				Common Stock						Additional		Retained
												Paid-in		Earnings
		Shares Issued		Amount		Shares Issued			Amount			Capital		(Deficit)			Total
		(Dollars in thousands)
Balance, December 31, 2000			4,400,850	$	44		200,000		$	2		$	20,883	$	(24,086	)	$	(3,157	)
	Net earnings (loss)		—		—		—			—			—		(16,721	)		(16,721	)
	Accretion of discount on preferred shares		—		—		—			—			—		(1,066	)		(1,066	)
Balance, December 31, 2001			4,400,850	$	44		200,000		$	2		$	20,883	$	(41,873	)	$	(20,944	)
	Net earnings (loss)		—		—		—			—			—		(2,028	)		(2,028	)
	Stock options exercised		59,697		1		—			—			12		—			13
	Accretion of discount on preferred shares		—		—		—			—			—		(1,265	)		(1,265	)
Balance, December 31, 2002			4,460,547	$	45		200,000		$	2		$	20,895	$	(45,166	)	$	(24,224	)
	Net earnings		—		—		—			—			—		1,341			1,341
	Accretion of discount on preferred shares		—		—		—			—			—		(715	)		(715	)
	Conversion of shares of Class B common stock into shares of Class A common stock		100,000		1		(100,000	)		(1	)		—		—			—
Balance, December 31, 2003			4,560,547	$	46		100,000		$	1		$	20,895	$	(44,540	)	$	(23,598	)

See accompanying notes to consolidated financial statements.

24

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2001, 2002 and 2003

					December 31,
					2001			2002			2003
					(Dollars in thousands)
Cash flows from operating activities:
	Net earnings (loss)				$	(16,721	)	$	(2,028	)	$	1,341
	Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:
		Depreciation and amortization of plant and equipment				8,672			8,075			4,855
		Other amortization				1,338			1,345			1,266
		Asset impairment				803			—			—
		Payments on restructuring charge				—			(375	)		—
		Cumulative effect of change in accounting principle				—			8,118			—
		Increase (decrease) in allowance for doubtful accounts				(943	)		(78	)		118
		Decrease in deferred income taxes				2,100			3,197			151
		Gain on sale of property and equipment				—			(8	)		(12	)
		Gain on sale of businesses				—			(17,784	)		(8	)
		Unrealized loss (gain) on derivative instruments				671			(418	)		—
		Changes in current assets and liabilities, excluding effects of acquisitions and dispositions:
			Decrease (increase) in accounts receivable			10,152			3,555			(1,923	)
			Increase in accrued interest receivable			—			—			(87	)
			Decrease (increase) in inventories			7,528			(162	)		583
			Decrease (increase) in prepaid expenses			(329	)		(220	)		62
			Decrease (increase) in other assets			(825	)		19			456
			Increase in income taxes payable			—			—			275
			Increase (decrease) in accounts payable			(881	)		1,976			2,856
			Increase in accrued expenses and other			881			2,166			327
				Net cash provided by operating activities		12,446			7,378			10,260
Cash flows from investing activities:
	Capital expenditures					(4,357	)		(4,023	)		(4,119	)
	Proceeds from sale of property and equipment					—			538			67
	Proceeds from sale of businesses					—			—			4,800
	Payment received on note receivable for sale of business					—			—			99
				Net cash provided by (used in) investing activities		(4,357	)		(3,485	)		847
Cash flows from financing activities:
	Increase (decrease) in checks issued in excess of bank balance					1,253			(1,869	)		(346	)
	Net repayments of line of credit					(3,710	)		(485	)		(5,350	)
	Proceeds from issuance of long-term debt					—			4,907			—
	Principal payments on long-term debt and capital leases					(5,509	)		(5,597	)		(4,961	)
	Proceeds from issuance of common stock					—			13			—
	Debt issuance cost					(123	)		(862	)		(450	)
				Net cash used in financing activities		(8,089	)		(3,893	)		(11,107	)
Net increase (decrease) in cash						—			—			—
Cash at beginning of period						—			—			—
Cash at end of period					$	—		$	—		$	—
Supplemental disclosures of cash flow information:
	Cash paid during the year for:
		Interest			$	9,653		$	5,511		$	3,296
		Income taxes				24			26			48

See accompanying notes to consolidated financial statements.

25

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2001, 2002 and 2003

(Dollars in thousands, except per share data)

(1) Description of Business and Summary of Significant Accounting Policies

     (a) Description of Business

      Morton Industrial Group, Inc. and subsidiaries is a contract manufacturer and supplier of high-quality fabricated sheet metal and plastic components and subassemblies for construction, agricultural, industrial and recreational equipment manufacturers located primarily in the Midwestern and Southeastern United States. Sales for the year ended December 31, 2003, were approximately as follows: construction — 65%, agricultural — 13%, industrial — 20% and recreational — 2%. The Company’s raw materials are readily available, and the Company is not dependent on a single supplier or only a few suppliers.

     (b) Principles of Consolidation

      The consolidated financial statements include the financial statements of Morton Industrial Group, Inc. (the Company) and its subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation.

     (c) Use of Estimates in Preparing Financial Statements

      Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses during the reporting period to prepare these financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from those estimates.

     (d) Trade Accounts Receivable

      Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. The Company determines the allowance based on customer credit-worthiness, historical write-off experience and general economic conditions and trends. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company does not have any off-balance-sheet credit exposure related to its customers.

     (e) Inventories

      Inventories are stated at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method for all inventories.

     (f) Property, Plant, and Equipment

      Property, plant, and equipment are stated at cost less accumulated depreciation. Equipment under capital leases is stated at the lower of the net present value of the minimum lease payments at the beginning of the lease term or fair value at the inception of the lease.

      Depreciation of plant and equipment is calculated over the estimated useful lives of the respective assets using straight-line and accelerated methods. The equipment held under capital leases is amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the asset.

26

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

     (g) Goodwill and Other Intangible Assets

      Goodwill represents the excess of costs over fair value of assets of businesses acquired. The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets, as of January 1, 2002. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but instead tested for impairment at least annually in accordance with the provisions of SFAS No. 142. SFAS No. 142 also requires that intangible assets with estimable useful lives be amortized over their respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with SFAS No. 144, Accounting for Impairment or Disposal of Long-Lived Assets.

     (h) Income Taxes

      Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

     (i) Stock Option Plan

      The Company applies the intrinsic-value-based method of accounting prescribed by Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations including FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation, an interpretation of APB Opinion No. 25, to account for its fixed-plan stock options. Under this method, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. SFAS No. 123, Accounting for Stock-Based Compensation, and SFAS No. 148, Accounting for Stock-Based Compensation — Transition and disclosure, an amendment of SFAS No. 123, established accounting and disclosure requirements using a fair-value-based method of accounting for stock-based employee compensation plans. As permitted by existing accounting standards, the Company has elected to continue to apply the intrinsic-value-based method of accounting described above, and has adopted only the disclosure requirements of SFAS 123, as amended.

      The per share weighted-average fair value of stock options granted during 2001, 2002 and 2003 was $1.67, $0.29 and $0.15 on the date of grant using the Black Scholes option-pricing model with the following weighted-average assumptions: expected dividend yield of 0%, risk-free interest rate of 6%, volatility of 91%, and an expected life of 10 years.

27

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following table illustrates the effect on net income if the fair-value-based method had been applied to all outstanding and unvested awards in each period.

		2001			2002			2003
Net earnings (loss) available to common shareholders:
	As reported	$	(17,787	)	$	(3,293	)	$	626
	Total stock-based employee compensation expense determined under fair value based method for all awards		(40	)		(216	)		(112	)
	Pro forma	$	(17,827	)	$	(3,509	)	$	514
Basic earnings (loss) available to common shareholders per share:
	As reported	$	(3.87	)	$	(0.71	)	$	0.14
	Pro forma		(3.87	)		(0.76	)		0.11
Diluted earnings (loss) available to common shareholders per share:
	As reported		(3.87	)		(0.71	)		0.13
	Pro forma		(3.87	)		(0.76	)		0.10

     (j) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

      The Company adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, on January 1, 2002. The adoption of SFAS No. 144 did not affect the Company’s financial statements.

      In accordance with SFAS No. 144, long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of are separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held for sale are presented separately in the appropriate asset and liability sections of the balance sheet.

      Goodwill is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicate that the asset might be impaired. An impairment loss is recognized to the extent that the carrying amount exceeds the asset’s fair value. This determination is made at the reporting unit level and consists of two steps. First, the Company determines the fair value of reporting unit and compares it to its carrying amount. Second, if the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation, in accordance with SFAS No. 141, Business Combinations. The residual fair value after this allocation is the implied fair value of the reporting unit goodwill.

     (k) Revenue Recognition

      Generally, revenue from sales is recognized when the goods are shipped and the customer takes ownership and assumes risk of loss, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. In certain cases, at the customer’s written

28

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

request, the Company enters into bill and hold transactions whereby title transfers to the customer, but the product does not ship until a specified later date. The Company recognizes revenues associated with the bill and hold arrangements when the product is complete, ready to ship, and hold criteria have been met.

     (l) Interest Rate Swaps

      As required by one of its financing arrangements, the Company entered into interest rate swap agreements to limit the effect of increases in the interest rates on certain floating rate debt. The difference between the floating rate on the Company’s debt and the rate on the swap agreements is accrued as interest rates change and is recorded in interest expense. During 1998, the Company entered into two swap agreements, expiring May 31, 2003 to June 30, 2003, with an initial aggregate notional amount of $27,500. The effect of these agreements was to limit the LIBOR interest rate component to 5.87% on half of the Company’s $27,930 term loans under the applicable financing arrangement. As a result of these swap agreements, interest expense was increased by $291, $709 and $337 in 2001, 2002 and 2003, respectively.

     (m) Fair Value of Financial Instruments

      The Company believes the recorded value of cash, accounts receivable, notes receivable, accounts payable and accrued expenses approximates fair value because of the short maturity of these financial instruments. The Company believes the recorded value of notes payable and long-term debt approximates fair value because their respective interest rates fluctuate with market rates or approximate current market rates.

      Interest rate swaps are stated at fair value, which is the estimated amount that the Company would receive or pay to terminate the agreements at the reporting date, taking into account current interest rates and the current creditworthiness of the counterparties. At December 31, 2002, the Company estimates it would have paid $337 to terminate the agreements. The agreements terminated June 30, 2003.

     (n) Earnings (Loss) Per Share

      Earnings (loss) per share is computed under the provisions of SFAS No. 128, Earnings Per Share. Amounts reported as earnings (loss) per share reflect the earnings available to common stockholders for the year divided by the weighted average number of Class A and Class B common shares outstanding during the year.

     (o) Impact of Recently Issued Accounting Standards

      In January 2003, FASB issued Interpretation 46, Consolidation of Variable Interest Entities (“Interpretation 46”), which addresses consolidation of certain variable interest entities and is effective January 31, 2003. The Company does not anticipate that the adoption of Interpretation 46 will have a material impact on its financial statements.

      The FASB also recently issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“Statement 150”), which establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. SFAS 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. FASB Staff Position Financial Accounting Standard 150-3, Effective Date, Disclosures, and Transition for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interest under FASB Statement No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, defers the effective date of SFAS 150 for certain mandatorily redeemable noncontrolling interests of

29

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

all entities. The Company adopted SFAS No. 150 as of July 1, 2003, and that adoption has had the following classification impact on the Company’s Condensed Consolidated Financial Statements:

      (i) related to the Condensed Consolidated Balance Sheet as of December 31, 2003, the redeemable preferred stock, previously reported as temporary equity, is classified as a liability.

      (ii) related to the Condensed Consolidated Statements of Operations, the expense reported in previous periods as “accretion of discount on preferred shares” is classified as “interest on redeemable preferred stock” from July 1, 2003 to December 31, 2003.

      On December 23, 2003, the Company entered into a stock redemption agreement for the redeemable preferred stock. See note 11 related to the terms of the redemption agreement.

     (p) Reclassifications

      Certain amounts in the 2002 financial statements have been reclassified to conform with the 2003 presentation.

(2) Discontinued Operations

      The financial results from discontinued operations are so classified as a result of two significant events during 2002: (i) the bankruptcy and subsequent sale of the assets of Morton Custom Plastics, LLC, and (ii) the Board of Directors’ decision to divest the only other remaining plastics operations facility in the Company, Mid-Central Plastics, Inc. (Mid-Central).

      On November 1, 2002, Morton Custom Plastics LLC (MCP, LLC), Morton Holdings, LLC (Holdings) and Morton Lebanon Kentucky IBRB, LLC (Kentucky) filed as debtors-in-possession under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Before filing, MCP, LLC and Kentucky had negotiated the terms of an agreement for sale of substantially all of their assets to Wilbert, Inc., pursuant to an Asset Purchase Agreement. Under the agreement, Wilbert, Inc. also agreed to assume the liabilities of MCP, LLC and Kentucky under certain of their contracts and leases. Based on its filing under Chapter 11, the Company did not include Morton Custom Plastics, LLC’s results in its consolidated financial statements subsequent to November 1, 2002.

      The sale of MCP’s, Holding’s and Kentucky’s assets was completed on December 24, 2002, in accordance with Section 363 of the United States Bankruptcy Code. The proceeds from the sale were used to retire a portion of the then-existing debt and pay expenses of the sale. The registrant received no proceeds from the sale.

      At December 31, 2002, the assets of Mid-Central were reduced to their estimated fair value less costs to sell, resulting in an impairment charge of $325 for the year ended December 31, 2002. The assets and liabilities of Mid-Central were classified in the December 31, 2002 balance sheet as “assets held for sale” and “liabilities held for sale”, respectively.

      The Company sold its “assets held for sale” and the “liabilities held for sale” on June 20, 2003. The terms of the transaction were substantially the same as those anticipated as of December 31, 2002. The sales price, subsequent to a working capital adjustment, was $6,100, with $4,800 received in cash at closing plus notes receivable from the buyer of $99, $97 and $1,100.

      The notes receivable of $99 and $97 were both collected prior to January 31, 2004. The note receivable of $1,100 is due June 20, 2006 and bears interest at 15% per annum. Interest for the period of June 20, 2003 through June 20, 2004 shall be 15% payment-in-kind, with interest payable in cash on June 20, 2005, and at the date of maturity, June 20, 2006.

30

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The remaining note receivable, due from the buyer, is subordinate to required payments due by the buyer to its senior secured lender. Payments received by the Company are assigned to the Harris Bank syndicate, the Company’s senior secured lender.

      Summary financial data of the discontinued operations is presented below:

	2001			2002			2003
Operating revenue	$	110,050		$	78,737		$	9,124
Operating expense		116,024			85,469			8,819
Operating income (loss)		(5,974	)		(6,732	)		305
Interest expense		(2,622	)		(2,105	)		(165	)
Income (loss) from operations of discontinued operations		(8,596	)		(8,837	)		140
Gain on disposal of MCP, LLC		—			17,784			—
Income taxes		(858	)		(2,157	)		(55	)
Net income (loss) from discontinued operations	$	(9,454	)	$	6,790		$	85

      Amounts held for sale of Mid-Central Plastics, Inc. as of December 31, 2002 consisted of the following:

Accounts receivable, net of allowance of $134		$	1,423
Inventories			2,241
Other current assets			427
Property, plant and equipment, net			4,899
	Assets held for sale	$	8,990
Current liabilities		$	2,504
Estimated debt required to be repaid upon sale			3,750
	Liabilities held for sale	$	6,254

(3) Restructuring Charge

      In connection with a restructuring plan adopted in October of 2001, the Company recorded a $1,323 restructuring charge associated with the restructuring and consolidation of certain of its Illinois plants. The restructuring included $520 for costs associated with certain leased facilities which will no longer be used and an $803 impairment charge for the abandonment of certain leasehold improvements and impairment of certain assets under the provisions of SFAS 121. As of December 31, 2002 a restructuring reserve of $145 is included in accrued expenses relating to facility lease payments, utilities, insurance and taxes expected to be incurred through the lease termination date. No restructuring reserve remains as of December 31, 2003.

(4) Inventories

      A summary of inventories follows:

	December 31
	2002		2003
Finished goods	$	4,590	$	5,427
Work in process		6,087		3,521
Raw materials		3,645		4,915
	$	14,322	$	13,863

31

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(5) Property, Plant, and Equipment

      A summary of property, plant, and equipment, including assets held under capital leases as described in note 9, is as follows:

				December 31
		Depreciable
		Lives		2002		2003
		(In years)
Land and land improvements			15	$	1,608	$	1,757
Buildings and leasehold improvements			15 - 39		8,604		8,577
Machinery and vehicles			5 - 12		26,134		27,008
Tooling			3		9,648		11,068
Office equipment			5 - 10		5,052		5,724
Construction in progress			—		517		462
					51,563		54,596
Less accumulated depreciation					28,199		32,164
	Property, plant, and equipment, net			$	23,364	$	22,432

(6) Intangible Assets

      A summary of intangible assets is as follows:

		December 31
		2002		2003
Goodwill		$	1,587	$	1,587
Covenants not to compete			2,186		2,186
Debt issuance costs			1,758		2,358
Other			435		435
			5,966		6,566
Less accumulated amortization			4,630		5,466
	Net intangible assets	$	1,336	$	1,100

      For amortizable intangible assets, the total intangible amortization expense for the years ended December 31, 2001, 2002 and 2003 was $462, $793 and $836, respectively. The estimated amortization expense for each of the next five years ending December 31 is as follows:

Year ending:
	2004	$	378
	2005		153
	2006		60
	2007		19
	2008		19

      The Company adopted SFAS No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002, and recorded a non-cash transition charge of $8,118, or a $1.75 loss per share, for impairment of goodwill during the year ended December 31, 2002. The Company determined the goodwill recorded at January 1, 2002 was primarily associated with indefinite-lived intangible assets resulting from the acquisitions of certain plastics facilities.

32

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The charge has been treated as the cumulative effect of a change in accounting principle. On January 1, 2002, the fair value of one of the Company’s reporting units (based on a multiple of projected EBITDA, less total debt) was less than the carrying value of its net assets, including goodwill, which indicated an impairment of goodwill. Under SFAS No. 142, fair value was allocated to the assets and liabilities of the reporting unit based on the purchase accounting method. This calculation indicated that the full amount of goodwill was impaired at the date of adoption of SFAS No. 142.

      The impact of goodwill amortization on net earnings available to common shareholders in prior years is presented below:

		2001
Year ended December 31:
	Net loss available to common shareholders	$	(17,787	)
	Add back: goodwill amortization		389
	Adjusted net earnings (loss) available to common shareholders	$	(17,398	)
Basic and diluted earnings per common share:
	Net loss available to common shareholders	$	(3.87	)
	Goodwill amortization		0.09
	Adjusted net earnings (loss) available to common shareholders	$	(3.78	)

(7) Derivative Instruments and Hedging Activities

      The Company uses variable-rate debt to finance its operations. The debt obligations expose the Company to variability in interest payments due to changes in interest rates. Management believes it is prudent to limit the variability of a portion of its interest payments. To meet this objective, management entered into interest rate swap agreements to manage fluctuations in cash flows resulting from interest rate risk, the last of which expired June 30, 2003. These swaps changed the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the interest rate swaps, the Company received variable interest rate payments and made fixed interest rate payments, thereby creating the equivalent of fixed rate debt.

      The Company adopted SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended by SFAS No. 137 and No. 138 on January 1, 2001. SFAS 133 requires that all derivative instruments be recorded on the balance sheet at their fair value. Gains or losses resulting from changes in the values of those derivatives would be accounted for depending on the use of the derivative and whether it qualifies for hedge accounting. The Company used derivative financial instruments (interest rate swaps) to mitigate its interest rate risk on a related financial instrument. SFAS 133 requires that changes in the fair value of derivatives that qualify as a cash flow hedge be recognized in other comprehensive income while the ineffective portion of the derivative’s change in fair value be recognized immediately in earnings. SFAS 133 requires that unrealized gains and losses on that portion of derivatives not qualifying for hedge accounting be recognized currently in earnings. The Company recorded other income (expense) of $(671), $418 and $337 for its interest rate swap contracts for the years ended December 31, 2001, 2002 and 2003 respectively, as they did not qualify for hedge accounting.

33

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(8) Long-term Debt

      A summary of long-term debt follows:

	December 31
	2002		2003
Revolving credit facility with the Harris syndicate	$	18,600	$	13,250
Note payable to the Harris syndicate, with variable rate interest (5.75% as of December 31, 2002 and 2003)		27,756		23,253
Subordinated note payable with interest payable at 7.0%, discounted $393 to yield 10.0%, due in quarterly payments with the balance due April 8, 2008		2,134		1,734
Note payable, electric cooperative, non-interest bearing, due in monthly payments with the balance due November 1, 2006		166		130
Capital lease obligations		160		113
Notes payable, miscellaneous		36		61
		48,852		38,541
Less current installments		5,331		6,210
Less amount included in liabilities held for sale		3,750		—
	$	39,771	$	32,331

      In May 1998, the Company entered into both a revolving credit facility and a term loan agreement with a syndicate of banks led by Harris Trust and Savings Bank (“the Harris syndicate”).

      The financing arrangements with the Harris syndicate, as subsequently amended, are described as of December 31, 2002 and 2003 in the following paragraphs:

      In February 2002, the Company entered into a new secured revolving credit facility with the Harris syndicate. The revolving credit agreement permits the Company to borrow up to a maximum of $21,000. The agreement requires payment of a quarterly commitment fee of .50% per annum of the average daily unused portion of the revolving credit facility. Interest is due monthly and is based upon the bank prime rate plus 1.5% (effective rate of 5.75% at December 31, 2002 and December 31, 2003). The Company, alternatively, could select a LIBOR plus 4.0% interest rate. The amount available under the revolving credit facility is limited to 85% of qualified accounts receivable, 50% of eligible inventory, plus $2,500 of other assets. The revolving credit agreement was originally set to mature on July 1, 2003. As described below, that date has been extended to April 1, 2005. At December 31, 2002 and 2003, the Company had $18,600 and $13,250 outstanding and $262 and $1,211 available under this credit facility.

      In February 2002, the Company also entered into a secured term loan arrangement with the Harris syndicate for a term loan of $32,965. The new Harris syndicate term loan arrangement replaced existing term loans and did not provide additional availability. The term loan under this financing arrangement is amortized monthly with principal payments ranging from $235 to $500 and the balance of $24,930 due originally on July 1, 2003 (now extended to April 1, 2005). Interest is due monthly and is based upon the bank prime rate plus 1.5% (effective rate of 5.75% at December 31, 2002 and December 31, 2003). The Company, alternatively, could select a LIBOR plus 4.0% interest rate. The agreement is secured by a first lien on all of the Company’s accounts receivable, inventory, equipment and various other assets, other than the assets of Morton Custom Plastics, LLC.

34

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The February, 2002 Harris syndicate agreement was amended during 2003 as follows:

•  maturity date of the revolving credit facility and remaining balance of the term loan extended to April 1, 2005

•  a reduction in the revolving credit commitment to $18,800 (from a previous level of $21,000)

•  effective February 28, 2003, increasing the limit of eligible inventory under the revolving credit facility to 60%

•  a change in the definition of “other asset value” in the borrowing base to $2,212 (from previous levels of $2,500 and $3,500)

•  establishing principal payment installments of $500 per month for the months ending April, 2004 through March, 2005

•  providing consent to the sale of Mid-Central Plastics Inc.

•  providing consent to enter into a settlement regarding the redeemable preferred stock held by Worthington Industries, Inc.

•  increasing the limitation for capital expenditures for 2003

      These debt agreements contain restrictions on capital expenditures, incurring additional debt or liens, making investments, mergers and acquisitions, selling assets or making payments such as dividends or stock repurchases, as well as containing various financial covenants.

      Under the most restrictive covenant in any agreement, no amount was available for payment of dividends at December 31, 2002 and 2003.

      The aggregate amounts of contractual long-term debt maturities and principal payments (based upon the amended credit facilities described above) for each of the five years subsequent to December 31, 2003 and thereafter are as follows:

Year ending:
2004	$	6,210
2005		31,233
2006		448
2007		411
2008		239
Thereafter		—
	$	38,541

      On September 20, 2000, the Company issued warrants to a lender, in connection with an amendment to the credit agreement, to purchase 238,548 shares of its Class A common stock. The 238,548 warrants issued are exercisable at any time through December 31, 2006, at an exercise price of $.01 per share. The warrants were valued at $863 and were recorded as a discount on the related term loans in the year ended December 31, 2000.

35

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(9) Leases

      The Company is obligated under various capital leases for certain machinery. At December 31 the gross amount of equipment and related amortization recorded under capital leases was as follows:

	2002		2003
Machinery	$	228	$	228
Less accumulated amortization		68		115
	$	160	$	113

      Assets under capital leases are included in property, plant, and equipment and amortization of assets held under capital leases is included in depreciation expense.

      The present value of future minimum capital lease payments at December 31, 2003 was as follows:

Year ending:
	2004			$	58
	2005				48
	2006				18
		Total minimum lease payments			124
Less amount representing interest (from 7.1% to 7.9%)					11
			Present value of net minimum capital lease payments	$	113

      The Company also has operating leases for several of its plants, certain warehouse space, and manufacturing and computer equipment. Rental expense for operating leases was $7,901, $6,317, and $6,516 for the years ended December 31, 2001, 2002, and 2003, respectively.

      Future minimum lease payments under noncancelable operating leases (with initial or remaining lease terms in excess of one year) as of December 31, 2003 are:

Year ending December 31:
	2004		$	6,007
	2005			4,957
	2006			3,169
	2007			2,489
	2008			882
	Thereafter			—
		Total minimum lease payments	$	17,504

36

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(10) Income Taxes

      Total income tax expense (benefit) for the periods presented was allocated as follows:

	December 31
	2001		2002			2003
Earnings loss before discontinued operations and cumulative effect of accounting change	$	1,242	$	(288	)	$	426
Discontinued operations		858		2,157			55
	$	2,100	$	1,869		$	481

      Income tax expense (benefit) from continuing operations consists of the following:

		Current			Deferred		Total
Year ended December 31, 2001:
	Federal	$	—		$	1,082	$	1,082
	State		—			160		160
		$	—		$	1,242	$	1,242
Year ended December 31, 2002:
	Federal	$	(288	)	$	—	$	(288	)
	State		—			—		—
		$	(288	)	$	—	$	(288	)
Year ended December 31, 2003:
	Federal	$	80		$	151	$	231
	State		195			—		195
		$	275		$	151	$	426

      Total income tax expense (benefit) attributable to earnings before discontinued operations and cumulative effect of accounting change differed from the amounts computed by applying the U.S. Federal corporate income tax rate of 34% for all periods to earnings (loss) before income taxes as a result of the following:

	December 31
	2001			2002			2003
Computed “expected” tax expense (benefit)	$	(2,049	)	$	(336	)	$	572
State income tax expense, net of Federal income tax benefit		106			—			129
Non-deductible interest on redeemable preferred stock		—			—			146
Amortization of non-deductible goodwill		149			—			—
Officer’s life insurance		20			20			20
Increase (decrease) in valuation allowance allocated to continuing operations		3,096			(42	)		(719	)
Other, net		(80	)		70			278
	$	1,242		$	(288	)	$	426

37

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2002 and 2003, are presented below:

			December 31
			2002			2003
Deferred tax assets attributable to:
	Net operating loss and credit carryforwards		$	25,261		$	23,971
	Accrued vacation pay			286			314
	Reserves and other			904			853
		Total gross deferred tax assets		26,451			25,138
Less valuation allowance				(21,203	)		(20,484	)
		Net deferred tax assets		5,248			4,654
Deferred tax liabilities attributable to:
	Plant and equipment, principally due to differences in depreciation			(3,345	)		(2,926	)
	Excess of tax over book amortization of organization costs			(49	)		(41	)
	Debt discount			(103	)		(87	)
		Total deferred tax liabilities		(3,497	)		(3,054	)
		Net deferred tax asset	$	1,751		$	1,600

      In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate future taxable income of approximately $4,700 prior to the expiration of the net operating loss carryforwards in 2021. Management believes it is more likely than not the Company will realize the benefits of these deductible differences, net of the existing valuation allowances at December 31, 2003 based upon anticipated profitability over the period of years that the temporary differences are expected to become tax deductions. Management believes that sufficient book and taxable income will be generated to realize the benefit of these tax assets. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.

      At December 31, 2003, the Company has net operating loss carryforwards for Federal income tax purposes of approximately $66,000 which are available to offset future federal taxable income, if any, through 2022.

(11) Redeemable Preferred Stock

      Pursuant to a 1999 agreement to purchase certain assets of Worthington Custom Plastics, Inc. (“Worthington”), the Company issued 10,000 shares of its preferred stock, without par value, to Worthington. The preferred stock was mandatorily redeemable on April 15, 2004 at $1,000 per share. The preferred stock was valued at $4,250 at the time of the acquisition and the discount is being accreted over a five-year period using the effective yield method. See also note 2 related to the 2002 sale of assets acquired from Worthington Custom Plastics, Inc and note 19 related to litigation regarding Worthington Industries, Inc.

      The Company and Worthington have entered into a stock redemption agreement, dated December 23, 2003, that provides for 30 monthly redemption payments of $50 each over a three year period (10 payments

38

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

each year in 2004, 2005 and 2006) to fully redeem the preferred stock. Each payment will redeem 333 (or 334) shares of the 10,000 shares outstanding and will result in a gain on redemption of $283. If shares are not redeemed under the provisions of this agreement, the redemption price remains at $1,000 per share. As part of this agreement, all litigation between the Company and Worthington is settled and dismissed.

(12) Stockholders’ Equity

      The Company’s capital stock consists of Class A and Class B common stock. The Class A and Class B shares have the same rights and preferences, except that the Class B shares guarantee the holders certain special voting rights. The holders of the Class B common stock are ensured that the total votes available to be cast by the holders, when combined with Class A common stock held, will be at least 24% of the votes available to be cast by all holders of common stock.

      The Board of Directors is also authorized to issue one or more series of preferred stock, with the number of shares, dividend rate, voting rights, redemption features and other rights to be determined by the Board of Directors.

(13) Stock Option Plans

      In 1998, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stock options to officers and key employees. The Plan authorizes grants of options to purchase up to 1,166,896 shares of authorized but unissued Class A common stock. Stock options are granted with an exercise price equal to the stock’s fair market value at the date of grant. All stock options under the Plan have ten-year terms and vest and become fully exercisable after three years from the date of grant. At December 31, 2002 and 2003, there were 8,100 and 327,561 additional shares available for grant under the Plan.

      The Company had a predecessor stock option plan under which key officers and employees were granted options at prices equal to fair market value of the stock on the date of grant. At December 31, 2002 and 2003, there were 9,259 and no options outstanding under the prior plan, respectively.

      Stock option activity during the periods indicated is as follows:

				Weighted
				Average
	Number of			Exercise
	Shares			Price
Outstanding at December 31, 2000		1,096,517		$	13.904
Issued		139,150			1.875
Exercised		—			—
Forfeited		(139,600	)		(8.447	)
Outstanding at December 31, 2001		1,096,067			13.072
Issued		131,500			0.325
Exercised		(59,697	)		(0.216	)
Forfeited		—			—
Outstanding at December 31, 2002		1,167,870			12.290
Issued		712,500			0.166
Exercised		—			—
Forfeited		(1,041,220	)		(13.675	)
Outstanding at December 31, 2003		839,150		$	0.286

39

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      The following is summary information about the Company’s stock options outstanding at December 31, 2003:

						Number of
Number of		Exercise				Shares
Shares		Price		Expiration Date		Exercisable
	51,650	$	1.875		February 2011		34,433
	75,000		0.325		June 2012		25,000
	600,000		0.150		February 2013		—
	30,000		0.250		April 2013		30,000
	72,500		0.250		August 2013		72,500
	10,000		0.300		November 2013		—
	839,150						161,933

(14) Concentration of Sales

      Sales to customers in excess of 10% of total net sales for the years ended December 31, 2001, 2002, and 2003 are as follows:

		Customer A		Customer B
Years ended:
	December 31, 2001		40%		51%
	December 31, 2002		37%		50%
	December 31, 2003		38%		50%

      Trade accounts receivable with these customers totaled $4,130 and $4,302 at December 31, 2002 and 2003, respectively.

(15) Employee Participation Plan

      The Company’s Employee Participation Plan allows substantially all employees to defer up to 15 percent of their income through payroll deduction of pre-tax contributions under section 401(k) of the Internal Revenue Code. The Company matches 25 percent of the first 6 percent of pre-tax income contributed by each employee. Employees may also make contributions of after-tax income. Additionally, the Company may make discretionary contributions to the plan for the benefit of participating employees. Certain of the acquired subsidiaries also had defined contribution plans which allow for employee pre-tax contributions and employer matching and discretionary contributions. The expense charged to operations related to defined contribution plans was $240, $239 and $230 for the years ended December 31, 2001, 2002 and 2003, respectively.

40

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(16) Earnings (Loss) Per Share

      The following reflects the reconciliation of the numerators and denominators of the income (loss) available to common shareholders per share and net income (loss) available to common shareholders per share assuming dilution computations:

			2001			2002			2003
Numerator:
	Earnings (loss) from continuing operations		$	(8,333	)	$	(1,965	)	$	541
	Earnings (loss) from discontinued operations			(9,454	)		6,790			85
	Earnings (loss) before cumulative effect of change in accounting principle			(17,787	)		4,825			626
	Cumulative effect of change in accounting principle			—			(8,118	)		—
		Net Earnings (loss) available to common shareholders	$	(17,787	)	$	(3,293	)	$	626
Denominator:
	Weighted average shares outstanding — basic			4,600,850			4,638,467			4,660,547
	Dilutive potential common shares — stock options			—			—			430,300
		Weighted average shares outstanding — diluted		4,600,850			4,638,467			5,090,847
Basic earnings per share:
	Earnings (loss) from continuing operations		$	(1.81	)	$	(0.42	)	$	0.12
	Earnings (loss) from discontinued operations			(2.06	)		1.46			0.02
	Earnings (loss) before cumulative effect of change in accounting principle			(3.87	)		1.04			0.14
	Cumulative effect of change in accounting principle			—			(1.75	)		—
		Net Earnings (loss) available to common shareholders	$	(3.87	)	$	(0.71	)	$	0.14
Diluted earnings per share:
	Earnings (loss) from continuing operations		$	(1.81	)	$	(0.42	)	$	0.11
	Earnings (loss) from discontinued operations			(2.06	)		1.46			0.02
	Earnings (loss) before cumulative effect of change in accounting principle			(3.87	)		1.04			0.13
	Cumulative effect of change in accounting principle			—			(1.75	)		—
		Net Earnings (loss) available to common shareholders	$	(3.87	)	$	(0.71	)	$	0.13

      Options to purchase 1,096,067 shares of Class A common stock at an average price of $13.072 per share and warrants to purchase 238,548 shares of Class A common stock at $.01 per share were outstanding at December 31, 2001, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

      Options to purchase 1,167,870 shares of Class A common stock at an average price of $12.294 per share and warrants to purchase 238,548 shares of Class A common stock at $.01 per share were outstanding at December 31, 2002, but were not included in the computation of diluted earnings per share because they were anti-dilutive.

41

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(17) Segment Reporting

      Subsequent to the previously reported sales of Morton Custom Plastics, LLC and Mid-Central Plastics, Inc., the Company has only one remaining segment — the contract metal fabrication segment.

(18) Selected Quarterly Financial Data (Unaudited)

      Selected quarterly financial information for the years ended December 31, 2003 and 2002 is as follows:

				First			Second			Third			Fourth
				Quarter			Quarter			Quarter			Quarter			Total Year
				(In thousands, except per share data)
2003:
	Sales			$	32,380		$	34,398		$	31,452		$	33,201		$	131,431
	Gross margin				4,591			5,010			4,063			4,449			18,113
	Operating income				1,283			1,698			886			884			4,751
	Earnings before discontinued operations and cumulative effect of accounting change				316			573			106			261			1,256
	Net earnings (loss) from discontinued operations				135			(50	)		—			—			85
	Net earnings available to common shareholders				119			140			106			261			626
	Earnings per share of common stock — basic:
		From continuing operations			0.00			0.04			0.02			0.06			0.12
		From discontinued operations			0.03			(0.01	)		—			—			0.02
			Total		0.03			0.03			0.02			0.06			0.14
	Earnings per share of common stock — diluted:
		From continuing operations			0.00			0.03			0.02			0.06			0.11
		From discontinued operations			0.03			(0.01	)		—			—			0.02
			Total		0.03			0.02			0.02			0.06			0.13
2002:
	Sales			$	29,177		$	32,241		$	28,981		$	26,168		$	116,567
	Gross margin				4,117			4,850			3,385			2,693			15,045
	Operating income (loss)				1,160			1,402			647			(334	)		2,875
	Earnings (loss) before discontinued operations and cumulative effect of accounting change				184			(473	)		(321	)		(90	)		(700	)
	Net earnings (loss) from discontinued operations				(526	)		(2,770	)		(4,326	)		14,412			6,790
	Cumulative effect of change in accounting principle				(8,118	)		—			—			—			(8,118	)
	Net earnings (loss) available to common shareholders				(8,739	)		(3,566	)		(4,978	)		13,990			(3,293	)
	Earnings per share of common stock — basic and diluted:
		From continuing operations			(0.02	)		(0.17	)		(0.14	)		(0.09	)		(0.42	)
		From discontinued operations			(0.12	)		(0.59	)		(0.92	)		3.09			1.46
		Cumulative effect of change in accounting principle			(1.75	)		—			—			—			(1.75	)
			Total		(1.89	)		(0.76	)		(1.06	)		3.00			(0.71	)

42

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(19) Litigation

      On May 1, 2000, Worthington Industries, Inc. (Worthington) filed suit (in the United States District Court for the Southern District of Ohio, Eastern Division (“the Court”)) against the Company and Morton Custom Plastics, LLC (“MCP, LLC”) related to MCP, LLC’s 1999 acquisition of the non-automotive plastics business from Worthington. In connection with the stock redemption agreement described in Note 11 above, all litigation between the Company and Worthington was released. An order of dismissal of the Worthington lawsuit against the Company was entered in the Court on January 20, 2004.

      The Company is also involved in routine litigation. Management does not believe any legal proceedings would have a material adverse effect on the Company’s financial condition or results of operations.

(20) Subsequent Event

      On March 26, 2004, the Company entered into a Second Amended and Restated Credit Agreement with a syndicate of banks led by Harris Trust and Savings Bank, As Agent, and also on March 26, 2004, entered into a Note and Warrant Purchase Agreement with BMO Nesbitt Burns Capital (U.S.) Inc., As Agent. These agreements were effective on March 26, 2004, and provided financing to replace the $13,300 revolving credit facility with the Harris syndicate and the $23,300 term note payable to the Harris syndicate as described in Note 8 above. In connection with this transaction, holders of 238,584 warrants to purchase Class A Common Stock surrendered them to the Company.

      Under the terms of the new agreements, the Company has:

      1) A 4-year secured term loan in the amount of $22,000 with variable rate interest; principal payments are due in quarterly installments of $500 beginning June 30, 2004 through March 31, 2005 and due in quarterly installments of $750 beginning June 30, 2005 through December 31, 2007 with the balance of $11,750 due on March 31, 2008. The Company will enter into interest rate protection contracts on at least 50% of the term loan.

      2) A secured revolving credit facility with a limit of $18,000, variable rate interest, and with an initial revolving credit balance of $8,700, and with initial availability of $5,400 as of March 26, 2004. The balance is due March 31, 2008. The amount available under the revolving credit facility is limited to 85% of eligible accounts receivable and 60% of eligible inventory. The facility requires a commitment fee of 0.50% per annum on the unused portion of the facility.

      At the Company’s option, for both the secured term loan and the revolving credit facility, interest will be at either a bank base rate plus applicable margin, or an adjusted LIBOR plus a LIBOR margin. At inception, the bank rate plus applicable margin is 6.75% and the adjusted LIBOR plus a LIBOR margin is 5.35%.

      3) A senior secured subordinated note in the amount of $10,000 bearing cash interest of 12% and PIK interest of 4% with no principal amortization, and the balance due March 26, 2009.

      Related to the senior secured subordinated note, the Company issued 545,467 warrants to purchase shares of its Class A Common Stock at an exercise price of $0.02 per share; these warrants expire March 26, 2014. The warrants may be put to the Company, at the then fair market value, five years from the date of issue, or upon change of control or upon a default on the senior secured subordinated loan.

43

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

      In connection with these loans, we have granted the lenders a lien on all of the Company’s accounts receivable, inventory, equipment, land and buildings, and various other assets. These agreements contain restrictions on capital expenditures, additional debt or liens, investments, mergers and acquisitions, asset sales and payments such as dividends or stock repurchases. These agreements also impose various financial covenants, including financial performance ratios. Fees associated with the March 26, 2004 transactions, including underwriting and legal fees, were approximately $1,500, paid at closing.

44

Item 9A. Controls and Procedures

      (a) Evaluation of disclosure controls and procedures. The Company’s principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rule 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended), based on their evaluation of these controls and procedures as of the end of the period covered by this Form 10-K, are effective.

      The Company’s management, including its principal executive officer and principal financial officer, does not expect that the Company’s disclosure controls and procedures or its internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgements in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control.

      Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. The design of any system of controls also is based, in part, upon certain assumptions about the likelihood of future events, and there can only be reasonable assurance that any design will succeed in achieving its stated goals under all potential future conditions.

      (b) Changes in internal controls. There have been no significant changes in the Company’s internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation.

PART III

Item 10. Directors and Executive Officers of the Registrant.

      The information required by this Item 10 about the executive officers and Directors of the Company is incorporated herein by reference to the information set forth under the caption “Election of Directors” in our definitive proxy statement for the 2004 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2003 pursuant to Regulation 14A.

Item 11. Executive Compensation.

      The information required by this Item 11 is incorporated herein by reference to the information set forth under the caption “Executive Compensation” in our definitive proxy statement for the 2004 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2003 pursuant to Regulation 14A.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

      The information required by this Item 12 is incorporated herein by reference to the information set forth under the caption “Principal Shareholders of the Company” in our definitive proxy statement for the 2004 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2003 pursuant to Regulation 14A.

45

Item 13. Certain Relationships and Related Transactions.

      The information required by this Item 13 is incorporated herein by reference to the information set forth under the caption “Executive Compensation — Certain Relationships and Related Transactions” in our definitive proxy statement for the 2004 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2003 pursuant to Regulation 14A.

Item 14. Principal Accountant Fees and Services

      The information required by this Item 14 is incorporated herein by reference to the information set forth under the caption “Ratification of the Selection of Auditors” in our definitive proxy statement for the 2004 annual meeting of shareholders, which we expect to file with the Securities and Exchange commission not later than one hundred twenty days after December 31, 2003 pursuant to Regulation 14A.

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

      (a) The following documents are filed as a part of this report:

      1. Financial Statements.

      The following financial statements of the Company are included in Item 8:

      a. Report of KPMG LLP, Independent Auditors

      b. Consolidated Balance Sheets as of December 31, 2002 and 2003

      c. Consolidated Statements of Operations for the years ended December 31, 2001, 2002 and 2003

d.  Consolidated Statements of Stockholders’ Equity (Deficit) for the years ended December 31, 2001, 2002 and 2003

      e. Consolidated Statements of Cash Flows for the years ended December 31, 2001, 2002 and 2003

      f. Notes to Consolidated Financial Statements

      2. Financial Statement Schedules

      The following financial statement schedule of the Company is included in Item 8:

      Schedule II — Valuation and Qualifying Accounts for the years ended December 31, 2001, 2002 and 2003

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
2.1 and 10.1	—	Agreement and Plan of Merger Between MLX Corp. and Morton Metalcraft Holding Co., dated as of October 20, 1997	Annex B to the Definitive Proxy Statement on Schedule 14A filed by MLX Corp. with the Securities and Exchange Commission (“SEC”) on January 6, 1998.
2.2 and 10.2	—	Securities Purchase Agreement Among MLX Corp. and Security Holders of Morton Metalcraft Holding Co., dated as of October 20, 1997	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997

46

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
3.1 and 4.1	—	Articles of Incorporation of the registrant as Amended prior to January 20, 1998	MLX Corp. Form 10-Q for the quarter ended June 30, 1993 Exhibit 3 to Morton Industrial Group, Inc.
3.2 and 4.2	—	Articles of Amendment to Articles of Incorporation of the Registrant Effective January 20, 1998	Report on Form 8-K filed with the SEC on February 4, 1998
3.2 and 4.2	—	Bylaws of the Registrant, as Amended	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
4.3 and 10.3	—	Credit Agreement Among the Registrant, Metalcraft Co., Morton Metalcraft Co. of North Carolina and Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
4.4 and 10.4	—	Security Agreement executed by Morton Industrial Group, Inc., Morton Metalcraft Co., and Morton Metalcraft Co. of North Carolina in favor of Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
4.5 and 10.5	—	Mortgage and Security Agreement with Assignment of Rents executed by Morton Metalcraft Co. in favor of Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
4.6 and 10.6	—	Pledge Agreement executed by Registrant in favor of Harris Trust & Savings Bank, individually and as Agent, dated January 20, 1998	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.7	—	Limited Indemnification Agreement dated as of October 20, 1997, among MLX Corp., William D. Morton, and Other Morton Metalcraft Shareholders and Option Holders	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
			Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.10	—	Lease between Agracel, Inc., and Morton Metalcraft Co. dated November 6, 1996.	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.11	—	Employment Agreement dated as of January 20, 1998, between the Registrant and William D. Morton	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.12	—	Employment Agreement dated as of January 20, 1998, between the Registrant and Daryl R. Lindemann	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997

47

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
10.13	—	MLX Corp. 1997 Stock Option Plan	Appendix C to the Definitive Proxy Statement on Schedule 14A filed by MLX Corp. with the SEC on January 6. 1998.
10.14	—	MLX Corp. 1995 Stock Option Plan	MLX Corp. Definitive Proxy Statement on Schedule 14A for the 1995 Annual Meeting of Stockholders
10.15	—	Master Lease Agreement between Morton Metalcraft Co. and General Electric Capital Corporation dated August 7, 1996	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.16	—	Guaranty of Master Lease Agreement by Morton Metalcraft Holding Co., dated August 7, 1996	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.23	—	Death Benefit Agreement between Morton Metalcraft Co. and William D. Morton	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.24	—	Salary Continuation Agreement between Morton Metalcraft Co. and William D. Morton dated February 26, 1996.	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1997
10.26	—	Stock Purchase Agreement among the Company, Joseph T. Buie, Jr., and Ernest J. Butler, dated April 8, 1998.	Exhibit 10.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998
10.27	—	Non-negotiable Promissory Note (subordinated) of the Company, Joseph T. Buie, Jr., dated April 8, 1998.	Exhibit 10.3 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998
10.28	—	Non-negotiable Promissory Note (subordinated) of the Company to Ernest. J. Butler, dated April 8, 1998.	Exhibit 10.4 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on April 14, 1998
10.29	—	Stock Purchase Agreement among the Company and Richard L. Goreham, Delores A. Staples and William B. Goreham, dated April 27, 1998.	Exhibit 10.1 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.30	—	Credit Agreement dated May 28, 1998 among the Company, Harris Trust and Savings Bank, and the lenders signatory thereto	Exhibit 10.2 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.32	—	Deed of Trust and Security Agreement with Assignment of Rents executed by B&W Metal Fabricators, Inc.	Exhibit 10.4 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998

48

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
10.33	—	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.	Exhibit 10.5 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.34	—	Amended and Restated Pledge 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.	Exhibit 10.6 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.35	—	Amended and Restated Mortgage and Security Agreement with Assignment of Rents executed by Morton Metalcraft Co., dated May 28, 1998.	Exhibit 10.7 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.35	—	Mortgage and Security Agreement with Assignment of Rents to executed by Mid-Central Plastics, Inc. dated May 28, 1998.	Exhibit 10.8 Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on June 12, 1998
10.36	—	First Amendment to Credit Agreement with Harris Trust & Savings Bank	Morton Industrial Group, Inc. Form 10-K for the year ended December 31, 1998
10.41	—	Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on April 1, 2002
10.42	—	First Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003
10.43	—	Second Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003
10.44	—	Third Amendment to Amended and Restated Agreement with Harris Trust and Savings Bank, As Agent	Exhibit 99.3 to Morton Industrial Group, Inc. Report on Form 10-K filed with SEC on March 31, 2003
10.45	—	Asset Purchase Agreement between Morton Custom Plastics, LLC and Wilbert, Inc.	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on November 4, 2002
10.46	—	Senior Secured, Super-Priority Debtor-in-Possession Credit Agreement among Morton Custom Plastics, LLC and General Electric Capital Corporation	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on November 12, 2002
10.47	—	Fourth Amendment to Amended and Restated Credit Agreement with Harris Trust & Savings Bank, As Agent	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 10-Q filed with SEC on August 11, 2003.

49

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
10.48	—	Fifth Amendment to Amended and Restated Credit Agreement with Harris Trust & Savings Bank, As Agent	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on December 29, 2003.
10.49	—	Sixth Amendment to Amended and Restated Credit Agreement with Harris Trust & Savings Bank, As Agent			X
10.50	—	Second Amended and Restated Credit Agreement			X
10.51	—	Note and Warrant Purchase Agreement			X
10.52	—	Settlement Agreement	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on December 29, 2003.
10.53	—	Stock Redemption Agreement	Exhibit 99.3 to Morton Industrial Group, Inc. Report on Form 8-K filed with SEC on December 29, 2003.
10.54	—	Agreement with Innovative Injection Technologies, Inc.	Exhibit 99.1 to Morton Industrial Group, Inc. Report on Form 8-K/A filed with SEC on July 7, 2003.
10.55	—	First Amendment to Agreement with Innovative Injection Technologies, Inc.	Exhibit 99.2 to Morton Industrial Group, Inc. Report on Form 8-K/A filed with SEC on July 7, 2003.
10.56	—	Investor Rights Agreement			X
13	—	Annual Report			X
16.2	—	Letter re: change in certifying accountant	Exhibit 16.1 to Morton Industrial Group, Inc. Report on Form 8-K filed with the SEC on February 18, 1999
21.1	—	Subsidiaries of Registrant			X
23.1	—	Consent of KPMG LLP			X
31.1	—	Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			X
31.2	—	Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.			X

50

				Filed
Exhibit Number and Document Title			Incorporated by Reference to	Herewith
32.1	—	Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			X
32.2	—	Certification pursuant to 18 U.S.C. Section 1350, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.			X

      (b) Reports on Form 8-K

Form 8-K was filed with the SEC on December 29, 2003 related to an extension of the Company’s bank credit facility and a settlement related to its redeemable preferred stock.

51

MORTON INDUSTRIAL GROUP, INC. AND SUBSIDIARIES

Schedule II — Valuation and Qualifying Accounts

		Balance At		Charged to								Balance At
		Beginning of		Costs and								End of
Description		Period		Expenses		Deductions			Other			Period
Allowance for doubtful accounts:
	Year ended December 31, 2001	$	1,324		595		(1,538	)		—			381
	Year ended December 31, 2002	$	381		7		(52	)		(252	)*		84
	Year ended December 31, 2003	$	84		310		(192	)		—			202

*  Represents the December 31, 2001 allowance for doubtful accounts of discontinued operations.

52

SIGNATURES

      Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

MORTON INDUSTRIAL GROUP, INC.

By:  /s/ WILLIAM D. MORTON

William D. Morton

President, Chief Executive

Officer, and Chairman of the

Board of Directors

Dated: March 30, 2004

      Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

Name	Title	Date
/s/ WILLIAM D. MORTON William D. Morton	President, Chief Executive Officer, and Chairman of the Board of Directors	March 30, 2004
/s/ RODNEY B. HARRISON Rodney B. Harrison	Vice President of Finance and Treasurer (Principal Accounting Officer)	March 30, 2004
/s/ FRED W. BROLING Fred W. Broling	Director	March 30, 2004
/s/ MARK W. MEALY Mark W. Mealy	Director	March 30, 2004

SHAREHOLDER INFORMATION

CORPORATE OFFICES

Morton Industrial Group, Inc.

1021 W. Birchwood

Morton, Illinois 61550-0429

Phone: 309-266-7176 Fax: 309-263-1841

INVESTOR INFORMATION

Shareholders and prospective investors are welcome to call or write with questions or requests for additional information. Please direct inquiries to Van Negris at:

Van Negris & Company, Inc.

1120 Avenue Of The Americas — Suite 4100

New York, NY 10036

Phone: 212-626-6730 Fax: 212-626-6732

ANNUAL MEETING

The Annual Meeting of the Shareholders of Morton Industrial Group, Inc. will be held on Tuesday, June 8, 2004 at 10:00 a.m. (CDT) at:

Bertha Frank Performing Arts Center

350 North Illinois Avenue

Morton, Illinois 61550

FORM 10-K

A copy of form 10-K, the Annual Report which the Company is required to file with the Securities and Exchange Commission, is available without charge upon request to the Company at the above address.

STOCK TRANSFER AGENT AND REGISTRAR

For inquiries about stock transfers or address changes, shareholders may contact:

American Stock Transfer & Trust Co.

59 Maiden Lane

New York, NY 10038

Phone: 800-937-5449

INDEPENDENT PUBLIC ACCOUNTANTS

KPMG LLP

Indianapolis, Indiana

STOCK MARKET INFORMATION

The common stock of Morton Industrial Group, Inc. is traded on the OTC Market under the ticker symbol MGRP.

BOARD OF DIRECTORS

William D. Morton

Chairman of the Board, President and CEO

Morton Industrial Group, Inc.

Fred W. Broling

Retired President and CEO

US Precision Glass

Mark W. Mealy

Head of the Mergers and Acquisitions Group

Wachovia Securities, Inc.

CORPORATE OFFICERS

William D. Morton

Chairman of the Board, President and CEO

Daryl R. Lindemann

Secretary

Rodney B. Harrison

Vice President of Finance & Treasurer

EX-10.49

                                                                   Exhibit 10.49


            SIXTH AMENDMENT TO AMENDED AND RESTATED CREDIT AGREEMENT

         This Sixth Amendment to Amended and Restated Credit Agreement (herein,
the "Amendment") is made as of March 15, 2004, by and among Morton Industrial
Group, Inc., a Georgia corporation (the "Borrower"), the Lenders party to the
Credit Agreement hereinafter identified and defined, and Harris Trust and
Savings Bank, as Agent for the Lenders (in such capacity, the "Agent").

                                    RECITALS

         A. The Lenders currently extend credit to the Borrower on the terms and
conditions set forth in that certain Amended and Restated Credit Agreement dated
as of February 25, 2002, as amended, by and among the Borrower, the Guarantors,
the Lenders, and the Agent (the "Credit Agreement"). All capitalized terms used
herein without definition shall have the same meanings herein as such terms have
in the Credit Agreement.

         B. The Borrower has requested that the Lenders increase the Capital
Expenditure limit for fiscal 2003 and make certain changes to the Borrowing
Base, and the Lenders are willing to agree to such changes, all on the terms and
conditions herein set forth.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

SECTION 1.            AMENDMENTS.

         Subject to the satisfaction of the conditions set forth in Section 3
below, the Credit Agreement shall be and hereby is amended as follows:

        1.1. The definition of "Borrowing Base" set forth in Section 5.1 of the
Credit Agreement is hereby amended and restated to read in its entirety as
follows:

               "Borrowing Base" means, as of any time it is to be
determined, the sum of:


                 (a) 85% of the then net book value of Eligible Accounts
(computed using the method of receivables valuation applied by the Borrower in
accordance with GAAP which reflects such value as the net book value of its
receivables, except that net book value for such purposes shall not reflect any
reserve for accounts more than ninety days past due that have already been
excluded from gross accounts in computing such Eligible Accounts) less such
other reserves for uncollectibility, location of account debtor, contras and
other matters as the Agent or Required Lenders in good


faith shall from time to time reasonably deem appropriate to adjust such net
book value; plus

                 (b) 60% of the value (computed at its cost using the method of
inventory valuation applied by the Borrower in accordance with GAAP which
reflects such cost on the Borrower's books as its net book value, but in any
event after reducing such value as so computed by the aggregate amount of all
reserves for obsolescence, slow-moving items, shrinkage and all such other
matters as the Agent or Required Lenders in good faith shall from time to time
reasonably deem appropriate to adjust such net book value) of Eligible
Inventory; plus

                 (c) the Other Asset Value then in effect;

provided that the Borrowing Base shall be computed only as against and on so
much of the Collateral as is included on the certificates to be furnished from
time to time by the Borrower pursuant to Section 8.5(f) hereof and, if required
by the Agent pursuant to any of the terms hereof or any Collateral Document, as
verified by such other evidence required to be furnished to the Agent pursuant
hereto or pursuant to any such Collateral Document. Notwithstanding the
foregoing to the contrary: (i)the amount of Eligible Accounts otherwise included
in the Borrowing Base shall be reduced, dollar for dollar, by a reserve equal to
the greater of (a) the amount (if any) by which (x) the aggregate amount of
accounts payable owing by the Borrower and its Subsidiaries to Deere and
Caterpillar together and their respective Affiliates for inventory and supplies
purchased (the "Deere/Caterpillar Payables") at any time exceeds (y) $5,000,000
or (b) the sum of (A) the amount (if any) by which (x) the aggregate amount of
accounts payable owing by the Borrower and its Subsidiaries to Deere and its
Affiliates for inventory and supplies purchased (the "Deere Payables") at any
time exceeds (y) $3,000,000 and (B) the amount (if any) by which (x) the
aggregate amount of accounts payable owing by the Borrower and its Subsidiaries
to Caterpillar and its Affiliates for inventory and supplies purchased (the
"Caterpillar Payables") at any time exceeds (y) $3,000,000; (ii) no reserve will
be imposed in computing the Borrowing


                                      -2-




Base as of any time solely in respect of the Deere/Caterpillar Payables, Deere
Payables or Caterpillar Payables to the extent the same do not exceed such
respective limits; and (iii) the Agent and the Required Lenders shall have the
right to impose reserves for other matters arising in connection with
receivables owing by Deere and Caterpillar and to otherwise impose reserves in
accordance with the Credit Agreement.

        1.2 Section 8.10 of the Credit Agreement is hereby amended and restated
to read in its entirety as follows:

Section 8.10. Capital Expenditures. The Borrower will not, nor will it permit
any Subsidiary to, expend or (without duplication) become obligated to expend,
in each case for Capital Expenditures aggregating for the Borrower and its
Subsidiaries (taken together) in excess of (i) $3,900,000 during fiscal 2003,
(ii) $4,500,000 during fiscal 2004 and (iii) $1,250,000 during the period from
January 1, 2005 through and including the Termination Date.

SECTION 2.            CONDITIONS PRECEDENT.

         The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:

        2.1. The Borrower, the Agent, and the Lenders shall have executed and
delivered this Amendment, and the Guarantors shall have executed and delivered
their consent to this Amendment in the space provided for that purpose below.

        2.2. Legal matters incident to this Amendment shall be satisfactory to
the Agent and the Lenders and their counsel.

        2.3. The Borrower shall have paid all fees and expenses of counsel to
the Agent with respect to the preparation of this Amendment as well as all prior
fees and charges of counsel to the Agent incurred prior to the date hereof which
remain outstanding and unpaid.

SECTION 3.            REPRESENTATIONS.

         In order to induce the Lenders to execute and deliver this Amendment,
the Borrower hereby represents to the Lenders that as of the date hereof, and
after giving effect to this Amendment, (a) the representations and warranties
set forth in Section 6 of the Credit Agreement are and shall be and remain true
and correct in all material respects (except that for purposes of this paragraph
the representations contained in Section 6.4 shall be deemed to refer to the
most recent financial statements of the Borrower delivered to the Lenders) and
(b) the Borrower is in full compliance with all of the terms and conditions of
the Credit Agreement after


                                      -3-


giving effect to this Amendment and no Default or Event of Default has occurred
and is continuing under the Credit Agreement or shall result after giving effect
to this Amendment.

SECTION 4.           RELEASE OF CLAIMS.

         TO INDUCE THE LENDERS AND THE AGENT TO ENTER INTO THIS AMENDMENT, THE
BORROWER AND THE GUARANTORS HEREBY RELEASE, ACQUIT, AND FOREVER DISCHARGE THE
LENDERS, THE AGENT AND THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS,
DIRECTORS, AGENTS, ATTORNEYS, ADVISORS, CONSULTANTS, EMPLOYEES, SUCCESSORS AND
ASSIGNS, FROM ALL LIABILITIES, CLAIMS, DEMANDS, ACTIONS, AND CAUSES OF ACTION OF
ANY KIND (IF THERE ARE ANY), WHETHER ABSOLUTE OR CONTINGENT, DUE OR TO BECOME
DUE, DISPUTED OR UNDISPUTED, AT LAW OR IN EQUITY, THAT THEY NOW HAVE OR EVER HAD
AGAINST THE LENDERS, THE AGENT AND THE OTHER PARTIES IDENTIFIED ABOVE, OR ANY
ONE OR MORE OF THEM INDIVIDUALLY, UNDER OR IN CONNECTION WITH THE CREDIT
AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.

SECTION 5.            MISCELLANEOUS.

        5.1. The Borrower has heretofore executed and delivered to the Agent and
the Lenders certain of the Collateral Documents. The Borrower hereby
acknowledges and agrees that, notwithstanding the execution and delivery of this
Amendment, the Collateral Documents remain in full force and effect and the
rights and remedies of the Agent and the Lenders thereunder, the obligations of
the Borrower thereunder, and the liens and security interests created and
provided for thereunder remain in full force and effect and shall not be
affected, impaired, or discharged 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 Collateral Documents as to the indebtedness which would
be secured thereby prior to giving effect to this Amendment.

        5.2. Except as specifically amended herein or waived hereby, the Credit
Agreement shall continue in full force and effect in accordance with its
original terms. Reference to this specific Amendment need not be made in the
Credit Agreement, the Notes, or any other instrument or document executed in
connection therewith, or in any certificate, letter or communication issued or
made pursuant to or with respect to the Credit Agreement, any reference in any
of such items to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.

        5.3. The Borrower agrees to pay all reasonable out-of-pocket costs and
expenses incurred by the Agent and the Lenders in connection with the
preparation, execution and delivery of this Amendment and the documents and
transactions contemplated hereby, including the reasonable fees and expenses of
counsel for the Agent with respect to the foregoing.


                                      -4-



        5.4. This Amendment may be executed in any number of counterparts, and
by the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this Amendment by signing any such counterpart and each of
such counterparts shall for all purposes be deemed to be an original. This
Amendment shall be governed by the internal laws of the State of Illinois.

                                      [SIGNATURE PAGES TO FOLLOW]






                                      -5-


         This Sixth Amendment to Amended and Restated Credit Agreement is
entered into by the parties hereto as of the date and year first above written.

                                         MORTON INDUSTRIAL GROUP, INC.

                                         By  /s/ RODNEY B. HARRISON
                                            ------------------------------------
                                            Name  Rodney B. Harrison
                                                 -------------------------------
                                            Title  VP of Finance
                                                  ------------------------------

                                         Accepted and agreed to.

                                         HARRIS TRUST AND SAVINGS BANK

                                         By  /s/ LAWRENCE A. MIZERA
                                            ------------------------------------
                                            Name  Lawrence A. Mizera
                                                 -------------------------------
                                            Title  Vice President
                                                  ------------------------------

                                         BRANCH BANKING & TRUST CO.

                                         By  /s/ WORD C. CLARK, JR.
                                            ------------------------------------
                                            Name  Word C. Clark, Jr.
                                                 -------------------------------
                                            Title  SVP
                                                  ------------------------------

                                         U.S. BANK NATIONAL ASSOCIATION

                                            f/k/a Firstar Bank, N.A.

                                         By  /s/ RON SHAPIRO
                                            ------------------------------------
                                            Name  Ron Shapiro
                                                 -------------------------------
                                            Title  VP
                                                  ------------------------------

                                         LASALLE BANK NATIONAL ASSOCIATION

                                         By  /s/ JAMES D. THOMPSON
                                            ------------------------------------
                                            Name  James D. Thompson
                                                 -------------------------------
                                            Title  Group Senior VP
                                                  ------------------------------

                                         NATIONAL CITY BANK

                                         By  /s/ STEPHEN A. MONTO
                                            ------------------------------------
                                            Name  Stephen A. Monto
                                                 -------------------------------
                                            Title  Account Officer
                                                  ------------------------------


                                      -6-


                    GUARANTORS' ACKNOWLEDGEMENT AND CONSENT

         Each of the undersigned hereby acknowledges and agrees that it is a
Guarantor under the terms of Section 11 of the Credit Agreement and, as such has
executed and delivered certain Collateral Documents pursuant to the Credit
Agreement. The undersigned hereby consent to the Sixth Amendment to Amended and
Restated Credit Agreement as set forth above and agree to the terms thereof,
including, without limitation, Section 5 thereof, and the undersigned hereby
confirm that their guaranties and the Collateral Documents executed by them, and
all of the obligations of the undersigned thereunder, remain in full force and
effect. The undersigned further agree that the consent of the undersigned to any
further amendments to the Credit Agreement shall not be required as a result of
this consent having been obtained. The undersigned acknowledge the Lenders are
relying on this acknowledgement and consent in entering into the Sixth Amendment
to Amended and Restated Credit Agreement with the Borrower.

                                         MORTON METALCRAFT CO.

                                         By  /s/ DARYL R. LINDEMANN
                                            ------------------------------------
                                            Name  Daryl R. Lindemann
                                                 -------------------------------
                                            Title  Vice President
                                                  ------------------------------

                                         MORTON METALCRAFT CO. OF NORTH CAROLINA

                                         By  /s/ DARYL R. LINDEMANN
                                            ------------------------------------
                                            Name  Daryl R. Lindemann
                                                 -------------------------------
                                            Title  Vice President
                                                  ------------------------------

                                         MORTON METALCRAFT CO. OF SOUTH CAROLINA

                                         By  /s/ DARYL R. LINDEMANN
                                            ------------------------------------
                                            Name  Daryl R. Lindemann
                                                 -------------------------------
                                            Title  Vice President
                                                  ------------------------------

                                         MID CENTRAL PLASTICS, INC.

                                         By  /s/ DARYL R. LINDEMANN
                                            ------------------------------------
                                            Name  Daryl R. Lindemann
                                                 -------------------------------
                                            Title  Vice President
                                                  ------------------------------

                                         B&W METAL FABRICATORS, INC.

                                         By  /s/ DARYL R. LINDEMANN
                                            ------------------------------------
                                            Name  Daryl R. Lindemann
                                                 -------------------------------
                                            Title  Vice President
                                                  ------------------------------

EX-10.50

                                                                   EXHIBIT 10.50


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

                  SECOND AMENDED AND RESTATED CREDIT AGREEMENT

                                  BY AND AMONG

                         MORTON INDUSTRIAL GROUP, INC.,

                 THE GUARANTORS FROM TIME TO TIME PARTY HERETO,

                   THE LENDERS FROM TIME TO TIME PARTY HERETO

                    NATIONAL CITY BANK, AS SYNDICATION AGENT

                                       AND

                     HARRIS TRUST AND SAVINGS BANK, AS AGENT

                           DATED AS OF MARCH 26, 2004

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

                                TABLE OF CONTENTS



SECTION                                                         HEADING                                                  PAGE
                                                                                                                   
SECTION 1.              THE CREDITS ..................................................................................     2

       Section 1.1.     Revolving Credit .............................................................................     2
                  (a)   Generally ....................................................................................     2
                  (b)   Revolving Loans ..............................................................................     3
       Section 1.2.     Term Credit . ................................................................................     3
       Section 1.3.     Letters of Credit ............................................................................     4
                  (a)   General Terms ................................................................................     4
                  (b)   Applications ................................................................................      4
                  (c)   The Reimbursement Obligation .................................................................     5
                  (d)   The Participating Interests ..................................................................     6
                  (e)   Indemnification ..............................................................................     6
                  (f)   Change in Laws ...............................................................................     7
       Section 1.4.     Manner and Disbursement of Borrowings ........................................................     7
                  (a)   Generally ....................................................................................     7
                  (b)   Reimbursement Obligation .....................................................................     8
                  (c)   Agent Reliance on Bank Funding ...............................................................     8
       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 ................................................................................    12
       Section 2.6.     Unavailability of Deposits or Inability to Ascertain Adjusted LIBOR ..........................    13
       Section 2.7.     Taxes and Increased Costs ....................................................................    13
       Section 2.8.     Change in Capital Adequacy Requirements ......................................................    14
       Section 2.9.     Funding Indemnity ............................................................................    15
       Section 2.10.    Lending Branch ...............................................................................    15
       Section 2.11.    Lender's Duty to Mitigate ....................................................................    15
       Section 2.12.    Discretion of Lenders as to Manner of Funding ................................................    16
       Section 2.13.    Replacement of Lender ........................................................................    16
       Section 2.14.    Default Rate .................................................................................    17

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



                                      -i-

                                                                                                                    
       Section 3.3.     Mandatory Prepayments ........................................................................    19
       Section 3.4.     Terminations of Revolving Credit Commitments .................................................    21
       Section 3.5.     Place and Application of Payments ............................................................    21
       Section 3.6.     Notations and Requests .......................................................................    22
       Section 3.7.     Excess Revolving Credit ......................................................................    23

SECTION 4.              COLLATERAL ...................................................................................    23

       Section 4.1.     Collateral ...................................................................................    23
       Section 4.2.     Guaranties ...................................................................................    23
       Section 4.3.     Further Assurances ...........................................................................    24
       Section 4.4.     Collections ..................................................................................    24

SECTION 5.              DEFINITIONS; INTERPRETATION ..................................................................    24

       Section 5.1.     Definitions ..................................................................................    24
       Section 5.2.     Interpretation ...............................................................................    42
       Section 5.3.     Change in Accounting Principles ..............................................................    43

SECTION 6.              REPRESENTATIONS AND WARRANTIES ...............................................................    43

       Section 6.1.     Organization and Qualification ...............................................................    43
       Section 6.2.     Subsidiaries .................................................................................    43
       Section 6.3.     Authority and Validity of Obligations ........................................................    44
       Section 6.4.     Use of Proceeds; Margin Stock ................................................................    44
       Section 6.5.     Financial Reports ............................................................................    45
       Section 6.6.     Full Disclosure ..............................................................................    45
       Section 6.7.     Good Title ...................................................................................    45
       Section 6.8.     Litigation and Other Controversies ...........................................................    45
       Section 6.9.     Taxes ........................................................................................    45
       Section 6.10.    Approvals ....................................................................................    46
       Section 6.11.    Affiliate Transactions .......................................................................    46
       Section 6.12.    Investment Company; Public Utility Holding Company ...........................................    46
       Section 6.13.    ERISA ........................................................................................    46
       Section 6.14.    Compliance with Laws .........................................................................    46
       Section 6.15.    Environmental and Safety Matters .............................................................    47
       Section 6.16.    Other Agreements .............................................................................    48
       Section 6.17.    No Default ...................................................................................    48
       Section 6.18.    Trademarks, Franchises, and Licenses .........................................................    48
       Section 6.19.    Governmental Authority and Licensing .........................................................    48
       Section 6.20.    Solvency .....................................................................................    49
       Section 6.21.    Capital Structure ............................................................................    49

SECTION 7.              CONDITIONS PRECEDENT .........................................................................    50

       Section 7.1.     All Advances .................................................................................    50
       Section 7.2.     Initial Advance ..............................................................................    51
       Section 7.3.     Initial Loans ................................................................................    54




                                      -ii-

                                                                                                                    
SECTION 8.              COVENANTS ....................................................................................    54

       Section 8.1.     Maintenance of Business ......................................................................    54
       Section 8.2.     Maintenance of Property ......................................................................    54
       Section 8.3.     Taxes and Assessments ........................................................................    54
       Section 8.4.     Insurance ....................................................................................    54
       Section 8.5.     Financial Reports ............................................................................    54
       Section 8.6.     Total Funded Debt/EBITDA Ratio ...............................................................    56
       Section 8.6.     Total Senior Funded Debt/EBITDA Ratio ........................................................    57
       Section 8.8.     Minimum EBITDA ...............................................................................    57
       Section 8.9.     Fixed Charge Coverage Ratio ..................................................................    58
       Section 8.10.    Capital Expenditures .........................................................................    58
       Section 8.11.    Indebtedness .................................................................................    58
       Section 8.12.    Liens ........................................................................................    59
       Section 8.13.    Investments, Loans, Advances and Guaranties ..................................................    60
       Section 8.14.    Leases .......................................................................................    61
       Section 8.15.    Dividends and Certain Other Restricted Payments ..............................................    62
       Section 8.16.    Mergers, Consolidations and Sales ............................................................    62
       Section 8.17.    Acquisitions .................................................................................    64
       Section 8.18.    Maintenance of Subsidiaries ..................................................................    64
       Section 8.19.    Formation of Subsidiaries ....................................................................    64
       Section 8.20.    ERISA ........................................................................................    64
       Section 8.21.    Compliance with Laws .........................................................................    64
       Section 8.22.    Burdensome Contracts with Affiliates .........................................................    65
       Section 8.23.    Changes in Fiscal Year .......................................................................    65
       Section 8.24.    Change in the Nature of Business .............................................................    65
       Section 8.25.    Use of Loan Proceeds .........................................................................    65
       Section 8.26.    No Restrictions ..............................................................................    65
       Section 8.27.    Subordinated Debt ............................................................................    65
       Section 8.28.    Management Compensation ......................................................................    66
       Section 8.29.    Worthington Settlement Documents .............................................................    66
       Section 8.30.    Mid-Central Debt .............................................................................    66
       Section 8.31.    Required Hedging .............................................................................    66
       Section 8.32.    Equity Restriction ...........................................................................    67

SECTION 9.              EVENTS OF DEFAULT AND REMEDIES ...............................................................    67

SECTION 10.             THE AGENT ....................................................................................    69

       Section 10.1.    Appointment and Authorization of Agent .......................................................    69
       Section 10.2.    Agent and its Affiliates .....................................................................    70
       Section 10.3.    Action by Agent ..............................................................................    70
       Section 10.4.    Consultation with Experts ....................................................................    70
       Section 10.5.    Liability of Agent; Credit Decision ..........................................................    70
       Section 10.6.    Indemnity ....................................................................................    71
       Section 10.7.    Resignation of Agent and Successor Agent .....................................................    71




                                     -iii-

                                                                                                                    
       Section 10.8.    Agent as Letter of Credit Issuer .............................................................    72
       Section 10.9.    Hedging Liability and Funds Transfer and Deposit Account Liability Arrangements ..............    72
       Section 10.10.   Designation of Additional Agents .............................................................    72
       Section 10.11.   Authorization to Release or Subordinate or Limit Liens .......................................    73
       Section 10.12.   Authorization to Enter into, and Enforcement of, the Collateral Documents ....................    73

SECTION 11. THE GUARANTIES ...........................................................................................    73

       Section 11.1.    The Guaranties ...............................................................................    73
       Section 11.2.    Guaranty Unconditional .......................................................................    74
       Section 11.3.    Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances ..................    75
       Section 11.4.    Waivers ......................................................................................    75
       Section 11.5.    Limit on Recovery ............................................................................    75
       Section 11.6.    Stay of Acceleration .........................................................................    76
       Section 11.7.    Benefit to Guarantors ........................................................................    76
       Section 11.8.    Guarantor Covenants ..........................................................................    76

SECTION 12. MISCELLANEOUS ............................................................................................    76

       Section 12.1.    Holidays .....................................................................................    76
       Section 12.2.    No Waiver, Cumulative Remedies ...............................................................    76
       Section 12.3.    Waivers, Modifications and Amendments ........................................................    76
       Section 12.4.    Costs and Expenses ...........................................................................    77
       Section 12.5.    Documentary Taxes ............................................................................    77
       Section 12.6.    Survival of Representations ..................................................................    77
       Section 12.7.    Survival of Indemnities ......................................................................    77
       Section 12.8.    Notices ......................................................................................    78
       Section 12.9.    Headings .....................................................................................    78
       Section 12.10.   Severability of Provisions ...................................................................    78
       Section 12.11.   Counterparts .................................................................................    78
       Section 12.12.   Binding Nature, Governing Law, Etc. ..........................................................    78
       Section 12.13.   Entire Understanding .........................................................................    79
       Section 12.14.   Participations ...............................................................................    79
       Section 12.15.   Assignment Agreements ........................................................................    79
       Section 12.16.   Confidentiality ..............................................................................    80
       Section 12.17.   Withholding Taxes ............................................................................    80
       Section 12.18.   Sharing of Set-Off ...........................................................................    82
       Section 12.19.   Headings .....................................................................................    82
       Section 12.20.   Set-off ......................................................................................    82
       Section 12.21.   Construction .................................................................................    82
       Section 12.22.   Lender's Obligations Several .................................................................    83
       Section 12.23.   Release of Claims ............................................................................    83
       Section 12.24.   Submission to Jurisdiction; Waiver of Jury Trial .............................................    83
       Section 12.25.   Reaffirmation of Collateral Documents ........................................................    83




                                      -iv-

                                                                                                                    
       Section 12.26.   Amended and Restated Interests ...............................................................    83

Signature ............................................................................................................     1



Exhibit A        --   Revolving Credit Note
Exhibit B        --   Term Note
Exhibit C        --   Swing Line Note
Exhibit D        --   Compliance Certificate
                      Attachment to Compliance Certificate
Exhibit E        --   Notice of Payment Request
Exhibit F        --   Guaranty
Exhibit G        --   Assignment and Acceptance
Exhibit H        --   Borrowing Base Certificate

Schedule 1       --   Existing Letter of Credit
Schedule 6.2     --   Subsidiaries
Schedule 6.15    --   Environmental Matters
Schedule 6.20    --   Capital Structure
Schedule 8.12    --   Other Liens


                                      -V-

                          MORTON INDUSTRIAL GROUP, INC.

                           SECOND AMENDED AND RESTATED
                                CREDIT AGREEMENT

      This Second Amended and Restated Credit Agreement is entered into as of
March 26, 2004, by and among Morton Industrial Group, Inc., a Georgia
corporation (the "Borrower"), each of the Subsidiaries from time to time
becoming a party hereto, as Guarantors, each of the financial institutions which
are or hereafter become party hereto (hereinafter referred to as a "Lender" and
collectively as the "Lenders"), and Harris Trust and Savings Bank in its
capacity as agent hereunder (hereinafter referred to as the "Agent").

                                 R E C I T A L S

      A. The Borrower has requested that the Lenders continue to extend credit
to the Borrower.

      B. The Borrower, the Guarantors, the Lenders (and certain other financial
institutions not party hereto) and the Agent are currently party to that certain
Amended and Restated Credit Agreement dated as of February 25, 2002 (as amended,
the "Previous Credit Agreement"). The Borrower hereby requests that certain
amendments be made to the Previous Credit Agreement and, for the sake of clarity
and convenience, that the Previous Credit Agreement be restated as so amended.
As part of such amendments to the Previous Credit Agreement, the Borrower has
requested that the Lenders refinance a portion of the Loans thereunder (the
"Previous Loans"), extend the maturity of the credit facilities provided
thereby, and make certain other changes thereto, all on and subject to the terms
and conditions set forth below. This Agreement shall become effective, and shall
amend and restate the Previous Credit Agreement, upon the execution of this
Agreement by the Borrower, the Guarantors, the Agent and the Lenders and the
satisfaction of the conditions precedent contained in Section 7 hereof; and from
and after the Effective Date, (i) all references made to the Previous Credit
Agreement in the Loan Documents or in any other instrument or document shall,
without more, be deemed to refer to this Second Amended and Restated Credit
Agreement and (ii) the Previous Credit Agreement shall be deemed amended and
restated in its entirety hereby.

      C. The Lenders, upon acceptance of this Agreement in writing and
satisfaction of the conditions precedent contained in Section 7 hereof, will
continue to lend monies and/or make advances, extensions of credit or other
financial accommodations to, on behalf of or for the benefit of the Borrower
pursuant hereto, and (i) any Previous Loans which were Revolving Loans under the
Previous Credit Agreement and which are not repaid on the Effective Date will
automatically, and without further action on the part of the Lenders or the
Borrower, become Revolving Loans under this Agreement held ratably in proportion
to the several Revolving Credit Commitments of the Lenders hereunder and be
evidenced by the Revolving Credit Notes issued under this Agreement, (ii) the
Existing Letters of Credit issued and outstanding under the Previous Credit
Agreement will automatically, and without further action on the part of the
Lenders or the Borrower, become Letters of Credit under this Agreement in which
the Lenders shall hold Participating Interests ratably according to their
several Revolving Credit

Commitments hereunder, and (iii) any portion of the Previous Loans which was
evidenced by the Term Loan under the Previous Credit Agreement and is not repaid
on the Effective Date will automatically, and without further action on the part
of the Lenders or the Borrower, become a portion of the Term Loan under this
Agreement held ratably in proportion to the several Term Loan Commitments of the
Lenders hereunder and be evidenced by the Term Notes issued under this
Agreement. Any Previous Loans under the Previous Credit Agreement which are
repaid on the Effective Date will be paid to the holders of the Notes issued
under the Previous Credit Agreement in such proportions as shall be necessary to
(x) repay in full the Previous Loans held by holders of the Notes issued under
the Previous Credit Agreement which are not Lenders hereunder and (y) allow such
Loans remaining outstanding hereunder to be held by the Lenders hereunder in the
proportions described in the immediately preceding sentence; provided that, if
so agreed by the Borrower and the Agent, Swing Loans outstanding on the
Effective Date will become Swing Loans under this Agreement and be evidenced by
the Swing Line Notes issued under this Agreement.

      NOW, THEREFORE, in consideration of the recitals set forth above, which by
this reference are incorporated into this Agreement set forth below, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and subject to the terms and conditions hereof and on the
basis of the representations and warranties herein set forth, the Borrower, the
Guarantors, the Agent and the Lenders hereby agree to the following:

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 facility described in this Section 1.1 (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, provided that,
as set forth in the recitals hereto, all or a portion of the initial Revolving
Loans made on the Effective Date shall represent a continuation of the Revolving
Loans outstanding under the Previous Credit Agreement. The maximum amount of the
Revolving Credit which each Lender agrees to extend to the Borrower shall not
exceed its Revolving Credit Commitment. The Revolving Credit may be utilized by
the Borrower in the form of Revolving Loans, Letters of Credit and Swing Loans,
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 lesser of (x) the Revolving
Credit Commitments in effect at such time or (y) the Borrowing Base as then
determined and computed. 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.


                                      -2-

      (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 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") 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. Subject to all of the terms and conditions
hereof, the Lenders severally agree to make a term loan in U.S. Dollars (the
"Term Loan") to the Borrower under the term credit facility set forth in this
Section 1.2 in an amount not to exceed their Term Loan Commitments, provided
that all or a portion of the initial Term Loan made on the Effective Date shall
represent a continuation of the Term Loan outstanding under the Previous Credit
Agreement. The Term Loan shall be disbursed in a single advance made on the
Effective Date, at which time the commitments of the Lenders to make the Term
Loan shall expire. Each Lender shall advance a pro rata share of the Term Loan
in accordance with the amount of its respective Term Percentage. Each Lender's
pro rata share of the Term Loan shall be evidenced by a Term Note of the
Borrower (individually a "Term Note" and collectively the "Term Notes") payable
to the order of such Lender in the amount of its pro rata share of the Term
Loan, each Term Note to be in the form (with appropriate insertions) attached
hereto as Exhibit B. Each Term Note shall mature in quarterly installments of
principal, with the amount of each such principal installment to equal the
amount set forth in Column B below shown opposite of the relevant due date as
set forth in Column A below:



              COLUMN A                COLUMN B

                                SCHEDULED PRINCIPAL
            PAYMENT DATE       PAYMENT ON TERM LOAN
                            
              06/30/04                $500,000
              09/30/04                $500,000
              12/31/04                $500,000
              03/31/05                $500,000
              06/30/05                $750,000
              09/30/05                $750,000



                                      -3-



              COLUMN A                COLUMN B

                                SCHEDULED PRINCIPAL
            PAYMENT DATE       PAYMENT ON TERM LOAN
            ------------       --------------------
                            
              12/31/05                $750,000
              03/31/06                $750,000
              06/30/06                $750,000
              09/30/06                $750,000
              12/31/06                $750,000
              03/31/07                $750,000
              06/30/07                $750,000
              09/30/07                $750,000
              12/31/07                $750,000
              03/31/08        All remaining principal


, it being agreed that the final payment of both principal and interest not
sooner paid on the Term Loan shall be due and payable on March 31, 2008, the
final maturity thereof, and with the amount of each payment due on the Term Note
held by each Lender to be equal to such Lender's Term Percentage of such
payment.

      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 or 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 Sublimit
as then in effect; provided, however, that the aggregate L/C Obligations at any
time outstanding shall not exceed the difference between (x) the lesser of (i)
the Revolving Credit Commitments in effect at such time or (ii) the Borrowing
Base as then determined and computed and (y) 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. Upon the effectiveness of this
Agreement, each Existing Letter of Credit shall, without any further action by
any party, be deemed to have been issued as a Letter of Credit hereunder for all
purposes hereof.

      (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


                                      -4-

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 expire not later than the earlier of (i) twelve (12) months from
the date of issuance and each renewal or (ii) five (5) Business Days prior to
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)
five (5) Business Days prior to the Termination Date. 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 Applicable Margin plus the Domestic
Rate from time to time in effect (computed on a basis of a year of 365 or 366
days, as the case may be, and the actual number of days elapsed). 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 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.


                                      -5-

      (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 E 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 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


                                      -6-

Participating Lenders under this Section 1.3(e) 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; 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
ninety (90) 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 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 Borrower 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


                                      -7-

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 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") may, in its
discretion, make loans ("Swing Loans") in U.S. Dollars to the Borrower under the
swing line facility set forth in this Section 1.6 (the "Swing Line") which shall
not in the aggregate at any time outstanding exceed the lesser of (i) the Swing
Line Commitment or (ii) the difference between (a) the lesser of (1) the
Revolving Credit Commitments in effect at such time or (2) the Borrowing Base as
then


                                      -8-

determined and computed and (b) 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 C 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 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 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 may 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


                                      -9-

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 this Agreement
to the contrary notwithstanding, (i) Harris shall have no obligation to make
Swing Loans and any Swing Loans shall be subject to all of the terms and
conditions of this Agreement and (ii) the Borrower shall not request more than
one Swing Loan during any one day.

      (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 7.1 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 7.1 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.


                                      -10-

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 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 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 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


                                      -11-

(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
$500,000.

      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 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.


                                      -12-

      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 Borrower 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:

            (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


                                      -13-

      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 ninety
(90) 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 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


                                      -14-

Borrower shall not be obligated to compensate such Lender to the extent its rate
of return was so reduced more than ninety (90) 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 the 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;

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.

      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


                                      -15-

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 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


                                      -16-

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 (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 2.14. Default Rate. Notwithstanding anything to the contrary
contained herein, while any Event of Default exists or after acceleration, the
Borrower shall pay interest (after as well as before entry of judgment thereon
to the extent permitted by law) on the principal amount of all Loans and
Reimbursement Obligations, and letter of credit fees at a rate per annum equal
to:

            (a) for any Domestic Rate Portion or any Swing Loan bearing interest
      based on the Domestic Rate, the sum of 2.0% plus the Applicable Margin
      plus the Domestic Rate from time to time in effect;

            (b) for any LIBOR Portion or any Swing Loan bearing interest at
      Harris' Quoted Rate, the sum of 2.0% plus the rate of interest in effect
      thereon at the time of such default until the end of the Interest Period
      applicable thereto and, thereafter, at a rate per annum equal to the sum
      of 2.0% plus the Applicable Margin for Domestic Rate Portions plus the
      Domestic Rate from time to time in effect;

            (c) for any Reimbursement Obligation, the sum of 2.0% plus the
      amounts due under Section 1.3 with respect to such Reimbursement
      Obligation; and

            (d) for any Letter of Credit, the sum of 2.0% plus the letter of
      credit fee due under Section 3.1 with respect to such Letter of Credit;

provided, however, that in the absence of acceleration, any adjustments pursuant
to this Section shall be made at the election of the Agent, acting at the
request or with the consent of the Required Lenders, with written notice to the
Borrower. While any Event of Default exists or after acceleration, interest
shall be paid on demand of the Agent at the request or with the consent of the
Required Lenders.


                                      -17-

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 calendar quarter 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
0.125% 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, 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 such 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 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 and Appraisal Fees. The Borrower shall pay to the Agent for its
own use and benefit reasonable 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 reasonably 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, the
Borrower shall not be required to reimburse the Agent for more than two such
audits per calendar year.

      (d) Agent's Fees. The Borrower shall pay to the Agent the fees agreed to
between the Agent and the Borrower in a letter dated March 22, 2004, or as
otherwise agreed to in writing 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


                                      -18-

$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, in the case of Domestic Rate Portions, and on the
third Business Day prior to such day, in the case of LIBOR Portions, 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
$500,000 or such greater amount which is an integral multiple of $100,000) at
any time upon one (1) Business Day's prior notice, in the case of Domestic Rate
Portions, and three (3) Business Days' prior notice, in the case of LIBOR
Portions, 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
the Term Notes shall be applied to the several installments thereof due on such
Notes in the inverse order of their respective maturities, beginning with the
final payment due on the final maturity date thereof. No amount paid or prepaid
on the Term Notes may be reborrowed.

      Section 3.3. Mandatory Prepayments.

      (a) Excess Cash Flow. No later than 90 days after the last day of each
fiscal year of the Borrower, the Borrower shall pay over to the Agent for the
ratable benefit of the Lenders, as and for a mandatory prepayment, an amount
equal to the Excess Cash Flow Prepayment Percentage of the Excess Cash Flow of
the Borrower and its Subsidiaries for such fiscal year, each such prepayment to
be allocated to the Term Loan until repaid in full, and then to prepay the
Revolving Loans and prefund any outstanding Letters of Credit.

      (b) Equity or Debt Offering. Within five (5) Business Days of receipt by
the Borrower of cash proceeds from (x) 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), or (y) any
issuance of Indebtedness after the Effective Date (other than Indebtedness
permitted by Sections 8.11(a)-(j) hereof), 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), such prepayment to be


                                      -19-

allocated to the Term Loan until repaid in full, and then to prepay the
Revolving Loans and prefund any outstanding Letters of Credit.

      (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, such prepayment to be allocated to the Term Loan until
repaid in full, and then to prepay the Revolving Loans and prefund any
outstanding Letters of Credit; 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 $250,000 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 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) Mid-Central Notes. On the date of any receipt by Mid-Central, the
Borrower or any other Subsidiary of the Borrower of any principal payment on the
Mid-Central Notes, the Borrower will immediately make a mandatory prepayment in
an amount equal to 100% of such principal payment received, of which prepayment
50% shall be allocated to the Term Loan and 50% shall be allocated to prepay the
Revolving Loans (it being understood that if the then-outstanding principal
amount of the Term Loan is less than 50% of such required prepayment amount,
then the remaining required prepayment amount shall be allocated to the
Revolving Loans, and if the then-outstanding principal amount of the Revolving
Loans is less than 50% of such required prepayment amount, then the remaining
required prepayment amount shall be allocated to the Term Loan).

      (e) Application. Each such prepayment required by this Section 3.3 shall
be applied to the Term Notes or the Revolving Credit Notes, as the case may be,
ratably in accordance with the unpaid principal balances thereof, with the
amount of such prepayments on the Term Notes


                                      -20-

applied to reduce the remaining scheduled amortization payments on the Term
Notes in inverse order of maturity, starting with the final payment due on the
final maturity date thereof.

      Section 3.4. Terminations of Revolving Credit Commitments. (a) Voluntary.
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 $2,500,000 or such greater amount which is an integral multiple of
$500,000), 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 to this Section may not be reinstated. Any reduction
of the Revolving Credit Commitments to a level below the L/C Sublimit or the
Swing Line Commitment shall effect a concurrent reduction in the L/C Sublimit or
Swing Line Commitment, as the case may be, so as to equal the total Revolving
Credit Commitments after giving effect to such reduction.

      (b) Mandatory. Concurrent with each prepayment of Revolving Loans required
under subsections (a), (b) and (c) of Section 3.3, the Revolving Credit
Commitments shall permanently terminate ratably in accordance with each Lender's
Revolver Percentage by an amount equal to the aggregate amount required to be
prepaid and applied against Revolving Loans.

      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, the
Hedging Liability or the Funds Transfer and Deposit Account Liability by the
Agent or any of the Lenders after acceleration or the final maturity of the
Obligations or termination of the Commitments as a result of an Event of Default
shall be remitted to the Agent and distributed as follows:


                                      -21-

            (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);

            (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), and Hedging Liability, the
      aggregate amount paid to or held as collateral security for the Lenders
      and, in the case of Hedging Liability, their Affiliates, to be allocated
      pro rata as among the Lenders in accord with the then respective aggregate
      unpaid principal balances of such Loans, the amount of L/C Obligations,
      and the amount of Hedging Liability;

            (e) fifth, to the payment of all other unpaid Obligations and all
      other indebtedness, obligations, and liabilities of the Borrower and its
      Subsidiaries secured by the Loan Documents (including, without limitation,
      Funds Transfer and Deposit Account Liability) to be allocated pro rata in
      accordance with the aggregate unpaid amounts owing to each holder thereof;
      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.


                                      -22-

      Section 3.7. Excess Revolving Credit. The Borrower covenants and agrees
that if at any time the aggregate principal amount outstanding on the Revolving
Loans, Swing Loans and L/C Obligations shall at any time and for any reason
exceed the lesser of the (x) the Revolving Credit Commitments then in effect or
(y) the Borrowing Base as then determined and computed, the Borrower shall
within one (1) Business Day, without notice or demand, pay over the amount of
such excess to the Agent for the account of the Lenders as and for a mandatory
prepayment on the Swing Loans or, if the Swing Loans have been prepaid in full
but Revolving Loans are outstanding, then and in any such event, such excess
shall be paid over to the Agent as and for mandatory prepayment on the Revolving
Loans or, if the Revolving Loans have been prepaid in full but L/C Obligations
are outstanding, then and in any such event, such excess shall be paid over to
the Agent to be applied against the Reimbursement Obligations then outstanding,
with any balance held as collateral security for any remaining L/C Obligations.

SECTION 4. COLLATERAL.

      Section 4.1. Collateral. The payment and performance of the Obligations,
Hedging Liability and Funds Transfer and Deposit Account 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 Third Amended and
Restated 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 Third Amended and Restated 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 (as supplemented or otherwise modified from time
to time, collectively the "Mortgages" and individually each a "Mortgage").

      Section 4.2. Guaranties. Payment of the Notes and the other Obligations,
as well as the Hedging Liability and Funds Transfer and Deposit Account
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 and Funds Transfer and Deposit Account Liability, together with such
other instruments, documents, certificates and opinions required by the Agent in
connection therewith.


                                      -23-

      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 4.4. Collections. The Borrower shall establish and maintain such
arrangements as shall be necessary or appropriate to assure that all proceeds of
the Collateral of the Borrower and its Subsidiaries are deposited (in the same
form as received) in accounts maintained with, or under the dominion and control
of, the Agent, such accounts to constitute special restricted accounts, the
Borrower and Guarantors acknowledging that the Agent has (and is hereby granted)
a lien on such accounts and all funds contained therein to secure the
Obligations, Hedging Liability and Funds Transfer and Deposit Account Liability.
If and to the extent that proceeds are deposited or maintained in one or more
accounts maintained with financial institutions other than the Agent, it shall
be a condition to the Borrower's or any Subsidiary's right to establish and
maintain such deposit accounts at any time following the Effective Date, that
the financial institutions maintaining such accounts shall have delivered to the
Agent blocked account agreements satisfactory to the Agent in form and substance
pursuant to which such financial institutions acknowledge the Agent's Lien
thereon, waive any right of offset or bankers' liens thereon (other than with
respect to account maintenance charges and returned items) and agree that, upon
notice from the Agent, the collected balances in such accounts will only be
transferred to the Agent. The Lenders agree with the Borrower that if and so
long as no Default or Event of Default has occurred or is continuing, amounts on
deposit in the accounts maintained with the Agent will (subject to the rules and
regulations of the Agent as from time to time in effect applicable to demand
deposit accounts) be made available to the Borrower and its Subsidiaries for use
in the conduct of their business. Upon the occurrence of an Event of Default,
the Agent may apply the funds on deposit in such accounts to the Obligations,
Hedging Liability and Funds Transfer and Deposit Account Liability.

SECTION 5. DEFINITIONS; INTERPRETATION.

      Section 5.1. Definitions. The following terms when used herein shall have
the following meanings:

      "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, or (iii) any other transaction pursuant to which a
Person is newly allocated a majority of the profits or losses of any other
Person.

      "Adjusted LIBOR" means a rate per annum determined by the Agent pursuant
to the following formula:

                                  
                  Adjusted LIBOR =             LIBOR
                                     -----------------------
                                     100%-Reserve Percentage




                                      -24-

"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 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.


                                      -25-

      "Applicable Margin" means, with respect to Loans, Reimbursement
Obligations, and the commitment fees and letter of credit fees payable under
Section 2.1 hereof, until the first Pricing Date, the rates per annum shown
opposite Level IV below, and thereafter from one Pricing Date to the next the
Applicable Margin means the rates per annum determined in accordance with the
following schedule:



                                                     APPLICABLE MARGIN
                                                      FOR DOMESTIC RATE          APPLICABLE MARGIN
                                                       PORTIONS UNDER           FOR LIBOR PORTIONS
                                                    REVOLVING CREDIT AND          UNDER REVOLVING
                     TOTAL SENIOR FUNDED                TERM LOAN AND          CREDIT AND TERM LOAN        APPLICABLE MARGIN
                    DEBT/EBITDA RATIO FOR               REIMBURSEMENT          AND LETTER OF CREDIT       FOR COMMITMENT FEE
           LEVEL      SUCH PRICING DATE             OBLIGATIONS SHALL BE:          FEE SHALL BE:               SHALL BE:
                                                                                              
             IV     Greater than or equal                   2.75%                      4.25%                     0.50%
                    to 2.25 to 1.0

            III     Less than 2.25 to                       2.25%                      3.75%                     0.50%
                    1.0, but greater than or
                    equal to 1.75 to 1.0

             II     Less than 1.75 to                       1.75%                      3.25%                     0.50%
                    1.0, but greater than or
                    equal to 1.25 to 1.0

             I      Less than 1.25 to 1.0                   1.25%                      2.75%                     0.50%


For purposes hereof, the term "Pricing Date" means, for any fiscal quarter of
the Borrower ending on or after December 31, 2004, the date on which the Agent
is in receipt of the Borrower's most recent financial statements (and, in the
case of the year-end financial statements, audit report) for the fiscal quarter
then ended, pursuant to Section 8.5 hereof, it being understood by the parties
hereto that the Applicable Margin shall remain at the rates shown opposite Level
IV above until receipt by the Agent of the Borrower's year-end financial
statements and audit report for the fiscal year ending December 31, 2004. The
Applicable Margin shall be established based on the Total Senior Funded
Debt/EBITDA Ratio for the most recently completed fiscal quarter and the
Applicable Margin established on a Pricing Date shall remain in effect until the
next Pricing Date. If the Borrower has not delivered its financial statements by
the date such financial statements (and, in the case of the year-end financial
statements, audit report) are required to be delivered under Section 8.5 hereof,
until such financial statements and audit report are delivered, the Applicable
Margin shall be the highest Applicable Margin (i.e., Level IV shall apply). If
the Borrower subsequently delivers such financial statements before the next
Pricing Date, the Applicable Margin established by such late delivered financial
statements shall take effect from the date of delivery until the next Pricing
Date. In all other circumstances, the Applicable Margin established by such
financial statements shall be in effect from the Pricing Date that occurs
immediately after the end of the fiscal quarter covered by such financial
statements until the next Pricing Date. Each determination of the Applicable
Margin made by the Agent in accordance with the foregoing shall be conclusive
and binding on the Borrower and the Lenders if reasonably determined.


                                      -26-

      "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.

      "Borrowing Base" means, as of any time it is to be determined, the sum of:

                  (a) 85% of the then net book value of Eligible Accounts
            (computed using the method of receivables valuation applied by the
            Borrower in accordance with GAAP which reflects such value as the
            net book value of its receivables, except that net book value for
            such purposes shall not reflect any reserve for accounts more than
            ninety days past due that have already been excluded from gross
            accounts in computing such Eligible Accounts) less such other
            reserves for uncollectibility, location of account debtor, contras
            and other matters as the Agent or Required Lenders in good faith
            shall from time to time reasonably deem appropriate to adjust such
            net book value; plus

                  (b) the lesser of (x) $10,000,000 and (y) 60% of the value
            (computed at its cost using the method of inventory valuation
            applied by the Borrower in accordance with GAAP which reflects such
            cost on the Borrower's books as its net book value, but in any event
            after reducing such value as so computed by the aggregate amount of
            all reserves for obsolescence, slow-moving items, shrinkage and all
            such other matters as the Agent or Required Lenders in good faith
            shall from time to time reasonably deem appropriate to adjust such
            net book value) of Eligible Inventory; minus

                  (c) a general reserve in the amount of $500,000;

provided that (A) the Borrowing Base shall be computed only as against and on so
much of the Collateral as is included on the certificates to be furnished from
time to time by the Borrower pursuant to Section 8.5(f) hereof and, if required
by the Agent pursuant to any of the terms hereof or any Collateral Document, as
verified by such other evidence required to be furnished to the Agent pursuant
hereto or pursuant to any such Collateral Document, and (B) the Agent shall have
the right to adjust the advance rates against Eligible Receivables and Eligible
Inventory based solely on the commercially reasonable exercise of its credit
judgment based on the results of any field audit of any Collateral which
reasonably supports any such adjustment and the Agent shall notify the Borrower
of any such adjustment to the advance rates promptly following such adjustment.

Notwithstanding any other provision of this definition of "Borrowing Base" to
the contrary: (i) the amount of Eligible Accounts otherwise included in the
Borrowing Base shall be reduced, dollar for dollar, by a reserve equal to the
greater of (a) the amount (if any) by which (x) the


                                      -27-

aggregate amount of accounts payable owing by the Borrower and its Subsidiaries
to Deere and Caterpillar together and their respective Affiliates for inventory
and supplies purchased (the "Deere/Caterpillar Payables") at any time exceeds
(y) $5,000,000 or (b) the sum of (A) the amount (if any) by which (x) the
aggregate amount of accounts payable owing by the Borrower and its Subsidiaries
to Deere and its Affiliates for inventory and supplies purchased (the "Deere
Payables") at any time exceeds (y) $3,000,000 and (B) the amount (if any) by
which (x) the aggregate amount of accounts payable owing by the Borrower and its
Subsidiaries to Caterpillar and its Affiliates for inventory and supplies
purchased (the "Caterpillar Payables") at any time exceeds (y) $3,000,000; (ii)
no reserve will be imposed in computing the Borrowing Base as of any time solely
in respect of the Deere/Caterpillar Payables, Deere Payables or Caterpillar
Payables to the extent the same do not exceed such respective limits; and (iii)
the Agent and the Required Lenders shall have the right to impose reserves for
other matters arising in connection with receivables owing by Deere and
Caterpillar and to otherwise impose reserves in accordance with the Credit
Agreement.

      "Borrowing Base Certificate" means the certificate in the form of Exhibit
H hereto, or in such other form acceptable to the Agent, to be delivered to the
Agent and the Lenders pursuant to Sections 7.2 and 8.5 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.

      "Capital Lease" means any lease of Property which in accordance with GAAP
is required to be capitalized on the balance sheet of the lessee.

      "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 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).

      "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


                                      -28-

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; or (iv) William D. Morton shall fail to own or be a
party to one or more contracts or arrangements giving him voting control over at
least 51% of the combined voting power of all securities of the Borrower
entitled to vote in the election of directors; or (v) the occurrence of any
"Change of Control" (or words of like import) as defined in the Note and Warrant
Purchase Agreement for the Senior Subordinated Debt.

      "Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.

      "Collateral Documents" means the Security Agreement, the Pledge Agreement,
the Mortgages and all other mortgages, deeds of trust, security agreements,
assignments, financing statements and other documents as shall from time to time
secure the Obligations, the Hedging Liability and the Funds Transfer and Deposit
Account Liability or any part thereof.

      "Commitments" means and includes the Revolving Credit Commitments, the
Swing Line Commitment and the Term Loan Commitments.

      "Companies" means the Borrower and the Domestic Subsidiaries, and the term
"Company" shall mean any of the foregoing unless the context in which such term
is used shall otherwise require.

      "Compliance Certificate" means a certificate in the form Exhibit D 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.

      "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


                                      -29-

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%.

      "Domestic Rate Portion" is defined in Section 2.1(a) hereof.

      "Domestic Subsidiary" means each Subsidiary of the Borrower which is
organized under the laws of the United States of America or any State thereof.

      "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, plus (iii) with
respect to any applicable accounting period of the Borrower, to the extent such
charges against Consolidated Net Income are reflected on the Borrower's annual
audited financial statements for the most recent fiscal year then ended, (x)
non-cash charges reflecting impairment charges arising from SFAS No. 142
(Goodwill and Other Intangible Assets), for such period, and (y) non-cash
charges for accretion of discount on, or interest on, preferred stock of the
Borrower for such period, plus or minus (iv) non-cash charges or gains resulting
from any valuation of the Warrants in accordance with the provisions of FAS 150.

      "EBITDA" means, with reference to any period, EBIT for such period plus
(i) all amounts properly deducted in arriving at such Consolidated Net Income
for such period in respect of depreciation of fixed assets and amortization of
intangible assets during such period on the books of the Borrower and its
Subsidiaries, provided that EBITDA for the fiscal quarters of the Borrower
listed below shall be deemed by the parties hereto to be, notwithstanding the
other provisions of this definition, $3,401,000 for the fiscal quarter ended
June 30, 2003, $2,324,000 for the fiscal quarter ended September 30, 2003 and
$2,365,000 for the fiscal quarter ended December 31, 2003.

      "Effective Date" means the date on which the Agent has received signed
counterpart signature pages of this Agreement from each of the signatories (or,
in the case of a Lender, confirmation that such Lender has executed such a
counterpart and dispatched it for delivery to the Agent) and the conditions in
Section 7.1 and 7.2 hereof have been fulfilled.

      "Eligible Account" means each account receivable of each Company that:

            (a) arises out of the sale of inventory delivered to and accepted
      by, or out of the rendition of services fully performed and accepted by,
      the account debtor on such account receivable, and such account receivable
      does not represent a pre-billed account receivable or a progress billing;


                                      -30-

            (b) is payable in U.S. Dollars and the account debtor on such
      account receivable is located within the United States of America or, if
      such right has arisen out of the sale of such goods shipped to, or out of
      the rendition of services to, an account debtor located in any other
      country, such right is secured by a valid and irrevocable transferable
      letter of credit issued by a lender reasonably acceptable to the Agent for
      the full amount thereof and which has been assigned or transferred to the
      Agent in a manner acceptable to the Agent;

            (c) is the valid, binding and legally enforceable obligation of the
      account debtor obligated thereon and such account debtor is not (i) a
      Subsidiary or an Affiliate of the Borrower, (ii) a shareholder, director,
      officer or employee of the Borrower or any Subsidiary, (iii) the United
      States of America, or any state or political subdivision thereof, or any
      department, agency or instrumentality of any of the foregoing, unless the
      Assignment of Claims Act or any similar state or local statute, as the
      case may be, is complied with to the satisfaction of the Agent, (iv) a
      debtor under any proceeding under the United States Bankruptcy Code, as
      amended, or any other comparable bankruptcy or insolvency law, or (v) an
      assignor for the benefit of creditors;

            (d) is not evidenced by an instrument or chattel paper unless the
      same has been endorsed and delivered to the Agent;

            (e) is an asset of such Company to which it has good and marketable
      title, is freely assignable, and is subject to a perfected, first priority
      Lien in favor of the Agent free and clear of any other Liens (other than
      Liens permitted by Section 8.12(a) or (b) hereof arising by operation of
      law which are subordinate to the Liens in favor of the Agent);

            (f) is not subject to any counterclaim or defense asserted by the
      account debtor or subject to any offset or contra account payable to the
      account debtor (unless the amount of such account receivable is net of
      such contra account established to the reasonable satisfaction of the
      Agent), provided that no account receivable with respect to which Deere or
      Caterpillar is the account debtor will be reduced in value pursuant to
      this clause (f) solely as a result of the existence of the
      Deere/Caterpillar Payables, it being understood that the adjustments to
      the Borrowing Base resulting solely from the existence of the
      Deere/Caterpillar Payables shall be as set forth in the definition of
      "Borrowing Base" herein;

            (g) no surety bond was required or given in connection with said
      account receivable or the contract or purchase order out of which the same
      arose;

            (h) it is evidenced by an invoice to the account debtor dated not
      more than 5 Business Days subsequent to the shipment date of the relevant
      inventory or completion of performance of the relevant services and is
      issued on ordinary trade terms requiring payment within 60 days of invoice
      date;

            (i) is not unpaid more than 90 days after the original due date;


                                      -31-

            (j) is not owed by an account debtor who is obligated on accounts
      receivable more than 25% of the aggregate unpaid balance of which have
      been past due for longer than the relevant period specified in subsection
      (i) above unless the Agent has approved the continued eligibility thereof;

            (k) does not arise from a sale on a bill-and-hold, guaranteed sale,
      sale-or-return, sale-on-approval, consignment or any other repurchase or
      return basis; and

            (l) is not otherwise deemed to be ineligible in the reasonable
      judgment of the Agent (it being acknowledged and agreed that with 5
      Business Days prior written notice any account receivable of any Company
      may be deemed ineligible by the Agent acting in its reasonable judgment).

      "Eligible Inventory" means all raw materials and finished goods inventory
of each Company (other than packaging, crating and supplies inventory) which:

            (a) is an asset of such Company to which it has good and marketable
      title, is freely assignable, and is subject to a perfected, first priority
      Lien in favor of the Agent free and clear of any other Liens (other than
      Liens permitted by Section 8.12(a) or (b) hereof which are subordinate to
      the Liens in favor of the Agent);

            (b) is located in the United States of America at a Permitted
      Collateral Location as set forth in the Security Agreement and, in the
      case of any location not owned by such Company, which is at all times
      subject to a lien waiver agreement from such landlord or other third party
      to the extent required by, and in form and substance satisfactory to, the
      Agent;

            (c) is not so identified to a contract to sell that it constitutes
      an account receivable;

            (d) is not obsolete or slow moving, and is of good and merchantable
      quality free from any defects which might adversely affect the market
      value thereof;

            (e) is not covered by a warehouse receipt or similar document;

            (f) in the case of finished goods inventory, was produced pursuant
      to binding and existing purchase orders therefor to which such Company has
      title; and

            (g) is not otherwise deemed to be ineligible in the reasonable
      judgment of the Agent (it being acknowledged and agreed that with 5
      Business Days prior written notice any inventory or categories thereof of
      any Company may be deemed ineligible by the Agent acting in its reasonable
      judgment).

      "Environmental Claims" means all claims, however asserted, by any
governmental authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.


                                      -32-

      "Environmental Laws" means any present or future federal, state or local
laws, statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, licenses, authorizations and permits
of, and agreements with, any governmental authority, in each case relating to
Environmental Matters.

      "Environmental Matters" means any matter arising out of or relating to
health and safety, or pollution or protection of the environment or workplace,
including any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
discharge, release, control or cleanup of any Hazardous Materials.

      "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.

      "Excess Cash Flow" means, with respect to any period, the amount (if any)
by which (a) EBITDA for such period exceeds (b) the sum of (i) Interest Expense
payable in cash during such period, plus (ii) federal, state and local income
taxes payable in cash during such period, plus (iii) the aggregate amount of
payments required to be made by the Borrower and its Subsidiaries during such
period in respect of all principal on all Indebtedness (whether at maturity, as
a result of mandatory sinking fund redemption, mandatory prepayment,
acceleration or otherwise, but excluding payments made under the Revolving
Credit and excluding mandatory prepayments of the Term Loans required to be paid
in respect of Excess Cash Flow under Section 3.3(a) hereof) and all payments of
Indebtedness of the type described in clause (viii) of the definition of
"Indebtedness" herein, plus (iv) the aggregate amount of Capital Expenditures
made by the Borrower and its Subsidiaries during such period to the extent
permitted by this Agreement and not financed with proceeds of Indebtedness.

      "Excess Cash Flow Prepayment Percentage" means (a) until such time as the
Total Funded Debt/EBITDA Ratio as demonstrated by the financial statements of
the Borrower submitted pursuant to Section 8.5 hereof has been less than 2.00 to
1.0 for two consecutive fiscal quarters and no Default or Event of Default is
continuing, 75%, and (b) thereafter, 50%.

      "Existing Letters of Credit" means the Letters of Credit set forth on
Schedule 1 hereto.

      "Fixed Charge Coverage Ratio" means, as of the last day of each fiscal
quarter of the Borrower, the ratio of (i) EBITDA for the four fiscal quarters of
the Borrower ending on such date, less Capital Expenditures for such four fiscal
quarters, to (ii) the sum for such four fiscal quarters of (a) Interest Expense
(but excluding therefrom all payment-in-kind interest and non-cash interest
relating to the Warrants in accordance with the terms of FAS 150), (b) Cash
Maturities, (c) federal, state and local income taxes and (d) without
duplication of the foregoing, stock redemption payments required to be made
pursuant to the terms of the Stock Redemption Agreement; provided that, for all
calculations of the Fixed Charge Coverage Ratio for fiscal quarters ending
through and including December 31, 2004, (1) Interest Expense for the four
fiscal quarters then ended shall be deemed by the parties hereto to be equal to
the product of (x) Interest Expense incurred during the period (the
"post-closing period") from and including


                                      -33-

the Effective Date through and including the last day of such period and (y) a
fraction, the numerator of which is 365 and the denominator of which is the
number of days in such post-closing period, (2) Cash Maturities for the four
fiscal quarters then ended shall be deemed by the parties hereto to be equal to
the product of (x) Cash Maturities during the post-closing period and (y) a
fraction, the numerator of which is 365 and the denominator of which is the
number of days in such post-closing period, and (3) stock redemption payments
required to be made during the four fiscal quarters then ended shall be deemed
by the parties hereto to be $500,000.

      "Fixed Rate Loan" means any LIBOR Portion and (to the extent bearing
interest with reference to Harris' Quoted Rate) any Swing Loan.

      "Funds Transfer and Deposit Account Liability" means the liability of the
Borrower or any Subsidiary owing to any of the Lenders, or any Affiliates of
such Lenders, arising out of (a) the execution or processing of electronic
transfers of funds by automatic clearing house transfer, wire transfer or
otherwise to or from deposit accounts of the Borrower and/or any Subsidiary now
or hereafter maintained with any of the Lenders or their Affiliates, (b) the
acceptance for deposit or the honoring for payment of any check, draft or other
item with respect to any such deposit accounts, and (c) any other deposit,
disbursement, and cash management services afforded to the Borrower or any
Subsidiary by any of such Lenders or their Affiliates.

      "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 audited financial statements referred to
in Section 6.5 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 F 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.

      "Harris' Quoted Rate" is defined in Section 1.6(e) hereof.

      "Hazardous Materials" means all or any of the following: (i) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances" or any other forumlation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity or
toxicity; (ii) oil,


                                      -34-

petroleum or petroleum derived substances, natural gas, natural gas liquids or
synthetic gas and drilling fluids, produced waters and other wastes associated
with the exploration, development or production of crude oil, natural gas or
geothermal resources; (iii) any flammable substances or explosives or any
radioactive materials; and (iv) asbestos in any form or electrical equipment
which contains any oil or dielectric fluid containing polychlorinated biphenyls.

      "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 (but
specifically excluding (x) trade accounts payable arising in the ordinary course
of business which are not more than 90 days past due and (y) unsecured
indebtedness of the type and in the amount permitted pursuant to Section 8.11(f)
hereof), (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 indebtedness secured by a purchase money mortgage
or other Lien to secure all or part of the purchase price of Property subject to
such mortgage or Lien, (v) all Capitalized Lease Obligations of such Person,
(vi) 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, (vii) 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, and (viii) with respect to the
Borrower or any of its Subsidiaries, all obligations of such Persons to pay the
Purchase Price (and, to the extent all or any portion of such amount is
reinstated pursuant to the Stock Redemption Agreement, the Stated Redemption
Amount) for the Subject Stock under, and as such capitalized terms are defined
in, the Stock Redemption Agreement, it being understood that for the purpose of
calculating compliance with the terms and provisions of this Agreement, the
amount of "Indebtedness" at any time of the type described in this clause (viii)
shall be agreed by the parties to be the arithmetical sum of all such
obligations then due and unpaid or to become due at any time in the future under
such agreement as in effect at the time of determination, provided that there
shall be excluded from this definition of "Indebtedness" the obligations of the
Borrower under the Warrants, notwithstanding any contrary treatment thereof
under GAAP.

      "Interest Expense" means, with reference to any period (the "measurement
period"), the sum of all interest expense with respect to Indebtedness or
Hedging Liabilities relating 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 (and including, for any measurement
period in the overall calculation of Interest Expense for such measurement
period, the net amount of interest expense relating to Hedging Liabilities
during such measurement period, whether positive or negative).


                                      -35-

      "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, if available to
all of the Lenders, 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;
      and

            (iv) no Interest Period may be selected if after giving effect
      thereto the Borrower will be unable to make a principal payment scheduled
      to be made during such Interest Period without paying part of a LIBOR
      Portion on a date other than the last day of the Interest Period
      applicable thereto.

      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 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).


                                      -36-

      "L/C Sublimit" shall mean $5,000,000, in each case as the same may be
reduced pursuant to Section 3.4 hereof.

      "Lender" means Harris Trust and Savings Bank, the other financial
institutions which are signatories hereto, and all other financial institutions
becoming parties hereto pursuant to Section 12.15 hereof.

      "Letters of Credit" is defined in Section 1.3 hereof.

      "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 Loan and the Swing
Loans.

      "Material Adverse Effect" means (a) a material adverse change in, or
material adverse effect upon, the operations, business, Property, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole, (b) a material impairment of the ability of the Borrower or any
Subsidiary to perform its material obligations under any Loan Document or (c) a
material adverse effect upon (i) the legality, validity, binding effect or
enforceability against the Borrower or any Subsidiary of any Loan Document or
the rights and remedies of the Administrative Agent and the Lenders thereunder
or (ii) the perfection or priority of any Lien granted under any Collateral
Document.

      "Material Plan" is defined in Section 9.1(i) hereof.

      "Mezzanine Finance" means BMO Nesbitt Burns Capital (U.S.), Inc. and its
permitted successors and assigns.

      "Mid-Central" means Mid-Central Plastics, Inc., an Iowa corporation.

      "Mid-Central Notes" means those certain promissory notes received by
Mid-Central as partial consideration for the Mid-Central Sale, including without
limitation the Three Month Note, the Six Month Note and the Subordinated Note as
defined in the asset purchase agreement for the Mid-Central Sale, all of which
are subject to the terms of the Wells Fargo Subordination Agreement.


                                      -37-

      "Mid-Central Sale" means the sale by Mid-Central to Innovative Injection
Technologies, Inc. of substantially all of its assets, including without
limitation its right, title and interest in and to its real property and
associated improvements and certain personal property associated therewith
located at 2360 Grand Avenue, West Des Moines, Iowa.

      "Mortgage" is defined in Section 4.1 hereof.

      "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 three types,
Revolving Credit Notes, Term Notes and the Swing Line Note, such Notes to
constitute three 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
and Term Percentage, unless the context in which such term is used shall
otherwise require.

      "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 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.

      "Pledge Agreement" is defined in Section 4.1 hereof.


                                      -38-

      "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.

      "Reportable Event" means a reportable event as defined in Section 4043 of
ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.

      "Required Lenders" means, as of the date of determination thereof, 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.

      "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" shall mean the commitments of each Lender
to extend credit under the Revolving Credit in the aggregate amount of
$18,000,000 for all the Lenders (each Lender's share of the total Revolving
Credit Commitments to be in the percentage set forth opposite such Lender's
signature to this Credit Agreement under the heading "Revolving Credit
Commitment" and, if applicable, opposite such Lender's signature on the relevant
Assignment Agreement delivered pursuant to Section 12.15 hereof) (subject to the
paragraph immediately following).

      All increases or reductions in the Revolving Credit Commitments shall
increase or decrease the Revolving Credit Commitments of the Lenders pro rata in
accordance with their Revolver Percentages.

      "Revolving Credit Notes" is defined in Section 1.1 hereof.

      "Revolving Loans" is defined in Section 1.1 hereof.

      "Security Agreement" is defined in Section 4.1 hereof.


                                      -39-

      "Senior Subordinated Debt" means the Indebtedness of the Borrower
evidenced by that certain 16% Senior Subordinated Promissory Note in the initial
principal amount of $10,000,000 due March 26, 2009, made by the Borrower in
favor of Mezzanine Finance, as the same may be amended, modified, supplemented
or restated from time to time in accordance with the provisions of this
Agreement.

      "Settlement Agreement" means that certain Settlement Agreement dated as of
November 20, 2003 by and between Worthington Industries, Inc., Worthington and
the Borrower.

      "SMP" means SMP Steel Corporation, a South Carolina corporation.

      "Stock Redemption Agreement" means that certain Stock Redemption Agreement
dated as of December 23, 2003 between the Borrower and Worthington.

      "Subordinated Debt" means, collectively, (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 currently outstanding principal amount of $1,262,781
and the second payable to the order of Ernest J. Butler in the currently
outstanding principal amount of $600,255, (y) the Senior Subordinated Debt and
(z) any other indebtedness for borrowed money subordinated in right of payment
to the prior payment of the Obligations, Hedging Liability and Funds Transfer
and Deposit Account Liability 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.

      "Subordination Agreement" means that certain Subordination and
Intercreditor Agreement dated as of March 26, 2004 by and between the Agent and
Mezzanine Finance, as the same may be amended, modified, supplemented or
restated from time to time in accordance with the terms hereof.

      "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.

      "Swing Line" is defined in the introductory paragraph hereof.

      "Swing Line Commitment" means $2,000,000 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.

      "Tax" or "Taxes" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility,


                                      -40-

environmental, communications, real or personal property, capital stock,
license, payroll, wage or other withholding, employment, social security,
severance, stamp, occupation, alternative or add-on minimum, estimated and other
taxes of any kind whatsoever (including, without limitation, deficiencies,
penalties, additions to tax, and interest attributable thereto) whether disputed
or not.

      "Tax Return" means any return, information report or filing with respect
to Taxes, including any schedules attached thereto and including any amendment
thereof.

      "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 Loan" is defined in Section 1.2 hereof.

      "Term Loan Commitments" means the commitments of the Lenders to make a
portion of the Term Loan in the amounts set forth opposite their signature
hereto under the headings "Term Loan" and opposite their signatures on
Assignment Agreements delivered pursuant to Section 12.15 hereof under the
heading "Term Loan," as such amount may be reduced pursuant hereto. The Term
Loan Commitments are $22,000,000 as of the date hereof.

      "Term Note" is defined in Section 1.2 hereof.

      "Term Percentage" means, for each Lender, the percentage held by such
Lender of the aggregate principal amount of the outstanding Term Loan.

      "Termination Date" means (x) March 31, 2008, 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.

      "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 Borrower 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.

      "Total Funded Debt/EBITDA Ratio" means, as of the last day of any fiscal
quarter of the Borrower, the ratio of (x) Total Funded Debt as of such date to
(y) EBITDA for the four fiscal quarters of the Borrower ending on such date.

      "Total Senior Funded Debt" means, at any time the same is to be
determined, Total Funded Debt at such time minus the sum of (x) the principal
balance of Subordinated Debt of the Borrower then outstanding and (y) the amount
of all Indebtedness of the type described in clause (viii) of the definition of
"Indebtedness" herein outstanding at such time.


                                      -41-

      "Total Senior Funded Debt/EBITDA Ratio" means, as of the last day of any
fiscal quarter of the Borrower, the ratio of (x) Total Senior Funded Debt as of
such date to (y) EBITDA for the four fiscal quarters of the Borrower ending on
such date.

      "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 and Swing Loans and the
outstanding amount of L/C Obligations.

      "Warrants" means the warrants to purchase common stock of the Borrower
issued on or about the Effective Date to the holders of the Senior Subordinated
Debt in accordance with the terms of the note and warrant purchase agreement
relating to such Senior Subordinated Debt.

      "Welfare Plan" means a "welfare plan" as defined in Section 3(1) of ERISA.

      "Wells Fargo Subordination Agreement" means that certain Subordination
Agreement dated as of June 20, 2003 made by the Borrower for the benefit of
Wells Fargo Business Credit, Inc. and relating to the Mid-Central Notes, in the
form delivered to the Agent prior to June 20, 2003.

      "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.

      "Worthington" means WI Products, Inc., f/k/a Worthington Custom Plastics,
Inc.

      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. All references in this Agreement or any other Loan Document to a
specific quarter or year ending date which are intended to refer to a fiscal
quarter or fiscal year ending date and which refer to a specific calendar
quarter or calendar year ending date (i.e., March 31, June 30, September 30 or
December 31) shall be deemed by the parties hereto, where appropriate in the
context, to refer to the corresponding fiscal quarter or fiscal year ending date
of the Borrower.


                                      -42-

      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 6.5 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.

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 qualification 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.

      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 qualification 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. Schedule 6.2
hereto identifies each Subsidiary, the jurisdiction of its incorporation or
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


                                      -43-

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. Authority and Validity of Obligations. The Borrower has full
right and authority to enter into this Agreement and the other Loan Documents
executed by it, to make the borrowings herein provided for, to issue its Notes
in evidence thereof, to grant to the Agent the Liens described in the Collateral
Documents executed by the Borrower, and to perform all of its obligations
hereunder and under the other Loan Documents executed by it. Each Subsidiary has
full right and authority to enter into the Loan Documents executed by it, to
guarantee the Obligations, Hedging Liability, and Funds Transfer and Deposit
Account Liability, to grant to the Agent the Liens described in the Collateral
Documents executed by such Person, and to perform all of its obligations under
the Loan Documents executed by it. The Loan Documents delivered by the Borrower
and its Subsidiaries have been duly authorized, executed, and delivered by such
Persons and constitute valid and binding obligations of the Borrower and its
Subsidiaries enforceable against them in accordance with their 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 this Agreement and the other Loan
Documents do not, nor does the performance or observance by the Borrower or any
Subsidiary of any of the matters and things herein or therein provided for, (a)
contravene or constitute a default under any provision of law or any judgment,
injunction, order or decree binding upon the Borrower or any Subsidiary or any
provision of the organizational documents (e.g., charter, certificate or
articles of incorporation and by-laws, certificate or articles of association
and operating agreement, partnership agreement, or other similar organizational
documents) of the Borrower or any Subsidiary, (b) contravene or constitute a
default under any covenant, indenture or agreement of or affecting the Borrower
or any Subsidiary or any of their Property, in each case where such
contravention or default, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, or (c) result in the creation or
imposition of any Lien on any Property of the Borrower or any Subsidiary other
than the Liens granted in favor of the Agent pursuant to the Collateral
Documents.

      Section 6.4. Use of Proceeds; Margin Stock. The Borrower shall use the
proceeds of the Term Loan to refinance all or a part of the Previous Loans and
to pay fees and expenses associated with such refinancing; and the Borrower
shall use the proceeds of the Revolving Credit to refinance all or a part of the
Previous Loans and to pay fees and expenses associated with such refinancing,
for Capital Expenditures and for its general working capital purposes, and for
such other legal and proper purposes as are consistent with all applicable laws.
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


                                      -44-

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 6.5. Financial Reports. The consolidated balance sheet of the
Borrower and its Subsidiaries as at December 31, 2003 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
KPMG LLP, independent public accountants, and the unaudited interim consolidated
balance sheet of the Borrower and its Subsidiaries as at February 29, 2004 and
the related consolidated statements of income, retained earnings and cash flows
of the Borrower and its Subsidiaries for the two (2) 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 December 31, 2003, 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 6.6. 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 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 6.7. 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 6.8. 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 6.9. Taxes. All Tax Returns with respect to any material Tax
required to be filed by the Borrower or any Subsidiary in any jurisdiction have,
in fact, been filed, and all Taxes 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 have a Material


                                      -45-

Adverse Effect. 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.
Neither the Borrower nor any of its Subsidiaries has made an election under
Section 341(f) of the Code. Neither the Borrower nor any of its Subsidiaries is
liable for the Taxes of another Person that is not a Subsidiary in an amount
under (i) Treasury Regulation Section 1.1502-6 (or comparable provisions of
state, local or foreign law), (ii) as a transferee or successor, (iii) by
contract or indemnity, or (iv) otherwise. Neither the Borrower nor any of its
Subsidiaries is a party to any tax sharing agreement. Each of the Borrower and
its Subsidiaries has disclosed on its federal income Tax Returns any position
taken for which substantial authority (within the meaning of Code Section
6662(d)(2)(B)(i)) did not exist at the time the Tax Return was filed. Neither
the Borrower nor any of its Subsidiaries has made any payments, is obligated to
make payments or is a party to an agreement that could obligate it to make any
payments that would not be deductible under Code Section 280G.

      Section 6.10. 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 6.11. 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 Subsidiary than would be usual
and customary in similar contracts or agreements between Persons not affiliated
with each other.

      Section 6.12. 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 6.13. 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 6.14. Compliance with Laws. The Borrower and its Subsidiaries are
in compliance with the requirements of all federal, state and local laws, rules
and regulations (in each case, other than with respect to Environmental Laws)
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, and the Americans with Disabilities


                                      -46-

Act of 1990, non-compliance with which would reasonably be expected to have a
Material Adverse Effect. 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 statutes and
regulations (other than Environmental Laws), which non-compliance would
reasonably be expected to have a Material Adverse Effect.

      Section 6.15. Environmental and Safety Matters.

      (a) Except as set forth on Schedule 6.15 hereto, the Borrower and its
Subsidiaries have materially complied with and are currently in material
compliance with all Environmental Laws, and neither the Borrower nor any of its
respective Subsidiaries have received any oral or written notice, regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
or any corrective, investigatory or remedial obligations arising under
Environmental Laws which have not been corrected and which relate to the
Borrower or any of its Subsidiaries or any of their Properties or facilities.
Without limiting the generality of the foregoing, the Borrower and its
Subsidiaries have obtained and materially complied with, and are currently in
material compliance with, all permits, licenses and other authorizations that
may be required pursuant to any Environmental Law for the occupancy of their
properties or facilities or the operation of their businesses. Neither this
Agreement nor the consummation of the transactions contemplated by this
Agreement shall impose any obligations on the Borrower or any of its
Subsidiaries or otherwise for site investigation or cleanup, or notification to
or consent of any government agencies or third parties under any Environmental
Laws (including, without limitation, any so called "transaction-triggered" or
"responsible property transfer" laws and regulations). None of the following
exists in violation of Environmental Laws at any property or facility owned,
occupied or operated by the Borrower or any of its Subsidiaries:

                  (i)   underground storage tanks or surface impoundments;

                  (ii)  asbestos-containing materials in any form or condition;
                        or

                  (iii) materials or equipment containing polychlorinated
                        biphenyls.

      (b) Except as set forth on Schedule 6.15 hereto, neither the Borrower nor
any of its Subsidiaries has treated, stored, disposed of, arranged for or
permitted the disposal of, transported, handled or released any substance
(including, without limitation, any Hazardous Material) or owned, occupied or
operated any facility or property, so as to give rise to liabilities of the
Borrower or any of its Subsidiaries for response costs, natural resource damages
or attorneys fees pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA"), or any other
Environmental Law, except where any such action would not, individually or in
the aggregate, have a Material Adverse Effect.

      (c) Without limiting the generality of the foregoing, except as set forth
on Schedule 6.15 hereto, no facts, events or conditions relating to the past or
present Properties, facilities or operations of the Borrower or its Subsidiaries
shall materially prevent, hinder or limit continued compliance with
Environmental Laws, give rise to any corrective, investigatory or remedial
obligations pursuant to Environmental Laws or any other material liabilities
(whether accrued,


                                      -47-

absolute, contingent, unliquidated or otherwise) pursuant to Environmental Laws
(including, without limitation, those liabilities relating to onsite or offsite
releases or threatened releases of Hazardous Materials, personal injury,
property damage or natural resources damage).

      (d) Except as set forth on Schedule 6.15 hereto, neither the Borrower nor
any of its Subsidiaries has, either expressly or by operation of law, assumed or
undertaken any liability or corrective, investigatory or remedial obligation of
any other Person relating to any Environmental Laws.

      (e) Except as set forth on Schedule 6.15 hereto, neither the Borrower nor
any of its Subsidiaries has received or is subject to any Environmental Claims.
No Lien, whether recorded or unrecorded, in favor of any international, federal,
state or local governmental authority having jurisdiction over the Borrower or
any of its Subsidiaries, relating to any liability of the Borrower or any of its
Subsidiaries arising under any Environmental Laws has attached to any property
owned, leased or operated

      Section 6.16. 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. All of the
Borrower's and its Subsidiaries' material contracts are valid, binding and
enforceable in accordance with their respective terms, except where any failure
or failures thereof would not, considered in the aggregate, have a Material
Adverse Effect. Each of the Borrower and each of its Subsidiaries has performed
all obligations required to be performed by it under such contracts and is not
in default under or in breach of nor in receipt of any claim of default or
breach under any such contract; no event has occurred which, with the passage of
time or the giving of notice or both, would result in a default, breach or event
of noncompliance by the Borrower or any of its Subsidiaries under any such
contract; and neither the Borrower nor any of its Subsidiaries has any present
expectation or intention of not fully performing all such obligations; neither
the Borrower nor any of its Subsidiaries has knowledge of any breach or
anticipated breach by the other parties to any such contract. Neither the
Borrower nor any of its Subsidiaries is a party to any contract or commitment
requiring it to purchase or sell goods or services or lease property above or
below (as the case may be) prevailing market prices and rates.

      Section 6.17. No Default. No Default or Event of Default has occurred and
is continuing.

      Section 6.18. Trademarks, Franchises, and Licenses. The Borrower and its
Subsidiaries own, possess, or have the right to use all necessary patents,
licenses, franchises, trademarks, trade names, trade styles, copyrights, trade
secrets, know how, and confidential commercial and proprietary information to
conduct their businesses as now conducted, without known conflict with any
patent, license, franchise, trademark, trade name, trade style, copyright or
other proprietary right of any other Person, except for any such failures to so
own, possess or have the right to use the same or any such conflicts which would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.

      Section 6.19. Governmental Authority and Licensing. The Borrower and its
Subsidiaries have received all licenses, permits, and approvals of all federal,
state, and local governmental


                                      -48-

authorities, if any, necessary to conduct their businesses, in each case where
the failure to obtain or maintain the same could reasonably be expected to have
a Material Adverse Effect. No investigation or proceeding which, if adversely
determined, could reasonably be expected to result in revocation or denial of
any material license, permit or approval is pending or, to the knowledge of the
Borrower, threatened.

      Section 6.20. Solvency. The Borrower and its Subsidiaries are solvent,
able to pay their debts as they become due, and have sufficient capital to carry
on their business and all businesses in which they are about to engage.

      Section 6.21. Capital Structure.

      (a) Generally. The authorized capital stock of the Borrower consists of
(i) 20,000,000 shares of Class A Common Stock, $.01 par value, of which there
are 4,560,547 shares issued and outstanding as of the Effective Date and no
shares held in the treasury of the Borrower; (ii) 200,000 shares of Class B
Common Stock, $.01 par value, of which there are 100,000 shares issued and
outstanding as of the Effective Date and no shares held in the treasury of the
Borrower; and (iii) 2,000,000 shares of Preferred Stock, no par value, of which
10,000 shares are issued and outstanding as of the Effective Date and no shares
held in the treasury of the Borrower. All outstanding shares of the Borrower's
Class A and Class B Common Stock and Preferred Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created by statute, the Articles of Incorporation or Bylaws of the
Borrower or any agreement or document to which the Borrower is a party or by
which it is bound. Shares of the Borrower's Class B Common Stock are
convertible, on a one-to-one basis, into shares of the Company's Class A Common
Stock, and shares of the Company's Preferred Stock are not convertible into any
capital stock of the Company. As of the Effective Date the Borrower had
remaining a reserve of an aggregate of 1,166,711 shares and 25,000 shares,
respectively, of the Borrower's Class A Common Stock for issuance to employees
pursuant to the Borrower's 1997 Employee Stock Option Plan (the "Stock Option
Plan") and the Borrower's Morton Industrial Group, Inc. Nonemployee Directors'
Compensation Plan (the "Borrower Director Plan"). Except for the warrants to
purchase shares of the Borrower's Class A Common Stock to be issued in
connection with the Note Purchase Agreement for the Senior Subordinated Debt,
Schedule 6.21 sets forth for each Person who held options to acquire shares of
the Borrower's Class A or Class B Common Stock, or any other capital stock of
the Borrower, in each case as of the Effective Date, the name of the holder of
such option, the number of shares subject to such option, the exercise price of
such option, the number of shares as to which such option was vested at such
date and the vesting schedule for such option.

      (b) Obligations With Respect to Capital Stock. Except as set forth in
Section 6.21(a) and except for the warrants to purchase shares of the Borrower's
Class A Common Stock held by the Lenders under the Previous Credit Agreement,
all of which will be cancelled on the Effective Date, as of the Effective Date,
there were no equity securities, partnership interests or similar ownership
interests of any class of the Borrower, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. As of the Effective Date, except as set forth in Section 6.21(a)
except for the warrants to purchase shares of the Borrower's Class A Common


                                      -49-

Stock to be issued in connection with the Note Purchase Agreement for the Senior
Subordinated Debt, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Borrower or any of its Subsidiaries is a party or by which it is bound
obligating the Borrower or any of its Subsidiaries to issue, deliver or sell, or
cause to be issued, delivered or sold, or repurchase, redeem or otherwise
acquire, or cause the repurchase, redemption or acquisition, of any shares of
capital stock, partnership interests or similar ownership interests of the
Borrower or any of its Subsidiaries or obligating the Borrower or any of its
Subsidiaries to grant, extend, accelerate the vesting of or enter into any such
option, warrant, equity security, call, right, commitment or agreement.

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:

      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, Swing Loan or Letter of
      Credit, after giving effect to such extension of credit, the aggregate
      principal amount outstanding of all Revolving Loans, Swing Loans and L/C
      Obligations shall not exceed the lesser of (i) the Revolving Credit
      Commitments then in effect or (ii) the Borrowing Base as then determined
      and computed;

            (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


                                      -50-

      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.

      The 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:

            (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) this Agreement, duly executed by the Borrower, the
            Guarantors and the Lenders, and the Notes, duly executed by the
            Borrower;

                  (ii) (v) the Collateral Documents and the UCC financing
            statements requested by the Agent in connection therewith, (w)
            original stock certificates representing all of the issued and
            outstanding shares of stock of the Borrower's subsidiaries, together
            with stock powers therefor executed in blank and undated, (x)
            patent, trademark, and copyright collateral agreements to the extent
            requested by the Agent, (y) deposit account, securities account, and
            commodity account control agreements to the extent requested by the
            Agent and (z) landlord waivers with respect to leased properties of
            the Borrower and its Subsidiaries to the extent requested by the
            Agent, which it is hereby agreed by the parties will be delivered on
            a post-closing basis with respect to the leased properties in Apex,
            North Carolina and on Detroit Street, Morton, Illinois;

                  (iii) a date-down endorsement for each policy of title
            insurance and all endorsements thereunder delivered in connection
            with the Previous Credit Agreement in form and substance acceptable
            to the Agent (which will, among other things, insure over any survey
            exception) from the issuer of such policy or another title insurance
            company acceptable to the Agent, maintaining the existing level of
            coverage under each such policy, provided that any such endorsements
            which are not available at the time of the making of the initial
            Loan hereunder will be delivered by the Borrower not later than 90
            days after the date hereof;

                  (iv) supplements to each Mortgage delivered under the Previous
            Credit Agreement and in effect as of the Effective Date, duly
            executed, reflecting the terms of this Second Amended and Restated
            Credit Agreement;

                  (v) certified copies of resolutions of the Board of Directors
            of the Borrower and each Guarantor authorizing the execution and
            delivery of the Loan


                                      -51-

            Documents delivered by them and indicating the authorized signers of
            such Loan Documents;

                  (vi) 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;

                  (vii) 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

                  (viii) 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 (i) Illinois counsel for
      the Borrower and the Guarantors and (ii) Georgia counsel for the Borrower,
      each in form and substance acceptable to the Agent and the Lenders;

            (c) the Agent shall have received from the Borrower reimbursement
      for any expenses incurred in connection with the Loan Documents or the
      Previous Credit Agreement (including, without limitation, legal fees);

            (d) the Agent shall have received evidence satisfactory to it,
      including without limitation a certificate from the Borrower's chief
      financial officer with supporting documentation satisfactory to the Agent,
      that (i) EBITDA for the twelve months ending on February 29, 2004, was not
      less than $11,600,000; (ii) the Total Funded Debt/EBITDA Ratio, measured
      based on Total Funded Debt projected to be outstanding after giving effect
      to the initial Loans hereunder and EBITDA for the four fiscal quarters
      ended on February 29, 2004, will be less than 4.10 to 1.0 and (iii) the
      Total Senior Funded Debt/EBITDA Ratio, measured based on Total Senior
      Funded Debt projected to be outstanding after giving effect to the initial
      Loans hereunder and EBITDA for the four fiscal quarters ended on February
      29, 2004, will be less than 2.90 to 1.0 (as used in this clause (d),
      EBITDA shall be understood by the parties to incorporate such adjustments
      thereto as are acceptable to the Borrower and the Administrative Agent and
      shall specifically exclude the terms of the proviso set forth at the end
      of the definition of "EBITDA" herein);

            (e) the Agent shall have received such evaluations and
      certifications as it may require (including (i) a Borrowing Base
      Certificate as of a date no more than ten days prior to the Effective
      Date, (ii) satisfactory results of a collateral audit, and (iii) updated
      appraisal reports, flood hazard determinations and environmental
      assessments in form and substance satisfactory to the Agent with respect
      to the real property of the Borrower and its Subsidiaries which is subject
      to the Liens of mortgages in favor of the Agent) in order to satisfy
      itself as to the value of the Collateral, the financial condition of the


                                      -52-

      Borrower and its Subsidiaries, and the lack of material contingent
      liabilities of the Borrower and its Subsidiaries;

            (f) the Liens granted to the Agent under the Collateral Documents
      shall have been perfected in a manner satisfactory to each Lender and its
      counsel;

            (g) the Borrower and its Subsidiaries shall have entered into the
      account arrangements described in Section 4.4 hereof;

            (h) after giving effect to the initial Loans hereunder, there shall
      be at least $5,000,000 in Unused Revolving Credit Commitment and in
      availability under the Borrowing Base;

            (i) the Obligations under the Previous Credit Agreement shall have
      been repaid in full and all Commitments of the Lenders thereunder
      cancelled;

            (j) the capital and organizational structure of the Borrower and its
      Subsidiaries shall be satisfactory to the Agent and the Lenders including,
      without limitation (i) receipt by the Borrower of cash proceeds of not
      less than $10,000,000 from the issuance of the Senior Subordinated Debt,
      all of the terms and conditions of which (including without limitation the
      terms pursuant to which the Senior Subordinated Debt is subordinated to
      the Obligations, Hedging Liability and Funds Transfer and Deposit Account
      Liability) shall be satisfactory to the Agent and the Lenders, and (ii)
      the Indebtedness described in clause (x) of the definition of
      "Subordinated Debt" herein shall remain outstanding in a principal amount
      of not less than $1,863,036 on terms and conditions acceptable to the
      Agent and the Lenders (and the Agent shall have received copies of the
      notes and any other documents evidencing such Indebtedness);

            (k) the Agent shall have received a fully executed copy of the
      Subordination Agreement, together with copies of the final executed note
      evidencing the Senior Subordinated Debt and the Note Purchase Agreement
      relating to the Senior Subordinated Debt;

            (l) the Agent shall have received evidence of insurance required to
      be maintained under the Loan Documents, naming the Agent as mortgagee and
      loss payee and as an additional insured;

            (m) the Agent shall have received the initial fees called for by
      Section 3.1(d) hereof;

            (n) the Agent shall have received financing statement, tax, and
      judgment lien search results against the Property of the Borrower and each
      Subsidiary evidencing the absence of Liens on its Property except as
      permitted by Section 8.12 hereof; and


                                      -53-

            (o) 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.

      Section 7.3. Initial Loans. As described in the recitals hereto, the
initial Loans shall represent a continuation of the Previous Loans.

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


                                      -54-

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 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 monthly fiscal period of the Borrower which is also the end
      of a fiscal quarter of the Borrower and within 30 days after the close of
      each other monthly fiscal period of the Borrower, a copy of the balance
      sheet, 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 and a comparison to budget, prepared by the Borrower in accordance
      with GAAP (subject to normal year-end audit adjustments and the absence of
      footnotes) 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 and a comparison
      to budget, accompanied by an unqualified opinion thereon of KPMG LLP 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) 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
      with the Securities and Exchange Commission or any successor thereto, or
      with any national securities exchanges;


                                      -55-

            (e) promptly after knowledge thereof shall have come to the
      attention of any responsible officer of the Borrower, written notice of
      (x) 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 (y) the occurrence of any
      Default or Event of Default hereunder;

            (f) as soon as available, and in any event within 30 days prior to
      the end of each fiscal year of the Borrower, a copy of the Borrower's
      consolidated and consolidating business plan for the following fiscal
      year, such business plan to show the Borrower's projected consolidated and
      consolidating revenues, expenses and balance sheet on a quarter-by-quarter
      and month-by-month basis, such business plan to be in reasonable detail
      prepared by the Borrower and in form satisfactory to the Agent and the
      Required Lenders (which shall include a summary of all assumptions made in
      preparing such business plan);

            (g) notice of any Change of Control; and

            (h) as soon as available, but in any event within 15 days following
      the close of each calendar month, a Borrowing Base Certificate signed by
      the Borrower's chief financial officer showing in reasonable detail the
      computation of the Borrowing Base as of the close of such monthly
      accounting period, such certificate to be in form and substance reasonably
      acceptable to the Agent and the Required Lenders.

      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 D 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. Total Funded Debt/EBITDA Ratio. The Borrower shall not, as of
the last day of each fiscal quarter of the Borrower ending on the dates set
forth below, permit the Total


                                      -56-

      Funded Debt/EBITDA Ratio to be greater than the corresponding ratio set
      forth opposite such dates:



                                                                  TOTAL FUNDED
                                                                DEBT/EBITDA RATIO
                  FISCAL QUARTER ENDING DATES               SHALL NOT BE GREATER THAN
                                                         
                  Effective Date through and
                      including 9/30/04                            4.40 to 1.0
                    12/31/04 through 9/30/05                       3.90 to 1.0
                    12/31/05 through 9/30/06                       3.50 to 1.0
                    12/31/06 through 9/30/07                       3.10 to 1.0
                    12/31/07 and thereafter                        3.00 to 1.0


      Section 8.7. Total Senior Funded Debt/EBITDA Ratio. The Borrower shall
not, as of the last day of each fiscal quarter of the Borrower ending on the
dates set forth below, permit the Total Senior Funded Debt/EBITDA Ratio to be
greater than the corresponding ratio set forth opposite such dates:



                                                              TOTAL SENIOR FUNDED
                                                               DEBT/EBITDA RATIO
                  FISCAL QUARTER ENDING DATES              SHALL NOT BE GREATER THAN
                                                        
                   Effective Date through and
                      including 9/30/04                            3.35 to 1.0
                    12/31/04 through 9/30/05                       2.80 to 1.0
                    12/31/05 through 9/30/06                       2.45 to 1.0
                    12/31/06 through 9/30/07                       2.10 to 1.0
                    12/31/07 and thereafter                        2.00 to 1.0


      Section 8.8. Minimum EBITDA. The Borrower shall not, as of the last day of
each fiscal quarter of the Borrower ending on the dates set forth below, permit
EBITDA for the four fiscal quarters of the Borrower then most-recently ended to
be less than the corresponding amount set forth opposite such dates:



                                                              EBITDA FOR FOUR FISCAL
                                                               QUARTERS THEN ENDED
              FISCAL QUARTER ENDING DATES                     SHALL NOT BE LESS THAN:
                                                           
                3/31/04 through 6/30/04                            $11,000,000
                        9/30/04                                    $11,500,000
               12/31/04 through 12/31/05                           $12,000,000



                                      -57-



                                                              EBITDA FOR FOUR FISCAL
                                                               QUARTERS THEN ENDED
              FISCAL QUARTER ENDING DATES                     SHALL NOT BE LESS THAN:
                                                           
                 3/31/06 and thereafter                            $11,500,000


      Section 8.9. Fixed Charge Coverage Ratio. The Borrower will not, as of the
last day of each fiscal quarter of the Borrower ending on the dates set forth
below, permit the Fixed Charge Coverage Ratio to be less than:



                                                          FIXED CHARGE COVERAGE RATIO
              FISCAL QUARTER ENDING DATES                   SHALL NOT BE LESS THAN
                                                       
                      At all times                                1.15 to 1.0


      Section 8.10. Capital Expenditures. The Borrower will not, nor will it
permit any Subsidiary to, expend or (without duplication) become obligated to
expend, in each case for Capital Expenditures aggregating for the Borrower and
its Subsidiaries (taken together) an amount during any fiscal year of the
Borrower in excess of the corresponding amount set forth below opposite such
fiscal year:



                                                             CAPITAL EXPENDITURES
                      FISCAL YEAR                              SHALL NOT EXCEED
                                                          
                          2004                                    $4,800,000
                          2005                                    $5,200,000
                          2006                                    $6,600,000
                          2007                                    $6,700,000
                          2008                                    $6,900,000


      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, Hedging Liability and Funds Transfer and
      Deposit Account Liability of the Borrower and its Subsidiaries owing to
      the Agent and the Lenders (and their Affiliates);

            (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 $3,000,000 at any one time outstanding;

            (c) obligations of the Borrower and its Subsidiaries arising out of
      interest rate, foreign currency and commodity hedging arrangements entered
      into with financial institutions in the ordinary course of business and
      not for speculative purposes;


                                      -58-

            (d) intercompany borrowings by and from the Borrower and its
      Subsidiaries;

            (e) 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;

            (f) unsecured indebtedness in an aggregate principal amount not to
      exceed $1,500,000 at any one time outstanding in favor of vendors or
      suppliers other than Deere or Caterpillar representing the extension, with
      the consent of the creditor, beyond the normal due date (but not beyond
      360 days from invoice) of trade credit incurred in the ordinary course of
      business;

            (g) Subordinated Debt owing to Mezzanine Finance in the original
      principal amount of $10,000,000, as reduced from time to time by permitted
      repayments thereof as provided in the Subordination Agreement, and the
      other Subordinated Debt described in clause (x) of the definition of
      "Subordinated Debt" in Section 5.1 hereof;

            (h) 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;

            (i) all obligations of the Borrower to pay the Purchase Price (and,
      to the extent all or any portion of such amount is reinstated pursuant to
      the Stock Redemption Agreement, the Stated Redemption Amount) for the
      Subject Stock under, and as such capitalized terms are defined in, the
      Stock Redemption Agreement; and

            (j) 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;


                                      -59-

            (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;

            (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(g) hereof provided such liens do
      not in any event encumber any trade fixtures or similar equipment;

            (g) junior and subordinate Liens granted in favor of Mezzanine
      Finance on certain assets of the Borrower and its Subsidiaries to the
      extent permitted by the terms of the Subordination Agreement;

            (h) the Liens described on Schedule 8.12 hereof; and

            (i) 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


                                      -60-

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;

            (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) the Borrower's investments from time to time in its
      Subsidiaries, and other intercompany loans and advances by and from the
      Borrower and its Subsidiaries to one another;

            (f) the Mid-Central Notes;

            (g) the Guaranties; and

            (h) guaranties by the Borrower of (i) trade accounts payable of its
      Subsidiaries arising in the ordinary course of business which are not more
      than 90 days past due and (ii) indebtedness of its Subsidiaries permitted
      pursuant to Sections 8.11 (b), (c), (f) and (j) hereof.

      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.

      In addition to the foregoing, neither the Borrower nor any Subsidiary will
(i) create or be or become a party to the creation of any special-purpose
vehicle or entity, whether or not the Borrower or any Subsidiary owns an equity
interest therein, (ii) be or become a partner of any general or limited
partnership or a member of any limited liability Company or similar Person, or
(iii) enter into any agreement pursuant to which it will be allocated any
profits or losses of any Person, whether or not it holds an equity interest of
any type therein.


                                      -61-

      Section 8.14. Leases. (a) 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 during any fiscal
year of the Borrower an amount in excess of the corresponding amount set forth
below opposite such fiscal year:



                                                    RENTAL EXPENSE SHALL
                 FISCAL YEAR                              NOT EXCEED
                                                 
                     2004                                 $7,200,000
                     2005                                 $7,800,000
          2006 and each fiscal year                       $8,200,000
                  thereafter


      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:

            (i) provided that no Default or Event of Default exists before or
      after giving effect thereto or would be caused thereby, the Borrower's
      expenditure of up to $20,000 in the aggregate to redeem fractional shares
      of its common stock resulting from a previous reverse stock split of the
      Borrower; or

            (ii) the Borrower's redemption of up to 10,000 shares of its Series
      1999A Preferred Stock at a redemption price not to exceed $50,000 per 333
      (or 334, as the case may be) shares redeemed and payable at the times set
      forth in Section 3 of the Stock Redemption Agreement as in effect on the
      Effective Date, provided that at the time of such redemption (x) the
      Borrower was in compliance with the requirements of each of Sections 8.6,
      8.7, 8.8, 8.9 and 8.10 hereof as of the end of the most recent fiscal
      quarter for which it was required to submit financial statements and a
      compliance certificate pursuant to Section 8.5 hereof, (y) no Event of
      Default exists under Section 9.1(a) or (b) hereof before or after giving
      effect to such redemption and (z) no "Standstill Period" (as defined in
      the Subordination Agreement) is in effect under the Subordination
      Agreement at the time of such redemption.


                                      -62-

      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 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;

                  (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.


                                      -63-

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. The Borrower will not, and will not permit any
of its Subsidiaries to, make or commit to make any Acquisitions.

      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 (a) 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, (b) the issuance of such stock to the Borrower or a
Wholly-Owned Subsidiary, and (c) the Lien granted on equity interests in the
Borrower's Subsidiaries in favor of the Agent and, to the extent permitted by
the Subordination Agreement, junior and subordinate Liens granted therein to
Mezzanine Finance.

      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 Subsidiary as collateral security for the Notes and the other
Obligations, as well as the Hedging Liability and Funds Transfer and Deposit
Account 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 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,


                                      -64-

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.

      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 proceeds of
the Loans solely for the purposes described in, or otherwise permitted by,
Section 6.4 hereof.

      Section 8.26. No Restrictions. Except as provided herein or in the
instruments evidencing the Subordinated Debt owing to Mezzanine Finance in
effect on the date hereof, the Borrower shall not, nor shall it permit any
Subsidiary to, directly or indirectly create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of the Borrower or any Subsidiary to: (a) pay dividends or make
any other distribution on any Subsidiary's capital stock or other equity
interests owned by the Borrower or any other Subsidiary, (b) pay any
indebtedness owed to the Borrower or any other Subsidiary, (c) make loans or
advances to the Borrower or any other Subsidiary, (d) transfer any of its
Property to the Borrower or any other Subsidiary, or (e) guarantee the
Obligations and/or grant Liens on its assets to the Agent as required by the
Loan Documents, except for such encumbrances or restrictions relating to (i)
customary non-assignment provisions of any lease and restrictions therein
restricting subletting, (ii) customary net worth provisions contained in leases
and other agreements entered into by the Borrower or a Subsidiary in the
ordinary course of business, (iii) customary non-assignment provisions in
licenses entered into by the Borrower or a Subsidiary as lessee, in the ordinary
course of business, and (iv) purchase money obligations and Capitalized Lease
Obligations that impose restrictions on the property purchased or leased.

      Section 8.27. Subordinated Debt. The Borrower shall not, nor shall it
permit any Subsidiary to, (a) amend or modify the terms and conditions
applicable to the Subordinated Debt


                                      -65-

owing to Mezzanine Finance in violation of the terms of the Subordination
Agreement or amend or modify any terms applicable to any other Subordinated Debt
in any respect whatsoever, (b) make any voluntary prepayment of any Subordinated
Debt or effect any voluntary redemption thereof, or (c) make any payment on
account of any Subordinated Debt which is prohibited under the terms of any
instrument or agreement subordinating the same to the Obligations.
Notwithstanding the foregoing, the Borrower may agree to a decrease in the
interest rate applicable to any Subordinated Debt or to a deferral of repayment
of any of the principal of or interest on any Subordinated Debt beyond the
current due dates therefor.

      Section 8.28. Management Compensation. Other than the payment of a
one-time bonus to William D. Morton in an amount (not to exceed $150,000)
approved by the compensation committee of the board of directors of the Borrower
for fiscal 2003, the Borrower shall not, without the Administrative Agent's
prior written approval, increase the compensation paid to any officer, key
employee or consultant in excess of historical increases in such compensation
consistent with the past practices of the Borrower.

      Section 8.29. Worthington Settlement Documents. The Borrower will not, nor
will it permit any Subsidiary to, amend or modify any of the terms or provisions
of either of the Settlement Agreement or the Stock Redemption Agreement without
the prior written consent of the Required Lenders. The Borrower will not, nor
will it permit any Subsidiary to, (i) prepay or otherwise advance the time for
the payment of any amounts due, or pay more than the amounts otherwise due,
under the Settlement Agreement or the Stock Redemption Agreement, or (ii) pay
any amount due under the Stock Redemption Agreement unless such payment is
permitted pursuant to the terms of Section 8.15 hereof (or represents interest
on such a permitted payment permitted to be paid pursuant to the immediately
following sentence), without (in each case described in the foregoing clauses
(i) and (ii)) the prior written consent of the Required Lenders. Without
limiting the foregoing, the Borrower will not pay, or permit any Subsidiary to
pay, more than $50,000 during any month as a payment of the Purchase Price (as
defined in the Stock Redemption Agreement) for the Subject Stock (as defined in
the Stock Redemption Agreement), unless such additional payment is a Deferred
Payment (as defined in the Stock Redemption Agreement) or interest on a Deferred
Payment which, pursuant to the terms of the Stock Redemption Agreement, may no
longer be deferred. If the making of any payment due under the Stock Redemption
Agreement would constitute a Payment Default or a Statutory Default (as those
terms are defined in the Stock Redemption Agreement), the Borrower will, and
will cause any Subsidiary to, take all necessary actions to defer such payment
under the Stock Redemption Agreement in accordance with the terms thereof.

      Section 8.30. Mid-Central Debt. The Borrower will not, nor will it permit
Mid-Central or any other Subsidiary to, amend or modify any of the terms or
provisions of, or agree to defer or forgive any payments otherwise due under,
any of the Mid-Central Notes, except to the extent required by the Wells Fargo
Subordination Agreement.

      Section 8.31. Required Hedging. Not later than 30 days after the Effective
Date, the Borrower will enter into one or more interest rate hedging
arrangements reasonably acceptable to the Agent with one or more financial
institutions reasonably acceptable to the Agent, providing for a fixed rate of
interest or an acceptable interest rate cap on a notional amount of not less
than


                                      -66-

fifty percent (50%) of the initial principal amount of the Term Loan for a
period of time reasonably acceptable to the Administrative Agent.

      Section 8.32. Equity Restriction. The Borrower shall not, and shall not
permit any of its Subsidiaries to, redeem, purchase or make any payments with
respect to any stock appreciation rights, phantom stock plans or similar rights
or plans.

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 Section 8.1, 8.5, 8.6, 8.7, 8.8, 8.9, 8.10, 8.11, 8.12, 8.13,
      8.14, 8.15, 8.16, 8.17, 8.18, 8.25, 8.27, 8.28, 8.29 or 8.30 hereof or of
      any provision in any Loan Document dealing with the use, disposition or
      remittance of the proceeds of Collateral or requiring the maintenance of
      insurance thereon; or

            (d) default in the observance or performance of any other provision
      hereof or of any other Loan Document which is not remedied within thirty
      (30) days after written notice thereof to the Borrower by the Agent or any
      Lender; or

            (e) any representation or warranty made by the Borrower herein or in
      any other Loan Document, 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

            (f) any event occurs or condition exists (other than those described
      in subsections (a) through (e) above) which is specified as an event of
      default under any of the other Loan Documents, or any of the Loan
      Documents shall for any reason not be or shall cease to be in full force
      and effect or is declared to be null and void, or any Guarantor shall
      purport to disavow, revoke, repudiate or terminate its obligations
      thereunder, or any of the Collateral Documents shall for any reason fail
      to create a valid and perfected first priority Lien in favor of the Agent
      in any Collateral purported to be covered thereby except as expressly
      permitted by the terms thereof, or any Subsidiary


                                      -67-

      takes any action for the purpose of terminating, repudiating or rescinding
      any Loan Document executed by it or any of its obligations thereunder; or

            (g) 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

            (h) 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

            (i) 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 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

            (j) a Change of Control shall occur; or

            (k) 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 this Section 9.1(k); or


                                      -68-

            (l) 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(k) 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
(j), 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;

            (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 (k) or (l) 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 (k) or (l) 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 (k) or (l) 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 of Agent. Each Lender hereby
appoints Harris Trust and Savings Bank as the Agent under the Loan Documents and
hereby authorizes the Agent to take such action as Agent on its behalf and to
exercise such powers under the Loan Documents as are delegated to the Agent by
the terms 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


                                      -69-

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.

      Section 10.2. Agent and its Affiliates. The Agent shall have the same
rights and powers under this Agreement and the other Loan Documents as any other
Lender and may exercise or refrain from exercising such rights and power as
though it were not the Agent, and the Agent and its affiliates may accept
deposits from, lend money to, and generally engage in any kind of business with
the Borrower or any Affiliate of the Borrower as if it were not the Agent under
the Loan Documents. The term "Lender" as used herein and in all other Loan
Documents, unless the context otherwise clearly requires, includes the Agent in
its individual capacity as a Lender. References herein to the Agent's Loans, or
to the amount owing to the Agent for which an interest rate is being determined,
refer to the Agent in its individual capacity as a Lender.

      Section 10.3. Action by Agent. If the Agent receives from the Borrower a
written notice of an Event of Default pursuant to Section 8.5 hereof, the Agent
shall promptly give each of the Lenders written notice thereof. The obligations
of the Agent under the Loan Documents are only those expressly set forth
therein. Without limiting the generality of the foregoing, the Agent shall not
be required to take any action hereunder with respect to any Default or Event of
Default, except as expressly provided in Sections 9.2 and 9.4. Upon the
occurrence of an Event of Default, the Agent shall take such action to enforce
its Lien on the Collateral and to preserve and protect the Collateral as may be
directed by the Required Lenders. Unless and until the Required Lenders give
such direction, the Agent may (but shall not be obligated to) take or refrain
from taking such actions as it deems appropriate and in the best interest of all
the Lenders. In no event, however, shall the Agent be required to take any
action in violation of applicable law or of any provision of any Loan Document,
and the Agent shall in all cases be fully justified in failing or refusing to
act hereunder or under any other Loan Document unless it first receives any
further assurances of its indemnification from the Lenders that it may require,
including prepayment of any related expenses and any other protection it
requires against any and all costs, expense, and liability which may be incurred
by it by reason of taking or continuing to take any such action. The Agent shall
be entitled to assume that no Default or Event of Default exists unless notified
in writing to the contrary by a Lender or the Borrower. In all cases in which
the Loan Documents do not require the Agent to take specific action, the Agent
shall be fully justified in using its discretion in failing to take or in taking
any action thereunder. Any instructions of the Required Lenders, or of any other
group of Lenders called for under the specific provisions of the Loan Documents,
shall be binding upon all the Lenders and the holders of the Obligations.

      Section 10.4. Consultation with Experts. The Agent may consult with legal
counsel, independent public accountants, and other experts selected by it and
shall not be liable for any action taken or omitted to be taken by it in good
faith in accordance with the advice of such counsel, accountants or experts.

      Section 10.5. Liability of Agent; Credit Decision. Neither the Agent nor
any of its directors, officers, agents or employees shall be liable for any
action taken or not taken by it in connection with the Loan Documents: (i) with
the consent or at the request of the Required Lenders or (ii) in the absence of
its own gross negligence or willful misconduct. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for or have any


                                      -70-

duty to ascertain, inquire into or verify: (i) any statement, warranty or
representation made in connection with this Agreement, any other Loan Document
or any Loan or Letter of Credit; (ii) the performance or observance of any of
the covenants or agreements of the Borrower or any Subsidiary contained herein
or in any other Loan Document; (iii) the satisfaction of any condition specified
in Section 7 hereof, except receipt of items required to be delivered to the
Agent; or (iv) the validity, effectiveness, genuineness, enforceability,
perfection, value, worth or collectibility hereof or of any other Loan Document
or of any other documents or writing furnished in connection with any Loan
Document or of any Collateral; and the Agent makes no representation of any kind
or character with respect to any such matter mentioned in this sentence. The
Agent may execute any of its duties under any of the Loan Documents by or
through employees, agents, and attorneys-in-fact and shall not be answerable to
the Lenders, the Borrower, or any other Person for the default or misconduct of
any such agents or attorneys-in-fact selected with reasonable care. The Agent
shall not incur any liability by acting in reliance upon any notice, consent,
certificate, other document or statement (whether written or oral) believed by
it to be genuine or to be sent by the proper party or parties. In particular and
without limiting any of the foregoing, the Agent shall have no responsibility
for confirming the accuracy of any compliance certificate or other document or
instrument received by it under the Loan Documents. The Agent may treat the
payee of any Note as the holder thereof until written notice of transfer shall
have been filed with the Agent signed by such payee 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 in the manner set forth
in the Loan Documents. It shall be the responsibility of each Lender to keep
itself informed as to the creditworthiness of the Borrower and its Subsidiaries,
and the Agent shall have no liability to any Lender with respect thereto.

      Section 10.6. Indemnity. The Lenders shall ratably, in accordance with
their respective interests in the Loans and Letters of Credit, indemnify and
hold the Agent, and its directors, officers, employees, agents, and
representatives harmless from and against any liabilities, losses, costs or
expenses suffered or incurred by it under any Loan Document or in connection
with the transactions contemplated thereby, regardless of when asserted or
arising, except to the extent they are promptly reimbursed for the same by the
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. The obligations of the Lenders under this Section shall survive
termination of this Agreement. 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 of this
Agreement and the other Loan Documents.

      Section 10.7. Resignation of Agent and Successor Agent. The Agent may
resign at any time by giving written notice thereof to the Lenders and the
Borrower. Upon any such resignation of the Agent, the Required Lenders shall
have the right to appoint a successor Agent. If no successor Agent shall have
been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent,


                                      -71-

which may be any Lender hereunder or any commercial bank organized under the
laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $200,000,000. Upon the acceptance of
its appointment as the Agent hereunder, such successor Agent shall thereupon
succeed to and become vested with all the rights and duties of the retiring
Agent under the Loan Documents, and the retiring Agent shall be discharged from
its duties and obligations thereunder. After any retiring Agent's resignation
hereunder as Agent, the provisions of this Section 10 and all protective
provisions of the other Loan Documents shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent, but no successor
Agent shall in any event be liable or responsible for any actions of its
predecessor. If the Agent resigns 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 Collateral
Documents shall be assigned without representation, recourse or warranty to the
Lenders as their interests may appear.

      Section 10.8. Agent as Letter of Credit Issuer. The Agent shall act on
behalf of the Lenders with respect to any Letters of Credit issued by it and the
documents associated therewith. The Agent shall have all of the benefits and
immunities (i) provided to it in this Section 10 with respect to any acts taken
or omissions suffered by it in connection with Letters of Credit issued by it or
proposed to be issued by it and the Applications pertaining to such Letters of
Credit, and (ii) as additionally provided in this Agreement with respect to it
in its capacity as issuer of Letters of Credit.

      Section 10.9. Hedging Liability and Funds Transfer and Deposit Account
Liability Arrangements. By virtue of a Lender's execution of this Agreement or
an assignment agreement pursuant to Section 12.15 hereof, as the case may be,
any Affiliate of such Lender with whom the Borrower or any Subsidiary has
entered into an agreement creating Hedging Liability or Funds Transfer and
Deposit Account Liability shall be deemed a Lender party hereto for purposes 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 Section 3.5 hereof. In connection with any such distribution of
payments and collections, the Agent shall be entitled to assume no amounts are
due to any Lender or its Affiliate with respect to Hedging Liability or Funds
Transfer and Deposit Account Liability unless such Lender has notified the Agent
in writing of the amount of any such liability owed to it or its Affiliate prior
to such distribution.

      Section 10.10. Designation of Additional Agents. The Agent shall have the
continuing right, for purposes hereof, at any time and from time to time to
designate one or more of the Lenders (and/or its or their Affiliates) as
"syndication agents," "documentation agents," "arrangers," or other designations
for purposes hereto, but such designation shall have no substantive effect, and
such Lenders and their Affiliates shall have no additional powers, duties or
responsibilities as a result thereof.

      Section 10.11. Authorization to Release or Subordinate or Limit Liens. The
Agent is hereby irrevocably authorized by each of the Lenders to (a) release any
Lien covering any


                                      -72-

Collateral that is sold, transferred, or otherwise disposed of in accordance
with the terms and conditions of this Agreement and the relevant Collateral
Documents (including a sale, transfer, or disposition permitted by the terms of
Section 8.16 hereof or which has otherwise been consented to in accordance with
Section 12.3 hereof), (b) release or subordinate any Lien on Collateral
consisting of goods financed with purchase money indebtedness or under a Capital
Lease to the extent such purchase money indebtedness or Capitalized Lease
Obligation, and the Lien securing the same, are permitted by Sections 8.11(b)
and 8.12(d) hereof, and (c) reduce or limit the amount of the indebtedness
secured by any particular item of Collateral to an amount not less than the
estimated value thereof to the extent necessary to reduce mortgage registry,
filing and similar tax.

      Section 10.12. Authorization to Enter into, and Enforcement of, the
Collateral Documents. The Agent is hereby irrevocably authorized by each of the
Lenders to execute and deliver the Collateral Documents on behalf of each of the
Lenders and their Affiliates and to take such action and exercise such powers
under the Collateral Documents as the Agent considers appropriate, provided the
Agent shall not amend the Collateral Documents unless such amendment is agreed
to in writing by the Required Lenders. Each Lender acknowledges and agrees that
it will be bound by the terms and conditions of the Collateral Documents upon
the execution and delivery thereof by the Agent. Except as otherwise
specifically provided for herein, no Lender (or its Affiliates) other than the
Agent 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 or for
the execution of any trust or power in respect of the Collateral or for the
appointment of a receiver or for the enforcement of any other remedy under the
Collateral Documents; it being understood and intended that no one or more of
the Lenders (or their Affiliates) shall have any right in any manner whatsoever
to affect, disturb or prejudice the Lien of the Agent (or any security trustee
therefor) under the Collateral Documents by its or their action or to enforce
any right thereunder, and that all proceedings at law or in equity shall be
instituted, had, and maintained by the Agent (or its security trustee) in the
manner provided for in the relevant Collateral Documents for the benefit of the
Lenders and their Affiliates.

SECTION 11. THE GUARANTIES.

      Section 11.1. The 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
guarantees jointly and severally to the Agent, the Lenders, their Affiliates and
each other holder of any of the Obligations, Hedging Liability and Funds
Transfer and Deposit Account 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 and Funds Transfer and Deposit Account Liability as and when the same
shall become due and payable, whether at its stated maturity, by acceleration or


                                      -73-

otherwise, according to the terms thereof (the Obligations, Hedging Liability
and Funds Transfer and Deposit Account 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 and jointly and severally agrees 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 under this Section 11 and with respect to the Loan Documents, the
instruments or documents governing any Hedging Liability and the instruments or
documents governing any Funds Transfer and Deposit Account Liability (the Loan
Documents and such other instruments and documents governing the Hedging
Liability and the Funds Transfer and Deposit Account Liability being hereinafter
referred to collectively as the "Guaranteed Debt Documents" and individually as
a "Guaranteed Debt Document,") 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 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


                                      -74-

            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.

      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


                                      -75-

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 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 Sublimit 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.


                                      -76-

      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 reasonable
fees and expenses of Messrs. Chapman and Cutler, counsel for the Agent, with
respect to all of the foregoing (whether or not the transactions contemplated
hereby are consummated), and all costs and expenses (including reasonable
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, any Collateral Document 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 given
by United


                                      -77-

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 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 other
Loan Documents, constitutes 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


                                      -78-

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 the 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. The Borrower authorizes each Lender to
disclose to any Participant or prospective Participant any financial or other
information pertaining to the Borrower or any Subsidiary, provided that such
Participant or prospective Participant has entered into an agreement to keep
such information confidential on substantially the terms set forth in Section
12.16 hereof.

      Section 12.15. Assignment Agreements. (a) Each Lender shall have the right
at any time, with the prior consent of the Agent and, so long as no Event of
Default then exists, the Borrower (which consent of the Borrower shall not be
unreasonably withheld) to sell, assign, transfer or negotiate all or any part of
its rights and obligations under the Loan Documents (including, without
limitation, the indebtedness evidenced by the Notes then held by such assigning
Lender, together with an equivalent percentage of its obligation to make Loans
and participate in Letters of Credit) to one or more commercial banks or other
financial institutions or investors, provided that, unless otherwise agreed to
by the Agent, such assignment shall be of a fixed percentage (and not by its
terms of varying percentage) of the assigning Lender's rights and obligations
under the Loan Documents; provided, however, that in order to make any such
assignment (i) unless the assigning Lender is assigning all of its Commitments,
outstanding Loans and interests in L/C Obligations, the assigning Lender shall
retain at least $5,000,000 in unused Commitments, outstanding Loans and
interests in Letters of Credit, (ii) the assignee Lender shall have Commitments,
outstanding Loans and interests in Letters of Credit of at least $5,000,000,
(iii) each such assignment shall be evidenced by a written agreement
(substantially in the form attached hereto as Exhibit G or in such other form
acceptable to the Agent) executed by such assigning Lender, such assignee Lender
or Lenders, the Agent and, if required as provided above, the Borrower, which
agreement shall specify in each instance the portion of the Obligations which
are to be assigned to the assignee Lender and the portion of the Commitments of
the assigning Lender to be assumed by the assignee Lender, and (iv) the
assigning Lender shall pay to the Agent a processing fee of $3,500 and any
out-of-pocket attorneys' fees and expenses incurred by the Agent in connection
with any such assignment agreement. Any such assignee shall become a Lender for
all purposes hereunder to the extent of the rights and obligations under the
Loan Documents it assumes and the assigning Lender shall be released from its
obligations, and will have released its rights, under the Loan Documents to the
extent of such assignment. The address for notices to such assignee Lender shall
be as specified in the assignment agreement executed by it. Promptly upon the
effectiveness of any such assignment agreement, the Borrower shall execute and
deliver replacement Notes to the assignee Lender and the assigning Lender in the
respective amounts of their Commitments (or assigned principal amounts, as
applicable) after giving effect to the reduction occasioned by such assignment
(all such Notes to constitute


                                      -79-

"Notes" for all purposes of the Loan Documents). The Borrower authorizes each
Lender to disclose to any purchaser or prospective purchaser of an interest in
the Loans and interest in Letters of Credit owed to it or its Commitments under
this Section any financial or other information pertaining to the Borrower or
any Subsidiary, provided that such purchaser or prospective purchaser has
entered into an agreement to keep such information confidential on substantially
the terms set forth in Section 12.16 hereof.

      (b) Any Lender may at any time pledge or grant a security interest in all
or any portion of its rights under this Agreement to secure obligations of such
Lender, including any such pledge or grant to a Federal Reserve Bank, and this
Section shall not apply to any such pledge or grant of a security interest;
provided that no such pledge or grant of a security interest shall release a
Lender from any of its obligations hereunder or substitute any such pledgee or
secured party for such Lender as a party hereto; provided further, however, the
right of any such pledgee or grantee (other than any Federal Reserve Bank) to
further transfer all or any portion of the rights pledged or granted to it,
whether by means of foreclosure or otherwise, shall be at all times subject to
the terms 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 Affiliates and to its and its Affiliates' 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 pursuant to the provisions of Section 12.14 or 12.15 hereof,
as applicable.

      Section 12.17. Withholding Taxes. (a) Payments Free of Withholding. Except
as otherwise required by law and subject to Section 12.17(b) hereof, each
payment by the Borrower and the Guarantors under this Agreement or the other
Loan Documents shall be made without withholding for or on account of any
present or future taxes (other than overall net income taxes on the recipient)
imposed by or within the jurisdiction in which the Borrower or such Guarantor is
domiciled, any jurisdiction from which the Borrower or such Guarantor makes any
payment, or (in each case) any political subdivision or taxing authority thereof
or therein. If any such withholding is so required, the Borrower or such
Guarantor shall make the withholding, pay the amount withheld to the appropriate
governmental authority before penalties attach thereto or interest accrues
thereon, and forthwith pay such additional amount as may be necessary to ensure
that the net amount actually received by each Lender and the Agent free and
clear of such taxes (including such taxes on such additional amount) is equal to
the amount which that Lender or the


                                      -80-

Agent (as the case may be) would have received had such withholding not been
made. If the Agent or any Lender pays any amount in respect of any such taxes,
penalties or interest, the Borrower or such Guarantor shall reimburse the Agent
or such Lender for that payment on demand in the currency in which such payment
was made. If the Borrower or such Guarantor pays any such taxes, penalties or
interest, it shall deliver official tax receipts evidencing that payment or
certified copies thereof to the Lender or Agent on whose account such
withholding was made (with a copy to the Agent if not the recipient of the
original) on or before the thirtieth day after payment.

      (b) U.S. Withholding Tax Exemptions. Each Lender that is not a United
States person (as such term is defined in Section 7701(a)(30) of the Code) shall
submit to the Borrower and the Agent on or before the date the initial Credit
Event is made hereunder or, if later, the date such financial institution
becomes a Lender hereunder, two duly completed and signed copies of (i) either
Form W-8 BEN (relating to such Lender and entitling it to a complete exemption
from withholding under the Code on all amounts to be received by such Lender,
including fees, pursuant to the Loan Documents and the Obligations) or Form W-8
ECI (relating to all amounts to be received by such Lender, including fees,
pursuant to the Loan Documents and the Obligations) of the United States
Internal Revenue Service or (ii) solely if such Lender is claiming exemption
from United States withholding tax under Section 871(h) or 881(c) of the Code
with respect to payments of "portfolio interest", a Form W-8 BEN, or any
successor form prescribed by the Internal Revenue Service, and a certificate
representing that such Lender is not a bank for purposes of Section 881(c) of
the Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of the Borrower and is not a controlled foreign
corporation related to the Borrower (within the meaning of Section 864(d)(4) of
the Code). Thereafter and from time to time, each Lender shall submit to the
Borrower and the Agent such additional duly completed and signed copies of one
or the other of such Forms (or such successor forms as shall be adopted from
time to time by the relevant United States taxing authorities) and such other
certificates as may be (i) requested by the Borrower in a written notice,
directly or through the Agent, to such Lender and (ii) required under
then-current United States law or regulations to avoid or reduce United States
withholding taxes on payments in respect of all amounts to be received by such
Lender, including fees, pursuant to the Loan Documents or the Obligations. Upon
the request of the Borrower or the Agent, each Lender that is a United States
person (as such term is defined in Section 7701(a)(30) of the Code) shall submit
to the Borrower and the Agent a certificate to the effect that it is such a
United States person.

      (c) Inability of Lender to Submit Forms. If any Lender determines, as a
result of any change in applicable law, regulation or treaty, or in any official
application or interpretation thereof, that it is unable to submit to the
Borrower or the Agent any form or certificate that such Lender is obligated to
submit pursuant to subsection (b) of this Section 12.17 or that such Lender is
required to withdraw or cancel any such form or certificate previously submitted
or any such form or certificate otherwise becomes ineffective or inaccurate,
such Lender shall promptly notify the Borrower and Agent of such fact and the
Lender shall to that extent not be obligated to provide any such form or
certificate and will be entitled to withdraw or cancel any affected form or
certificate, as applicable.


                                      -81-

      Section 12.18. Sharing of Set-Off. Each Lender agrees with each other
Lender a party hereto that if such Lender shall receive and retain any payment,
whether by set-off or application of deposit balances or otherwise, on any of
the Loans or Reimbursement Obligations in excess of its ratable share of
payments on all such Obligations then outstanding to the Lenders, then such
Lender shall purchase for cash at face value, but without recourse, ratably from
each of the other Lenders such amount of the Loans or Reimbursement Obligations,
or participations therein, held by each such other Lenders (or interest therein)
as shall be necessary to cause such Lender to share such excess payment ratably
with all the other Lenders; provided, however, that if any such purchase is made
by any Lender, and if such excess payment or part thereof is thereafter
recovered from such purchasing Lender, the related purchases from the other
Lenders shall be rescinded ratably and the purchase price restored as to the
portion of such excess payment so recovered, but without interest. For purposes
of this Section, amounts owed to or recovered by the Agent in connection with
Reimbursement Obligations in which Lenders have been required to fund their
participation shall be treated as amounts owed to or recovered by the Agent as a
Lender hereunder.

      Section 12.19. Headings. Section headings used in this Agreement are for
reference only and shall not affect the construction of this Agreement.

      Section 12.20. Set-off. In addition to any rights now or hereafter granted
under applicable law and not by way of limitation of any such rights, upon the
occurrence and during the continuation of any Event of Default, each Lender and
each subsequent holder of any Obligation is hereby authorized by the Borrower
and each Guarantor at any time or from time to time, without notice to the
Borrower or such Guarantor or to any other Person, any such notice being hereby
expressly waived, to set-off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, indebtedness
evidenced by certificates of deposit, whether matured or unmatured, but not
including trust accounts, and in whatever currency denominated) and any other
indebtedness at any time held or owing by that Lender or that subsequent holder
to or for the credit or the account of the Borrower or such Guarantor, whether
or not matured, against and on account of the Obligations of the Borrower or
such Guarantor to that Lender or that subsequent holder under the Loan
Documents, including, but not limited to, all claims of any nature or
description arising out of or connected with the Loan Documents, irrespective of
whether or not (a) that Lender or that subsequent holder shall have made any
demand hereunder or (b) the principal of or the interest on the Loans or Notes
and other amounts due hereunder shall have become due and payable pursuant to
Section 9 hereof and although said obligations and liabilities, or any of them,
may be contingent or unmatured.

      Section 12.21. Construction. The provisions of this Agreement relating to
Subsidiaries shall only apply during such times as the Borrower has one or more
Subsidiaries. NOTHING CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED TO PERMIT
ANY ACT OR OMISSION WHICH IS PROHIBITED BY THE TERMS OF ANY COLLATERAL DOCUMENT,
THE COVENANTS AND AGREEMENTS CONTAINED HEREIN BEING IN ADDITION TO AND NOT IN
SUBSTITUTION FOR THE COVENANTS AND AGREEMENTS CONTAINED IN THE COLLATERAL
DOCUMENTS.

      Section 12.22. Lender's Obligations Several. The obligations of the
Lenders hereunder are several and not joint. Nothing contained in this Agreement
and no action taken by the Lenders


                                      -82-

pursuant hereto shall be deemed to constitute the Lenders a partnership,
association, joint venture or other entity.

      Section 12.23. Release of Claims. TO INDUCE THE LENDERS AND THE AGENT TO
ENTER INTO THIS AGREEMENT, THE BORROWER AND THE GUARANTORS HEREBY RELEASE,
ACQUIT, AND FOREVER DISCHARGE THE LENDERS UNDER THE PREVIOUS CREDIT AGREEMENT,
THE AGENT AND THEIR AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, AGENTS,
ATTORNEYS, ADVISORS, CONSULTANTS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL
LIABILITIES, CLAIMS, DEMANDS, ACTIONS, AND CAUSES OF ACTION OF ANY KIND (IF
THERE ARE ANY), WHETHER ABSOLUTE OR CONTINGENT, DUE OR TO BECOME DUE, DISPUTED
OR UNDISPUTED, AT LAW OR IN EQUITY, THAT THEY NOW HAVE OR EVER HAD AGAINST THE
LENDERS UNDER THE PREVIOUS CREDIT AGREEMENT, THE AGENT AND THE OTHER PARTIES
IDENTIFIED ABOVE, OR ANY ONE OR MORE OF THEM INDIVIDUALLY, UNDER OR IN
CONNECTION WITH THE PREVIOUS CREDIT AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS
AS DEFINED THEREIN.

      Section 12.24. Submission to Jurisdiction; Waiver of Jury Trial. The
Borrower and the Guarantors hereby submit to the nonexclusive jurisdiction of
the United States District Court for the Northern District of Illinois and of
any Illinois State court sitting in the City of Chicago for purposes of all
legal proceedings arising out of or relating to this Agreement, the other Loan
Documents or the transactions contemplated hereby or thereby. The Borrower and
the Guarantors irrevocably waive, to the fullest extent permitted by law, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. THE BORROWER,
THE GUARANTORS, THE AGENT, AND THE LENDERS HEREBY IRREVOCABLY WAIVE ANY AND ALL
RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO ANY
LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.

      Section 12.25. Reaffirmation of Collateral Documents. Each Company hereby
reaffirms its obligations under any and all Collateral Documents executed prior
to the date hereof, as amended from time to time, in support of the Obligations
under and as defined in the Previous Credit Agreement and in the Credit
Agreement dated as of May 29, 1998 among the Borrower and certain of the Lenders
party hereto, and agrees and acknowledges that the Liens created and provided
for by such Collateral Documents continue to be effective in favor of the Agent
and the Lenders and continue to secure, among other things, the Obligations, the
Hedging Liability and the Funds Transfer and Deposit Account Liability as
defined in this Second Amended and Restated Credit Agreement.

      Section 12.26. Amended and Restated Interests. Each Company and each
Lender agrees that, upon the effectiveness of this Agreement and each Lender's
funding of any amounts by which its Loans outstanding on the Effective Date
hereunder exceed its Previous Loans outstanding under the Previous Credit
Agreement immediately prior to the effectiveness of this Agreement, each Lender
shall have, as applicable, the Revolving Credit Commitment, outstanding
Revolving Credit Loans, participation interests in Swing Line Loans and L/C


                                      -83-

Obligations, Term Loan Commitment and outstanding portion of the Term Loan as
provided herein, together with all of the rights and obligations pertaining
thereto.

                           [SIGNATURE PAGES TO FOLLOW]


                                      -84-

      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 the date first above written.

                                         MORTON INDUSTRIAL GROUP, INC.

                                         By  /s/ WILLIAM D. MORTON
                                            ------------------------------------
                                            Its:  Chairman
                                                 -------------------------------

                                         MORTON METALCRAFT CO.

                                         By  /s/ WILLIAM D. MORTON
                                            ------------------------------------
                                            Its:  President
                                                 -------------------------------


                                         MORTON METALCRAFT CO. OF NORTH CAROLINA

                                         By  /s/ WILLIAM D. MORTON
                                            ------------------------------------
                                            Its:  President
                                                 -------------------------------

                                         MORTON METALCRAFT CO. OF SOUTH CAROLINA

                                         By  /s/ WILLIAM D. MORTON
                                            ------------------------------------
                                            Its:  President
                                                 -------------------------------


                                         MID CENTRAL PLASTICS, INC.

                                         By  /s/ WILLIAM D. MORTON
                                            ------------------------------------
                                            Its:  President
                                                 -------------------------------

                                         B&W METAL FABRICATORS, INC.

                                         By  /s/ WILLIAM D. MORTON
                                            ------------------------------------
                                            Its:  President
                                                 -------------------------------


                                      -2-

      Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.

Amount and Percentage of Commitments:

                                     
Revolving Credit Commitment:            HARRIS TRUST AND SAVINGS BANK
$6,750,000 (37.50%)

Term Loan Commitment:                   By  /s/ JAY S. DAMERON
$8,250,000 (37.50%)                        -------------------------------------
                                              Jay S. Dameron
                                              Vice President

                                        111 West Monroe Street, 20th Floor East
                                        Chicago, Illinois 60603

                                        Attention: Jay S. Dameron
                                        Telephone: (312) 461-3889
                                        Telecopy: (312) 293-8445

                                        LIBOR Funding Office:
                                        Nassau Branch
                                        c/o 111 West Monroe Street
                                        Chicago, Illinois  60690




                                      -3-

Amount and Percentage of Commitments:

                                   
Revolving Credit Commitment:          NATIONAL CITY BANK
$9,000,000 (50%)

Term Loan Commitment:                 By  /s/ RICHARD M. SEMS
$11,000,000 (50%)                        ---------------------------------------
                                        Print Name  Richard M. Sems
                                                   -----------------------------
                                        Title  Senior Vice President
                                              ----------------------------------

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

                                      ------------------------------------------
                                      Attention:
                                                 ----------------
                                      Telephone: (   )
                                                  ---  -----------
                                      Telecopy: (   )
                                                 ---  -----------

                                      LIBOR Funding Office

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

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




                                      -4-

Amount and Percentage of Commitments:

                                 
Revolving Credit Commitment:        BANK OF MONTREAL
$2,250,000 (12.50%)

Term Loan Commitment:               By  /s/ DANIEL J. GRESLA
$2,750,000 (12.50%)                    -----------------------------------------
                                    Print Name  Daniel J. Gresla
                                               ---------------------------------
                                    Title  Managing Director
                                          --------------------------------------

                                    111 West Monroe Street
                                    Chicago, Illinois 60603

                                    Attention:
                                                --------------
                                    Telephone: (312)    -
                                                     --- -----
                                    Telecopy: (312)    -
                                                    --- -----


                                    LIBOR Funding Office:
                                    Nassau Branch
                                    c/o 111 West Monroe Street
                                    Chicago, Illinois  60690

EX-10.51

                                                                   EXHIBIT 10.51


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

                       NOTE AND WARRANT PURCHASE AGREEMENT

                                  BY AND AMONG

                         MORTON INDUSTRIAL GROUP, INC.,

                 THE GUARANTORS FROM TIME TO TIME PARTY HERETO,

                                 THE PURCHASERS

                                       AND

                     BMO NESBITT BURNS CAPITAL (U.S.), INC.,

                                    AS AGENT

                           DATED AS OF MARCH 26, 2004

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



                                                                                                                
SECTION 1             PURCHASE AND SALE OF THE NOTES AND WARRANTS...............................................    1
         Section 1.1           Notes and Warrants...............................................................    1
         Section 1.2           The Closing......................................................................    1
         Section 1.3           Pro Rata Payment.................................................................    1

SECTION 2             INTEREST .................................................................................    2
         Section 2.1           Interest Rate....................................................................    2
         Section 2.2           Computation of Interest..........................................................    2
         Section 2.3           Default Rate.....................................................................    2

SECTION 3             FEES, PREPAYMENTS, TERMINATIONS, APPLICATIONS AND NOTATIONS...............................    2
         Section 3.1           Fees.............................................................................    2
         Section 3.2           Voluntary Prepayments of Notes...................................................    3
         Section 3.3           Place of Payments................................................................    4
         Section 3.4           Application of Payments..........................................................    4

SECTION 4             COLLATERAL................................................................................    5
         Section 4.1           Collateral.......................................................................    5
         Section 4.2           Guaranties.......................................................................    5
         Section 4.3           Further Assurances...............................................................    5
         Section 4.4           Collections......................................................................    5

SECTION 5             DEFINITIONS; INTERPRETATION...............................................................    6
         Section 5.1           Definitions......................................................................    6
         Section 5.2           Interpretation...................................................................   17
         Section 5.3           Change in Accounting Principles..................................................   17

SECTION 6             REPRESENTATIONS AND WARRANTIES............................................................   17
         Section 6.1           Organization and Qualification...................................................   18
         Section 6.2           Subsidiaries.....................................................................   18
         Section 6.3           Authority and Validity of Obligations............................................   18
         Section 6.4           Use of Proceeds; Margin Stock....................................................   19
         Section 6.5           Financial Reports................................................................   19
         Section 6.6           Full Disclosure..................................................................   19
         Section 6.7           Good Title.......................................................................   20
         Section 6.8           Litigation and Other Controversies...............................................   20
         Section 6.9           Taxes............................................................................   20





                                TABLE OF CONTENTS
                                   (continued)
                                                                                                                
         Section 6.10          Approvals........................................................................   20
         Section 6.11          Affiliate Transactions...........................................................   20
         Section 6.12          Investment Company; Public Utility Holding Company...............................   21
         Section 6.13          ERISA............................................................................   21
         Section 6.14          Compliance with Laws (Nonenvironmental)..........................................   21
         Section 6.15          Environmental and Safety Matters.................................................   21
         Section 6.16          Other Agreements.................................................................   22
         Section 6.17          No Default.......................................................................   23
         Section 6.18          Trademarks, Franchises, and Licenses.............................................   23
         Section 6.19          Governmental Authority and Licensing.............................................   23
         Section 6.20          Solvency.........................................................................   23
         Section 6.21          Capital Structure................................................................   23
         Section 6.22          SEC Disclosure...................................................................   24

SECTION 7             CONDITIONS PRECEDENT......................................................................   25
         Section 7.1           Conditions.......................................................................   25
         Section 7.2           Documents........................................................................   26

SECTION 8             COVENANTS.................................................................................   29
         Section 8.1           Maintenance of Business..........................................................   29
         Section 8.2           Maintenance of Property..........................................................   29
         Section 8.3           Taxes and Assessments............................................................   29
         Section 8.4           Insurance........................................................................   29
         Section 8.5           Financial Reports................................................................   30
         Section 8.6           Total Funded Debt/EBITDA Ratio...................................................   31
         Section 8.7           Total Senior Funded Debt/EBITDA Ratio............................................   32
         Section 8.8           Minimum EBITDA...................................................................   32
         Section 8.9           Fixed Charge Coverage Ratio......................................................   33
         Section 8.10          Capital Expenditures.............................................................   33
         Section 8.11          Board Matters....................................................................   33
         Section 8.12          Investor Protection..............................................................   34
         Section 8.13          Equity Restriction...............................................................   34
         Section 8.14          Indebtedness.....................................................................   34
         Section 8.15          Liens............................................................................   35



                                      iii



                                TABLE OF CONTENTS
                                   (continued)
                                                                                                                
         Section 8.16          Investments, Loans, Advances and Guaranties......................................   36
         Section 8.17          Leases...........................................................................   37
         Section 8.18          Dividends and Certain Other Restricted Payments..................................   38
         Section 8.19          Mergers, Consolidations and Sales................................................   38
         Section 8.20          Acquisitions.....................................................................   39
         Section 8.21          Maintenance of Subsidiaries......................................................   39
         Section 8.22          Formation of Subsidiaries........................................................   40
         Section 8.23          ERISA............................................................................   40
         Section 8.24          Compliance with Laws.............................................................   40
         Section 8.25          Burdensome Contracts with Affiliates.............................................   40
         Section 8.26          Changes in Fiscal Year...........................................................   40
         Section 8.27          Change in the Nature of Business.................................................   40
         Section 8.28          Use of Loan Proceeds.............................................................   41
         Section 8.29          No Restrictions..................................................................   41
         Section 8.30          Senior Debt......................................................................   41
         Section 8.31          Junior Subordinated Debt.........................................................   41
         Section 8.32          [Reserved].......................................................................   41
         Section 8.33          Worthington Settlement Documents.................................................   41
         Section 8.34          Mid-Central Debt.................................................................   42
         Section 8.35          D & O Insurance..................................................................   42
         Section 8.36          Capital Stock....................................................................   42
         Section 8.37          Management Compensation..........................................................   42
         Section 8.38          Additional Life Insurance........................................................   42

SECTION 9             REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS..........................................   43
         Section 9.1           Organization and Good Standing...................................................   43
         Section 9.2           Authorization; Power.............................................................   43
         Section 9.3           Validity.........................................................................   43
         Section 9.4           Accredited Investor..............................................................   43
         Section 9.5           Purchase for Own Account; Acknowledgment of Risk.................................   43

SECTION 10            EVENTS OF DEFAULT AND REMEDIES............................................................   44
         Section 10.1          Events of Default................................................................   44
         Section 10.2          Consequences of Events of Default................................................   46



                                    iv



                                TABLE OF CONTENTS
                                   (continued)

                                                                                                                
SECTION 11            THE AGENT.................................................................................   47
         Section 11.1          Appointment and Authorization of Agent...........................................   47
         Section 11.2          Agent and its Affiliates.........................................................   47
         Section 11.3          Action by Agent..................................................................   47
         Section 11.4          Consultation with Experts........................................................   48
         Section 11.5          Liability of Agent; Credit Decision..............................................   48
         Section 11.6          Indemnity........................................................................   48
         Section 11.7          Resignation of Agent and Successor Agent.........................................   49
         Section 11.8          Designation of Additional Agents.................................................   49
         Section 11.9          Authorization to Release or Subordinate or Limit Liens...........................   49
         Section 11.10         Authorization to Enter into, and Enforcement of, the Collateral Documents........   50
         Section 11.11         Subordination and Intercreditor Agreement........................................   50

SECTION 12            The Guaranties............................................................................   50
         Section 12.1          The Guaranties...................................................................   50
         Section 12.2          Guaranty Unconditional...........................................................   51
         Section 12.3          Discharge Only upon Payment in Full; Reinstatement in Certain Circumstances......   51
         Section 12.4          Waivers..........................................................................   52
         Section 12.5          Limit on Recovery................................................................   52
         Section 12.6          Stay of Acceleration.............................................................   52
         Section 12.7          Benefit to Guarantors............................................................   52
         Section 12.8          Guarantor Covenants..............................................................   53

SECTION 13            MISCELLANEOUS.............................................................................   53
         Section 13.1          Holidays.........................................................................   53
         Section 13.2          No Waiver, Cumulative Remedies...................................................   53
         Section 13.3          Waivers, Modifications and Amendments............................................   53
         Section 13.4          Costs and Expenses...............................................................   53
         Section 13.5          Documentary Taxes................................................................   54
         Section 13.6          Survival of Representations......................................................   54
         Section 13.7          Survival of Indemnities..........................................................   54
         Section 13.8          Notices..........................................................................   54
         Section 13.9          Headings.........................................................................   55



                                       v



                                TABLE OF CONTENTS
                                   (continued)

                                                                                                                
         Section 13.10         Severability of Provisions.......................................................   55
         Section 13.11         Counterparts.....................................................................   55
         Section 13.12         Binding Nature, Governing Law, Etc...............................................   55
         Section 13.13         Entire Understanding.............................................................   55
         Section 13.14         Confidentiality..................................................................   55
         Section 13.15         Sharing of Set-Off...............................................................   56
         Section 13.16         Headings.........................................................................   56
         Section 13.17         Set-off..........................................................................   56
         Section 13.18         Construction.....................................................................   56
         Section 13.19         Submission to Jurisdiction; Waiver of Jury Trial.................................   57



                                       vi



PURCHASER SCHEDULE

Exhibit A               --      Form of Note
Exhibit B               --      Form of Warrant
Exhibit C               --      Compliance Certificate
                                Attachment to Compliance Certificate
Exhibit D               --      Guaranty
Schedule 6.2            --      Subsidiaries
Schedule 6.7            --      Property
Schedule 6.15           --      Environmental and Safety Matters
Schedule 6.21           --      Capital Structure
Schedule 7.2(l)         --      EBITDA Reconciliation
Schedule 8.15           --      Other Liens



                          MORTON INDUSTRIAL GROUP, INC.
                                NOTE AND WARRANT
                               PURCHASE AGREEMENT

         This Note and Warrant Purchase Agreement is entered into as of March
26, 2004, (the "AGREEMENT"), by and among Morton Industrial Group, Inc., a
Georgia corporation (the "COMPANY"), each of the Subsidiaries from time to time
becoming a party hereto, as Guarantors, each of the purchasers set forth in the
Purchaser Schedule hereto (together with any other transferee or other Person
that becomes a holder of any Note, collectively, the "PURCHASERS" and
individually, a "PURCHASER"), and BMO Nesbitt Burns Capital (U.S.), Inc., in its
capacity as agent hereunder (hereinafter referred to as the "AGENT").

         The parties hereto agree as follows:

                                   SECTION 1

                   PURCHASE AND SALE OF THE NOTES AND WARRANTS

         Section 1.1       Notes and Warrants.

                  (a)      Sale and Issuance of Securities. Subject to the terms
and conditions hereof, at the Closing the Company shall sell to the Purchasers
and the Purchasers shall purchase from the Company (i) the Notes in the
aggregate principal amount of $10,000,000, in the amounts set forth opposite
each Purchaser's name as set forth in the Purchaser Schedule, and (ii) the
Warrants to purchase in the aggregate, nine percent (9%) of the Company's common
stock on a fully-diluted basis, in the amounts set forth opposite each
Purchaser's name as set forth in the Purchaser Schedule.

                  (b)      Guaranties. The obligations of the Company under the
Notes, the Collateral Documents and, with respect to the payment to each
Purchaser of the Put Price (as defined in the Warrants), shall be guaranteed by
each Subsidiary of the Company pursuant to a guaranty in form and substance
acceptable to the Agent (the "GUARANTY").

         Section 1.2       The Closing. The closing of the separate purchases
and sales of the Securities (the "CLOSING") shall take place at the offices of
Vedder, Price, Kaufman & Kammholz, P.C., at 10:00 a.m. on March 26, 2004 (the
"CLOSING DATE"), or at such other place or on such other date as may be mutually
agreeable to the Company, the Agent and the Purchasers. At the Closing, the
Company shall deliver to the Purchasers instruments evidencing the Notes and the
Warrants to be purchased by such Purchaser, payable to the order of such
Purchaser or its nominee or registered in such Purchaser's or its nominee's
name, respectively, upon payment by such Purchaser of the amount set forth
opposite such Purchaser's name in the Purchaser Schedule, by wire transfer of
immediately available funds to an account specified in writing by the Company to
the Agent at least two (2) Business Days prior to the Closing.

         Section 1.3       Pro Rata Payment. All payments to the Purchasers or
any other holders of the Notes (whether for principal, interest or otherwise)
shall be made pro rata among such holders based upon the aggregate unpaid
principal amount of the Notes held by each such holder. If any holder of any of
the Notes obtains any payment (whether voluntary or involuntary) of



principal, interest or other amount with respect to any of the Notes in excess
of such holder's pro rata share of such payments obtained by all holders of the
Notes, such holder hereby agrees to purchase from the other holders of the Notes
a participation in the Notes held by them as is necessary to cause such holders
to share the excess payment ratably among each of them as provided in this
Section 1.3.

                                   SECTION 2

                                    INTEREST

         Section 2.1       Interest Rate. The Notes shall bear interest on the
unpaid balance thereof at the aggregate rate of 16% per annum, and shall be
payable at the times specified in the Notes, which interest shall be segregated
into Current Interest and Deferred Interest, all as more fully specified in the
Notes.

         Section 2.2       Computation of Interest. All interest shall be
computed on the basis of a year of 360 days for the actual number of days
elapsed.

         Section 2.3       Default Rate. Notwithstanding anything to the
contrary contained herein, while any Event of Default exists or after
acceleration, the Company shall pay interest (after as well as before entry of
judgment thereon to the extent permitted by law) on the principal amount of all
Notes at a rate per annum equal to the rate specified in Section 10.2 of this
Agreement. Any interest above the aggregate rate of 16% per annum required to be
paid under this Section 2.3 shall be deemed to be Current Interest.

                                   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 Maturity Date, the Company shall pay to the
Agent for the ratable benefit of the Purchasers as hereinafter set forth, a
commitment fee of $200,000, $25,000 of which has been paid prior to the Closing
Date.

                  (b)      Audit and Appraisal Fees. The Company shall pay to
the Agent for its own use and benefit reasonable 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 reasonably 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). The Agent, on behalf of the Purchasers, shall
be entitled to conduct two (2) such audits (each a "SCHEDULED FIELD AUDIT")
during each calendar year (unless any Default or Event of Default has occurred,
in which case there shall be no limit on the number of such audits). In the
absence of any Default or Event of Default, the Company shall not be required to
reimburse the Agent for more than two (2) Scheduled Field Audits per calendar
year.

                                       2



         Section 3.2       Voluntary Prepayments of Notes.

                  (a)      Optional Prepayments of the Notes. At any time and
from time to time, the Company may, at its option, upon notice as provided in
Section 3.2(b), prepay all or any portion of the principal balance of the Notes,
on any quarterly payment date, in minimum increments of $500,000, plus a
prepayment premium equal to the product obtained by multiplying (i) the amount
being prepaid by (ii) the percentage set forth below opposite the time period in
which such prepayment shall occur (the "PREPAYMENT PREMIUM"):



                TIME PERIOD                       PERCENTAGE
                -----------                       ----------
                                          
Closing Date to March 31, 2005                        3%
April 1, 2005 to March 31, 2006                       2%
April 1, 2006 to March 31, 2007                       1%
April 1, 2007 to maturity                    No Prepayment Premium


In addition, the Company may, at its option, upon notice as provided in Section
3.2(b), prepay all or any portion of the Deferred Interest on any quarterly
payment date without having to pay a prepayment premium. Except as provided in
Section 3.2(a) and 3.2(c) hereof, the Notes may not be voluntarily prepaid by
the Company.

                  (b)      Notice of Optional Prepayments; Officer's
Certificate. The Company will give each holder of the Notes written notice of
such optional prepayment under Section 3.2(a) not less than two (2) Business
Days prior to the date fixed for such prepayment. Each such notice shall be
accompanied by an officer's certificate (i) stating the principal amount and
holder of each Note to be prepaid and the principal amount thereof to be
prepaid, (ii) stating the proposed date of prepayment and any conditions
relating thereto and (iii) stating the Prepayment Premium required under Section
3.2(a) (calculated as of the date of such prepayment).

                  (c)      Contingent Prepayments of Notes on Change of Control;
Officer's Certificates.

                           (i)      In the event of a Change of Control, the
         Company will, at least thirty (30) days and not more than sixty (60)
         days prior to such Change of Control, give written notice thereof to
         each holder of the Securities, which shall contain a written
         irrevocable notice that the Company will prepay (a "PREPAYMENT
         NOTICE"), by a date (the "PREPAYMENT DATE") specified in such notice
         (which date shall be on or prior to the effective date of the Change of
         Control), all of the Obligations under the Notes held by such holder in
         full (and not in part) in cash. Such notice may state that the
         Company's prepayment is conditioned upon the consummation of such
         Change of Control. The Company shall pay to such holder the outstanding
         principal amount of all Notes then held by such holder, together with
         all accrued and unpaid interest thereon. In the event of a prepayment
         of the Notes in connection with a Change of Control, no Prepayment
         Premium shall be due in connection therewith and neither the Company
         nor any Guarantor shall be liable therefor.

                                       3



                           (ii)     Any notice by the Company to prepay the
         Notes, and any subsequent prepayment thereof pursuant to this Section
         3.2(c), shall be accompanied by an officer's certificate (A) stating
         the principal amount of each Note to be prepaid, (B) stating the
         Prepayment Date, (C) stating the accrued interest on each such Note to
         the Prepayment Date to be prepaid, (D) stating the Prepayment Premium
         payable in connection with such proposed prepayment (calculated as of
         the date of such notice or prepayment, as the case may be), (E)
         certifying that the conditions of this Section 3.2(c) have been
         fulfilled, and (F) specifying the nature of the Change of Control, the
         transactions or proposed transactions resulting in such Change of
         Control and the date or proposed date of the occurrence of such Change
         of Control.

         Section 3.3       Place of Payments. All payments of principal,
interest, fees and all other amounts payable hereunder shall be made to such
Purchaser's account as specified in the Purchaser Schedule 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, by wire transfer of 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 such Purchaser). Payments received by such Purchaser after 1:00 p.m.
(Chicago time) or any date 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 Purchasers and shall be
promptly distributed by the Agent ratably to the Purchasers. No amount paid or
prepaid on the Notes may be reborrowed.

         Section 3.4       Application of Payments Anything contained herein to
the contrary notwithstanding, all payments and collections received in respect
of the Notes and other Obligations by the Agent or any of the Purchasers, after
acceleration or the final maturity of the Obligations as a result 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 Operative Documents and in any event
including all costs and expenses of a character which the Company has agreed to
pay under Section 13.4 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 Purchasers, in which event such amounts shall be remitted to the
Purchasers to reimburse them for payments theretofore made to the Agent);

                  (b)      second, to the payment of any outstanding interest or
other fees or indemnification amounts due under the Operative Documents other
than for principal of the Notes, ratably as among the Agent and the Purchasers
in accord with the amount of such interest and other fees or Obligations owing
each;

                  (c)      third, to the payment of all other unpaid Obligations
and all other indebtedness, obligations, and liabilities of the Company and its
Subsidiaries secured by the Operative Documents (including, without limitation,
the Put Price and any Deferred Put

                                       4


Obligation) to be allocated pro rata in accordance with the aggregate unpaid
amounts owing to each holder thereof; and

                  (d)      fourth, to the Company or to whoever the Agent
reasonably determines to be lawfully entitled thereto.

                                   SECTION 4

                                   COLLATERAL

         Section 4.1       Collateral. The payment and performance of the
Obligations shall at all times be secured by, among other things, (a) all of the
Company's and its Subsidiaries' accounts, chattel paper, documents, instruments,
general intangibles, inventory, equipment and certain other assets and property
of the Company and its Subsidiaries, in each case whether now owned or held or
hereafter acquired or arising, pursuant to that certain Security Agreement from
the Company 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 Company and its Subsidiaries, in each case whether
now owned or held or hereafter acquired or arising, pursuant to that certain
Pledge Agreement from the Company 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
Company 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 (as supplemented or otherwise
modified from time to time, collectively the "MORTGAGES" and individually each a
"MORTGAGE").

         Section 4.2       Guaranties. Payment of obligations evidenced by the
Notes and the other Obligations 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 Company shall also cause such Subsidiary to execute such Collateral
Documents (having terms and conditions substantially similar to those executed
by the Company and its Subsidiaries in connection with the purchase and sale of
the Securities under this Agreement) as the Agent may then require, granting in
favor of the Agent for the benefit of the holders of the Notes a security
interest in and lien on the assets of such Subsidiary as collateral security for
the Notes and the other Obligations, together with such other instruments,
documents, certificates and opinions required by the Agent in connection
therewith.

         Section 4.3       Further Assurances. The Company 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 Company 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 Majority Holders may deem necessary or desirable to
provide for or protect or perfect the Lien of the Agent in the Collateral.

         Section 4.4       Collections. The Company shall establish and maintain
such arrangements as shall be necessary or appropriate to assure that all
proceeds of the Collateral of

                                       5


the Company and its Subsidiaries are deposited (in the same form as received) in
accounts maintained with a financial institution reasonably satisfactory to, and
under the dominion and control of, the Agent (subject to the dominion and
control of the Senior Bank Agent), such accounts to constitute special
restricted accounts, the Company and Guarantors acknowledging that the Agent has
(and is hereby granted) a lien on such accounts and all funds contained therein
to secure the Obligations. It shall be a condition to the Company's or any
Subsidiary's right to establish and maintain such deposit accounts at any time
following the Closing Date, that the financial institutions maintaining such
accounts shall have delivered to the Agent blocked account agreements reasonably
satisfactory to the Agent in form and substance pursuant to which such financial
institutions acknowledge the Agent's Lien thereon, waive any right of offset or
bankers' liens thereon (other than (i) Liens of the Senior Bank Agent which are
subject to the Subordination Agreement and (ii) with respect to account
maintenance charges and returned items). Agent acknowledges that Harris Trust
and Savings Bank is a satisfactory financial institution for purposes of this
Section 4.4.

                                    SECTION 5

                          DEFINITIONS; INTERPRETATION.

         Section 5.1       Definitions. The following terms when used herein
shall have the following meanings:

         "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, or (iii) any other transaction pursuant
to which a Person is newly allocated a majority of the profits or losses of any
other Person.

         "AFFILIATE" means any Person, directly or indirectly controlling,
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 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 BMO Nesbitt Burns Capital (U.S.), Inc. and any successor
thereto appointed pursuant to Section 11.1 hereof.

         "AUTHORIZED REPRESENTATIVE" means those Persons shown on the list of
officers and employees of the Company pursuant to Section 7.2(h) hereof or on
any update of any such list provided by the Company to the Agent, or any further
or different officers and employees so named by any Authorized Representative in
a written notice to the Agent.

                                 6


         "BOARD" shall mean the board of directors (or comparable managers) of a
Person.

         "BORROWING BASE" shall have the meaning given such term in the Senior
Credit Agreement as in effect on the date hereof.

         "BORROWING BASE CERTIFICATE" shall have the meaning given such term in
the Senior Credit Agreement as in effect on the date 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.

         "CAPITAL EXPENDITURES" means, for any period, capital expenditures of
the Company and its Subsidiaries during such period as defined and classified in
accordance with GAAP.

         "CAPITAL LEASE" means any lease of Property which, in accordance with
GAAP, is required to be capitalized on the balance sheet of the lessee.

         "CAPITAL STOCK" shall mean (i) in the case of a corporation, voting
capital stock, (ii) in the case of an association or business entity, any and
all shares, interests, participations, rights or other equivalents (however
designated) of voting capital stock, (iii) in the case of a partnership, voting
partnership interests (whether general or limited), (iv) in the case of a
limited liability company, voting membership or similar interests and (v) any
other interest or participation that confers on a Person the right to vote and
to receive a share of the profits and losses of, or distributions of assets of,
the issuing Person.

         "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 MATURITIES" means, with reference to any period, the aggregate
amount of payments required to be made by the Company 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).

         "CERCLA" is defined in Section 6.15(b).

         "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), directly or indirectly,
of securities of the Company (or other securities convertible into such
securities) representing more than twenty-five percent (25%) of the combined
voting power of all securities of the Company 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 Company ceasing for any reason to
constitute a majority of the Parent Board unless the Persons replacing such
individuals were nominated by William D. Morton or the Parent Board; 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
Company (or other securities convertible into such securities) representing more
than twenty-five percent (25%) of the

                                       7


combined voting power of all securities of the Company entitled to vote in the
election of directors; or (iv) except for Permitted Transfers, either William D.
Morton or Mark W. Mealy ceases any time and for any reason own and to hold of
record at least ninety percent (90%) of the securities of the Company which he
owns and holds of record on the Closing Date; or (v) William D. Morton shall
fail to own or be a party to one or more contracts or arrangements giving him
voting control over at least fifty-one percent (51%) of the combined voting
power of all securities of the Company entitled to vote in the election of
directors.

         "CLOSING DATE" means the date on which the Agent has received signed
counterpart signature pages of this Agreement from each of the signatories and
the conditions in Section 7.1 and 7.2 hereof have been fulfilled.

         "CODE" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto.

         "COLLATERAL DOCUMENTS" means the Security Agreement, the Pledge
Agreement, the Mortgages and all other mortgages, deeds of trust, security
agreements, assignments, financing statements and other documents as shall from
time to time secure the Obligations.

         "CONSOLIDATED ENTITY" means, collectively, the Company and each of its
Subsidiaries that are consolidated for financial reporting purposes.

         "CONSOLIDATED NET INCOME" means, with reference to any period, the net
income (or net deficit) of the Company and its Subsidiaries for such period as
computed on a consolidated basis in accordance with GAAP.

         "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 Company or any Subsidiary, are treated
as a single employer under Section 414 of the Code.

         "CREDIT PARTIES" means the Company and the Domestic Subsidiaries, and
the term "CREDIT PARTY" shall mean any of the foregoing unless the context in
which such term is used shall otherwise require.

         "CURRENT INTEREST" means the rate of twelve percent (12.00%) per annum
(computed on the basis of a 360-day year and the actual number of days elapsed
in any year) on the unpaid principal amount of the Notes outstanding from time
to time from and including the date of issuance thereof until the date paid, or
if less, at the highest rate then permitted under applicable law.

         "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.

         "DEFERRED INTEREST" means the rate of four percent (4%) per annum
(computed on the basis of a 360-day year and the actual number of days elapsed
in any year) on the unpaid principal amount of the Notes outstanding from time
to time from and including the date of issuance thereof until the date paid, or
if less, at the highest rate then permitted under applicable law.

                                       8


         "DEFERRED PUT OBLIGATIONS" shall have the meaning given such term in
the Warrants.

         "DOMESTIC SUBSIDIARY" means each Subsidiary of the Company which is
organized under the laws of the United States of America or any State thereof.

         "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, plus (iii) with
respect to any applicable accounting period of the Company, to the extent such
charges against Consolidated Net Income are reflected on the Company's annual
audited financial statements for the most recent fiscal year then ended, (x)
non-cash charges reflecting impairment charges arising from SFAS No. 142
(Goodwill and Other Intangible Assets), for such period, and (y) non-cash
charges for accretion of discount on, or interest on, preferred stock of the
Company for such period, plus or minus (iv) non-cash charges or gains resulting
from any valuation of the Warrants in accordance with the provisions of FAS 150.

         "EBITDA" means, with reference to any period, EBIT for such period plus
all amounts properly deducted in arriving at such Consolidated Net Income for
such period in respect of depreciation of fixed assets and amortization of
intangible assets during such period on the books of the Company and its
Subsidiaries; provided, that EBITDA for the fiscal quarters of the Company
listed below shall be deemed by the parties hereto to be, notwithstanding the
other provisions of this definition, $3,401,000 for the fiscal quarter ended
June 30, 2003, $2,324,000 for the fiscal quarter ended September 30, 2003, and
$2,365,000 for the fiscal quarter ended December 31, 2003.

         "ENVIRONMENTAL CLAIMS" means all claims, however asserted, by any
governmental authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law, or for release or injury
to the environment.

         "ENVIRONMENTAL LAWS" means any present or future federal, state or
local laws, statutes, common law duties, rules, regulations, ordinances and
codes, together with all administrative orders, licenses, authorizations and
permits of, and agreements with, any governmental authority, in each case
relating to Environmental Matters.

         "ENVIRONMENTAL MATTERS" means any matter arising out of or relating to
health and safety, or pollution or protection of the environment or workplace,
including any of the foregoing relating to the presence, use, production,
generation, handling, transport, treatment, storage, disposal, distribution,
discharge, release, control or cleanup of any Hazardous Materials.

         "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 10.1 hereof.

         "FIXED CHARGE COVERAGE RATIO" means, as of the last day of each fiscal
quarter of the Company, the ratio of (i) EBITDA for the four fiscal quarters of
the Company ending on such date, less Capital Expenditures for such four fiscal
quarters, to (ii) the sum for such four fiscal

                                       9


quarters of (a) Interest Expense (but excluding therefrom all payment-in-kind
interest and non-cash interest relating to the Warrants in accordance with the
provisions of FAS 150), (b) Cash Maturities, (c) federal, state and local income
taxes and (d) without duplication of the foregoing, stock redemption payments
required to be made pursuant to the terms of the Stock Redemption Agreement;
provided that, for all calculations of the Fixed Charge Coverage Ratio for
fiscal quarters ending through and including December 31, 2004, (1) Interest
Expense for the four fiscal quarters then ended shall be deemed by the parties
hereto to be equal to the product of (x) Interest Expense incurred during the
period (the "POST-CLOSING PERIOD") from and including the Effective Date through
and including the last day of such period and (y) a fraction, the numerator of
which is 365 and the denominator of which is the number of days in such
post-closing period, (2) Cash Maturities for the four fiscal quarters then ended
shall be deemed by the parties hereto to be equal to the product of (x) Cash
Maturities during the post-closing period and (y) a fraction, the numerator of
which is 365 and the denominator of which is the number of days in such
post-closing period, and (3) stock redemption payments required to be made
during the four fiscal quarters then ended shall be deemed by the parties hereto
to be $500,000.

         "GAAP" means generally accepted accounting principles as in effect from
time to time, applied by the Company and its Subsidiaries on a basis consistent
with the preparation of the Company's audited financial statements referred to
in Section 6.5 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 12.1 hereof.

         "GUARANTY" means this Agreement as to Guarantors party hereto and
otherwise, a letter to the Agent in the form of Exhibit E hereto executed by a
Subsidiary whereby it acknowledges it is party hereto as a Guarantor under
Section 12 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 Majority Holders.

         "HAZARDOUS MATERIAL" means all or any of the following: (i) substances
that are defined or listed in, or otherwise classified pursuant to, any
Environmental Laws or regulations as "hazardous substances," "hazardous
materials," "hazardous wastes," "toxic substances" or any other formulation
intended to define, list or classify substances by reason of deleterious
properties such as ignitability, corrosivity, reactivity, carcinogenicity, or
toxicity; (ii) oil, petroleum or petroleum derived substances, natural gas,
natural gas liquids or synthetic gas and drilling fluids, produced waters and
other wastes associated with the exploration, development or production of crude
oil, natural gas or geothermal resources; (iii) any flammable substances or
explosives or any radioactive materials; and (iv) asbestos in any form or
electrical equipment which contains any oil or dielectric fluid containing
polychlorinated biphenyls.

         "HEDGING LIABILITY" means the liability of the Company to any of the
Senior 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 Company may from time to time enter into with any one or
more of the Senior Lenders or their Affiliates. Unless and until the amount of
the

                                       10


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 (but
specifically excluding (x) trade accounts payable arising in the ordinary course
of business which are not more than 180 days past due and (y) unsecured
indebtedness of the type and in the amount permitted pursuant to Section 8.14(f)
hereof), (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 indebtedness secured by a purchase money mortgage
or other Lien to secure all or part of the purchase price of Property subject to
such mortgage or Lien, (v) all Capitalized Lease Obligations of such Person,
(vi) 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, (vii) 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, and (viii) with respect to the
Company or any of its Subsidiaries, all obligations of such Persons to pay the
Purchase Price (and, to the extent all or any portion of such amount is
reinstated pursuant to the Stock Redemption Agreement, the Stated Redemption
Amount) for the Subject Stock under, and as such capitalized terms are defined
in, the Stock Redemption Agreement, it being understood that for the purpose of
calculating compliance with the terms and provisions of this Agreement, the
amount of "Indebtedness" at any time of the type described in this clause (viii)
shall be agreed by the parties to be the arithmetical sum of all such
obligations then due and unpaid or to become due at any time in the future under
such agreement as in effect at the time of determination, provided that there
shall be excluded from this definition of "Indebtedness" the obligations of the
Company under the Warrants, notwithstanding any contrary treatment thereof under
GAAP.

         "INTEREST EXPENSE" means, with reference to any period (the
"MEASUREMENT PERIOD"), the sum of all interest expense with respect to
Indebtedness or Hedging Liabilities relating to indebtedness (including imputed
interest charges with respect to Capitalized Lease Obligations and all
amortization of debt discount and expense) of the Company and its Subsidiaries
for such measurement period determined in accordance with GAAP (and including,
for any measurement period in the overall calculation of Interest Expense for
such measurement period, the net amount of interest expense relating to Hedging
Liabilities during such measurement period, whether positive or negative).

         "JUNIOR SUBORDINATED DEBT" means, collectively (x) the currently
outstanding Indebtedness of the Company 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 currently outstanding principal amount
of $1,262,781, and the second payable to the order of Ernest J. Butler in the
currently outstanding principal amount of $600,255, (y) Indebtedness to
Worthington under the Settlement Agreement and the Stock Redemption Agreement
and (z) any other indebtedness for borrowed money which shall be subordinated in
right of payment to the prior payment of the Obligations by written provisions
acceptable to the Agent and Majority Holders in form and substance and otherwise
pursuant to documentation, in an amount, and

                                       11


containing interest rates, payment terms, maturities, amortization schedules,
covenants, defaults, remedies and other material terms in form and substance
satisfactory to the Agent and Majority Holders.

         "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.

         "MAJORITY HOLDERS" means, as of the date of determination thereof, the
holders of at least fifty-one percent (51%) of the outstanding principal amount
of the Notes and the holders of at least fifty-one percent (51%) of the
Underlying Capital Stock (on an as-converted basis).

         "MATERIAL ADVERSE EFFECT" means (a) a material adverse change in, or
material adverse effect upon, the operations, business, Property, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole, (b) a material impairment of the ability of the Company or any
Subsidiary to perform its material obligations under any Operative Document, or
(c) a material adverse effect upon (i) the legality, validity, binding effect or
enforceability against the Company or any Subsidiary of any Operative Document
or the rights and remedies of the Agent and the Purchasers thereunder or (ii)
the perfection or priority of any Lien granted under any Collateral Document.

         "MATERIAL PLAN" is defined in Section 10.1(j) hereof.

         "MATURITY DATE" means (x) March 26, 2009, or (y) if earlier, such
earlier date on which the Notes are accelerated in whole pursuant to Sections
10.1 or 10.2 hereof.

         "MID-CENTRAL" means Mid-Central Plastics, Inc., an Iowa corporation.

         "MID-CENTRAL NOTES" means those certain promissory notes received by
Mid-Central as partial consideration for the Mid-Central Sale, including without
limitation the Three Month Note, the Six Month Note and the Subordinated Note as
defined in the asset purchase agreement for the Mid-Central Sale, all of which
are subject to the terms of the Wells Fargo Subordination Agreement.

         "MID-CENTRAL SALE" means the sale by Mid-Central to Innovative
Injection Technologies, Inc. of substantially all of its assets, including
without limitation its right, title and interest in and to its real property and
associated improvements and certain personal property associated therewith
located at 2360 Grand Avenue, West Des Moines, Iowa.

         "MORTGAGE" is defined in Section 4.1 hereof.

         "MORTON SOUTH CAROLINA" means Morton Metalcraft Co. of South Carolina,
a South Carolina corporation.

         "NOTES" means and includes those certain Senior Subordinated Promissory
Notes dated the date hereof in the aggregate principal amount of Ten Million
Dollars $10,000,000, issued to the Purchasers by the Company pursuant to this
Agreement, in substantially the form attached

                                       12


hereto as Exhibit A, with the blanks appropriately filled in, as may be amended,
restated, replaced, substituted or otherwise modified from time to time.

         "OBLIGATIONS" means all obligations of the Company to pay the principal
and interest on the Notes, all fees and charges payable hereunder, and all other
payment obligations of the Company arising under or in relation to any Operative
Document, including, without limitation, the Put Price and any Deferred Put
Obligations, 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.

         "OFFICER'S CERTIFICATE" means a certificate signed on behalf of the
Company by the Company's president, CEO or chief financial officer, stating that
(a) the officers signing such certificate have made or have caused to be made
such investigations as are necessary in order to permit them to verify the
accuracy of the information set forth in such certificate and (b) such
certificate does not misstate any material fact and does not omit to state any
fact necessary to make the certificate not misleading.

         "OPERATIVE DOCUMENTS" means this Agreement, the Notes, the Warrants,
the Investor Rights Agreement, the Guaranties, the Collateral Documents and all
other documents, instruments and agreements executed by or on behalf of the
Company and delivered concurrently herewith or at any time hereafter to or for
the Purchasers, Agent or any Affiliate of Purchasers or Agent, all as amended,
restated or supplemented from time to time.

         "OPTION PLANS" means the Stock Option Plan and the Company Director
Plan, as each such term is defined in Section 6.21(a) hereof.

         "PARENT BOARD" has the meaning given such term in Section 8.11 hereof.

         "PAYMENT DEFAULT" means in Event of Default as described in Section
10.1(a) after the expiration of any applicable grace period.

         "PBGC" means the Pension Benefit Guaranty Corporation or any Person
succeeding to any or all of its functions under ERISA.

         "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.

         "PERMITTED TRANSFERS" means any sale, assignment, transfer, pledge,
hypothecation, mortgage, encumbrance or other disposition of all or any of the
Capital Stock of the Company held by William Morton or Mark Mealy, respectively,
as follows: (i) by way of gift to any member of his family or to any trust or
other estate planning entity for his benefit or the benefit of any such family
member, provided that any such transferee shall agree in writing with the
Company and the Purchasers, as a condition to such transfer, to be bound by all
of the provisions of this Agreement to the same extent as if such transferee
were such transferor; or (ii) by will or the laws of descent and distribution,
in which event each such transferee shall be bound by all of the provisions of
this Agreement to the same extent as if such transferee were such transferor. As
used herein, the word "family" shall include any spouse, lineal ancestor or
descendant.

                                       13


         "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 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.

         "PLEDGE AGREEMENT" is defined in Section 4.1 hereof.

         "PROPERTY" means any interest in any kind of property or asset, whether
real, personal or mixed, or tangible or intangible.

         "REPORTABLE EVENT" means a reportable event as defined in Section 4043
of ERISA and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event, provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.

         "SECURITIES" means, collectively, the Notes and the Warrants.

         "SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal law then in force.

         "SECURITY AGREEMENT" is defined in Section 4.1 hereof.

         "SECURITIES AND EXCHANGE COMMISSION" includes any governmental body or
agency succeeding to the functions thereof.

         "SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar federal law then in force.

         "SENIOR BANK AGENT" means Harris Trust and Savings Bank, in its
capacity as agent under the Senior Credit Agreement and any successor thereto
appointed pursuant to the Senior Credit Agreement.

         "SENIOR CREDIT AGREEMENT" means that certain Second Amended and
Restated Credit Agreement, dated the date hereof, by and among the Company,
certain guarantor parties thereto, the Senior Lenders and the Senior Bank Agent,
as amended, supplemented or modified from time to time, including, without
limitation, any agreement refinancing in whole or in part the "Obligations" (as
defined therein) as permitted under the Subordination Agreement.

                                       14


         "SENIOR CREDIT DOCUMENTS" means the Senior Credit Agreement and the
related agreements, documents and instruments, as amended, modified or
supplemented in accordance with the Subordination Agreement.

         "SENIOR DEBT" means the Indebtedness of the Company and extension of
credit by the Senior Lenders under the Senior Credit Agreement, together with
extensions of credit pursuant to any modifications of the Senior Credit
Agreement, to the extent permitted under the Subordination Agreement, as the
same may be amended, modified, supplemented or restated from time to time in
accordance with the provisions of this Agreement.

         "SENIOR LENDERS" means the financial institutions from time to time
party to the Senior Credit Agreement.

         "SETTLEMENT AGREEMENT" means that certain Settlement Agreement dated as
of November 20, 2003 by and between Worthington Industries, Inc., Worthington
and the Company.

         "SHARES" shall mean certificated or uncertificated instruments or
denominations that represent the ownership of the Capital Stock of any Person.

         "SMP" means SMP Steel Corporation, a South Carolina corporation.

         "STOCK REDEMPTION AGREEMENT" means that certain Stock Redemption
Agreement dated as of December 23, 2003 between the Company and Worthington.

         "SUBORDINATION AGREEMENT" means that certain Subordination and
Intercreditor Agreement dated as of March 26, 2004, by and between the Agent and
Senior Bank Agent, as the same may be amended, modified, supplemented or
restated from time to time in accordance with the terms hereof.

         "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 Company, by one or more of its
Subsidiaries, or by the Company and one or more of such Subsidiaries.

         "SUBSIDIARY BOARD" has the meaning given such term in Section 8.11 of
this Agreement.

         "TAX" or "TAXES" means federal, state, county, local, foreign or other
income, gross receipts, ad valorem, franchise, profits, sales or use, transfer,
registration, excise, utility, environmental, communications, real or personal
property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.

         "TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.

                                       15


         "TOTAL FUNDED DEBT" means, at any time the same is to be determined,
the aggregate of all Indebtedness of the Company and its Subsidiaries at such
time, plus all Indebtedness of any other Person which is directly or indirectly
guaranteed by the Company 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 Company or any of its Subsidiaries
has otherwise assured a creditor against loss.

         "TOTAL FUNDED DEBT/EBITDA RATIO" means, as of the last day of any
fiscal quarter of the Company, the ratio of (x) Total Funded Debt as of such
date to (y) EBITDA for the four fiscal quarters of the Company ending on such
date.

         "TOTAL SENIOR FUNDED DEBT" means, at any time the same is to be
determined, Total Funded Debt at such time minus the sum of (i) the principal
balance of the Obligations, and (ii) the principal balance of Junior
Subordinated Debt then outstanding to Messrs. Bouie and Butler, and (iii)
amounts owing by the Company to Worthington pursuant to the Settlement Agreement
or the Stock Redemption Agreement.

         "TOTAL SENIOR FUNDED DEBT/EBITDA RATIO" means, as of the last day of
any fiscal quarter of the Company, the ratio of (x) Total Senior Funded Debt as
of such date to (y) EBITDA for the four fiscal quarters of the Company ending on
such date.

         "UNDERLYING CAPITAL STOCK" means (a) the Capital Stock issued or
issuable upon exercise of the Warrants and (b) any Capital Stock issued or
issuable with respect to the securities referred to in clause (a) above by way
of dividend or split or in connection with a combination of Shares,
recapitalization, merger, consolidation or other reorganization. For purposes of
this Agreement, any Person who exercises a Warrant shall be deemed to be the
holder of the Underlying Capital Stock obtainable upon exercise of such Warrant,
and such Person shall be entitled to exercise the rights of a holder of
Underlying Capital Stock hereunder. As to any particular Shares of Underlying
Capital Stock, such Shares shall cease to be Underlying Capital Stock when they
have been (i) effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (ii) distributed to
the public through a broker, dealer or market maker pursuant to Rule 144 under
the Securities Act (or any similar provision then in force) or (iii) repurchased
by the Company or any of its Subsidiaries.

         "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" shall have the meaning given such
term in the Senior Credit Agreement.

         "WARRANTS" means and includes those certain Stock Purchase Warrants
dated the date hereof, issued by the Company in favor of the Purchasers to
acquire an aggregate of nine percent (9%) of the Capital Stock of the Company,
on a fully-diluted basis, in substantially the form

                                       16


attached hereto as Exhibit B, with the blanks appropriately filled in, as may be
amended, restated or supplemented from time to time, and "WARRANT" means each of
the Warrants issued hereunder, individually.

         "WELFARE PLAN" means a "welfare plan" as defined in Section 3(1) of
ERISA.

         "WELLS FARGO SUBORDINATION AGREEMENT" means that certain Subordination
Agreement dated as of June 20, 2003 made by the Company for the benefit of Wells
Fargo Business Credit, Inc. and relating to the Mid-Central Notes, in the form
delivered to the Agent.

         "WHOLLY OWNED SUBSIDIARY" means a Subsidiary of the Company 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 Company
and/or one or more Wholly Owned Subsidiaries within the meaning of this
definition.

         "WORTHINGTON" means WI Products, Inc., f/k/a Worthington Custom
Plastics, Inc.

         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 6.5 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 Company or the Majority Holders may by notice to the
holders of the Notes and the Company, respectively, require that the Agent (at
the direction of the Majority Holders) and the Company 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 Company and its Subsidiaries shall be
the same as if such change had not been made. No delay by the Company or the
Majority Holders 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 Company 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.

                                   SECTION 6

                         REPRESENTATIONS AND WARRANTIES.

         The Company represents and warrants to the Agent and the Purchasers as
follows:

                                       17


         Section 6.1       Organization and Qualification. The Company 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 Company 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 qualification 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 Company or in its ability to perform
or the Agent's ability to enforce performance of the Company's obligations under
the Operative Documents.

         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 qualification 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 Company and its Subsidiaries taken as
a whole or in its ability to perform or the Agent's ability to enforce
performance of the Company's obligations under the Operative Documents. Schedule
6.2 hereto identifies each Subsidiary, the jurisdiction of its incorporation or
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
Company 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 Company or a
Subsidiary are owned, beneficially and of record, by the Company or such
Subsidiary free and clear of all Liens, other than Liens in favor of the Senior
Bank Agent that are subject to the Subordination Agreement. 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       Authority and Validity of Obligations. The Company
has full right and authority to enter into this Agreement and the other
Operative Documents executed by it, to issue its Notes and Warrants, to grant to
the Agent the Liens described in the Collateral Documents executed by the
Company, and to perform all of its obligations hereunder and under the other
Operative Documents executed by it. Each Subsidiary has full right and authority
to enter into the Operative Documents executed by it, to grant to the Agent the
Liens described in the Collateral Documents executed by such Person, and to
perform all of its obligations under the Operative Documents executed by it. The
Operative Documents delivered by the Company and its Subsidiaries have been duly
authorized, executed, and delivered by such Persons and constitute valid and
binding obligations of the Company and its Subsidiaries enforceable against them
in accordance with their terms, except as enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance or similar laws affecting
creditors' rights generally and

                                       18


general principles of equity (regardless of whether the application of such
principles is considered in a proceeding in equity or at law); and this
Agreement and the other Operative Documents do not, nor does the performance or
observance by the Company or any Subsidiary of any of the matters and things
herein or therein provided for, (a) contravene or constitute a default under any
provision of law or any judgment, injunction, order or decree binding upon the
Company or any Subsidiary or any provision of the organizational documents
(e.g., charter, certificate or articles of incorporation and by-laws,
certificate or articles of association and operating agreement, partnership
agreement, or other similar organizational documents) of the Company or any
Subsidiary, (b) contravene or constitute a default under any covenant, indenture
or agreement of or affecting the Company or any Subsidiary or any of their
Property, in each case where such contravention or default, individually or in
the aggregate, could reasonably be expected to have a Material Adverse Effect,
or (c) result in the creation or imposition of any Lien on any Property of the
Company or any Subsidiary other than the Liens (i) granted in favor of the Agent
pursuant to the Collateral Documents, and (ii) granted in favor of the Senior
Bank Agent that are subject to the Subordination Agreement.

         Section 6.4       Use of Proceeds; Margin Stock. The Company shall use
the proceeds of the issuance of the Notes to refinance all or a part of its
existing senior credit facility, to pay fees and expenses associated with such
refinancing and general working capital purposes. Neither the Company 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 Note 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 6.5       Financial Reports. The consolidated balance sheet of
the Company and its Subsidiaries as at December 31, 2003 and the related
consolidated statements of income, retained earnings and cash flows of the
Company and its Subsidiaries for the fiscal year then ended, and accompanying
notes thereto, which financial statements are accompanied by the audit report of
KPMG LLP, independent public accountants, and the unaudited interim consolidated
balance sheet of the Company and its Subsidiaries as at February 29, 2004 and
the related consolidated statements of income, retained earnings and cash flows
of the Company and its Subsidiaries for the two (2) months then ended,
heretofore furnished to the Purchasers, fairly present the consolidated
financial condition of the Company 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 Company
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 December 31, 2003, no event or condition has occurred
which would have a Material Adverse Effect.

         Section 6.6       Full Disclosure. The statements and information
furnished to the Agent and the Purchasers in connection with the negotiation of
this Agreement and the commitments by the Purchasers to provide all or part of
the financing contemplated hereby do not contain any untrue statements of a
material fact or omit a material fact necessary to make the material statements
contained therein or herein not misleading, the Purchasers acknowledging that as
to

                                       19


any projections furnished to any Purchaser, the Company only represents that the
same were prepared on the basis of information and estimates the Company
believed to be reasonable.

         Section 6.7       Good Title. The Company and its respective
Subsidiaries have good and defensible title to their respective Property as
reflected on the most recent consolidated balance sheet of the Company and its
Subsidiaries furnished to the Purchasers (except for sales of assets by the
Company and such Subsidiaries in the ordinary course of their respective
businesses), subject to no Liens other than such thereof as are specifically
identified on Schedule 6.7 or, with the exception of Liens on real Property,
permitted by Section 8.15 hereof.

         Section 6.8       Litigation and Other Controversies. There is no
litigation or governmental proceeding or labor controversy pending, nor to the
knowledge of the Company threatened, against the Company 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
Company and its Subsidiaries taken as a whole.

         Section 6.9       Taxes. All Tax Returns with respect to any material
Tax required to be filed by the Company or any Subsidiary in any jurisdiction
have, in fact, been filed, and all Taxes upon the Company 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 Company does not know
of any proposed additional Tax assessment against the Company or any Subsidiary
which if paid (taking into consideration any cash segregated for such purpose)
would have a Material Adverse Effect. Adequate provisions in accordance with
GAAP for Taxes on the books of the Company 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. No Consolidated Entity has made an election under Section
341(f) of the Code. No Consolidated Entity is liable for the Taxes of another
Person that is not a Subsidiary in an amount under (i) Treasury Regulation
Section 1.1502-6 (or comparable provisions of state, local or foreign law), (ii)
as a transferee or successor, (iii) by contract or indemnity, or (iv) otherwise.
No Consolidated Entity is a party to any tax sharing agreement. Each
Consolidated Entity has disclosed on its federal income Tax Returns any position
taken for which substantial authority (within the meaning of Code Section
6662(d)(2)(B)(i)) did not exist at the time the Tax Return was filed. No
Consolidated Entity has made any payments, is obligated to make payments or is a
party to an agreement that could obligate it to make any payments that would not
be deductible under Code Section 280G.

         Section 6.10      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 Company or any other Person, is or will be necessary to the valid execution,
delivery or performance by the Company of this Agreement, the Operative
Documents, the Notes, the Warrants or the Investor Rights Agreement.

         Section 6.11      Affiliate Transactions. Neither the Company 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 Company or such Subsidiary than would be usual
and customary in similar contracts or agreements between Persons not affiliated
with each other.

                                       20


         Section 6.12      Investment Company; Public Utility Holding Company.
Neither the Company 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 6.13      ERISA. The Company 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 Company 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 6.14      Compliance with Laws (Nonenvironmental). The Company
and its Subsidiaries are in compliance with the requirements of all federal,
state and local laws, rules and regulations (in each case, other than with
respect to Environmental Laws) applicable to or pertaining to the Properties or
business operations of the Company or any such Subsidiary (including, without
limitation, the Occupational Safety and Health Act of 1970, and the Americans
with Disabilities Act of 1990, non-compliance with which would reasonably be
expected to have a Material Adverse Effect as a whole. Neither the Company 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 statutes and regulations (other than Environmental Laws), which
non-compliance would reasonably be expected to have a Material Adverse Effect.

         Section 6.15      Environmental and Safety Matters

                  (a)      Except as set forth on the Schedule 6.15, the Company
and its Subsidiaries have materially complied with and are currently in material
compliance with all Environmental Laws, and neither the Company nor any of its
respective Subsidiaries have received any oral or written notice, regarding any
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise)
or any corrective, investigatory or remedial obligations arising under
Environmental Laws which have not been corrected and which relate to the Company
or any of its Subsidiaries or any of their Properties or facilities. Without
limiting the generality of the foregoing, the Company and its Subsidiaries have
obtained and materially complied with, and are currently in material compliance
with, all permits, licenses and other authorizations that may be required
pursuant to any Environmental Law for the occupancy of their properties or
facilities or the operation of their businesses. Neither this Agreement nor the
consummation of the transactions contemplated by this Agreement shall impose any
obligations on the Company or any of its Subsidiaries or otherwise for site
investigation or cleanup, or notification to or consent of any government
agencies or third parties under any Environmental Laws (including, without
limitation, any so called "transaction-triggered" or "responsible property
transfer" laws and regulations). None of the following exists in violation of
Environmental Laws at any property or facility owned, occupied or operated by
the Company or any of its respective Subsidiaries:

                           (i)      underground storage tanks or surface
         impoundments;

                                       21


                           (ii)     asbestos-containing materials in any form or
         condition; or

                           (iii)    materials or equipment containing
         polychlorinated biphenyls.

                  (b)      Except as set forth on Schedule 6.15, neither the
Company nor any of its respective Subsidiaries has treated, stored, disposed of,
arranged for or permitted the disposal of, transported, handled or released any
substance (including, without limitation, any Hazardous Material) or owned,
occupied or operated any facility or property, so as to give rise to liabilities
of the Company or any of its Subsidiaries for response costs, natural resource
damages or attorneys fees pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 ("CERCLA"), as amended, or any other
Environmental Law, except where any such action would not, individually or in
the aggregate, have a Material Adverse Effect.

                  (c)      Without limiting the generality of the foregoing,
except as set forth on Schedule 6.15, no facts, events or conditions relating to
the past or present Properties, facilities or operations of the Company or its
Subsidiaries shall materially prevent, hinder or limit continued compliance with
Environmental Laws, give rise to any corrective, investigatory or remedial
obligations pursuant to Environmental Laws or any other material liabilities
(whether accrued, absolute, contingent, unliquidated or otherwise) pursuant to
Environmental Laws (including, without limitation, those liabilities relating to
onsite or offsite releases or threatened releases of Hazardous Materials,
personal injury, property damage or natural resources damage).

                  (d)      Except as set forth on Schedule 6.15, neither the
Company nor any of its Subsidiaries has, either expressly or by operation of
law, assumed or undertaken any liability or corrective, investigatory or
remedial obligation of any other Person relating to any Environmental Laws.

                  (e)      Except as set forth on Schedule 6.15, neither the
Company nor any of its Subsidiaries has received or is subject to any
Environmental Claims. No Lien, whether recorded or unrecorded, in favor of any
international, federal, state or local governmental authority having
jurisdiction over the Company or any of its Subsidiaries, relating to any
liability of the Company or any of its Subsidiaries arising under any
Environmental Laws has attached to any property owned, leased or operated by the
Company or any of its Subsidiaries.

         Section 6.16      Other Agreements. Neither the Company nor any of its
Subsidiaries is in default under the terms of any covenant, indenture or
agreement of or affecting the Company or any such Subsidiary or any of their
Properties, which default would have a Material Adverse Effect. All of the
Company's and its Subsidiaries' material contracts are valid, binding and
enforceable in accordance with their respective terms, except where any failure
or failures thereof would not, considered in the aggregate, have a Material
Adverse Effect. Each of the Company and each of its Subsidiaries has performed
all obligations required to be performed by it under such contracts and is not
in default under or in breach of nor in receipt of any claim of default or
breach under any such contract; no event has occurred which, with the passage of
time or the giving of notice or both, would result in a default, breach or event
of noncompliance by the Company or any of its Subsidiaries under any such
contract; and neither the Company nor any of its Subsidiaries has any present
expectation or intention of not fully performing all such

                                       22


obligations; neither the Company nor any of its Subsidiaries has knowledge of
any breach or anticipated breach by the other parties to any such contract.
Neither the Company nor any of its Subsidiaries is a party to any contract or
commitment requiring it to purchase or sell goods or services or lease property
above or below (as the case may be) prevailing market prices and rates.

         Section 6.17      No Default.  No Default or Event of Default has
occurred and is continuing.

         Section 6.18      Trademarks, Franchises, and Licenses. The Company and
its Subsidiaries own, possess, or have the right to use all necessary patents,
licenses, franchises, trademarks, trade names, trade styles, copyrights, trade
secrets, know how, and confidential commercial and proprietary information to
conduct their businesses as now conducted, without known conflict with any
patent, license, franchise, trademark, trade name, trade style, copyright or
other proprietary right of any other Person, except for any such failures to so
own, possess or have the right to use the same or any such conflicts which would
not, individually or in the aggregate, be reasonably likely to have a Material
Adverse Effect.

         Section 6.19      Governmental Authority and Licensing. The Company and
its Subsidiaries have received all licenses, permits, and approvals of all
federal, state, and local governmental authorities, if any, necessary to conduct
their businesses, in each case where the failure to obtain or maintain the same
could reasonably be expected to have a Material Adverse Effect. No investigation
or proceeding which, if adversely determined, could reasonably be expected to
result in revocation or denial of any material license, permit or approval is
pending or, to the knowledge of the Company, threatened.

         Section 6.20      Solvency. The Company and its Subsidiaries are
solvent, able to pay their debts as they become due, and have sufficient capital
to carry on their business and all businesses in which they are about to engage.

         Section 6.21      Capital Structure.

                  (a)      Generally. The authorized capital stock of the
Company consists of (i) 20,000,000 shares of Class A Common Stock, $.01 par
value, of which there are 4,560,547 shares issued and outstanding as of the
Closing Date and no shares held in the treasury of the Company; (ii) 200,000
shares of Class B Common Stock, $.01 par value, of which there are 100,000
shares issued and outstanding as of the Closing Date and no shares held in the
treasury of the Company; and (iii) 2,000,000 shares of Preferred Stock, no par
value, of which 10,000 shares are issued and outstanding as of the Closing Date
and no shares held in the treasury of the Company. All outstanding shares of the
Company's Class A and Class B Common Stock and Preferred Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws of
the Company or any agreement or document to which the Company is a party or by
which it is bound. Shares of the Company's Class B Common Stock are convertible,
on a one-to-one basis, into shares of the Company's Class A Common Stock, and
shares of the Company's Preferred Stock are not convertible into any Capital
Stock of the Company. As of the Closing Date the Company had remaining a reserve
of an aggregate of 1,166,711 shares and 25,000 shares,

                                       23


respectively, of the Company's Class A Common Stock for issuance to employees
pursuant to the Company's 1997 Employee Stock Option Plan (the "STOCK OPTION
PLAN"), and the Company's Morton Industrial Group, Inc. Nonemployee Directors'
Compensation Plan (the "COMPANY DIRECTOR PLAN"). Except for the Warrants,
Schedule 6.21 sets forth for each Person who held options to acquire shares of
the Company's Class A or Class B Common Stock, or any other capital stock of the
Company, in each case as of the Closing Date, the name of the holder of such
option, the number of shares subject to such option, the exercise price of such
option, the number of shares as to which such option was vested at such date and
the vesting schedule for such option. As of the Closing Date there are, in the
aggregate, 336,981 shares of Class A Common Stock available for issuance under
the Option Plans.

                  (b)      Obligations With Respect to Capital Stock. Except as
set forth in Section 6.21(a), and except for the Warrants, as of the Closing
Date, there are no equity securities, partnership interests or similar ownership
interests of any class of the Company, or any securities exchangeable or
convertible into or exercisable for such equity securities, partnership
interests or similar ownership interests, issued, reserved for issuance or
outstanding. As of the Closing Date, except as described in Section 6.21(a) and
except for the Warrants, there are no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company or any of its Subsidiaries is a party or by which it is bound obligating
the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition, of any shares of capital stock,
partnership interests or similar ownership interests of the Company or any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement.

         Section 6.22      SEC Disclosure. The Class A Common Stock of the
Company is registered pursuant to Section 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended (the "EXCHANGE ACT"), and the Company has
timely filed all proxy statements, reports, schedules, forms, statements and
other documents required to be filed by it under the Exchange Act. The Company
has filed (a) its Annual Report on Form 10-K for the fiscal year ended December
31, 2002 and (b) its Quarterly Report on Form 10-Q for the fiscal quarter ended
October 31, 2003 (collectively, the "SEC REPORTS"). Each SEC Report was, at the
time of its filing, in substantial compliance with the requirements of its
respective form and none of the SEC Reports, nor the financial statements (and
the notes thereto) included in the SEC Reports, as of their respective filing
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of the Company included in the SEC Reports
comply as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the United States
Securities and Exchange Commission or other applicable rules and regulations
with respect thereto. Such financial statements have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except (i)
as may be otherwise indicated in such financial statements or the notes thereto
or (ii) in the case of unaudited interim statements, to the extent they may not
include footnotes or may be condensed) and fairly present in all material
respects the financial condition, the results of operations and the cash flows
of the

                                       24


Company and its Subsidiaries, on a consolidated basis, as of, and for, the
periods presented in each such SEC Report.

                                   SECTION 7

                              CONDITIONS PRECEDENT.

         The obligation of the Purchasers to purchase and pay for the Securities
is subject to fulfillment on or prior to the Closing Date of the following
conditions precedent to the satisfaction of the Purchasers in their sole
discretion:

         Section 7.1       Conditions.  As of the time of the purchase of the
Securities by the Purchasers:

                  (a)      each of the representations and warranties set forth
in Section 6 hereof and the other Operative Documents 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 Company 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)      the Company shall have simultaneously sold to the
Purchasers the Securities to be purchased by the Purchasers hereunder at the
Closing;

                  (d)      the Company shall have made all filings under all
applicable federal and state securities laws necessary to consummate the
issuance of the Securities pursuant to this Agreement in compliance with such
laws;

                  (e)      the purchase and sale of the Securities 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 Purchaser
(including, without limitation, Regulation U of the Board of Governors of the
Federal Reserve System, the Securities Act and the Securities Exchange Act) as
then in effect;

                  (f)      the Company, the Senior Bank Agent and the Senior
Lenders shall have entered into the Senior Credit Agreement and all conditions
to its effectiveness shall have been satisfied and no default or event of
default shall have occurred and be continuing thereunder;

                  (g)      the Purchasers shall have received approval from each
of their respective investment committees to purchase the Securities and enter
into this Agreement;

                  (h)      since December 31, 2003 there shall have been no
change in the financial condition, operating results, assets, operations,
business prospects, results, assets, operations, business prospects, employee
relations or customer or supplier relations of the Company or any of its
Subsidiaries which would have a Material Adverse Effect; and

                  (i)      Agent and the other Purchasers shall have completed a
due diligence review of the Company and its Subsidiaries and their respective
records, financial condition and

                                       25


operations, which due diligence review shall be satisfactory to Agent and the
other Purchasers in their sole discretion.

         Section 7.2       Documents. At or prior to the purchase of the
Securities, the Agent shall have received the following for the account of the
Purchasers (each to be properly executed and completed) and the same shall have
been approved as to form and substance by the Purchasers:

                  (a)      this Agreement, the Notes and the Warrants, duly
executed by the Company, the Guarantors and the Purchasers, as applicable;

                  (b)      (i) the Collateral Documents and the UCC financing
statements requested by the Agent in connection therewith, (ii) copies of
original stock certificates representing all of the issued and outstanding
shares of stock of the Company's Subsidiaries, together with stock powers
therefor executed in blank and undated, (iii) patent, trademark, and copyright
collateral agreements to the extent requested by the Agent, (iv) deposit
account, securities account, and commodity account control agreements to the
extent requested by the Agent and (v) landlord waivers with respect to leased
properties of the Company and its Subsidiaries to the extent requested by the
Agent, which it is hereby agreed by the parties will be delivered on a
post-closing basis with respect to the leased properties in Apex, North Carolina
and on Detroit Street, Morton, Illinois.

                  (c)      a Mortgage duly executed and recorded with respect to
each parcel of real property owned by the Company or any of its Subsidiaries;

                  (d)      copies of title insurance policies and date-down
endorsements for each policy of title insurance and all endorsements thereunder
delivered to the Senior Bank Agent in form and substance acceptable to the Agent
(which will, among other things, insure over any survey exception) from the
issuer of such policy or another title insurance company acceptable to the
Agent, maintaining the existing level of coverage under each such policy,
provided that any title policies and endorsements which are not available at the
time of the purchase of the Securities hereunder will be delivered by the
Company to the Agent not later than 90 days after the date hereof, and Agent
shall be named as the named insured on each title policy delivered hereunder;

                  (e)      certified copies of resolutions of the Parent Board
and each Subsidiary Board authorizing the execution and delivery of the
Operative Documents delivered by them and indicating the authorized signers of
such Operative Documents;

                  (f)      copies of the articles of incorporation and by-laws
of the Company and each Guarantor certified as true and correct by the Secretary
or other appropriate officer of the Company or such Guarantor, as the case may
be;

                  (g)      a good standing certificate for the Company 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 in each jurisdiction in which such Person is required to
qualify to do business; and

                                       26


                  (h)      an incumbency certificate containing the name, title
and genuine signatures of the Company's Authorized Representatives;

                  (i)      the Company, Agent and the Purchasers and certain
other Persons shall have entered into an Investor Rights Agreement, in form and
substance satisfactory to the Purchasers (the "INVESTOR RIGHTS AGREEMENT"), and
the Investor Rights Agreement shall be in full force and effect;

                  (j)      the Agent shall have received for the account of and
addressed to the Purchasers the favorable written opinions of (i) Illinois
counsel for the Company and the Guarantors and (ii) Georgia counsel for the
Company, each in form and substance acceptable to the Agent and the Purchasers;

                  (k)      the Agent shall have received copies of reliance
letters addressed to the Agent and the Purchasers in form and substance
satisfactory to Agent and the Purchasers relating to any prior environmental
assessments;

                  (l)      the Agent shall have received evidence satisfactory
to it, including without limitation a certificate from the Company's chief
financial officer with supporting documentation satisfactory to the Agent, that
(i) EBITDA for the twelve months ending on February 29, 2004, was not less than
$11,600,000; (ii) the Total Funded Debt/EBITDA Ratio, measured based on Total
Funded Debt projected to be outstanding after giving effect to the Closing
hereunder and under the Senior Credit Agreement and EBITDA for the four fiscal
quarters ended on February 29, 2004, will be less than 4.10 to 1.0; and (iii)
the Total Senior Funded Debt/EBITDA Ratio, measured based on Total Senior Funded
Debt projected to be outstanding after giving effect to the Closing hereunder
and under the Senior Credit Agreement and EBITDA for the four fiscal quarters
ended on February 29, 2004, will be less than 2.90 to 1.0 (as used in this
clause (d), EBITDA shall be understood by the parties to incorporate such
adjustments thereto as are acceptable to the Company and the Agent and shall
specifically exclude the terms of the proviso set forth at the end of the
definition of EBITDA herein);

                  (m)      the Agent shall have received such evaluations and
certifications as it may require (including (i) satisfactory results of a
collateral audit, and (ii) appraisal reports, real estate surveys, flood hazard
determinations and environmental assessments in form and substance satisfactory
to the Agent with respect to the real property of the Company and its
Subsidiaries in order to satisfy itself as to the value of the Collateral, the
financial condition of the Company and its Subsidiaries, and the lack of
material contingent liabilities of the Company and its Subsidiaries;

                  (n)      the Liens granted to the Agent under the Collateral
Documents shall have been perfected in a manner satisfactory to each Lender and
its counsel;

                  (o)      the Borrower and its Subsidiaries shall have entered
into the account arrangements described n Section 4.4 hereof.

                  (p)      the Agent shall have received a fully executed copy
of the Subordination Agreement;

                                       27


                  (q)      [Reserved];

                  (r)      the Agent shall have received evidence of insurance
required to be maintained under the Operative Documents, naming the Agent as
mortgagee and loss payee for the benefit of the Purchasers and as an additional
insured;

                  (s)      the Agent shall have received financing statement,
tax, and judgment lien search results against the Property of the Company and
each Subsidiary evidencing the absence of Liens on its Property except as
permitted by Section 8.15 hereof;

                  (t)      the Agent shall have received, for the benefit of the
Purchasers, a collateral assignment of life insurance in form and substance
satisfactory to the Agent on the life of William Morton, which insurance shall
be in an aggregate amount of not less than $4,000,000;

                  (u)      the Agent shall have received for the account of the
Purchasers such other agreements, instruments, documents, certificates and
opinions as the Agent or the Purchasers may reasonably request;

                  (v)      the Agent shall have received from the Company the
initial fees called for by Section 3.1(a) hereof and reimbursement for any fees,
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby (including, without limitation, legal fees);

                  (w)      the Liens granted to the Agent under the Collateral
Documents shall have been perfected in a manner satisfactory to each Purchaser
and its counsel;

                  (x)      after giving effect to the initial loans under the
Senior Credit Agreement, there shall be at least $5,000,000 in Unused Revolving
Credit Commitment and in availability under the Borrowing Base, which shall be
evidenced by a Borrowing Base Certificate delivered at the Closing in the form
provided to the Senior Bank Agent;

                  (y)      the obligations under the existing senior credit
agreement shall have been repaid in full and all commitments of the senior
lenders thereunder cancelled; and

                  (z)      the capital and organizational structure of the
Company and its Subsidiaries shall be satisfactory to the Agent and the
Purchasers including, without limitation, the effectiveness of the Senior Credit
Agreement, which shall provide for loans thereunder of $40,000,000 which shall
include an $18,000,000 revolving facility and a $22,000,000 term facility, which
shall be satisfactory to the Agent and the Purchasers, and Agent shall have
received true, correct and complete copies of the Senior Credit Documents.

         Anything to the contrary in the foregoing provisions of this Section
7.2 notwithstanding:

                  (aa)     Provided that Agent receives reliance letters
                           acceptable to Agent and the Purchasers, Agent shall
                           accept environmental audits which are deemed
                           acceptable to Senior Agent;

                                       28


                  (bb)     Agent shall accept copies of the following real
                           estate surveys in lieu of new surveys:

                           (i)      Survey of the Morton, Illinois real estate
                                    dated January 8, 1998 by David L. Humphrey,
                                    professional land surveyor;

                           (ii)     Survey of the Welcome, North Carolina real
                                    estate dated August 10, 1992 by J. Todd
                                    Everhart, registered land surveyor; and

                           (iii)    Survey of the Honea Path, South Carolina
                                    real estate dated May 15, 1998 by J. Don
                                    Lee, registered land surveyor.

                                   SECTION 8

                                   COVENANTS.

         The Company agrees that, so long as any portion of the Notes remains
outstanding, except to the extent compliance in any case or cases is waived in
writing by the Majority Holders:

         Section 8.1       Maintenance of Business. The Company 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 8.19 hereof) and all licenses, permits
and franchises necessary to the proper conduct of its business.

         Section 8.2       Maintenance of Property. The Company 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 Company 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 Company 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 Company 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 Company will upon request of the

                                       29


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 Company will, and will cause
each of its Subsidiaries to, maintain a standard system of accounting in
accordance with GAAP, will permit the Agent, each holder of any Note and their
representatives to visit and inspect the properties and assets (including books
and records) of the Company and its Subsidiaries at all reasonable times and
will furnish to the Agent, each holder of the Securities and their duly
authorized representatives such information respecting the business and
financial condition of the Company and its Subsidiaries as the Agent or such
holder may reasonably request; and without any request, the Company will furnish
to the holders of the Notes:

                  (a)      as soon as available, and in any event within 45 days
after the close of each monthly fiscal period of the Company which is also the
end of a fiscal quarter of the Company and within 30 days after the close of
each other monthly fiscal period of the Company, a copy of the balance sheet,
statements of income, retained earnings and cash flows of the Company 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 and a comparison to budget, prepared
by the Company in accordance with GAAP (subject to normal year-end audit
adjustments and the absence of footnotes) and certified to by the chief
financial officer of the Company;

                  (b)      as soon as available, and in any event within 90 days
after the close of each fiscal year of the Company, a copy of the consolidated
balance sheet of the Company and its Subsidiaries as of the close of such fiscal
year and the consolidated statements of income, retained earnings and cash flows
of the Company 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 and a comparison to budget, accompanied by an
unqualified opinion thereon of KPMG LLP or another firm of independent public
accountants of recognized national standing, selected by the Company 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 Company 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)      a copy of any management letters on internal
accounting controls of the Company 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 Company 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 Company files with the Securities
and Exchange Commission or any successor thereto, or with any national
securities exchanges;

                                       30


                  (e)      promptly after knowledge thereof shall have come to
the attention of any responsible officer of the Company, written notice of (x)
any threatened or pending litigation or governmental proceeding or labor
controversy against the Company or any Subsidiary which, if adversely
determined, would have a material adverse effect on the financial condition,
Properties, business or operations of the Company and its Subsidiaries taken as
a whole or of (y) the occurrence of any Default or Event of Default hereunder;

                  (f)      as soon as available, and in any event within 30 days
prior to the end of each fiscal year of the Company, a copy of the Company's
consolidated and consolidating business plan for the following fiscal year, such
budget and business plan to show the Company's projected consolidated and
consolidating revenues, expenses and balance sheet on a
quarter-by-quarter/month-by-month basis, such business plan to be in reasonable
detail prepared by the Company and in form satisfactory to the Agent and the
Majority Holders (which shall include a summary of all assumptions made in
preparing such budget and business plan);

                  (g)      notice of any Change of Control; and

                  (h)      within thirty (30) days after the close of each
month, a Borrowing Base Certificate prepared as of the last day of such month.

         Each of the financial statements furnished to the holders of the Notes
pursuant to clauses (a) and (b) of this Section shall be accompanied by a
written certificate in the form attached hereto as Exhibit C signed by the chief
financial officer of the Company 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 Company 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 Company will, and will cause each Subsidiary to, permit the Agent,
the Purchasers and their duly authorized representatives to visit and inspect
any of the Properties of the Company 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 Company authorizes such accountants to
discuss with the holders of the Notes (and such Persons as any holder of any
Note may designate) the finances and affairs of the Company and its
Subsidiaries) all at such reasonable times and as often as may be reasonably
requested.

         Section 8.6       Total Funded Debt/EBITDA Ratio. The Company shall
not, as of the last day of each fiscal quarter of the Company ending on the
dates set forth below, permit the Total Funded Debt/EBITDA Ratio to be greater
than the corresponding ratio set forth opposite such dates:

                                       31




                                                TOTAL FUNDED
     FISCAL QUARTER                          DEBT/EBITDA RATIO
      ENDING DATES                       SHALL NOT BE GREATER THAN
- -------------------------                --------------------------
                                      
Closing Date through and
     including 9/30/04                          5.00 to 1.0
12/31/04 through 9/30/05                        4.50 to 1.0
12/31/05 through 9/30/06                        4.00 to 1.0
12/31/06 through 9/30/07                        3.50 to 1.0
12/31/07 and thereafter                         3.40 to 1.0


Section 8.7 Total Senior Funded Debt/EBITDA Ratio. The Company shall not, as of
the last day of each fiscal quarter of the Company ending on the dates set forth
below, permit the Total Senior Funded Debt/EBITDA Ratio to be greater than the
corresponding ratio set forth opposite such dates:



                                           TOTAL SENIOR FUNDED
     FISCAL QUARTER                         DEBT/EBITDA RATIO
      ENDING DATES                      SHALL NOT BE GREATER THAN
- -------------------------               --------------------------
                                     
Closing Date through and
   including 9/30/04                            3.95 to 1.0
12/31/04 through 9/30/05                        3.30 to 1.0
12/31/05 through 9/30/06                        2.90 to 1.0
12/31/06 through 9/30/07                        2.45 to 1.0
12/31/07 and thereafter                         2.35 to 1.0


         Section 8.8       Minimum EBITDA. The Company shall not, as of the last
day of each fiscal quarter of the Company ending on the dates set forth below,
permit EBITDA for the four fiscal quarters of the Company then most-recently
ended to be less than the corresponding amount set forth opposite such dates:



     FISCAL QUARTER                    EBITDA FOR SUCH PERIOD SHALL
      ENDING DATE                           NOT BE LESS THAN:
- -------------------------              ----------------------------
                                    
3/31/04 through 9/30/04                         $10,000,000
12/31/04 through 9/30/06                        $10,200,000


                                       32




     FISCAL QUARTER                    EBITDA FOR SUCH PERIOD SHALL
      ENDING DATE                           NOT BE LESS THAN:
- -------------------------              ----------------------------
                                    
12/31/06 and thereafter                          $9,775,000


         Section 8.9       Fixed Charge Coverage Ratio. The Company will not,
as of the last day of each fiscal quarter of the Company ending on the dates set
forth below, permit the Fixed Charge Coverage Ratio to be less than:



     FISCAL QUARTER                              FIXED CHARGE COVERAGE
      ENDING DATES                           RATIO SHALL NOT BE LESS THAN
- -----------------------------                -----------------------------
                                          
At all times                                         1.0 to 1.0


         Section 8.10      Capital Expenditures. The Company will not, nor will
it permit any Subsidiary to, expend or (without duplication) become obligated to
expend, in each case for Capital Expenditures aggregating for the Company and
its Subsidiaries (taken together) an amount during any fiscal year of the
Company in excess of the corresponding amount set forth below opposite such
fiscal year:



                                    CAPITAL EXPENDITURES
FISCAL YEAR                           SHALL NOT EXCEED
- -----------                         --------------------
                                 
    2004                                 $5,280,000
    2005                                 $5,720,000
    2006                                 $7,260,000
    2007                                 $7,370,000
    2008                                 $7,590,000


         Section 8.11      Board Matters. The Company shall hold meetings of its
Board of Directors (the "PARENT BOARD") at least once every quarter. The Board
of Directors of any Subsidiary of the Company (each, a "SUBSIDIARY BOARD") shall
hold meetings at least once every quarter. The Parent Board shall have an audit
committee and a compensation committee. Members of the audit committee and the
compensation committee shall be members of the Parent Board that are not
employees of the Company or any of its Subsidiaries. Pursuant to the Investor
Rights Agreement, any Purchaser holding fifty percent (50%) of the Warrants or
fifty percent (50%) of the Underlying Capital Stock shall have the right to
designate one Person (each, a "DESIGNEE") who shall have observation rights with
respect to all meetings of the Parent Board and any Subsidiary Board. Each
Designee shall have observation rights with respect to all meetings of the
Parent Board and each Subsidiary Board. Each Designee shall have the right to
attend each meeting of the Parent Board and each Subsidiary Board and all
committees, respectively, thereof. The Parent Board and each Subsidiary Board
shall give each Designee and

                                       33


each Purchaser notice of each meeting of its Board and each committee thereof at
the same time and in the same manner as notices given to the members of its
Board (which notice shall be promptly confirmed in writing). Each Designee and
each Purchaser shall be entitled to receive all written materials and other
information given to members of the Parent Board and the Subsidiary Boards and
each committee thereof in connection with such meetings at the same time such
materials and information are given to all other members of such Boards and such
committees. The Company and each Subsidiary shall reimburse each Designee for
reasonable out-of-pocket expenses in connection with attending such Board and
committee meetings. The Company and each Subsidiary agrees to take any and all
actions necessary to effectuate the intent of the foregoing provisions of this
Section 8.11.

         Section 8.12      Investor Protection. In connection with any Change of
Control or similar transaction under circumstances where any Purchaser or any
holder thereof continues to hold a Warrant, the Company shall make, or cause to
be made, available to such Purchaser and/or such holder all economic benefits in
a manner that treats any Purchaser and/or such holder equitably with respect to
all other equity holders of the Company. In this regard, the Company agrees to
structure any Change of Control or similar transaction, under circumstances
where any Purchaser or any holder thereof continues to hold a Warrant, in order
to treat all equity holders, including such Purchaser and/or such holder, in a
fair and equitable manner and such transaction structure shall not include
disguised purchase price components in the form of payments allocated to
covenants not to compete, consulting payments and the like, except for
employment agreements or similar agreements providing for reasonable "arms
length" levels of compensation to such equity holder in return for future
services to be rendered to the acquirer subsequent to a Change of Control.

         Section 8.13      Equity Restriction.  The Company shall not:

                  (a)      except as expressly permitted under Section 8.18 and
8.33 of this Agreement, directly or indirectly make, or permit any of its
Subsidiaries to make, any purchase of any Capital Stock, or directly or
indirectly redeem, purchase or make, or permit any of its Subsidiaries to
redeem, purchase or make, any payments with respect to any stock appreciation
rights, phantom stock plans or similar rights or plans; and

                  (b)      authorize, issue or enter into any agreement
providing for the issuance (contingent or otherwise) of any notes or debt
securities containing equity features (including, without limitation, any notes
or debt securities convertible into or exchangeable for Capital Stock or other
equity securities issued in connection with the issuance of Capital Stock, or
other equity securities or containing profit participation features) at a price
at issuance which is lower than the then current market price of the Company's
Capital Stock except as otherwise expressly contemplated by this Agreement.

         Section 8.14      Indebtedness. The Company 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 neither restrict nor operate to prevent:

                  (a)      obligations of the Company and its Subsidiaries owing
to the Agent and the Senior Lenders (and their Affiliates) under the Senior
Credit Agreement;

                                       34


                  (b)      purchase money indebtedness and Capitalized Lease
Obligations secured by Liens permitted by Section 8.15(d) hereof in an aggregate
amount which does not exceed $3,000,000 at any one time outstanding;

                  (c)      obligations of the Company arising out of interest
rate, foreign currency and commodity hedging arrangements entered into with
financial institutions in the ordinary course of business and not for
speculative purposes;

                  (d)      intercompany borrowings by and from the Company and
its Subsidiaries;

                  (e)      indebtedness secured by Liens permitted by Section
8.15(e) hereof in an aggregate amount which does not exceed $1,000,000 at any
one time outstanding;

                  (f)      unsecured indebtedness in an aggregate principal
amount not to exceed $1,500,000 at any one time outstanding in favor of vendors
or suppliers other than Deere or Caterpillar representing the extension, with
the consent of the creditor, beyond the normal due date (but not beyond 360 days
from invoice) of trade credit incurred in the ordinary course of business;

                  (g)      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;

                  (h)      all obligations of the Company to pay the Purchase
Price (and, to the extent all or any portion of such amount is reinstated
pursuant to the Stock Redemption Agreement, the Stated Redemption Amount) for
the Subject Stock under, and as such capitalized terms are defined in, the Stock
Redemption Agreement;

                  (i)      to the extent not included in Section 8.14(h), the
Junior Subordinated Debt; and

                  (j)      unsecured indebtedness not otherwise permitted by
this Section 8.14 provided the aggregate amount at any one time outstanding does
not exceed $100,000.

         Section 8.15      Liens. The Company 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 Company 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 Company 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

                                       35


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 Company 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;

                  (d)      Liens securing indebtedness permitted by Section
8.14(b) hereof in respect of Property now owned or hereafter acquired by the
Company 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 Company 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 8.14(g) hereof provided such liens do not in any event
encumber any trade fixtures or similar equipment;

                  (g)      Liens granted in favor of Senior Bank Agent on
certain assets of the Company and its Subsidiaries that are subject to the terms
of the Subordination Agreement;

                  (h)      the Liens described on Schedule 8.15 hereof; and

                  (i)      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 Company or any of its Subsidiaries.

         Section 8.16      Investments, Loans, Advances and Guaranties. The
Company 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

                                       36


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;

                  (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)      the Company's investments from time to time in its
Subsidiaries, and other intercompany loans and advances by and from the Company
and its Subsidiaries to one another;

                  (f)      the Mid-Central Notes;

                  (g)      the Guaranties; and

                  (h)      guaranties by the Company of (i) trade accounts
payable of its Subsidiaries arising in the ordinary course of business which are
not more than ninety (90) days past due and (ii) indebtedness of its
Subsidiaries permitted pursuant to Sections 8.14(b), (c), (f), and (j) hereof.

         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.

         In addition to the foregoing, neither the Company nor any Subsidiary
will (i) create or be or become a party to the creation of any special-purpose
vehicle or entity, whether or not the Company or any Subsidiary owns an equity
interest therein, (ii) be or become a partner of any general or limited
partnership or a member of any limited liability Company or similar Person, or
(iii) enter into any agreement pursuant to which it will be allocated any
profits or losses of any Person, whether or not it holds an equity interest of
any type therein.

         Section 8.17      Leases. (a) The Company 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 Company
or any such Subsidiary of any

                                       37


Property theretofore owned by it and which has been or is to be sold or
transferred by such owner to such lender or investor.

                  (a)      Operating Leases. The Company 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 Company 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 Company and its
Subsidiaries under all such leases and similar arrangements would exceed
$7,500,000 for fiscal year 2004, $8,100,000 for fiscal year 2005, and $8,500,000
for fiscal year 2006 and thereafter.

         Section 8.18      Dividends and Certain Other Restricted Payments. The
Company 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:

                           (i)      provided that no Default or Event of Default
         exists before or after giving effect thereto or would be caused
         thereby, the Company's expenditure of up to $20,000 in the aggregate to
         redeem fractional shares of its common stock resulting from a previous
         reverse stock split of the Company; or

                           (ii)     the Company's redemption of up to 10,000
         shares of its Series 1999A Preferred Stock at a redemption price not to
         exceed $50,000 per 333 (or 334, as the case may be) shares redeemed and
         payable at the times set forth in Section 3 of the Stock Redemption
         Agreement as in effect on the Closing Date, provided that at the time
         of such redemption (x) the Company was in compliance with the
         requirements of each of Sections 8.6, 8.7, 8.8, 8.9 and 8.10 of this
         Agreement as of the end of the most recent fiscal quarter for which it
         was required to submit financial statements and a compliance
         certificate pursuant to Section 8.5 hereof, (y) no Event of Default
         exists under Section 10.1(a) or (b) hereof before or after giving
         effect to such redemption and (z) no "Standstill Period" (as defined in
         the Subordination Agreement) is in effect under the Subordination
         Agreement at the time of such redemption.

         Section 8.19      Mergers, Consolidations and Sales. The Company 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 Company may merge or
consolidate with or into the Company or any Wholly Owned Subsidiary of the
Company; provided that in any such merger or consolidation involving the
Company, the Company 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 Company, such Wholly Owned Subsidiary shall be the continuing
or surviving corporation; and provided, further, that, in the case of such a
merger or consolidation

                                       38


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 Company or any Wholly Owned Subsidiary of the Company; and

                  (c)      the Company may merge with a Wholly Owned Subsidiary
incorporated in Delaware and directly owned by the Company solely for the
purpose of changing the Company'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;

                           (ii)     such Wholly Owned Subsidiary shall have
         acknowledged in writing (in form and substance reasonably satisfactory
         to the Agent and Majority Holders) its assumption of all the Company's
         obligations under the Operative Documents to the same extent, with the
         same force and effect, as if such Wholly Owned Subsidiary were
         originally the Company identified and defined therein;

                           (iii)    the Agent shall have received an opinion of
         counsel of the Company, and such other assurances that the Agent or
         Majority Holders 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 Company
         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 Operative 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 Company and its Subsidiaries taken as a whole.

         Section 8.20      Acquisitions. The Company will not, and will not
permit any of its Subsidiaries to, make or commit to make any Acquisitions.

         Section 8.21      Maintenance of Subsidiaries. The Company 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 (a) 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, (b) the issuance of such stock to the Company or a
Wholly-Owned Subsidiary, and (c) the Lien granted on equity interests in the
Company's Subsidiaries in favor of the Agent and, subject to the Subordination
Agreement, Liens granted therein to Senior Bank Agent.

                                       39


         Section 8.22      Formation of Subsidiaries. In the event any
Subsidiary is formed or acquired after the date hereof, the Company 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 holders of the Notes a security
interest in and lien on the personal property of such Subsidiary as collateral
security for the Notes and the other Obligations, 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 the
Operative 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 8.23      ERISA. The Company 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
Company will, and will cause each of its Subsidiaries to, promptly notify the
holders of the Notes of (i) the occurrence of any Reportable Event 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
Company or any of its Subsidiaries of any material liability, fine or penalty,
or any material increase in the contingent liability of the Company or any such
Subsidiary with respect to any post-retirement Welfare Plan benefit.

         Section 8.24      Compliance with Laws. The Company 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
Company or any such Subsidiary, non-compliance with which could have a Material
Adverse Effect or would reasonably be expected to result in a Lien upon any of
their Property.

         Section 8.25      Burdensome Contracts with Affiliates. The Company
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 Company or such Subsidiary than would be usual and customary in
similar contracts, agreements or business arrangements between Persons not
affiliated with each other.

         Section 8.26      Changes in Fiscal Year. Except to change (with notice
to the Purchasers) its fiscal year to correspond with the calendar year, neither
the Company nor any of its Subsidiaries will change its fiscal year from its
present basis without the prior written consent of the Majority Holders.

         Section 8.27      Change in the Nature of Business. The Company will
not, and will not permit any of its Subsidiaries to, engage in any business or
activity if as a result the general

                                       40


nature of the business of the Company or any such Subsidiary would be changed in
any material respect from the general nature of the business engaged in by the
Company or such Subsidiary on the date of this Agreement.

         Section 8.28      Use of Loan Proceeds. The Company will use the
proceeds of the Loans solely for the purposes described in, or otherwise
permitted by, Section 6.4 hereof.

         Section 8.29      No Restrictions. Except as provided herein, the
Company shall not, nor shall it permit any Subsidiary to, directly or indirectly
create or otherwise cause or suffer to exist or become effective any consensual
encumbrance or restriction of any kind on the ability of the Company or any
Subsidiary to: (a) pay dividends or make any other distribution on any
Subsidiary's capital stock or other equity interests owned by the Company or any
other Subsidiary, (b) pay any indebtedness owed to the Company or any other
Subsidiary, (c) make loans or advances to the Company or any other Subsidiary,
(d) transfer any of its Property to the Company or any other Subsidiary, or (e)
guarantee the Obligations and/or grant Liens on its assets to the Agent as
required by the Operative Documents, except for such encumbrances or
restrictions relating to (i) customary non-assignment provisions of any lease
and restrictions therein restricting subletting, (ii) customary net worth
provisions contained in leases and other agreements entered into by the Company
or a Subsidiary in the ordinary course of business, (iii) customary
non-assignment provisions in licenses entered into by the Company or a
Subsidiary as lessee, in the ordinary course of business, and (iv) purchase
money obligations and Capitalized Lease Obligations that impose restrictions on
the property purchased or leased.

         Section 8.30      Senior Debt. The Company shall not, nor shall it
permit any Subsidiary to, amend or modify the terms and conditions applicable to
the Senior Debt owing to Senior Lender in violation of the terms of the
Subordination Agreement.

         Section 8.31      Junior Subordinated Debt. The Company shall not, nor
shall it permit any Subsidiary to (a) amend or modify the terms and conditions
applicable to the Subordinated Debt owing to Messrs. Buie and Butler or amend or
modify any terms applicable to any other Subordinated Debt in any respect
whatsoever, (b) make any voluntary prepayment of the Junior Subordinated Debt or
effect any voluntary redemption thereof, or (c) make any payment on account of
any Subordinated Debt which is prohibited under the terms of any instrument or
agreement Subordinating the same to the Obligations. Notwithstanding the
foregoing, the Company may agree to a decrease in the interest rate applicable
to the Junior Subordinated Debt or to a deferral of repayment of any of the
principal of or interest on the Junior Subordinated Debt beyond the current due
dates therefor.

         Section 8.32      [Reserved].

         Section 8.33      Worthington Settlement Documents. The Company will
not, nor will it permit any Subsidiary to, amend or modify any of the terms or
provisions of either of the Settlement Agreement or the Stock Redemption
Agreement without the prior written consent of the Majority Holders. The Company
will not, nor will it permit any Subsidiary to, (i) prepay or otherwise advance
the time for the payment of any amounts due, or pay more than the amounts
otherwise due, under the Settlement Agreement or the Stock Redemption Agreement,
or (ii) pay any amount due under the Stock Redemption Agreement unless such
payment is permitted

                                       41


pursuant to the terms of Section 8.18 hereof (or represents interest on such a
permitted payment permitted to be paid pursuant to the immediately following
sentence), without (in each case described in the foregoing clauses (i) and
(ii)) the prior written consent of the Majority Holders. Without limiting the
foregoing, the Company will not pay, or permit any Subsidiary to pay, more than
$50,000 during any month as a payment of the Purchase Price (as defined in the
Stock Redemption Agreement) for the Subject Stock (as defined in the Stock
Redemption Agreement), unless such additional payment is a Deferred Payment (as
defined in the Stock Redemption Agreement) or interest on a Deferred Payment
which, pursuant to the terms of the Stock Redemption Agreement, may no longer be
deferred. If the making of any payment due under the Stock Redemption Agreement
would constitute a Payment Default or a Statutory Default (as those terms are
defined in the Stock Redemption Agreement), the Company will, and will cause any
Subsidiary to, take all necessary actions to defer such payment under the Stock
Redemption Agreement in accordance with the terms thereof.

         Section 8.34      Mid-Central Debt. The Company will not, nor will it
permit Mid-Central or any other Subsidiary to, amend or modify any of the terms
or provisions of, or agree to defer or forgive any payments otherwise due under,
any of the Mid-Central Notes, except to the extent required by the Wells Fargo
Subordination Agreement.

         Section 8.35      D & O Insurance. The Company shall at all times
maintain directors' and officers' liability insurance policies.

         Section 8.36      Capital Stock. The Company shall at all times reserve
and keep available out of its authorized but unissued shares of Capital Stock,
solely for the purpose of issuance upon any conversion of the Warrants, such
number of shares of Capital Stock issuable upon the conversion of the Warrants.
All shares of Capital Stock which are so issuable shall, when issued, be duly
and validly issued, fully paid and nonassessable and free from all taxes, liens,
charges and encumbrances. The Company shall take all such actions as may be
necessary to assure that all such Shares of Capital Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which Shares of Capital
Stock may be listed.

         Section 8.37      Management Compensation. The Company shall not,
without the Agent's prior written approval, increase the compensation paid to
any officer, key employee or consultant in excess of historical increases in
such compensation consistent with the past practices of the Company; provided,
however, that, upon the approval of the compensation committee of the Parent
Board, the Company shall be permitted to pay to William Morton a bonus of up to
$150,000 for the Company's 2003 fiscal year.

         Section 8.38      Additional Life Insurance. No later than forty-five
(45) days following the Closing Date, the Agent shall have received, for the
benefit of the Purchasers, collateral assignments of life insurance in form and
substance satisfactory to the Agent on the lives of certain key employees of the
Company determined by the Agent, which insurance shall be in an aggregate amount
of not less than $1,000,000 for all such persons.

         In addition to the foregoing, so long any portion of the Warrant, the
Underlying Capital Stock or the Deferred Put Obligations remains outstanding,
except to the extent compliance in

                                       42


any case or cases is waived in writing by the Majority Holders, the Company
shall and shall cause its Subsidiaries to observe the covenants set forth in
Sections 8.1, 8.2, 8.5, 8.11, 8.12, 8.13, 8.36 and 8.37 hereof.

                                   SECTION 9

                REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

         As a material inducement to the Company entering into this Agreement
and selling the Securities hereunder, each Purchaser, severally but not jointly,
hereby represents and warrants to Holdings and the Company as follows:

         Section 9.1       Organization and Good Standing. It is a limited
partnership, limited liability company or corporation, as the case may be, duly
organized, validly existing and in good standing under the laws of its state of
formation or organization and has all requisite power and authority to carry on
its business as now conducted.

         Section 9.2       Authorization; Power. The execution and delivery by
it of, and the performance by it under, the Operative Documents to which it is a
party and the purchase of the Note and the Warrant issued in favor of it have
been duly authorized by all requisite action, and it has the full right, power
and authority to enter into, and perform its obligations under, this Agreement.

         Section 9.3       Validity. This Agreement has been duly executed and
delivered by it and constitutes its valid and binding obligation, enforceable in
accordance with its terms, except as the same may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles,
regardless of whether such enforceability is considered in a proceeding in
equity or at law. The execution, delivery and performance of this Agreement and
the purchase of the Securities will not conflict with, or result in a material
breach of any of the terms of, or constitute a material default under, its
charter documents.

         Section 9.4       Accredited Investor. It is an "accredited investor"
as such term is defined in Rule 501 of Regulation D under the Securities Act.

         Section 9.5       Purchase for Own Account; Acknowledgment of Risk. It
is acquiring the Securities purchased hereunder by it or acquired pursuant
hereto by it for its own account without the present intention of resale or
distribution. It acknowledges that it may not resell or otherwise transfer such
Securities without an effective registration statement or exemption therefrom
under federal and applicable state securities laws, and that it may have to hold
its investment for an indefinite amount of time. It further acknowledges that
the purchase of the Securities is a risky investment and that it may lose its
entire investment hereby.

                                       43


                                   SECTION 10

                         EVENTS OF DEFAULT AND REMEDIES.

         Section 10.1      Events of Default. 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

                  (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 Company hereunder or under any other Operative
Document; or

                  (c)      default in the observance or performance of any
covenant set forth in Section 8.1, 8.6, 8.7, 8.8, 8.9, 8.10, 8.13, 8.14, 8.15,
8.16, 8.17, 8.18, 8.19, 8.20, 8.21, 8.22, 8.28, 8.31, 8.33 or 8.34 hereof or of
any provision in any Operative Document dealing with the use, disposition or
remittance of the proceeds of Collateral or requiring the maintenance of
insurance thereon; or

                  (d)      default in the observance or performance of any
covenant set forth in Section 8.5, 8.11 or 8.12 which is not remedied within ten
(10) days after written notice thereof to the Company by the Agent or any holder
of any Note; or

                  (e)      default in the observance or performance of any other
provision hereof or of any other Operative Document which is not remedied within
thirty (30) days after written notice thereof to the Company by the Agent or any
holder of any Note; or

                  (f)      any representation or warranty made by the Company
herein or in any other Operative Document, or in any statement or certificate
furnished by it pursuant hereto or thereto, or in connection with the purchase
and sale of the Securities, proves untrue in any material respect as of the date
of the issuance or making thereof; or

                  (g)      any event occurs or condition exists (other than
those described in subsections (a) through (f) above) which is specified as an
event of default under any of the other Operative Documents, or any of the
Operative Documents shall for any reason not be or shall cease to be in full
force and effect or is declared to be null and void, or any Guarantor shall
purport to disavow, revoke, repudiate or terminate its obligations thereunder,
or any of the Collateral Documents shall for any reason fail to create a valid
and perfected first priority Lien in favor of the Agent in any Collateral
purported to be covered thereby except as expressly permitted by the terms
thereof, or any Subsidiary takes any action for the purpose of terminating,
repudiating or rescinding any Loan Document executed by it or any of its
obligations thereunder; or

                  (h)      default shall occur under any evidence of
Indebtedness aggregating $1,000,000 or more issued, assumed or guaranteed by the
Company or any Subsidiary or under

                                       44


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 Company 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 Company 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 Company 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 Material Plan against
the Company 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)      a Change of Control shall occur; or

                  (l)      the Company 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 this Section
10.1(l); or

                  (m)      a custodian, receiver, trustee, examiner, liquidator
or similar official shall be appointed for the Company or any of its
Subsidiaries or any substantial part of any of their Property, or a proceeding
described in Section 10.1(l) shall be instituted against the Company or any of
its Subsidiaries, and such appointment continues undischarged or such proceeding
continues undismissed or unstayed for a period of sixty (60) days; or

                  (n)      the Senior Lenders shall accelerate the Senior Debt;
or

                                       45


                  (o)      the Company shall breach or fail to perform any of
its covenants or obligations contained in the Investor Rights Agreement; or

                  (p)      all or any portion of the outstanding principal of
the Notes (or any accrued and unpaid interest thereon) has not been paid in full
and any Purchaser exercises its put rights under the Warrant; or

                  (q)      the Company shall have defaulted in any of its
obligations under any Warrant.

         Section 10.2      Consequences of Events of Default.

                  (a)      If any Event of Default has occurred, the total
interest rate on the Notes shall increase immediately by two (2) percentage
points and such two percent (2%) shall be deemed to be and treated as Current
Interest. Any increase of the Current Interest resulting from the operation of
this subsection shall terminate as of the close of business on the date on which
no Event of Default exists (subject to subsequent increases pursuant to this
subparagraph). Notwithstanding the foregoing, if a Payment Default occurs at any
time on or prior to December 31, 2004, the sum of the Current Interest and
Deferred Interest with respect to the Notes shall permanently increase by two
(2) percentage points (i.e., from sixteen percent (16%) to eighteen percent
(18%)); provided, however, that if such Payment Default is cured within one
hundred eighty (180) days of the occurrence thereof, the sum of the Current
Interest and Deferred Interest shall thereafter decrease to sixteen percent
(16%).

                  (b)      If an Event of Default of the type described in
Section 10.1(l) has occurred, then the aggregate principal amount of the Notes
(together with all accrued interest thereon and all other amounts due and
payable with respect thereto) shall become immediately due and payable without
any action on the part of the holders of the Notes, and the Company shall
immediately pay to the holders of the Notes all amounts due and payable with
respect to the Notes.

                  (c)      If any Event of Default has occurred and is
continuing, then each holder of the Notes may declare all or any portion of the
outstanding principal amount of its Note (together with all accrued interest
thereon and all other amounts due and payable with respect thereto) to be
immediately due and payable and may demand immediate payment of all or any
portion of the outstanding principal amount of such Note (together with all such
other amounts then due and payable) owned by such holder.

                  (d)      Subject to Section 11 hereof the Agent (at the
direction of the Majority Holder), shall also have any other rights which such
holder may be afforded under any contract or agreement from time to time and any
other rights which such holder may have pursuant to applicable law.

                  (e)      The Agent (at the direction of the Majority Holders)
may commence enforcement actions under the Collateral Documents and may exercise
the Put under and as defined in the Warrants.

                                       46


                                   SECTION 11

                                    THE AGENT

         Section 11.1      Appointment and Authorization of Agent. Each
Purchaser hereby appoints BMO Nesbitt Burns Capital (U.S.), Inc. as the Agent
under the Operative Documents and hereby authorizes the Agent to take such
action as Agent on its behalf and to exercise such powers under the Operative
Documents as are delegated to the Agent by the terms thereof, together with such
powers as are reasonably incidental thereto. The Purchasers expressly agree that
the Agent is not acting as a fiduciary of the holders of the Notes in respect of
the Operative Documents, the Company or otherwise, and nothing herein or in any
of the other Operative Documents shall result in any duties or obligations on
the Agent or any of the Operative Documents except as expressly set forth
herein.

         Section 11.2      Agent and its Affiliates. The Agent shall have the
same rights and powers under this Agreement and the other Operative Documents as
any other Purchaser and may exercise or refrain from exercising such rights and
power as though it were not the Agent, and the Agent and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Company or any Affiliate of the Company as if it were not the
Agent under the Operative Documents. The term "PURCHASER" or "HOLDER OF A NOTE"
as used herein and in all other Operative Documents, unless the context
otherwise clearly requires, includes the Agent in its individual capacity as a
holder of a Note. References herein to the Agent's Notes, or to the amount owing
to the Agent for which an interest rate is being determined, refer to the Agent
in its individual capacity as a holder of a Note.

         Section 11.3      Action by Agent. If the Agent receives from the
Company a written notice of an Event of Default pursuant to Section 8.5 hereof,
the Agent shall promptly give each of the holders of the Notes written notice
thereof. The obligations of the Agent under the Operative Documents are only
those expressly set forth therein. Without limiting the generality of the
foregoing, the Agent shall not be required to take any action hereunder with
respect to any Default or Event of Default, except as expressly provided in
Section 11.2. Upon the occurrence of an Event of Default, the Agent shall take
such action to enforce its Lien on the Collateral and to preserve and protect
the Collateral as may be directed by the Majority Holders. Unless and until the
Majority Holders give such direction, the Agent may (but shall not be obligated
to) take or refrain from taking such actions as it deems appropriate and in the
best interest of all the holders of the Notes. In no event, however, shall the
Agent be required to take any action in violation of applicable law or of any
provision of any Operative Document, and the Agent shall in all cases be fully
justified in failing or refusing to act hereunder or under any other Operative
Document unless it first receives any further assurances of its indemnification
from the holders of the Notes that it may require, including prepayment of any
related expenses and any other protection it requires against any and all costs,
expense, and liability which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall be entitled to assume that
no Default or Event of Default exists unless notified in writing to the contrary
by a holder of a Note or the Company. In all cases in which the Operative
Documents do not require the Agent to take specific action, the Agent shall be
fully justified in using its discretion in failing to take or in taking any
action thereunder. Any instructions of the Majority Holders, or of any other
group

                                       47


of holders of the Notes called for under the specific provisions of the
Operative Documents, shall be binding upon all the holders of the Notes and the
holders of the Obligations.

         Section 11.4      Consultation with Experts. The Agent may consult with
legal counsel, independent public accountants, and other experts selected by it
and shall not be liable for any action taken or omitted to be taken by it in
good faith in accordance with the advice of such counsel, accountants or
experts.

         Section 11.5      Liability of Agent; Credit Decision. Neither the
Agent nor any of its directors, officers, agents or employees shall be liable
for any action taken or not taken by it in connection with the Operative
Documents: (i) with the consent or at the request of the Majority Holders or
(ii) in the absence of its own gross negligence or willful misconduct. Neither
the Agent nor any of its directors, officers, agents or employees shall be
responsible for or have any duty to ascertain, inquire into or verify: (i) any
statement, warranty or representation made in connection with this Agreement,
any other Operative Document or any Note or Warrant; (ii) the performance or
observance of any of the covenants or agreements of the Company or any
Subsidiary contained herein or in any other Operative Document; (iii) the
satisfaction of any condition specified in Section 7 hereof, except receipt of
items required to be delivered to the Agent; or (iv) the validity,
effectiveness, genuineness, enforceability, perfection, value, worth or
collectibility hereof or of any other Operative Document or of any other
documents or writing furnished in connection with any Operative Document or of
any Collateral; and the Agent makes no representation of any kind or character
with respect to any such matter mentioned in this sentence. The Agent may
execute any of its duties under any of the Operative Documents by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
holders of the Notes, the Company, or any other Person for the default or
misconduct of any such agents or attorneys-in-fact selected with reasonable
care. The Agent shall not incur any liability by acting in reliance upon any
notice, consent, certificate, other document or statement (whether written or
oral) believed by it to be genuine or to be sent by the proper party or parties.
In particular and without limiting any of the foregoing, the Agent shall have no
responsibility for confirming the accuracy of any compliance certificate or
other document or instrument received by it under the Operative Documents. The
Agent may treat the payee of any Note as the holder thereof until written notice
of transfer shall have been filed with the Agent signed by such payee in form
satisfactory to the Agent. Each holder of a Note acknowledges that it has
independently and without reliance on the Agent or any other holder of any Note,
and based upon such information, investigations and inquiries as it deems
appropriate, made its own credit analysis and decision to purchase the
Securities in the manner set forth in the Operative Documents. It shall be the
responsibility of each holder of any Note to keep itself informed as to the
creditworthiness of the Company and its Subsidiaries, and the Agent shall have
no liability to any holder of any Note with respect thereto.

         Section 11.6      Indemnity. The holders of the Notes shall ratably, in
accordance with their respective interests in the Notes and Warrants, indemnify
and hold the Agent, and its directors, officers, employees, agents, and
representatives harmless from and against any liabilities, losses, costs or
expenses suffered or incurred by it under any Operative Document or in
connection with the transactions contemplated thereby, regardless of when
asserted or arising, except to the extent they are promptly reimbursed for the
same by the Company and except to the extent that any event giving rise to a
claim was caused by the gross negligence or willful

                                       48


misconduct of the party seeking to be indemnified. The obligations of the
holders of the Notes under this Section shall survive termination of this
Agreement. The Agent shall be entitled to offset amounts received for the
account of a holder of a Note under this Agreement against unpaid amounts due
from such holder 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 holder of a Note arising outside of this Agreement and
the other Operative Documents.

         Section 11.7      Resignation of Agent and Successor Agent. The Agent
may resign at any time by giving written notice thereof to the holders of the
Notes and the Company. Upon any such resignation of the Agent, the Majority
Holders shall have the right to appoint a successor Agent. If no successor Agent
shall have been so appointed by the Majority Holders, and shall have accepted
such appointment, within 30 days after the retiring Agent's giving of notice of
resignation then the retiring Agent may, on behalf of the holders of the Notes,
appoint a successor Agent, which may be any holder of a Note hereunder or any
commercial bank organized under the laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$200,000,000. Upon the acceptance of its appointment as the Agent hereunder,
such successor Agent shall thereupon succeed to and become vested with all the
rights and duties of the retiring Agent under the Operative Documents, and the
retiring Agent shall be discharged from its duties and obligations thereunder.
After any retiring Agent's resignation hereunder as Agent, the provisions of
this Section 11 and all protective provisions of the other Operative Documents
shall inure to its benefit as to any actions taken or omitted to be taken by it
while it was Agent, but no successor Agent shall in any event be liable or
responsible for any actions of its predecessor. If the Agent resigns and no
successor is appointed, the rights and obligations of such Agent shall be
automatically assumed by the Majority Holders and (i) the Company shall be
directed to make all payments due each holder of any Note hereunder directly to
such holder and (ii) the Agent's rights in the Collateral Documents shall be
assigned without representation, recourse or warranty to the holders of the
Notes as their interests may appear.

         Section 11.8      Designation of Additional Agents. The Agent shall
have the continuing right, for purposes hereof, at any time and from time to
time to designate one or more of the holders of the Notes (and/or its or their
Affiliates) as "SYNDICATION AGENTS," "DOCUMENTATION AGENTS," "ARRANGERS," or
other designations for purposes hereto, but such designation shall have no
substantive effect, and such holder and their Affiliates shall have no
additional powers, duties or responsibilities as a result thereof.

         Section 11.9      Authorization to Release or Subordinate or Limit
Liens. The Agent is hereby irrevocably authorized by each Purchaser and any of
the holders of the Notes to (a) release any Lien covering any Collateral that is
sold, transferred, or otherwise disposed of in accordance with the terms and
conditions of this Agreement and the relevant Collateral Documents (including a
sale, transfer, or disposition permitted by the terms of Section 8.19 hereof or
which has otherwise been consented to in accordance with Section 13.3 hereof),
(b) release or subordinate any Lien on Collateral consisting of goods financed
with purchase money indebtedness or under a Capital Lease to the extent such
purchase money indebtedness or Capitalized Lease Obligation, and the Lien
securing the same, are permitted by Sections 8.14(b) and 8.15(d) hereof, and (c)
reduce or limit the amount of the indebtedness secured by any

                                       49


particular item of Collateral to an amount not less than the estimated value
thereof to the extent necessary to reduce mortgage registry, filing and similar
tax.

         Section 11.10     Authorization to Enter into, and Enforcement of, the
Collateral Documents. The Agent is hereby irrevocably authorized by each of the
holders of the Notes to execute and deliver the Collateral Documents on behalf
of each of the holders of the Notes and their Affiliates and to take such action
and exercise such powers under the Collateral Documents as the Agent considers
appropriate, provided the Agent shall not amend the Collateral Documents unless
such amendment is agreed to in writing by the Majority Holders. Each holder of
the Notes acknowledges and agrees that it will be bound by the terms and
conditions of the Collateral Documents upon the execution and delivery thereof
by the Agent. Except as otherwise specifically provided for herein, no holder
(or its Affiliates) other than the Agent 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 or for the execution of any trust or power in
respect of the Collateral or for the appointment of a receiver or for the
enforcement of any other remedy under the Collateral Documents; it being
understood and intended that no one or more of the holder of the Notes (or their
Affiliates) shall have any right in any manner whatsoever to affect, disturb or
prejudice the Lien of the Agent (or any security trustee therefor) under the
Collateral Documents by its or their action or to enforce any right thereunder,
and that all proceedings at law or in equity shall be instituted, had, and
maintained by the Agent (or its security trustee) in the manner provided for in
the relevant Collateral Documents for the benefit of the holder of the Notes and
their Affiliates.

         Section 11.11     Subordination and Intercreditor Agreement. The Agent
is hereby irrevocably authorized by each of the Purchasers on their own behalf
to execute and deliver the Subordination Agreement on the Closing Date, and to
take such action and exercise such powers under the Subordination Agreement as
the Agent considers appropriate. Each Lender acknowledges that it has read, and
accepts, the Subordination Agreement and will be bound by the terms and
conditions thereof.

                                   SECTION 12

                                 THE GUARANTIES

         Section 12.1      The Guaranties. To induce the Purchasers to purchase
the Securities 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
guarantees jointly and severally to the Agent, the Purchasers, their Affiliates
and each other holder of the Securities and any of the Obligations, 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
Notes and obligations with respect to the Warrants and under the Deferred Put
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 as and when the same shall become due and payable, whether at its stated
maturity, by acceleration or otherwise, according to the terms

                                       50


thereof (the Obligations so guaranteed being hereinafter referred to
collectively as the "GUARANTEED OBLIGATIONS"). In case of failure by the Company
punctually to pay any Guaranteed Obligations, each Guarantor hereby
unconditionally and jointly and severally agrees 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 Company.

         Section 12.2      Guaranty Unconditional. The obligations of each
Guarantor as a guarantor under this Section 12 and with respect to the Operative
Documents 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 Company or of any other
Guarantor under this Agreement or any other Operative Document or by operation
of law or otherwise;

                  (b)      any modification or amendment of or supplement to
this Agreement or any other Operative Document;

                  (c)      any change in the corporate existence, structure or
ownership of, or any insolvency, bankruptcy, reorganization or other similar
proceeding affecting, the Company, any other Guarantor, or any of their
respective assets, or any resulting release or discharge of any obligation of
the Company or of any other Guarantor contained in any Operative Document;

                  (d)      the existence of any claim, set-off or other rights
which the Guarantor may have at any time against the Agent, any holder of any
Note 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 Company, 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 Company, regardless of what
obligations of the Company remain unpaid;

                  (g)      any invalidity or unenforceability relating to or
against the Company or any other Guarantor for any reason of this Agreement or
of any other Operative Document or any provision of applicable law or regulation
purporting to prohibit the payment by the Company or any other Guarantor of the
principal of or interest on any Note or any other amount payable by them under
the Operative Documents; or

                  (h)      any other act or omission to act or delay of any kind
by the Agent, any holder of any Note 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 Operative Documents.

         Section 12.3      Discharge Only upon Payment in Full; Reinstatement in
Certain Circumstances. Each Guarantor's obligations under this Section 12 shall
remain in full force and

                                       51


effect until the principal of and interest on the Notes and all other Guaranteed
Obligations shall have been paid and satisfied in full. If at any time any
payment of the principal of or interest on any Note or any other amount payable
by the Company under any of the Operative Documents is rescinded or must be
otherwise restored or returned upon the insolvency, bankruptcy or reorganization
of the Company or of any Guarantor, or otherwise, each Guarantor's obligations
under this Section 12 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.

         Section 12.4      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
holder of any Note or any other Person against the Company, 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 payment by such Guarantor of any amount pursuant to any
of the Operative Documents on account of credit extended to the Company 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.

         Section 12.5      Limit on Recovery. Notwithstanding any other
provision hereof, the right of recovery against each Guarantor under this
Section 12 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 12.6      Stay of Acceleration. If acceleration of the time for
payment of any amount payable by the Company under this Agreement or any other
Operative Document is stayed upon the insolvency, bankruptcy or reorganization
of the Company, all such amounts otherwise subject to acceleration under the
terms of this Agreement or the other Operative Documents shall nonetheless be
payable jointly and severally by the Guarantors hereunder forthwith on demand by
the Agent made at the request of the Majority Holders.

         Section 12.7      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.

                                       52


         Section 12.8      Guarantor Covenants. Each Guarantor shall take such
action as the Company is required by this Agreement to cause such Guarantor to
take, and shall refrain from taking such action as the Company is required by
this Agreement to prohibit such Guarantor from taking.

                                   SECTION 13

                                 MISCELLANEOUS.

         Section 13.1      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 13.2      No Waiver, Cumulative Remedies. No delay or failure
on the part of the Agent 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 holder of any Note are cumulative to, and not exclusive of, any rights or
remedies which any of them would otherwise have.

         Section 13.3      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 Majority Holders;
provided, however, that without the consent of all holders of the Notes no such
amendment, modification or waiver shall increase the amount or extend the terms
of any Note 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 holder 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
"MAJORITY HOLDERS" or change the number of holders of Notes 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 13.4      Costs and Expenses. The Company agrees to pay on
demand the costs and expenses of the Agent in connection with the negotiation,
preparation, execution and delivery of the Operative 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 Vedder, Price, Kaufman & Kammholz, P.C.,
counsel for the Agent, with respect to all 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 holders of the
Notes or any other holders of a Note in connection with a default under

                                       53


or the enforcement of the Operative Documents or any other instrument or
document to be delivered hereunder or thereunder. The Company agrees to
indemnify and save the holders of the Notes and the Agent harmless from any and
all liabilities, losses, costs and expenses (collectively, "INDEMNIFIED
LIABILITIES") incurred by the holders of the Notes or the Agent in connection
with any action, suit or proceeding brought against the Agent or any holder of
any Note by any Person (but excluding attorneys' fees for litigation solely
between the holders of the Notes to which the Company 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 holder of any Note 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 provisions of
this Section and the protective provisions of Section 2 hereof shall survive
payment of the Notes.

         Section 13.5      Documentary Taxes. The Company agrees to pay on
demand any documentary, stamp or similar taxes payable in respect of this
Agreement, the Notes, the Warrant, any Collateral Document 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 13.6      Survival of Representations. All representations and
warranties made herein or in any other Operative 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 13.7      Survival of Indemnities. All indemnities and other
provisions relative to reimbursement to the holders of the Notes of amounts
sufficient to protect the yield of the holders of the Notes with respect to the
Notes, 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 13.8      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 Company, or on the appropriate signature page hereof, in the
case of the holders of the Securities and the Agent, or such other address or
telecopier number as such party may hereafter specify by notice to the Agent and
the Company given by United States certified or registered mail or by telecopy.
Notices hereunder to the Company 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

                                       54


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 13.9      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 13.10     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 13.11     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 13.12     Binding Nature, Governing Law, Etc. This Agreement
shall be binding upon the Company and its successors and assigns, and shall
inure to the benefit of the Agent and the Purchasers 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 regard to principles of conflicts of laws. The Company may not
assign its rights hereunder without the written consent of the Agent and the
holders of the Notes.

         Section 13.13     Entire Understanding. This Agreement, together with
other Operative Documents, constitutes 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.

                  (a)      Transfer Restrictions. The Securities acquired
pursuant hereto are subject to the applicable transfer restrictions contained in
the Notes, the Warrants and the Investor Rights Agreement, as the case may be.

         Section 13.14     Confidentiality. The Agent and each holder of any
Note shall hold in confidence any material nonpublic information delivered or
made available to them by the Company or any Subsidiary. The foregoing to the
contrary notwithstanding, nothing herein shall prevent any holder of any Note
from disclosing any information delivered or made available to it by the Company
or any Subsidiary (i) to any other holder, (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

                                       55


Agent or any holder of any Note which is not permitted by this Agreement, (vi)
in connection with any litigation to which the Agent, any holder, or any of
their respective Affiliates may be a party, along with the Company, 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 or otherwise, (viii) to such holder's Affiliates and to its and its
Affiliates' 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 hereby.

         Section 13.15     Sharing of Set-Off. Each holder of any Note agrees
with each other holder a party hereto that if such holder shall receive and
retain any payment, whether by set-off or application of deposit balances or
otherwise, on any of the Notes or Obligations in excess of its ratable share of
payments on all such Obligations then outstanding to the holder of the Notes,
then such holder shall purchase for cash at face value, but without recourse,
ratably from each of the other holders such amount of the Notes or Obligations,
or participations therein, held by each such other holder (or interest therein)
as shall be necessary to cause such holder to share such excess payment ratably
with all the other holders of the Notes; provided, however, that if any such
purchase is made by any holder, and if such excess payment or part thereof is
thereafter recovered from such purchasing holder, the related purchases from the
other holders of the Notes shall be rescinded ratably and the purchase price
restored as to the portion of such excess payment so recovered, but without
interest.

         Section 13.16     Headings. Section headings used in this Agreement are
for reference only and shall not affect the construction of this Agreement.

         Section 13.17     Set-off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such rights,
upon the occurrence and during the continuation of any Event of Default, each
holder of any Note and each subsequent holder of any Obligation is hereby
authorized by the Company and each Guarantor at any time or from time to time,
without notice to the Company or such Guarantor or to any other Person, any such
notice being hereby expressly waived, to set-off and to appropriate and to apply
any and all deposits (general or special, including, but not limited to,
indebtedness evidenced by certificates of deposit, whether matured or unmatured,
but not including trust accounts, and in whatever currency denominated) and any
other indebtedness at any time held or owing by that Purchaser or that
subsequent holder to or for the credit or the account of the Company or such
Guarantor, whether or not matured, against and on account of the Obligations of
the Company or such Guarantor to that Purchaser or that subsequent holder under
the Operative Documents, including, but not limited to, all claims of any nature
or description arising out of or connected with the Operative Documents,
irrespective of whether or not (a) that Purchaser or that subsequent holder
shall have made any demand hereunder or (b) the principal of or the interest on
the Loans or Notes and other amounts due hereunder shall have become due and
payable pursuant to Section 9 hereof and although said obligations and
liabilities, or any of them, may be contingent or unmatured.

         Section 13.18     Construction. The provisions of this Agreement
relating to Subsidiaries shall only apply during such times as the Company has
one or more Subsidiaries. NOTHING CONTAINED HEREIN SHALL BE DEEMED OR CONSTRUED
TO PERMIT ANY ACT OR OMISSION WHICH IS PROHIBITED BY THE TERMS OF ANY COLLATERAL
DOCUMENT, THE COVENANTS AND AGREEMENTS

                                       56


CONTAINED HEREIN BEING IN ADDITION TO AND NOT IN SUBSTITUTION FOR THE COVENANTS
AND AGREEMENTS CONTAINED IN THE COLLATERAL DOCUMENTS.

         Section 13.19     Submission to Jurisdiction; Waiver of Jury Trial. The
Company and the Guarantors hereby submit to the nonexclusive jurisdiction of the
United States District Court for the Northern District of Illinois and of any
Illinois State court sitting in the City of Chicago for purposes of all legal
proceedings arising out of or relating to this Agreement, the other Operative
Documents or the transactions contemplated hereby or thereby. The Company and
the Guarantors irrevocably waive, to the fullest extent permitted by law, any
objection which they may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum. THE COMPANY,
THE GUARANTORS, THE AGENT, AND THE PURCHASERS HEREBY IRREVOCABLY WAIVE ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO
ANY LOAN DOCUMENT OR THE TRANSACTIONS CONTEMPLATED THEREBY.

                          [SIGNATURE PAGES TO FOLLOW]

                                       57


         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 the date first above written.

                                      MORTON INDUSTRIAL GROUP, INC.

                                      By:  /s/ WILLIAM D. MORTON
                                          --------------------------------------
                                         Its:  Chairman
                                              ----------------------------------

                                      MORTON METALCRAFT CO.

                                      By:  /s/ WILLIAM D. MORTON
                                          --------------------------------------
                                         Its:  President
                                              ----------------------------------

                                      MORTON METALCRAFT CO. OF NORTH CAROLINA

                                      By:  /s/ WILLIAM D. MORTON
                                          --------------------------------------
                                         Its:  President
                                              ----------------------------------

                                      MORTON METALCRAFT CO. OF SOUTH CAROLINA

                                      By:  /s/ WILLIAM D. MORTON
                                          --------------------------------------
                                         Its:  President
                                              ----------------------------------

                                      MID CENTRAL PLASTICS, INC.

                                      By:  /s/ WILLIAM D. MORTON
                                          --------------------------------------
                                         Its:  President
                                              ----------------------------------

                                      B&W METAL FABRICATORS, INC.

                                      By:  /s/ WILLIAM D. MORTON
                                          --------------------------------------
                                         Its:  President
                                              ----------------------------------

                                       58


         Accepted and Agreed to at Chicago, Illinois as of the day and year last
above written.

                                      BMO NESBITT BURNS CAPITAL (U.S.), INC.,
                                      as Agent and as a Purchaser

                                      By:  /s/ DOUGLAS P. SUTTON
                                          --------------------------------------
                                      Name:  Douglas P. Sutton
                                      Title: Managing Director


                                       59


                               PURCHASER SCHEDULE



Purchaser                              Aggregate Principal Amount
(Notice and Payment                    of Notes to be
Information)                           Purchased                      Note Denominations         Warrants
- --------------------                   --------------------------     ------------------         --------
                                                                                        
BMO Nesbitt Burns Capital              $10,000,000.00                 $10,000,000.00             5 - 545,467 shares
(U.S.), Inc.


                                       1



         THIS WARRANT WAS ORIGINALLY ISSUED ON MARCH 26, 2004 AND NEITHER IT NOR
         THE CLASS A STOCK ISSUABLE UPON EXERCISE HEREOF HAS BEEN REGISTERED
         UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE ILLINOIS
         SECURITIES LAW OF 1953, AND NEITHER MAY BE SOLD OR OFFERED FOR SALE IN
         THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
         OFFERED UNDER THOSE LAWS, OR AN OPINION FROM COUNSEL SATISFACTORY TO
         THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

         The security represented by this certificate is subject to a certain
         Investor Rights Agreement dated as of March 26, 2004 (as amended,
         restated or otherwise modified from time to time, the "Investor Rights
         Agreement"), among the issuer hereof, BMO Nesbitt Burns Capital (U.S.),
         Inc., the issuer hereof, William Morton, Mark Mealy and certain other
         parties named therein. A copy of the Investor Rights Agreement shall be
         furnished without charge by the issuer hereof to the holder hereof upon
         written request.

         The security represented by this certificate is subject to the terms of
         a Subordination and Intercreditor Agreement dated as of March 26, 2004
         (as amended, restated or supplemented from time to time, the
         "Subordination Agreement") between BMO Nesbitt Burns Capital (U.S.),
         Inc., a Delaware corporation, as agent, and Harris Trust and Savings
         Bank, as agent.

                          MORTON INDUSTRIAL GROUP, INC.

                             STOCK PURCHASE WARRANT

March 26, 2004                                               Certificate No. W-5

                  FOR VALUE RECEIVED, Morton Industrial Group, Inc., a Georgia
corporation (the "Company"), hereby grants to BMO Nesbitt Burns
Capital (U.S.), Inc., a Delaware corporation (the "Holder"), or its successors
and assigns (together with the Holder, the "Registered Holders" and,
individually, a "Registered Holder"), the right to purchase from the Company the
Applicable Number of shares of the Class A Common Stock, $.01 par value, of the
Company, at a price per share of $.02 (the "Exercise Price"). This warrant (this
"Warrant") is issued pursuant to the terms of that certain Note and Warrant
Purchase Agreement dated as of March 26, 2004 (as amended, restated or otherwise
modified from time to time, the "Purchase Agreement"), among the Company, the
Holder and certain other parties named therein. Certain capitalized terms used
herein are defined in Section 1 hereof. Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Purchase Agreement.
The amount and kind of



securities obtainable pursuant to the rights granted hereunder and the purchase
price for such securities are subject to adjustment pursuant to the provisions
contained in this Warrant. All warrants, including, without limitation, this
Warrant, representing portions of the rights hereunder are referred to herein as
this "Warrant." This Warrant shall be numbered and shall be registered in a
Warrant Register by the Company at its principal place of business in the State
of Illinois. Unless all or a portion of this Warrant has been assigned as
permitted herein, the Company shall be entitled to treat the Holder as the owner
in fact of this Warrant for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in the Warrant on the part of any other
Person. For tax purposes, the value of this Warrant as of the date hereof is
$10,000.

         This Warrant is subject to the following provisions:

1.       Definitions. The terms set forth below have the following meanings:

                  "Applicable Number" on the Date of Issuance shall equal that
number of shares of Common Stock determined by multiplying nine percent (9%) by
the Common Stock Deemed Outstanding on the Date of Issuance (after giving effect
to the issuance of this Warrant) (i.e., 545,467 shares of Common Stock);
provided, however, that the Applicable Number may be reduced to a number that is
determined based upon the mutually exclusive methodologies set forth in
subsection (a) or subsection (b) below:

         (a)      If a Change of Control is consummated prior to the fifth (5th)
anniversary of the Date of Issuance and

                  (i)      the Net Equity Value is equal to or greater than
         $50,000,000, then the Applicable Number shall equal that number of
         shares of Common Stock determined by multiplying five percent (5%) by
         the Common Stock Deemed Outstanding on the Date of Issuance (after
         giving effect to the issuance of this Warrant) (i.e., 290,278 shares of
         Common Stock); or

                  (ii)     the Net Equity Value is less than $50,000,000 but
         equal to or greater than $48,000,000, then the Applicable Number shall
         equal that number of shares of Common Stock determined by multiplying
         six percent (6%) by the Common Stock Deemed Outstanding on the Date of
         Issuance (after giving effect to the issuance of this Warrant) (i.e.,
         352,039 shares of Common Stock); or

                  (iii)    the Net Equity Value is less than $48,000,000 but
         equal to or greater than $46,000,000, then the Applicable Number shall
         equal that number of shares of Common Stock determined by multiplying
         seven percent (7%) by the Common Stock Deemed Outstanding on the Date
         of Issuance (after giving effect to the issuance of this Warrant)
         (i.e., 415,128 shares of Common Stock); or

                  (iv)     the Net Equity Value is less than $46,000,000 but
         equal to or greater than $44,000,000, then the Applicable Number shall
         equal that number of shares of Common Stock determined by multiplying
         eight percent (8%) by the Common Stock Deemed Outstanding on the Date
         of Issuance (after giving effect to the issuance of this Warrant)
         (i.e., 479,589 shares of Common Stock); or

                                       -2-


                  (v)      the Net Equity Value is less than $44,000,000, then
         the Applicable Number shall equal that number of shares of Common Stock
         determined by multiplying nine percent (9%) by the Common Stock Deemed
         Outstanding on the Date of Issuance (after giving effect to the
         issuance of this Warrant) (i.e., 545,467 shares of Common Stock).

         (b)      If a Change of Control has not been consummated prior to the
fifth (5th) anniversary of the Date of Issuance and/or

                  (i)      EBITDA for the calendar year ended December 31, 2004
         exceeds $14,506,000, then the Applicable Number as of the Date of
         Issuance shall be reduced by an amount equal to one percent (1%)
         multiplied by the Common Stock Deemed Outstanding on the Date of
         Issuance (after giving effect to the issuance of this Warrant); and/or

                  (ii)     EBITDA for the calendar year ended December 31, 2005
         exceeds $16,706,000, then the Applicable Number as of the Date of
         Issuance shall be reduced by an amount equal to one percent (1%)
         multiplied by the Common Stock Deemed Outstanding on the Date of
         Issuance (after giving effect to the issuance of this Warrant); and/or

                  (iii)    EBITDA for the calendar year ended December 31, 2006
         exceeds $18,591,000, then the Applicable Number as of the Date of
         Issuance shall be reduced by an amount equal to one percent (1%)
         multiplied by the Common Stock Deemed Outstanding on the Date of
         Issuance (after giving effect to the issuance of this Warrant); and/or

                  (iv)     EBITDA for the calendar year ended December 31, 2007
         exceeds $14,217,000, then the Applicable Number as of the Date of
         Issuance shall be reduced by an amount equal to one percent (1%)
         multiplied by the Common Stock Deemed Outstanding on the Date of
         Issuance (after giving effect to the issuance of this Warrant);

         provided, however, that (A) the amount by which the Applicable Number
as of the Date of Issuance may be reduced in accordance with this subsection (b)
shall not exceed four percent (4%) multiplied by the Common Stock Deemed
Outstanding on the Date of Issuance (after giving effect to the issuance of this
Warrant) (i.e., 255,189 shares of Common Stock) and (B) if the Company does not
exceed the EBITDA projection set forth above for any such calendar year, then
the potential reduction of the Applicable Number for such calendar year shall
not apply and may not be recovered in any future years.

                  "Change of Control" shall have the meaning assigned to such
term in the Purchase Agreement.

                  "Class A Stock" means the Class A Common Stock of the Company,
par value $.01 per share.

                                       -3-


                  "Class B Stock" means the Class B Common Stock of the Company,
par value $.01 per share.

                  "Common Stock" means, at any given time, the issued and
outstanding common stock of the Company, determined on a fully-diluted basis,
including, without limitation, the Class A Stock and the Class B Stock.

                  "Common Stock Deemed Outstanding" means, at any given time,
the number of shares of Common Stock actually outstanding at such time, plus the
number of shares of Common Stock issuable at such time upon exercise or
conversion of all outstanding Options and Convertible Securities regardless of
whether the Options or Convertible Securities are actually exercisable at such
time.

                  "Company Value" as of any Valuation Date shall equal the sum
of (a) EBITDA for the twelve (12) month period immediately preceding such
Valuation Date multiplied by five (5) plus (b) the Company's cash and cash
equivalents balance as of the last day of the month immediately preceding such
Valuation Date, minus (c) the outstanding amount of principal and interest on
the Company's Total Funded Debt (to the extent such debt is permitted
Indebtedness as of the last day of the month immediately preceding the Valuation
Date.

                  "Convertible Securities" means any stock or other securities
directly or indirectly convertible into or exchangeable for any shares of Common
Stock.

                  "Date of Issuance" means March 26, 2004.

                  "Deferred Put Obligation" is defined in Section 5(c) hereof.

                  "Diligent Efforts" is defined in Section 5(c) hereof.

                  "Exercise Period" is defined in Section 2(a) hereof.

                  "Exercise Price" is defined in the first paragraph of this
Warrant.

                  "Exercise Time" is defined in Section 2(b)(i) hereof.

                  "Holder" is defined in the first paragraph of this Warrant.

                  "EBITDA" means the consolidated EBITDA (as defined in the
Purchase Agreement) of the Company and its Subsidiaries.

                  "GAAP" means generally accepted accounting principles,
consistently applied.

                  "Liquidating Dividend" is defined in Section 4 hereof.

                                       -4-


                  "Majority Warrant Holders" means the Registered Holders of
this Warrant representing at least fifty-one percent (51%) of the shares of
Warrant Stock issuable upon exercise of this Warrant.

                  "Market Price" means as to any security (other than this
Warrant) the average of the closing prices of such security's sales on all
domestic securities exchanges on which such security may at the time be listed
or quoted, including for this purpose The Nasdaq Stock Market, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed or quoted, the average of the highest bid
and lowest asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of twenty (20)
days consisting of the day as of which "Market Price" is being determined and
the nineteen (19) consecutive business days prior to such day; provided that if
such security is listed on any domestic securities exchange the term "business
days" as used in this sentence means business days on which such exchange is
open for trading. If at any time such security is not listed on any domestic
securities exchange or quoted on The Nasdaq Stock Market or the domestic
over-the-counter market, the "Market Price" shall be the Market Value divided by
the Common Stock Deemed Outstanding on the Valuation Date (but, with respect to
Section 3 hereof, prior to giving effect to the event triggering the
determination of the Market Price).

                  "Market Value" means the fair market value of the Company's
entire equity determined on a going concern basis as between a willing buyer and
a willing seller and taking into account all relevant factors determinative of
value (but not taking into account any discounts for lack of liquidity, minority
position or other similar or related discounts), plus (to the extent not
otherwise taken into consideration in the determination of fair market value of
the Company's entire equity) the aggregate amount of cash or property payable or
to be surrendered to the Company upon exercise or conversion of all Options and
Convertible Securities and the principal amount of any debt constituting
Convertible Securities. Unless otherwise agreed by the Company and the
Registered Holders, Market Value shall be determined by an investment banking
firm reasonably acceptable to the Company and the Registered Holders, which firm
shall submit to the Company and the Registered Holders a written report setting
forth such determination. If the parties are unable to agree on an investment
banking firm within fifteen (15) days after the date of the event triggering the
determination of Market Value, a third firm will be selected by agreement of two
investment banking firms, one selected by the Company and one selected by the
Registered Holders. The expenses of such firm shall be borne by the Company, and
the determination of such firm shall be final and binding upon all parties,
except as otherwise provided in Section 6(d).

                        "Net Equity Value" means the net cash and non-cash
proceeds (valued at the Market Price thereof) payable to the holders of Common
Stock (without regard to the obligation to redeem this Warrant) upon or in
connection with the consummation of a Change of Control or Organic Change, after
payment of all debt obligations having priority over payments to equityholders
of the Company, including, without limitation,

                                       -5-


Funded Debt, adjustments for cash and working capital and reasonable transaction
expenses and fees.

                  "Option Plans" shall have the meaning assigned to such term in
the Purchase Agreement.

                  "Options" means any rights or options to subscribe for or
purchase capital stock of the Company or Convertible Securities, including,
without limitation, under the Option Plans.

                  "Organic Change" is defined in Section 3(d) hereof.

                  "Preferred Stock" means the Preferred Stock of the Company, no
par value per share.

                  "Put" is defined in Section 6(a) hereof.

                  "Put Closing" is defined in Section 6(b) hereof.

                  "Put Event" means the occurrence of any of the following
events: (a) a Change of Control; (b) an Organic Change; (c) the fifth (5th)
anniversary of the Date of Issuance; or (d) the optional prepayment by the
Company or any other Person of seventy-five percent (75%) or more of the
original aggregate principal amount of the Notes.

                  "Put Notes" is defined in Section 6(c) hereof.

                  "Put Notice" is defined in Section 6(a) hereof.

                  "Put Price" of each Put Share that is Put by a Registered
Holder shall be equal to the greater of: (a) (i) Company Value multiplied by the
Warrant Fraction divided by (ii) the number of shares of Warrant Stock; and (b)
the per share Market Price of the Put Shares on the Valuation Date (assuming the
exercise for Put Shares of the portion of this Warrant being Put prior to such
determination, and subject to any adjustment pursuant to the last sentence of
Section 6(b) hereof). Notwithstanding anything to the contrary contained herein,
if the Put is exercised by the Registered Holder concurrently with the
consummation of a Change of Control or Organic Change, the Put Price shall be
equal to (A) Net Equity Value multiplied by the Warrant Fraction divided by (B)
the number of shares of Warrant Stock.

                  "Put Shares" is defined in Section 6(b) hereof.

                  "Registered Holder" or "Registered Holders" is defined in the
first paragraph of this Warrant.

                  "Restricted Applicable Number" on the Date of Issuance shall
equal that number of shares of Common Stock determined by multiplying five
percent (5%) by the Common Stock Deemed Outstanding on the Date of Issuance
(after giving effect to the issuance of this Warrant) (i.e., 290,278 shares of
Common Stock).

                                       -6-


                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Valuation Date" means the date of a Put Notice.

                  "Warrant" is defined in the first paragraph of this Warrant.

                  "Warrant Fraction" means a fraction, the numerator of which
shall be the number of shares of Warrant Stock issuable upon exercise of the
portion of this Warrant to be repurchased by the Company from the applicable
Registered Holder and the denominator of which shall be the total number of
shares of Common Stock Deemed Outstanding (assuming full exercise of this
Warrant).

                  "Warrant Stock" means the Class A Stock issuable upon exercise
of this Warrant; provided that if there is a change such that the securities
issuable upon exercise of this Warrant are issued by an entity other than the
Company or there is a change in the type or class of securities so issuable,
then the term "Warrant Stock" shall mean the securities issuable upon exercise
of this Warrant if such securities are issuable in shares, or shall mean the
smallest unit in which such securities are issuable if such securities are not
issuable in shares.

                  Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.

2.       Exercise of Warrant.

         (a)      Exercise Period. Except as specifically provided in Section
2(d) below, the Registered Holders may exercise, in whole or in part, the
purchase rights represented by this Warrant at any time and from time to time
after the Date of Issuance, to and including the tenth (10th) anniversary of the
Date of Issuance (the "Exercise Period"). The Company shall give the Registered
Holders written notice of the expiration of the Exercise Period at least thirty
(30) days, but not more than ninety (90) days, prior to the end of the Exercise
Period.

         (b)      Exercise Procedure.

                  (i)      This Warrant shall be deemed to have been exercised
         when the Company has received all of the following items (the "Exercise
         Time"):

                           (A)      a completed Exercise Agreement, as described
                  in Section 2(c) below, executed by the Registered Holder(s)
                  exercising all or part of the purchase rights represented by
                  this Warrant;

                           (B)      this Warrant;

                           (C)      if this Warrant is not registered in the
                  name of the Holder, an Assignment or Assignments in the form
                  set forth on Exhibit A hereto evidencing the assignment of
                  this Warrant to such Person, in which case the Registered
                  Holder(s) shall have complied with the provisions set forth

                                       -7-


                  in Section 8 hereof and shall have executed a joinder to the
                  Investor Rights Agreement pursuant to which the shares issued
                  pursuant to this Warrant shall be subject to the same terms as
                  the shares held by the Holder on the date hereof are subject;

                           (D)      either (1) a check payable to the Company in
                  an amount equal to the product of the Exercise Price
                  multiplied by the number of shares of Warrant Stock being
                  purchased upon such exercise (the "Aggregate Exercise Price"),
                  (2) the surrender to the Company of debt or equity securities
                  of the Company or any of its Subsidiaries having a Market
                  Price equal to the Aggregate Exercise Price of the Warrant
                  Stock being purchased upon such exercise (provided that, for
                  purposes of this subsection, the Market Price of any note or
                  other debt security or any preferred stock shall be deemed to
                  be equal to the aggregate outstanding principal amount or
                  liquidation value thereof plus all accrued and unpaid interest
                  thereon or accrued or declared and unpaid dividends thereon),
                  or (3) a written notice to the Company that the Registered
                  Holder(s) is exercising this Warrant (or a portion thereof) by
                  authorizing the Company to withhold from issuance a number of
                  shares of Warrant Stock issuable upon such exercise of this
                  Warrant which, when multiplied by the Market Price of the
                  Warrant Stock, is equal to the Aggregate Exercise Price (and
                  such withheld shares shall no longer be issuable under this
                  Warrant); and

                           (E)      if requested by the Company, the Registered
                  Holder shall confirm in writing, in a form satisfactory to the
                  Company, that the shares of Warrant Stock of the Company
                  issuable upon exercise of this Warrant are being acquired
                  solely for the Registered Holder's own account and not as a
                  nominee for any other party, for investment, and not with a
                  view toward distribution or resale in violation of the
                  Securities Act, and that the Registered Holder is an
                  Accredited Investor (as defined in Regulation D promulgated by
                  the Securities and Exchange Commission). If the Registered
                  Holder cannot make such representations because they would be
                  factually incorrect, it shall be a condition to the Registered
                  Holder's exercise of this Warrant that the Company receive
                  such other representations as the Company considers reasonably
                  necessary to assure the Company that the issuance of its
                  securities upon exercise of this Warrant shall not violate any
                  federal or state securities laws.

                  (ii)     Certificates for shares of Warrant Stock purchased
         upon exercise of this Warrant shall be delivered by the Company to each
         Registered Holder exercising its rights under this Warrant within five
         (5) Business Days after the date of the Exercise Time. If a Registered
         Holder exercises less than all of the purchase rights represented by
         the portion of this Warrant held by such Registered Holder, unless such
         portion of this Warrant has expired, the Company shall prepare a new
         Warrant, substantially identical hereto, representing the rights
         formerly represented by this Warrant which have not expired or been
         exercised

                                       -8-


         and shall, within such five day period, deliver such new Warrant to the
         Person designated for delivery in the Exercise Agreement.

                  (iii)    The Warrant Stock issuable upon exercise of this
         Warrant shall be deemed to have been issued to the exercising
         Registered Holder(s) at the Exercise Time, and such Registered Holder
         shall be deemed for all purposes to have become the record holder of
         such Warrant Stock at the Exercise Time.

                  (iv)     The issuance of certificates for shares of Warrant
         Stock shall be made without charge to the exercising Registered
         Holder(s) for any issuance tax in respect thereof or other cost
         incurred by the Company in connection with such exercise and the
         related issuance of Warrant Stock. Each share of Warrant Stock shall,
         upon payment of the Exercise Price therefor, be fully paid and
         nonassessable and free from all taxes, liens, charges and encumbrances
         with respect to the issuance thereof, but subject to restrictions on
         transferability imposed on securities which are not registered under
         the Securities Act or any state securities laws.

                  (v)      The Company shall not close its books against the
         transfer of this Warrant or of any share of Warrant Stock issued or
         issuable upon the exercise of this Warrant in any manner which
         interferes with the timely exercise of this Warrant.

                  (vi)     The Company shall assist and cooperate with any
         Registered Holder required to make any governmental filings or obtain
         any governmental approvals prior to or in connection with any exercise
         of this Warrant (including, without limitation, making any filings
         required to be made by the Company).

                  (vii)    Notwithstanding any other provision hereof, if an
         exercise of any portion of this Warrant is to be made in connection
         with a registered public offering or the sale of the Company or any
         Affiliate or Subsidiary thereof, or a transaction or a series of
         transactions which, if consummated, would result in a Change of Control
         of the Company or any Affiliate or Subsidiary thereof, the exercise of
         any portion of this Warrant may, at the election of the Registered
         Holder(s) hereof, be conditioned upon the consummation of the public
         offering or the sale of the Company, in which case such exercise shall
         not be deemed to be effective until the consummation of such
         transaction.

                  (viii)   The Company shall at all times reserve and keep

         available out of its authorized but unissued shares of Warrant Stock
         solely for the purpose of issuance upon the exercise of this Warrant,
         such number of shares of Warrant Stock issuable upon the exercise of
         this Warrant. All shares of Warrant Stock shall, upon payment of the
         Exercise Price therefor, when issued, be duly and validly issued, fully
         paid and nonassessable and free from all taxes, liens, charges and
         encumbrances. The Company shall take all such actions as may be
         necessary to assure that all such shares of Warrant Stock may be so
         issued without violation of any applicable law or governmental
         regulation or any requirements of any

                                       -9-


         domestic securities exchange upon which shares of Warrant Stock may be
         listed (except for official notice of issuance which shall be
         immediately delivered by the Company upon each such issuance). The
         Company shall from time to time take all such actions as may be
         necessary to assure that the par value of the unissued shares of
         Warrant Stock issuable upon exercise of this Warrant is at all times
         equal to or less than the Exercise Price. The Company shall not take
         any action which would cause the number of authorized but unissued
         shares of Warrant Stock to be less than the number of such shares
         required to be reserved hereunder for issuance upon exercise of this
         Warrant.

         (c)      Exercise Agreement. Upon any exercise of this Warrant, the
Exercise Agreement shall be substantially in the form set forth in Exhibit B
hereto, except that if the shares of Warrant Stock are not to be issued in the
name of the Person in whose name this Warrant is registered, the Exercise
Agreement shall also state the name of the Person to whom the certificates for
the shares of Warrant Stock are to be issued, and if the number of shares of
Warrant Stock to be issued does not include all the shares of Warrant Stock
purchasable hereunder, it shall also state the name of the Person to whom a new
Warrant for the unexercised portion of the rights hereunder is to be delivered.
Such Exercise Agreement shall be dated the actual date of execution thereof.

         (d)      Exercise Restriction. In order to give effect to the possible
reduction in the Applicable Number pursuant to the adjustments set forth in
subsection (a) or subsection (b) of such definition, the Holder agrees that,
prior to the earlier to occur of (i) a Change of Control or Organic Change and
(b) the fifth (5th) anniversary of the Date of Issuance, the Holder shall only
have the right to exercise this Warrant for the Restricted Applicable Number.

3.       Certain Adjustments. In order to prevent dilution of the rights granted
under this Warrant (except as otherwise set forth in the definition of
Applicable Number), the Exercise Price shall be subject to adjustment from time
to time as provided in this Section 3, and the number of shares of Warrant Stock
(including, for the avoidance of doubt, the Applicable Number and the Restricted
Applicable Number) issuable upon exercise of this Warrant shall be subject to
adjustment from time to time as provided in this Section 3.

         (a)      Adjustment of Exercise Price and Number of Shares.

                  (i)      If and whenever on or after the Date of Issuance the
         Company issues or sells, or in accordance with Section 3(b) hereof is
         deemed to have issued or sold, any shares of Common Stock below the Put
         Price per share of such Common Stock determined as of the date of such
         issuance or sale, then the Exercise Price shall be adjusted to an
         amount equal to (A) the Exercise Price in effect immediately prior to
         such issuance or sale multiplied by (B) a fraction, the numerator of
         which shall be the sum of (1) the number of shares of Common Stock
         Deemed Outstanding immediately prior to such issuance or sale
         multiplied by the Put Price of the Warrant Stock determined as of the
         date of such issuance or sale without giving effect to such issuance or
         sale, plus (2) the consideration, if

                                      -10-


         any, received by the Company upon such issuance or sale, and the
         denominator of which will be the product derived by multiplying the Put
         Price of the Warrant Stock determined as of the date of such issuance
         or sale without giving effect to such issuance or sale, by the number
         of shares of Common Stock Deemed Outstanding immediately after such
         issuance or sale.

                  (ii)     Upon each such adjustment of the Exercise Price
         hereunder, the number of shares of Warrant Stock issuable upon exercise
         of this Warrant shall be adjusted to the number of shares determined by
         multiplying the Exercise Price in effect immediately prior to such
         adjustment by the number of shares of Warrant Stock issuable upon
         exercise of this Warrant immediately prior to such adjustment and
         dividing the product thereof by the Exercise Price resulting from such
         adjustment.

                  (iii)    Notwithstanding the foregoing, there shall be no
         adjustment to the Exercise Price or the number of shares of Warrant
         Stock issuable upon exercise of this Warrant with respect to (a) the
         issuance of Warrant Stock upon exercise of this Warrant, (b) the
         issuance of any new warrants in connection with this Warrant, or (c)
         the issuance of any other warrants pursuant to the Purchase Agreement
         or the issuance of Common Stock upon the exercise of such warrants.

                  (iv)     In addition, there shall be no adjustment to the
         Exercise Price upon the issuance of Options under the Option Plans,
         after the Date of Issuance, exercisable for up to 336,981 shares of
         Class A Stock, at an exercise price per share equal to the Market Price
         on the grant date, or the issuance of shares of Common Stock upon the
         exercise of such Options; provided, however, that if such Options are
         issued at an exercise price per share below such Market Price, the
         Exercise Price shall adjust pursuant to Section 3(a)(i) hereof as if
         such Options were issued below the Put Price as provided in Section
         3(b)(i).

                  (v)      If, at any time after the Date of Issuance, the
         Company issues any Options under the Option Plans, such additional
         Options shall be deemed to be included in "Common Stock Deemed
         Outstanding on the Date of Issuance" for purposes of calculating the
         Applicable Number (and the Restricted Applicable Number), and the
         number of shares of Warrant Stock issuable upon exercise of this
         Warrant shall be increased proportionally based upon the number of
         Options so issued.

         (b)      Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 3(a) hereof, the following
shall be applicable:

                  (i)      Issuance of Rights or Options. If the Company in any
         manner grants or sells any Options and the lowest price per share for
         which any one share of Common Stock is issuable upon the exercise of
         any such Option, or upon conversion or exchange of any Convertible
         Securities issuable upon exercise of such Option, is less than the Put
         Price per share determined as of such time, then such share of Common
         Stock shall be deemed to have been issued and sold by the

                                      -11-


         Company at such time for such price per share. For purposes of this
         Section 3(b)(i) hereof, the "lowest price per share for which any one
         share of Common Stock is issuable" shall be determined by dividing (1)
         the sum of the lowest amounts of consideration (if any) received or
         receivable by the Company upon (A) the granting or sale of the Option,
         (B) exercise of the Option and (C) conversion or exchange of the Option
         or such aforesaid Convertible Securities, by (2) the total maximum
         number of shares of Common Stock issuable upon the conversion or
         exchange of the Option and the aforesaid Convertible Securities. No
         further adjustment of the Exercise Price shall be made upon the actual
         issuance of such Common Stock or Convertible Securities, upon the
         exercise of such Options or upon the actual issuance of Common Stock
         upon conversion or exchange of such Convertible Securities.

                  (ii)     Issuance of Convertible Securities. If the Company in
         any manner issues or sells any Convertible Securities and the lowest
         price per share for which any one share of Common Stock is issuable
         upon conversion or exchange thereof is less than the Put Price per
         share determined as of such time, then the maximum number of shares of
         Common Stock issuable upon conversion or exchange of such Convertible
         Securities shall be deemed to be outstanding and to have been issued
         and sold by the Company at the time of the issuance or sale of such
         Convertible Securities for such price per share. For the purposes of
         this Section 3(b)(ii) hereof, the "lowest price per share for which any
         one share of Common Stock is issuable" shall be determined by dividing
         (1) the sum of (A) the amount received or receivable by the Company as
         consideration for the issue or sale of such Convertible Securities,
         plus (B) the minimum aggregate amount of additional consideration, if
         any, payable to the Company upon the conversion or exchange thereof, by
         (2) the total maximum number of shares of Common Stock issuable upon
         the conversion or exchange of all such Convertible Securities. No
         further adjustment of the Exercise Price shall be made upon the actual
         issuance of such Common Stock upon conversion or exchange of such
         Convertible Securities, and if any such issuance or sale of such
         Convertible Securities is made upon exercise of any Options for which
         adjustments of the Exercise Price had been or are to be made pursuant
         to Section 3(b)(i) hereof, no further adjustment of the Exercise Price
         shall be made by reason of such issuance or sale.

                  (iii)    Change in Option Price or Conversion Rate. If the
         purchase price provided for in any Options, the additional
         consideration, if any, payable upon the issuance, conversion or
         exchange of any Convertible Securities, or the rate at which any
         Convertible Securities are convertible into or exchangeable for Common
         Stock changes at any time, the Exercise Price in effect at the time of
         such change shall be adjusted immediately to the Exercise Price which
         would have been in effect at such time had such Options or Convertible
         Securities still outstanding provided for such changed purchase price,
         additional consideration or changed conversion rate, as the case may
         be, at the time initially granted, issued or sold (but in no event
         shall the Exercise Price after any such adjustments exceed the Exercise
         Price on the Date of Issuance) and the number of shares of Warrant
         Stock shall be correspondingly adjusted.

                                      -12-


                  (iv)     Treatment of Expired Options and Unexercised
         Convertible Securities. Upon the expiration of any Option or the
         termination of any right to convert or exchange any Convertible
         Securities without the exercise of such Option or right, the Exercise
         Price then in effect and the number of shares of Warrant Stock issuable
         upon exercise of this Warrant shall be adjusted to the Exercise Price
         and the number of shares which would have been in effect at the time of
         such expiration or termination had such Option or Convertible
         Securities, to the extent outstanding immediately prior to such
         expiration or termination, never been issued.

                  (v)      Calculation of Consideration Received. If any Warrant
         Stock, Options or Convertible Securities are issued or sold or deemed
         to have been issued or sold for cash, the consideration received
         therefor shall be deemed to be the net amount received by the Company
         therefor. In case any Warrant Stock, Options or Convertible Securities
         are issued or sold for a consideration other than cash, the amount of
         the consideration other than cash received by the Company shall be the
         fair value of such consideration, except where such consideration
         consists of securities, in which case the amount of consideration
         received by the Company shall be the Market Price thereof as of the
         date of receipt. In case any Warrant Stock, Options or Convertible
         Securities are issued to the owners of the non-surviving entity in
         connection with any merger in which the Company is the surviving
         entity, the amount of consideration therefor shall be deemed to be the
         fair value of such portion of the net assets and business of the
         non-surviving entity as is attributable to such Warrant Stock, Options
         or Convertible Securities, as the case may be. The fair value of any
         consideration other than cash or securities shall be determined by an
         investment banking firm reasonably acceptable to the Company and the
         Registered Holders, which firm shall submit to the Company and the
         Registered Holders a written report setting forth such determination.
         If the parties are unable to agree on an investment banking firm within
         fifteen (15) days after delivery of the issuance of the applicable
         securities, a third firm will be selected by agreement of two
         investment banking firms, one selected by the Company and one selected
         by the Registered Holders. The expenses of such firm shall be borne by
         the Company, and the determination of such firm as to the fair value of
         such consideration shall be final and binding upon all parties.

                  (vi)     Integrated Transactions. In case any Option or
         Convertible Security is issued in connection with the issue or sale of
         other securities of the Company, together compromising one integrated
         transaction in which no specific consideration is allocated to such
         Option or Convertible Security by the parties thereto, the Option or
         Convertible Security shall be deemed to have been issued for a
         consideration of $.01.

                  (vii)    Treasury Shares. The number of shares of Warrant
         Stock outstanding at any given time shall not include shares owned or
         held by or for the account of the Company or any Subsidiary, and the
         disposition of any shares so owned or held shall be considered an
         issuance or sale of Common Stock.

                                      -13-


         (c)      Subdivision or Combination of Common Stock. If the Company at
any time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) one or more classes of its outstanding shares of Common Stock into a
greater number of shares, the Exercise Price in effect immediately prior to such
subdivision shall be proportionately reduced and the number of shares of Common
Stock issuable upon exercise of this Warrant shall be proportionately increased.
If the Company at any time combines (by reverse stock split or otherwise) one or
more classes of its outstanding shares of Common Stock into a smaller number of
shares, the Exercise Price in effect immediately prior to such combination shall
be proportionately increased and the number of shares of Warrant Stock issuable
upon exercise of this Warrant shall be proportionately decreased.

         (d)      Consolidation, Merger or Sale. Any recapitalization,
reorganization, reclassification, consolidation, merger or sale of all or
substantially all of the Company's assets or other transaction, in each case
which is effected in such a way that the holders of Common Stock are entitled to
receive (either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock, is referred to herein as
an "Organic Change." Prior to the consummation of any Organic Change, the
Company shall make appropriate provision to ensure that the Registered Holders
of this Warrant shall thereafter have the right to acquire and receive, in lieu
of or addition to (as the case may be) the shares of Warrant Stock immediately
theretofore acquirable and receivable upon the exercise of this Warrant, such
shares of stock, securities or assets as may be issued or payable with respect
to or in exchange for the number of shares of Warrant Stock immediately
theretofore acquirable and receivable upon exercise of this Warrant had such
Organic Change not taken place. In any such case, the Company shall make
appropriate provision (in form and substance reasonably satisfactory to the
Registered Holders) with respect to such holders' rights and interests under
this Warrant to insure that all of the provisions of this Warrant shall
thereafter continue to be applicable to such holders (including, in the case of
any such Organic Change in which the successor entity or purchasing entity is
other than the Company and in which the value for the Warrant Stock reflected by
the terms of such Organic Change is less than the Exercise Price in effect
immediately prior to such Organic Change, an immediate adjustment of the
Exercise Price to the value for the Warrant Stock reflected by the terms of such
Organic Change, and a corresponding immediate adjustment in the number of shares
of Warrant Stock acquirable and receivable upon exercise of this Warrant). The
Company shall not effect any Organic Change unless, prior to the consummation
thereof, the successor entity (if other than the Company) resulting from
consolidation or merger or the entity purchasing such assets assumes by written
instrument (in form and substance reasonably satisfactory to the Registered
Holders), the obligation to deliver to each such Registered Holder such shares
of stock, securities or assets as, in accordance with the foregoing provisions,
such Registered Holder may be entitled to acquire.

         (e)      Certain Events. If any event occurs of the type contemplated
by the provisions of this Section 3 hereof but not expressly provided for by
such provisions (including, without limitation, the granting of stock
appreciation rights, phantom stock rights or other rights with equity features),
then the Company's board of directors shall make an appropriate adjustment to
the Exercise Price and the number of shares of Warrant Stock issuable upon
exercise of this Warrant so as to protect the rights of the

                                      -14-


Registered Holders of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of shares of Warrant Stock
issuable upon exercise of this Warrant as otherwise determined pursuant to this
Section 3 hereof.

         (f)      No Avoidance. In the event the Company shall enter into any
transaction for the purpose of avoiding the provisions of this Section 3 hereof,
the benefits provided by such provisions shall nevertheless apply and be
preserved.

         (g)      Notices.

                  (i)      Promptly upon any adjustment of the Exercise Price
         and/or the number of shares of Warrant Stock issuable upon exercise of
         this Warrant, the Company shall give written notice thereof to the
         Registered Holders, setting forth in reasonable detail and certifying
         the calculation of such adjustment.

                  (ii)     The Company shall give written notice to the
         Registered Holder at least ten (10) days prior to the date on which the
         Company closes its books or takes a record (A) with respect to any
         dividend or distribution upon the Warrant Stock, (B) with respect to
         any pro rata subscription offer to holders of Warrant Stock or (C) for
         determining rights to vote with respect to any Organic Change, Change
         of Control, dissolution or liquidation.

                  (iii)    The Company shall also give written notice to the
         Registered Holder at least twenty (20) days prior to the date on which
         any Organic Change, Change of Control, dissolution or liquidation shall
         take place. Failure to give such notice or any defect therein or in the
         mailing thereof shall not affect the validity of any action taken in
         connection with such Organic Change, Change of Control, dissolution or
         liquidation.

4.       Dividends. If the Company declares or pays a dividend upon the Warrant
Stock payable (a) in cash out of earnings or earned surplus (determined in
accordance with GAAP) (a "Cash Dividend") or (b) other than in cash out of
earnings or earned surplus (determined in accordance with GAAP) except for a
stock dividend payable in shares of Warrant Stock (a "Liquidating Dividend"),
then the Company shall pay to the Registered Holder of this Warrant at the time
of payment thereof the Liquidating Dividend or Cash Dividend, as the case may
be, which would have been paid to such Registered Holder had this Warrant been
fully exercised immediately prior to the date on which a record is taken for
such Liquidating Dividend or Cash Dividend, as the case may be, or, if no record
is taken, the date as of which the record holders of Warrant Stock entitled to
such dividends are to be determined.

5.       Purchase Rights. If at any time the Company grants, issues or sells to
any Person any Options, Convertible Securities or other rights to purchase
stock, warrants, securities or other property of the Company (the "Purchase
Rights"), then the Registered Holders of this Warrant (or any Person designated
by the Registered Holders) shall be entitled to acquire, upon the terms
applicable to such Purchase Rights, the aggregate Purchase Rights which the
Registered Holders could have acquired if they had held the number of

                                      -15-


shares of Warrant Stock issuable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Warrant Stock are to be determined for the grant,
issue or sale of such Purchase Rights.

6.       Put Arrangements.

         (a)      Upon the occurrence of any Put Event and at any time
thereafter, any Registered Holder shall have the right to require the Company to
repurchase all or a portion of both this Warrant held by such Registered Holder
(the value of which shall be determined with respect to the value of the shares
of Warrant Stock issuable upon exercise of this Warrant, in accordance with this
Section 6) and the shares of Warrant Stock held by such Registered Holder at the
Put Price (the foregoing being referred to herein as the "Put"), by delivering a
written notice to the Company specifying the portion of this Warrant and the
number of shares of Warrant Stock to be purchased (the "Put Notice"). Upon the
delivery of the Put Notice, the Company and the Holder shall in good faith
promptly determine the Put Price as provided hereunder. Within five (5) days
after receipt of a Put Notice from any Registered Holder, the Company shall
notify in writing all other Registered Holders that the Put has been exercised,
and each other Registered Holder shall have the right, exercisable by written
notice delivered to the Company within ten (10) days after receipt of such
written notice from the Company, to request that all or a portion of this
Warrant held by such other Registered Holder's and/or shares of Warrant Stock
held by such other Registered Holders be included in the exercise of the Put
together with the portion of this Warrant and shares of Warrant Stock of the
Registered Holder(s) who delivered the Put Notice. The right to exercise the Put
shall also inure to the benefit of all transferees of the Registered Holders.

         (b)      Upon exercise of the Put, the Company will be obligated to
purchase all or such portion of this Warrant and/or shares of Warrant Stock
requested to be repurchased (collectively, the "Put Shares") at the Put Price in
cash at a mutually agreeable time and place which will in no event be later than
the ten (10) Business Days after the date as of which the Put Price has been
determined (the "Put Closing"). Promptly upon determination of the Put Price,
the Company will notify all Registered Holders of the portion of this Warrant
and/or shares of Warrant Stock thereof that are subject to the Put, as well as
the time and place of the Put Closing (the "Closing Notice"). Each Registered
Holder exercising its Put rights hereunder may deliver to the Company all or any
portion of this Warrant held by such Registered Holder in satisfaction of the
sale of such Registered Holder's shares of Warrant Stock hereunder, in which
event the Put Price will be reduced by the Exercise Price of the portion of this
Warrant so delivered.

         (c)      At the Put Closing, each exercising Registered Holder shall
deliver to the Company certificates representing the Put Shares held by such
Registered Holder or the portion of this Warrant held by such Registered Holder,
as applicable, and the Company shall deliver to such holder the Put Price
therefor in cash (subject to any adjustment pursuant to the last sentence of
Section 6(b) hereof) payable with respect thereto by wire transfer to each such
Registered Holder. The Company will, and will cause each of its Subsidiaries to,
undertake diligent efforts during the thirty (30) day period immediately

                                      -16-


following the delivery date of the Put Notice to finance the payment of the Put
Price for all of the Put Shares in accordance with this Section 6 hereof so that
the Put Price for all of the Put Shares may be paid in full in cash at the Put
Closing. Such diligent efforts ("Diligent Efforts") shall include, but not be
limited to, pursuing private or public offerings of equity or debt securities,
restructuring of the Company's or any Subsidiary's debt and other
recapitalization. In the event that, notwithstanding such Diligent Efforts, the
Company is unable for any reason to purchase all of the Put Shares at the Put
Closing in cash, the Company shall at the Put Closing (i) pay in cash those
funds which are legally available to redeem the maximum possible number of Put
Shares ratably among the Registered Holders of such Put Shares based upon the
respective portion of the Put Price then owed to each such Registered Holder and
(ii) pay the portion of the Put Price which it is not able to pay in cash (the
"Deferred Put Obligation") by issuing to the holders of Put Shares promissory
notes in the form of Exhibit C attached hereto and made a part hereof (the "Put
Notes"). The Put Notes shall accrue interest at an annual rate equal to sixteen
percent (16%) per annum. Interest on the Put Notes shall be payable quarterly in
arrears based on a 360 day year and actual number of days elapsed in any year.
The Deferred Put Obligation, together with all accrued and unpaid interest
thereon, shall be payable in full on or before the second (2nd) anniversary of
the Put Closing. During the thirty (30) day period prior to the first (1st) and
second (2nd) anniversaries of the date of issuance of the Put Notes, the Company
will, and will cause each of its Subsidiaries to, undertake Diligent Efforts to
arrange debt and/or equity financing in order to retire the Put Notes for cash
and will provide to the Registered Holders any information regarding the
Company's efforts to obtain such financing as is reasonably requested by the
Registered Holders. Notwithstanding anything to the contrary contained herein,
the Company shall not be permitted to defer payment of the Put Price for all of
the Put Shares if the Put is exercised in connection with a Change of Control or
Organic Change and, accordingly, the Company shall, at the closing of such
Change of Control or Organic Change, pay the entire amount of the Put Price in
cash.

         (d)      If the Company fails to satisfy its obligations pursuant to
the Put, each Registered Holder may pursue the Company in connection with any
rights and remedies such Registered Holder may have at law or in equity. Each
Registered Holder may also, at its election, at any time rescind the Put and the
Put Notice if (i) the Company fails to satisfy its obligations pursuant to the
Put to pay the Put Price in cash, (ii) the Company fails for any reason to
consummate a Change of Control, or (iii) the Registered Holder determines that
the Put Price is unacceptable. In the event the Put and the Put Notice are
rescinded pursuant to clause (i) or (ii) of this Section 6(d), the Company shall
pay the expenses of any appraiser used in determining the Put Price. In the
event the Put and the Put Notice are rescinded pursuant to clause (iii) of this
Section 6(d), the rescinding Registered Holders (severally based on the number
of shares of Warrant Stock held or deemed to be held by such Registered Holders)
shall pay the expenses of any appraiser used in determining the Put Price.

7.       Limitations of Liability. No provision hereof, in the absence of
affirmative action by the Registered Holders to purchase Warrant Stock, and no
enumeration herein of the rights and privileges of the Registered Holders, shall
give rise to any liability of such

                                      -17-


holders for the payment of the Exercise Price of the Warrant Stock issuable
hereunder or as stockholders of the Company.

8.       Warrant Transferable. Subject to the transfer conditions referred to in
the legend endorsed hereon, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the Registered Holders,
upon surrender of this Warrant with a properly executed Assignment (in the form
of Exhibit A attached hereto) at the principal office of the Company.

9.       Holder's Acknowledgements. By accepting this Warrant, the Holder
agrees, acknowledges and understands that:

                  (i)      Neither this Warrant nor the shares of Warrant Stock
         purchasable hereunder (the "Securities") have been registered under the
         Securities Act and, therefore, the Holder bears the economic risk of
         the investment indefinitely because the Securities may not be sold
         unless subsequently registered under the Act or an exemption from such
         registration is available; except as otherwise provided in the Investor
         Rights Agreement, the Company has not represented or covenanted to take
         any action necessary to make available any registration or any
         exemption for sale of the Securities without registration.

                  (ii)     The Securities have not been registered under the
         securities laws of any state and the offering of the Securities has not
         been reviewed for accuracy or completeness by any state securities
         commissioner or agency. The Holder agrees that a legend to the
         foregoing effect may be placed upon any and all certificates and other
         documents issued to the Holder representing such Securities.

                  (iii)    The Company may place a stop-transfer order or
         otherwise make appropriate notations in the records of the Company to
         enforce the restrictions described above.

                  (iv)     The Holder is acquiring the Securities for its own
         account, solely for investment, and not with a view to resale or
         distribution.

10.      Warrant Exchangeable for Different Denominations. Any portion of this
Warrant is exchangeable, upon the surrender thereof properly endorsed by the
Registered Holder thereof at the principal office of the Company with
appropriate instructions in writing, for a new warrant of like tenor
representing in the aggregate the purchase rights hereunder, and each of such
new warrants shall represent such portion of such rights as is designated by
such Registered Holder at the time of such surrender. The Date of Issuance of
this Warrant shall be deemed to be the Date of Issuance of any new warrant
regardless of the number of times new certificates representing the unexpired
and unexercised rights formerly represented by this Warrant shall be issued.

11.      Replacement. Upon receipt of evidence reasonably satisfactory to the
Company (an affidavit of the Registered Holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant or any portion thereof, and in the case of any such
loss, theft or destruction, upon receipt of indemnity or

                                      -18-


bond reasonably satisfactory to the Company (provided that if such holder is a
financial institution or other institutional investor, its own agreement shall
be satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Company shall (at its expense) execute and deliver, in lieu of
such certificate, a new certificate of like kind representing the same rights
represented by such lost, stolen, destroyed or mutilated certificate and dated
the date of such lost, stolen, destroyed or mutilated certificate.

12.      Notices. Except as otherwise expressly provided herein, all notices
referred to in this Warrant shall be in writing and shall be delivered
personally, sent by reputable overnight courier service (charges prepaid) or
sent by registered or certified mail, return receipt requested, postage prepaid
and shall be deemed to have been given when so delivered, sent or deposited in
the U.S. Mail (a) to the Company, at its principal executive offices and (b) to
a Registered Holder of this Warrant, at such Registered Holder's address as it
appears in the records of the Company (unless otherwise indicated by any such
holder).

13.      Amendment and Waiver. Except as otherwise provided herein, the
provisions of this Warrant may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the prior written consent of the Majority
Warrant Holders.

14.      Descriptive Headings. The descriptive headings of the several Sections
and subsections of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.

15.      Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be governed by the internal
laws of the State of Illinois, after giving effect to any choice of law or
conflict of law provision or rule that would cause the application of the laws
of any jurisdictions other than the State of Illinois.

16.      Affiliate or Subsidiary Transaction. The Company acknowledges and
agrees that, in the event that an Affiliate or Subsidiary of the Company shall
be the subject of (a) a Change of Control or (b) an Organic Change, then the
Registered Holders shall have the right to elect to receive, or be entitled to
receive, as a result of the consummation of such transaction, the cash or
securities to be received by equity holders of such entity, or to participate in
such transaction, as if this Warrant were exercisable by the Registered Holders
for their pro rata portion of the capital stock or other equity of such entity
immediately prior to the consummation of such transaction.

                            [SIGNATURE PAGE FOLLOWS]

                                      -19-


                    SIGNATURE PAGE TO STOCK PURCHASE WARRANT

                  IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by a duly authorized officer and to be dated as of the date first above
written.

                                                 MORTON INDUSTRIAL GROUP, INC.

                                                 By: ___________________________
                                                 Name: _________________________
                                                 Title: ________________________




                                    EXHIBIT A

                                   ASSIGNMENT

FOR VALUE RECEIVED, [______________________________] hereby sells, assigns and
transfers all of the rights of the undersigned under the attached Warrant
(Certificate No. W-[_____]) with respect to the number of shares of the Warrant
Stock covered thereby set forth below, unto:

Names of Assignee                         Address                 No. of Shares

Dated:                                    Signature ____________________________

                                                    ____________________________

                                            Witness ____________________________



                                    EXHIBIT B

                               EXERCISE AGREEMENT

To:                                                                     Dated:

                  The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. W-[______]), hereby agrees to subscribe for
the purchase of [_________] shares of the Warrant Stock covered by such Warrant
and makes payment herewith in full therefor at the price per share provided by
such Warrant.

                                        Signature ______________________________

                                          Address ______________________________



                                    EXHIBIT C

                                Form of Put Note

EX-10.56

                                                                   Exhibit 10.56


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





                          MORTON INDUSTRIAL GROUP, INC.

                            INVESTOR RIGHTS AGREEMENT

                           DATED AS OF MARCH 26, 2004





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






                                TABLE OF CONTENTS



                                                                                                              PAGE
                                                                                                           
SECTION 1             GENERAL....................................................................................1

         1.1      Definitions....................................................................................1

SECTION 2             REGISTRATION...............................................................................4

         2.1      Demand Registration............................................................................4

         2.2      Piggyback Registrations........................................................................6

         2.3      Registration Procedures........................................................................6

         2.4      Registration Expenses..........................................................................7

         2.5      Representations and Warranties.................................................................7

         2.6      Indemnification................................................................................8

         2.7      No Piggyback on Registrations.................................................................10

         2.8      Compliance....................................................................................10

         2.9      Discontinued Disposition......................................................................11

         2.10     Registered Public Offering Involving an Underwriting..........................................11

SECTION 3             SPECIAL RIGHTS............................................................................12

         3.1      Co-Sale Rights (Tag Along)....................................................................12

         3.2      Drag-Along Rights.............................................................................13

         3.3      Preemptive Rights.............................................................................14

SECTION 4             COVENANTS.................................................................................15

SECTION 5             MISCELLANEOUS.............................................................................18

         5.1      Governing Law.................................................................................18

         5.2      Survival......................................................................................18

         5.3      Successors and Assigns........................................................................19

         5.4      Entire Agreement..............................................................................19

         5.5      Severability..................................................................................19

         5.6      Amendment and Waiver..........................................................................19

         5.7      Delays or Omissions...........................................................................19

         5.8      Notices.......................................................................................20

         5.9      Titles and Subtitles..........................................................................20

         5.10     Counterparts..................................................................................20

         5.11     Remedies......................................................................................20




                                        i



                          MORTON INDUSTRIAL GROUP, INC.

                            INVESTOR RIGHTS AGREEMENT

         THIS INVESTOR RIGHTS AGREEMENT (the "AGREEMENT") is entered into as of
the 26th day of March, 2004, by and among MORTON INDUSTRIAL GROUP, INC., a
Georgia corporation (the "COMPANY"), William D. Morton (referred to herein as
the "STOCKHOLDER"), and the investors listed on EXHIBIT A hereto (referred to
herein, collectively, as the "INVESTORS" and each, individually, as an
"INVESTOR").

                                    RECITALS

         WHEREAS, pursuant to that certain Note and Warrant Purchase Agreement
of even date herewith (as the same may be amended, modified, supplemented or
restated from time to time, the "NOTE AGREEMENT"), by and among the Company,
certain Subsidiaries of the Company party thereto, BMO Nesbitt Burns Capital
(U.S.), Inc., as agent, and the Investors, the Investors purchased certain
secured subordinated promissory notes of the Company and certain warrants to
purchase shares of the Company's Class A Stock; and

         WHEREAS, the execution of this Agreement by the Company, the
Stockholder and the Investors is a condition to the consummation by the
Investors of the transactions contemplated by the Note Agreement.

         NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree hereto as follows:

                                    SECTION 1

                                     GENERAL

         1.1 DEFINITIONS. Except as otherwise provided herein or in this Section
1.1, capitalized terms used and not defined herein shall have the meanings
assigned thereto in the Note Agreement. As used in this Agreement the following
terms shall have the following respective meanings:

         "CLASS A STOCK" means the Class A Common Stock of the Company, par
value $.01 per share.

         "CLASS B STOCK" means the Class B Common Stock of the Company, par
value $.01 per share.

         "COMMON STOCK" means, at any given time, the issued and outstanding
common stock of the Company, determined on a fully-diluted basis, including,
without limitation, the Class A Stock and the Class B Stock, and any securities
issued or issuable with respect thereto, including, without limitation, pursuant
to a stock dividend, stock split, reclassification or like action, or pursuant
to an exchange (including a merger).





         "COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the number
of shares of Common Stock actually outstanding at such time, plus the number of
shares of Common Stock issuable at such time upon exercise or conversion of all
outstanding Options and Convertible Securities regardless of whether the Options
or Convertible Securities are actually exercisable at such time.

         "CONVERTIBLE SECURITIES" means any stock or other securities directly
or indirectly convertible into or exchangeable for any shares of Common Stock.

         "EFFECTIVENESS DATE" means the 90th day following a Demand Notice.

         "EFFECTIVENESS PERIOD" shall have the meaning set forth in Section
2.1(c).

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "FILING DATE" means, with respect to a Registration Statement required
to be filed hereunder, a date no later than forty-five (45) days following a
Demand Notice.

         "FORM S-3" means such form under the Securities Act as in effect on the
date hereof, or any successor or similar registration form under the Securities
Act subsequently adopted by the SEC, which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.

         "HOLDER" and "HOLDERS" means each of the Investors and any of their
respective transferees or assignees who receive or acquire Registrable
Securities.

         "INVESTOR" and "INVESTORS" are defined in the preamble above and shall
include each of their respective successors and assigns.

         "MAJORITY CONTROL" means the acquisition of, or control over, the
Company's Common Stock, Convertible Securities or Options, representing more
than fifty percent (50%) of the combined voting power of all securities of the
Company entitled to vote in the election of directors.

         "NOTE AGREEMENT" is defined in the recitals above.

         "NOTES" means those certain Senior Secured Subordinated Promissory
Notes in the aggregate original principal amount of $10,000,000 issued by the
Company to the Investors on March 26, 2004.

         "OPTION PLANS" shall have the meaning assigned to such term in the Note
Agreement.

         "OPTIONS" means any rights or options to subscribe for or purchase
capital stock of the Company or Convertible Securities, including, without
limitation, under the Option Plans.

         "PERMITTED SALE" shall mean the sale, transfer or other disposition by
the Stockholder of up to ten percent (10%) of the Common Stock of the Company
held by the Stockholder on March 26, 2004.



                                       2

         "PERMITTED TRANSFERS" shall have the meaning assigned to such term in
the Note Agreement.

         "PROCEEDING" means an action, claim, suit, investigation or proceeding
(including, without limitation, an investigation or partial proceeding, such as
a deposition), whether commenced or threatened.

         "PROSPECTUS" means the prospectus included in the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

         "REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement by the SEC.

         "REGISTRABLE SECURITIES" means (a) the Warrants; (b) the Warrant Stock
issued or issuable upon exercise of the Warrants; (c) any shares of capital
stock issued or issuable from time to time (with any adjustments) in exchange
for or otherwise with respect to the Warrant Stock referenced in clause (b); and
(d) any rights associated with the Warrant Stock; provided, however, that any
such securities will cease to be Registrable Securities at such time as they
have been sold under a registration statement or pursuant to Rule 144, or at
such time as they are eligible to be sold pursuant to Rule 144(k).

         "REGISTRATION STATEMENT" means each registration statement required to
be filed hereunder, including the Prospectus, amendments and supplements to such
registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.

         "RULE 144" means Rule 144 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

         "RULE 415" means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

         "RULE 424" means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended from time to time, or any similar
rule or regulation hereafter adopted by the Commission having substantially the
same effect as such Rule.

         "SEC" or "COMMISSION" means the United States Securities and Exchange
Commission.



                                       3



         "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.

         "STOCKHOLDER" is defined in the preamble above.

         "TRADING DAY" means any day on which a Trading Market is open for
trading.

         "TRADING MARKET" means any of the NASD OTC Bulletin Board, NASDAQ
SmallCap Market, the Nasdaq National Market, the American Stock Exchange or the
New York Stock Exchange.

         "WARRANT STOCK" shall mean the shares of Class A Stock issued or
issuable upon exercise of the Warrants, as such number of shares may be adjusted
up or down pursuant to the terms of the Warrant.

         "WARRANTS" means those certain Common Stock Purchase Warrants issued by
the Company to the Investors on March 26, 2004, to purchase shares of Class A
Stock.

                                    SECTION 2

                                  REGISTRATION

         2.1 DEMAND REGISTRATION.

                  (a) At any time, upon the written demand of any Holder to the
Company (a "DEMAND REGISTRATION") requesting that the Company effect the
registration under the Securities Act of Registrable Securities of such Holder,
the Company will promptly give written notice (a "DEMAND NOTICE") of such demand
to all other Holders. Each other Holder may request that the Company effect the
registration under the Securities Act of additional Registrable Securities of
such Holder by delivering written notice to the Company specifying such number
of Registrable Securities within twenty (20) days of receipt of the Demand
Notice. Within such 20-day period the Company shall give written notice (a
"REGISTRATION NOTICE") to all Holders that the Company will be filing a
Registration Statement pursuant to this Section 2.1(a).

                  (b) The Company is obligated to effect only two (2) Demand
Registrations under Section 2.1(a); provided, however, that (i) a registration
will not constitute a Demand Registration under Section 2.1(a) until it has been
declared effective under the Securities Act and (ii) if a registration statement
filed pursuant to Section 2.1(a) is terminated or withdrawn by the Company
before the end of the Effectiveness Period, such registration will not
constitute a Demand Registration and the Company shall be obligated to pay the
expenses of an additional Demand Registration under Section 2.1(a).

                  (c) On or prior to the Filing Date the Company shall prepare
and file with the Commission a Registration Statement covering the Registrable
Securities for an offering to be made on a continuous basis pursuant to Rule
415. The Registration Statement shall be on Form S-3 (except if the Company is
not then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith). The Company shall cause the Registration Statement to
become effective



                                       4



and remain effective as provided herein. The Company shall use its best efforts
to cause the Registration Statement to be declared effective under the
Securities Act as promptly as possible after the filing thereof, but in any
event no later than the Effectiveness Date. The Company shall use its best
efforts to keep the Registration Statement continuously effective under the
Securities Act until the date which is the earlier date of when (i) all
Registrable Securities have been sold or (ii) all Registrable Securities may be
sold immediately without registration under the Securities Act and without
volume restrictions pursuant to Rule 144(k), as determined by counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company's transfer agent and the affected Holders (the
"EFFECTIVENESS PERIOD").

         (d) If: (i) the Registration Statement is not filed on or prior to the
Filing Date; (ii) the Registration Statement is not declared effective by the
Commission by the Effectiveness Date; (iii) after the Registration Statement is
filed with and declared effective by the Commission, the Registration Statement
ceases to be effective (by suspension or otherwise) as to all Registrable
Securities to which it is required to relate at any time prior to the expiration
of the Effectiveness Period (without being succeeded immediately by an
additional registration statement filed and declared effective) for a period of
time which shall exceed thirty (30) days in the aggregate per year or more than
twenty (20) consecutive calendar days (defined as a period of 365 days
commencing on the date the Registration Statement is declared effective); or
(iv) the Common Stock is not listed or quoted, or is suspended from trading on
any Trading Market for a period of three (3) consecutive Trading Days (provided
the Company shall not have been able to cure such trading suspension within
thirty (30) days of the notice thereof or list the Common Stock on another
Trading Market); (any such failure or breach being referred to as an "EVENT,"
and for purposes of clause (i) or (ii) the date on which such Event occurs, or
for purposes of clause (iii) the date which such thirty (30) day or twenty (20)
consecutive day period (as the case may be) is exceeded, or for purposes of
clause (iv) the date on which such three (3) Trading Day period is exceeded,
being referred to as "EVENT DATE"; provided, however, that with respect to the
Event Date referred to in clause (ii) above, the Event Date shall be extended
for such time as the Effectiveness Date is delayed as a direct result of the
Company receiving comments to the Registration Statement from the Commission
that delays effectiveness of the Registration Statement so long as the Company
has promptly responded to the Commission's comments), then until the applicable
Event is cured, the Company shall pay to each Holder an amount in cash, as
liquidated damages and not as a penalty, equal to 1.0% for each thirty (30) day
period (prorated for partial periods) on a daily basis of the original principal
amount of the Note. While such Event continues, such liquidated damages shall be
paid not less often than each thirty (30) days. Any unpaid liquidated damages as
of the date when an Event has been cured by the Company shall be paid within
three (3) days following the date on which such Event has been cured by the
Company.

         (e) Within three (3) Business Days of the Effectiveness Date, the
Company shall cause its counsel to issue a blanket opinion, in a form acceptable
to the Holders, to the transfer agent stating that the shares are subject to an
effective registration statement and can be reissued free of restrictive legend
upon notice of a sale by the Holders and confirmation by the Holders that they
have complied with the prospectus delivery requirements, provided that the
Company has not advised the transfer agent orally or in writing that the opinion
has been withdrawn. Copies of the blanket opinion required by this Section
2.1(e) shall be delivered to the Holders within the time frame set forth above.



                                       5



         2.2 PIGGYBACK REGISTRATIONS. If at any time there is not an effective
Registration Statement covering all of the Registrable Securities and the
Company shall determine to prepare and file with the Commission a registration
statement relating to an offering for its own account or the account of others
under the Securities Act of any of its equity securities, other than on Form S-4
or Form S-8 (each as promulgated under the Securities Act) or their then
equivalents relating to equity securities to be issued solely in connection with
any acquisition of any entity or business or equity securities issuable in
connection with stock option or other employee benefit plans, then the Company
shall send to each Holder written notice of such determination and, if within
thirty (30) days after receipt of such notice, any such Holder shall so request
in writing, the Company shall include in such registration statement all or any
part of such Registrable Securities such Holder requests to be registered
subject to customary underwriter cutbacks applicable to all Holders.

         2.3 REGISTRATION PROCEDURES. If and whenever the Company is required by
the provisions hereof to effect the registration of any Registrable Securities
under the Securities Act, the Company will, as expeditiously as possible:

                  (a) prepare and file with the Commission the Registration
Statement with respect to such Registrable Securities, respond as promptly as
possible to any comments received from the Commission, and use its best efforts
to cause the Registration Statement to become and remain effective for the
Effectiveness Period with respect thereto, and promptly provide to the Holders
copies of all filings and Commission letters of comment relating thereto;

                  (b) prepare and file with the Commission such amendments and
supplements to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act with respect to the disposition of all Registrable Securities covered by the
Registration Statement and to keep such Registration Statement effective until
the expiration of the Effectiveness Period;

                  (c) furnish to the Holders such number of copies of the
Registration Statement and the Prospectus included therein (including each
preliminary Prospectus) as the Holders reasonably may request to facilitate the
public sale or disposition of the Registrable Securities covered by the
Registration Statement;

                  (d) if required under applicable securities law, use its best
efforts to register or qualify the Holders' Registrable Securities covered by
the Registration Statement under the securities or "blue sky" laws of such
jurisdictions within the United States as the Holders may reasonably request;
provided, however, that the Company shall not for any such purpose be required
to qualify generally to transact business as a foreign corporation in any
jurisdiction where it is not so qualified or to consent to general service of
process in any such jurisdiction;

                  (e) list the Registrable Securities covered by the
Registration Statement with any securities exchange on which the Common Stock of
the Company is then listed;

                  (f) immediately notify the Holders at any time when a
Prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the Prospectus contained in such



                                       6



Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light of the
circumstances then existing; and

                  (g) make available for inspection by the Holders and any
attorney, accountant or other agent retained by the Holders, all publicly
available, non-confidential financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all publicly available, non-confidential
information reasonably requested by the attorney, accountant or agent of the
Holders.

         2.4 REGISTRATION EXPENSES. All expenses relating to the Company's
compliance with Sections 2 and 3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, transfer taxes fees
and expenses (including reasonable counsel fees) incurred in connection with
complying with state securities or "blue sky" laws, fees of the NASD, transfer
taxes, fees of transfer agents and registrars, fees of, and disbursements
incurred by, one counsel for the Holders (to the extent such counsel is required
due to Company's failure to meet any of its obligations hereunder), are called
"REGISTRATION EXPENSES". All selling commissions applicable to the sale of
Registrable Securities, including any fees and disbursements of any special
counsel to the Holders beyond those included in Registration Expenses, are
called "SELLING EXPENSES." The Company shall only be responsible for all
Registration Expenses.

         2.5 REPRESENTATIONS AND WARRANTIES.

                  (a) The Common Stock of the Company is registered pursuant to
Section 12(b) or 12(g) of the Exchange Act and the Company has timely filed all
proxy statements, reports, schedules, forms, statements and other documents
required to be filed by it under the Exchange Act. The Company has filed (i) its
Annual Report on Form 10-K for the fiscal year ended December 31, 2002 and (ii)
its Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 2003
(collectively, the "SEC REPORTS"). Each SEC Report was, at the time of its
filing, in substantial compliance with the requirements of its respective form
and none of the SEC Reports, nor the financial statements (and the notes
thereto) included in the SEC Reports, as of their respective filing dates,
contained any untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the SEC Reports comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the Commission or other applicable rules and
regulations with respect thereto. Such financial statements have been prepared
in accordance with GAAP applied on a consistent basis during the periods
involved (except (i) as may be otherwise indicated in such financial statements
or the notes thereto or (ii) in the case of unaudited interim statements, to the
extent they may not include footnotes or may be condensed) and fairly present in
all material respects the financial condition, the results of operations and the
cash flows of the Company and its Subsidiaries, on a consolidated basis, as of,
and for, the periods presented in each such SEC Report.

                  (b) The Common Stock is listed for trading on the Nasdaq
National Market and satisfies all requirements for the continuation of such
listing. The Company has not received



                                       7



any notice that its Common Stock will be delisted from the Nasdaq National
Market (except for prior notices which have been fully remedied) or that the
Common Stock does not meet all requirements for the continuation of such
listing.

                  (c) Neither the Company, nor any of its Affiliates, nor any
Person acting on its or their behalf, has directly or indirectly made any offers
or sales of any security or solicited any offers to buy any security under
circumstances that would cause the offering of the Securities pursuant to the
Note Agreement to be integrated with prior offerings by the Company for purposes
of the Securities Act which would prevent the Company from selling the Common
Stock pursuant to Rule 506 under the Securities Act, or any applicable
exchange-related stockholder approval provisions, nor will the Company or any of
its Affiliates or Subsidiaries take any action or steps that would cause the
offering of the Securities to be integrated with other offerings.

                  (d) The Warrants and the shares of Warrant Stock which the
Holders may acquire pursuant to the Warrants are all restricted securities under
the Securities Act as of the date of this Agreement. The Company will not issue
any stop transfer order or other order impeding the sale and delivery of any of
the Registrable Securities at such time as such Registrable Securities are
registered for public sale or an exemption from registration is available,
except as required by federal or state securities laws.

                  (e) The Company understands the nature of the Registrable
Securities issuable upon the exercise of the Warrants and recognizes that the
issuance of such Registrable Securities may have a potential dilutive effect.
The Company specifically acknowledges that its obligation to issue the
Registrable Securities is binding upon the Company and enforceable regardless of
the dilution such issuance may have on the ownership interests of other
shareholders of the Company.

                  (f) Except for agreements made in the ordinary course of
business, there is no agreement that has not been filed with the Commission as
an exhibit to a registration statement or to a form required to be filed by the
Company under the Exchange Act, the breach of which could reasonably be expected
to have a material and adverse effect on the Company and its Subsidiaries, or
would prohibit or otherwise interfere with the ability of the Company to enter
into and perform any of its obligations under this Agreement in any material
respect.

         2.6 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement pursuant to this Agreement:

                  (a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, the members, managers, shareholders, partners,
officers and directors of each Holder, any underwriter (as defined in the
Securities Act) for such Holder and any Person who controls such Holder or
underwriter within the meaning of the Securities Act or the Exchange Act or acts
as such Holder's investment advisor (each, a "HOLDER INDEMNIFIED PERSON"),
against any losses, claims, damages, expenses or liabilities (joint or several)
("LOSSES") to which they may become subject under the Securities Act, the
Exchange Act, any other federal or state law, or otherwise, insofar as such
Losses (or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations in a registration



                                       8



statement filed pursuant to this Agreement, any post-effective amendment thereof
or any prospectus included therein (collectively a "VIOLATION"): (i) any untrue
statement or alleged untrue statement of a material fact contained in such
registration statement, including any preliminary prospectus or final prospectus
contained therein or any amendments or supplements thereto; (ii) the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading; or (iii) any
violation or alleged violation by the Company of the Securities Act, the
Exchange Act, any state securities law or any rule or regulation promulgated
under the Securities Act, the Exchange Act or any state securities law in
connection with the offering covered by such registration statement. The Company
will promptly pay as incurred to each Holder Indemnified Person for any legal or
other expenses incurred by them in connection with investigating or defending
any such Losses if it is judicially determined that there was such a Violation;
provided however, that the indemnity agreement contained in this Section 2.6(a)
shall not apply to amounts paid in settlement of any such Losses if such
settlement is effected without the consent of the Company, which consent shall
not be unreasonably withheld, nor shall the Company be liable in any such case
for any such Losses to the extent that they arise out of or are based upon a
Violation which occurs in reliance upon and in conformity with written
information furnished expressly for use in connection with such registration
statement by such Holder Indemnified Person.

                  (b) To the extent permitted by law, in connection with a
registration statement in which a Holder is participating, such Holder will
indemnify and hold harmless, severally and not jointly and severally, the
Company, each of its directors, each of its officers who signs a registration
statement and each Person, if any, who controls the Company within the meaning
of the Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder's members,
managers, shareholders, partners, directors and officers or any Person who
controls such Holder (each, a "COMPANY INDEMNIFIED PERSON"), against any Losses
to which any of them may become subject under the Securities Act, the Exchange
Act, other federal or state law, or otherwise, insofar as such Losses arise out
of or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder under an instrument duly executed
by such Holder and stated to be specifically for use in connection with such
registration. Each such Holder will promptly pay as incurred to each Company
Indemnified Person any legal or other expenses incurred by such Company
Indemnified Person in connection with investigating or defending any such Losses
if it is judicially determined that there was such a Violation; provided,
however, that the indemnity agreement contained in this Section 2.6(b) shall not
apply to amounts paid in settlement of any such Losses if such settlement is
effected without the consent of such Holder, which consent shall not be
unreasonably withheld; provided further, that in no event shall any indemnity
under this Section 2.6 exceed the net proceeds from the offering received by
such Holder.

                  (c) Promptly after receipt by an indemnified Person under this
Section 2.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim for Losses in
respect thereof is to be made against any indemnifying party under this Section
2.6, deliver to the indemnifying party a written notice of the commencement
thereof. The indemnifying party shall have the right to participate in and, to
the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly given notice, to assume the defense thereof with
counsel mutually satisfactory to the indemnified



                                       9



parties and the indemnified Person; provided, however, that an indemnified party
shall have the right to retain its own counsel, with the fees and expenses to be
paid by the indemnifying party, if representation of such indemnified party by
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to any indemnified Person under this Section 2.6, except to the extent
that the indemnifying party is materially prejudiced in its ability to defend
such action. The indemnification required by this Section 2.6 will be made by
periodic payments of the amount thereof as incurred.

                  (d) If the indemnification provided for in this Section 2.6 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any Losses, the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall to the extent permitted by
applicable law contribute to the amount paid or payable by such indemnified
party as a result of such Losses, or in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the Violation(s) that resulted
in such Losses as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by a court of law by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission;
provided, that in no event shall any contribution by a Holder hereunder exceed
the net proceeds from the offering received by such Holder.

                  (e) The obligations of the Company and the Holders under this
Section 2.6 shall survive completion of any offering of Registrable Securities
in a registration statement and the termination of this Agreement. No
indemnifying party, in the defense of any such claim or litigation, shall,
except with the consent of each indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect to such claim or litigation.

         2.7 NO PIGGYBACK ON REGISTRATIONS. Neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in any Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right for inclusion of shares in the
Registration Statement to any of its security holders. The Company has not
previously entered into any agreement granting any registration rights with
respect to any of its securities to any Person that have not been fully
satisfied.

         2.8 COMPLIANCE. Each Holder covenants and agrees that it will comply
with the prospectus delivery requirements of the Securities Act as applicable to
it in connection with sales of Registrable Securities pursuant to the
Registration Statement.



                                       10



         2.9 DISCONTINUED DISPOSITION. Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of a Discontinuation Event (as defined below), such Holder will
forthwith discontinue disposition of such Registrable Securities under the
applicable Registration Statement until such Holder's receipt of the copies of
the supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the "ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
Section 2.9. For purposes of this Section 2.9, a "DISCONTINUATION EVENT" shall
mean (i) when the Commission notifies the Company whether there will be a
"review" of such Registration Statement and whenever the Commission comments in
writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the
Holders); (ii) any request by the Commission or any other federal or state
governmental authority for amendments or supplements to such Registration
Statement or Prospectus or for additional information; (iii) the issuance by the
Commission of any stop order suspending the effectiveness of such Registration
Statement covering any or all of the Registrable Securities or the initiation of
any Proceedings for that purpose; (iv) the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and/or (v) the occurrence of any event or passage of time that makes
the financial statements included in such Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to such
Registration Statement, Prospectus or other documents so that, in the case of
such Registration Statement or Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading.

         2.10 REGISTERED PUBLIC OFFERING INVOLVING AN UNDERWRITING. If the
Holders intend to distribute the Registrable Securities covered by their request
under Section 2.1(a) by means of an underwriting, they shall so advise the
Company as a part of their request made pursuant to Section 2.1(a). In such
event, the Holders shall negotiate in good faith with an underwriter or
underwriters selected by the Holders with regard to the underwriting of such
requested registration. The Company shall (together with all Holders proposing
to distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected pursuant to this Section 2.10. Notwithstanding any other provision of
this Section 2.10, if the underwriter determines that marketing factors require
a limitation on the number of shares to be underwritten, the underwriter may
(subject to the allocation priority set forth below) limit the number of
Registrable Securities to be included in the registration and underwriting. The
Company shall so advise all Holders, and the number of shares of securities that
are entitled to be included in the registration and underwriting shall be
allocated among all Holders, and any reduction among such Holders shall be pro
rata among all such Persons and, for purposes of making any such reduction, each
Holder which is a partnership, together with the Affiliates, partners,
employees, retired partners and retired



                                       11



employees of such Holder, the estates and family members of any such partners,
employees, retired partners and retired employees and of their spouses, and any
trusts for the benefit of any of the foregoing Persons shall be deemed to be a
single "Person," and any pro rata reduction with respect to such "Person" shall
be based upon the aggregate number of Registrable Securities owned by all
entities and individuals included as such "Person", as defined in this sentence
(and the aggregate number so allocated to such "Person" shall be allocated among
the entities and individuals included in such "Person" in such manner as such
Holder may reasonably determine). To facilitate the allocation of shares in
accordance with the above provisions, the underwriter or underwriters may round
the number of shares allocated to the Holders to the nearest one hundred shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, it may elect to withdraw therefrom by written notice to the
Company, the underwriter and the other Holders. In the event of any such
withdrawal, the Company will include in any such registration in lieu thereof
any additional shares of Registrable Securities which were requested to be
included by a Holder and which were excluded pursuant to the above-described
underwriter limitation up to the maximum set by such underwriter.

                                    SECTION 3

                                 SPECIAL RIGHTS

         3.1 CO-SALE RIGHTS (TAG ALONG).

                  (a) Except pursuant to any Permitted Transfers or a Permitted
Sale, if the Stockholder (the "INITIATING SELLER") shall propose to transfer to
a third party (or related group of third parties) any shares of Common Stock
held by such Stockholder (whether in one transaction or in a series of related
transactions) (a "PARTICIPATION SALE"), the Initiating Seller shall provide
written notice of the Participation Sale to each Investor and the Company. Each
Investor may elect to participate in the Participation Sale by delivering
written notice of such election to the Company and the Initiating Seller within
twenty (20) days following the receipt by such Investors of notice of such
Participation Sale. Each Investor that makes such an election shall be entitled
to sell for cash, at the same price as the Initiating Seller, the Warrants
and/or a number of shares of Warrant Stock equal to the product of (i) the
quotient determined by dividing the number of shares of Warrant Stock owned by
such Investor, by the Common Stock owned by the Stockholder, and (ii) the number
of shares of Common Stock to be sold by the Initiating Seller in such
transaction. If the purchase price to be paid to the Initiating Seller in any
Participation Sale is comprised of cash and non-cash consideration, the
Initiating Seller shall take all actions necessary to cause such third party
purchaser to first allocate all or such portion of the cash consideration as is
necessary to purchase the Warrants and/or Warrant Stock from the Investors
electing to participate in such Participation Sale. If such cash consideration
is not sufficient to purchase all of such Warrants and/or Warrant Stock from the
electing Investors, then the Initiating Seller shall be prohibited from
consummating such Participation Sale. If an Investor exercises rights pursuant
to this Section 3.1(a), such Investor shall be entitled to sell the same
proportionate amount of any other securities that the Initiating Seller sell to
such third party purchasers in connection with the Participation Sale in the
event such Investor holds such other securities.



                                       12



                  (b) If the third party purchaser of any of the shares of
Common Stock to be sold in a Participation Sale refuses to purchase, for cash,
the Warrants or shares of Warrant Stock which any Investor has elected to
include in the Participation Sale pursuant to Section 3.1(a), then the
Initiating Seller may not sell any of their shares of Common Stock to such third
party purchaser.

                  (c) As a condition to the effective exercise of the rights in
Section 3.1(a), each electing Investor shall join in and agree to be bound by
all provisions of the documents applicable to it pursuant to which the third
party purchaser is to acquire securities (provided all electing Investors are
treated in substantially the same manner), except that the electing Investor
shall not be required to make any representations or warranties other than title
to the Warrants or shares of Warrant Stock being sold.

                  (d) The obligations of the Investors with respect to the
Participation Sale in which they are participating are subject to the
satisfaction of the following conditions: upon the consummation of the
Participation Sale, all of such Investors shall receive substantially the same
form and amount of consideration per share, or if any such participating
Investors are given an option as to the form and amount of consideration to be
received, all such participating Investors shall be given substantially the same
option.

                  (e) The Company and the Stockholder shall take all actions
required hereunder and under the Warrants to enable any Investor to sell all or
any portion of the Warrants and/or Warrant Stock in connection with a
Participation Sale.

         3.2 DRAG-ALONG RIGHTS.

                  (a) Except in connection with any Permitted Transfers, in the
event the Stockholder proposes to transfer to a third party (or related group of
third parties) Majority Control (whether in one transaction or in a series of
related transactions) (a "MAJORITY SALE"), the Stockholder (the "TRANSFERRING
STOCKHOLDER") shall have the right to compel the Investors to effect the
transfer for value of their Warrant and/or Warrant Stock to such third party
(the "DRAG-ALONG RIGHT"), in each instance, at the same price and on the same
terms and conditions as the Transferring Stockholder proposes to transfer his
shares of Common Stock to such third party.

                  (b) The Transferring Stockholder must deliver a notice (the
"DRAG-ALONG NOTICE") to the Investors and the Company at least thirty (30) days
prior to the consummation of the Majority Sale. The Drag-Along Notice shall
state (i) the bona fide intention of the Transferring Stockholder to effect the
Majority Sale; (ii) the name and address of the third party to whom the
Transferring Stockholder intends to transfer hsi shares of Common Stock; (iii)
the expected closing date of such Majority Sale; (iv) the principal terms of
such Majority Sale, including, without limitation, the purchase price; (v) the
portion of the Warrant and/or the number of shares of Warrant Stock which each
Investor is required to sell; and (vi) whether the Transferring Stockholder
intends to exercise its Drag-Along Right.

                  (c) The Transferring Stockholder shall include with the
Drag-Along Notice all then existing documents proposed to be executed by any
Investor in connection with the



                                       13



proposed Majority Sale and shall, to the extent such documents are modified or
additional documents are created prior to such Majority Sale, promptly transmit
such proposed modifications or such additional documents to each such Investor.

                  (d) If, at the end of ninety (90) days following the date of
the effectiveness of the Drag-Along Notice, the Transferring Stockholder has not
completed the Majority Sale, each Investor shall be released from its obligation
under the Drag-Along Notice, and it shall be necessary for a new and separate
Drag-Along Notice to be furnished and the terms and provisions of this Section
3.2 to be separately complied with in order to thereafter consummate such
Majority Sale pursuant to this Section 3.2.

                  (e) In the event the total number of shares of Common Stock to
be sold in such Majority Sale exceeds the number of shares of Common Stock the
purchasers are willing to purchase, the Transferring Stockholder may rescind his
Drag-Along Notice; provided that each Investor shall then have the rights set
forth in Section 3.1 above with respect to its right to exercise a Tag-Along
Right with respect to such sale.

         3.3 PREEMPTIVE RIGHTS.

                  (a) Except for the issuance of Common Stock under the Option
Plans, if the Company intends to issue and sell of any shares of its Common
Stock, Options or Convertible Securities (other than as a dividend on the
outstanding shares of Common Stock) (a "SALE"), the Company shall concurrently
offer to sell to each Investor a portion of the securities offered in such Sale
equal to the percentage determined by dividing (i) the number of shares of
Warrant Stock held by such Investor immediately prior to the proposed issuance
of such securities, on a fully-diluted basis, by (ii) the aggregate number of
shares of Common Stock Deemed Outstanding prior to such sale. In connection with
such issuance of such securities to each Investor pursuant to this Section
3.3(a), all such securities shall be entitled to all rights and subject to all
obligations under this Agreement.

                  (b) The Investors shall exercise any preemptive rights
hereunder within forty-twenty (20) days following the receipt of written notice
from the Company describing in reasonable detail the purchase price, the payment
terms, the period in which the preemptive right hereunder is to be exercised and
each Investor's percentage allotment.

                  (c) Upon the expiration of the offering period described
above, the Company shall be entitled to sell such securities which the Investors
have not elected to purchase during the sixty (60) day period following such
expiration, on terms and conditions no more favorable to the purchasers thereof
than those offered to the Investors. Any securities offered or sold by the
Company following such sixty (60) day period shall be re-offered to the
Investors pursuant to the terms of this Section 3.3.

                  (d) The provisions of this Section 3.3 shall terminate at such
time as the Investors no longer hold, in the aggregate, at least fifty percent
(50%) of the Warrants (and/or Warrant Stock issuable upon exercise of the
Warrants) issued on the Closing Date.



                                       14



                                    SECTION 4

                                    COVENANTS

                  (a) BOARD SIZE; COMPOSITION. The Company shall hold meetings
of its Board of Directors (the "PARENT BOARD") at least once every quarter. The
Board of Directors of any Subsidiary of the Company (each, a "SUBSIDIARY BOARD")
shall hold meetings at least once every quarter. The Parent Board shall have an
audit committee and a compensation committee. Members of the audit committee and
the compensation committee shall be members of the Parent Board that are not
employees of the Company or any of its Subsidiaries. Any Investor holding fifty
percent (50%) of the Warrants, or fifty percent (50%) of the Warrant Stock
issuable upon exercise of the Warrants, shall have the right to appoint one (1)
Person as its designee to the Parent Board and each Subsidiary Board (each, an
"INVESTOR DESIGNEE"). Each Investor Designee shall have observation rights with
respect to all meetings of the Parent Board and each Subsidiary Board . Each
Investor Designee shall have the right to attend each meeting of the Parent
Board and each Subsidiary Board and all committees, respectively, thereof. The
Parent Board and each Subsidiary Board shall give each Investor notice of each
meeting of its Board and each committee thereof at the same time and in the same
manner as notices given to the members of its Board (which notice shall be
promptly confirmed in writing). Each Investor Designee and each Investor shall
be entitled to receive all written materials and other information given to
members of the Parent Board and the Subsidiary Boards and each committee thereof
in connection with such meetings at the same time such materials and information
are given to all other members of such Boards and such committees. The Company
and each Subsidiary shall reimburse each Investor Designee for reasonable
out-of-pocket expenses in connection with attending such Parent Board and
Subsidiary Board and committee meetings. The Stockholder, the Company and each
Subsidiary agrees to take any and all actions necessary to effectuate the intent
of the foregoing provisions.

                  (b) MAINTENANCE OF BUSINESS. The Company 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 8.19 of the Note Agreement) and all
licenses, permits and franchises necessary to the proper conduct of its
business.

                  (c) MAINTENANCE OF PROPERTY. The Company will maintain,
preserve and keep those of its assets and property 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 assets and property
owned or used by it.

                  (d) FINANCIAL REPORTS. The Company will, and will cause each
of its Subsidiaries to, maintain a standard system of accounting in accordance
with GAAP, will permit each Investor and their representatives to visit and
inspect the properties and assets (including books and records) of the Company
and its Subsidiaries at all reasonable times and will furnish to each Investor
and their duly authorized representatives such information respecting the



                                       15



business and financial condition of the Company and its Subsidiaries as such
Investor may reasonably request; and without any request, the Company will
furnish to the Investors:

                           (i) as soon as available, and in any event within 45
         days after the close of each monthly fiscal period of the Company which
         is also the end of a fiscal quarter of the Company and within 30 days
         after the close of each other monthly fiscal period of the Company, a
         copy of the balance sheet, statements of income, retained earnings and
         cash flows of the Company 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 and a comparison to budget, prepared by the
         Company in accordance with GAAP (subject to normal year-end audit
         adjustments and the absence of footnotes) and certified to by the chief
         financial officer of the Company;

                           (ii) as soon as available, and in any event within 90
         days after the close of each fiscal year of the Company, a copy of the
         consolidated balance sheet of the Company and its Subsidiaries as of
         the close of such fiscal year and the consolidated statements of
         income, retained earnings and cash flows of the Company 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 and a comparison to budget, accompanied by an
         unqualified opinion thereon of KPMG LLP or another firm of independent
         public accountants of recognized national standing, selected by the
         Company and satisfactory to the Investors, 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 Company 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;

                           (iii) a copy of any management letters on internal
         accounting controls of the Company or any Subsidiary prepared by its
         independent public accountants;

                           (iv) promptly after the sending or filing thereof,
         copies of all proxy statements, financial statements and reports the
         Company 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 Company files with the Securities and Exchange
         Commission or any successor thereto, or with any national securities
         exchanges;

                           (v) promptly after knowledge thereof shall have come
         to the attention of any responsible officer of the Company, written
         notice of any threatened or pending litigation or governmental
         proceeding or labor controversy against the Company or any Subsidiary
         which, if adversely determined, would have a material adverse effect on
         the financial condition, assets, properties, business or operations of
         the Company and its



                                       16



         Subsidiaries taken as a whole or of (y) the occurrence of any Default
         or Event of Default under the Note Agreement;

                           (vi) as soon as available, and in any event within 30
         days prior to the end of each fiscal year of the Company, a copy of the
         Company's consolidated and consolidating business plan for the
         following fiscal year, such budget and business plan to show the
         Company's projected consolidated and consolidating revenues, expenses
         and balance sheet on a quarter-by-quarter/month-by-month basis, such
         business plan to be in reasonable detail prepared by the Company and in
         form satisfactory to the Investors (which shall include a summary of
         all assumptions made in preparing such budget and business plan);

                           (vii) notice of any Change of Control; and

                           (viii) within thirty (30) days after the close of
         each month, a Borrowing Base Certificate prepared as of the last day of
         such month.

                           (ix) Each of the financial statements furnished
         pursuant to clauses (i) and (ii) of this Section shall be accompanied
         by a written certificate in the form attached to the Note Agreement as
         Exhibit C signed by the chief financial officer of the Company 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 Company to remedy the same and setting
         forth such calculations as are required by the Note Agreement. The
         Company will, and will cause each Subsidiary to, permit the Investors
         and their duly authorized representatives to visit and inspect any of
         the Properties of the Company 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 Company
         authorizes such accountants to discuss with the Investors (and such
         Persons as any Investor may designate) the finances and affairs of the
         Company and its Subsidiaries) all at such reasonable times and as often
         as may be reasonably requested.

                  (e) INVESTOR PROTECTION. In connection with any Change of
Control or similar transaction under circumstances where any Investor continues
to hold a Warrant or any Warrant Stock, the Company shall make, or cause to be
made, available to such Investor all economic benefits in a manner that treats
any Investor equitably with respect to all other equity holders of the Company.
In this regard, the Company agrees to structure any Change of Control or similar
transaction, under circumstances where any Investor continues to hold a Warrant
or any Warrant Stock, in order to treat all equity holders, including such
Investors, in a fair and equitable manner and such transaction structure shall
not include disguised purchase price components in the form of payments
allocated to covenants not to compete, consulting payments and the like, except
for employment agreements or similar agreements providing for reasonable "arms
length" levels of compensation to such equity holder in return for future
services to be rendered to the acquirer subsequent to a Change of Control.



                                       17



                  (f) EQUITY RESTRICTION. The Company shall not:

                           (i) directly or indirectly make, or permit any of its
         Subsidiaries to make, any purchase of any Common Stock, or directly or
         indirectly redeem, purchase or make, or permit any of its Subsidiaries
         to redeem, purchase or make, any payments with respect to any stock
         appreciation rights, phantom stock plans or similar rights or plans; or

                           (ii) authorize, issue or enter into any agreement
         providing for the issuance (contingent or otherwise) of any notes or
         debt securities containing equity features (including, without
         limitation, any notes or debt securities convertible into or
         exchangeable for Common Stock or other equity securities issued in
         connection with the issuance of Common Stock, or other equity
         securities or containing profit participation features) at a price at
         issuance which is lower than the then current market price of the
         Company's Common Stock except as otherwise expressly contemplated by
         this Agreement.

                  (g) RESERVED STOCK. The Company shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of issuance upon any exercise of the Warrants, such number of
shares of Common Stock as are issuable upon the exercise of the Warrants. All
shares of Common Stock which are so issuable shall, when issued, be duly and
validly issued, fully paid and nonassessable and free from all taxes, liens,
charges and encumbrances. The Company shall take all such actions as may be
necessary to assure that all such shares of Common Stock may be so issued
without violation of any applicable law or governmental regulation or any
requirements of any domestic securities exchange upon which shares of Common
Stock may be listed.

                  (h) MANAGEMENT COMPENSATION. The Company shall not, without
the Agent's prior written approval, increase the compensation paid to any
officer, key employee or consultant in excess of historical increases in such
compensation consistent with the past practices of the Company; provided,
however, that, upon the approval of the compensation committee of the Parent
Board, the Company shall be permitted to pay to William Morton a bonus of up to
$150,000 for the Company's 2003 fiscal year.

                  (i) COVENANT CONTINUATION. The provisions of Sections 4(b),
(c) and (h) above shall terminate at such time as the Investors no longer hold,
in the aggregate, at least twenty-five percent (25%) of the Warrants (and/or
Warrant Stock issuable upon exercise of the Warrants) issued on the Closing
Date.

                                    SECTION 5

                                  MISCELLANEOUS

         5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Illinois as applied to agreements among Illinois
residents entered into and to be performed entirely within Illinois.

         5.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions



                                       18



contemplated hereby. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby, to the
extent they may contain representations or warranties of the Company therein,
shall be deemed to be representations and warranties by the Company hereunder
solely as of the date of such certificate or instrument.

         5.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each such
successor, assign, heir, executors, and administrator; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the Person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.

         5.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Note Agreement and the other documents delivered pursuant thereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.

         5.5 SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

         5.6 AMENDMENT AND WAIVER.

                  (a) Except as otherwise expressly provided for herein, this
Agreement may be amended or modified only upon the written consent of the
Company and the Investors.

                  (b) Except as otherwise expressly provided for herein, the
obligations of the Company and the rights of the Investors under this Agreement
may be waived only with the written consent of each Investor.

                  (c) Notwithstanding the foregoing, this Agreement may be
amended with only the written consent of the Company to include transferees of
any Holder of Warrants as "Investors."

         5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Investor, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Investor's part of any breach, default or noncompliance under the Agreement
or any waiver on such



                                       19



Investor's part of any provisions or conditions of this Agreement must be in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement, by law, or otherwise
afforded to Investor, shall be cumulative and not alternative.

         5.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed electronic mail or facsimile if
sent during normal business hours of the recipient; if not, then on the next
Business Day; (c) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid; or (d) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the party to be notified at the address as set forth on the signature
pages hereof or at such other address as such party may designate by ten (10)
days advance written notice to the other parties hereto.

         5.9 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

         5.10 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

         5.11 REMEDIES. In the event of a breach by the Company or by a Holder,
of any of their respective obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.



                             SIGNATURE PAGE FOLLOWS



                                       20



                   SIGNATURE PAGE TO INVESTOR RIGHTS AGREEMENT

         IN WITNESS WHEREOF, the parties hereto have executed this INVESTOR
RIGHTS AGREEMENT as of the date set forth above.


COMPANY:                                 INVESTORS:


MORTON INDUSTRIAL GROUP, INC.            BMO NESBITT BURNS CAPITAL (U.S.), INC.


                                         By: /s/ Douglas P. Sutton
                                             ----------------------------------
By: /s/ William D. Morton                Name: Douglas P. Sutton
   ------------------------------              --------------------------------
    William D. Morton, Chairman          Title: Managing Director
                                                -------------------------------

                                         FOR OTHER INVESTORS
                                         SEE ATTACHED SIGNATURE PAGES






COMMON STOCKHOLDERS:

                          MORTON INDUSTRIAL GROUP, INC.

                            INVESTOR RIGHTS AGREEMENT

                                 SIGNATURE PAGE

         By execution of this Signature Page, the undersigned does hereby
acknowledge and agree to the Morton Industrial Group, Inc. Investor Rights
Agreement, dated as of March 26, 2004 and does hereby authorize the Company to
attach a counterpart of this Signature Page to the Investor Rights Agreement as
evidence of the agreements set forth therein.

                                          /s/ William D. Morton
                                          -------------------------------------
                                          WILLIAM D. MORTON

                                          Date:
                                               --------------------------------


                                          -------------------------------------
                                          (Street Address)

                                          -------------------------------------
                                          (City or Town)             (Zip Code)



                                    EXHIBIT A

                     SCHEDULE OF NOTE AND WARRANT INVESTORS



                                      B-1

EX-13

                                                                      EXHIBIT 13


                                 (MORTON LOGO)

                         MORTON INDUSTRIAL GROUP, INC.

                                   (GRAPHIC)

                                 ANNUAL REPORT
                                      2003



1

OPTIMISTIC ECONOMIC OUTLOOK

The industries served by Morton Metalcraft Co. strengthened during the last half
of 2003 and are projected to be even stronger in 2004. Our internal focus using
6 Sigma methodology has positioned the Company to be able to efficiently respond
to our improving customer order board. We celebrate with our customers the
positive economic environment and look forward to the benefit they and our
shareholders will have as a result of it.

Morton Industrial Group, Inc.'s mission is to operate Morton Metalcraft Co., a
highly respected contract manufacturing supplier who has significant
relationships with a diverse group of industrial original equipment
manufacturers.


(GRAPHIC)

                         MORTON INDUSTRIAL GROUP, INC.


                                                                               2


            TO OUR SHAREHOLDERS, EMPLOYEES, CUSTOMERS AND SUPPLIERS

MORTON INDUSTRIAL GROUP, INC. entered 2003 continuing to experience the nearly
four-year constriction in manufacturing in the U.S. economy. Orders received by
our customers who serve the Construction, Agricultural and Commercial capital
goods industries stabilized during the first three quarters of the year, firmed
in the fourth quarter and, by the first quarter of 2004, began to escalate. The
long-running recession in American manufacturing now appears to have come to an
end.

                           KEY ACCOMPLISHMENTS IN 2003

Our decision last year to focus only on our core foundational metal fabrication
business - Morton Metalcraft Co. - has proven to be a correct one. It has
allowed us to bring to completion our Consolidation Strategy, show Positive
Customer Performance trends and record Improved Financial Results. These Key
Accomplishments in 2003 benefit all of our stakeholders and we believe position
us well for the future.

     o    CONSOLIDATION STRATEGY - Our consolidation strategy included closing
          our Peoria facility, exiting the last of our plastics businesses and
          lowering our corporate overhead, leaving us with a very competitive
          cost structure.

     o    POSITIVE CUSTOMER PERFORMANCE - Our continued commitment to 6 Sigma
          methodology has produced positive trends in customer delivery, quality
          and cost management objectives and been rewarded by additional
          projects from our existing and new strategic customers.

     o    IMPROVED FINANCIAL RESULTS - Our profitability in each quarter of 2003
          resulted from revenue increasing 12.8% from $116.5 million in 2002 to
          over $131.4 million in 2003; gross profit increasing 20.4% from $15.0
          million in 2002 to $18.1 million in 2003; and operating income
          increasing 65.3% from $2.9 million in 2002 to $4.8 million in 2003.

These Key Accomplishments in 2003 were the direct result of the commitment,
dedication, resolve and hard work of our approximately 1,100 talented employees.
Morton Metalcraft Co., therefore, has entered 2004 operationally leaner,
financially stronger and positioned to respond positively to the economic
recovery that we sense is beginning to materialize.

                        NEW BUSINESS ENVIRONMENT IN 2004

MORTON METALCRAFT CO.'S customers are prestigious members of American Industry.
During this extended multi-year manufacturing recession, these leading Original
Equipment Manufacturers have leaned out their businesses and held their
inventories to very low levels. Now, with their customer orders strengthening,
they have had to correspondingly increase their assembly line production
schedules and release consistently stronger orders to their supplier network.

To support our customers in this new business environment, Morton Metalcraft Co.
has, during the first quarter of 2004, added appropriate capacity by hiring
Manpower, purchasing Machines and increasing our Material orders to our
suppliers.

     o    MANPOWER - during Q1, 2004, we have hired and trained over 200 new
          direct and indirect employees and will make further adjustments -
          required by changes in demand.

     o    MACHINES - during Q1, 2004, we have purchased over a dozen pieces of
          key manufacturing equipment principally expanding capacity in our
          First Operations laser departments.

     o    MATERIAL - during Q1, 2004, we have increased the flow of purchased
          material with cosmetically sensitive sheet steel, which is the most
          difficult material to secure because of the challenges currently being
          experienced by the U.S. Steel Industry.

We are confident about our ability to respond in support of our customers in
this new business environment. Our optimism is based on our continued faith in
the excellent capacities of our supply network and the ongoing commitment and
resolve of our now over 1,300 employees.

And finally, we are pleased to report that we have completed a new long-term
capital structure which will adequately support our operations for years to
come. Our profitability each quarter and the further debt reduction achieved
during 2003, together with our agreement to redeem our preferred stock, have
enabled us to establish new, long-term senior and subordinated debt credit
facilities completed March 26, 2004.

                        AMERICAN INDUSTRY REMAINS STRONG

With the loss of jobs during the historic multi-year recession in manufacturing,
many have predicted the weakening and eventual elimination of American
Industrial companies due to increased global competition. We see it differently.
Just as the ingenuity of the American manufacturer made it possible to counter
the threat from Japan in the 1980s and from Mexico in the 1990s, we are now
learning to use technology and logistics to maintain profitability as we compete
with the emerging challenges now presented by China and India.

2004 has clearly brought a new business environment to American Industry and it
appears we are adjusting quickly again.  Profits are up in the manufacturing
sector of the U.S. economy and based on our customers' current sense of
optimism, we believe they will stay that way for the foreseeable future. We at
Morton Industrial Group, Inc. are proud to be a part of American Industry which
continues to be a very important part of the overall U.S. economy and the fabric
of our American way of life.

                                  IN CONCLUSION

We again express our sincere appreciation to you, our Shareholders, Employees,
Customers and Suppliers, for your continued support during these recent lean
years and now as we see the manufacturing sector of the U.S. economy recovering.
We hope this positive trend will continue for all of us to enjoy together for
the rest of 2004 and many years to come.


                                                   /s/ William D. Morton
                                                   William D. Morton
                                                   Chairman and CEO



3

MORTON METALCRAFT CO.,

is a manufacturer of highly engineered components and sub-assemblies for
industrial original equipment manufacturers. Its products include metal
fabrications and assemblies for a broad range of industry segments which include
the construction, agricultural and commercial equipment industries.

MIDWEST DIVISION

(PHOTO)                    1021 W. Birchwood Street
                           Morton, Illinois 61550
                           Phone: 309.266.7176
                           Fax: 309.263.1866


(PHOTO)                    400 Detroit Avenue
                           Morton, Illinois 61550
                           Phone: 309.263.3299
                           Fax: 309.263.1854


(GRAPHIC)



                             MORTON METALCRAFT CO.


                                                                               4

MORTON METALCRAFT CO.'s

superior competitive strengths have resulted in strong, focused relationships
with its prestigious customer base. Its five manufacturing facilities are
strategically located in the Midwestern and Southeastern United States in close
proximity to its customers' manufacturing and assembly facilities. Morton's
principal customers include Carrier Corporation, Caterpillar Inc., Deere & Co.,
Federal Signal Corporation, Hallmark Cards, Kubota Corporation and Winnebago
Industries, Inc.


SOUTHEAST DIVISION

(PHOTO)                    2080 E. Williams Street
                           Apex, North Carolina 27502
                           Phone: 919.363.1630
                           Fax: 919.363.1103

(PHOTO)                    835 Salem Road
                           Welcome, North Carolina 27374
                           Phone: 336.731.5700
                           Fax: 336.731.8005

(PHOTO)                    534 Corbin Road
                           Honea Path, South Carolina 29654
                           Phone: 864.369.1800
                           Fax: 864.369.9022


(GRAPHIC)


                             MORTON METALCRAFT CO.


5

BOARD OF DIRECTORS

                           WILLIAM D. MORTON
                           56, serves as Chairman, Chief Executive Officer and
                           President of Morton Industrial Group, Inc. and Morton
                           Metalcraft Co. Mr. Morton became a director of Morton
                           Metalcraft Co. in 1989 and upon conclusion of its
                           merger into Morton Industrial Group, Inc. in 1998, a
                           Morton Industrial Group, Inc. director.

                           FRED W. BROLING
                           68, retired as Chairman of the Board and Chief
                           Executive Officer of US Precision Glass Company in
                           2002. Mr. Broling became a director of Morton
                           Metalcraft Co. in 1989, and upon conclusion of its
                           merger into Morton Industrial Group, Inc. in 1998, a
                           Morton Industrial Group, Inc. director. He is a
                           member of the Compensation and Stock Option Committee
                           and of the Audit Committee of the Board.

                           MARK W. MEALY 46, serves as Head of the Mergers and
                           Acquisitions Group at Wachovia Securities, Inc. Mr.
                           Mealy became a director of Morton Metalcraft Co. in
                           1995 and upon conclusion of its merger into Morton
                           Industrial Group, Inc. in 1998, a Morton Industrial
                           Group, Inc. director. He is a member of the
                           Compensation and Stock Option Committee and of the
                           Audit Committee of the Board.

MANAGEMENT TEAM

                           BRIAN R. DOOLITTLE Sr. Vice President of Sales &
                           Engineering, Morton Metalcraft Co.

                           BRIAN L. GEIGER Sr. Vice President of Operations,
                           Morton Metalcraft Co.

                           RODNEY B. HARRISON Vice President of Finance, Morton
                           Industrial Group, Inc.

                           DARYL R. LINDEMANN Secretary, Morton Industrial
                           Group, Inc. Sr. Vice President of Finance and Support
                           Services, Morton Metalcraft Co.

                           WILLIAM D. MORTON, Chairman, Chief Executive Officer
                           and President of Morton Industrial Group, Inc. and
                           Morton Metalcraft Co.


"Safe Harbor" Statement Under The Private Securities Reform Litigation Act of
1995: This annual report contains "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934, including statements containing words
"anticipates," "believes," "intends," "estimates," "expects," "projects," and
similar words. The forward looking statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results to be
materially different from any future results expressed or implied by such
forward looking statements. Such factors include, among others, the following:
the loss of certain significant customers; the cyclicality of our construction
and agricultural sales; the availability of working capital; general economic
and business conditions, both nationally and in the markets in which we operate
or will operate; competition; and other factors referenced in the Company's
reports and registration statements filed with the Securities and Exchange
Commission. Given these uncertainties, prospective investors are cautioned not
to place undue reliance on such forward looking statements. The forward looking
statements contained herein speak only of the Company's expectation as of the
date of this annual report. We disclaim any obligations to update any such
factors or publicly announce the result of any revisions to any of the forward
looking statements contained herein to reflect future events or developments.


                         MORTON INDUSTRIAL GROUP, INC.


                                                                               6

SHAREHOLDER INFORMATION


CORPORATE OFFICES

  Morton Industrial Group, Inc.
  1021 W. Birchwood Street
  Morton, Illinois 61550
  Phone: 309.266.7176
  Fax: 309.263.1841

STOCK LISTING

The common stock of Morton Industrial Group, Inc. is quoted on the OTC Market
(OTC:MGRP).

ANNUAL MEETING

The Annual Meeting of the Shareholders of Morton Industrial Group, Inc. will be
held at Bertha Frank Performing Arts Center located at 350 N. Illinois Avenue,
Morton, Illinois 61550 on Tuesday, June 8, 2004 at 10:00 a.m. (CDT).

STOCK TRANSFER AGENT AND REGISTRAR

For inquiries about stock transfers or address changes, Shareholders may
contact:

American Stock Transfer & Trust Co.
59 Maiden Lane
New York, New York 10007
Phone: 800.937.5449

INVESTOR RELATIONS

Shareholders and prospective investors are welcome to call or write with
questions or requests for additional information. Please direct inquiries to:

Van Negris & Company
1120 Avenue of the Americas-Suite 4100
New York, New York 10036
Phone: 212.626-6730
Fax: 212.626-6732


INDEPENDENT AUDITORS

KPMG LLP, Indianapolis, Indiana

COUNSEL

Husch & Eppenberger LLC
Peoria, Illinois

ANNUAL REPORT ON FORM 10-K

Additional copies of this Annual Report and the Annual Report on Form 10-K may
be obtained without charge by writing to the Company at the address listed
above. These reports are also available to the public on request as required by
the Securities and Exchange Commission (SEC). These statements have not been
reviewed or confirmed for accuracy or relevance by the SEC.

All of the Company SEC Filings can be viewed from the Company's website
www.mortongroup.com and "clicking" SEC Offsite Filings.


                         MORTON INDUSTRIAL GROUP, INC.



                          MORTON INDUSTRIAL GROUP, INC.
                              www.mortongroup.com

                    1021 W. Birchwood Street Morton, IL 61550
                        P: 309.266.7176   F: 309.263.1841

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

      At December 31, 2003, the Company had five directly wholly owned subsidiaries:

Morton Metalcraft Co., an Illinois corporation

Morton Metalcraft Co., of North Carolina, a North Carolina corporation

B & W Metal Fabricators, Inc., a North Carolina corporation

Mid-Central Plastics, Inc., an Iowa corporation (operations sold June, 2003)

Morton Metalcraft Co. of South Carolina, a South Carolina corporation

      At December 31, 2003, the Company owned 49% of Morton Holdings, LLC. Morton Holdings, LLC owned 100% of Morton Custom Plastics, LLC. Morton Custom Plastics, LLC held the assets acquired in 1999 from Worthington Custom Plastics, Inc. Quilvest Custom Plastics, Inc., an affiliate of shareholders of Morton Industrial Group, Inc. owned 51% of Morton Holdings, LLC. Morton Industrial Group, Inc., acted as the manager of Morton Holdings, LLC and was allocated 100% of each item of Morton Holdings, LLC’s income, gains, losses, deductions and credits. Quilvest Custom Plastics, Inc. granted Morton Industrial Group, Inc., an irrevocable option to purchase its interest in Morton Holdings, LLC at any time for the sum of One Thousand Dollars.

      On November 1, 2002, Morton Holdings, LLC and Morton Custom Plastics, LLC filed as debtor-in-possession under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. Before filing, Morton Custom Plastics, LLC had negotiated the terms of an agreement for sale of substantially all of its assets to Wilbert, Inc., pursuant to an Asset Purchase Agreement. Under the agreement, Wilbert, Inc. also assumed the liabilities of Morton Custom Plastics, LLC under certain of their contracts and leases. This sales transaction was completed on December 24, 2002. EX-23.1 9 c84052exv23w1.htm CONSENT

EXHIBIT 23.1

The Board of Directors and Stockholders

Morton Industrial Group, Inc.:

We consent to incorporation by reference in the registration statements (Nos. 333-68927 and 333-69575) on Form S-8 of Morton Industrial Group, Inc. of our report dated March 19, 2004, except as to note 20 which is as of March 29, 2004, relating to the consolidated balance sheets of Morton Industrial Group, Inc. and Subsidiaries as of December 31, 2002 and 2003, and the related consolidated statements of operations, stockholders’ equity (deficit), and cash flows and the consolidated financial statement schedule for each of the years in the three-year period ended December 31, 2003, which report appears in the December 31, 2003, annual report on Form 10-K of Morton Industrial Group, Inc. Our report refers to a change in accounting for goodwill amortization and impairment in 2002.

/s/ KPMG LLP

KPMG LLP

Indianapolis, Indiana

March 29, 2004

EX-23.1

exv23w1

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William D. Morton, as Chairman and Chief Executive Officer of Morton Industrial Group, Inc., certify that:

      1. I have reviewed this annual report on Form 10-K of Morton Industrial Group, Inc.;

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the registrant and have:

      a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

      a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ WILLIAM D. MORTON

William D. Morton

Chairman and Chief Executive Officer

March 30, 2004 EX-31.2 11 c84052exv31w2.htm CERTIFICATION

EXHIBIT 31.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Rodney B. Harrison, as Vice President of Finance of Morton Industrial Group, Inc., certify that:

      1. I have reviewed this annual report on Form 10-K of Morton Industrial Group, Inc.;

      2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

      3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

      4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)) for the registrant and have:

      (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

      (b) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

      (c) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

      5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

      (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ RODNEY B. HARRISON

Rodney B. Harrison

Vice President of Finance

March 30, 2004 EX-32.1 12 c84052exv32w1.htm CERTIFICATION

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Annual Report of Morton Industrial Group, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William D. Morton, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

      (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ WILLIAM D. MORTON

William D. Morton

Chairman and Chief Executive Officer

March 30, 2004

      This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. EX-32.2 13 c84052exv32w2.htm CERTIFICATION

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Annual Report of Morton Industrial Group, Inc. (the “Company”) on Form 10-K for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Rodney B. Harrison, Vice President of Finance of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

      (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

      (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ RODNEY B. HARRISON

Rodney B. Harrison

Vice President of Finance

March 30, 2004

      This certification accompanies the Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. -----END PRIVACY-ENHANCED MESSAGE-----

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EX-32.1

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EX-32.2

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